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EXHIBIT 99.2
CVB FINANCIAL CORP. 1999 ORANGE NATIONAL BANCORP
1997 CONTINUATION STOCK OPTION PLAN
2. BACKGROUND
(a) CVB Financial Corp. (the "Company") and Orange National Bancorp
("ONB") entered into that certain Agreement and Plan of Reorganization (the
"Agreement") dated as of May 18, 1999, which provides for the merger of ONB with
and into the Company.
(b) Section 7.9 of the Agreement provides as follows:
7.9.1 At and as of the Effective Time of the Merger, CVB shall
assume each and every outstanding option to purchase shares of ONB Stock ("ONB
Stock Option") and all obligations of ONB under the ONB Stock Option Plans. Each
and every ONB Stock Option so assumed by CVB under this Agreement shall continue
to have, and be subject to, the same terms and conditions set forth in the ONB
Stock Option Plans and in the other documents governing such ONB Stock Option
immediately prior to the Effective Time of the Merger, except that: (i) such ONB
Stock Option shall be exercisable for that number of whole shares of CVB Stock
equal to the product of (A) the number of shares of ONB Stock that were
purchasable under such ONB Stock Option immediately prior to the Effective Time
of the Merger multiplied by (B) the Conversion Ratio, rounded down to the
nearest whole number of shares of CVB Stock; and (ii) the per share exercise
price for the shares of CVB Stock issuable upon exercise of such ONB Stock
Option shall be equal to the quotient determined by dividing (A) the exercise
price per share of ONB Stock at which such ONB Stock Option was exercisable
immediately prior to the Effective Time of the Merger by (B) the Conversion
Ratio. Prior to the Effective Time of the Merger, CVB shall issue to each holder
of an outstanding ONB Stock Option a document evidencing the assumption of such
ONB Stock Option by CVB pursuant to this Section 7.9.
7.9.2. CVB shall comply with the terms of the ONB Stock Option Plan
and use its reasonable best efforts so that, to the extent required by, and
subject to the provisions of, such Plans, ONB Stock Options which qualify as
incentive stock options prior to the Effective Time of the Merger qualify as
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incentive stock options of CVB after the Effective Time of the Merger.
7.9.3 At or prior to the Effective Time of the Merger, CVB shall
take all corporate action necessary to reserve for issuance a sufficient number
of shares of CVB Stock for delivery upon exercise of CVB Stock Options assumed
by it in accordance with this Section 7.9. At the Effective Time, or as soon as
practicable thereafter, CVB shall, if necessary, file a registration statement
on Form S-8, as the case may be (or any successor or other appropriate forms);
or another appropriate form with respect to the shares of CVB Common Stock
subject to such options and shall use all reasonable efforts to maintain the
effectiveness of such registration statement (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
(c) The term "Effective Time," as used herein, shall mean the effective
time of the Merger as such term is defined in the Agreement. The Effective Time
occurred or is anticipated to occur on or about October 4, 1999.
(d) As of the Effective Time, there were options for two hundred
nineteen thousand (219,000) shares of ONB common stock outstanding under the ONB
1997 Stock Option Plan (the "1997 ONB Plan").
(e) By way of this CVB Financial Corp. 1999 Orange National Bancorp 1997
Continuation Stock Option Plan, the Company is assuming the ONB 1997 Plan to (i)
reflect the substitution of the Company for ONB; (ii) reflect the options to
purchase stock will be options to purchase the common stock of the Company
("Company Common Stock") with appropriate adjustment for the Conversion Ratio
determined according to the Agreement, (iii) reduce the number of shares
available for distribution under the 1997 ONB Plan to the number of shares
subject to outstanding ONB Stock Options as of the Effective Time, and (iv) make
other appropriate revisions to the 1997 ONB Plan not inconsistent with the
provisions of the Agreement.
3. PURPOSE
The purpose of the CVB Financial Corp. 1999 Orange National Bancorp
1997 Continuation Stock Option Plan (the "Plan") is to strengthen CVB Financial
Corp. (the Company") and those corporations which are or hereafter become
subsidiary corporations of the
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Company by providing an additional means of attracting and retaining competent
directors, officers and management level employees and by providing to
participating directors, officers and management level 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
management level employees may purchase shares of the common stock of the
Company pursuant to options granted in accordance with the Plan.
Options granted pursuant to the 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.
4. ADMINISTRATION
The Plan shall be administered by the Board of Directors (the
"Board"). Any action of the Board 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 shall have
the authority to construe and interpret the Plan, define the terms used
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herein, 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 shall be final, conclusive and binding on all persons, optionees,
grantees, subsidiary corporations of the Company and any successors-in-interest
to such parties.
5. 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 the Plan are intended to
be qualified under Section 422 of the Code.
(b) Full-time salaried officers and management level employees of
the Company 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 Company who is
not also a full-time salaried officer or employee of the Company or a subsidiary
corporation, may be granted an incentive stock option hereunder. Subject to the
express provisions of the Plan, the Board shall (i) select from the eligible
class of employees and determine to whom incentive stock options shall be
granted, (ii) determine the discretionary 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 granted, (iv) determine
the number of shares subject to each incentive stock option, and (v) grant such
incentive stock options to such individuals. 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) Except as described in subsection (e) below, the Board shall not
grant an incentive stock option to purchase shares of the Company's common stock
to any individual who, at the time of the grant, owns stock possessing more than
10% of the total combined voting
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power or value of all classes of stock of the Company 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.
(d) 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 Company 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.
(e) The purchase price of stock subject to each incentive stock
option shall be determined by the Board 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 Company or a subsidiary corporation, in which 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.
6. NONQUALIFIED STOCK OPTIONS
(a) All options granted which are (i) in excess of the aggregate
fair market value limitations set forth in Section 3(d) 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 Company and the optionee.
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(b) Directors, full-time salaried officers and management level
employees of the Company 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 shall (i) select from
the eligible class of individuals and determine 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, (iv). determine the number of shares subject to each
nonqualified stock option and (v) grant such nonqualified stock options to such
individuals. An individual who has been granted a nonqualified stock option may,
if he or she is other-wise eligible under the Plan, be granted additional
nonqualified stock options if the Board shall so determine.
(c) The purchase price of stock subject to each nonqualified stock
option shall be determined by the Board 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.
7. 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 Company'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 the Plan shall
not exceed three hundred twenty eight thousand five hundred (328, 500). If any
option shall be canceled, surrendered or expire for any reason without having
been exercised in full, the underlying shares subject thereto shall again be
available for purposes of the Plan.
8. CONTINUATION OF EMPLOYMENT
Nothing contained in the Plan (or in any option agreement) shall
obligate the Company or a subsidiary corporation to employ any optionee for any
period or interfere in any
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way with the right of the Company or a subsidiary corporation to reduce the
optionee's compensation. However, the Company may not reduce the terms of any
option without the approval of the optionee.
9. EXERCISE OF OPTIONS
No option shall be exercisable until all necessary regulatory and
shareholder approvals of the 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 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. Notwithstanding the foregoing, the options shall vest at the rate of at
least 20% per year over a five year period from the date the option is granted.
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 Company 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 (a) in cash or (b) subject to applicable law, with the
Company's stock previously acquired by the optionee and held by the optionee for
a period of at least six months. Notwithstanding the foregoing, in the event an
optionee who has an incentive stock option does exercise the incentive stock
option by utilizing (b) above, the optionee should obtain tax advice as to the
consequences of such action. The equivalent dollar value of shares used to
effect a purchase shall be the fair market value of the shares on the date of
exercise. 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 Company, of the right of such person to exercise the option; Optionees will
have no rights as shareholders with respect to stock of the Company subject to
their stock option agreements until the date of issuance of the stock
certificate to them.
10. 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.
11. CESSATION OF DIRECTORSHIP OR EMPLOYMENT
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Except as provided in Sections 10 and 20 hereof, if an optionee
ceases to be a director or an employee of the Company 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 an
employee of the Company or a subsidiary corporation. If an optionee is both a
director and an employee, then unless otherwise provided for in the optionee's
option grant or option agreement, such option shall expire three (3) months
after the latter of the date of termination of the optionee's directorship or
employment.
12. TERMINATION OF EMPLOYMENT FOR CAUSE
If the stock option agreement so provides and if an optionee's
employment by the Company or a subsidiary corporation is terminated for cause,
the optionee's 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 with respect thereto shall be final and conclusive.
13. DISABILITY OR DEATH OF OPTIONEE
If any optionee dies while serving as a director or an employee of
the Company 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 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 a
director or an employee of the Company 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.
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14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
If the outstanding shares of the stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company through reorganization, merger, recapitalization,
reclassification, stock split, stock dividend, stock consolidation or otherwise,
without consideration to the Company, an 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.
15. TERMINATING EVENTS
A Terminating Event shall be defined as any one of the following
events: (i) a dissolution or liquidation of the Company, (ii) a reorganization,
merger or consolidation of the Company with one or more corporations, the result
of which (A) the Company is not the surviving corporation, or (B) the Company
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 Company);
(iii) a sale of substantially all the assets of the Company to another
corporation, or (iv) a sale of the equity securities of the Company representing
more than 80% of the aggregate voting power of all outstanding equity securities
of the Company to any person or entity, or any group of persons and/or entities
acting in concert. When the Company knows that a Terminating Event will occur
(i) the Company 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 the Plan,
whether or not vested under the Plan or applicable stock option agreement, and
(ii) all outstanding options granted pursuant to the 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, which
successor may also assume the Plan, in which case the Plan will not terminate.
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16. 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 or management level employees of
the Company or a subsidiary corporation;
may be adopted without the Company 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 consent of the
optionee, alter or impair any rights or obligations under any option theretofore
granted.
17. 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 described in Sections 3(b)
and 4(b) hereof, provided, however, that if appropriate resolutions of the Board
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 is
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taken by unanimous written consent of its members, the action of the Board shall
be deemed to be at the time the last member of the Board signs the consent.
18. 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 Company has fully complied with
all applicable requirements of any regulatory agency having jurisdiction over
the Company including registration of the stock options and underlying shares,
as necessary, and all applicable requirements of any exchange upon which stock
of the Company may be listed. The optionee shall give the Company notice of any
sale or disposition of any such shares not more than five (5) days after such
sale or disposition.
19. EFFECTIVE DATE OF THE PLAN
The Plan shall be deemed adopted by the Board as of February 19,
1997. The affirmative vote of the holders of a majority of ONB (the Company's
predecessor) of the issued and outstanding shares of common stock required for
approval of the Plan was obtained on May 19, 1997.
20. TERMINATION
Unless previously terminated by the Board, the Plan shall terminate
at the close of business on February 19, 2007. No options shall be granted under
the Plan thereafter, but such termination shall not affect any option
theretofore granted.
21. OPTION AGREEMENT
Each option shall be evidenced by a written stock option agreement
executed by the Company 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 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.
22. OPTION PERIOD
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Each option and all rights and obligations thereunder shall expire
on such date as the Board 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.
23. EXCULPATION AND INDEMNIFICATION
To the extent permitted by applicable law in effect from time to
time, no member of the Board shall be liable for any act or omission of any
other member of the Board nor for any act or omission on the member's own part,
except the member's own willful misconduct or gross negligence. The Company 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 in any action brought by a third party against such person (whether or not
the Company is joined as a party defendant) to impose a liability or penalty on
such person while a member of the Board arising with respect to the Plan or
administration thereof or out of membership on the Board or all or any
combination of the preceding; provided, the Board determines in good faith that
such member of the Board was acting in good faith, within what such member of
the Board 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 Company 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 Company by a shareholder or holder of a voting
trust certificate representing shares of the Company or a 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 and the term
"person" as used in this Section 21 shall include the estate, executor,
administrator, heirs, legatees or devisees of such person.
24. AGREEMENT AND REPRESENTATIONS OF OPTIONEE
Unless the shares of stock covered by the Plan have been registered
with the Securities Exchange Commission, each optionee shall, by accepting an
option, represent and agree, for himself or herself and his or her transferees
by will or the laws of descent and distribution, that all stock will be acquired
for investment and not for resale or distribution. Upon such exercise of any
portion of an option, the person entitled to exercise the same shall, upon
request of the Company, furnish evidence satisfactory to the Company (including
a written and signed representation) to the effect that the stock is being
acquired in good faith for investment and not for resale or distribution.
Furthermore, the Company, at its sole discretion may take all reasonable steps,
including affixing the following legend (and/or such other legend or legends as
counsel shall require) on certificates embodying the shares:
The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be sold, pledged,
hypothecated or otherwise transferred or offered for sale in the absence
of an effective registration statement
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with respect to them under the Securities Act of 1933 or a written
opinion of counsel for the optionee which opinion shall be acceptable to
counsel for the Company that registration is not required.
to assure itself against any sale or distribution by the optionee which does not
comply with the Plan or any federal or state securities laws.
The Company agrees to remove any legend affixed to the
certificates embodying the shares pursuant to this Section 22 when all of the
restrictions on the transfer of the shares, whether imposed by the Plan or
federal or state law, have terminated.
25. INFORMATION TO EMPLOYEES
The Company shall provide optionees with financial statements of the
Company at least annually.
26. EFFECTIVE DATE
The amendments to the ONB 1997 Stock Option Plan incorporated within
and to create this Plan shall become effective at the Effective Time.
ADOPTION OF PLAN AND RESERVATION OF SHARES
For valuable consideration, including the promises set forth and
the consideration provided for in the Agreement, as defined in the foregoing
Plan, and effective as of the Effective Time described in the foregoing plan and
defined in the Agreement, the undersigned Company does hereby adopt the
foregoing Plan, does hereby reserve three hundred twenty eight thousand five
hundred (328,500) shares of its Common Stock for issuance upon the exercise of
options under the Plan, and agrees to notify its transfer agent of such
reservation.
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Executed on September 29, 1999 in Ontario, California, effective as
of the Effective Time set forth in the foregoing Plan.
CVB FINANCIAL CORP.
By: /s/ X. Xxxx Xxxxx, President and
Chief Executive Officer
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