BSM BANCORP
1996 STOCK OPTION PLAN
Adopted November 12, 1996
Amended, March 11, 1997
Amended May 13, 1997
Amended March 17, 1998
1. PURPOSE
The purpose of the BSM Bancorp 1996 Stock Option Plan (the "Plan") is to
strengthen BSM Bancorp (the "Corporation") and those corporations which are or
hereafter become subsidiary corporations by providing additional means of
attracting and retaining competent managerial personnel and by providing to
participating directors, officers, and key employees added incentives for high
levels of performance and for unusual efforts to increase the earnings of the
Corporation and any Subsidiary corporations; and to allow consultants, business
associates and others with business relationships with the opportunity to
participate in the ownership of the Corporation and thereby have an interest in
the success and increased value of the Corporation. The Plan seeks to
accomplish these purposes and achieve these results by providing a means whereby
such directors, officers, key employees, consultants, business associates and
others may purchase shares of Common Stock of the Corporation pursuant to Stock
Options granted in accordance with this Plan.
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Stock Options granted pursuant to this Plan are intended to be Incentive
Stock Options or Non-Qualified Stock Options, as shall be determined and
designated by the Stock Option Committee upon the grant of each Stock Option
hereunder.
2. DEFINITIONS
For the purposes of this Plan, the following terms shall have the following
meanings:
(a) "COMMON STOCK." This term shall mean shares of the Corporation's
no par value common stock, subject to adjustment pursuant to Paragraph 14
(Adjustment Upon Changes in Capitalization) hereunder.
(b) "CORPORATION." This term shall mean BSM Bancorp, a California
corporation.
(c) "ELIGIBLE PARTICIPANT." This term shall mean: (i) all directors
of the Corporation or any Subsidiary; (ii) all full time officers (whether or
not they are also directors) of the Corporation or any Subsidiary; (iii) all
full time key employees (as such persons may be determined by the Stock Option
Committee from time to time) of the Corporation or any Subsidiary, and (iv)
consultants, business associates or others with important business relationships
with the Corporation.
(d) "EMPLOYER." This term shall mean the Corporation, as defined
herein, or any other Subsidiary of the Corporation, as appropriate, depending
upon which company optionee is employed.
(e) "FAIR MARKET VALUE." This term shall mean the fair market value
of the Corporation's Common Stock as determined by any reasonable valuation
method
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including the average of the bid price per share for the five (5) business days
prior to the date of grant of the option, or in accordance with the Commissioner
of Corporations Regulation Section 260.140.50, which generally provides that in
determining whether the price is fair, predominant weight will be given to the
following: (a) if securities of the same class are publicly traded on an active
market of substantial depth, the recent market price of such securities; (b) if
the securities of the same class have not been so publicly traded, the price at
which securities of reasonable comparable corporations (if any) in the same
industry are being traded, subject to appropriate adjustments for the
dissimilarities between the corporations being compared; or (c) in the absence
of any reliable indicator under subsection (a) or (b), the earnings history,
book value and prospects of the issuer in light of market conditions generally.
(e) "INCENTIVE STOCK OPTION." This term shall mean a Stock Option
which is an "Incentive Stock Option" within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended.
(f) "NON-QUALIFIED STOCK OPTION." This term shall mean a Stock Option
which is not an Incentive Stock Option.
(g) "OPTION SHARES." This term shall mean shares of Common Stock
which are covered by and subject to any outstanding unexercised Stock Option
granted pursuant to this Plan.
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(h) "OPTIONEE." This term shall mean any Eligible Participant to whom
a stock option has been granted pursuant to this Plan, provided that at least
part of the Stock Option is outstanding and unexercised.
(i) "PLAN." This term shall mean the BSM Bancorp 1996 Stock Option
Plan as embodied herein and as may be amended from time to time in accordance
with the terms hereof and applicable law.
(j) "STOCK OPTION." This term shall mean the right to purchase from
the Corporation a specified number of shares of Common Stock under the Plan at a
price and upon terms and conditions determined by the Stock Option Committee.
(k) "STOCK OPTION COMMITTEE." The Board of Directors of the
Corporation may select and designate a stock option committee consisting of at
least three and not more than five persons, at least two of whom are directors,
having full authority to act in the matters. Regardless of whether a Stock
Option Committee is selected, the Board of Directors may act as the Stock Option
Committee and any action taken by the Board of Directors as such shall be deemed
to be action taken by the Stock Option Committee. All references in the Plan to
the "Stock Option Committee" shall be deemed references to the Board of
Directors acting as a stock option committee and to a duly appointed Stock
Option Committee, if there be one. In the event of any conflict between any
action taken by the Board of Directors acting as a Stock Option Committee and
any action taken by a duly appointed Stock Option Committee, the action taken by
the Board of Directors shall be controlling and the action taken by the duly
appointed Stock Option Committee shall be disregarded.
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(l) "SUBSIDIARY." This term shall mean any subsidiary corporation of
the Corporation as such term is defined in Section 425(f) of the Internal
Revenue Code of 1986, as amended.
3. ADMINISTRATION
(a) STOCK OPTION COMMITTEE. This Plan shall be administered by the
Stock Option Committee. The Board of Directors of the Corporation shall have
the right, in its sole and absolute discretion, to remove or replace any person
from or on the Stock Option Committee at any time for any reason whatsoever.
(b) ADMINISTRATION OF THE PLAN. Any action of the Stock Option
Committee with respect to the administration of the Plan shall be taken pursuant
to a majority vote, or pursuant to the unanimous written consent, of its
members. Any such action taken by the Stock Option Committee in the
administration of this Plan shall be valid and binding, so long as the same is
in conformity with the terms and conditions of this Plan. Subject to compliance
with each of the terms, conditions and restrictions set forth in this Plan,
including, but not limited to, those set forth in Section 6(a)(ii) hereof, the
Stock Option Committee shall have the exclusive right, in its sole and absolute
discretion, to establish the terms and conditions of any Stock Options granted
under the Plan, including, without limitation, the power to: (i) establish the
number of Stock Options, if any, to be granted hereunder, in the aggregate and
with regard to any individual Eligible Participant; (ii) determine the time or
times when such Stock Options, or any parts thereof, may be exercised; (iii)
determine and designate which Stock Options granted under the Plan shall be
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Incentive Stock Options and which shall be Non-Qualified Stock Options; (iv)
determine the Eligible Participants, if any, to whom Stock Options are granted;
(v) determine the duration and purposes, if any, of leaves of absence which may
be permitted to holders of unexercised, unexpired Stock Options without such
constituting a termination of employment under the Plan; (vi) prescribe and
amend the terms, provisions and form of any instrument or agreement setting
forth the terms and conditions of every Stock Option granted hereunder; and
(vii) make loans to or guarantee any obligations of any Optionees, except
directors, in connection with the exercise of Stock Options as specified in
Section 8(d) hereof, whenever the Stock Option Committee determines that such
loan or guarantee may reasonably be expected to benefit the corporation, subject
to the provisions of Section 315(b) of the California General Corporations Law
of 1977, as amended and subject to Regulations G, U and T promulgated by the
Board of Governors of the Federal Reserve System pursuant to Section 7 of the
Securities Exchange Act of 1934, if the Option Shares are listed on a stock
exchange or are contained in the list of over-the-counter margin securities
published by the Federal Reserve Board.
(c) DECISIONS AND DETERMINATIONS. Subject to the express provisions
of the Plan, the Stock Option Committee shall have the authority to construe and
interpret the Plan, to define the terms used therein, to prescribe, amend, and
rescind rules and regulations relating to the administration of the Plan, and to
make all other determinations necessary or advisable for administration of the
Plan. Determinations
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of the Stock Option Committee on matters referred to in this Section 3 shall be
final and conclusive so long as the same are in conformity with the terms of
this Plan.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustments as provided in Section 14 hereof, the maximum number
of shares of Common Stock which may be issued upon exercise of Stock Options
granted under this Plan is limited to 30% of the issued and outstanding shares
of the Corporation up to a maximum of 892,542 shares in the aggregate. If any
Stock Option shall be canceled, surrendered, or expire for any reason without
having been exercised in full, the unpurchased Option Shares represented thereby
shall again be available for grants of Stock Options under this Plan.
5. ELIGIBILITY
Only Eligible Participants shall be eligible to receive grants of Stock
Options under this Plan.
6. GRANTS OF STOCK OPTIONS
(a) GRANT. Subject to the express provisions and limitations of the
Plan, the Stock Option Committee, in its sole and absolute discretion, may grant
Stock Options to Eligible Participants of the Corporation, for a number of
Option Shares, at the price(s) and time(s), on the terms and conditions and to
such Eligible Participants as it deems advisable and specifies in the respective
grants.
Subject to the limitations and restrictions set forth in the Plan, an
Eligible Participant who has been granted a Stock Option may, if otherwise
eligible, be granted additional Stock Options if the Stock Option Committee
shall so determine.
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The Stock Option Committee shall designate in each grant of a Stock Option
whether the Stock Option is an Incentive Stock Option or a Non-Qualified Stock
Option.
(b) DATE OF GRANT AND RIGHTS OF OPTIONEE. The determination of the
Stock Option Committee to grant a Stock Option shall not in any way constitute
or be deemed to constitute an obligation of the Corporation, or a right of the
Eligible Participant who is the proposed subject of the grant, and shall not
constitute or be deemed to constitute the grant of a Stock Option hereunder
unless and until both the Corporation and the Eligible Participant have executed
and delivered the form of stock option agreement then required by the Stock
Option Committee as evidencing the grant of the Stock Option, together with such
other instruments as may be required by the Stock Option Committee pursuant to
this Plan; provided, however, that the Stock Option Committee may fix the date
of grant as any date on or after the date of its final determination to grant
the Stock Option (or if no such date is fixed, then the date of grant shall be
the date on which the determination was finally made by the Stock Option
Committee to grant the Stock Option), and such date shall be set forth in the
stock option agreement. The date of grant as so determined shall be deemed the
date of grant of the Stock Option for purposes of this Plan.
(c) SHAREHOLDER-EMPLOYEES. Notwithstanding anything to the contrary
contained elsewhere herein, a Stock Option shall not be granted hereunder to an
Eligible Participant who owns, directly or indirectly, at the date of the grant
of the Stock Option, more than ten percent (10%) of the total combined voting
power of all classes of capital stock of the Corporation or a Subsidiary
corporation, unless the
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purchase price of the Option Shares subject to said Stock Option is at least
110% of the Fair Market Value of the Option Shares, determined as of the date
said Stock Option is granted.
(d) MAXIMUM VALUE OF STOCK OPTIONS. Except as provided in paragraph
(e) of this Section 6, the maximum aggregate Fair Market Value of Option Shares
(determined as of the respective Stock Option grant dates) for which an Eligible
Participant may be granted Incentive Stock Options in any calendar year shall
not exceed $100,000, plus any "unused carryover amount." The unused carryover
amount, determined on a yearly basis, shall be equal to one-half (1/2) of the
difference between $100,000 and the aggregate Fair Market Value (determined as
of the respective Stock Option grant dates) of all of the Option Shares subject
to Incentive Stock Options granted to the Optionee during the calendar year
under the Plan. The provisions of Section 422A(c)(4) of the Internal Revenue
Code of 1986, as amended, are incorporated herein by this reference for the
purpose of the determination and application of the unused carryover amount.
The aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options are
exercisable for the first time by such individual under the terms of the Plan
during any calendar year is limited to $100,000, but the value of stock for
which options may be granted to an employee in a given year may exceed $100,000.
(e) SUBSTITUTED STOCK OPTIONS. If all of the outstanding shares of
common stock of another corporation are changed into or exchanged solely for
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Common Stock of the Corporation in a transaction to which Section 424(a) of the
Internal Revenue Code of 1986, as amended, applies, then, subject to the
approval of the Board of Directors of the Corporation, Stock Options under the
Plan may be substituted ("Substituted Options") in exchange for valid,
unexercised and unexpired stock options of such other corporation. Substituted
options shall qualify as Incentive Stock Options under the Plan, provided that
(and to the extent) the stock options exchanged for the Substituted Options were
"Incentive Stock Options" within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended.
(f) NON-QUALIFIED STOCK OPTIONS. All Stock Options granted by the
Stock Option Committee which: (i) are designated at the time of grant as
Incentive Stock Options but do not so qualify under the provisions of Section
422A of the Code or any regulations or rulings issued by the Internal Revenue
Service for any reason; (ii) are in excess of the fair market value limitations
set forth in Section 6(d); or (iii) are designated at the time of grant as
Non-Qualified Stock Options, shall be deemed Non-Qualified Stock Options under
this Plan. Non-Qualified Stock Options granted or substituted hereunder shall
be so designated in the stock option agreement entered into between the
Corporation and the Optionee.
7. STOCK OPTION EXERCISE PRICE
(a) MINIMUM PRICE. The exercise price of any Option Shares shall be
determined by the Stock Option Committee, in its sole and absolute discretion,
upon the grant of a Stock Option. Except as provided elsewhere herein, said
exercise price shall not be less than one hundred percent (100%) of the Fair
Market Value of the
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Common Stock represented by the Option Share on the date of grant of the related
Stock Option.
(b) EXCHANGED STOCK OPTIONS. Where the outstanding shares of stock of
another corporation are changed into or exchanged for shares of Common Stock of
the Corporation without monetary consideration to that other corporation, then,
subject to the approval of the Board or Directors of the Corporation, Stock
Options may be granted in exchange for unexercised, unexpired stock options of
the other corporation, and the exercise price of the Option Shares subject to
each Stock Option so granted may be fixed at a price less than one hundred
percent (100%) of the Fair Market Value of the Common Stock at the time such
Stock Option is granted if said exercise price has been computed to be not less
than the exercise price set forth in the stock option of the other corporation,
with appropriate adjustment to reflect the exchange ratio of the shares of stock
of the other corporation into the shares of Common Stock of the Corporation.
(c) SUBSTITUTED OPTIONS. The exercise price of the Option Shares
subject to each Substituted Option may be fixed at a price less than one hundred
percent (100%) of the Fair Market Value of the Common Stock at the time such
Substituted option is granted if said exercise price has been computed to be not
less than the exercise price set forth in the stock option of the other
corporation for which it was exchanged, with appropriate adjustment to reflect
the exchange ratio of the shares of stock of the other corporation into the
shares of Common Stock.
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8. EXERCISE OF STOCK OPTIONS.
(a) EXERCISE. Except as otherwise provided elsewhere herein, each
Stock Option shall be exercisable in such increments, which need not be equal,
and upon such contingencies as the Stock Option Committee shall determine at the
time of grant of the Stock Option; provided, however, (i) that if an Optionee
shall not in any given period exercise any part of a Stock Option which has
become exercisable during that period, the Optionee's right to exercise such
part of the Stock Option shall continue until expiration of the Stock Option or
any part thereof as may be provided in the related stock option agreement, and
(ii) in the case of options that are not granted to officers, directors or
consultants of the Company, a minimum of 20% of the Stock Option shall be
exercisable in each year over a five year period from the date the option is
granted. No Stock Option or part thereof shall be exercisable except with
respect to whole shares of Common Stock, and fractional share interests shall be
disregarded except that they may be accumulated.
(b) PRIOR OUTSTANDING INCENTIVE STOCK OPTIONS. Incentive Stock
Options granted to an Optionee may be exercisable while such Optionee has
outstanding and unexercised any Incentive Stock Option previously granted (or
substituted) to him or her pursuant to this Plan. The Stock Option Committee
shall determine if such options shall be exercisable if there are any Incentive
Stock Options previously granted (or substituted) to him or her pursuant to this
Plan, and such determination shall be evidenced in the Agreement executed by the
Optionee and Company. An
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Incentive Stock Option shall be treated as outstanding until it is exercised in
full or expires by reason of lapse of time.
(c) NOTICE AND PAYMENT. Stock Options granted hereunder shall be
exercised by written notice delivered to the Corporation specifying the number
of Option Shares with respect to which the Stock Option is being exercised,
together with concurrent payment in full of the exercise price as hereinafter
provided in Section 8(d) hereof. If the Stock Option is being exercised by any
person or persons other than the Optionee, said notice shall be accompanied by
proof, satisfactory to counsel for the Corporation, of the right to such person
or persons to exercise the Stock Option. The Corporation's receipt of a notice
of exercise without concurrent receipt of the full amount of the exercise price
shall not be deemed an exercise of a Stock Option by an Optionee, and the
Corporation shall have no obligation to an Optionee for any Option Shares unless
and until full payment of the exercise price is received by the Corporation in
accordance with Section 8(d) hereof, and all of the terms and provisions of the
Plan and the related stock option agreement have been complied with.
(d) PAYMENT OF EXERCISE PRICE. The exercise price of any Option
Shares purchased upon the proper exercise of a Stock Option shall be paid in
full at the time of each exercise of a Stock Option in cash and/or, with the
prior written approval of the Stock Option Committee, in Common Stock of the
Corporation which, when added to the cash payment, if any, has an aggregate Fair
Market Value equal to the full amount of the exercise price of the Stock Option,
or part thereof, then being
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exercised and/or, with the prior written approval of the Stock Option Committee,
on a deferred basis evidenced by a promissory note, containing such terms and
subject to such security as the Stock Option Committee shall determine to be
fair and reasonable from time to time, for the total option price for the number
of shares so purchased. In addition, the Optionee shall have the right upon
the exercise of a stock Option in the manner set forth above to surrender for
cancellation a portion of the Stock Option to the Company for the number of
shares (the "Surrendered Shares") specified in the holder's notice of exercise,
by delivery to the Company with such notice written instructions from such
holder to apply the Appreciated Value (as defined below) of the Surrendered
Shares to payment of the exercise price for shares subject to the Stock Options
that are being acquired upon such exercise. The term "Appreciated Value" for
each share subject to this Stock Option shall mean the excess of the Fair Market
Value thereof over the exercise price then in effect. No director, consultant
or business associate may purchase any Stock Option on a deferred basis
evidenced by a promissory note. Unless payment is on a deferred basis, payment
by an Optionee as provided herein shall be made in full concurrently with the
Optionee's notification to the Corporation of his intention to exercise all or
part of a Stock Option. If all or part of payment is made in shares of Common
Stock as heretofore provided, such payment shall be deemed to have been made
only upon receipt by the Corporation of all required share certificates, and all
stock powers and other required transfer documents necessary to transfer the
shares of Common Stock to the Corporation.
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(e) REORGANIZATION. Notwithstanding any provision in any stock option
agreement pertaining to the time of exercise of a Stock Option, or part thereof,
upon adoption by the requisite holders of the Corporation's outstanding shares
of Common Stock of any plan of dissolution, liquidation, reorganization, merger,
consolidation or sale of all or substantially all of the assets of the
Corporation to another corporation, or the acquisition of stock representing
more than 50% of the voting power of the Corporation then outstanding, by
another corporation or person, which would, upon consummation, result in
termination of a Stock Option in accordance with Section 15 hereof, the Stock
Option shall become immediately exercisable as to all Option Shares, whether or
not vested, for such period of time as may be determined by the Stock Option
Committee, but in any event not less than 30 days prior to the adoption of the
plan of dissolution, liquidation, reorganization, merger, consolidation, sale,
or acquisition on the condition that the terminating event described in Section
15 hereof is consummated. Any Option Shares not exercised will be terminated.
If such Terminating Event is not consummated, Stock Options granted pursuant to
the Plan shall be exercisable in accordance with their respective terms.
(f) MINIMUM EXERCISE. Not less than ten (10) Option Shares may be
purchased at any one time upon exercise of a Stock Option unless the number of
shares purchased is the total number which remains to be purchased under the
Stock Option.
(g) COMPLIANCE WITH LAW. No shares of Common Stock shall be issued by
the Corporation upon exercise of any Stock Option, and an Optionee shall have
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no rights or claim to such shares, unless and until: (a) payment in full as
provided in Section 8(d) hereof has been received by the Corporation; (b) in the
opinion of the counsel for the Corporation, all applicable registration
requirements of the Securities Act of 1933, all applicable listing requirements
of securities exchanges or associations on which the Corporation's Common Stock
is then listed or traded, and all other requirements of law and of regulatory
bodies having jurisdiction over such issuance and delivery, have been fully
complied with; and (c) if required by federal or state law or regulation, the
Optionee shall have paid to the Corporation the amount, if any, required to be
withheld on the amount deemed to be compensation to the Optionee as a result of
the exercise of his or her Stock Option, or made other arrangements satisfactory
to the Corporation, in its sole discretion, to satisfy applicable income tax
withholding requirements.
9. NONTRANSFERABILITY OF STOCK OPTIONS.
Each Stock Option shall, by its terms, be nontransferable by the Optionee
other than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by the Optionee or his or her
guardian or legal representative.
10. CONTINUATION OF EMPLOYMENT
Except for directors, consultants or business advisors with a written
contract for any definite term, this Agreement shall not obligate the
Corporation or a Subsidiary to employ Optionee. Optionee acknowledges that
there is no agreement, express or implied, between Optionee and the Corporation
or other Subsidiary of the Corporation for any specific period of employment,
nor for continuing long-term employment.
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Optionee and the Employer each have a right to terminate employment, with or
without cause. Optionee also acknowledges that the Employer retains the right
to demote, transfer, change job duties, and change the compensation at any time
with or without cause in its sole discretion.
11. CESSATION OF EMPLOYMENT
(a) Except as provided in Sections 8(e), 12, 13, 14 or 15 hereof, except if
Optionee is granted an option as a consultant, business associate or other
person or entity with important business relationships with the Corporation, if,
for any reason, an Optionee's status as an Eligible Participant is terminated,
the Stock Options granted to such Optionee shall expire on the expiration dates
specified for said Stock Options at the time of their initial grant, or three
(3) months after the Optionee's status as an Eligible Participant is terminated,
whichever is earlier. During such period after Options shall be exercisable
only as to those increments, if any, which had become exercisable as of the date
on which such Optionee's status as an Eligible Participant terminated, and any
Stock Options or increments which had not become exercisable as of such date
shall expire and terminate automatically on such date. If Optionee is granted
an option as a consultant, business associate or other person or entity with
important business relationships with the Corporation, this Stock Option shall
not expire as a result of consultant, business associate or other person or
entity with important business relationships with the Corporation no longer
doing business or otherwise terminating his or its business relationship with
the Corporation.
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(b) Except if Optionee is granted an option as a consultant, business
advisor, or other person or entity with important business relationships with
the Corporation, and if Optionee's status as an Eligible Participant is
terminated for violation of the Employer's Standards of Conduct, the Stock
Options granted to such Optionee shall automatically expire and terminate in
their entirety immediately upon such termination; provided, however, that the
Stock Option Committee may, in its sole discretion, within thirty (30) days of
such termination, reinstate such Stock Options by giving written notice of such
reinstatement to the Optionee. In the event of such reinstatement, the Optionee
may exercise the Stock Options only to such extent, for such time, and upon such
terms and conditions as in the case of an Optionee whose status as an Eligible
Participant had been terminated for a reason other than violation of the
Employer's Standards of Conduct, disability or death. Reasons for termination
for violation of the Employer's Standards of Conduct, shall include, but not be
limited to, termination for malfeasance or gross misfeasance in the performance
of duties or conviction of illegal activity in connection therewith, and, in any
event, the determination of the Stock Option Committee with respect thereto
shall be final and conclusive. If Optionee is granted an option as a
consultant, business advisor, or other person or entity with important business
relationships with the Corporation, and are not classified as eligible employees
of the Corporation or any Subsidiary, this Stock Option shall not expire as a
result of such Optionee's termination.
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12. DEATH OF OPTIONEE
Except if Optionee is granted an option as a consultant, business associate
or other person or entity with important business relationships with the
Corporation, if an Optionee loses his status as an Eligible Participant by
reason of death, or if an Optionee dies during the three-month period referred
to in Section 11 hereof, the Stock Options granted to such Optionee shall expire
on the expiration dates specified for said Stock Options at the time of their
initial grant, or one (l) year after the date of such death, whichever is
earlier. If Optionee is granted an option as a consultant, business associate
or other person or entity with important business relationships with the
Corporation, this Stock Option shall not expire as a result of such Optionee's
death. After such death but before such expiration, subject to the terms and
provisions of the Plan and the related stock option agreements, the person or
persons to whom such Optionee's rights under the Stock Options shall have passed
by will or by the applicable laws of descent and distribution, or the executor
or administrator of the Optionee's estate, shall have the right to exercise such
Stock Options to the extent that increments, if any, had become exercisable as
of the date on which the Optionee's status as an Eligible Participant had been
lost.
13. DISABILITY OF OPTIONEE
Except if Optionee is granted an option as a consultant, business associate
or other person or entity with important business relationships with the
Corporation, if an Optionee is disabled while employed by or while serving as a
director of the Corporation or a Subsidiary or during the three-month period
referred to in Section 11 hereof, the
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Stock Options granted to such Optionee shall expire on the expiration dates
specified for said Stock Options at the time of their initial grant, or one (l)
year after the date of such disability, whichever is earlier. If Optionee is
granted an option as a consultant, business associate or other person or entity
with important business relationships with the Corporation, this Stock Option
shall not expire as a result of such Optionee's disability. After such
disability but before such expiration, the Optionee or a guardian or conservator
of the Optionee's estate, as duly appointed by a court of competent
jurisdiction, shall have the right to exercise such Stock Options to the extent
that increments, if any, had become exercisable as of the date on which the
Optionee became disabled or ceased to be employed by the Corporation or a
Subsidiary as a result of the disability. For the purpose of this Section 13,
an Optionee shall be deemed to have become "disabled" if it shall appear to the
Stock Option Committee, upon written certification delivered to the Corporation
by a qualified licensed physician, that the Optionee has become permanently and
totally 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 which has lasted or can be expected to last for a continuous
period of not less than 12 months.
14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
If the outstanding shares of Common Stock of the Corporation are increased,
decreased, or changed into or exchanged for a different number or kind of shares
or securities of the Corporation, through a reorganization, merger,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or otherwise, without
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consideration to the Corporation, an appropriate and proportionate adjustment
shall be made in the number and kind of shares as to which Stock Options may be
granted. A corresponding adjustment changing the number or kind of Option
Shares and the exercise prices per share allocated to unexercised Stock Options,
or portions thereof, which shall have been granted prior to any such change,
shall likewise be made. Any such adjustment, however, in an outstanding Stock
Option shall be made without change in the total price applicable to the
unexercised portion of the Stock Option, but with a corresponding adjustment in
the price for each Option Share subject to the Stock Option. Any adjustment
under this Section shall be made by the Stock Option Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final and conclusive. No fractional shares of stock shall be issued or
made available under the Plan on account of any such adjustment, and fractional
share interests shall be disregarded and the fractional share interest shall be
rounded down to the nearest whole number.
15. TERMINATING EVENTS
(a) Not less than thirty (30) days prior to consummation of a plan of
dissolution or liquidation of the Corporation, or consummation of a plan of
reorganization, merger or consolidation of the Corporation with one or more
corporations, as a result of which the Corporation is not the surviving
corporation and the outstanding securities of the class then subject to options
hereunder are changed or exchanged for cash or property or securities not of the
Corporation's issue, or upon the sale of all or substantially all the assets of
the Corporation to another corporation, or the acquisition of stock
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representing more than fifty percent (50%) of the voting power of the
Corporation then outstanding by another corporation or person (the "Terminating
Event"), the Stock Option Committee or the Board of Directors shall notify each
Optionee of the pendency of the Terminating Event. Upon the effective date of
the Terminating Event, the Plan shall automatically terminate and all Stock
Options theretofore granted shall terminate, unless provision is made in
connection with such transaction for the continuance of the Plan and/or
assumption of Stock Options theretofore granted, or substitution for such Stock
Options with new stock options covering stock of a successor employer
corporation, or a parent or subsidiary corporation thereof, solely at the
discretion of such successor corporation, or parent or subsidiary corporation,
with appropriate adjustments as to number and kind of shares and prices, in
which event the Plan and options theretofore granted shall continue in the
manner and under the terms so provided. If the Plan and unexercised options
shall terminate pursuant to the foregoing sentence, all persons shall have the
right to exercise any unexercised portions of options outstanding and not
exercised, shall have the right, at such time prior to the consummation of the
transaction causing such termination as the Corporation shall designate and for
a period of not less than 30 days, to exercise all unexercised portions of their
options, including the portions which would, but for this paragraph entitled
"Terminating Events," not yet be exercisable.
(b) Notwithstanding the previous paragraph in this Section 15, Section
8(e), or any other Paragraph or Section of this Plan, except for Substituted
Stock Options in Section 6(e), in connection with the Agreement to Merge and
Plan of Reorganization
-22-
(the "Agreement") dated January 29, 1998 and amended on March 18, 1998 by and
between the Corporation, Bank of Santa Maria, a Subsidiary (the "Bank") and
Mid-State Bank ('Mid-State") in which the Bank would merge with and into
Mid-State Bank, and shareholders of Mid-State Bank would become shareholders of
the Corporation (the "Mid-State Transaction"), and for the Mid-State Transaction
only, (i) not less than thirty (30) days prior to the Effective Time of the
Mid-State Transaction (the "Effective Time"), the Stock Option Committee or the
Board of Directors of the Corporation shall notify each Optionee of the pendency
of the Mid-State Transaction; (ii) on and after the Effective Time, and as
provided in the Agreement, the Plan shall not automatically terminate but will
continue until the Plan terminates or is terminated pursuant to the other terms
of the Plan; (iii) prior to the Effective Time, the vesting schedules of each
and every stock option outstanding shall accelerate in accordance with the
previous paragraph of this Section 15, and all Optionees shall have the right to
exercise all unexercised portions of their options, including the portions which
would, but for this paragraph, not yet be exercisable; (iv) except as provided
in (v), each such Corporation option, or portion of such Corporation Option,
granted pursuant to the Plan shall terminate if not exercised pursuant to the
previous paragraph of this Section 15 on or before the Effective Time; and (v)
prior to or at the Effective Time, all Optionees who have not exercised their
stock options and who are either officers and employees of the Corporation or
the Bank, or all directors of the Corporation or the Bank that will continue as
directors of the Corporation and Mid-State following consummation of the
Mid-State Transaction, shall have the right to receive, in their discretion, a
substitute
-23-
stock option from the Corporation, which shall contain the same terms and
conditions as the option for which it is substituted except that the substitute
stock option shall be vested and fully exercisable for all shares to which it is
subject.
16. AMENDMENT AND TERMINATION
The Board of Directors of the Corporation may at any time and from
time-to-time suspend, amend, or terminate the Plan and may, with the consent of
Optionee, make such modifications of the terms and conditions of a Stock Option
as it shall deem advisable; provided that, except as permitted under the
provisions of Section 15 hereof, no amendment or modification may be adopted
without the Corporation having first obtained all necessary regulatory approvals
and approval of the holders of a majority of the Corporation's shares of Common
Stock present, or represented, and entitled to vote at a duly held meeting of
shareholders of the Corporation if the amendment or modification would:
(a) materially increase the benefits accruing to participants under
the Plan;
(b) materially increase the number of securities which may be issued
under the Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) increase or decrease the exercise price of any Stock Options
granted under the Plan;
(e) increase the maximum term of Stock Options provided for herein;
-24-
(f) permit Stock Options to be granted to any person who is not an
Eligible Participant; or
(g) change any provision of the Plan which would affect the
qualification as an Incentive Stock Option under the Plan.
No Stock Option may be granted during any suspension of the Plan or after
termination of the Plan. Amendment, suspension, or termination of the Plan
shall not (except as otherwise provided in Section 16 hereof), without the
consent of the Optionee, alter or impair any rights or obligations under any
Stock Option theretofore granted.
17. RIGHTS OF ELIGIBLE PARTICIPANTS AND OPTIONEES
Neither any Eligible Participant, any Optionee or any other person shall
have any claim or right to be granted any Stock Option under this Plan, and
neither this Plan nor any action taken hereunder shall be deemed or construed as
giving any Eligible Participant, Optionee or any other person any right to be
retained in the employ of the Corporation or any subsidiary of the Corporation.
Without limiting the generality of the foregoing, there is no vesting of any
right in the classification of any person as an Eligible Participant or
Optionee, such classification being used solely to define and limit those
persons who are eligible for consideration of the grant of Stock Options under
the Plan.
18. PRIVILEGES OF STOCK OWNERSHIP; SECURITIES LAW COMPLIANCE; NOTICE OF SALE
No Optionee shall be entitled to the privileges of stock ownership as to
any Option Shares not actually issued and delivered. No Option Shares may be
purchased
-25-
upon the exercise of a Stock Option unless and until all then applicable
requirements of all regulatory agencies having jurisdiction and all applicable
requirements of securities exchanges upon which the stock of the Corporation is
listed (if any) shall have been fully complied with. The Corporation will
diligently endeavor to comply with all applicable securities laws before any
options are granted under the Plan and before any stock is issued pursuant to
options. The Optionee shall, not more than five (5) days after each sale or
other disposition of shares of Common Stock acquired pursuant to the exercise of
Stock Options, give the Corporation notice in writing of such sale or other
disposition.
The Corporation will provide to each Optionee its Annual Report as required
by Section 260.140.46 of the regulations of the California Commissioner of
Corporations.
19. EFFECTIVE DATE OF THE PLAN
The Plan shall be deemed adopted as of November 12, 1996, and shall be
effective immediately, subject to approval of the Plan by the holders of at
least a majority of the corporation's outstanding shares of Common Stock and
approval of the Plan by the California Commissioner of Corporations.
-26-
20. TERMINATION
Unless previously terminated as aforesaid, the Plan shall terminate ten
(10) years from the earliest date of (i) adoption of the Plan by the Board of
Directors, (ii) approval of the Plan by holders of at least a majority of the
Corporation's outstanding shares of Common Stock, or (iii) approval of the Plan
by the California Commissioner of Corporations. No Stock Options shall be
granted under the Plan thereafter, but such termination shall not affect any
Stock Option theretofore granted.
21. OPTION AGREEMENT
Each Stock Option granted under the Plan shall be evidenced by a written
stock option agreement executed by the Corporation and the Optionee, and shall
contain each of the provisions and agreements herein specifically required to be
contained therein, and such other terms and conditions as are deemed desirable
by the Stock Option Committee and are not inconsistent with the Plan.
22. STOCK OPTION PERIOD
Each Stock Option and all rights and obligations thereunder shall expire on
such date as the Stock Option Committee may determine, but not later than ten
(10) years from the date such Stock Option is granted, and shall be subject to
earlier termination as provided elsewhere in the Plan.
23. EXCULPATION AND INDEMNIFICATION OF STOCK OPTION COMMITTEE
In addition to such other rights of indemnification which they may have as
directors of the Corporation or as members of the Stock Option Committee, the
present and former members of the Stock Option Committee, and each of them,
shall be
-27-
indemnified by the Corporation for and against all costs, judgments, penalties
and reasonable expenses, including reasonable attorney's fees, actually and
necessarily incurred by them in connection with any action, suit or proceeding,
or in connection with any appeal thereof, to which they or any of them may be a
party by reason of any act or omission of any member of the Stock Option
Committee under or in connection with the Plan or any Stock Option granted
thereunder; provided, however, that a member of the Stock Option Committee shall
not be entitled to any indemnification whatsoever pursuant to this Section for
or as a result of any act or omission of such member which was not taken in good
faith and which constituted willful misconduct or gross negligence by such
member; provided further, that any amounts paid by any member of the Stock
Option Committee in settlement of any action, suit or proceeding for which
indemnification may be sought pursuant to this Section shall be first approved
in writing by independent legal counsel selected by the Corporation; and,
provided further, that within thirty (30) days after institution of any action,
suit or proceeding against any member with respect to which such member is
entitled to indemnification hereunder, such member shall, in writing, offer the
Corporation the opportunity, at its own expense, to handle (including settle)
and conduct the defense thereof. The provisions of this Section shall apply to
the estate, executor and administrator of each member of the Stock Option
Committee.
24. AGREEMENT AND REPRESENTATIONS OF OPTIONEE
Unless the shares of Common Stock covered by this Plan have been registered
with the Securities and Exchange Commission pursuant to Section 5 of the
Securities
-28-
Act of 1933, each Optionee shall by and upon accepting a Stock Option, represent
and agree in writing, for himself or herself and his or her transferees by will
or the laws of descent and distribution, that he or she is a bona fide
California resident, that all such Option Shares will be acquired for investment
purposes and not for resale or distribution and that the optioned stock will not
be transferred to a person who is not a California resident. Upon the exercise
of a Stock Option, or a part thereof, the person entitled to exercise the same
shall, unless waived by the Corporation, furnish evidence satisfactory to the
Corporation, including written and signed representations, to the effect that he
or she is a California resident, that the Option Shares are being acquired for
investment purposes and not for resale or distribution, and that the Option
Shares being acquired shall not be sold or otherwise transferred to any
individual or entity not a resident of the State of California. Furthermore,
the Corporation, at its sole discretion, to assure itself that any sale or
distribution by the Optionee complies with this Plan and any applicable federal
or state securities laws, may take all reasonable steps, including placing stop
transfer instructions with the corporation's transfer agent prohibiting
transfers in violation of the Plan and affixing the following legend (and/or
such other legend or legends as the Stock Option Committee shall require) on
certificates evidencing the shares:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE
-29-
OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
and
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER
THE ACT OR A DETERMINATION BY BSM Bancorp THAT REGISTRATION
IS NOT REQUIRED."
At any time that an Optionee contemplated the disposition of any of the
Option Shares (whether by sale, exchange, gift or other form of transfer) he or
she shall first notify the Corporation of such proposed disposition and shall
thereafter cooperate with the Corporation in complying with all applicable
requirements of law which, in the opinion of counsel for the Corporation, must
be satisfied prior to the making of such disposition. Before consummating such
disposition, BSM Bancorp shall determine that such disposition will not result
in a violation of any state or federal securities law or regulations. The
Corporation shall remove any legend affixed to certificates for Option Shares
pursuant to this Section if and when all of the restrictions on the transfer of
the Option Shares, whether imposed by this Plan or federal or state law, have
terminated. An Optionee who thereafter sells or disposes of his shares of
Common Stock will be required to notify the Corporation of such sale or
disposition within five (5) days after the sale or disposition.
-30-
25. NOTICES
All notices and demands of any kind which the Stock Option Committee, any
Optionee, Eligible Participant, or any other person may be required or desires
to serve under the terms of this Plan shall be in writing and shall be served by
personal service upon the respective person or by leaving a copy of such notice
or demand at the address of such person as may be reflected in the records of
the Corporation, or in the case of the Stock Option Committee, with the
Secretary of the Corporation, or by mailing a copy thereof by certified or
registered mail, postage prepaid, with return receipt requested. In the case of
service by mail, it shall be deemed complete at the expiration of the third day
after the day of mailing, except for notice of the exercise of any Stock Option
and payment of the Stock Option exercise price, both of which must be actually
received by the Corporation.
26. LIMITATION OF OBLIGATIONS OF THE CORPORATION
Any obligation of the Corporation arising under or as a result of this Plan
or any Stock Option granted hereunder shall constitute the general unsecured
obligation of the Corporation, and not of the Board of Directors of the
Corporation, or any members thereof, the Stock Option Committee, or any member
thereof, any officer of the Corporation, or any other person or any Subsidiary,
and none of the foregoing, except the Corporation, shall be liable for any debt,
obligation, cost or expense hereunder.
-31-
27. LIMITATION OF RIGHTS
The Stock Option Committee, in its sole and absolute discretion, is
entitled to determine who, if anyone, is an Eligible Participant under this
Plan, and which, if any, Eligible Participant shall receive any grant of a Stock
Option. No oral or written agreement by any person on behalf of the Corporation
relating to this Plan or any Stock Option granted hereunder is authorized, and
such agreement may not bind the Corporation or the Stock Option Committee to
grant any Stock Option to any person.
28. SEVERABILITY
If any provision of this Plan as applied to any person or to any
circumstances shall be adjudged by a court of competent jurisdiction to be void,
invalid, or unenforceable, the same shall in no way effect any other provision
hereof, the application of any such provision in any other circumstances, or the
validity of enforceability hereof.
29. CONSTRUCTION
Where the context or construction requires, all words applied in the plural
shall be deemed to have been used in the singular and vice versa, and the
masculine gender shall include the feminine and the neuter.
30. HEADINGS
The headings of the several paragraphs of this Plan are inserted solely for
convenience of reference and are not intended to form a part of and are not
intended to govern, limit or aid in the construction of any term or provision
hereof.
-32-
31. SUCCESSORS
This Plan shall be binding upon the respective successors, assigns, heirs,
executors, administrators, guardians and personal representatives of the
Corporation and any Optionee.
32. GOVERNING LAW
This Plan shall be governed by and construed in accordance with the laws of
the State of California.
33. CONFLICT
In the event of any conflict between the terms and provisions of this Plan,
and any other document, agreement or instrument, including, without limitation,
any stock option agreement, the terms and provisions of this Plan shall control.
-33-
SECRETARY'S CERTIFICATE OF ADOPTION
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of BSM Bancorp;
and
2. That the foregoing BSM Bancorp 1996 Stock Option Plan, as amended,
was duly adopted by the Board of Directors of BSM Bancorp as the Stock Option
Plan for the Corporation at a meeting duly called as required by law and
convened on the 17th day of March, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation this 17th day of March, 1998.
-----------------------------------
William L. Snelling, Secretary
[SEAL]
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OPTIONEES TO WHOM INCENTIVE STOCK OPTIONS ARE GRANTED MUST MEET CERTAIN
HOLDING PERIOD AND EMPLOYMENT REQUIREMENTS FOR FAVORABLE TAX TREATMENT.
UNLESS OTHERWISE STATED, ALL DEFINED TERMS IN THE PLAN SHALL HAVE THE SAME
MEANING HEREIN AS SET FORTH IN THE PLAN.
BSM BANCORP
STOCK OPTION AGREEMENT
/ / Incentive Stock Option
/ / Non-Qualified Stock Option
THIS AGREEMENT, dated the ____ day of ____________, 19__, by and
between BSM Bancorp, a California corporation (the "Corporation"), and
_____________________ (the "Optionee");
WHEREAS, pursuant to the Corporation's 1996 Stock Option Plan (the
"Plan"), the Stock Option Committee has authorized the grant to Optionee of a
Stock Option to purchase all or any part of _____________________ (______)
authorized but unissued shares of the Corporation's Common Stock at the price
of _________________ Dollars ($_____) per share, such Stock Option to be for
the term and upon the terms and conditions hereinafter stated;
NOW, THEREFORE, it is hereby agreed:
1. GRANT OF STOCK OPTION. Pursuant to said action of the Stock
Option Committee and pursuant to authorizations granted by all appropriate
regulatory and governmental agencies, the Corporation hereby grants to
Optionee a Stock Option to
-1-
purchase, upon and subject to the terms and conditions of the Plan, which is
incorporated in full herein by this Reference, all or any part of
________________ (_______) Option Shares of the Corporation's Common Stock, at
the price of ____________________ Dollars ($_____) per share. For purposes of
this Agreement and the Plan, the date of grant shall be _________________, 19__.
At the date of grant, Optionee [DOES] [DOES NOT OWN] stock possessing more than
10% of the total combined voting power of all classes of capital stock of the
Corporation or any Subsidiary.
The Stock Option granted hereunder [IS] [IS NOT] intended to qualify
as an Incentive Stock Option within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended.
2. EXERCISABILITY. This Stock Option shall be exercisable as to
_________ Option Shares on _________, 19__, as to _________ Option Shares on
_________, 19__, as to _________ Option Shares on _________, 19__, as to
_________ Option Shares on _________, 19__, and as to _________ Option Shares on
________, 19__. This Stock Option shall remain exercisable as to all of such
Option Shares until _________, 19__ (but not later than ten (10) years from the
date hereof), at which time it shall expire in its entirety, unless this Stock
Option has expired or terminated earlier in accordance with the provisions
hereof. Option shares as to which this Stock Option becomes exercisable may be
purchased at any time prior to expiration of this Stock Option.
-2-
3. EXERCISE OF STOCK OPTION. Subject to the provision of Paragraph 4
hereof, this Stock Option may be exercised by written notice delivered to the
Corporation stating the number of Option Shares with respect to which this Stock
Option is being exercised, together with cash and/or, if permitted at the time
of exercise by the Stock Option Committee, shares of Common Stock of the
Corporation which, when added to the cash payment, if any, have an aggregate
Fair Market Value equal to the full amount of the purchase price of such Option
Shares, and/or, if permitted at the time of exercise by the Stock Option
Committee, and if Optionee is not also a director, consultant or business
advisor of the Corporation or any of its subsidiaries, on a deferred basis
evidenced by a promissory note. In addition, the Optionee shall have the right
upon the exercise of this Stock Option in the manner set forth above to
surrender for cancellation a portion of this Stock Option to the Company for the
number of share (the "Surrendered Shares") specified in the holder's notice of
exercise, by delivery to the Company with such notice written instructions from
such holder to apply the Appreciated Value (as defined below) of the Surrendered
Shares to payment of the exercise price for shares subject to this Stock Option
that are being acquired upon such exercise. The term "Appreciated Value" for
each share subject to this Stock Option shall mean the excess of the Fair Market
Value thereof over the exercise price then in effect. Not less than ten (10)
Option shares may be purchased at any one time unless the number purchased is
the total number which remains to be purchased under this Stock Option and in no
event may the Stock Option be exercised
-3-
with respect to fractional shares. Upon exercise, Optionee shall make
appropriate arrangements and shall be responsible for the withholding of any
federal and state income taxes then due.
4. PRIOR OUTSTANDING STOCK OPTIONS. Incentive Stock Options granted
to an Optionee may be exercisable while such Optionee has outstanding and
unexercised any Incentive Stock Option previously granted to him or her pursuant
to this Plan. The Stock Option Committee shall determine if such options shall
be exercisable if there are any Incentive Stock Options previously granted (or
substituted) to him or her pursuant to this Plan, and such determination shall
be evidenced in the Agreement executed by the Optionee and the Corporation. An
Incentive Stock Option shall be treated as outstanding until it is exercised in
full or expires by reason of lapse of time.
5. CESSATION OF EMPLOYMENT. (a) Except as provided in Paragraphs 6,
8 or 10 hereof, except if Optionee is granted an option as a consultant,
business associate or other person or entity with important business
relationships with the Corporation, if Optionee's status as an Eligible
Participant under the Plan is terminated, this Stock Option shall expire three
(3) months thereafter or on the date specified in Paragraph 2 hereof, whichever
is earlier. During such period after termination of status as an Eligible
Participant, except if Optionee is granted an option as a consultant, business
associate or other person or entity with important business relationships with
the Corporation, this Stock Option shall be exercisable only as to those
increments, if any, which had become exercisable as of the date on which the
Optionee's status as an Eligible Participant was terminated, and any Stock
Options or increments which had
-4-
not become exercisable as of such date shall expire and terminate automatically
on such date. If Optionee is granted an option as a consultant, business
associate or other person or entity with important business relationships with
the Corporation, this Stock Option shall not expire as a result of consultant,
business associate or other person or entity with important business
relationships with the Corporation no longer doing business or otherwise
terminating his or its business relationship with the Corporation.
(b) TERMINATION FOR VIOLATION OF STANDARDS OF CONDUCT AS REFERENCED IN
OPTIONEE'S EMPLOYEE HANDBOOK. Except if Optionee is granted an option as a
consultant, business associate or other person or entity with important business
relationships with the Corporation, if Optionee's status as an Eligible
Participant under the Plan is terminated for violation of the Employer's
Standards of Conduct, this Stock Option shall automatically expire unless
reinstated by the Stock Option committee within thirty (30) days of such
termination by giving written notice of such reinstatement to Optionee. In the
event of such reinstatement, Optionee may exercise this Stock Option only to
such extent, for such time, and upon such terms and conditions as in the case of
Optionee's termination as an Eligible Participant under the Plan for a reason
other than violation of the Employer's Standards of Conduct, disability or
death. Termination for violation of the Employer's Standards of Conduct shall
include, but not be limited to, or termination for malfeasance or gross
misfeasance in the performance of duties or conviction of illegal activity in
connection therewith, and, in any event, the determination of the Stock Option
Committee with
-5-
respect thereto shall be final and conclusive. If Optionee is granted an option
as a consultant, business associate or other person or entity with important
business relationships with the Corporation and are not classified as eligible
employees of the Corporation or its subsidiaries, this Stock Option shall not
expire as a result of such Optionee's termination.
6. DISABILITY OR DEATH OF OPTIONEE. Except if Optionee is granted an
option as a consultant, business associate or other person or entity with
important business relationships with the Corporation, if Optionee loses his or
its status as an Eligible Participant under the Plan by reason of death or if
Optionee is disabled while employed by the Corporation or a Subsidiary, or if
Optionee dies or becomes so disabled during the three-month period referred to
in Paragraph 5 hereof, this Stock Option shall automatically expire and
terminate one (l) year after the date of Optionee's disability or death or on
the day specified in Paragraph 2 hereof, whichever is earlier. If Optionee is
granted an option as a consultant, business associate or other person or entity
with important business relationships with the Corporation, this Stock Option
shall not expire as a result of such Optionee's death or disability. After
Optionee's disability or death but before such expiration, the person or persons
to whom Optionee's rights under this Stock Option shall have passed by order of
a court of competent jurisdiction or by will or the applicable laws of descent
and distribution, or the executor, administrator or conservator of Optionee's
estate, shall have the right to exercise this Stock Option to the extent that
increments, if any, had become exercisable as of the date on which Optionee's
status as an Eligible Participant under
-6-
the Plan had been terminated. For purposes hereof, "disability" shall have the
same meaning as set forth in Section 13 of the Plan.
7. NONTRANSFERABILITY. This Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during Optionee's lifetime only by Optionee or his or her guardian
or legal representative.
8. EMPLOYMENT. Except for directors, consultants or business
advisors with a written contract for any definite term, this Agreement shall not
obligate the Corporation or a Subsidiary to employ Optionee. Optionee
acknowledges that there is no agreement, express or implied, between Optionee
and the Corporation or other Subsidiary of the Corporation for any specific
period of employment, nor for continuing long-term employment. Optionee and the
Employer each have a right to terminate employment, with or without cause.
Optionee also acknowledges that the Employer retains the right to demote,
transfer, change job duties, and change the compensation at any time with or
without cause in its sole discretion.
9. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Option Shares unless and until said Option
Shares are issued to Optionee as provided in the Plan. Except as provided in
Section 15 of the Plan, no adjustment will be made for dividends or other rights
in respect of which the record date is prior to the date such stock certificates
are issued.
10. MODIFICATION AND TERMINATION BY BOARD OF DIRECTORS. The rights
of Optionee are subject to modification and termination upon the occurrence of
certain events as provided in Sections 12, 13, 14 and 15 of the Plan. Upon
adoption by the
-7-
requisite holders of the Corporation's outstanding shares of Common Stock of any
plan of dissolution, liquidation, reorganization, merger, consolidation or sale
of all or substantially all of the assets of the Corporation to, or the
acquisition of stock representing more than fifty percent (50%) of the voting
power of the Corporation then outstanding by another corporation or person which
would, upon consummation, result in termination of this Stock Option in
accordance with Section 15 of the Plan, this Stock Option shall become
immediately exercisable as to all unexercised Option Shares notwithstanding the
incremental exercise provisions of paragraph 2 of this Agreement for a period
then specified by the Stock Option Committee, but in any event not less than 30
days, in accordance with Section 8(e) of the Plan, on the condition that the
terminating event described in Section 15 of the Plan is consummated. If such
terminating event is not consummated, this Stock Option shall be exercisable in
accordance with the terms of the Agreement, excepting this Paragraph 10.
11. NOTIFICATION OF SALE. Optionee agrees that Optionee, or any
person acquiring Option Shares upon exercise of this Stock Option, will notify
the Corporation in writing not more than five (5) days after any sale or other
disposition of such Shares.
12. REPRESENTATIONS OF OPTIONEE. No Option Shares issuable upon the
exercise of this Stock Option shall be issued and delivered unless and until all
requirements of applicable state and federal law and of the Securities and
Exchange
-8-
Commission pertaining to the issuance and sale of such Option Shares, and all
applicable listing requirements of the securities exchanges, if any, on which
shares of Common Stock of the Corporation of the same class are then listed,
shall have been complied with. Without limiting the foregoing, the undersigned
Optionee hereby agrees, represents and warrants that unless and until the shares
of Common Stock covered by the Plan and issued to Optionee have been registered
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended, Optionee will acquire all Option Shares upon exercise of this
Stock Option for investment purposes only and not for resale or for
distribution, and Optionee hereby agrees to execute and deliver to the
Corporation a representation letter in the form and substance of Exhibit "A"
attached hereto, and to be bound by the representations, warranties, covenants
and promises contained therein. Optionee further agrees, represents and
warrants that upon exercise of all or part of this Stock Option, Optionee will
not transfer any such Option Shares except in compliance with said registration
provisions or an applicable exemption therefrom. Upon each exercise of any
portion of this Stock Option, the person entitled to exercise same shall, unless
waived by the Corporation, furnish evidence satisfactory to counsel for the
Corporation (including written and signed representations in the form attached
hereto as Exhibit "B") that the Option Shares are being acquired in good faith
for investment purposes only and not for resale or distribution except in
compliance with the state and federal requirements described above or applicable
exemptions therefrom. Furthermore, the Corporation, may, if it deems
appropriate, issue stop transfer instructions against any
-9-
Option Shares and affix to any certificate representing such Shares the legends
of the type described in Section 24 of the Plan.
13. NOTICES. All notices to the Corporation provided for in this
Agreement shall be addressed to it in care of its President or Chief Financial
Officer at its principal office and all notices to Optionee shall be addressed
to Optionee's address on file with the Corporation or a subsidiary corporation,
or to such other address as either may designate to the other in writing, all in
compliance with the notice provisions set forth in Section 25 of the Plan.
14. INCORPORATION OF PLAN. All of the provisions of the Plan are
incorporated herein by reference as if set forth in full hereat. In the event
of any conflict between the terms of the Plan and any provision contained
herein, the terms of the Plan shall be controlling and the conflicting
provisions herein shall be disregarded.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
BSM Bancorp
By:
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By:
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OPTIONEE
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OPTIONEES TO WHOM INCENTIVE STOCK OPTIONS ARE GRANTED MUST MEET CERTAIN HOLDING
PERIOD AND EMPLOYMENT REQUIREMENTS FOR FAVORABLE TAX TREATMENT.
UNLESS OTHERWISE STATED, ALL DEFINED TERMS IN THE PLAN SHALL HAVE THE SAME
MEANING HEREIN AS SET FORTH IN THE PLAN.
BSM BANCORP
SUBSTITUTE STOCK OPTION AGREEMENT
/ / Incentive Stock Option
/ / Non-Qualified Stock Option
THIS AGREEMENT is dated the ____ day of ____________, 19__, by and
between BSM Bancorp, a California corporation (the "Corporation"), and
_____________________ (the "Optionee");
WHEREAS, pursuant to the Corporation's 1996 Stock Option Plan (the
"Plan"), the Stock Option Committee has authorized the grant to Optionee of a
Stock Option to purchase all or any part of _____________________ (______)
authorized but unissued shares of the Corporation's Common Stock at the price of
_________________ Dollars ($_____) per share,
WHEREAS, the Corporation has entered into an Agreement to Merge and
Plan of Reorganization dated January 29, 1998, as amended (the "Agreement') with
the Bank of Santa Maria, its wholly-owned subsidiary (the "Bank"), and Mid-State
Bank ("Mid-State") pursuant to which (i) the Bank will merge with and into
Mid-State and Mid-State will continue as the surviving bank, (ii) the Bancorp
will become the bank holding company for Mid-State and change its name to
"Mid-State Bancshares" and (iii)
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the shareholders of Mid-State will become shareholders of the Bancorp in
accordance with the exchange ratio set forth in the Agreement (the "Merger");
WHEREAS, as required by the Agreement, the Board of Directors of the
Bancorp have approved amendments to the Plan that would allow for the granting
of substitute stock options to officers and employees of the Bancorp and the
Bank, and certain directors of the Bancorp and the Bank that will continue as
directors of the Bancorp and Mid-State, that would have the same terms and
conditions as existing Bancorp options, except that such substitute options
would be completely vested and such stock options would not terminate as a
result of the Merger;
WHEREAS, this Substitute Stock Option Agreement is intended to
accommodate the requirements of the Agreement;
NOW, THEREFORE, it is hereby agreed:
1. GRANT OF STOCK OPTION. Pursuant to said action of the Stock
Option Committee and pursuant to authorizations granted by all appropriate
regulatory and governmental agencies, the Corporation hereby grants to Optionee
a Stock Option to purchase, upon and subject to the terms and conditions of the
Plan, which is incorporated in full herein by this Reference, all or any part of
________________ (_______) Option Shares of the Corporation's Common Stock, at
the price of ____________________ Dollars ($_____) per share. For purposes of
this Agreement and the Plan, the date of grant shall be _________________, 19__.
At the date of grant, Optionee [DOES] [DOES NOT OWN] stock possessing more than
10% of the total combined voting power of all classes of capital stock of the
Corporation or any Subsidiary.
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The Stock Option granted hereunder [IS] [IS NOT] intended to qualify
as an Incentive Stock Option within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended.
2. EXERCISABILITY. This Stock Option shall be exercisable as to
________________ Option Shares on ________________, 19__, as to
__________________ Option Shares on ________________, 19__, as to
__________________ Option Shares on ________________, 19__, as to
__________________ Option Shares on ________________, 19__, and as to
__________________ Option Shares on ________________, 19__. This Stock
Option shall remain exercisable as to all of such Option Shares until
_______________, 19__ (but not later than ten (10) years from the date hereof),
at which time it shall expire in its entirety, unless this Stock Option has
expired or terminated earlier in accordance with the provisions hereof. Option
shares as to which this Stock Option becomes exercisable may be purchased at any
time prior to expiration of this Stock Option.
3. EXERCISE OF STOCK OPTION. Subject to the provision of Paragraph 4
hereof, this Stock Option may be exercised by written notice delivered to the
Corporation stating the number of Option Shares with respect to which this Stock
Option is being exercised, together with cash and/or, if permitted at the time
of exercise by the Stock Option Committee, shares of Common Stock of the
Corporation which, when added to the cash payment, if any, have an aggregate
Fair Market Value equal to the full amount of the purchase price of such Option
Shares, and/or, if permitted at the time of exercise by the Stock Option
Committee, and if Optionee is not
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also a director, consultant or business advisor of the Corporation or any of its
subsidiaries, on a deferred basis evidenced by a promissory note. In addition,
the Optionee shall have the right upon the exercise of this Stock Option in the
manner set forth above to surrender for cancellation a portion of this Stock
Option to the Company for the number of share (the "Surrendered Shares")
specified in the holder's notice of exercise, by delivery to the Company with
such notice written instructions from such holder to apply the Appreciated Value
(as defined below) of the Surrendered Shares to payment of the exercise price
for shares subject to this Stock Option that are being acquired upon such
exercise. The term "Appreciated Value" for each share subject to this Stock
Option shall mean the excess of the Fair Market Value thereof over the exercise
price then in effect. Not less than ten (10) Option shares may be purchased at
any one time unless the number purchased is the total number which remains to be
purchased under this Stock Option and in no event may the Stock Option be
exercised with respect to fractional shares. Upon exercise, Optionee shall make
appropriate arrangements and shall be responsible for the withholding of any
federal and state income taxes then due.
4. PRIOR OUTSTANDING STOCK OPTIONS. Incentive Stock Options granted
to an Optionee may be exercisable while such Optionee has outstanding and
unexercised any Incentive Stock Option previously granted to him or her pursuant
to this Plan. The Stock Option Committee shall determine if such options shall
be exercisable if there are any Incentive Stock Options previously granted (or
substituted) to him or her pursuant to this Plan, and such determination shall
be evidenced in the
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Agreement executed by the Optionee and the Corporation. An Incentive Stock
Option shall be treated as outstanding until it is exercised in full or expires
by reason of lapse of time.
5. CESSATION OF EMPLOYMENT. (a) Except as provided in Paragraphs 6,
8 or 10 hereof, except if Optionee is granted an option as a consultant,
business associate or other person or entity with important business
relationships with the Corporation, if Optionee's status as an Eligible
Participant under the Plan is terminated, this Stock Option shall expire three
(3) months thereafter or on the date specified in Paragraph 2 hereof, whichever
is earlier. During such period after termination of status as an Eligible
Participant, except if Optionee is granted an option as a consultant, business
associate or other person or entity with important business relationships with
the Corporation, this Stock Option shall be exercisable only as to those
increments, if any, which had become exercisable as of the date on which the
Optionee's status as an Eligible Participant was terminated, and any Stock
Options or increments which had not become exercisable as of such date shall
expire and terminate automatically on such date. If Optionee is granted an
option as a consultant, business associate or other person or entity with
important business relationships with the Corporation, this Stock Option shall
not expire as a result of consultant, business associate or other person or
entity with important business relationships with the Corporation no longer
doing business or otherwise terminating his or its business relationship with
the Corporation.
(b) TERMINATION FOR VIOLATION OF STANDARDS OF CONDUCT AS REFERENCED IN
OPTIONEE'S EMPLOYEE HANDBOOK. Except if Optionee is granted an option as a
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consultant, business associate or other person or entity with important business
relationships with the Corporation, if Optionee's status as an Eligible
Participant under the Plan is terminated for violation of the Employer's
Standards of Conduct, this Stock Option shall automatically expire unless
reinstated by the Stock Option committee within thirty (30) days of such
termination by giving written notice of such reinstatement to Optionee. In the
event of such reinstatement, Optionee may exercise this Stock Option only to
such extent, for such time, and upon such terms and conditions as in the case of
Optionee's termination as an Eligible Participant under the Plan for a reason
other than violation of the Employer's Standards of Conduct, disability or
death. Termination for violation of the Employer's Standards of Conduct shall
include, but not be limited to, or termination for malfeasance or gross
misfeasance in the performance of duties or conviction of illegal activity in
connection therewith, and, in any event, the determination of the Stock Option
Committee with respect thereto shall be final and conclusive. If Optionee is
granted an option as a consultant, business associate or other person or entity
with important business relationships with the Corporation and are not
classified as eligible employees of the Corporation or its subsidiaries, this
Stock Option shall not expire as a result of such Optionee's termination.
6. DISABILITY OR DEATH OF OPTIONEE. Except if Optionee is granted an
option as a consultant, business associate or other person or entity with
important business relationships with the Corporation, if Optionee loses his or
its status as an Eligible Participant under the Plan by reason of death or if
Optionee is disabled while
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employed by the Corporation or a Subsidiary, or if Optionee dies or becomes so
disabled during the three-month period referred to in Paragraph 5 hereof, this
Stock Option shall automatically expire and terminate one (l) year after the
date of Optionee's disability or death or on the day specified in Paragraph 2
hereof, whichever is earlier. If Optionee is granted an option as a consultant,
business associate or other person or entity with important business
relationships with the Corporation, this Stock Option shall not expire as a
result of such Optionee's death or disability. After Optionee's disability or
death but before such expiration, the person or persons to whom Optionee's
rights under this Stock Option shall have passed by order of a court of
competent jurisdiction or by will or the applicable laws of descent and
distribution, or the executor, administrator or conservator of Optionee's
estate, shall have the right to exercise this Stock Option to the extent that
increments, if any, had become exercisable as of the date on which Optionee's
status as an Eligible Participant under the Plan had been terminated. For
purposes hereof, "disability" shall have the same meaning as set forth in
Section 13 of the Plan.
7. NONTRANSFERABILITY. This Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during Optionee's lifetime only by Optionee or his or her guardian
or legal representative.
8. EMPLOYMENT. Except for directors, consultants or business
advisors with a written contract for any definite term, this Agreement shall not
obligate the Corporation or a Subsidiary to employ Optionee. Optionee
acknowledges that there is
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no agreement, express or implied, between Optionee and the Corporation or other
Subsidiary of the Corporation for any specific period of employment, nor for
continuing long-term employment. Optionee and the Employer each have a right to
terminate employment, with or without cause. Optionee also acknowledges that
the Employer retains the right to demote, transfer, change job duties, and
change the compensation at any time with or without cause in its sole
discretion.
9. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Option Shares unless and until said Option
Shares are issued to Optionee as provided in the Plan. Except as provided in
Section 15 of the Plan, no adjustment will be made for dividends or other rights
in respect of which the record date is prior to the date such stock certificates
are issued.
10. MODIFICATION AND TERMINATION BY BOARD OF DIRECTORS. The rights
of Optionee are subject to modification and termination upon the occurrence of
certain events as provided in Sections 12, 13, 14 and 15 of the Plan.
11. TERMINATING EVENTS
Not less than thirty (30) days prior to consummation of a plan of
dissolution or liquidation of the Corporation, or consummation of a plan of
reorganization, merger or consolidation of the Corporation with one or more
corporations, as a result of which the Corporation is not the surviving
corporation and the outstanding securities of the class then subject to options
hereunder are changed or exchanged for cash or property or securities not of the
Corporation's issue, or upon the sale of all or substantially all the assets of
the Corporation to another
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corporation, or the acquisition of stock representing more than fifty percent
(50%) of the voting power of the Corporation then outstanding by another
corporation or person (the "Terminating Event"), the Stock Option Committee
or the Board of Directors shall notify each Optionee of the pendency of the
Terminating Event. Upon the effective date of the Terminating Event, the Plan
shall automatically terminate and all Stock Options theretofore granted shall
terminate, unless provision is made in connection with such transaction for
the continuance of the Plan and/or assumption of Stock Options theretofore
granted, or substitution for such Stock Options with new stock options
covering stock of a successor employer corporation, or a parent or subsidiary
corporation thereof, solely at the discretion of such successor corporation,
or parent or subsidiary corporation, with appropriate adjustments as to
number and kind of shares and prices, in which event the Plan and options
theretofore granted shall continue in the manner and under the terms so
provided. If the Plan and unexercised options shall terminate pursuant to
the foregoing sentence, all persons shall have the right to exercise any
unexercised portions of options outstanding and not exercised, shall have the
right, at such time prior to the consummation of the transaction causing such
termination as the Corporation shall designate and for a period of not less
than 30 days, to exercise all unexercised portions of their options,
including the portions which would, but for this paragraph entitled
"Terminating Events," not yet be exercisable.
12. NOTIFICATION OF SALE. Optionee agrees that Optionee, or any
person acquiring Option Shares upon exercise of this Stock Option, will notify
the Corporation in writing not more than five (5) days after any sale or other
disposition of such Shares.
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13. REPRESENTATIONS OF OPTIONEE. No Option Shares issuable upon
the exercise of this Stock Option shall be issued and delivered unless and
until all requirements of applicable state and federal law and of the
Securities and Exchange Commission pertaining to the issuance and sale of
such Option Shares, and all applicable listing requirements of the securities
exchanges, if any, on which shares of Common Stock of the Corporation of the
same class are then listed, shall have been complied with. Without limiting
the foregoing, the undersigned Optionee hereby agrees, represents and
warrants that unless and until the shares of Common Stock covered by the Plan
and issued to Optionee have been registered with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, Optionee will
acquire all Option Shares upon exercise of this Stock Option for investment
purposes only and not for resale or for distribution, and Optionee hereby
agrees to execute and deliver to the Corporation a representation letter in
the form and substance of Exhibit "A" attached hereto, and to be bound by the
representations, warranties, covenants and promises contained therein.
Optionee further agrees, represents and warrants that upon exercise of all or
part of this Stock Option, Optionee will not transfer any such Option Shares
except in compliance with said registration provisions or an applicable
exemption therefrom. Upon each exercise of any portion of this Stock Option,
the person entitled to exercise same shall, unless waived by the Corporation,
furnish evidence satisfactory to counsel for the Corporation (including
written and signed representations in the form attached hereto as Exhibit
"B") that the Option Shares are being acquired in good faith for investment
purposes
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only and not for resale or distribution except in compliance with the state
and federal requirements described above or applicable exemptions therefrom.
Furthermore, the Corporation, may, if it deems appropriate, issue stop
transfer instructions against any Option Shares and affix to any certificate
representing such Shares the legends of the type described in Section 24 of
the Plan.
14. NOTICES. All notices to the Corporation provided for in this
Agreement shall be addressed to it in care of its President or Chief Financial
Officer at its principal office and all notices to Optionee shall be addressed
to Optionee's address on file with the Corporation or a subsidiary corporation,
or to such other address as either may designate to the other in writing, all in
compliance with the notice provisions set forth in Section 25 of the Plan.
15. INCORPORATION OF PLAN. All of the provisions of the Plan are
incorporated herein by reference as if set forth in full hereat. In the event
of any conflict between the terms of the Plan and any provision contained
herein, the terms of the Plan shall be controlling and the conflicting
provisions herein shall be disregarded.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
BSM BANCORP
By:
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By:
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OPTIONEE
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