EXHIBIT 4a
1997 HERITAGE OAKS BANCORP
STOCK OPTION PLAN
AMENDED MAY 27, 1999
1. PURPOSE OF THE PLAN.
The purpose of this 1997 Heritage Oaks Bancorp Stock Option Plan (the
"Plan") is to advance the interests of the Company through providing select key
Employees and Directors of the Bank, the Company, and their Affiliates with the
opportunity to acquire Shares. By encouraging such stock ownership, the Company
seeks to attract, retain and motivate the best available personnel for positions
of substantial responsibility and to provide additional incentive to Directors
and key Employees of the Company or any Affiliate to promote the success of the
business.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code, and any other subsidiary corporations of a
parent corporation of the Company.
(b) "Agreement" shall mean a written agreement entered into in accordance
with Paragraph 5(c).
(c) "Award" shall mean an Option evidenced by a written agreement entered
into in accordance with Paragraph 5(c).
(d) "Bank" shall mean Heritage Oaks Bank.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with Paragraph 5(a) hereof.
(h) "Common Stock" shall mean the common stock, no par value, of the
Company.
(I) "Company" shall mean Heritage Oaks Bancorp.
(j) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company or between the Company, an Affiliate or a successor.
(k) "Director" shall mean any member of the Board, and any member of the
board of directors of any Affiliate that the Board has by resolution designated
as being eligible for participation in this Plan.
(l) "Non-Employee Director" shall mean any member of the Board who is a
"non-employee director" within the meaning of Rule 16b-3.
(m) "Effective Date" shall mean the date specified in Paragraph 13 hereof.
(n) "Employee" shall mean any person employed by the Company, the Bank or
an Affiliate who is an employee for federal tax purposes.
(o) "Exercise Price" shall mean the price per Optioned Share at which an
Option may be exercised.
(p) "ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(q) "Market Value" shall mean the fair market value of the Common Stock,
as determined under Paragraph 7(b) hereof.
(r) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan but which is not intended to be and is not
identified as an ISO.
(s) "Option" means an ISO and/or a Non-ISO.
(t) "Optioned Shares" shall mean Shares subject to an Award granted
pursuant to this Plan.
(u) "Participant" shall mean any key Employee or other person who receives
an Award pursuant to the Plan.
(v) "Plan" shall mean this 1997 Heritage Oaks Bancorp Stock Option Plan.
(w) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(x) "Share" shall mean one share of Common Stock.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a term of 10
years from the Effective Date or the date the Plan is adopted by the Board
(whichever period ends earlier), unless sooner terminated pursuant to Paragraph
15 hereof. No Award shall be granted under the Plan after such 10 year term.
(b) Term of Awards. The term of each Award granted under the Plan shall
be established by the Committee, but shall not exceed 10 years; provided,
however, that in the case of an Employee who owns Shares representing more than
10% of the outstanding Common Stock at the time an ISO is granted, the term of
such ISO shall not exceed five years, subject to the provisions of Section 8(e)
hereof.
4. SHARES SUBJECT TO THE PLAN.
Except as otherwise required by the provisions of Paragraph 10 hereof, the
aggregate number of Shares deliverable pursuant to Awards shall not exceed
260,303 Shares. Such Shares will be authorized but unissued Shares. If any
Awards should expire, become unexercisable, or be forfeited, for any reason
without having been exercised or become vested in full, the Optioned Shares
shall, unless the Plan shall have been terminated, be available for the grant of
additional Awards under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered by the
Committee, which shall consist of not less than three (3) members of the Board
who are Non-Employee Directors. Members of the Committee shall serve at the
pleasure of the Board. In the absence at any time of a duly appointed
Committee, the Plan shall be administered by those members of the Board who are
Non-Employee Directors.
(b) Powers of the Committee. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion (i) to select
Participants and grant Awards, (ii) to determine the form and content of
Awards to be issued in the form of Agreements under the Plan, (iii) to
interpret the Plan, (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan, (v) to make other determinations necessary
or advisable for the administration of the Plan. The Committee shall have
and may exercise such other power and authority as may be delegated to it by
the Board from time to time. A majority of the entire Committee shall
constitute a quorum and the action of a majority of the members present at
any meeting at which a quorum is present, or acts approved in writing by a
majority of the Committee without a meeting, shall be deemed the action of
the Committee.
(c) Agreement. Each Award shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall
be bound by the terms and restrictions of the Plan and of such Agreement.
The terms of each such Agreement shall be in accordance with the Plan. In
particular, the Committee shall set forth in each Agreement (i) the Exercise
Price of an Option, (ii) the number of Shares subject to, and the expiration
date of, the Award, (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such Award, and
(v) whether the Option is intended to be an ISO or a Non-ISO.
The Chairman of the Committee and such other Directors and officers as
shall be designated by the Committee are hereby authorized to execute Agreements
on behalf of the Company and to
cause them to be delivered to the recipients of Awards.
(d) Effect of the Committee's Decisions. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
(e) Indemnification. In addition to such other rights of indemnification
as they may have, the members of the Committee shall be indemnified by the
Company in connection with any claim, action, suit or proceeding relating to any
action taken or failure to act under or in connection with the Plan or any
Award, granted hereunder to the full extent provided for under the Company's
governing instruments with respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. Only key Employees and Directors shall be eligible to
receive grants of Options pursuant to the Plan.
(b) Special Rules for ISOs. The aggregate Market Value, as of the date
the option is granted, of the Shares with respect to which ISOs are exercisable
for the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present or future Parent or Subsidiary of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may grant Options in
excess of the foregoing limitations, in which case such Options granted in
excess of such limitations shall be Options which are Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Options Shares on the date of grant without taking into account any restrictions
on the Optioned Shares. In the case of an Employee who owns Shares representing
more than 10% of the Company's outstanding Shares of Common Stock at the time an
ISO is granted, the Exercise Price shall not be less than 110% of the Market
Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including NASDAQ National Market or
Small Cap System) on the date in question, then the Market Value per Share will
be the average of the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise Price shall be
the mean between the bid and asked price on such date. If the Common Stock is
traded otherwise than on a national securities exchange on the date in question,
then the Market Value per Share shall be the mean between the bid and asked
price on such date, or, if there is no bid and asked price on such date, then on
the next prior business day on which there was a bid and asked price. If no
such bid and asked price is available, then the Market Value per Share shall be
its fair market value as determined by the Committee, in its sole and absolute
discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Subject to (e) below, any Option granted hereunder
shall be exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Agreement granted to a
Participant. An Option may not be exercised for a fractional Share.
(b) Procedure for Exercise. A Participant may exercise Options,
subject to provisions relative to its termination and limitations on its
exercise, only by (1) written notice of intent to exercise the Option with
respect to a specified number of Shares, and (2) payment to the Company
(contemporaneously with delivery of such notice) in cash, in Common Stock,
or a combination of cash and Common Stock, of the amount of the Exercise
Price for the number of Shares with respect to which the Option is then being
exercised. Each such notice shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Chief Financial Officer of the
Company at the Company's executive offices. Common Stock utilized in full or
partial payment of the Exercise Price for Options shall be valued at its
Market Value per Share at the date of exercise.
(c) Period of Exercisability. Except to the extent otherwise provided
in more restrictive terms of an Agreement, an Option may be exercised by a
Participant only with respect to the vested portion of such Option and only
while he is an Employee or Director and has maintained Continuous Service
from the date of the grant of the Option, or within three months after
termination of such Continuous Service (but not later than the date on which
the Option would otherwise expire), except if the Employee's or Director's
Continuous Service terminates by reason of:
(1) "Just Cause" which for purposes hereof shall mean termination
because of the Employee's or Director's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, then the Participant's rights to exercise
such Option shall expire on the date of such termination;
(2) death, then all Options of the deceased Participant shall become
immediately exercisable and may be exercised within one year from the date
of his death (but not later than the date on which the Option would
otherwise expire) by the personal representatives of his estate or person
or persons to whom his rights under such Option shall have passed by will
or by laws of descent and distribution;
(3) Permanent and Total Disability (as such term is defined in
Section 22(e)(3) of the Code), then all Options of the disabled Participant
shall become immediately exercisable and may be exercised within one year
from the date of such Permanent and Total Disability, but not later than
the date on which the Option would otherwise expire.
(d) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
(e) No Option may be exercised prior to the first anniversary date of the
grant of such Option, at which time it may become exercisable with respect to no
more than 20% of the Optioned Shares. On each anniversary of the Option grant
thereafter, the Option may become exercisable with
respect to no more than an additional 20% of the Optioned Shares. Vesting
shall cease immediately upon the termination of employment or directorship of
an optionee. The foregoing vesting schedule is the most rapid vesting
permitted under the Plan except in the case of death or disability (which
shall be governed by Paragraphs 8(c)(2) and (3) above).
9. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS.
(a) Notwithstanding any other provisions of this Plan to the contrary,
all Awards of Options to Non-Employee Directors pursuant to the Plan shall be
made by the Board and not the Committee. Each such option shall be a Non-ISO
Option. Such Non-ISOs shall have an Exercise Price per Share equal to the
Market Value of a Share on the date of grant.
(b) Terms of Exercise. Options received under the provisions of this
Paragraph may be exercised in accordance with Paragraph 8 above.
10. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of
shares reserved for issuance under the Plan, and the number and kind of
shares subject to outstanding Awards (and the Exercise Price thereof), shall
be proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.
(b) Transactions in which the Company Is Not the Surviving Entity. In
the event of (i) the liquidation or dissolution of the Company, (ii) a merger
or consolidation in which the Company is not the surviving entity, (iii) the
sale or disposition of all or substantially all of the Company's assets or
(iv) a tender offer or acquisition by one person or a group of persons acting
in concert of more than 50% of the Company's outstanding Shares (any of the
foregoing to be referred to herein as a "Transaction"), the Committee shall
notify each optionee of the pendency of the Transaction. Upon delivery of
said notice, any Award granted prior to the Transaction shall be,
notwithstanding the provisions of Paragraph 8(e), exercisable in full and not
only as to those Shares with respect to which installments, if any, have been
accrued, subject, however, to earlier expiration or termination as provided
elsewhere in the Plan. Upon the date thirty (30) days after delivery of such
notice, any option or portion thereof not exercised shall terminate, and upon
the effective date of the Transaction, this Plan shall terminate, unless
provision is made in connection with the Transaction for assumption of
Options theretofore granted, or payment therefor, or substitution for such
Options of new options covering stock of a successor corporation, or a parent
or subsidiary corporation thereof, solely at the option of such successor
corporation or parent or subsidiary corporation, with appropriate adjustments
as to number and kind of shares and prices.
(c) Special Rule for ISOs. Any adjustment made pursuant to
subparagraphs (a) or (b) hereof shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code,
of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional or Difference Shares
or Securities. If, by reason of any adjustment made pursuant to this
Paragraph, a Participant becomes entitled to new, additional or different
shares of stock or securities, such new, additional or different shares of
stock or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Award before
the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph,
the issuance by the Company or an Affiliate of shares of stock of any class,
or of securities convertible in to Shares or stock of another class, for cash
or property or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, shall not affect and no
adjustment shall be made with respect to, the number, class, Exercise Price
of Shares then subject to Awards or reserved for issuance under the Plan.
11. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution, or pursuant to the terms of a "qualified domestic relations
order" (within the meaning of Section 414(p) of the Code and the regulations
and rulings thereunder). An Award may be exercised only by a Participant,
the Participant's personal representative or a permitted transferee.
12. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the later of
the date on which the Committee makes the determination of granting such
Award, and the Effective Date. Notice of the determination shall be given
to each Participant to whom an Award is so granted within a reasonable time
after the date of such grant.
13. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval by a
favorable vote of stockholders owning at least a majority of the Shares
eligible to be cast at a meeting duly held in accordance with applicable laws.
14. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize the
Committee to direct execution of an instrument providing for the modification
of any outstanding Award, provided no such modification shall confer on the
holder of said Award any right or benefit which could not be conferred on him
by the grant of a new Award at such time, or impair the Award without the
consent of the holder of the Award.
15. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan.
Except for any changes that may be required to be made at the direction
of the Department of Corporations in connection with a permit procedure under
the California Corporate Securities Law, shareholder approval must be
obtained for any amendment of the Plan that would change the number of Shares
subject to the Plan (except in accordance with Paragraph 10 above), change
the category of persons eligible to be Participants, or materially increase
the benefits under the Plan.
No amendment, suspension or termination of the Plan shall, without the
consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not
be issued with respect to any Award unless the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
(b) Special Circumstance. The inability of the Company to obtain
approval from any regulatory body or authority deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder shall relieve the Company of any liability in respect of the
non-issuance or sale of such Shares.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable.
17. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of the
Plan.
18. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of Options
shall be subject to the Participant's satisfaction of all applicable federal,
state and local income and employment tax withholding obligations. The
Committee, in its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have the Company
withhold Shares, or to deliver to the Company Shares that he already owns,
having a value equal to the amount required to be withheld. The value of
Shares to be with withheld, or delivered to the Company, shall be based on
the Market Value of the Shares on the date the amount of tax to be withheld
is to be determined. As an alternative, the Company may retain, or sell
without notice, a number of such Shares sufficient to cover the amount
required to be withheld.
19. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to participate or
participation in the
Plan create or be deemed to create any legal or equitable right of the
Employee, Director, or any other party to continue service with the Company,
the Bank, or any Affiliate of such corporations.
20. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws of
the State of California, except to the extent that federal law shall be deemed
to apply.