FALLBROOK NATIONAL BANK
STOCK OPTION AGREEMENT UNDER 1993 STOCK OPTION PLAN
To: [Name of Employee] Granting Date: [Month, date], 19[year]
We are pleased to notify you that Fallbrook National Bank (the "Bank")
hereby grants to you an option to purchase all or any part of * _________ *
shares of the Common Stock of the Bank ("the Shares") at the option price of
*$_______* (the "Option Price") per Share as a stock option under the Bank's
1993 Stock Option Plan (the "Plan")
THIS OPTION IS:
A. AN INCENTIVE OPTION ONLY IF THE BLANK IS INITIALED BY THE
BANK AT THE TIME THIS AGREEMENT IS DELIVERED TO YOU ______.
OTHERWISE, IT IS A NON-STATUTORY OPTION
B. A "DIRECTOR OPTION" ONLY IF THIS BLANK IS INITIALED AT THE TIME
THIS AGREEMENT IS DELIVERED TO YOU, ______. ALL DIRECTOR OPTIONS ARE
NON-STATUTORY OPTIONS, REGARDLESS OF ANY OTHER TERMS SET FORTH HEREIN.
THE OPTION MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS OF THE
PLAN. ONLY CERTAIN PROVISIONS OF THE PLAN ARE SUMMARIZED IN THIS
STOCK OPTION AGREEMENT (THIS "AGREEMENT")
THIS OPTION MAY BE EXERCISED ONLY IF THE PLAN IS APPROVED BY
SHAREHOLDERS HOLDING A MAJORITY OF THE VOTING POWER OF THE ISSUED AND
OUTSTANDING SHARES OF THE BANK.
1. PURPOSE OF THE OPTION.
One of the purposes of the Plan is to advance the interests of the Bank by
stimulating the efforts of directors, officers and full-time salaried employees
on behalf of the Bank by granting them financial participation in the process
and success of the Bank.
2. SIGNATURE ON OPTION AGREEMENT
This option can not be exercised unless you first sign this document in the
place provided and return it to the Secretary of the Bank. It should be
returned before the close of business on
1
the 20th day after the granting date of this option. If you fail to do so, this
option may terminate and be of no effect. However, your signing and delivering
this letter will not bind you to purchase any Shares subject to the option.
Your obligation to purchase the Shares can arise only when you exercise this
option in the manner set forth in Paragraph 3 below.
3. TERMS OF OPTION AND EXERCISE OF OPTION.
"Subject to the provisions of Paragraphs 4 and 5 below and this Paragraph
3, this option shall vest and become exercisable as to the following shares on
the following dates.
Number of Months Number
Following Grant of Shares
--------------- ---------
12 mo. - [month, date, year] [ ]
24 mo. - [month, date, year] [ ]
36 mo. - [month, date, year] [ ]
48 mo. - [month, date, year] [ ]
48 mo. - [month, date, year] [ ]
Any portion of this option that you do not exercise shall accumulate and
can be exercised by you any time prior to the expiration of [MONTH, DATE, YEAR]
(120) months from the granting date.
This option may be exercised by delivering to the Secretary of the Bank,
payment in full at the Option Price for the number of Shares being purchased in
cash or by certified check or official bank check or the equivalent thereof
acceptable to the Bank, together with a written notice in a form satisfactory to
the Bank, signed by you specifying the number of Shares you then desire to
purchase and the time of delivery thereof, which shall not be less than fifteen
(15) days and not more than thirty (30) days after the giving of such notice
unless an earlier or later date is mutually agreed upon. At such time the Bank
shall, without transfer or issue tax to you (or such other person entitled to
exercise this option), deliver to you (or such person entitled to exercise this
option) at the principal office of the Bank, or such other place as shall be
mutually acceptable, a certificate or certificates for such shares dated the
date of this option was validly exercised; provided, however, that the time of
such delivery may be postponed by the Bank for such period as may be required
for it with reasonable diligence to comply with any requirements of law. No
fractional shares shall be issued or delivered.
As a holder of this option, you shall have the rights of a shareholder with
respect to the Shares subject to this option only after such Shares shall have
been issued and delivered to you upon the exercise of this option.
4. TERMINATION OF OFFICE OR EMPLOYMENT.
Unless this option is a Director Option, if your status as an employee or
officer of the Bank or is Affiliates (as such term is defined in the Plan) is
terminated for any reason other than death, disability or cause, this option may
be exercised within thirty (30) days from the date of
2
such termination to the extent you were entitled to exercise the option on the
date of termination, but in no event may this option be exercised after the
expiration of the term of this option. If this option is a Director Option,
then it may be exercised until the expiration of the term of this option,
regardless of any termination of your status as an employee, officer or director
of the Bank. If, however, you are removed from your office or your employment
with the Bank or its Affiliates for cause, and notwithstanding anything else
herein to the contrary, neither you nor your estate shall be entitled to
exercise any option with respect to any Shares whatsoever after such removal or
termination, unless the Board of Directors, in its sole discretion, determines
otherwise.
5. DEATH OR DISABILITY.
Unless this option is a Director Option, if you die or become disables
while serving as an officer or employee of the Bank or its Affiliates, this
option may be exercised in whole or in part by you or your qualified
representative (in the event of your mental disability) or by duly authorized
executor of your Will or by the duly authorized administrator or special
administrator of your estate (in the event of your death) within twelve (12)
months from the date of your death or disability to the extent that you had the
right to exercise this option on the date of your death or disability, but in no
event after the expiration of the term of this option. If this option is a
Director Option, then it may be so exercised until the expiration of the term of
this option, regardless of your death or disability.
Disability shall be determined under Section 422A of the Internal Revenue
Code of 1986 (the "Code") in effect at the date of such disability. Section
422A of the Code currently uses the definition of Section 22 (e) (3) of the Code
which state:
"(3) PERMANENT AND TOTAL DISABILITY DEFINED- An individual is
permanently and totally disabled if he is 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 twelve (12) months. An individual shall not be
considered to be permanently and totally disabled unless he furnished
proof of the existence thereof in such form and manner, and at such
times, as the Secretary may require".
6. NONTRANSFERABILITY OF OPTION .
This option shall be not be transferable except by Will or the laws of
descent and distribution, and this Agreement may be exercised during your
lifetime only by you. Any purported transfer or assignment of this option shall
be void and of no effect, and shall give the Bank the right to terminate this
option as of the date of such purported transfer or assignment.
3
7. ADJUSTMENT OF AND CHANGES IN THE SHARES.
Notwithstanding the preceding provision of this agreement, upon receipt of
notice from the Stock Option Committee or the Board of Directors of the pendency
of dissolution or liquidation of the Bank or a reorganization, merger, or
consolidation of the Bank with one or more corporations as a result of which the
Bank will not be the surviving corporation, or a sale of substantially all the
assets and property of the Bank to another person (a "Terminating Event"), this
option shall be exercisable in full and not only as to those shares with respect
to which installments , if any, have been accrued. Upon the date thirty (30)
days after receipt of said notice, this option or any portion hereof not
exercised shall terminate, unless provision shall be made in connection with the
Termination Event for assumption of this option or for substitution for this
option of new options covering stock of a successor employer corporation, or
parent or subsidiary corporation thereof, solely at the option of such successor
corporation or parent or subsidiary corporation, with appropriate adjustments as
to the number and kind of shares and prices.
8. SUBJECT TO TERMS OF THE PLAN.
This Agreement and the option granted hereby shall be subject in all
respects to the terms and conditions of the Plan. In the event of any conflict
or inconsistency between this Agreement and the terms of the Plan, the terms of
the Plan shall control. Your signature herein represents your acknowledgment of
receipt of a copy of the Plan. Any dispute or disagreement which shall arise
under, or as a result of, or pursuant to, this Agreement shall be finally and
conclusively determined by the Board of Directors of the Bank or duly appointed
Committee in its sole discretion, and such determination shall be binding upon
all parties.
9. TAX EFFECTS.
THE FEDERAL TAX CONSEQUENCES OF EMPLOYEE STOCK OPTIONS ARE COMPLEX AND
SUBJECT TO CHANGE. A TAXPAYER'S PARTICULAR SITUATION MAY BE SUCH THAT SOME
VARIATION OF THE GENERAL RULE IS APPLICABLE. ACCORDINGLY, AN OPTIONEE (OR HIS
OR HER GUARDIAN, ESTATE OR LEGATEE) SHOULD CONSULT WITH HIS OR HER OWN TAX
ADVISOR BEFORE EXERCISING ANY OPTION OR DISPOSING OF ANY SHARES ACQUIRED UPON
THE EXERCISE OF AN OPTION.
10. RIGHTS AS A SHAREHOLDER OR EMPLOYEE.
You have no rights as a shareholder of the Bank with respect to any Shares
until the date of the issuance and delivery of stock certificate to you for
such Shares. The existence of this option shall neither create nor imply a right
to continued employment with the Bank.
4
11. NOTIFICATION OF SALE.
You agree that you, or any person acquiring Shares upon exercise of this
option, will notify the Bank not more than five (5) days after any sale or
disposition of such Shares. If this option is a non-statutory option, you may,
in addition to the exercise price, be required to pay to the Bank an amount
equal to the withholding taxes imposed.
FALLBROOK NATIONAL BANK
By: ___________________________________
Xxxxxx X. Xxxxxxx
President/CEO
Agreed to this _________ day
of _____________________, 19_____
_______________________________
[Name of Employee]
5
