**Exhibit 10.40**

 

NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO SHARES OFCOMMUNITY VALLEY BANCORP’S COMMON STOCK SHALL BE ISSUED PURSUANT HERETO UNLESSTHE COMMUNITY VALLEY BANCORP 2000 STOCK OPTION PLAN SHALL HAVE FIRST BEENAPPROVED BY THE SHAREHOLDERS OF COMMUNITY VALLEY BANCORP.

 

COMMUNITY VALLEY BANCORPNONQUALIFIED STOCK OPTION AGREEMENT

 

This Nonqualified Stock Option Agreement (the “Agreement”) is made andentered into as of the 21st of October, 2003, by and between COMMUNITY VALLEYBANCORP, a California corporation (the “Company”), and Charles J. Mathews (“Optionee”);

 

WHEREAS, pursuant to the COMMUNITY VALLEY BANCORP 2000 Stock OptionPlan, as amended (the “Plan”), a copy of which is attached hereto, the Board ofDirectors of the Company has authorized granting to Optionee, a nonqualifiedstock option to purchase all or any part of Two thousand (2,000) authorized butunissued shares of the Company’s common stock for cash at the price of Twenty-fiveDollars and 75 Cents ($ 25.75) per share, such option to be for the term andupon the terms and conditions hereinafter stated;

 

NOW, THEREFORE, it is hereby agreed:

 

**1.             Grantof Option.**Pursuant to said action of the Board ofDirectors and pursuant to authorizations granted by all appropriate regulatoryand governmental agencies, the Company hereby grants to Optionee the option topurchase, upon and subject to the terms and conditions of the Plan, which isincorporated in full herein by this reference, all or any part of Two thousand (2,000)shares of the Company’s common stock (hereinafter called “stock”) at the priceof Twenty-five Dollars and 75 Cents ($ 25.75) per share, which price is notless than one hundred percent (100%) of the fair market value of the stock asof the date of action of the Board of Directors granting this option.

 

**2.             Exercisability.**This option shall be exercisable as to up to, butnot including, 20% of the options shares granted per year for a five yearperiod, at which time options will be exercisable at 100% of grant. The first20% vesting will be available for exercise 12 months from the date of grant.Upon death or disability of optionee, this grant will be deemed to be 100%vested. This option shall remain exercisable as to all of such shares untilOctober 20, 2013, (but not later than ten (10) years from the date this optionis granted) unless this option has expired or terminated earlier in accordancewith the provisions hereof. Shares as to which this option becomes exercisablepursuant to the foregoing provision may be purchased at any time prior toexpiration of this option.

 

**3.             Exerciseof Option.**This option may be exercised by writtennotice delivered to the Company stating the number of shares with respect towhich this option is being exercised, together with cash in the amount of thepurchase price of such shares. Not fewer than ten (10) shares may be purchasedat any one time unless the number of shares purchased is the total number ofshares which is exercisable at such time, and in no event may the option beexercised with respect to fractional shares. Upon exercise, Optionee shall makeappropriate arrangements and shall be responsible for the withholding of anyfederal and state taxes then due.

 

**4.             Cessationof Directorship or Employment.**Except as provided inParagraphs 2 and 5 hereof, if Optionee shall cease to be a director or anemployee of the Company or a subsidiary corporation for any reason other thanOptionee’s death or disability [as defined in Section 22(e)(3) of the InternalRevenue Code of 1986, as amended from time to time (the “Code”)], this optionshall expire three (3) months thereafter. During the three (3) month periodthis option shall be exercisable only as to those installments, if any, whichhad accrued as of the date when Optionee ceased to be a director or an employeeof the Company or a subsidiary corporation.

 

**5.             Terminationof Employment for Cause.**If Optionee’s employmentwith the Company or a subsidiary corporation is terminated for cause, thisoption shall expire immediately, unless reinstated by the Board of Directorswithin thirty days (30) days of such termination by giving written notice ofsuch reinstatement to Optionee at his or her last known address. In the eventof such reinstatement, Optionee may exercise this option only to such extent,for such time, and upon such terms and conditions as if Optionee had ceased tobe an employee of the Company or a subsidiary corporation upon the date of suchtermination for a reason other than cause, death or disability. 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.

 

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**6.             Nontransferability;Death or Disability of Optionee.**This option shallnot be transferable except by will or by the applicable laws of descent anddistribution and shall be exercisable during Optionee’s lifetime only byOptionee. If Optionee dies while serving as a director or an employee of theCompany or a subsidiary corporation, or during the three (3) month periodreferred to in Paragraph 4 hereof, this option shall expire one (1) year afterthe 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, thepersons to whom Optionee’s rights under this option shall have passed by willor by the applicable laws of descent and distribution or the executor oradministrator of Optionee’s estate shall have the right to exercise this optionas to those shares for which installments had accrued under Paragraph 2 hereofas of the date on which Optionee ceased to be a director or an employee of theCompany or a subsidiary corporation.

 

If Optionee terminates his or her directorship or employment because ofdisability, Optionee may exercise this option to the extent he or she isentitled to do so at the date of termination, at any time within one (1) yearof the date of termination, or before the expiration date specified inParagraph 2 hereof, whichever is earlier.

 

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

 

**8.             Privilegesof Stock Ownership.**Optionee shall have no rightsas a shareholder with respect to the Company’s stock subject to this optionuntil the date of issuance of stock certificates 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 aresubject to modification and termination upon the occurrence of certain eventsas provided in Sections 13 and 14 of the Plan.

 

**10.          Notificationof Sale.**Optionee agrees that Optionee, or anyperson acquiring shares upon exercise of this option, will notify the Companynot more than five (5) days after any sale or other disposition of such shares.No shares issuable upon the exercise of this option shall be issued anddelivered unless and until the Company has fully complied with all applicablerequirements of any regulatory agency having jurisdiction over the Company, andall applicable requirements of any exchange upon which stock of the Company maybe listed.

 

**11.          Notices.**Any notice to the Company provided for in thisAgreement shall be addressed to it in care of its President or Chief FinancialOfficer at its main office and any notice to Optionee shall be addressed toOptionee’s address on file with the Company or a subsidiary corporation, or tosuch other address as either may designate to the other in writing. Any noticeshall be deemed to be duly given if and when enclosed in a properly sealedenvelope and addressed as stated above and deposited, postage prepaid, with theUnited 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, andto the Company by personal delivery to its President or Chief FinancialOfficer.

 

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

 
| **OPTIONEE**             |   | **COMMUNITY VALLEY BANCORP** |
|--------------------------|--------|------------------------------|
| ** **               |   |                         |
| ** **               |   |                         |
| //s// Charles J. Mathews |   | By                           | //s// Keith C. Robbins |   |
|                     |   |                         |
|                     |   |                         |
|                     | By     |                         |   |
|                          |        |                              |  |  |  |  |

 

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