Exhibit 10.1

NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO SHARES OF UNITED
SECURITY BANCSHARES’ COMMON STOCK SHALL BE ISSUED PURSUANT HERETO UNLESS THE
UNITED SECURITY BANCSHARES 2005 STOCK OPTION PLAN SHALL HAVE FIRST BEEN APPROVED
BY THE SHAREHOLDERS OF UNITED SECURITY BANCSHARES.

UNITED SECURITY BANCSHARES

INCENTIVE STOCK OPTION AGREEMENT

          This Incentive Stock Option Agreement (the “Agreement”) is made and
entered into as of the 1st day of January, 2006, by and between United Security
Bancshares, a California corporation (the “Company”), and Dennis R. Woods
(“Optionee”);

          WHEREAS, pursuant to the United Security Bancshares 2005 Stock Option
Plan (the “Plan”), a copy of which is attached hereto, the Administrator of the
Plan has authorized granting to Optionee an incentive stock option to purchase
all or any part of Twenty-Five Thousand (25,000) authorized but unissued shares
of the Company’s common stock at the price of Thirty Dollars and Fifty Cents
($30.50) per share, such option to be for the term and upon the terms and
conditions hereinafter stated;

          NOW, THEREFORE, it is hereby agreed:

          1. Grant of Option. Pursuant to said action of the Administrator, the
Company hereby

grants to Optionee the option to purchase, upon and subject to the terms and
conditions of the Plan which is incorporated in full herein by this reference,
all or any part of Twenty-Five Thousand (25,000) shares of the Company’s common
stock (hereinafter called “stock”) at the price of Thirty Dollars and Fifty
Cents ($30.50) per share, which price is not less than one hundred percent
(100%) of the fair market value of the stock (or not less than 110% of the fair
market value of the stock for Optionee-shareholders who own securities
possessing more than ten percent (10%) of the total combined voting power of all
classes of securities of the Company) as of the date of action of the
Administrator granting this option.

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          2. Exercisabilitv. This option shall be exercisable as to:

Number of Shares

Vesting Date

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5,000

January 1, 2007

 

 

5,000

January 1,2008

 

 

5,000

January 1, 2009

 

 

5,000

January 1, 2010

 

 

5,000

January 1, 2011

This option shall remain exercisable as to all vested shares until January 1,
2016 (but not later than ten (10) years from the date this option is granted)
unless this option has expired or terminated earlier in accordance with the
provisions hereof or in the Plan. Subject to paragraphs 4 and 5, shares as to
which this option becomes exercisable pursuant to the foregoing provision may be
purchased at any time prior to expiration of this option.

          3. Exercise of Option. This option may be exercised by written notice
(substantially in the form as that which is attached as Exhibit A) delivered to
the Company stating the number of shares with respect to which this option is
being exercised, together with (a) cash in the amount of the purchase price of
such shares, or (b) subject to applicable law, with the Company’s stock
previously acquired by Optionee and held by Optionee for a period of at least
six months. Notwithstanding the foregoing, in the event Optionee does exercise
the option by utilizing (b) above, Optionee should obtain tax advice as to the
consequences of such action. Not less than ten (10) shares may be purchased at
anyone time unless the number purchased is the total number which may be
purchased under this option and in no event may the option be exercised with
respect to fractional shares. Upon exercise, Optionee shall make appropriate
arrangements and shall be responsible for the withholding of any federal and
state taxes then due.

          4. Cessation of Employment. If Optionee shall cease to be an employee
of the Company or a subsidiary corporation, this option shall expire three (3)
months thereafter, except (i) as provided in Paragraphs 2, 5 and 6 hereof in
which case the option shall expire as provided in those sections and (ii) when
the Optionee is changing his or her status from employee or employee-director to
director, in which case such stock option shall be converted to a nonqualified
stock option three months and one day following such change in status. During
the aforementioned three (3) month period this option shall be exercisable only
as to those installments, if any, which had accrued as of the date when Optionee
ceased to be an employee of the Company or a subsidiary corporation.

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          5. Termination of Employment for Cause. If Optionee’s employment with
the Company or a subsidiary corporation is terminated for cause, this option
shall expire thirty (30) days from the date of such termination. Termination for
cause shall include, but not be limited to, termination for malfeasance or gross
misfeasance in the performance of duties or conviction of a crime involving
moral turpitude, and, in any event, the determination of the Board of Directors
with respect thereto shall be final and conclusive.

          6. Nontransferabilitv~ Death or Disability of Optionee. This option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during Optionee’s lifetime only by
Optionee. If Optionee dies while serving as an employee of the Company or a
subsidiary corporation, or during the three (3) month period referred to in
Paragraph 4 hereof, this option shall expire one (1) year after the date of
Optionee’s death or on the day specified in Paragraph 2 hereof, whichever is
earlier. After Optionee’s death but before such expiration, the persons to whom
Optionee’s rights under this option shall have passed by will or by the laws of
descent and distribution or the executor or administrator of Optionee’s estate
shall have the right to exercise this option as to those shares for which
installments had accrued under Paragraph 2 hereof as of the date on which
Optionee ceased to be an employee of the Company or a subsidiary corporation.

          If Optionee terminates his or her employment because of disability (as
defined in Section 22(e)(3) of the Code), 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, or before the expiration
date specified in Paragraph 2 hereof, whichever is earlier.

          7. Employment. This Agreement shall not obligate the Company or a
subsidiary corporation to employ Optionee for any period, nor shall it interfere
in any way with the right of the Company or a subsidiary corporation to reduce
Optionee’s compensation.

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          8. Privileges of Stock Ownership. Optionee shall have no rights as a
shareholder with respect to the Company’s stock subject to this option until the
date of issuance of stock certificates to Optionee. Except as provided in the
Plan, no adjustment will be made for dividends or other rights for which the
record date is prior to the date such stock certificates are issued.

          9. Modification and Termination. The rights of Optionee are subject to
modification and termination upon the occurrence of certain events as provided
in Sections 13 and 14 of the Plan.

          10. Notification of Sale. Optionee agrees that Optionee, or any person
acquiring shares upon exercise of this option, will notify the Company not more
than five (5) days after any sale or other disposition of such shares.

          11. Representations of Optionee. No shares issuable upon the exercise
of this option shall be issued and delivered unless and until the Company has
complied with all applicable requirements of California and federal law and of
the Securities and Exchange Commission and the California Department of
Corporations, as necessary, pertaining to the issuance and sale of such shares,
and all applicable listing requirements of the securities exchanges, if any, on
which shares of the Company of the same class are then listed. Optionee agrees
to ascertain that such requirements shall have been complied with at the time of
any exercise of this option. In addition, if the Optionee is an “affiliate” for
purposes of the Securities Act of 1933, there may be additional restrictions on
the resale of stock, and Optionee therefore agrees to ascertain what those
restrictions are and to abide by the restrictions and other applicable federal
and state securities laws.

          Furthermore, the Company may, if it deems appropriate, issue stop
transfer instructions against any shares of stock purchased upon the exercise of
this option and affix to any certificate representing such shares the legends
which the Company deems appropriate.

          Optionee represents that the Company, its directors, officers,
employees and agents have not and will not provide tax advice with respect to
the option, and Optionee agrees to consult with his or her own tax advisor as to
the specific tax consequences of the option, including the application and
effect of federal, state, local and other tax laws.

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          12. Notices. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its President or Chief Financial Officer at
its main office and any notice to Optionee shall be addressed to Optionee’s
address on file with the Company or a subsidiary corporation, or to such other
address as either may designate to the other in writing. Any notice shall be
deemed to be duly given if and when enclosed in a properly sealed envelope and
addressed as stated above and deposited, postage prepaid, with the United States
Postal Service. In lieu of giving notice by mail as aforesaid, any written
notice under this Agreement may be given to Optionee in person, and to the
Company by personal delivery to its President or Chief Financial Officer.

          13. Incentive Stock Option. This Agreement is intended to be an
incentive stock option agreement as defined in Section 422 of the Code;
provided, however, that if the option shall fail to constitute an incentive
stock option for any reason, the option shall thereafter be governed by the
provisions of the Plan regarding nonqualified stock options.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

OPTIONEE

 

 

 

 

 

 

 

 

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EXHIBIT A

NOTICE OF STOCK OPTION EXERCISE

Mr. Ken Donahue
Chief Financial Officer
United Security Bancshares
1525 East West Shaw Avenue
Fresno, California 93710

Dear Mr. Donahue:

Pursuant to my incentive stock option agreement dated ____________ , I am
exercising my stock option to acquire ____________ shares of common stock of
United Security Bancshares. I am also enclosing payment by means of (cash in the
amount of $____________ , or qualifying shares of United Security Bancshares
having a fair market value) equal to the sum of the option exercise price.

I further acknowledge that United Security Bancshares makes no representations
as to federal or state tax matters, and that I am to consult with my own tax
attorney or tax accountant for advice with respect to the exercise of my stock
option and the effect of the sale of the option shares. [(For executive officers
of the Company or insiders of the Company) I further acknowledge that I am an
affiliate or insider of United Security Bancshares and that federal securities
laws are applicable to the exercise of the stock option and any subsequent sale
of the option shares including the applicability of the Securities Act of 1933
and Rule 144 (both dealing with the sale of shares by an affiliate). I agree to
comply with such securities laws and rules.]

 

Sincerely,

 

 

 

 

 

Name of Optionee

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