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MID-STATE BANCSHARES
1996 STOCK OPTION PLAN
Adopted November 12, 1996
Amended, March 11, 1997
Amended May 13, 1997
Amended March 17, 1998
Amended October 14, 1998
Amended May 18, 2000
1. PURPOSE
The purpose of the Mid-State Bancshares 1996 Stock Option Plan (the
"Plan") is to strengthen Mid-State Bancshares (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,
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business associates and others 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.
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 Mid-State Bancshares,
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.
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(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 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 Mid-State Bancshares 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 1,500,000 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.
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
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(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
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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;
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(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
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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.
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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
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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
At any time that an Optionee contemplates the disposition of any of the
Option Shares (whether by sale, exchange, gift or other form of transfer) he or
she shall first
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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,
Mid-State Bancshares 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.
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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.
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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.
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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.
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SECRETARY'S CERTIFICATE OF ADOPTION
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Assistant Secretary
of Mid-State Bancshares; and
2. That the foregoing Mid-State Bancshares 1996 Stock Option
Plan, as amended, was duly adopted by the Board of Directors of Mid-State
Bancshares as the Stock Option Plan for the Corporation at a meeting duly called
as required by law and convened on the 14th day of October, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed the seal of the Corporation this 14th day of October, 1998.
-------------------------------------
James G. Stathos, Assistant Secretary
[SEAL]
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