Document:

Exhibit 10.19

 

Luther Burbank Corporation 
 Omnibus Equity and Incentive Compensation Plan

 

 

	
ARTICLE I. ESTABLISHMENT;   PURPOSES; AND DURATION
    	
 
    	
1
    
	
1.1
    	
Establishment of the   Plan
    	
 
    	
1
    
	
1.2
    	
Purposes of the Plan
    	
 
    	
1
    
	
1.3
    	
Duration of the Plan
    	
 
    	
1
    
	
ARTICLE II. DEFINITIONS
    	
 
    	
1
    
	
2.1
    	
“Affiliate”
    	
 
    	
1
    
	
2.2
    	
“Award”
    	
 
    	
2
    
	
2.3
    	
“Award Agreement”
    	
 
    	
2
    
	
2.4
    	
“Beneficial Owner”
    	
 
    	
2
    
	
2.5
    	
“Board” or “Board of   Directors”
    	
 
    	
2
    
	
2.6
    	
“Cash-Based Award”
    	
 
    	
2
    
	
2.7
    	
“Cause”
    	
 
    	
2
    
	
2.8
    	
“Change-in-Control”
    	
 
    	
2
    
	
2.9
    	
“Code”
    	
 
    	
4
    
	
2.10
    	
“Committee”
    	
 
    	
4
    
	
2.11
    	
“Consultant”
    	
 
    	
4
    
	
2.12
    	
“Covered Employee”
    	
 
    	
4
    
	
2.13
    	
“Director”
    	
 
    	
4
    
	
2.14
    	
“Dividend Equivalents”
    	
 
    	
4
    
	
2.15
    	
“Effective Date”
    	
 
    	
4
    
	
2.16
    	
“Employee”
    	
 
    	
4
    
	
2.17
    	
“Exchange Act”
    	
 
    	
4
    
	
2.18
    	
“Fair Market Value”
    	
 
    	
4
    
	
2.19
    	
“Fiscal Year”
    	
 
    	
5
    
	
2.20
    	
“Grant Price”
    	
 
    	
5
    
	
2.21
    	
“Incentive Stock   Option” or “ISO”
    	
 
    	
5
    
	
2.22
    	
“Insider”
    	
 
    	
5
    
	
2.23
    	
“Non-Employee Director”
    	
 
    	
5
    
	
2.24
    	
“Nonqualified Stock   Option” or “NQSO”
    	
 
    	
5
    
	
2.25
    	
“Notice”
    	
 
    	
5
    
	
2.26
    	
“Option” or “Stock   Option”
    	
 
    	
5
    
	
2.27
    	
“Option Price”
    	
 
    	
5
    
	
2.28
    	
“Other Stock-Based   Award”
    	
 
    	
5
    
	
2.29
    	
“Participant”
    	
 
    	
6
    
	
2.30
    	
“Performance-Based   Compensation”
    	
 
    	
6
    
	
2.31
    	
“Performance Measure”
    	
 
    	
6
    
	
2.32
    	
“Performance Period”
    	
 
    	
6
    
	
2.33
    	
“Performance Share”
    	
 
    	
6
    
	
2.34
    	
“Performance Unit”
    	
 
    	
6
    
	
2.35
    	
“Period of Restriction”
    	
 
    	
6
    
	
2.36
    	
“Person”
    	
 
    	
6
    
	
2.37
    	
“Restricted Stock”
    	
 
    	
6
    
	
2.38
    	
“Restricted Stock Unit”
    	
 
    	
6
    
	
2.39
    	
“Rule 16b-3”
    	
 
    	
6
    
	
2.40
    	
“SEC”
    	
 
    	
6
    

 

 

	
2.41
    	
“Securities Act”
    	
 
    	
7
    
	
2.42
    	
“Share”
    	
 
    	
7
    
	
2.43
    	
“Stock Appreciation   Right” or “SAR”
    	
 
    	
7
    
	
2.44
    	
“Subsidiary”
    	
 
    	
7
    
	
2.45
    	
“Substitute Awards”
    	
 
    	
7
    
	
2.46
    	
“Termination”
    	
 
    	
7
    
	
ARTICLE III.   ADMINISTRATION
    	
 
    	
7
    
	
3.1
    	
General
    	
 
    	
7
    
	
3.2
    	
Committee
    	
 
    	
8
    
	
3.3
    	
Authority of the   Committee
    	
 
    	
8
    
	
3.4
    	
Award Agreements
    	
 
    	
9
    
	
3.5
    	
Discretionary   Authority; Decisions Binding
    	
 
    	
10
    
	
3.6
    	
Delegation of   Administration
    	
 
    	
10
    
	
3.7
    	
Repricing
    	
 
    	
10
    
	
ARTICLE IV. SHARES SUBJECT   TO THE PLAN AND AWARD LIMITS
    	
 
    	
11
    
	
4.1
    	
Number of Shares   Available for Grants
    	
 
    	
11
    
	
4.2
    	
Award Limits
    	
 
    	
11
    
	
4.3
    	
Adjustments in   Authorized Shares
    	
 
    	
12
    
	
4.4
    	
No Limitation on Corporate   Actions
    	
 
    	
13
    
	
ARTICLE V. ELIGIBILITY AND   PARTICIPATION
    	
 
    	
13
    
	
5.1
    	
Eligibility
    	
 
    	
13
    
	
5.2
    	
Actual Participation
    	
 
    	
13
    
	
ARTICLE VI. STOCK OPTIONS
    	
 
    	
13
    
	
6.1
    	
Grant of Options
    	
 
    	
13
    
	
6.2
    	
Award Agreement
    	
 
    	
13
    
	
6.3
    	
Option Price
    	
 
    	
14
    
	
6.4
    	
Duration of Options
    	
 
    	
14
    
	
6.5
    	
Exercise of Options
    	
 
    	
14
    
	
6.6
    	
Payment
    	
 
    	
14
    
	
6.7
    	
Rights as a Shareholder
    	
 
    	
15
    
	
6.8
    	
Limitations on   Incentive Stock Options
    	
 
    	
15
    
	
ARTICLE VII. STOCK   APPRECIATION RIGHTS
    	
 
    	
15
    
	
7.1
    	
Grant of SARs
    	
 
    	
15
    
	
7.2
    	
Grant Price
    	
 
    	
16
    
	
7.3
    	
Exercise of SARs
    	
 
    	
16
    
	
7.4
    	
Award Agreement
    	
 
    	
16
    
	
7.5
    	
Term of SARs
    	
 
    	
16
    
	
7.6
    	
Payment of SAR Amount
    	
 
    	
16
    
	
7.7
    	
Rights as a Shareholder
    	
 
    	
16
    
	
ARTICLE VIII. RESTRICTED   STOCK AND RESTRICTED STOCK UNITS
    	
 
    	
17
    
	
8.1
    	
Awards of Restricted   Stock and Restricted Stock Units
    	
 
    	
17
    
	
8.2
    	
Award Agreement
    	
 
    	
17
    
	
8.3
    	
Nontransferability of   Restricted Stock
    	
 
    	
17
    
	
8.4
    	
Period of Restriction   and Other Restrictions
    	
 
    	
17
    
	
8.5
    	
Delivery of Shares,   Payment of Restricted Stock Units
    	
 
    	
17
    
	
8.6
    	
Forms of Restricted   Stock Awards
    	
 
    	
18
    

 

 

	
8.7
    	
Voting Rights
    	
 
    	
18
    
	
8.8
    	
Dividends and Other   Distributions
    	
 
    	
18
    
	
ARTICLE IX. PERFORMANCE   UNITS, PERFORMANCE SHARES, AND CASH-BASED AWARDS
    	
 
    	
19
    
	
9.1
    	
Grant of Performance   Units, Performance Shares and Cash-Based Awards
    	
 
    	
19
    
	
9.2
    	
Value of Performance   Units, Performance Shares and Cash-Based Awards
    	
 
    	
19
    
	
9.3
    	
Earning of Performance   Units, Performance Shares and Cash-Based Awards
    	
 
    	
19
    
	
9.4
    	
Form and Timing of   Payment of Performance Units, Performance Shares and Cash-Based Awards
    	
 
    	
19
    
	
9.5
    	
Rights as a Shareholder
    	
 
    	
20
    
	
ARTICLE X. OTHER STOCK-BASED   AWARDS
    	
 
    	
20
    
	
10.1
    	
Other Stock-Based   Awards
    	
 
    	
20
    
	
10.2
    	
Value of Other   Stock-Based Awards
    	
 
    	
20
    
	
10.3
    	
Payment of Other   Stock-Based Awards
    	
 
    	
20
    
	
ARTICLE XI. PERFORMANCE   MEASURES
    	
 
    	
20
    
	
11.1
    	
Performance Measures
    	
 
    	
20
    
	
11.2
    	
Evaluation of   Performance
    	
 
    	
21
    
	
11.3
    	
Adjustment of   Performance-Based Compensation
    	
 
    	
22
    
	
11.4
    	
Committee Discretion
    	
 
    	
22
    
	
ARTICLE XII. DIVIDEND   EQUIVALENTS
    	
 
    	
22
    
	
12.1
    	
Dividend Equivalents
    	
 
    	
22
    
	
ARTICLE XIII.   TRANSFERABILITY OF AWARDS
    	
 
    	
23
    
	
13.1
    	
Transferability of   Awards
    	
 
    	
23
    
	
ARTICLE XIV. RIGHTS OF   PARTICIPANTS
    	
 
    	
23
    
	
14.1
    	
Rights or Claims
    	
 
    	
23
    
	
14.2
    	
Adoption of the Plan
    	
 
    	
24
    
	
14.3
    	
Vesting
    	
 
    	
24
    
	
14.4
    	
No Effects on Benefits
    	
 
    	
24
    
	
14.5
    	
One or More Types of   Awards
    	
 
    	
24
    
	
ARTICLE XV.   CHANGE-IN-CONTROL
    	
 
    	
24
    
	
15.1
    	
Treatment of   Outstanding Awards
    	
 
    	
24
    
	
15.2
    	
No Implied Rights;   Other Limitations
    	
 
    	
27
    
	
15.3
    	
Termination, Amendment,   and Modifications of Change-in-Control Provisions
    	
 
    	
27
    
	
ARTICLE XVI. AMENDMENT,   MODIFICATION, AND TERMINATION
    	
 
    	
27
    
	
16.1
    	
Amendment,   Modification, and Termination
    	
 
    	
27
    
	
16.2
    	
Adjustment of Awards   Upon the Occurrence of Certain Unusual or Nonrecurring Events
    	
 
    	
28
    
	
ARTICLE XVII. TAX   WITHHOLDING AND OTHER TAX MATTERS
    	
 
    	
29
    
	
17.1
    	
Tax Withholding
    	
 
    	
29
    
	
17.2
    	
Withholding or   Tendering Shares
    	
 
    	
29
    
	
17.3
    	
Restrictions
    	
 
    	
29
    
	
17.4
    	
Special ISO Obligations
    	
 
    	
29
    
	
17.5
    	
Section 83(b) Election
    	
 
    	
30
    
	
17.6
    	
No Guarantee of   Favorable Tax Treatment
    	
 
    	
30
    
	
ARTICLE XVIII. LIMITS OF   LIABILITY; INDEMNIFICATION
    	
 
    	
30
    
	
18.1
    	
Limits of Liability
    	
 
    	
30
    

 

 

	
18.2
    	
Indemnification
    	
 
    	
31
    
	
ARTICLE XIX. SUCCESSORS
    	
 
    	
31
    
	
19.1
    	
Successors
    	
 
    	
31
    
	
ARTICLE XX. MISCELLANEOUS
    	
 
    	
31
    
	
20.1
    	
Drafting Context
    	
 
    	
31
    
	
20.2
    	
Severability
    	
 
    	
31
    
	
20.3
    	
Exercise and Payment of   Awards
    	
 
    	
31
    
	
20.4
    	
No Effect on Other   Plans
    	
 
    	
32
    
	
20.5
    	
Section 16 of   Exchange Act and Code Section 162(m)
    	
 
    	
32
    
	
20.6
    	
Requirements of Law;   Limitations on Awards
    	
 
    	
32
    
	
20.7
    	
Participants Deemed to   Accept Plan
    	
 
    	
33
    
	
20.8
    	
Governing Law
    	
 
    	
33
    
	
20.9
    	
Plan Unfunded
    	
 
    	
34
    
	
20.10
    	
No Fractional Shares
    	
 
    	
34
    
	
20.11
    	
Clawback
    	
 
    	
34
    

 

 

LUTHER BURBANK CORPORATION 
 OMNIBUS EQUITY AND INCENTIVE COMPENSATION PLAN

 

Luther Burbank Corporation, a California corporation (the “Company”) hereby adopts the Luther Burbank Corporation Omnibus Equity and Incentive Compensation Plan (the “Plan”) for the benefit of Non-Employee Directors of the Company and officers and eligible employees and Consultants of the Company and any Subsidiaries and Affiliates (as each term defined below), as follows:

 

ARTICLE I.
 ESTABLISHMENT; PURPOSES; AND DURATION

 

1.1                               Establishment of the Plan.  The Board of Directors (defined below) hereby establishes and adopts the Plan effective as of [INSERT] and as approved by the Company’s shareholders, which occurred [INSERT].  The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Cash-Based Awards and Other Stock-Based Awards.

 

1.2                               Purposes of the Plan.  The Plan is intended to provide certain present and future Employees, Directors and Consultants stock based incentives and other equity interests in the Company, thereby giving them a stake in the growth and prosperity of the Company and encouraging the continuance of their services with the Company, Subsidiaries or Affiliates.  To accomplish such purposes, the Plan provides that the Company may grant Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Cash-Based Awards and Other Stock-Based Awards.

 

1.3                               Duration of the Plan.  The Plan shall remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at any time pursuant to Article XVI, until all Shares subject to it shall have been delivered, and any restrictions on such Shares have lapsed, pursuant to the Plan’s provisions.  However, in no event may an Award be granted under the Plan on or after ten years from [INSERT] (the “Effective Date”), the date the shareholders approved the Plan.

 

ARTICLE II.
 DEFINITIONS

 

Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized:

 

2.1                               “Affiliate” means any Person which, directly or indirectly, Controls, is Controlled by or is under common Control with such Person, including, without limitation, any partner, officer, shareholder, Director, Employee, representative or agent of such Person.  For the purposes of this definition, “Control” shall mean the ability, directly or indirectly, to direct the activities of the relevant Person.

 

 

2.2                               “Award” means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Other Stock-Based Awards.

 

2.3                               “Award Agreement” means either: (a) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under the Plan, or (b) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof.

 

2.4                               “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934 (“Exchange Act”), except that a Person shall not be deemed to be the “Beneficial Owner” of any securities which are properly reported on a Form 13-F.

 

2.5                               “Board” or “Board of Directors” means the Board of Directors of the Company.

 

2.6                               “Cash-Based Award” means an Award granted to a Participant, as described in Article IX.

 

2.7                               “Cause” means (i) engaging in conduct which is demonstrably and materially injurious to the Company and any Subsidiaries and Affiliates, or that materially harms the reputation, good will, or business of the Company and any Subsidiaries and Affiliates; (ii) engaging in conduct which is reported in the general or trade press or otherwise achieves general notoriety and which is scandalous, immoral or illegal; (iii) being convicted of, or entered a plea of guilty or nolo contendere (or similar plea) to a crime that constitutes a felony, or a crime that constitutes a misdemeanor involving moral turpitude, dishonesty or fraud; (iv) the suspension, removal or prohibition from participating in the conduct of the Company’s affairs by an order issued under section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818) or any comparable provision of federal or state law; (v) having been found liable in any Securities and Exchange Commission or other civil or criminal securities law action or any cease and desist order applicable to Participant is entered (regardless of whether or not Participant admits or denies liability); (vi) gross negligence, insubordination, or material violation of any duty of loyalty or other fiduciary duty to the Company or any other material misconduct on the Participant’s part; (vii) the willful refusal or negligent failure to perform assigned duties; (viii) having used or disclosed, without authorization, confidential or proprietary information of the Company or its Subsidiaries and Affiliates; (viii) having breached any written agreement with the Company not to disclose any information pertaining to the Company or its Subsidiaries and Affiliates or their customers, suppliers and businesses; (ix) having breached any agreement relating to non-solicitation, non-competition, or the ownership or protection of the intellectual property of the Company or its Subsidiaries and Affiliates; or (x) having breached any applicable federal, state or local laws or regulation governing Participant’s duties with the Company or any of the Company’s policies applicable to Participant, whether currently in effect or adopted after the Effective Date of the Plan.

 

2.8                               “Change-in-Control” means the first to occur of the following events with respect to the Company:

 

2

 

(i)                                     any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person, any securities acquired directly from the Company or its Affiliates) representing 40% or more of either the then outstanding Shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (A) of sub-paragraph (ii) below; or

 

(ii)                                  there is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 40% or more of either the then outstanding Shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities; or

 

(iii)                               the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement is entered into for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such transaction or series of transactions; or

 

(iv)                              the following individuals cease for any reason to constitute a majority of the members of the Board then serving: individuals who, on the Effective Date of the Plan, constitute the Board and any new Director (other than a Director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds of the Directors then still in office who either were Directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended.

 

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2.9                               “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time, including rules and regulations promulgated thereunder and successor provisions and rules and regulations thereto.

 

2.10                        “Committee” means the Compensation Committee of the Board of Directors or a subcommittee thereof, or such other committee designated by the Board to administer the Plan.

 

2.11                        “Consultant” means an independent contractor or consultant who performs services for the Company or a Subsidiary or Affiliate in a capacity other than as an Employee or Director.

 

2.12                        “Covered Employee” means any Employee who is or may become a “covered employee,” as defined in Code Section 162(m), and who is designated, either as an individual Employee or a member of a class of Employees, by the Committee within the shorter of (i) ninety (90) days after the beginning of the Performance Period, or (ii) the first twenty-five percent (25%) of the Performance Period, as a “Covered Employee” under the Plan for such applicable Performance Period.

 

2.13                        “Director” means any individual who is a member of the Board of Directors of the Company.

 

2.14                        “Dividend Equivalents” means the equivalent value (in cash or Shares) of dividends that would otherwise be paid on the Shares subject to or issued pursuant to an Award (including Restricted Stock Units) but that have not been issued or delivered, as described in Article XII.

 

2.15                        “Effective Date” shall have the meaning ascribed to such term in Section 1.3.

 

2.16                        “Employee” means any person designated as an employee of the Company, a Subsidiary and/or an Affiliate on the payroll records thereof.  An Employee shall not include any individual during any period he or she is classified or treated by the Company, a Subsidiary or an Affiliate as an independent contractor, a Consultant, or any employee of an employment, consulting, or temporary agency, or any other entity other than the Company, a Subsidiary and/or an Affiliate without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a common-law employee of the Company, a Subsidiary and/or an Affiliate during such period.  For purposes of the Plan, upon approval by the Committee, the term Employee may also include Employees whose employment with the Company, a Subsidiary or an Affiliate has been terminated subsequent to being granted an Award under the Plan.  For the avoidance of doubt, a Director who would otherwise be an “Employee” within the meaning of this Section 2.16 shall be considered an Employee for purposes of the Plan.

 

2.17                        “Exchange Act” means the Securities Exchange Act of 1934, as it may be amended from time to time, including the rules and regulations promulgated thereunder and successor provisions and rules and regulations thereto.

 

2.18                        “Fair Market Value” means the fair market value of the Shares as determined by the Committee by the reasonable application of such reasonable valuation method, consistently

 

4

 

applied, as the Committee deems appropriate; provided, however, that, with respect to ISOs, for purposes of Section 6.3 and 6.8(c), such Fair Market Value shall be determined subject to Section 422(c)(7) of the Code; provided further, however, that (a) if the Shares are readily tradable on an established securities market, Fair Market Value on any date shall be the last sale price reported for the Shares on such market on such date or, if no sale is reported on such date, on the last date preceding such date on which a sale was reported, or (b) if the Shares are admitted for listing on the New York Stock Exchange or other comparable market, Fair Market Value on any date shall be the last sale price reported for the Shares on such market on such date or, if no sale is reported on such date, on the last day preceding such date on which a sale was reported.  In each case, the Committee shall determine Fair Market Value in a manner that satisfies the applicable requirements of Code Section 409A.

 

2.19                        “Fiscal Year” means the calendar year, or such other consecutive twelve-month period as the Committee may select.

 

2.20                        “Grant Price” means the price established at the time of grant of an SAR pursuant to Article VII, used to determine whether there is any payment due upon exercise of the SAR.

 

2.21                        “Incentive Stock Option” or “ISO” means a right to purchase Shares under the Plan in accordance with the terms and conditions set forth in Article VI and which is designated as an Incentive Stock Option and which is intended to meet the requirements of Section 422 of the Code.

 

2.22                        “Insider” means an individual who is, on the relevant date, an officer, Director or ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Committee in accordance with Section 16 of the Exchange Act.

 

2.23                        “Non-Employee Director” means a Director who is not an Employee.

 

2.24                        “Nonqualified Stock Option” or “NQSO” means a right to purchase Shares under the Plan in accordance with the terms and conditions set forth in Article VI and which is not intended to meet the requirements of Section 422 of the Code or otherwise does not meet such requirements.

 

2.25                        “Notice” means notice provided by a Participant to the Company in a manner prescribed by the Committee.

 

2.26                        “Option” or “Stock Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article VI.

 

2.27                        “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.

 

2.28                        “Other Stock-Based Award” means an equity-based or equity-related Award described in Section 10.1, granted in accordance with the terms and conditions set forth in Article X.

 

5

 

2.29                        “Participant” means any eligible individual as set forth in Article V who holds one or more outstanding Awards.

 

2.30                        “Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees.  Notwithstanding the foregoing, nothing in the Plan shall be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section 162(m) does not constitute performance-based compensation for other purposes, including Code Section 409A.

 

2.31                        “Performance Measure” means performance criteria or measures as described in Section 11.1 on which the performance goals described in Article XI are based and which are approved by the Company’s shareholders pursuant to the Plan in order to qualify certain Awards as Performance-Based Compensation in accordance with Article XI.

 

2.32                        “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to, or the amount or entitlement to, an Award.

 

2.33                        “Performance Share” means an Award of a performance share granted to a Participant, as described in Article IX.

 

2.34                        “Performance Unit” means an Award of a performance unit granted to a Participant, as described in Article IX.

 

2.35                        “Period of Restriction” means the period during which Shares of Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture, and, in the case of Restricted Stock, the transfer of Shares of Restricted Stock is limited in some way, as provided in Article VIII.

 

2.36                        “Person” shall have the meaning given in Exchange Act Section 3(a)(9), as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

2.37                        “Restricted Stock” means an Award granted to a Participant pursuant to Article VIII.

 

2.38                        “Restricted Stock Unit” means an Award, whose value is equal to a Share, granted to a Participant pursuant to Article VIII.

 

2.39                        “Rule 16b-3” means Rule 16b-3 under the Exchange Act, or any successor rule, as the same may be amended from time to time.

 

2.40                        “SEC” means the Securities and Exchange Commission.

 

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2.41                        “Securities Act” means the Securities Act of 1933, as it may be amended from time to time, including the rules and regulations promulgated thereunder and successor provisions and rules and regulations thereto.

 

2.42                        “Share” means a share of common stock of the Company (including any new, additional or different stock or securities resulting from any change in corporate capitalization as listed in Section 4.3).

 

2.43                        “Stock Appreciation Right” or “SAR” means an Award designated as an SAR, pursuant to the terms of Article VII.

 

2.44                        “Subsidiary” means any present or future corporation which is or would be a “subsidiary corporation” of the Company as the term is defined in Section 424(f) of the Code.

 

2.45                        “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, options or other awards previously granted, or the right or obligation to grant future options or other awards, by a company acquired by the Company, a Subsidiary and/or an Affiliate or with which the Company, a Subsidiary and/or an Affiliate combines, or otherwise in connection with any merger, consolidation, acquisition of property or stock, or reorganization involving the Company, a Subsidiary or an Affiliate, including a transaction described in Code Section 424(a).

 

2.46                        “Termination” means the time when a Participant ceases the performance of services for the Company, any Affiliate or Subsidiary, as applicable, for any reason, with or without Cause, including a Termination by resignation, discharge, death, disability or retirement, but excluding (a) a Termination where there is a simultaneous reemployment (or commencement of service) or continuing employment (or service) of a Participant by the Company, Affiliate or any Subsidiary, (b) at the discretion of the Committee, a Termination that results in a temporary severance, and (c) at the discretion of the Committee, a Termination of an Employee that is immediately followed by the Participant’s service as a Non-Employee Director.

 

ARTICLE III.
 ADMINISTRATION

 

3.1                               General.  The Committee shall have exclusive authority to operate, manage and administer the Plan in accordance with its terms and conditions.  Notwithstanding the foregoing, in its absolute discretion, the Board may at any time and from time to time exercise any and all rights, duties and responsibilities of the Committee under the Plan, including establishing procedures to be followed by the Committee, but excluding matters which under any applicable law, regulation or rule, including any exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3) or Section 162(m) of the Code, are required to be determined in the sole discretion of the Committee.  If and to the extent that the Committee does not exist or cannot function, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee, subject to the limitations set forth in the immediately preceding sentence.  Notwithstanding any other provision of the Plan to the contrary, any action or determination specifically affecting or relating to an Award granted to a Non-Employee Director, including under Article X, shall be taken, or approved or ratified, by the Board.

 

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3.2                               Committee.  The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors.  The Committee shall operate in accordance with the terms of the Luther Burbank Corporation Compensation Committee Charter, and as may be required under applicable law, including but not limited to under Section 16 of the Exchange Act (including Rule 16b-3) and Section 162(m) of the Code.

 

3.3                               Authority of the Committee.  The Committee shall have full discretionary authority to grant, pursuant to the terms of the Plan, Awards to those individuals who are eligible to receive Awards under the Plan.  Except as limited by law or by the Certificate of Incorporation or By-Laws of the Company, and subject to the provisions herein, the Committee shall have full power, in accordance with the other terms and provisions of the Plan, to:

 

(a)                                 select Employees, Non-Employee Directors and Consultants who may receive Awards under the Plan and become Participants;

 

(b)                                 determine eligibility for participation in the Plan and decide all questions concerning eligibility for, and the amount of, Awards under the Plan;

 

(c)                                  determine the sizes and types of Awards;

 

(d)                                 determine the terms and conditions of Awards, including the Option Prices of Options and the Grant Prices of SARs;

 

(e)                                  grant Awards as an alternative to, or as the form of payment for grants or rights earned or payable under, other bonus or compensation plans, arrangements or policies of the Company or a Subsidiary or Affiliate;

 

(f)                                   grant Substitute Awards on such terms and conditions as the Committee may prescribe, subject to compliance with the ISO rules under Code Section 422 and the nonqualified deferred compensation rules under Code Section 409A, where applicable;

 

(g)                                  make all determinations under the Plan concerning Termination of any Participant’s employment or service with the Company or a Subsidiary or Affiliate, including whether such Termination occurs by reason of Cause, disability or in connection with a Change-in-Control and whether a leave constitutes a Termination;

 

(h)                                 determine whether or not a Change-in-Control shall have occurred;

 

(i)                                     construe and interpret the Plan and any agreement or instrument entered into under the Plan, including any Award Agreement;

 

(j)                                    establish and administer any terms, conditions, restrictions, limitations, forfeiture, vesting or exercise schedule, and other provisions of or relating to any Award;

 

(k)                                 establish and administer any performance goals in connection with any Awards, including related Performance Measures or performance criteria and applicable Performance Periods, determine the extent to which any performance goals and/or other terms and conditions of an Award are attained or are not attained, and certify whether,

 

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and to what extent, any such performance goals and other material terms applicable to Awards intended to qualify as Performance-Based Compensation were in fact satisfied;

 

(l)                                     construe any ambiguous provisions, correct any defects, supply any omissions and reconcile any inconsistencies in the Plan and/or any Award Agreement or any other instrument relating to any Awards;

 

(m)                             establish, adopt, amend, waive and/or rescind rules, regulations, procedures, guidelines, forms and/or instruments for the Plan’s operation or administration;

 

(n)                                 make all valuation determinations relating to Awards and the payment or settlement thereof;

 

(o)                                 grant waivers of terms, conditions, restrictions and limitations under the Plan or applicable to any Award, or accelerate the vesting or exercisability of any Award;

 

(p)                                 subject to the provisions of Article XVI, amend or adjust the terms and conditions of any outstanding Award and/or adjust the number and/or class of Shares of stock subject to any outstanding Award;

 

(q)                                 at any time and from time to time after the granting of an Award, specify such additional terms, conditions and restrictions with respect to such Award as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws or rules, including terms, restrictions and conditions for compliance with applicable securities laws or listing rules, methods of withholding or providing for the payment of required taxes and restrictions regarding a Participant’s ability to exercise Options through a cashless (broker-assisted) exercise;

 

(r)                                    determine whether, and to what extent and under what circumstances Awards may be settled in cash, Shares or other property or canceled or suspended; and

 

(s)                                   exercise all such other authorities, take all such other actions and make all such other determinations as it deems necessary or advisable for the proper operation and/or administration of the Plan.

 

3.4                               Award Agreements.  The Committee shall, subject to applicable laws and rules, determine the date an Award is granted.  Each Award shall be evidenced by an Award Agreement; however, two or more Awards granted to a single Participant may be combined in a single Award Agreement.  An Award Agreement shall not be a precondition to the granting of an Award; provided, however, that (a) the Committee may, but need not, require as a condition to any Award Agreement’s effectiveness, that such Award Agreement be executed on behalf of the Company and/or by the Participant to whom the Award evidenced thereby shall have been granted (including by electronic signature or other electronic indication of acceptance), and such executed Award Agreement be delivered to the Company, and (b) no Person shall have any rights under any Award unless and until the Participant to whom such Award shall have been granted has complied with the applicable terms and conditions of the Award.  The Committee shall prescribe the form of all Award Agreements, and, subject to the terms and conditions of the

 

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Plan, shall determine the content of all Award Agreements.  Any Award Agreement may be supplemented or amended in writing from time to time as approved by the Committee; provided that the terms and conditions of any such Award Agreement as supplemented or amended are not inconsistent with the provisions of the Plan.  In the event of any dispute or discrepancy concerning the terms of an Award, the records of the Committee or its designee shall be determinative.

 

3.5                               Discretionary Authority; Decisions Binding.  The Committee shall have full discretionary authority in all matters related to the discharge of its responsibilities and the exercise of its authority under the Plan.  All determinations, decisions, actions and interpretations by the Committee with respect to the Plan and any Award Agreement, and all related orders and resolutions of the Committee shall be final, conclusive and binding on all Participants, the Company and its shareholders, any Subsidiary or Affiliate and all Persons having or claiming to have any right or interest in or under the Plan and/or any Award Agreement.  The Committee shall consider such factors as it deems relevant to making or taking such decisions, determinations, actions and interpretations, including the recommendations or advice of any Director or officer or Employee of the Company, any Director, officer or Employee of a Subsidiary or Affiliate and such attorneys, Consultants and accountants as the Committee may select.  A Participant or other holder of an Award may contest a decision or action by the Committee with respect to such Person or Award only on the grounds that such decision or action was arbitrary or capricious or was unlawful, and any review of such decision or action shall be limited to determining whether the Committee’s decision or action was arbitrary or capricious or was unlawful.

 

3.6                               Delegation of Administration.  Except to the extent prohibited by applicable law, including any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3) or Section 162(m) of the Code, or the applicable rules of a stock exchange, the Committee may, in its discretion, allocate all or any portion of its responsibilities and powers under this Article III to any one or more of its members and/or delegate all or any part of its responsibilities and powers under this Article III to any Person or Persons selected by it; provided, however, that the Committee may not delegate its authority to correct defects, omissions or inconsistencies in the Plan.  Any such authority delegated or allocated by the Committee under this Section 3.6 shall be exercised in accordance with the terms and conditions of the Plan and any rules, regulations or administrative guidelines that may from time to time be established by the Committee, and any such allocation or delegation may be revoked by the Committee at any time.

 

3.7                               Repricing.  Notwithstanding any other provisions of the Plan, neither the Board nor the Committee may take any action:  (1) to amend the terms of an outstanding Option or SAR to reduce the Option Price or Grant Price thereof, cancel an Option or SAR and replace it with a new Option or SAR with a lower Option Price or Grant Price, or that has an economic effect that is the same as any such reduction or cancellation; or (2) to cancel an outstanding Option or SAR having an Option Price or Grant Price above the then-current Fair Market Value of the Shares in exchange for cash or the grant of another type of Award, without, in each such case, first obtaining approval of the shareholders of the Company of such action.

 

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ARTICLE IV.
 SHARES SUBJECT TO THE PLAN AND AWARD LIMITS

 

4.1                               Number of Shares Available for Grants.  The Shares of stock subject to Awards granted under the Plan shall be Shares.  Such Shares subject to the Plan may be either authorized and unissued Shares (which will not be subject to preemptive rights) or previously issued Shares acquired by the Company or any Subsidiary.  Subject to adjustment as provided in Section 4.3, the total number of Shares that may be delivered pursuant to Awards under the Plan as of the Effective Date shall be 3,360,000 (the “Share Reserve”).  Any Shares that are subject to an Option, SAR, or other Award which for any reason expires or is terminated or canceled without having been fully exercised or satisfied, and any Shares that are subject to any Restricted Stock Award (including any Shares subject to a Participant’s Restricted Stock Award that are repurchased by the Company at the Participant’s cost), Restricted Stock Unit Award or other Award granted under the Plan which are forfeited, shall, to the extent of any such expiration, termination, cancellation or forfeiture, be available for delivery in connection with future Awards under the Plan.  However, notwithstanding any other provisions of this Section 4.1 to the contrary, (i) Shares withheld or tendered to pay the exercise price or withholding taxes with respect to an outstanding Award shall not again be made available for issuance pursuant to Awards under the Plan, and (ii) the payment of cash dividends or Dividend Equivalents in cash in connection with Awards shall not reduce the Share Reserve.  Any Shares delivered under the Plan upon exercise or satisfaction of Substitute Awards shall not reduce the Shares available for delivery under the Plan; provided, however, that the total number of Shares that may be delivered pursuant to Incentive Stock Options granted under the Plan shall be equal to 3,360,000 Shares, as adjusted pursuant to this Section 4.1, but without application of the foregoing provisions of this sentence.  Notwithstanding the foregoing, Shares issued pursuant to Restricted Stock Units that were awarded to replace any non-vested phantom stock awards under the Luther Burbank Corporation and Subsidiaries Phantom Stock Plan shall not count towards the available Share Reserve.

 

4.2                               Award Limits.  The following limits shall apply to grants of all Awards under the Plan:

 

(a)                                 Options:  The maximum aggregate number of Shares that may be subject to Options granted in any Fiscal Year to any one Participant shall be 500,000 Shares.

 

(b)                                 SARs:  The maximum aggregate number of Shares that may be subject to Stock Appreciation Rights granted in any Fiscal Year to any one Participant shall be 500,000 Shares.

 

(c)                                  Restricted Stock or Restricted Stock Units:  The maximum aggregate Fair Market Value of Shares that may be subject to Awards of Restricted Stock or Restricted Stock Units granted in any Fiscal Year to any one Participant shall be $5,000,000.

 

(d)                                 Performance Shares or Performance Units:  The maximum aggregate value, measured at target, for Awards of Performance Shares or Performance Units granted in any Fiscal Year to any one Participant shall be $5,000,000.

 

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(e)                                  Cash-Based Awards:  The maximum aggregate amount awarded with respect to Cash-Based Awards made in any Fiscal Year to any one Participant shall not exceed $5,000,000.

 

(f)                                   Non-Employee Director Awards:  The maximum aggregate value awarded with respect to any Awards made in any Fiscal Year to any one Non-Employee Director shall not exceed $300,000.

 

(g)                                  Other Stock-Based Awards:  The maximum aggregate Fair Market Value with respect to Other Stock-Based Awards made in any Fiscal Year to any one Participant shall be $5,000,000.

 

To the extent required by Section 162(m) of the Code, Shares subject to Options or SARs which are canceled shall continue to be counted against the limits set forth in paragraphs (a) and (b) immediately preceding.  Notwithstanding the foregoing, Shares issued pursuant to Restricted Stock Units that were awarded to replace any non-vested phantom stock awards under the Luther Burbank Corporation and Subsidiaries Phantom Stock Plan shall not count towards the Award limits under this Section 4.2.

 

4.3                               Adjustments in Authorized Shares.  In the event of any corporate event or transaction (including a change in the Shares or the capitalization of the Company), such as a reclassification, recapitalization, merger, consolidation, reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code), issuance of warrants or rights, dividend or other distribution (whether in the form of cash, stock or other property), stock split or reverse stock split, spin-off, split-up, combination or exchange of Shares, repurchase of Shares, or other like change in corporate structure, partial or complete liquidation of the Company or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement of Participants’ rights under the Plan, shall substitute or adjust, as applicable, the number, class and kind of securities which may be delivered under Section 4.1; the number, class and kind, and/or price (such as the Option Price of Options or the Grant Price of SARs) of securities subject to outstanding Awards; the Award limits set forth in Section 4.2; and other value determinations applicable to outstanding Awards; provided, however that the number of Shares subject to any Award shall always be a whole number. The Committee shall also make appropriate adjustments and modifications in the terms of any outstanding Awards to reflect or related to any such events, adjustments, substitutions or changes, including modifications of performance goals and changes in the length of Performance Periods, subject to the requirements of Article XI in the case of Awards intended to qualify as Performance-Based Compensation.  Any adjustment, substitution or change pursuant to this Section 4.3 made with respect to an Award intended to be an Incentive Stock Option shall be made only to the extent consistent with such intent, unless the Committee determines otherwise, and any such adjustment that is made with respect to an Award that provides for Performance-Based Compensation shall be made consistent with the intent that such Award qualify for the performance-based compensation exception under Section 162(m) of the Code.  The Committee shall not make any adjustment pursuant to this Section 4.3 that would cause an Award that is otherwise exempt from Code Section 409A to become subject to Code Section 409A, or that would cause an Award that is subject to Code Section 409A to fail to satisfy the requirements of Code Section 409A.  All

 

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determinations of the Committee as to adjustments or changes under this Section 4.3 shall be conclusive and binding on the Participants.

 

4.4                               No Limitation on Corporate Actions.  The existence of the Plan and any Awards granted hereunder shall not affect in any way the right or power of the Company, any Subsidiary or any Affiliate to make or authorize any adjustment, recapitalization, reorganization or other change in its capital structure or business structure, any merger or consolidation, any issuance of debt, preferred or prior preference stock ahead of or affecting the Shares, additional Shares of capital stock or other securities or subscription rights thereto, any dissolution or liquidation, any sale or transfer of all or part of its assets or business or any other corporate act or proceeding.  Further, except as expressly provided herein or by the Committee, (i) the issuance by the Company of Shares or any class of securities convertible into Shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of Shares or obligations of the Company convertible into such Shares or other securities, (ii) the payment of a dividend in property other than Shares, (iii) the occurrence of any capital change described in Section 4.3 or (iv) the occurrence of any similar transaction, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to Awards theretofore granted or the Option Price, Grant Price or purchase price per Share applicable to any Award, unless the Committee shall determine, in its discretion, that an adjustment is necessary or appropriate.

 

ARTICLE V.
 ELIGIBILITY AND PARTICIPATION

 

5.1                               Eligibility.  Employees, Non-Employee Directors and Consultants shall be eligible to become Participants and receive Awards in accordance with the terms and conditions of the Plan, subject to the limitations on the granting of ISOs set forth in Section 6.8(a).

 

5.2                               Actual Participation.  Subject to the provisions of the Plan, the Committee may, from time to time, select Participants from all eligible employees, Non-Employee Directors and Consultants and shall determine the nature and amount of each Award.

 

ARTICLE VI.
 STOCK OPTIONS

 

6.1                               Grant of Options.  Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee.  The granting of an Option shall take place when the Committee by resolution, written consent or other appropriate action determines to grant such Option for a particular number of Shares to a particular Participant at a particular Option Price.

 

6.2                               Award Agreement.  Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which the Option shall become exercisable and such other provisions as the Committee shall determine, which are not inconsistent with the terms of the Plan.  The Award Agreement also shall specify whether the

 

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Option is intended to be an ISO or an NQSO.  To the extent that any Option does not qualify as an ISO (whether because of its provisions or the time or manner of its exercise or otherwise), such Option, or the portion thereof which does not so qualify, shall constitute a separate NQSO.

 

6.3                               Option Price.  The Option Price for each Option shall be determined by the Committee and set forth in the Award Agreement; provided that, subject to Section 6.8(c), the Option Price of an Option shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted; provided further, that Substitute Awards or Awards granted in connection with an adjustment provided for in Section 4.3, in the form of stock options, shall have an Option Price per Share that is intended to maintain the economic value of the Award that was replaced or adjusted, as determined by the Committee.

 

6.4                               Duration of Options.  Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant and set forth in the Award Agreement; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary of its date of grant, subject to the respective last sentences of Sections 6.5 and 6.8(c).

 

6.5                               Exercise of Options.  Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance determine and set forth in the Award Agreement, which need not be the same for each grant or for each Option or Participant.  An Agreement may provide that the period of time over which an Option other than an ISO may be exercised shall be automatically extended if on the scheduled expiration date of such Option the Optionee’s exercise of such Option would violate applicable securities laws; provided, however, that during such extended exercise period the Option may only be exercised to the extent the Option was exercisable in accordance with its terms immediately prior to such scheduled expiration date; provided further, however, that such extended exercise period shall end not later than thirty (30) days after the exercise of such Option first would no longer violate such laws.

 

6.6                               Payment.  Options shall be exercised by the delivery of a written Notice of exercise to the Company, in a form specified or accepted by the Committee, or by complying with any alternative exercise procedures that may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for such Shares, which shall include applicable taxes, if any, in accordance with Article XVII.  The Option Price upon exercise of any Option shall be payable to the Company in full either:  (a) in cash or its equivalent; (b) subject to such terms, conditions and limitations as the Committee may prescribe, by tendering (either by actual delivery or attestation) unencumbered Shares previously acquired by the Participant exercising such Option having an aggregate Fair Market Value at the time of exercise equal to the total Option Price, (c) by a combination of (a) and (b); or (d) by any other method approved or accepted by the Committee in its sole discretion, including, if the Committee so determines, a cashless (broker-assisted) exercise that complies with all applicable laws.  Subject to any governing rules or regulations, as soon as practicable after receipt of a written notification of exercise and full payment in accordance with the preceding provisions of this Section 6.6, the Company shall deliver to the Participant exercising an Option, in the Participant’s name, evidence of book entry Shares, or, upon the Participant’s request, Share certificates, in an appropriate amount based upon the number of

 

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Shares purchased under the Option.  Unless otherwise determined by the Committee, all payments under all of the methods described above shall be paid in United States dollars.

 

6.7                               Rights as a Shareholder.  No Participant or other Person shall become the Beneficial Owner of any Shares subject to an Option, nor have any rights to dividends or other rights of a shareholder with respect to any such Shares, until the Participant has actually received such Shares following exercise of his or her Option in accordance with the provisions of the Plan and the applicable Award Agreement.

 

6.8                               Limitations on Incentive Stock Options.

 

(a)                                 General.  No ISO shall be granted to any individual otherwise eligible to participate in the Plan who is not an Employee of the Company or a Subsidiary on the date of granting of such Option.  Any ISO granted under the Plan shall contain such terms and conditions, consistent with the Plan, as the Committee may determine to be necessary to qualify such Option as an Incentive Stock Option under Section 422 of the Code.  Any ISO granted under the Plan may be modified by the Committee to disqualify such Option from treatment as an Incentive Stock Option under Section 422 of the Code.

 

(b)                                 $100,000 Per Year Limitation.  Notwithstanding any intent to grant ISOs, an Option granted under the Plan will not be considered an ISO to the extent that it, together with any other Incentive Stock Options (within the meaning of Section 422 of the Code, but without regard to subsection (d) of such Section) under the Plan and any other Incentive Stock Option plans of the Company, any Subsidiary and any “parent corporation” of the Company within the meaning of Section 424(e) of the Code, are exercisable for the first time by any Participant during any calendar year with respect to Shares having an aggregate Fair Market Value in excess of $100,000 (or such other limit as may be required by the Code) as of the time the Option with respect to such Shares is granted.  The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted.

 

(c)                                  Options Granted to Certain Shareholders.  No ISO shall be granted to an individual otherwise eligible to participate in the Plan who owns (within the meaning of Section 424(d) of the Code), at the time the Option is granted, more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or a Subsidiary or any “parent corporation” of the Company within the meaning of Section 424(e) of the Code.  This restriction does not apply if at the time such ISO is granted the Option Price of the ISO is at least 110% of the Fair Market Value of a Share on the date such ISO is granted, and the ISO by its terms is not exercisable after the expiration of five years from such date of grant.

 

ARTICLE VII.
 STOCK APPRECIATION RIGHTS

 

7.1                               Grant of SARs.  Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee.  The Committee shall have complete discretion in determining the number of Shares

 

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to which a SAR pertains (subject to Article IV) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to any SAR.

 

7.2                               Grant Price.  The Grant Price for each SAR shall be determined by the Committee and set forth in the Award Agreement, subject to the limitations of this Section 7.2.  The Grant Price for each SAR shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date such SAR is granted, except in the case of Substitute Awards or Awards granted in connection with an adjustment provided for in Section 4.3.

 

7.3                               Exercise of SARs.  SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, in accordance with the Plan, determines and sets forth in the Award Agreement.

 

7.4                               Award Agreement.  Each SAR grant shall be evidenced by an Award Agreement that shall specify the number of Shares to which the SAR pertains, the Grant Price, the term of the SAR, and such other terms and conditions as the Committee shall determine in accordance with the Plan.

 

7.5                               Term of SARs.  The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that no SAR shall be exercisable more than ten (10) years after it is granted.

 

7.6                               Payment of SAR Amount.  An election to exercise SARs shall be deemed to have been made on the date of Notice of such election to the Company.  Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

 

(a)                                 The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price of the SAR; by

 

(b)                                 The number of Shares with respect to which the SAR is exercised.

 

Notwithstanding the foregoing provisions of this Section 7.6 to the contrary, the Committee may establish and set forth in the applicable Award Agreement a maximum amount per Share that will be payable upon the exercise of a SAR.  At the discretion of the Committee, such payment upon exercise of a SAR shall be in cash, in Shares of equivalent Fair Market Value, or in some combination thereof.

 

7.7                               Rights as a Shareholder.  A Participant receiving a SAR shall have the rights of a Shareholder only as to Shares, if any, actually issued to such Participant upon satisfaction or achievement of the terms and conditions of the Award, and in accordance with the provisions of the Plan and the applicable Award Agreement, and not with respect to Shares to which such Award relates but which are not actually issued to such Participant.

 

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ARTICLE VIII.
 RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

8.1                               Awards of Restricted Stock and Restricted Stock Units.  Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine.  Subject to the terms and conditions of this Article VIII and the Award Agreement, upon delivery of Shares of Restricted Stock to a Participant, or creation of a book entry evidencing a Participant’s ownership of Shares of Restricted Stock, pursuant to Section 8.6, the Participant shall have all of the rights of a shareholder with respect to such Shares, subject to the terms and restrictions set forth in this Article VIII or the applicable Award Agreement or as determined by the Committee.  Restricted Stock Units shall be similar to Restricted Stock, except no Shares are actually awarded to a Participant who is granted Restricted Stock Units on the date of grant, and such Participant shall have no rights of a shareholder with respect to such Restricted Stock Units.

 

8.2                               Award Agreement.  Each Restricted Stock and/or Restricted Stock Unit Award shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine in accordance with the Plan.

 

8.3                               Nontransferability of Restricted Stock.  Except as provided in this Article VIII, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, encumbered, alienated, hypothecated or otherwise disposed of until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement.

 

8.4                               Period of Restriction and Other Restrictions.  The Period of Restriction shall lapse based on continuing service as a Non-Employee Director or Consultant or continuing employment with the Company, a Subsidiary or an Affiliate, the achievement of performance goals, the satisfaction of other conditions or restrictions or upon the occurrence of other events, in each case, as determined by the Committee, at its discretion, and stated in the Award Agreement.

 

8.5                               Delivery of Shares, Payment of Restricted Stock Units.  After the last day of the Period of Restriction applicable to a Participant’s Shares of Restricted Stock, and after all conditions and restrictions applicable to such Shares of Restricted Stock have been satisfied or lapse (including satisfaction of any applicable withholding tax obligations), pursuant to the applicable Award Agreement, such Shares of Restricted Stock shall become freely transferable by such Participant.  After the last day of the Period of Restriction applicable to a Participant’s Restricted Stock Units, and after all conditions and restrictions applicable to Restricted Stock Units have been satisfied or lapse (including satisfaction of any applicable withholding tax obligations), pursuant to the applicable Award Agreement, such Restricted Stock Units shall be settled by delivery of Shares, a cash payment determined by reference to the then-current Fair Market Value of Shares or a combination of Shares and such cash payment, as the Committee, in its sole discretion, shall determine, either by the terms of the Award Agreement or otherwise.

 

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8.6                               Forms of Restricted Stock Awards.  Each Participant who receives an Award of Shares of Restricted Stock shall be issued a stock certificate or certificates evidencing the Shares covered by such Award registered in the name of such Participant, which certificate or certificates may contain an appropriate legend.  The Committee may require a Participant who receives a certificate or certificates evidencing a Restricted Stock Award to immediately deposit such certificate or certificates, together with a stock power or other appropriate instrument of transfer, endorsed in blank by the Participant, with signatures guaranteed in accordance with the Exchange Act if required by the Committee, with the Secretary of the Company or an escrow holder as provided in the immediately following sentence.  The Secretary of the Company or such escrow holder as the Committee may appoint shall retain physical custody of each certificate representing a Restricted Stock Award until the Period of Restriction and any other restrictions imposed by the Committee or under the Award Agreement with respect to the Shares evidenced by such certificate expire or shall have been removed.  The foregoing to the contrary notwithstanding, the Committee may, in its discretion, provide that a Participant’s ownership of Shares of Restricted Stock prior to the lapse of the Period of Restriction or any other applicable restrictions shall, in lieu of such certificates, be evidenced by a “book entry” (i.e., a computerized or manual entry) in the records of the Company or its designated agent in the name of the Participant who has received such Award.  Such records of the Company or such agent shall, absent manifest error, be binding on all Participants who receive Restricted Stock Awards evidenced in such manner.  The holding of Shares of Restricted Stock by the Company or such an escrow holder, or the use of book entries to evidence the ownership of Shares of Restricted Stock, in accordance with this Section 8.6, shall not affect the rights of Participants as owners of the Shares of Restricted Stock awarded to them, nor affect the restrictions applicable to such shares under the Award Agreement or the Plan, including the Period of Restriction.

 

8.7                               Voting Rights.  Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction.  A Participant shall have no voting rights with respect to any Restricted Stock Units.

 

8.8                               Dividends and Other Distributions.  During the Period of Restriction, Participants holding Shares of Restricted Stock shall be credited with any cash dividends paid with respect to such Shares while they are so held, unless determined otherwise by the Committee and set forth in the Award Agreement.  The Committee may apply any restrictions to such dividends that the Committee deems appropriate; provided, however, that absent an express statement to the contrary in the Award Agreement, such dividends shall have the same Restriction Period as the underlying Shares subject to the applicable Award.  Except as set forth in the Award Agreement, in the event of (a) any adjustment as provided in Section 4.3, or (b) any Shares or securities are received as a dividend, or an extraordinary dividend is paid in cash, on Shares of Restricted Stock, any new or additional Shares or securities or any extraordinary dividends paid in cash received by a recipient of Restricted Stock shall be subject to the same terms and conditions, including the Period of Restriction, as relate to the original Shares of Restricted Stock.

 

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ARTICLE IX.
 PERFORMANCE UNITS, PERFORMANCE SHARES, AND CASH-BASED AWARDS

 

9.1                               Grant of Performance Units, Performance Shares and Cash-Based Awards.  Subject to the terms of the Plan, Performance Units, Performance Shares, and/or Cash-Based Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee, in accordance with the Plan.  A Performance Unit, Performance Share or Cash-Based Award entitles the Participant who receives such Award to receive Shares or cash upon the attainment of performance goals and/or satisfaction of other terms and conditions determined by the Committee when the Award is granted and set forth in the Award Agreement.  Such entitlements of a Participant with respect to his or her outstanding Performance Unit, Performance Share or Cash-Based Award shall be reflected by a bookkeeping entry in the records of the Company, unless otherwise provided by the Award Agreement.  The terms and conditions of such Awards shall be consistent with the Plan and set forth in the Award Agreement and need not be uniform among all such Awards or all Participants receiving such Awards.

 

9.2                               Value of Performance Units, Performance Shares and Cash-Based Awards.  Each Performance Unit shall have an initial value that is established by the Committee at the time of grant.  Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant.  Each Cash-Based Award shall have a value as shall be determined by the Committee.  The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units and Performance Shares and Cash-Based Awards that will be paid out to the Participant.

 

9.3                               Earning of Performance Units, Performance Shares and Cash-Based Awards.  Subject to the terms of the Plan, after the applicable Performance Period has ended, the holder of Performance Units, Performance Shares or Cash-Based Awards shall be entitled to receive payment on the number and value of Performance Units, Performance Shares or Cash-Based Awards earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals and/or other terms and conditions have been achieved or satisfied.  The Committee shall determine the extent to which any such pre-established performance goals and/or other terms and conditions of a Performance Unit, Performance Share or Cash-Based Award are attained or not attained following conclusion of the applicable Performance Period.  The Committee may, in its discretion, waive any such performance goals and/or other terms and conditions relating to any such Award not intended to qualify as Performance-Based Compensation.

 

9.4                               Form and Timing of Payment of Performance Units, Performance Shares and Cash-Based Awards.  Payment of earned Performance Units, Performance Shares and Cash-Based Awards shall be as determined by the Committee and as set forth in the Award Agreement.  Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units, Performance Shares and Cash-Based Awards in the form of cash or in Shares (or in a combination thereof) which have an aggregate Fair Market Value equal to the value of the earned Performance Units, Performance Shares or Cash-Based Awards as soon as practicable after the end of the Performance Period and following the Committee’s determination of actual performance against the performance goals and/or other terms and conditions

 

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established by the Committee.  Such Shares may be granted subject to any restrictions imposed by the Committee, including pursuant to Section 20.6.  The determination of the Committee with respect to the form of payment of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.

 

9.5                               Rights as a Shareholder.  A Participant receiving a Performance Unit, Performance Share or Cash-Based Award shall have the rights of a shareholder only as to Shares, if any, actually received by the Participant upon satisfaction or achievement of the terms and conditions of such Award and not with respect to Shares subject to the Award but not actually issued to such Participant.

 

ARTICLE X.
 OTHER STOCK-BASED AWARDS

 

10.1                        Other Stock-Based Awards.  The Committee may grant types of equity-based or equity-related Awards not otherwise described by the terms of the Plan (including the grant or offer for sale of unrestricted Shares), in such amounts (subject to Article IV) and subject to such terms and conditions, as the Committee shall determine. Such Other Stock-Based Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

 

10.2                        Value of Other Stock-Based Awards.  Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion, and any such performance goals shall be set forth in the applicable Award Agreement.  If the Committee exercises its discretion to establish performance goals, the number and/or value of Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which such performance goals are met.

 

10.3                        Payment of Other Stock-Based Awards.  Payment, if any, with respect to an Other Stock-Based Award shall be made in accordance with the terms of the Award, as set forth in the Award Agreement, in cash or Shares as the Committee determines.

 

ARTICLE XI.
 PERFORMANCE MEASURES

 

11.1                        Performance Measures.  At the discretion of the Committee, Performance Measures may be based on the total return to the Company’s shareholders, inclusive of dividends paid, during the applicable Performance Period (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), or upon attainment of one or more of the following criteria, whether 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: asset quality measures, asset turnover, assets under management, book value, cash flow (including funds from operations), comparison with various share market indices, credit quality, debt reduction, earnings (either in aggregate or on a per-share basis), earnings before or after either: interest, taxes, depreciation or amortization (EBITDA), economic value added, equity

 

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and/or value, fee income, financing and other capital raising transactions, gross or net income, gross or net operating margins, gross or net revenues, investment services earnings, investment services revenue, loan originations, loan production, loan growth, non-performing loans, market share, net income or earnings, net interest, net interest margin, net interest income, net interest spread, new trust assets, new trust fees, nonperforming assets to assets ratio, operating cash flow or operating cash flow per share revenue growth, operating efficiency, operating income or earnings, pre-tax income, product revenue growth, productivity ratios and measures (e.g. efficiency ratio), profit returns and margins, return on assets, return on capital, return on equity, return on investment, return on net assets, return on revenue, sales growth, share price (including growth in share price and total shareholder return), strategic business objectives (including objective project milestones) including: consisting of one or more objectives based on meeting specified market penetration or geographic business expansion goals, cost targets, customer satisfaction, employee satisfaction, management of employment practices and employee benefits, supervision of litigation, goals with respect to information technology, implementation or completion of critical projects, and goals relating to acquisitions or divestitures of subsidiaries, affiliates, branches, or joint ventures, strategic partnerships or transactions(including co-development, co-marketing, profit sharing, joint venture or other similar arrangements), Tier-1 common equity, total deposits, demand deposits, deposit growth, total loans, total trust assets, trust revenue, unusual or nonrecurring items as measured either against the annual budget or as a ratio to revenue, working capital, or year-end cash. Performance Measures may be established on a Company-wide basis or with respect to one or more business units or divisions or Subsidiaries.

 

When establishing Performance Measures, the Committee may exclude any or all “extraordinary items” as determined under U.S. generally accepted accounting principles including, without limitation, the charges or costs associated with restructurings of the Company, or any Affiliate or Subsidiary, discontinued operations, other unusual or non-recurring items, the cumulative effects of accounting changes or such other objective factors as the Committee deems appropriate. Except in the case of Awards to Covered Employees intended to be Performance-Based Compensation, the Committee may also adjust the Performance Measures 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 Committee may determine.

 

Such performance goals shall be established by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Code Section 162(m)(4)(C), or any successor provision thereto, and the regulations thereunder, for Performance-Based Compensation, and may be set forth in the applicable Award Agreement.  Any Performance Measures may be used to measure the performance of the Company, its Affiliates, and/or Subsidiaries as a whole or any business unit of the Company, its Affiliates, and/or Subsidiaries or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select any relevant Performance Measure as compared to various stock market indices, or growth rates, or trends.

 

11.2                        Evaluation of Performance.  Notwithstanding any other provision of the Plan, payment or vesting of any such Award that is intended to qualify as Performance-Based Compensation shall not be made until the Committee certifies in writing that the applicable

 

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Performance Measures and any other material terms of such Award were in fact satisfied, except as otherwise provided in this Article XI.

 

11.3                        Adjustment of Performance-Based Compensation.  Notwithstanding any provision of the Plan to the contrary, with respect to any Award that is intended to qualify as Performance-Based Compensation, (a) the Committee may adjust downwards, but not upwards, any amount payable, or other benefits granted, issued, retained and/or vested pursuant to such an Award on account of satisfaction of the applicable performance goals on the basis of such further considerations as the Committee in its discretion shall determine, and (b) the Committee may not waive the achievement of the applicable performance goals, except in the case of the Participant’s death, disability or a Change-in-Control.

 

11.4                        Committee Discretion.  In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval.  In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting of such Awards on performance measures other than those set forth in Section 11.1.

 

ARTICLE XII.
 DIVIDEND EQUIVALENTS

 

12.1                        Dividend Equivalents.  Unless otherwise provided by the Committee, no adjustment shall be made in the Shares issuable or taken into account under Awards on account of cash dividends that may be paid or other rights that may be issued to the holders of Shares prior to issuance of such Shares under such Award. The Committee may grant Dividend Equivalents based on the dividends declared on Shares that are subject to any Award. The Committee may also grant Dividend Equivalents based on the dividends that would have been declared on Restricted Stock Units or Performance Units had such Units been Shares of Restricted Stock or Performance Units, as the case may be. In the event that payment or settlement of an Award is contingent on achievement of performance goals or the lapse of a Period of Restriction, no Dividend Equivalents shall be paid on any unearned portion of the Award. Dividend Equivalents may be credited as of the dividend payment dates, during the period between the date the Award is granted and the date the Award becomes payable, terminates or expires. Dividend Equivalents may be subject to any limitations and/or restrictions determined by the Committee. Dividend Equivalents shall be converted to cash or additional Shares by such formula and at such time, and shall be paid at such times, as may be determined by the Committee. Unless the Award Agreement provides otherwise, Dividend Equivalents shall be paid to the Participant at least annually, not later than the fifteenth day of the third month following the end of the calendar year in which the Dividend Equivalents are credited (or, if later, the fifteenth day of the third month following the end of the calendar year in which the Dividend Equivalents are no longer subject to a substantial risk of forfeiture within the meaning of Code Section 409A). Any Dividend Equivalents that are accumulated and paid after the date specified in the preceding sentence shall be explicitly set forth in a separate arrangement that provides for the payment of the Dividend Equivalents at a time and in a manner that satisfies the

 

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requirements of Code Section 409A. No Dividend Equivalents shall relate to Shares underlying an Option or SAR unless such Dividend Equivalent rights are explicitly set forth as a separate arrangement and do not cause any such Option or SAR to be subject to Code Section 409A.

 

ARTICLE XIII.
 TRANSFERABILITY OF AWARDS

 

13.1                        Transferability of Awards.  No Awards may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant shall be exercisable during his or her lifetime only by such Participant.

 

ARTICLE XIV.
 RIGHTS OF PARTICIPANTS

 

14.1                        Rights or Claims.  No individual shall have any rights or claims under the Plan except in accordance with the provisions of the Plan and any applicable Award Agreement.  The grant of an Award under the Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in the Plan as being applicable to such type of Award, or to all Awards, or as are expressly set forth in the Award Agreement evidencing such Award.  Without limiting the generality of the foregoing, nothing contained in the Plan or in any Award Agreement shall be deemed to:

 

(a)                                 Give any Employee or Non-Employee Director the right to be retained in the service of the Company, an Affiliate and/or a Subsidiary, whether in any particular position, at any particular rate of compensation, for any particular period of time or otherwise;

 

(b)                                 Restrict in any way the right of the Company, an Affiliate and/or a Subsidiary to terminate, change or modify any Employee’s employment or any Non-Employee Director’s service as a Director at any time with or without Cause;

 

(c)                                  Confer on any Consultant any right of continued relationship with the Company, an Affiliate and/or a Subsidiary, or alter any relationship between them, including any right of the Company or an Affiliate or Subsidiary to terminate, change or modify its relationship with a Consultant;

 

(d)                                 Give any Employee, Non-Employee Director or Consultant the right to receive any bonus, whether payable in cash or in Shares, or in any combination thereof, from the Company, an Affiliate and/or a Subsidiary, nor be construed as limiting in any way the right of the Company, an Affiliate and/or a Subsidiary to determine, in its sole discretion, whether or not it shall pay any Employee, Non-Employee Director or Consultant bonuses, and, if so paid, the amount thereof and the manner of such payment; or

 

(e)                                  Give any Participant any rights whatsoever with respect to an Award except as specifically provided in the Plan and the Award Agreement.

 

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14.2                        Adoption of the Plan.  The adoption of the Plan shall not be deemed to give any Employee, Non-Employee Director or Consultant or any other individual any right to be selected as a Participant or to be granted an Award, or, having been so selected, to be selected to receive a future Award.

 

14.3                        Vesting.  Notwithstanding any other provision of the Plan, a Participant’s right or entitlement to exercise or otherwise vest in any Award not exercisable or vested at the time of grant shall only result from continued services as a Non-Employee Director or Consultant or continued employment, as the case may be, with the Company or any Subsidiary or Affiliate, or satisfaction of any other performance goals or other conditions or restrictions applicable, by its terms, to such Award.

 

14.4                        No Effects on Benefits.  Payments and other compensation received by a Participant under an Award are not part of such Participant’s normal or expected compensation or salary for any purpose, including calculating Termination, indemnity, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments under any laws, plans, contracts, arrangements or otherwise.  No claim or entitlement to compensation or damages arises from the termination of the Plan or diminution in value of any Award or Shares purchased or otherwise received under the Plan.

 

14.5                        One or More Types of Awards.  A particular type of Award may be granted to a Participant either alone or in addition to other Awards under the Plan.

 

ARTICLE XV.
 CHANGE-IN-CONTROL

 

15.1                        Treatment of Outstanding Awards.  In the event of a Termination on account of a Change-in-Control, unless otherwise specifically prohibited by any applicable laws, rules or regulations or otherwise provided in any applicable Award Agreement, as in effect prior to the occurrence of the Change-in-Control, specifically with respect to a Termination on account of a Change-in-Control:

 

(a)                                 In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Award Agreement or by resolution adopted prior to the occurrence of such Change-in-Control, that any Options, SARs and Other Stock-Based Awards (if applicable) which are outstanding shall become exercisable as determined by the Committee, notwithstanding anything to the contrary in the Award Agreement; provided, however, that if the surviving or successor corporation to the Company, or any parent or Subsidiary thereof, or any other corporation that is a party to the transaction resulting in the Change-in-Control, does not agree to assume, or substitute equivalent options or other awards for, such Options, SARs or Other Stock-Based Awards, or in the event of a liquidation of the Company, then immediately prior to the occurrence of such Change-in-Control, or as of such earlier date as the Committee may prescribe, any and all Options, SARs and Other Stock-Based Awards (if applicable) which are outstanding shall immediately become fully exercisable as to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the Award Agreement.

 

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(b)                                 In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Award Agreement or by resolution adopted prior to the occurrence of such Change-in-Control, that restrictions, performance goals or other conditions applicable to Restricted Stock Units, Shares of Restricted Stock and Other Stock-Based Awards previously awarded to Participants shall be canceled or deemed achieved, the Period of Restriction applicable thereto shall terminate, and restrictions on transfer, sale, assignment, pledge or other disposition applicable to any such Shares of Restricted Stock shall lapse, in each case, to the extent provided by the Committee, notwithstanding anything to the contrary in the Award Agreement; provided, however, that if the surviving or successor corporation to the Company, or any parent or Subsidiary thereof, or any other corporation that is a party to the transaction resulting in the Change-in-Control does not agree to assume, or substitute equivalent awards for, any such Awards, or in the event of a liquidation of the Company, then immediately prior to the occurrence of such Change-in-Control, any restrictions, performance goals or other conditions applicable to Restricted Stock Units, Shares of Restricted Stock and Other Stock-Based Awards previously awarded to Participants shall be immediately canceled or deemed achieved, the Period of Restriction applicable thereto shall immediately terminate, and all restrictions on transfer, sale, assignment, pledge or other disposition applicable to any such Shares of Restricted Stock shall immediately lapse, notwithstanding anything to the contrary in the Plan or the Award Agreement.

 

(c)                                  In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Award Agreement or by resolution adopted prior to the occurrence of such Change-in-Control, that any Awards which are outstanding shall, in whole or in part, immediately become vested and nonforfeitable; provided, however, that if the surviving or successor corporation to the Company, or any parent or Subsidiary thereof, or any other corporation that is a party to the transaction resulting in the Change-in-Control does not agree to assume, or substitute equivalent awards for, any such Awards, or in the event of a liquidation of the Company, then immediately prior to the occurrence of such Change-in-Control, all Awards which are outstanding shall immediately become fully vested and nonforfeitable.

 

(d)                                 In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Award Agreement or by resolution adopted prior to the occurrence of such Change-in-Control, that the target payment opportunities attainable under any outstanding Awards of Performance Units, Performance Shares, Cash-Based Awards and other Awards shall be deemed to have been fully or partially earned for any Performance Period(s), as determined by the Committee, immediately prior to the effective date of the Change-in-Control.  Notwithstanding the immediately preceding sentence to the contrary, if the surviving or successor corporation to the Company, or any parent or Subsidiary thereof, or any other corporation that is a party to the transaction resulting in the Change-in-Control does not agree to assume, or substitute equivalent awards for, any such Awards, or in the event of a liquidation of the Company, then the target payment opportunities attainable under any outstanding Awards of Performance Units, Performance Shares, Cash-Based Awards and other Awards shall be deemed to have been fully earned for the entire Performance Period(s) immediately prior to the effective date of the Change-in-Control, subject to a

 

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determination by the Committee, and (i) there shall be paid out to each Participant holding such an Award denominated in Shares, not later than five (5) days prior to the effective date of the Change-in-Control, a pro rata number of Shares (or the equivalent Fair Market Value thereof, as determined by the Committee, in cash) based upon an assumed achievement of all relevant targeted performance goals, unless actual performance exceeds the target, in which case actual performance shall be used, and upon the length of time within the Performance Period which has elapsed prior to the Change-in-Control, and (ii) Awards denominated in cash shall be paid pro rata to applicable Participants in cash within thirty (30) days following the effective date of the Change-in-Control, with the pro-ration determined as a function of the length of time within the Performance Period which has elapsed prior to the Change-in-Control, and based on an assumed achievement of all relevant targeted performance goals, unless actual performance exceeds the target, in which case actual performance shall be used.

 

(e)                                  In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Award Agreement applicable to any Award or by resolution adopted prior to the occurrence of such Change-in-Control, that any Award the payment or settlement of which was deferred or otherwise may be paid or distributed immediately prior to the Change-in-Control, except as otherwise provided by the Committee in accordance with Section 15.1(f); provided, however, that if the surviving or successor corporation to the Company, or any parent or Subsidiary thereof, or any other corporation that is a party to the transaction resulting in the Change-in-Control does not agree to assume, or substitute equivalent awards for, any such Awards, or in the event of a liquidation of the Company, then any such Award shall be paid or distributed immediately prior to such Change-in-Control, except as otherwise provided by the Committee in accordance with Section 15.1(f).

 

(f)                                   In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Award Agreement applicable to any Award or by resolution adopted prior to the occurrence of the Change-in-Control, that any outstanding Award shall be adjusted by substituting for each Share subject to such Award immediately prior to the transaction resulting in the Change-in-Control the consideration (whether stock or other securities of the surviving corporation or any successor corporation to the Company, or a parent or Subsidiary thereof, or that may be issuable by another corporation that is a party to the transaction resulting in the Change-in-Control) received in such transaction by holders of Shares for each Share held on the closing or effective date of such transaction, in which event the aggregate Option Price or Grant Price, as applicable, of the Award shall remain the same; provided, however, that if such consideration received in such transaction is not solely stock of a successor, surviving or other corporation, the Committee may provide for the consideration to be received upon exercise or payment of an Award, for each Share subject to such Award, to be solely stock or other securities of the successor, surviving or other corporation, as applicable, equal in Fair Market Value, as determined by the Committee, to the per-Share consideration received by holders of Shares in such transaction.

 

(g)                                  In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Award Agreement applicable to

 

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any Award or by resolution adopted prior to the occurrence of the Change-in-Control, that any outstanding Award (or portion thereof) shall be converted into a right to receive cash, on or as soon as practicable following the closing date or expiration date of the transaction resulting in the Change-in-Control in an amount equal to the highest value of the consideration to be received in connection with such transaction for one Share, or, if higher, the highest Fair Market Value of a Share during the thirty (30) consecutive business days immediately prior to the closing date or expiration date of such transaction, less the per-Share Option Price, Grant Price or outstanding unpaid purchase price, as applicable to the Award, multiplied by the number of Shares subject to such Award, or the applicable portion thereof.

 

(h)                                 The Committee may, in its discretion, provide that an Award can or cannot be exercised after, or will otherwise terminate or not terminate as of, a Change-in-Control.

 

15.2                        No Implied Rights; Other Limitations.  No Participant shall have any right to prevent the consummation of any of the acts described in Section 4.3 or 15.1 affecting the number of Shares available to, or other entitlement of, such Participant under the Plan or such Participant’s Award.  Any actions or determinations of the Committee under this Article XV need not be uniform as to all outstanding Awards, nor treat all Participants identically.  Notwithstanding any provision of Section 15.1 to the contrary, no actions of the Committee under Section 15.1 shall materially impair the previously accrued rights of a Participant under any outstanding Award without the written consent of such Participant unless otherwise provided in the applicable Award Agreement.  Notwithstanding the adjustments described in Section 15.1, in no event may any Option or SAR be exercised after ten (10) years from the date it was originally granted, and any changes to ISOs pursuant to this Article XV shall, unless the Committee determines otherwise, only be effective to the extent such adjustments or changes do not cause a “modification” (within the meaning of Section 424(h)(3) of the Code) of such ISOs or adversely affect the tax status of such ISOs.

 

15.3                        Termination, Amendment, and Modifications of Change-in-Control Provisions.  Notwithstanding any other provision of the Plan (but subject to the limitations of Section 15.1(h), the last sentence of Section 16.1 and Section 16.2) or any Award Agreement provision, the provisions of this Article XV may not be terminated, amended, or modified on or after the date of a Change-in-Control to materially impair any Participant’s Award theretofore granted and then outstanding under the Plan without the prior written consent of such Participant.

 

ARTICLE XVI.
 AMENDMENT, MODIFICATION, AND TERMINATION

 

16.1                        Amendment, Modification, and Termination.  The Board may, at any time and with or without prior Notice, amend, alter, suspend, or terminate the Plan, and the Committee may, to the extent permitted by the Plan, amend the terms of any Award theretofore granted, including any Award Agreement, in each case, retroactively or prospectively; provided, however, that no such amendment, alteration, suspension, or termination of the Plan shall be made which, without first obtaining approval of the shareholders of the Company (where such approval is necessary to satisfy (i) the then-applicable requirements of Rule 16b-3, (ii) any

 

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requirements under the Code relating to ISOs or for exemption from Section 162(m) of the Code, or (iii) any applicable law, regulation or rule (including the applicable regulations and rules of the SEC and any national securities exchange)), would:

 

(a)                                 except as is provided in Section 4.3, increase the maximum number of Shares which may be sold or awarded under the Plan or increase the maximum limitations set forth in Section 4.2;

 

(b)                                 except as is provided in Section 4.3, decrease the minimum Option Price or Grant Price requirements of Sections 6.3 and 7.2, respectively;

 

(c)                                  change the class of Persons eligible to receive Awards under the Plan;

 

(d)                                 change the Performance Measures set forth in Section 11.1;

 

(e)                                  extend the duration of the Plan or the period during which Options or SARs may be exercised under Section 6.4 or 7.5, as applicable; or

 

(f)                                   otherwise require shareholder approval to comply with any applicable law, regulation or rule (including the applicable regulations and rules of the SEC and any national securities exchange).

 

In addition, (A) no such amendment, alteration, suspension or termination of the Plan or any Award theretofore granted, including any Award Agreement, shall be made which would materially impair the previously accrued rights of a Participant under any outstanding Award without the written consent of such Participant, provided, however, that the Board may amend or alter the Plan and the Committee may amend or alter any Award, including any Agreement, either retroactively or prospectively, without the consent of the applicable Participant, (x) so as to preserve or come within any exemptions from liability under Section 16(b) of the Exchange Act, pursuant to the rules and releases promulgated by the SEC (including Rule 16b-3), and/or so that any Award that is intended to qualify as Performance-Based Compensation shall qualify for the performance-based compensation exception under Code Section 162(m) (or any successor provision), or (y) if the Board or the Committee determines in its discretion that such amendment or alteration either (I) is required or advisable for the Company, the Plan or the Award to satisfy, comply with or meet the requirements of any law, regulation, rule or accounting standard or (II) is not reasonably likely to significantly diminish the benefits provided under such Award, or that such diminishment has been or will be adequately compensated, and (B) notwithstanding any other provisions of the Plan, neither the Board nor the Committee may take any action:  (1) to amend the terms of an outstanding Option or SAR to reduce the Option Price or Grant Price thereof, cancel an Option or SAR and replace it with a new Option or SAR with a lower Option Price or Grant Price, or that has an economic effect that is the same as any such reduction or cancellation; or (2) to cancel an outstanding Option or SAR having an Option Price or Grant Price above the then-current Fair Market Value of the Shares in exchange for cash or the grant of another type of Award, without, in each such case, first obtaining approval of the shareholders of the Company of such action.

 

16.2                        Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Board or the Committee shall make adjustments in the terms and conditions of, and

 

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the criteria included in, Awards in recognition of unusual or nonrecurring events (including the events described in Section 4.3) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.  Any such adjustment with respect to an Award intended to be an ISO shall be made only to the extent consistent with such intent, unless the Board or the Committee determines otherwise, and any such adjustment that is made with respect to an Award that is intended to qualify as Performance-Based Compensation shall be made consistent with the intent that such Award qualify for the performance-based compensation exception under Code Section 162(m) (or any successor provision).  The determination of the Committee as to the foregoing adjustments shall be conclusive and binding on Participants under the Plan.

 

ARTICLE XVII.
 TAX WITHHOLDING AND OTHER TAX MATTERS

 

17.1                        Tax Withholding.  The Company and/or any Subsidiary or Affiliate are authorized to withhold from any Award granted or payment due under the Plan the amount of all Federal, state, local and non-United States taxes due in respect of such Award or payment and take any such other action as may be necessary or appropriate, as determined by the Committee, to satisfy all obligations for the payment of such taxes.  The recipient of any payment or distribution under the Plan shall make arrangements satisfactory to the Company, as determined in the Committee’s discretion, for the satisfaction of any tax obligations that arise by reason of any such payment or distribution.  The Company shall not be required to make any payment or distribution under or relating to the Plan or any Award until such obligations are satisfied or such arrangements are made, as determined by the Committee in its discretion.

 

17.2                        Withholding or Tendering Shares.  Without limiting the generality of Section 17.1, the Committee may in its discretion permit a Participant to satisfy or arrange to satisfy, in whole or in part, the tax obligations incident to an Award by:  (a) electing to have the Company withhold Shares or other property otherwise deliverable to such Participant pursuant to his or her Award and/or (b) tendering to the Company Shares owned by such Participant (or by such Participant and his or her spouse jointly) and purchased or held for the requisite period of time as may be required to avoid the Company’s or the Affiliates’ or Subsidiaries’ incurring an adverse accounting charge, based, in each case, on the Fair Market Value of the Shares on the payment date as determined by the Committee.  All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

17.3                        Restrictions.  The satisfaction of tax obligations pursuant to this Article XVII shall be subject to such restrictions as the Committee may impose, including any restrictions required by applicable law or the rules and regulations of the SEC, and shall be construed consistent with an intent to comply with any such applicable laws, rule and regulations.

 

17.4                        Special ISO Obligations.  The Committee may require a Participant to give prompt written Notice to the Company concerning any disposition of Shares received upon the exercise of an ISO within:  (i) two (2) years from the date of granting such ISO to such Participant or (ii) one (1) year from the transfer of such Shares to such Participant or (iii) such

 

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other period as the Committee may from time to time determine.  The Committee may direct that a Participant with respect to an ISO undertake in the applicable Award Agreement to give such written Notice described in the preceding sentence, at such time and containing such information as the Committee may prescribe, and/or that the certificates evidencing Shares acquired by exercise of an ISO refer to such requirement to give such Notice.

 

17.5                        Section 83(b) Election.  If a Participant makes an election under Section 83(b) of the Code to be taxed with respect to an Award as of the date of transfer of Shares rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a) of the Code, such Participant shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service.  Neither the Company nor any Subsidiary or Affiliate shall have any liability or responsibility relating to or arising out of the filing or not filing of any such election or any defects in its construction.

 

17.6                        No Guarantee of Favorable Tax Treatment.  Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Code Section 409A, the Company does not warrant that any Award under the Plan will qualify for favorable tax treatment under Code Section 409A or any other provision of federal, state, local, or non-United States law.  The Company shall not be liable to any Participant for any tax, interest, or penalties the Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan.

 

ARTICLE XVIII.
 LIMITS OF LIABILITY; INDEMNIFICATION

 

18.1                        Limits of Liability.

 

(a)                                 Any liability of the Company or a Subsidiary or Affiliate to any Participant with respect to any Award shall be based solely upon contractual obligations created by the Plan and the Award Agreement.

 

(b)                                 None of the Company, any Subsidiary, any Affiliate, any member of the Board or the Committee or any other Person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability, in the absence of bad faith, to any party for any action taken or not taken in connection with the Plan, except as may expressly be provided by statute.

 

(c)                                  Each member of the Committee, while serving as such, shall be considered to be acting in his or her capacity as a Director of the Company.  Members of the Board of Directors and members of the Committee acting under the Plan shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for gross negligence or willful misconduct in the performance of their duties.

 

(d)                                 The Company shall not be liable to a Participant or any other Person as to:  (i) the non-issuance of Shares as to which the Company has been unable to obtain from any regulatory body having relevant jurisdiction the authority deemed by the

 

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Committee or the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, and (ii) any tax consequence expected, but not realized, by any Participant or other Person due to the receipt, exercise or settlement of any Option or other Award.

 

18.2                        Indemnification.  Subject to the requirements of California law, each person who is or shall have been a member of the Committee and each delegate of such Committee shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be made a party or in which he or she may be involved in by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided that the Company is given an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it personally. The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or By-laws, by contract, as a matter of law, or otherwise.

 

ARTICLE XIX.
 SUCCESSORS

 

19.1                        Successors.  All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

 

ARTICLE XX.
 MISCELLANEOUS

 

20.1                        Drafting Context.  Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.  The words “Article,” “Section,” and “paragraph” herein shall refer to provisions of the Plan, unless expressly indicated otherwise. The words “include,” “includes,” and “including” herein shall be deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of similar import, unless the context otherwise requires.

 

20.2                        Severability.  In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

 

20.3                        Exercise and Payment of Awards.  An Award shall be deemed exercised or claimed when the Secretary of the Company or any other Company official or other person designated by the Committee for such purpose receives appropriate written Notice from a Participant, in form acceptable to the Committee, together with payment of the applicable Option

 

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Price, Grant Price or other purchase price, if any, and compliance with Article XVII, in accordance with the Plan and such Participant’s Award Agreement.

 

20.4                        No Effect on Other Plans.  Neither the adoption of the Plan nor anything contained herein shall affect any other compensation or incentive plans or arrangements of the Company or any Subsidiary or Affiliate, or prevent or limit the right of the Company or any Subsidiary or Affiliate to establish any other forms of incentives or compensation for their directors, officers, eligible employees or consultants or grant or assume options or other rights otherwise than under the Plan.

 

20.5                        Section 16 of Exchange Act and Code Section 162(m).  Unless otherwise stated in the Award Agreement, notwithstanding any other provision of the Plan, any Award granted to an Insider shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3) that are requirements for the application of such exemptive rule, and the Plan and the Award Agreement shall be deemed amended to the extent necessary to conform to such limitations.  Furthermore, notwithstanding any other provision of the Plan or an Award Agreement, any Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be subject to any applicable limitations set forth in Code Section 162(m) or any regulations or rulings issued thereunder (including any amendment to the foregoing) that are requirements for qualification as “other performance-based compensation” as described in Code Section 162(m)(4)(C), and the Plan and the Award Agreement shall be deemed amended to the extent necessary to conform to such requirements and no action of the Committee that would cause such Award not to so qualify shall be effective.

 

20.6                        Requirements of Law; Limitations on Awards.

 

(a)                                 The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

(b)                                 If at any time the Committee shall determine, in its discretion, that the listing, registration and/or qualification of Shares upon any securities exchange or under any state, Federal or non-United States law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of Shares hereunder, the Company shall have no obligation to allow the grant, exercise or payment of any Award, or to issue or deliver evidence of title for Shares issued under the Plan, in whole or in part, unless and until such listing, registration, qualification, consent and/or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Committee.

 

(c)                                  If at any time counsel to the Company shall be of the opinion that any sale or delivery of Shares pursuant to an Award is or may be in the circumstances unlawful or result in the imposition of excise taxes on the Company or any Subsidiary or Affiliate under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery,

 

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or to make any application or to effect or to maintain any qualification or registration under the Securities Act, or otherwise with respect to Shares or Awards and the right to exercise or payment of any Option or Award shall be suspended until, in the opinion of such counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company or any Subsidiary or Affiliate.

 

(d)                                 Upon termination of any period of suspension under this Section 20.6, any Award affected by such suspension which shall not then have expired or terminated shall be reinstated as to all Shares available before such suspension and as to the Shares which would otherwise have become available during the period of such suspension, but no suspension shall extend the term of any Award.

 

(e)                                  The Committee may require each person receiving Shares in connection with any Award under the Plan to represent and agree with the Company in writing that such person is acquiring such Shares for investment without a view to the distribution thereof, and/or provide such other representations and agreements as the Committee may prescribe.  The Committee, in its absolute discretion, may impose such restrictions on the ownership and transferability of the Shares purchasable or otherwise receivable by any person under any Award as it deems appropriate.  Any such restrictions shall be set forth in the applicable Award Agreement, and the certificates evidencing such Shares may include any legend that the Committee deems appropriate to reflect any such restrictions.

 

(f)                                   An Award and any Shares received upon the exercise or payment of an Award shall be subject to such other transfer and/or ownership restrictions and/or legending requirements as the Committee may establish in its discretion and may be referred to on the certificates evidencing such Shares, including restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.

 

20.7                        Participants Deemed to Accept Plan.  By accepting any benefit under the Plan, each Participant and each Person claiming under or through any such Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Board, the Committee or the Company, in any case in accordance with the terms and conditions of the Plan.

 

20.8                        Governing Law.  The Plan and all Award Agreements and other agreements hereunder shall be construed in accordance with and governed by the laws of the state of California, without giving effect to the choice of law principles thereof, except to the extent superseded by applicable United States federal law.  Unless otherwise provided in the Award Agreement, Participants are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of California, to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.

 

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20.9                        Plan Unfunded.  The Plan shall be unfunded.  The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of Shares or the payment of cash upon exercise or payment of any Award.  Proceeds from the sale of Shares pursuant to Options or other Awards granted under the Plan shall constitute general funds of the Company.

 

20.10                 No Fractional Shares.  An Option or other Award shall not be exercisable with respect to a fractional Share.  No fractional Shares shall be issued upon the exercise or payment of an Option or other Award.

 

20.11                 Clawback.  Any Awards under the Plan are subject to any policy, whether in existence as of the Effective Date or later established by the Company that provides for the clawback or recovery of amounts paid to Participants under circumstances requiring clawback or recovery as set forth in the policy.  Such policy will apply even if the Participant is not subject to the policy when the Award was granted or settled but the Participant later becomes subject to the policy.  The Committee will make any determinations for clawback or recovery in its sole discretion and in accordance with any applicable law or regulation.

 

34Exhibit 10.20

 

LUTHER BURBANK CORPORATION AND SUBSIDIARIES

PHANTOM STOCK PLAN

 

This LUTHER BURBANK CORPORATION AND SUBSIDIARIES PHANTOM STOCK PLAN (the “Plan”) is adopted as of the 1st day of January 2011, by Luther Burbank Corporation, a California corporation located in Santa Rosa, California, and its subsidiaries (the “Company”).

 

The purpose of this Plan is to encourage executives, key officers, and directors to remain with the Company, and reward such participating individuals for their contributions to the long-term success of the Company.  The Company will pay all benefits under this Plan from its general assets.  This Plan shall be unfunded for tax purposes.

 

ARTICLE 1
 DEFINITIONS

 

Whenever used in this Plan, the following words and phrases shall have the meanings specified:

 

Section 1.1.                                 “Administrator” means the Company in its capacity as the Administrator of the Plan, or such person or committee as may be exercising the authority of the Administrator as provided in Section 7.1.

 

Section 1.2.                                 “Award” means the award of shares of Phantom Stock, if any, that shall be the basis for any benefits under the Plan.

 

Section 1.3.                                 “Award Agreement” means the form established and approved by the Administrator that designates the Award amount granted to a Participant and any performance or service vesting criteria necessary for the Participant to receive an Award.

 

Section 1.4.                                 “Award Date” means the date as of which Awards are granted to a Participant, as defined in the Participant’s Award Agreement.

 

Section 1.5.                                “Award Price” for Award(s) granted on the Award Date is equal to Luther Burbank Corporation’s Current Book Value as defined in Section 1.7 divided by the number of total common shares outstanding as of the Award Date.

 

Section 1.6.                                 “Beneficiary Designation Form” means the form established and approved from time to time by the Administrator that a Participant completes, signs and returns to the Administrator to designate one or more beneficiaries.

 

Section 1.7.                                “Book Value” as of any date means the book value of Luther Burbank Corporation as of the most recent valuation date established by the Administrator, which is equal to the Company’s total equity capital on such date plus any Discretionary Dividends paid since December 31, 2010.

 

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Section 1.8.                                 “Benefit Payment Election Form” means the form established and approved by the Administrator that a Participant completes, signs and returns to the Administrator to designate the timing of normal benefit payments under the Plan.

 

Section 1.9.                                 “Board” means elected or appointed members of the Board of Directors of the Company, as constituted from time to time.

 

Section 1.10.                          “Cause” means the Participant’s Separation from Service for any of the following, as determined by the Administrator:

 

(a)                                 Gross negligence or gross neglect of duties;

 

(b)                                 Commission of a felony or of a misdemeanor involving moral turpitude;

 

(c)                                  Actions adverse to the interests of the Company, including but not limited to fraud, disloyalty, dishonesty, or willful violation of any law or significant Company policy committed in connection with the Participant’s employment; or

 

(d)                                 An order for removal of the Participant by the Company’s banking regulators.

 

Section 1.11.                         “Change in Control” means a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as such change is defined in Section 409A of the Code and regulations thereunder.

 

Section 1.12.                         “Code” means the Internal Revenue Code of 1986, as amended.

 

Section 1.13.                         “Committee” means Board elected or Board appointed members of the Compensation Committee of the Company, as constituted from time to time.

 

Section 1.14.                         “Default Payment Date” means the last day of the third month subsequent to the five (5) year anniversary of the Award Date.

 

Section 1.15.                         “Disability” means a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company.  Medical determination of Disability may be made, in the Administrator’s discretion, by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Company, or by such other method as the Administrator may determine.  The Participant must submit proof of Disability in such form as the Administrator may require.

 

Section 1.16.                         “Discretionary Dividends” means any amounts paid to Luther Burbank Corporation’s shareholders not intended for the Subchapter S federal and franchise tax obligations of such shareholders as a result of the Company’s consolidated taxable income for any year.

 

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Section 1.17.                         “Participant” means an employee or director of the Company who has been selected to participate in the Plan and who has completed any forms required for participation by the Administrator.

 

Section 1.18.                         “Payment Date” means, for each Award, the later of the Default Payment Date or the date designated by the Participant on the Benefit Payment Election Form.  Awards are subject to a vesting schedule as defined in the Award Agreement.

 

Section 1.19.                         “Phantom Stock” means a contractual right to receive an amount in cash equal to one (1) share of Phantom Stock, as determined in accordance with Article 4 of the Plan, subject to a vesting schedule defined in the Award Agreement.

 

Section 1.20.                         “Phantom Stock Account” means an entry on the records of the Company equal to the total number of Phantom Stock shares credited to the Participant for a given Plan Year in accordance with Section 4.1 of this Plan.  The value of the Phantom Stock Account shall be determined in accordance with Section 1.21.

 

Section 1.21.                         “Phantom Stock Account Value” means the aggregate value, including any appreciation or depreciation, of all Phantom Stock shares credited to the Participant’s Phantom Stock Account.  Except in the event of a Change in Control or a Separation from Service initiated by the Company without Cause within ninety (90) days prior to a Change in Control, the value of each Phantom Stock share shall be equivalent to the Book Value of one (1) share of Phantom Stock as of the last day of the fiscal quarter preceding the valuation date.  In the event of a Change in Control or a Separation from Service initiated by the Company without Cause within ninety (90) days prior to a Change in Control, the value of each Phantom Stock share shall be equivalent to the sales price per one (1) share of Phantom Stock, as determined by the terms of the Change in Control, plus any Discretionary Dividends per share paid since December 31, 2010.

 

Section 1.22.                         “Plan Year” means a twelve-month period commencing on the Award Date and ending on the day that is 12 months after this date.

 

Section 1.23.                         “Separation from Service” means that the Participant’s service, as an employee, director, or independent contractor, to the Company and all members of any controlled group as defined in Section 414(b) or (c) of the Code to which the Company belongs, has terminated for any reason, other than by reason of a leave of absence approved by the Company or the death of the Participant.  For an employee, whether a termination of employment—and therefore Separation from Service—takes place is determined in accordance with the requirements of Code Section 409A based on the facts and circumstances surrounding the termination of the Participant’s employment and whether the Company and the Participant intended for the Participant to provide significant services for the Company following such termination.  For purposes of this Plan, a Participant terminates employment as of the date the Company and the Participant reasonably anticipate that (i) no further services will be performed by the Participant in any capacity including as a Director of the Company or other independent contractor, or (ii) that the level of bona fide services the Participant will perform (whether as a employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding thirty six (36) month period (or the employee’s entire period of employment if shorter).

 

The Participant’s employment relationship will be treated as continuing intact while the Participant is on military leave, sick leave or other bona fide leave of absence if the period of such leave of

 

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absence does not exceed six (6) months, or if longer, so long as the Participant’s right to reemployment with the Company is provided either by statute or by contract.  If the period of leave exceeds six (6) months and there is no right to reemployment, a Separation from Service will be deemed to have occurred as of the first date immediately following such six (6) month period.

 

ARTICLE 2
 ELIGIBILITY, PARTICIPATION AND AWARDS

 

Section 2.1.                                 Selection by Administrator.  Participation in the Plan shall be limited to a select group of employees and directors of the Company, as determined by the Administrator.  Each Participant will be notified in writing that he or she has been selected as a Participant in the Plan.  In no event shall any employee or director be considered a Participant, or have any rights under this Plan, until he or she has been notified in writing of his or her selection, and has received an Award Agreement.

 

Section 2.2.                                 Enrollment Requirements.  As a condition to participation, each selected Participant shall complete, execute and return to the Administrator an Award Agreement, a Beneficiary Designation Form, and a Beneficiary Payment Election Form.  In addition, the Administrator shall establish from time to time such other enrollment and eligibility requirements as it determines in its sole discretion are necessary.

 

Section 2.3.                                 Eligibility; Commencement of Participation.  Provided each Participant in the Plan has met all enrollment requirements set forth in this Plan and required by the Administrator, that Participant will be covered by the Plan and will be eligible to receive benefits at the time and in the manner provided hereunder, subject to the provisions of the Plan.

 

Section 2.4.                                 Termination of Participation and/or Eligibility.  If the Administrator determines that a Participant no longer qualifies as a member of a select group of management, or as a highly compensated employee, or as a director or, in its discretion, decides that the Participant should no longer be eligible to participate in the Plan, the Administrator shall have the right, in its sole discretion, to terminate the Participant’s participation in the Plan.  In such event, all Awards previously granted to such Participant shall remain in effect in accordance with their terms, but the Participant shall be ineligible to receive any further Awards.

 

Section 2.5.                                 Awards.  All Awards will be evidenced by a signed Award Agreement in such form as the Administrator shall determine.

 

Section 2.6.                                 Vesting in Awards.  Subject to Sections 5.3, 5.4, and 8.2, the terms of vesting will be defined in each Participant’s Award Agreement.

 

ARTICLE 3
 EARNING OF AWARDS

 

Section 3.1.                                Awards.  Awards, if any, are provided at the discretion of the Administrator and will be based on Company and/or individual performance criteria that have been pre-established and communicated to Participants via the Award Document.  As the Plan develops and priorities change, the Administrator, in its discretion, may revise performance measures and goals.  In addition, the Administrator may provide discretionary Awards without any associated performance conditions.

 

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Section 3.2.                                Performance-Based Awards.  For Awards that are made subject to performance conditions, an Award range will be set by the Administrator for each Participant and set forth in the Award Document.

 

Section 3.3.                                Clawback.  If the Administrator determines, in its discretion, that a Participant received an Award that is based on materially inaccurate financial statements, reviews, gains, or any other materially inaccurate criteria used in determining or setting such retention Award or incentive compensation, then the Administrator shall determine the amount of any such Award that was paid as a result of such materially inaccurate financial statements, reviews, gains, or other materially inaccurate criteria (the “Overpayment Amount”).  The Administrator shall, promptly after making such determination, send the Participant a notice of recovery (“Recovery Notice”) which shall specify the Overpayment Amount and the terms for prompt repayment thereof.  The Company shall have the right to offset the Overpayment Amount against any other Award, or any other amount payable to the Participant, to the maximum extent permitted by law.

 

ARTICLE 4

PHANTOM STOCK ACCOUNT

 

Section 4.1.                                Establishing and Crediting.  The Company shall establish a Phantom Stock Account on its books for the Participant and shall credit to the Phantom Stock Account amounts as determined by the following:

 

Section 4.2.                                Awards.  An Award amount value will be determined for each Participant by the Administrator.  The Administrator has adopted an equity valuation formula to determine the number of Phantom Stock shares needed to equal the Award amount for each Participant.

 

The example below shows how many shares are needed to equal a value of $30,000 for an Award granted as of January 1, 2011.

 

	
Award
    	
 
    	
$30,000
    	
 
    
	
Book Value of   Luther Burbank Corporation at 12/31/2010
    	
 
    	
$257,452,433
    	
 
    
	
Total Common   Shares Outstanding
    	
 
    	
210,000
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Award Price   (“Book Value”) per Phantom Stock Share
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
$257,452,433 / 210,000   = $1,225.96
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Number of   Phantom Stock shares Awarded $30,000 / $1,225.96
    	
 
    	
24.471
    	
 
    

 

As demonstrated in the formula above, the Company would award 24.471 shares of Phantom Stock to equal a base value of $30,000.  All awarded shares will be rounded to the nearest third decimal (thousandths) place. The Participant will receive the aggregate value plus or minus the appreciation or depreciation on such shares as determined in Section 1.21.  The Committee shall have the right to change the method of determining Award values with respect to new Awards at any time.

 

Section 4.3.                                Extraordinary Items.  In the event of any change in the outstanding shares of Luther Burbank Corporation’s common stock that occurs after the establishment by the Company of the Participant’s Phantom Stock Account by reason of a stock dividend or split, public offering, recapitalization, merger, consolidation, combination, exchange of shares where in each case shares are issued with or without additional consideration and as to which the Company is a surviving

 

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corporation, or other similar corporate change, the number, kind, value and price of Phantom Stock shares subject to this Plan to the extent then outstanding shall be adjusted by the Company, whose determination shall be conclusive.

 

Section 4.4.                                 Valuation.  The Phantom Stock Account Value is defined in Section 1.21.  In no event will the value of the Phantom Stock Account due to a Participant under this Plan increase or decrease after the Awards are 100% vested, except for an increase due to interest on deferred payment amounts or an increase in the event of a Change in Control.  If any portion of the Phantom Stock Account is payable after the Default Payment Date, the Phantom Stock Account Value with respect to such portion as of the Default Payment Date shall not be revalued, but shall be credited with interest at the end of each month until paid at a rate equal to the Company’s one-year jumbo certificate of deposit account, or such other rate as the Administrator may determine, except in the case of a Change in Control.

 

Section 4.5.                                Statement of Accounts.  The Company shall use reasonable efforts to provide to each Participant, within a reasonable time following the Plan Year of the Award and immediately prior to the payment of any benefits, a statement setting forth the balance in the Phantom Stock Account; provided that the failure to provide such statement shall not result in any liability.

 

Section 4.6.                                 Accounting Device Only.  The Phantom Stock Account is solely a device for measuring amounts to be paid under this Plan.  The Phantom Stock Account is not a trust fund of any kind.  The Participant is a general unsecured creditor of the Company for the payment of benefits and any assets set aside by the Company to pay the benefits hereunder shall remain the Company’s assets until paid.  The benefits represent the mere Company promise to pay such vested benefits.  The Participant’s rights are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Participant’s creditors.

 

ARTICLE 5
 BENEFITS

 

Section 5.1.                                 Normal Benefit.  Subject to Article 6, other provisions of this Article 5 and the Benefit Payment Election Form, upon the Payment Date for each Award, the Company shall pay to the Participant the value of the Phantom Stock Account for such Award in a lump sum in cash on the Payment Date for such Award.

 

Section 5.1.1                         Election of Payment Date. Each Participant may elect a Payment Date for each Award that is later than the Default Payment Date, or may elect payment in installments commencing on the Payment Date (which installments shall be considered a single payment for purposes of Section 409A)  by specifying the Payment Date or payment method on the Benefit Payment Election Form.  Such Payment Date and method must be specified not later than one of the following dates:

 

(a)                                 The last day of the year prior to the year in which the Award is granted;

 

(b)                                 In the case of a newly hired employee who has never previously been eligible to participate in the Plan or in any other deferred compensation plan that is required to be aggregated with the Plan under Section 409A, the date on which the Award is granted;

 

6

 

(c)                                  The date that is not later than thirty (30) days after the date the Award is granted, and which is twelve (12) months before the earliest date on which any portion of the Award can vest, other than by reason of death, Disability, or Change in Control; or

 

(d)                                 At least one year prior to the Default Payment Date, provided that the Payment Date elected is at least five (5) years later than the Default Payment Date.

 

All such elections shall be made in accordance with procedures specified by the Administrator, and subject to such conditions as the Administrator may require.  After the first day of the year to which such election relates, the election shall be irrevocable and may not be subsequently modified in any respect, except as otherwise provided in Section 5.7.

 

Section 5.2.                                 Separation from Service.  Upon Separation from Service other than due to a Change in Control, the Company shall pay to the Participant the vested portion of the Phantom Stock Account within sixty (60) days following such Separation from Service in a lump sum in cash.  All unvested amounts shall be forfeited.  Notwithstanding any provision of this Plan to the contrary, if the Participant’s Separation from Service is for Cause, the Company shall not pay any benefit under this Plan and the Participant’s Phantom Stock Account shall be immediately forfeited.

 

Section 5.3.                                Change in Control.  Upon a Change in Control while the Participant is employed, the Participant shall become one hundred percent (100%) vested in the Phantom Stock Account, and the value of any award not yet distributed at the time of a Change in Control will be equal to the value of the Phantom Stock Account at that time as defined in Article 4.  The Participant’s Phantom Stock Account shall be distributed in a lump sum within sixty (60) days following the Change in Control.  If a Participant is terminated by the Company without Cause, and a Change in Control occurs within ninety (90) days after the Separation from Service, the Participant shall be paid the excess, if any, of the full value of the Participant’s Phantom Stock Account, taking into account the Change in Control and including any portion that was forfeited upon Separation from Service, over the amount that was paid or payable to the Participant upon the Separation from Service.  Such amount shall be paid to the Participant in a lump sum within sixty (60) days after the Change in Control; provided that if the amount payable upon the Separation from Service has not been paid at the time of the Change in Control, it shall be paid in accordance with Section 5.2 and 5.5.

 

Section 5.4.                                 Death or Disability Benefit.  Upon Separation from Service due to death or Disability of the Participant, the Participant shall become one hundred percent (100%) vested in the Phantom Stock Account.  The Company shall pay to the Participant, or the Participant’s designated beneficiary as the case may be, the Phantom Stock Account in a lump sum within sixty (60) days following Separation from Service due to Disability or the Participant’s death.

 

Section 5.5.                                Restriction on Timing of Distribution.  Notwithstanding any provision of this Plan to the contrary, if the Company, or any member of a controlled group as defined in Code Section 414(b) or (c) of which the Company is a member, has any class of stock that is publicly traded on an established securities market or otherwise, and if the Participant is considered a “specified employee,” as defined in Section 409A of the Code, distribution under Sections 5.2 or 5.4 (for Disability only) may not commence earlier than six (6) months after the date of Separation from Service, or if earlier on the date of the Participant’s death.  Rather, any distribution which would otherwise be paid to the Participant during such period shall be accumulated and paid to the

 

7

 

Participant in a lump sum on the first day of the seventh month following the Separation from Service.  All subsequent distributions shall be paid in the manner specified.

 

Section 5.6.                                 Distributions Upon Income Inclusion Under Code Section 409A. If any amount is required to be included in income by any Participant prior to receipt due to a failure of this Plan to meet the requirements of Code Section 409A, the Participant may petition the Administrator for a distribution of that portion of the amount the Company has accrued with respect to the Company’s obligations hereunder that is required to be included in the Participant’s income.  Upon the grant of such a petition, which grant shall not be unreasonably withheld, the Company shall distribute to the Participant immediately available funds in an amount equal to the portion of the amount the Company has accrued with respect to the Company’s obligations hereunder required to be included in income as a result of the failure of this Plan to meet the requirements of Code Section 409A, within ninety (90) days.  Such a distribution shall affect and reduce the Participant’s benefits to be paid under this Plan.

 

Section 5.7.                                 Change in Form or Timing of Distributions.  For distribution of benefits hereunder, a Participant and the Administrator may, subject to the terms of Article 8, amend any Award Agreement to delay the timing or change the form of distribution of the Award.  Any such amendment:

 

(a)                                 may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;

(b)                                 if such amendment changes the Payment Date, must be made at least twelve (12) months prior to the Payment Date and must defer the Payment Date by at least five (5) years;

(c)                                  if such amendment changes the time at which an amount is paid by reason of a Separation from Service (including a Separation from Service due to Disability), or a Change in Control, such amendment must defer the payment until at least five (5) years from the date on which the payment would otherwise have been made, and if the Separation from Service or Change in Control occurs within twelve (12) months after the date of the amendment, the amendment shall be null and void;

(d)                                 if such amendment changes the time at which an amount is paid by reason of the Participant’s death, and the Participant dies within twelve (12) months after the date of the amendment, the amendment shall be null and void;

(e)                                  if the amendment provides for payment in installments in lieu of a lump sum, must be made at least twelve (12) months prior to the Payment Date and must defer the Payment Date by at least five (5) years ; and

(f)                                   must in all other respects comply with Code Section 409A and the regulations thereunder, as determined by the Administrator in its sole discretion.

 

ARTICLE 6
 BENEFICIARIES

 

Section 6.1.                                 Beneficiary Designations.  The Participant shall designate a beneficiary by filing a written designation with the Company.  The Participant may revoke or modify the designation at any time by filing a new designation.  However, designations will only be effective if signed by the Participant and accepted by the Company during the Participant’s lifetime.  The Participant’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Participant, or if the Participant names a spouse as beneficiary and the marriage is

 

8

 

subsequently dissolved.  If the Participant dies without a valid beneficiary designation, all payments shall be made to the personal representative of the Participant’s estate.

 

Section 6.2.                                 Facility of Payment.  If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person, or to such other person as the Administrator may determine in its sole discretion.  The Administrator may require proof of incompetency, minority or guardianship as it may deem appropriate prior to distribution of the benefit.  Such distribution shall completely discharge the Company from all liability with respect to such benefit.

 

ARTICLE 7
 ADMINISTRATION; CLAIMS AND REVIEW PROCEDURES

 

Section 7.1.                                 Administration.  The Company shall be the Administrator of the Plan, and shall have full authority and discretion to administer and interpret the Plan, to select Participants, to grant Awards and determine the terms of Awards and Award Agreements, to adopt rules and procedures necessary or appropriate for the administration of the Plan, to interpret and construe all terms of the Plan and Award Agreements, and to make all determinations related to eligibility to participate in the Plan, and the grant, valuation, payment, and interpretation of Awards.  All determinations made in good faith by the Administrator shall be final and binding on all persons.  The authority of the Company as Administrator shall be exercised by the Board or by such committee to whom the Board may delegate such authority.  In the absence of any other delegation, such authority shall be exercised by the Committee.  The authority of the Administrator may also be exercised with regard to administrative and ministerial matters by the senior officer of the Company responsible for human resources matters or persons acting under his or her authority, subject to the oversight of the Committee.

 

Section 7.2.                                 Claims Procedure.  A Participant or beneficiary (“claimant”) who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

 

Section 7.2.1                          Initiation — Written Claim.  The claimant initiates a claim by submitting to the Administrator a written claim for the benefits.

 

Section 7.2.2                         Timing of Administrator Response.  The Administrator shall respond to such claimant within 90 days after receiving the claim.  If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required.  The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

 

Section 7.2.3                         Notice of Decision.  If the Administrator denies part or all of the claim, the Administrator shall notify the claimant in writing of such denial.  The Administrator shall write the notification in a manner calculated to be understood by the claimant.  The notification shall set forth:

 

(a)                                 The specific reasons for the denial,

 

9

 

(b)                                 A reference to the specific provisions of the Plan on which the denial is based,

(c)                                  A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed; and

(d)                                 An explanation of the Plan’s review procedures and the time limits applicable to such procedures.

 

Section 7.3.                                Review Procedure.  If the Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Administrator of the denial, as follows:

 

Section 7.3.1                         Initiation — Written Request.  To initiate the review, the claimant, within 60 days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.

 

Section 7.3.2                         Additional Submissions — Information Access.  The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim.  The Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as determined by the Administrator) to the claimant’s claim for benefits.

 

Section 7.3.3                         Considerations on Review.  In considering the review, the Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

 

Section 7.3.4                         Timing of Administrator Response.  The Administrator shall respond in writing to such claimant within 60 days after receiving the request for review.  If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required.  The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

 

Section 7.3.5                         Notice of Decision.  The Administrator shall notify the claimant in writing of its decision on review.  The Administrator shall write the notification in a manner calculated to be understood by the claimant.  The notification shall set forth:

 

(a)                                 The specific reasons for the denial,

(b)                                 A reference to the specific provisions of the Plan on which the denial is based, and

(c)                                  A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as determined by the Administrator) to the claimant’s claim for benefits.

 

ARTICLE 8
 AMENDMENTS AND TERMINATION

 

Section 8.1.                                Amendments.                         This Plan may be amended, altered, or suspended, in the sole discretion of and by action of the Administrator.  No amendment shall reduce the balance in any

 

10

 

Participant’s Phantom Stock Account without the Participant’s consent, but amendments may change the time at which Phantom Stock Accounts are distributed, subject to Section 5.7.  Any procedures or rules adopted by the Administrator with respect to the administration of the Plan that are inconsistent with any provision of the Plan that is administrative, technical or ministerial in nature shall be deemed an amendment to the Plan to the extent of the inconsistency.  The Administrator may amend outstanding Award Agreements without prior consent of the Participants to the extent necessary to comply with any applicable law, including any law governing the payment of compensation by financial institutions or Section 409A of the Code.

 

Section 8.2.                                Termination.  The Plan may be terminated at any time by action of the Company and no termination shall reduce the balance in any Participant’s Phantom Stock Account without the Participant’s consent.  Upon termination of the Plan under this Article, all outstanding Awards shall remain in effect and be paid in accordance with their terms; provided that the Company may, to the extent permitted by Code Section 409A, provide for some or all Awards to be fully vested and paid in full as a result of the termination.

 

ARTICLE 9
 MISCELLANEOUS

 

Section 9.1.                                 Binding Effect.  This Plan shall bind the Participant and the Company, and their beneficiaries, survivors, executors, successors, administrators and transferees.

 

Section 9.2.                                 No Guarantee of Employment.  This Plan is not an employment policy or contract.  It does not give the Participant the right to remain an employee or director of the Company, nor does it interfere with the Company’s right to discharge the Participant.  It also does not require the Participant to remain an employee or director nor interfere with the Participant’s right to terminate employment or appointment at any time.

 

Section 9.3.                                 Non-Transferability.  Benefits under this Plan cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

 

Section 9.4.                                 Reorganization.  All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of, including but not limited to merger or consolidation into or with another company, reorganization, sale of substantially all of its assets to another company, firm, or person.  Upon the occurrence of such event, the term “Company” as used in this Plan shall be deemed to refer to the successor or survivor company.

 

Section 9.5.                                 Tax Withholding.  The Company shall withhold any taxes including but not limited to FICA and taxes owed under Code Section 409A from the benefits provided under this Plan.  The Company’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authorities.  The Company shall satisfy all applicable reporting requirements, including those under Code Section 409A.

 

Section 9.6.                                 Applicable Law.  The Plan and all rights hereunder shall be governed by the laws of the State of California, except to the extent preempted by the laws of the United States of America.

 

11

 

Section 9.7.                                 Unfunded Arrangement.  The Participant and beneficiary are general unsecured creditors of the Company for the payment of vested benefits under this Plan.  The benefits represent the mere promise by the Company to pay such benefits.  The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors.  Any insurance on the Participant’s life is a general asset of the Company to which the Participant and beneficiary have no preferred or secured claim.

 

Section 9.8.                                 Entire Agreement.  This Plan constitutes the entire agreement between the Company and the Participant as to the subject matter hereof.  No rights are granted to the Participant by virtue of this Plan other than those specifically set forth therein.

 

Section 9.9.                                 Gender and Number.  Except where otherwise indicated by the context, any masculine term used herein shall include the feminine, the plural shall include the singular and the singular shall include the plural.

 

Section 9.10.                          Severability.  If any part of the Plan is declared by any suit or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any other part of the plan.  Any Section or part of a Section so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

 

Section 9.11.                         Compliance with Section 409A.  This Plan shall be interpreted and administered consistent with Code Section 409A.

 

IN WITNESS WHEREOF, the Company signs this Plan.

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
LUTHER   BURBANK CORPORATION AND SUBSIDIARIES
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
Title:   Chairman & CEO
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
Title:   President & COO
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
Title:   Senior Vice President & CFO
    

 

12

 

LUTHER BURBANK CORPORATION AND SUBSIDIARIES
 PHANTOM STOCK PLAN

 

BENEFICIARY DESIGNATION FORM

 

I designate the following as beneficiary of any death benefits under this Plan:

 

Primary:

 

	
 
    
	
 
    
	
 
    

 

Contingent:

 

	
 
    
	
 
    
	
 
    

 

Note:                  To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

 

I understand that I may change these beneficiary designations by filing a new written designation with the Company.  I further understand that pursuant to Section 6.1 of the Plan the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

 

	
Signature
    	
 
    	
 
    
	
 
    	
 
    
	
Printed   Name:
    	
 
    	
 
    
	
 
    	
 
    
	
Date
    	
 
    	
 
    
					

 

Accepted by the Administrator this     day of                     , 20  .

 

	
By
    	
 
    	
 
    
	
 
    	
 
    
	
Title
    	
 
    	
 
    
				

 

 

LUTHER BURBANK CORPORATION AND SUBSIDIARIES
 PHANTOM STOCK PLAN

BENEFIT PAYMENT ELECTION FORM

 

Unless elected otherwise, the Default Payment Date of the Phantom Stock Account value attributed to this Award will be March 31, 201X.

 

I elect to receive payment of the Phantom Stock Account value attributed to the Award dated as of January 1, 201X at the following date(s):

 

Please check one:

 

o            Lump sum in cash on March 31, 201X

 

o            Lump sum in cash on March 31, 20     (not to exceed 10 years after March 31, 201X)

 

o            Payable in      annual installments in cash beginning on March 31, 20     (final payment not to exceed 10 years after March 31, 201X)

 

Amounts deferred after March 31, 201X will have interest calculated and added to the Phantom Stock Account each month end at a rate equal to Luther Burbank Savings’ one-year jumbo certificate of deposit account.

 

Benefits paid prior to a Change in Control as determined by Section 1.11 will not be subject to any change in valuation.

 

All benefits will be paid in accordance with the Plan.

 

 

	
Signature
    	
 
    	
 
    
	
 
    	
 
    
	
Printed   Name:
    	
 
    	
 
    
	
 
    	
 
    
	
Date
    	
 
    	
 
    
					

 

Accepted by the Administrator this     day of                     , 20  .

 

	
By:
    	
 
    	
 
    
	
 
    	
 
    
	
Title:
    	
 
    	
 
    
				

 

 

LUTHER BURBANK CORPORATION AND SUBSIDIARIES

PHANTOM STOCK PLAN

AWARD DOCUMENT — SAMPLE

 

To receive any Award under the Plan for the time period beginning on January 1, 201X and ending December 31, 201X, all of the following minimum plan triggers must be attained.

 

I.                Plan Triggers

 

In determining the value of each award once plan triggers are achieved, the following Company performance goals will be taken into consideration and such award will be within the award value range herein defined.

 

I.                Performance Goals

 

II.           Award Value Range

0% to X.X% of Participant’s annual salary as of the Award Date

 

Subject to the terms of the Plan, if the performance criteria above are attained during the applicable performance period, the Company agrees to grant an Award to the Participant from the Luther Burbank Corporation and Subsidiaries Phantom Stock Plan.

 

	
 
    	
Luther   Burbank Corporation and Subsidiaries
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
Date:
    	
 
    

 

 

LUTHER BURBANK CORPORATION AND SUBSIDIARIES

PHANTOM STOCK PLAN

AWARD AGREEMENT

 

The Board of Directors of Luther Burbank Corporation and its Subsidiaries recognizes the important role you play in the success of the Company.  As such, the Board of Directors would like to reward you with a grant of Phantom Stock conditioned upon the conditions and terms contained within this individual award agreement (the “Award Agreement”).  Accordingly, the Company hereby grants you the right to earn the following:

 

	
1.
    	
Name of Grantee:
    	
Individual’s Name
    
	
 
    	
 
    	
 
    
	
2.
    	
Award As-of-Date:
    	
January 1, 201X
    
	
 
    	
 
    	
 
    
	
3.
    	
Type of Equity Granted:
    	
Phantom Stock
    
	
 
    	
 
    	
 
    
	
4.
    	
Number of Equity Shares Granted:
    	
Number of shares granted
    
	
 
    	
 
    	
 
    
	
5.
    	
Award Price per Share:
    	
$XXX.XX per share
    
	
 
    	
 
    	
 
    
	
6.
    	
Vesting Schedule:
    	
If Participant is employed by or an acting Director   of the Company at the end of the fourth (4th) Plan Year following the Award   Date or as determined by the Administrator the Participant shall become   eighty percent (80%) vested and eligible to receive Plan benefits for such   Award. If Participant is employed by or an acting Director of the Company at   the end of the fifth (5th) Plan Year following the Award Date or as   determined by the Administrator, the Participant shall become one hundred   percent (100%) vested and eligible to receive Plan benefits for such Award.
    
	
 
    	
 
    	
 
    
	
7.
    	
Summary of Grant:
    	
The grant is governed by the terms of the Luther   Burbank Corporation and Subsidiaries Phantom Stock Plan (the “Plan”). A copy   of the Plan is available by contacting the Administrator as defined in the   Plan. By accepting the grant, you agree to the terms of the Plan and this   Award Agreement.
    
	
 
    	
 
    	
 
    
	
8.
    	
Beneficiary Designation:
    	
A Participant’s “beneficiary” is the person or   persons entitled to receive payments or other benefits or exercise rights   that are available under the Plan in the event of the Participant’s death. A   Participant may designate a beneficiary or change a previous beneficiary   designation at any time by using the Beneficiary Designation Form. If no   beneficiary designated by the Participant is eligible to receive payments or   other benefits or exercise rights that are available under the Plan at the   Participant’s death, the beneficiary shall be the Participant’s estate.
    
	
 
    	
 
    	
 
    
	
9.
    	
Deferrals and Share Settlements:
    	
Notwithstanding any other provision under the Plan,   the Administrator may permit a Participant to defer such Participant’s   receipt of the payment of cash that would otherwise be due to such   Participant by virtue of the settlement of the Phantom Stock shares.
    

 

 

	
 
    	
 
    	
 
    
	
Grantee                                          Date
    	
 
    	
John Biggs, President &   COO                                  Date
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Victor Trione, Chairman   of the Board                      Date

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