**EXHIBIT 10.63**

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**NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT,NO SHARES OF WESTERN SIERRA BANCORP’S COMMON STOCK SHALL BE ISSUED PURSUANTHERETO UNLESS THE WESTERN SIERRA BANCORP 1999 STOCK OPTION PLAN SHALL HAVEFIRST BEEN APPROVED BY THE SHAREHOLDERS OF WESTERN SIERRA BANCORP.**

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# **WESTERN SIERRA BANCORP**

**NONQUALIFIED STOCK OPTION AGREEMENT**

 

This Nonqualified Stock Option Agreement (the“Agreement”) is made and entered into as of the 1st day of July, 2003,by and between Western Sierra Bancorp, a California corporation (the“Bancorp”), and Lary Davis, (“Optionee”);

 

WHEREAS, pursuant to the Western Sierra Bancorp 1999Stock Option Plan (the “Plan”), a copy of which is attached hereto, the Boardof Directors of the Bancorp has authorized granting to Optionee a nonqualifiedstock option to purchase all or any part of one thousand ninety-eight(1,098)authorized but unissued shares of the Bancorp’s common stock at the price of thirty-twoDollars and seventy-nine Cents ($32.79) per share, such option tobe 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 Board ofDirectors, the Bancorp hereby grants to Optionee the option to purchase, uponand subject to the terms and conditions of the Plan which is incorporated infull herein by this reference, all or any part of one thousand ninety-eight(1,098) shares of the Bancorp’s common stock (hereinafter called“stock”) at the price of thirty-two Dollars and seventy-nineCents ($32.79) per share, which price is not less than one hundredpercent (100%) of the fair market value of the stock as of the date of actionof the Board of Directors granting this option.

 

**2.  Exercisability.**  This option shall be exercisable as to:

 
| **Number of Shares** |   | **Vesting  Date** |   |
|----------------------|--------|-------------------|--------|
| 1,098                |   | immediate         |   |

 

This option shall remain exercisable as to all vested shares until July 1,2013 (but not later than ten (10) years from the date this option isgranted) unless this option has expired or terminated earlier in accordancewith the provisions hereof or in the Plan. Subject to paragraphs 4 and 5, shares as to which this option becomesexercisable pursuant to the foregoing provision may be purchased at any timeprior to expiration of this option.

 

**3.  Exercise ofOption.**  Thisoption may be exercised by written notice (substantially in the form as thatwhich is attached as Exhibit A) delivered to the Bancorp stating the number ofshares 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 toapplicable law, with the Bancorp’s stock previously acquired by Optionee andheld by Optionee for a period of at least six months.  Notwithstanding the foregoing, in the event Optionee doesexercise the option by utilizing (b) above, Optionee should obtain tax adviceas to the consequences of such action. Not less than ten (10) shares may be purchased at any one time unlessthe number purchased is the total number which may be purchased under thisoption and in no event may the option be exercised with respect to fractionalshares.  Upon exercise, Optionee shallmake appropriate arrangements and shall be responsible for the withholding ofany federal and state taxes then due.

 

**4.  Cessation ofDirectorship or Employment.**  Except as provided in Paragraphs 2 and 5 hereof, if Optioneeshall cease to be a director or an employee of the Bancorp or a subsidiarycorporation for any reason other than Optionee’s death or disability [asdefined in Section 22(e)(3) of the Internal Revenue Code of 1986, asamended from time to time (the “Code”)], this option shall expire three (3)months thereafter.  During the three (3)month period this option shall be exercisable only as to those installments, ifany, which had accrued as of the date when Optionee ceased to be a director oran employee of the Bancorp or a subsidiary corporation.  If Optionee is both a director and anemployee, then such option shall expire three (3) months after the latter ofthe date of termination of Optionee’s directorship or employment.

 

**5.  Termination ofEmployment for Cause.** If Optionee’s employment with the Bancorp or a subsidiary corporation isterminated for cause, this option shall expire thirty (30) days from the dateof such termination.  Termination forcause shall include, but not be limited to, termination for malfeasance orgross misfeasance in the performance of duties or conviction of a crimeinvolving moral turpitude, and, in any event, the determination of the Board ofDirectors with respect thereto shall be final and conclusive.

 

**6.  Nontransferability;Death or Disability of Optionee.**  This option shall not be transferable exceptby will or by the laws of descent and distribution and shall be exercisableduring Optionee’s lifetime only by Optionee. If Optionee dies while serving as a director or an employee of theBancorp or a subsidiary corporation, or during the three

 

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(3) month period referredto in Paragraph 4 hereof, this option shall expire one (1) year after the dateof Optionee’s death or on the day specified in Paragraph 2 hereof, whichever isearlier.  After Optionee’s death butbefore such expiration, the persons to whom Optionee’s rights under this optionshall have passed by will or by the laws of descent and distribution or theexecutor or administrator of Optionee’s estate shall have the right to exercisethis option as to those shares for which installments had accrued under Paragraph2 hereof as of the date on which Optionee ceased to be a director or anemployee of the Bancorp or a subsidiary corporation.

 

If Optionee terminates his or her directorship oremployment because of disability (as defined in Section 22(e)(3) of theCode), Optionee may exercise this option to the extent he or she is entitled todo so at the date of termination, at any time within one (1) year of the dateof termination, or before the expiration date specified in Paragraph 2 hereof,whichever is earlier.

 

**7.  Employment.**  This Agreement shall not obligate theBancorp or a subsidiary corporation to employ Optionee for any period, norshall it interfere in any way with the right of the Bancorp or a subsidiarycorporation to reduce Optionee’s compensation.

 

**8.  Privileges ofStock Ownership.** Optionee shall have no rights as a shareholder with respect to theBancorp’s stock subject to this option until the date of issuance of stockcertificates to Optionee.  Except asprovided in the Plan, no adjustment will be made for dividends or other rightsfor which the record date is prior to the date such stock certificates areissued.

 

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

 

**10.  Notificationof Sale.**  Optioneeagrees that Optionee, or any person acquiring shares upon exercise of thisoption, will notify the Bancorp not more than five (5) days after any sale orother disposition of such shares.

 

**11.  Representationsof Optionee.**  Noshares issuable upon the exercise of this option shall be issued and deliveredunless and until the Bancorp has complied with all applicable requirements ofCalifornia and federal law and of the Securities and Exchange Commission andthe California Department of Corporations pertaining to the issuance and saleof such shares, and all applicable listing requirements of the securitiesexchanges, if any, on which shares of the Bancorp of the same class are thenlisted.  Optionee agrees to ascertainthat such requirements shall have been complied with at the time of anyexercise 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 Optioneetherefore agrees to ascertain what those restrictions are and to abide by therestrictions and other applicable federal and state securities laws.

 

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

 

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

 

**12.  Notices.**  Any notice to the Bancorp provided for inthis Agreement shall be addressed to it in care of its President or ChiefFinancial Officer at its main office and any notice to Optionee shall be addressedto Optionee’s address on file with the Bancorp or a subsidiary corporation, orto such other address as either may designate to the other in writing.  Any notice shall be deemed to be duly givenif and when enclosed in a properly sealed envelope and addressed as statedabove and deposited, postage prepaid, with the United States PostalService.  In lieu of giving notice bymail as aforesaid, any written notice under this Agreement may be given toOptionee in person, and to the Bancorp by personal delivery to its President orChief Financial Officer.

 

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

 
| **OPTIONEE** |   | **WESTERN SIERRA BANCORP** |
|--------------|--------|----------------------------|
|         |   |                       |   |
|         |   |                       |   |
| By           |   | /s/ Lary Davis             |   | By |   | /s/ Charles Bacchi |   |
|         |   | Lary Davis, Optionee       |   |   | Charles Bacchi, Chairman |
|         |   |                       |   |   |
|         |   |                       |   |   |
|         |   |                       |   | By |   | /s/ Gary D. Gall |   |
|         |   |                       |   |   | Gary D. Gall, Pres/CEO |
|              |        |                            |  |  |  |  |  |  |  |

 

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