CASH AND DUE FROM BANKS

EX-10.1 3 a81663ex10-1.txt EXHIBIT 10.1 EXHIBIT 10.1 THE BANK OF HEMET 1994 STOCK OPTION PLAN 1. PURPOSE The purpose of The Bank of Hemet 1994 Stock Option Plan (the "Plan") is to strengthen The Bank of Hemet (the "Bank") and those corporations which are or hereafter become subsidiary corporations of the Bank by providing an additional means of attracting and retaining competent directors, officers and key employees and by providing to participating directors, officers and key employees added incentive for high levels of performance. The Plan seeks to accomplish these purposes and achieve these results by providing a means whereby such directors, officers and key employees may purchase shares of the common stock of the Bank pursuant to options granted in accordance with this Plan. Options granted pursuant to this Plan are intended to be either "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), or "nonqualified stock options", as shall be determined and designated upon the grant of each option hereunder. 2. ADMINISTRATION This Plan shall be administered by the Board of Directors (the "Board"). The Board in its sole discretion may from time to time appoint a committee (the "Stock Option Committee") to administer the Plan and exercise all of the powers, authority and discretion of the Board under this Plan. The Board may from time to time remove members from, or add members to, the Stock Option Committee, and vacancies on the Stock Option Committee shall be filled by the Board. The Board may abolish the Stock Option Committee at any time and/or revest in the Board the administration of the Plan. Any action of the Board, or the Stock Option Committee, if applicable, with respect to the administration of the Plan shall be taken pursuant to a majority vote, or the unanimous written consent, of its members. Subject to the express provisions of the Plan, the Board, or the Stock Option Committee, if applicable, shall have the authority to construe and interpret the Plan, define the terms used therein, prescribe, amend and rescind, the rules and regulations relating to administration of the Plan, and make all other determinations necessary or advisable for administration of the Plan. All decisions, determinations, interpretations or other actions by the Board, or the Stock Option Committee, if applicable, shall be final, conclusive and binding on all persons, optionees, grantees, subsidiary corporations of the Bank and any successors-in-interest to such parties. With regard to the granting of a stock option to a member of the Board, or the Stock Option Committee, if applicable, such member must abstain from voting. 3. INCENTIVE STOCK OPTIONS All options granted which are designated at the time of grant as an "incentive stock option" shall be deemed an incentive stock option. (a) Incentive stock options granted under this Plan are intended to be qualified under Section 422 of the Code. (b) Full-time salaried officers and key employees of the Bank or a subsidiary corporation (as that term is defined in Section 424(f) of the Code), shall be eligible for selection to participate in the incentive stock option portion of the Plan. No director of the Bank who is not also a full-time salaried officer or employee of the Bank or a subsidiary corporation, may be granted an incentive stock option hereunder. Subject to the express provisions of the Plan, the Board, or the Stock Option Committee, if applicable, shall (i) select from the eligible class of employees to whom incentive stock options shall be granted and make recommendations to the Board concerning the individuals to whom incentive stock options shall be granted, (ii) determine the terms and provisions of the respective incentive stock option agreements (which need not be identical), (iii) determine the times at which such incentive stock options shall be 2 granted, and (iv) determine the number of shares subject to each incentive stock option. An individual who has been granted an incentive stock option may, if he or she is otherwise eligible under the Plan, be granted additional incentive stock options if the Board shall so determine. (c) The Board shall determine the individuals who shall receive incentive stock options and the terms and provisions of the incentive stock options, and shall grant such incentive stock options to such individuals. Notwithstanding the above sentence, however, the Board may delegate to the Stock Option Committee the power to determine the individuals who shall receive incentive stock options and the terms and provisions of such incentive stock options, and the power to grant incentive stock options to such individuals. (d) Except as described in subsection (f) below, the Board or the Stock Option Committee, if applicable, shall not grant an incentive stock option to purchase shares of the Bank's common stock to any individual who, at the time of the grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Bank or a subsidiary corporation. The attribution rules of Section 424(d) of the Code shall apply in the determination of ownership of stock for these purposes. (e) The aggregate fair market value (determined as of the time the incentive stock option is granted) of stock with respect to which incentive stock options are exercisable for the first time by an individual during any calendar year (under all plans of the Bank and its subsidiary corporations, if any) shall not exceed $100,000, plus any greater amount as may be permitted under subsequent amendments to the Code. (f) The purchase price of stock subject to each incentive stock option shall be determined by the Board, or the Stock Option Committee, if applicable, but shall not be less than one hundred percent (100%) of the fair market value of such stock at the time such option is granted, except, in the case of optionees who at the time of the grant own more than ten percent (10%) of the total combined voting power of all classes of stock of the Bank or a subsidiary corporation (as defined in Section 422 of the Code), in which 3 case the purchase price of the stock shall not be less than one hundred ten percent (110%) of the fair market value of such stock at the time such option is granted and the term of such option shall be for no more than five (5) years. The fair market value of such stock shall be determined in accordance with any reasonable valuation method, including the valuation methods described in Treasury Regulation Section 20.2031-2. (g) No incentive stock option pursuant to this Plan shall be granted to any eligible individual, if such option grant along with all other outstanding stock options of such individual would result in such individual having options to acquire a number of shares of the Bank that would be in excess of ten percent (10%) of the total outstanding shares of the same class and series of the Bank. 4. NONQUALIFIED STOCK OPTIONS (a) All options granted which are (i) in excess of the aggregate fair market value limitations set forth in Section 3(e) hereof, (ii) designated at the time of the grant as "nonqualified", or (iii) intended to be incentive stock options but do not meet the requirements of incentive stock options, shall be deemed nonqualified stock options. Nonqualified stock options granted hereunder shall be so designated in the nonqualified stock option agreement entered into between the Bank and the optionee. (b) Directors, full-time salaried officers (including full-time salaried officers who are also directors) and key employees of the Bank or a subsidiary corporation shall be eligible for selection to participate in the nonqualified stock option portion of the Plan. Subject to the express provisions of the Plan, the Board, or the Stock Option Committee, if applicable, shall (i) select from the eligible class of individuals to whom nonqualified stock options shall be granted and make recommendations to the Board concerning the individuals to whom nonqualified stock options shall be granted, (ii) determine the discretionary terms and provisions of the respective nonqualified stock option agreements (which need not be identical), (iii) determine the times at which such nonqualified stock options shall be granted, and (iv) determine the number of shares 4 subject to each nonqualified stock option. An individual who has been granted a nonqualified stock option may, if he or she is otherwise eligible under the Plan, be granted additional nonqualified stock options if the Board shall so determine. (c) The Board shall determine the individuals who shall receive nonqualified stock options and the terms and provisions of the nonqualified stock options, and shall grant such nonqualified stock options to such individuals. Notwithstanding the above sentence, however, the Board may delegate to the Stock Option Committee the power to determine the individuals who shall receive nonqualified stock options and the terms and provisions of such nonqualified stock options, and the power to grant nonqualified stock options to such individuals. (d) The purchase price of stock subject to each nonqualified stock option shall be determined by the Board, or the Stock Option Committee, if applicable, but shall not be less than one hundred percent (100%) of the fair market value of such stock at the time such option is granted. The fair market value of such stock shall be determined in accordance with any reasonable valuation method, including the valuation methods described in Treasury Regulation 20.2031-2. (e) No nonqualified stock option pursuant to this Plan shall be granted to any eligible individual, if such option grant along with all other outstanding stock options of such individual would result in such individual having options to acquire a number of shares of the Bank that would be in excess of ten percent (10%) of the total outstanding shares of the same series and class of the Bank. 5. STOCK SUBJECT TO THE PLAN Subject to adjustments as provided in Section 12, hereof, the stock to be offered under the Plan shall be shares of the Bank's authorized but unissued common stock (hereinafter called "stock") and the aggregate amount of stock to be delivered upon exercise of all options granted under this Plan shall not exceed 75,000 shares. If any option shall be cancelled, surrendered or expire for any reason without having been 5 exercised in full, the underlying shares subject thereto shall again be available for purposes of this Plan. 6. CONTINUATION OF EMPLOYMENT Nothing contained in the Plan (or in any option agreement) shall obligate the Bank or any subsidiary corporation to employ any optionee for any period or interfere in any way with the right of the Bank or a subsidiary corporation to reduce the optionee's compensation. However, the Bank may not reduce the terms of any option without the approval of the optionee. 7. EXERCISE OF OPTIONS No option shall be exercisable until all necessary regulatory and shareholder approvals for this Plan are obtained. Except as otherwise provided in this section, each option shall be exercisable in such installments, which need not be equal, and upon such contingencies as the Board, or the Stock Option Committee, if applicable, shall determine; provided, however, that if an optionee shall not in any given installment period purchase all of the shares which the optionee is entitled to purchase in such installment period, the optionee's right to purchase any shares not purchased in such installment period shall continue until expiration or termination of such option. Fractional share interests shall be disregarded, except that they may be accumulated. Not less than ten (10) shares may be purchased at any one time unless the number of shares purchased is the total number of shares which is exercisable at such time. Options may be exercised by written notice delivered to the Bank stating the number of shares with respect to which the option is being exercised, together with the full purchase price for such shares. Payment of the option price in full, for the number of shares to be delivered, must be made in cash. If the option is being exercised by any person other than the optionee, said notice shall be accompanied by proof, satisfactory to counsel for the Bank, of the right of such person to exercise the option. Optionees 6 will have no rights as shareholders with respect to stock of the Bank subject to their stock option agreements until the date of issuance of the stock certificate to them. 8. NONTRANSFERABILITY OF OPTIONS Each 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 his or her lifetime only by the optionee. 9. CESSATION OF DIRECTORSHIP OR EMPLOYMENT Except as provided in Sections 10 and 20 hereof, if an optionee ceases to be a director or an employee of the Bank or a subsidiary corporation for any reason other than his or her disability (as defined in Section 22(e)(3) of the Code) or death, the optionee's option shall expire three (3) months after the date of termination of such directorship or employment. During the period after cessation of directorship or employment, such option shall be exercisable only as to those installments, if any, which have accrued and/or vested as of the date on which the optionee ceased to be a director or employee of the Bank or a subsidiary corporation. 10. TERMINATION OF EMPLOYMENT FOR CAUSE If the stock option agreement so provides and if an optionee's employment by the Bank or a subsidiary corporation is terminated for cause, the optionee's option shall expire immediately, provided, however, the Board may, in its sole discretion, within thirty (30) days of such termination, reinstate the option by giving written notice of such reinstatement to the optionee at the optionee's last known address. In the event of reinstatement, the optionee may exercise the option only to such extent, for such time, and upon such terms and conditions as if he or she had ceased to be employed by the Bank or a subsidiary corporation upon the date of such termination for a reason other than cause, disability or death. Termination for cause shall include, but not be limited 7 to, termination for malfeasance or gross misfeasance in the performance of duties or conviction of illegal activity in connection therewith or any conduct detrimental to the interests of the Bank or a subsidiary corporation, and, in any event, the determination of the Board with respect thereto shall be final and conclusive. 11. DISABILITY OR DEATH OF OPTIONEE If any optionee dies while serving as a director or employee of the Bank or a subsidiary corporation, the option shall expire one (1) year after the date of such death, except as provided in Section 20 hereof. After such death but before such expiration, the persons to whom the optionee's rights under the option shall have passed by will or by the applicable laws of descent and distribution or the executor or administrator of optionee's estate shall have the right to exercise such option to the extent that installments, if any, had accrued and/or vested as of the date on which the optionee ceased to be director or employee of the Bank or a subsidiary corporation. If the optionee shall terminate his or her directorship or employment because of disability (as defined in Section 22(e)(3) of the Code), the optionee may exercise this option to the extent he or she is entitled to do so at the date of termination, at any time within one (1) year of the date of termination, except as provided in Section 20 hereof. If any optionee dies during the three (3) month period referred to in Section 9 hereof, the option shall expire one (1) year after the date of such death, except as provided in Section 20 hereof. 12. ADJUSTMENT UPON CHANGES IN CAPITALIZATION If the outstanding shares of the stock of the Bank are increased, decreased, changed into or exchanged for a different number or kind of shares or securities of the Bank through reorganization, merger, recapitalization, reclassification, stock split, stock dividend, stock consolidation or otherwise, without consideration to the Bank, an 8 appropriate and proportionate adjustment shall be made in the number and kind of shares as to which options may be granted. A corresponding adjustment changing the number or kind of shares and the exercise price per share allocated to unexercised 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 option shall be made without change in the total price applicable to the unexercised portion of the option, but with a corresponding adjustment in the price for each share subject to the option. Any adjustment under this Section 12 shall be made by the Board, 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, except that they may be accumulated. 13. TERMINATING EVENTS A Terminating Event shall be defined as any one of the following events: (i) a dissolution or liquidation of the Bank; (ii) a reorganization, merger or consolidation of the Bank with one or more corporations, the result of which (A) the Bank is not the surviving corporation, or (B) the Bank becomes a subsidiary of another corporation (which shall be deemed to have occurred if another corporation shall own directly or indirectly, over 80% of the aggregate voting power of all outstanding equity securities of the Bank); (iii) a sale of substantially all the assets of the Bank to another corporation; or (iv) a sale of the equity securities of the Bank representing more than 80% of the aggregate voting power of all outstanding equity securities of the Bank to any person or entity, or any group of persons and/or entities acting in concert. When the Bank knows that a Terminating Event will occur (i) the Bank shall deliver to each optionee no less than thirty (30) days prior to the Terminating Event, written notification of the Terminating Event and the optionee's right to exercise all options granted pursuant to this Plan, whether or not vested under this Plan or applicable stock option agreement, and (ii) all 9 outstanding options granted pursuant to this Plan shall completely vest and become immediately exercisable as to all shares granted pursuant to the option immediately prior to such Terminating Event. This right of exercise shall be conditional upon execution of a final plan of dissolution or liquidation or a definitive agreement of consolidation or merger. Upon the occurrence of the Terminating Event all outstanding options and the Plan shall terminate; provided, however, that any outstanding options not exercised as of the occurrence of the Terminating Event shall not terminate if there is a successor corporation which assumes the outstanding options or substitutes for such options, new options covering the stock of the successor corporation with appropriate adjustments as to the number and kind of shares and prices. 14. AMENDMENT AND TERMINATION The Board may at any time suspend, amend or terminate the Plan and may, with the consent of the optionee, make such modification of the terms and conditions of the option as it shall deem advisable; provided that, except as permitted under the provisions of Sections 12 and 13 hereof, no amendment or modification which would: (a) increase the maximum number of shares which may be purchased pursuant to options granted under the Plan either in the aggregate or by an individual; (b) change the minimum option price; (c) increase the maximum term of options provided for herein; or (d) permit options to be granted to anyone other than directors, full-time salaried officers (including a full-time salaried officer who is also a director) or key employees of the Bank or a subsidiary corporation; may be adopted without the Bank having first obtained any necessary regulatory and shareholder approvals required by law. No option may be granted during any suspension or after termination of the Plan. Amendment, suspension or termination of the Plan shall not (except as otherwise provided in Section 12 hereof), without the 10 consent of the optionee, alter or impair any rights or obligations under any option theretofore granted. 15. TIME OF GRANTING OPTIONS The time an option is granted, sometimes referred to as the date of grant, shall be the day of the action of the Board, or the Stock Option Committee, if applicable, described in Sections 3(c) and 4(c) hereof; provided, however, that if appropriate resolutions of the Board, or the Stock Option Committee, if applicable, indicate that an option is granted as of and on some future date, the time such option is granted shall be such future date. If action by the Board, or the Stock Option Committee, if applicable, is taken by unanimous written consent of its members, the action of the Board, or the Stock Option Committee, if applicable shall be deemed to be at the time the last Board, or Stock Option Committee, if applicable, member signs the consent. 16. PRIVILEGES OF STOCK OWNERSHIP; SECURITIES LAW COMPLIANCE; NOTICE OF SALE No optionee shall be entitled to the privileges of stock ownership as to any shares of stock not actually issued. No shares shall be purchased upon the exercise of any option unless and until the Bank has fully complied with all applicable requirements of any regulatory agency having jurisdiction over the Bank and all applicable requirements of any exchange upon which stock of the Bank may be listed. The optionee shall give the Bank notice of any sale or disposition of any such shares not more than five (5) days after such sale or disposition. 17. EFFECTIVE DATE OF THE PLAN The Plan shall be deemed adopted by the Board as of April 20, 1994 and shall be effective immediately subject to approval by the shareholders of the Bank by vote of a majority of the outstanding shares represented and voting at a meeting of 11 shareholders and by a majority of the disinterested shares represented and voting at the meeting of shareholders, and the approval of the California State Banking Department. 18. TERMINATION Unless previously terminated by the Board, the Plan shall terminate at the close of business on a date ten (10) years from the earlier of the date of approval by the Bank's outstanding shares or the date of adoption of this Plan by the Board. No options shall be granted under the Plan thereafter, but such termination shall not affect any option theretofore granted. 19. OPTION AGREEMENT Each option shall be evidenced by a written stock option agreement executed by the Bank 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 and are not inconsistent with the Plan. Each incentive stock option agreement shall contain such terms and provisions as the Board, or the Stock Option Committee, if applicable, may determine to be necessary in order to qualify such option as an incentive stock option within the meaning of Section 422 of the Code. 20. OPTION PERIOD Each option and all rights and obligations thereunder shall expire on such date as the Board, or the Stock Option Committee, if applicable, may determine, but not later than ten (10) years from the date such option is granted, and shall be subject to earlier termination as provided elsewhere in the Plan. 21. EXCULPATION AND INDEMNIFICATION 12 To the extent permitted by applicable law in effect from time to time, no member of the Board or the Stock Option Committee shall be liable for any act or omission of any other member of the Board or the Stock Option Committee nor for any act or omission on the member's own part, except the member's own willful misconduct or gross negligence. The Bank and its subsidiary corporations shall pay expenses incurred by, and satisfy a judgment or fine rendered or levied against, a present or former member of the Board or the Stock Option Committee in any action brought by a third party against such person (whether or not the Bank is joined as a party defendant) to impose a liability or penalty on such person while a member of the Board or the Stock Option Committee arising with respect to the Plan or administration thereof or out of membership on the Board or the Stock Option Committee, or all or any combination of the preceding; provided, the Board determines in good faith that such member of the Board or the Stock Option Committee was acting in good faith, within what such member of the Board or the Stock Option Committee reasonably believed to be the scope of his or her employment or authority, and for a purpose which he or she reasonably believed to be in the best interests of the Bank or its shareholders. Payments authorized hereunder include amounts paid and expenses incurred in settling any such action or threatened action. This Section 21 does not apply to any action instituted or maintained in the right of the Bank by a shareholder or holder of a voting trust certificate representing shares of the Bank or any subsidiary corporation thereof. The provisions of this Section 21 shall apply to the estate, executor, administrator, heirs, legatees or devisees of a member of the Board or the Stock Option Committee, and the term "person" as used in this Section 21 shall include the estate, executor, administrator, heirs, legatees or devisees of such person. THE BANK OF HEMET By ---------------------------------- By ---------------------------------- 13