PACIFIC COMMUNITY BANKING GROUP
1999 STOCK OPTION PLAN
Adopted February 23, 1999
1. PURPOSE
The purpose of the Pacific Community Banking Group 1999 Stock Option
Plan (the "Plan") is to strengthen Pacific Community Banking Group (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, key employees, consultants and others with significant
and material business relationships 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 such individuals
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 and others with significant and material business relationships
may purchase shares of Common Stock of the Corporation pursuant to Stock
Options granted in accordance with this Plan.
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.
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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 Pacific Community
Banking Group, 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 and others with significant and material 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 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
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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.
(f) "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.
(g) "NON-QUALIFIED STOCK OPTION." This term shall mean a Stock
Option which is not an Incentive Stock Option.
(h) "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.
(i) "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.
(j) "PLAN." This term shall mean the Pacific Community Banking
Group 1999 Stock Option Plan as embodied herein and as may be amended from
time to time in accordance with the terms hereof and applicable law.
(k) "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.
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(l) "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.
(m) "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
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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 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
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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 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 1,350,000 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.
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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. 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.
An eligible director, officer or employee shall not participate in
the granting of his or her own options.
(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
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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 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,
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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, but such options in excess of $100,000 shall be treated as
non-qualified options.
(e) SUBSTITUTED STOCK OPTIONS. If all of the outstanding shares of
common stock of another corporation are changed into or exchanged solely for
common stock in a transaction to which Section 425(a) of the Internal Revenue
Code of 1986, as amended, applies, then, subject to the approval of the
Board of Directors of the Bank, 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)
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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 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 of 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.
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(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.
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, consultants of, or others with significant
and material business relationships with, the Company, a minimum of 20% of
the stock options 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.
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(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, subject to the requirements
of Rule 260.141.41(f) of the California Commissioner of Corporations. An
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
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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 exercised and/or, with the prior written
approval of the Stock Option Committee and if legally permitted, 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. No Director 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.
(e) REORGANIZATION. Notwithstanding any provision in any stock
option agreement pertaining to the time of exercise of a Stock Option, or
part thereof,
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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 16 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 16 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 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
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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 Optionees with a written contract for any definite term, this
Agreement shall not obligate the Corporation or a Subsidiary to employ
Optionee.
11. CESSATION OF EMPLOYMENT.
Except as provided in Sections 8(e), 12, 13, 14, 15 or 16 hereof, 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
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Optionee's status as an Eligible Participant is terminated, whichever is
earlier. Thereafter, Options shall be exercisable only as to those
increments, if any, which had become exercisable as of such expiration date,
and any Stock Options or increments which had not become exercisable as of
such date shall expire and terminate automatically on such expiration date.
12. TERMINATION FOR VIOLATION OF STANDARDS OF CONDUCT AS REFERENCED IN
OPTIONEE'S EMPLOYEE HANDBOOK.
If Optionee's status as an Eligible Participant is terminated for
violation of the Employer's Standards of Conduct, the vested portion of Stock
Options granted to such Optionee shall be exercisable for a thirty (30) day
period following such termination, and thereafter such Stock Options shall
automatically expire and terminate in their entirety; provided, however, that
the Stock Option Committee may, in its sole discretion, within thirty (30)
days of such termination, reinstate such Stock Options to the status of
options terminated for reasons other than violations of the Employer's
Standards of Conduct, death or disability by giving written notice of such
reinstatement to the Optionee. In the event of such reinstatement, the
Optionee may exercise the Stock Options as provided in Section 11 herein.
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.
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13. DEATH OF OPTIONEE
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 12 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 (1) year after the date of such death, whichever is
earlier. 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.
14. DISABILITY OF OPTIONEE
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 12 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 (1) year after the date of such
disability, whichever is earlier. 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
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Corporation or a Subsidiary as a result of the disability. For the purpose of
this Section 14, 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.
15. 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 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
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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.
16. 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 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
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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.
17. 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 16 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;
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(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;
(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 17 hereof), without
the consent of the Optionees, alter or impair any rights or obligations under
any Stock Option theretofore granted.
18. 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
21
define and limit those persons who are eligible for consideration of the
grant of Stock Options under the Plan;
19. 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 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 of 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.
20. EFFECTIVE DATE OF THE PLAN
The Plan shall be deemed adopted as of February 23, 1999, 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.
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21. 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; or (ii) approval of the Plan by holders of at least a majority of
the Corporation's outstanding shares of Common Stock. No Stock Options shall
be granted under the Plan thereafter, but such termination shall not affect
any Stock Option theretofore granted.
22. 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.
23. 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.
24. 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 indemnified by the Corporation for and against all costs,
judgments, penalties and
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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 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, as 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.
25. (Reserved)
26. 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
24
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.
27. (Reserved)
28. 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.
29. 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.
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30. 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.
31. 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. SUCCESSORS
This Plan shall be binding upon the respective successors, assigns,
heirs, executors, administrators, guardians and personal representatives of
the Corporation and any Optionee.
33. GOVERNING LAW
This Plan shall be governed by and construed in accordance with the laws
of the State of California.
34. 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.
26
SECRETARY'S CERTIFICATE OF ADOPTION
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Assistant Secretary of Pacific
Community Banking Group; and
2. That the foregoing Pacific Community Banking Group 1999 Stock
Option Plan was duly adopted by the Board of Directors of Pacific Community
Banking Group as the Stock Option Plan for the Corporation at a meeting duly
called as required by law and convened on the 23rd day of February, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation this 23rd day of February, 1999.
/s/ MARGARAT HOWE
--------------------------------------
Margarat Howe, Assistant Secretary
[SEAL]
27
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.
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 OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
PACIFIC COMMUNITY BANKING GROUP
STOCK OPTION AGREEMENT
----------------------
/ / Incentive Stock Option
/ / Non-Qualified Stock Option
THIS AGREEMENT, dated the ___ day of ________, 19__, by and between
Pacific Community Banking Group, a California corporation (the
"Corporation"), and ________________ (the "Optionee");
WHEREAS, pursuant to the Corporation's 1999 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
1
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.
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 legally permitted, 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. 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 Agreement executed by the
Optionee and the Corporation, subject
3
to the requirements of Rule 260.141.41(f) of the California Commissioner of
Corporations. 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. Except as provided in paragraphs 7,
9, or 11 hereof, 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, 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 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.
6. TERMINATION FOR VIOLATION OF STANDARDS OF CONDUCT AS REFERENCED
IN OPTIONEE'S EMPLOYEE HANDBOOK. If Optionee's status as an Eligible
Participant under the Plan is terminated for violation of the Employer's
Standard of Conduct, the vested portion of this Stock Option shall be
exercisable for a thirty (30) day period following such termination, and
thereafter this Stock Option shall automatically expire and terminate in
their entirety; provided, however, that the Stock Option Committee may, in
its sole discretion, within thirty (30) days of such termination, reinstate
such Stock Options to the status of options terminated for reasons other than
violations of the Employer's Standards of Conduct, death or disability by
giving written notice of such reinstatements to the Optionee. In the event of
such reinstatement, the Optionee may exercise the Stock Options as provided
in Section 11 herein.
4
Termination for violation of the Employer's Standard 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.
7. DISABILITY OR DEATH OF OPTIONEE. If Optionee loses his or her
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 (1) year after the date of Optionee's disability or
death or on the day specified in Paragraph 2 hereof, whichever is earlier.
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 14 of the Plan.
8. 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.
5
9. EMPLOYMENT. Except for optionees with a written contract for
any definite term, this Agreement shall not obligate the Corporation or a
Subsidiary to employ Optionee.
10. 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.
11. 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, 15 and 16 of the Plan.
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, 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 16 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 16 of the Plan is consummated. If such terminating event
is not consummated, this Stock Option shall
6
be exercisable in accordance with the terms of the Agreement, excepting this
Paragraph 11.
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.
13. (Reserved)
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 26 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.
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
PACIFIC COMMUNITY BANKING GROUP
By:
-----------------------------------
By:
-----------------------------------
OPTIONEE
---------------------------------------
8