SDNB FINANCIAL CORP
1994 STOCK OPTION PLAN
1. PURPOSES.
The purpose of this Stock Option Plan (the "Plan") is to
strengthen SDNB FINANCIAL CORP., a California corporation (the
"Corporation"), and its controlled subsidiaries by providing an
additional means of attracting and retaining key executive officers,
employees and directors, and by providing such persons added incentive
for high levels of performance and for unusual efforts to increase the
earnings of the Corporation. The Plan seeks to accomplish these
purposes by encouraging stock ownership of the Corporation so that such
persons may acquire or increase their proprietary interest in the
success of the Corporation. The Plan is intended to comply with the
provisions of the Internal Revenue Code of 1986, as amended, pertaining
to incentive stock options.
2. DEFINITIONS.
Whenever the following terms are used in this Plan, they will
have the meaning specified below unless the context clearly indicates
the contrary.
(a) "Board of Directors" means the Board of Directors of
SDNB Financial Corp.
(b) "Cash Bonus Award" means a cash award granted pursuant
to Section 8 of the Plan.
(c) "Committee" means the Committee appointed to
administer the Plan pursuant to Section 3 thereof.
(d) "Common Stock" means the common shares, no par value,
of SDNB Financial Corp., and any class of voting common shares into
which said common shares may hereafter be converted.
(e) "Employee" means any regular full-time employee of
SDNB Financial Corp., or any of its present or future parent or
subsidiary corporations.
(f) "Fair Market Value" means the value of a share of
Common Stock at any given time established by the Committee by use of
any reasonable valuation method, taking into consideration prices at
which shares of Common Stock have recently traded, the number of shares
traded and other relevant factors as determined by the Committee. Until
changed by the Committee, it shall mean the midpoint between the bid and
ask price on the date of determination.
(g) "Incentive Award" means Incentive Stock Option, Non-
qualified Stock Option, Restricted Stock, Stock Appreciation Right or
Cash Bonus Award granted under the Plan.
(h) "Incentive Stock Option" means an option as defined
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), including an Incentive Stock Option granted under the Plan.
(i) "Non-qualified Stock Option" means a stock option
other than an Incentive Stock Option granted under the Plan.
(j) "Option" means either a Non-qualified Stock Option or
an Incentive Stock Option.
(k) "Optionee" means any person holding an Incentive Stock
Option or a Non-qualified Stock option granted under the Plan.
(l) "Parent" and "subsidiary" shall have the meaning set
forth on subsections (e) and (f), respectively, of Section 424 of the
Code.
(m) "Plan" means this Stock Option Plan, as it may be
amended from time to time.
(n) "Restricted Stock" means a right to purchase shares of
Common Stock of the Corporation which is nontransferable and subject to
substantial risk of forfeiture until restrictions lapse. Restrictions
lapse over a period of years, based on continuing employment.
(o) "Stock Appreciation Right" means a right granted
pursuant to Section 10 of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by a committee
appointed by the Board of Directors of the Corporation (the
"Committee"). The Committee shall consist of not less than three
members of the Board of Directors, who shall be appointed by, and serve
at the pleasure of, the Corporation's Board of Directors. Each member
of the Committee shall be a "disinterested person" within the meaning of
Rule 16b-3 of the Securities Exchange Act of 1934. The Board of
Directors may from time to time remove members from, or add members to,
the Committee. Vacancies on the Committee, however caused, shall be
filled only by the Board of Directors. The Committee shall select one
of its members as Chairman, and shall hold meetings at such times and
places as it may determine. Acts by a majority of the Committee in a
meeting at which a quorum is present and acts approved in writing by a
majority of the members of the Committee shall be the valid acts of the
Committee. No member of the Committee shall vote on any matter
concerning his own participation in the Plan.
(b) The Committee shall be authorized to grant Incentive
Awards under the Plan to such Employees of the Corporation and such
other eligible persons at such times and in such amounts as it may
decide.
(c) The interpretation and construction by the Committee
of any provisions of the Plan or of any Incentive Award granted under it
shall be final. No member of the Committee or the Board of Directors
shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted under it and the members shall
be entitled to indemnification and reimbursement in the manner and to
the extent permitted by applicable law.
4. NATURE OF STOCK OPTIONS.
The Plan is designed to qualify certain Options granted
hereunder as "Incentive Stock Options" within the meaning of Section 422
of the Code. Such compliance shall not preclude the grant of Non-
qualified Stock Options or other Incentive Awards. Any Options granted
or exchanged under this Plan, which do not meet the limitations required
(including all Options granted to directors who are not full-time
officers or employees of the Corporation or its subsidiaries) to qualify
as Incentive Stock Options shall be deemed "non-qualified" for tax
purposes. The Committee shall have the authority to grant Non-qualified
Stock Options to any eligible officer, employee or director.
5. ELIGIBILITY.
5.1 Officers and Employees. Full-time officers and
Employees of the Corporation or its controlled subsidiaries, who perform
services of special importance to the Corporation (or such subsidiaries)
relative to its management, operation or development shall be eligible
to receive Incentive Awards under the Plan. A "full-time officer" shall
be deemed to include a person providing services as an officer on behalf
of the Corporation or any subsidiary. The selection of recipients of
Incentive Awards shall be within the sole and absolute discretion of the
Committee.
5.2 Directors and Others. Any director of the Corporation
or its controlled subsidiaries shall be eligible to receive Incentive
Awards under the Plan. Options granted to directors who are not full-
time officers or employees of the Corporation cannot be granted as
Incentive Stock Options for tax purposes. The Committee is further
authorized to grant Non-qualified Stock Options hereunder to such other
persons as the Committee deems to be in the best interests of the
Corporation. Said Options shall be granted on the specific terms set
forth in the agreement relating thereto.
5.3 Termination of Eligibility. If the Optionee ceases to
be a director of or employed by the Corporation or a parent or
subsidiary thereof, for any reason other than his death or termination
for cause, any Option granted hereunder to such Optionee shall expire
three months (12 months in the case of an Optionee whose eligibility
has ceased because of his disability) from the date of the occurrence
giving rise to such termination of eligibility or upon the date it
expires by its terms, whichever is earlier. During such three-month
period, the Option may be exercised in accordance with its terms, but
only in respect of the number of such shares for which the right to
exercise has accrued as of the date of such cessation of affiliation as
a director or termination of employment, as the case may be. The
Committee shall decide whether an authorized leave of absence or absence
for military or governmental service, or absence for any other reason,
shall constitute termination of eligibility for purposes of this Section
5.3. If an Optionee's affiliation with the Corporation is terminated
"for cause," including willful breach of duty by an employee during the
course of his employment or habitual neglect of his duties, his Option
shall expire immediately, although the Committee may reinstate the
Option, in its sole discretion, within 30 days of the date of
termination and such terminated employee may exercise such reinstated
Option within a period not to exceed three months from such Optionee's
termination of employment.
5.4 Death of Optionee. If the Optionee shall die while
eligible to participate in the Plan or within three months after the
termination of his eligibility and shall not have fully exercised the
Option, the Option may be exercised (subject to the condition that no
option shall be exercisable after its expiration and only to the extent
that the Optionee's right to exercise such Option had accrued pursuant
to Section 7.6 hereof at the time of his death and had not previously
been exercised) at any time within 12 months after the Optionee's death
by the executors or administrators of the Optionee or by any person or
persons who shall have acquired the Option directly from the Optionee by
bequest or inheritance.
5.5 Non-Assignability of Option Rights. No Option shall
be assignable or transferrable otherwise than by will or the laws of
descent and distribution. During the life of an Optionee, an Option
shall be exercisable only by him.
6. SHARES OF COMMON STOCK SUBJECT TO PLAN.
6.1 Identification of Stock. The aggregate number of
shares of Common Stock that may be issued or transferred or exercised
pursuant to Incentive Awards under the Plan shall not exceed 400,000
shares of the Corporation's authorized but unissued or acquired or
reacquired Common Stock, no par value (herein the "Stock") (subject to
adjustment as provided in Section 7.7). If any Incentive Award granted
hereunder shall expire or terminate for any reason without having been
exercised in full, the unpurchased shares subject thereto shall again be
available for purposes of this Plan. Provided, however, shares as to
which an Option has been surrendered in connection with the exercise of
a related Stock Appreciation Right will not again be available for the
grant of any further Incentive Awards.
6.2 Limitation on Amount of Stock Subject to Incentive
Stock Options. For Options granted under this Plan, to the extent that
the aggregate fair market value (determined as of the date an option is
granted) of the Stock with respect to which Options are exercisable for
the first time by any employee during any calendar year under the Plan
(and any other plans maintained by the Corporation, its parent or
subsidiaries) exceeds $100,000, such Options shall be Non-qualified
Stock Options.
7. TERMS AND CONDITIONS OF OPTIONS.
Any Option (or other Incentive Awards) granted pursuant to the
Plan shall be evidenced by an agreement in such form as the Committee
shall from time to time determine, which agreement shall comply with
and be subject to the following, among other, terms and conditions:
7.1 Number of Shares. Each Option shall state the number
of shares to which it pertains.
7.2 Option Exercise Price. Each Option shall state the
purchase price upon exercise thereof.
7.2.1 Options Granted to More than 10% Shareholders. The
exercise purchase price for options granted to persons eligible to
receive Options under this Plan who own more than 10% of the voting
power or value of all classes of the Corporation's stock or of any
parent or subsidiary corporation ("Control Person[s]") shall be not less
than 110% of the Fair Market Value of the Stock subject to the Option on
the date of granting the Option; provided, however, that this Section
7.2.1 shall not apply to any Non-Qualified Stock Options granted under
the Plan.
7.2.2 Options Granted to Others. The exercise purchase
price for Options granted to persons other than a Control Person shall
be not less than the Fair Market Value of the shares of Stock on the
date of granting the Option; provided that in the event options are
issued in exchange for options of an acquired company in a merger or
consolidation, the options shall be exchanged on a like basis as that
company's stock is exchanged for the Corporation's Common Stock.
7.3 Method of Exercise. An option shall be exercised by
written notice to the Corporation stating the number of shares with
respect to which the Option is being exercised and designating a time
for the delivery thereof, which term shall be at least twenty (20) days
after the giving of such notice unless an earlier date shall have been
mutually agreed upon. At the time specified in the notice, the
Corporation shall deliver to the Optionee at the principal office of the
Corporation, or such other appropriate place as may be determined by the
Committee, a certificate or certificates for such shares of previously
authorized but unissued shares or acquired or reacquired shares of Stock
as the Corporation may elect. Notwithstanding the foregoing, the
Corporation may postpone delivery of any certificate or certificates
after notice of exercise for such reasonable period as may be required
to comply with any applicable listing requirements of any national or
other securities exchange or to reasonably cause the issuance of said
certificate(s). In the event an Option shall be exercisable by any
person other than the Optionee, the required notice under this section
shall be accompanied by appropriate proof of the right of such person to
exercise the Option.
7.4 Medium and Time of Payment. The exercise price shall
be payable in full upon the exercise of the Option by certified or bank
cashier's check, or, if specifically authorized in the option agreement,
by the delivery of certificates evidencing shares of Common Stock of the
Corporation having a Fair Market Value (as defined herein and subject to
the approval of the Committee) equivalent to the full (or partial, as
the case may be) purchase price for the shares to be acquired on
exercise of the Option. Any shares so assigned and delivered to the
Corporation in full or partial payment of the exercise purchase price
will be valued at their Fair Market Value on the exercise date. No
fractional shares will be issued pursuant to the exercise of Incentive
or Non-qualified Stock Option nor will any cash payment be made in lieu
of fractional shares. No commission may be paid by the Company to any
broker on the sale of shares of Stock pursuant to the exercise of the
Option.
7.5 Term of Option.
7.5.1 Options to Control Persons. The term of an
Incentive Stock Option granted to Control Persons shall be determined by
the Committee at the time of grant, but shall not exceed five (5) years
from the day of the grant. In n o event shall any Option be exercisable
after the expiration of its term.
7.5.2 Options to Others. The term of any Option other
than an Incentive Stock Option granted to a Control Person shall be
determined by the Committee at the time of
grant, but shall not exceed ten (10) years from the date of grant. In
no event shall an Option be exercisable after the expiration of its
term.
7.6 Vesting and Exercise of Option. Each Option shall
become exercisable and the total number of shares subject thereto shall
be purchasable in such installments, which need not be equal, as the
Committee shall determine; provided, however, if the holder of an Option
shall not in any given installment period purchase all of the shares of
Stock which such holder is entitled to purchase in such installment
period, such holder's right to purchase any shares of Stock not
purchased in such installment period shall continue until the expiration
or sooner termination of such holder's Option. The Committee may, at
any time after grant of the Option and from time to time, increase the
number of shares purchasable in any installment subject to the total
number of shares subject to the Option. No Option or installment
thereof shall be exercisable except in respect of whole shares, and
fractional share interests shall be disregarded. Not less than twenty
(20) shares may be purchased at one time unless the number purchased is
the total number at the time available for purchase under the Option.
7.7 Adjustments Upon Changes In Capitalization. Subject
to any required action by the shareholders, the number of shares of
Stock covered by each outstanding Option, and the price per share
thereof in each such Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Stock of the
Corporation resulting from a subdivision or consolidation of shares or
the payment of a stock dividend (but only on the Stock) or any other
increase or decrease in the number of such shares effected without
receipt of consideration by the Corporation or for per share
consideration less than the option price of such Option. Any fractional
share that would otherwise result from an adjustment pursuant to this
Section 7.7 shall be rounded downward to the next full number of shares
without other compensation or consideration to the holder of such
Option. To the extent that the foregoing adjustments shall be made by
the Committee, whose determination in that respect shall be final,
binding and conclusive.
7.8 Reorganization. Subject to any required action by the
shareholders, if the Corporation shall be the surviving corporation in
any merger or consolidation, each outstanding Option shall pertain to
and apply to the securities to which a holder of the number of shares of
Stock subject to the Option would have been entitled. A dissolution or
liquidation of the Corporation or a merger, acquisition, consolidation
or other reorganization in which the Corporation is not the surviving
corporation, shall cause each outstanding Option to terminate; provided
that each Optionee shall, in such event, have the right immediately
prior to such dissolution or liquidation, or merger, consolidation or
reorganization in which the Corporation is not the surviving
corporation, to exercise his Option in whole or in part without regard
to the installment provisions of Section 7.6 of the Plan, provided that
the Option is otherwise exercisable in accordance with the terms set
forth herein.
The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business
or assets.
7.9 Rights as a Shareholder. An Optionee or a transferee
of an Option (as expressly permitted hereunder) shall have no rights as
a shareholder with respect to any shares underlying his Option until the
date of the issuance to him of a certificate for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other
rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 7.7 hereof.
7.10 Modification, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding options
granted under the Plan, or accept the surrender of outstanding Options
(to the Extent not heretofore exercised) and authorize the granting of
new options in substitution therefor (to the extent not theretofore
exercised).
7.11 Other Provisions. The Option or other Incentive
Award agreements authorized under the Plan shall contain such other
provisions, including without limitation, restrictions upon the exercise
of such Incentive Awards, as the Committee shall deem advisable.
8. CASH BONUS AWARD
At the time an Optionee exercises an Incentive Stock Option or
Non-qualified Stock Option or sells shares of Common Stock received upon
the exercise of an Incentive Stock Option or Non-qualified Stock Option
or any other Incentive Stock Option or Non-qualified Stock Option
granted by the Corporation before the effective date of this Plan, the
Committee may grant a Cash Bonus Award in such amount as the Committee
may determine. The Committee may make such a determination at the time
of grant or exercise or at the time such shares are sold. The Cash
Bonus Award may be subject to any condition imposed by the Committee,
including a reservation of the right to revoke a Cash Bonus Award at any
time before it is paid.
9. RESTRICTED STOCK.
The Committee may approve the grant of Restricted Stock to an
Employee, subject to the following terms and conditions:
(a) The date of grant will be the date the Committee takes
the necessary action to approve the grant; provided, however, that if
the minutes or appropriate resolutions of the Committee provide that a
Restricted Stock grant is to be made as of a date in the future, the
date of grant will be such future date.
(b) All shares of Restricted Stock sold or granted
pursuant to the Plan (including any shares of Restricted Stock received
by the holder as a result of stock dividends, stock splits or any other
forms of capitalization) may be made subject to such terms and
conditions as the Committee may in its sole discretion deem appropriate
(the "Restrictions"), including, but not limited to, the following:
(i) The shares may not be sold, transferred, or
otherwise alienated or hypothecated until the Restrictions are removed
or expire.
(ii) The Committee may require the Holder to enter
into an escrow agreement providing that the certificates representing
Restricted Stock sold or granted pursuant to the Plan will remain in the
physical custody of an escrow holder until all Restrictions are removed
or expire.
(iii) Each certificate representing Restricted Stock
sold or granted pursuant to the Plan will bear a legend making
appropriate reference to the Restrictions imposed on the Restricted
Stock.
(iv) The Committee may impose Restrictions designed to
facilitate exemption from or compliance with the Securities Act of 1933,
as amended, and/or the Securities Exchange Act of 1934, as amended, with
requirements of any stock exchange upon which such shares or shares of
the same class are then listed and with any blue sky or other securities
laws applicable to such shares.
(c) The Restrictions imposed under subparagraph (b) above
upon Restricted Stock will lapse in accordance with a schedule or other
conditions as determined by the Committee.
(d) Subject to the provisions of subparagraph (b) above
and subparagraph (e) below, the holder will have all rights of a
shareholder with respect to the Restricted Stock granted or sold,
including the right to vote the shares and receive all dividends and
other distributions paid or made with respect thereto.
(e) In the event a holder of Restricted Stock ceases to be
an Employee, all such holder's Restricted Stock subject to restrictions
at the time his or her employment terminates will be returned to or
repurchased by the Corporation at the original price at which such
Restricted Stock had been purchased unless the Committee determines
otherwise.
10. STOCK APPRECIATION RIGHTS.
Stock Appreciation Rights may be granted, with the express
approval of the Board of Directors of the Corporation, to Employees in
connection with the granting of an Option under the Plan. Such Stock
Appreciation Rights, if granted, would authorize an Employee to
surrender an Option and receive a payment based on the excess of the
fair market value of the Stock to which the Option relates over the
option price. The terms and conditions of any such Stock Appreciation
Rights which will be set forth in the option agreement relating thereto,
shall include the following (as well as any additional terms provided by
the Committee):
(a) The date of grant will be the date the Committee takes
the necessary action to approve the grant; provided, however, that if
the minutes or appropriate resolutions of the Committee (or Board of
Directors) provide that a Stock Appreciation Right is to be granted as
of a date in the future, the date of grant will be such future date.
(b) A Stock Appreciation Right may be granted in
connection with an Incentive Stock Option or a Non-qualified Stock
Option, either at the time of grant or at any time thereafter during the
term of the Option.
(c) A Stock Appreciation Right will entitle the holder of
the related Option upon exercise of the Stock Appreciation Right, to
surrender such Option, or any portion thereof to the extent of the
number of shares with respect to which such Stock Appreciation Right is
exercised, and to receive payment of an amount computed pursuant to
subsection (e) hereof. Such Option will, to the extent surrendered,
then cease to be exercisable.
(d) A Stock Appreciation Right granted hereunder will be
exercisable at such time or times, and only to the extent, that a
related Option is exercisable, and will not be transferable except to
the extent that such related Option may be transferable.
Notwithstanding anything to the contrary herein, no Stock Appreciation
Right related to an Incentive Stock Option may be exercised when the
purchase price of a share of Common Stock specified in the related
Incentive Stock Option is greater than the fair market value of such
share.
(e) Upon the exercise of the Stock Appreciation Right, the
holder will be entitled to receive payment of an amount determined by
multiplying (i) the difference obtained by subtracting (a) the exercise
price of a share of Common Stock specified in the related Incentive
Stock Option or Non-qualified Stock Option from (b) the Fair Market
Value of a share of Common Stock on the date of exercise of such Stock
Appreciation Right, times (ii) the number of shares as to which such
Stock Appreciation Right will have been exercised. Upon exercise of
such Stock Appreciation Rights, and to the extent thereof, the related
Incentive Stock Option or Non-qualified Stock Option will cease to be
exercisable.
(f) Payment of the amount determined under subsection (e)
above may be made solely in whole shares of Common Stock valued at their
Fair Market Value on the date of exercise of the Stock Appreciation
Right or alternatively, in the sole discretion of the Committee, solely
cash or a combination of cash and shares as the Committee deems
advisable. If the Committee decides to make full payment in shares of
Common Stock, and the amount payable results in a fractional share,
payments for such fractional shares shall be made in cash.
(g) The Committee may approve the grant of Stock
Appreciation Rights unrelated to Options to eligible persons, subject to
the terms and conditions determined by the Board of Directors.
11. AMENDMENT OF THE PLAN.
The Board of Directors of the Corporation may, insofar as
permitted by law, from time to time, with respect to any shares at that
time not subject to Options, suspend or discontinue the Plan or revise
or amend it in any respect whatsoever, subject to approval of the
shareholders of the Corporation as may be required. The following
amendments or modifications may be adopted only with the prior vote of
the holders of the majority of the Corporation's outstanding Common
Stock:
(a) Increase the maximum number of shares which may be
obtained 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;
(d) Decrease, directly or indirectly (by cancellation and
restriction of Options or otherwise), the exercise price applicable to
any Option granted under the Plan;
(e) Permit the granting of Options to any one other than
persons eligible under the terms of the Plan; or
(f) Materially increase the benefits accruing to
participants.
12. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of
Stock pursuant to Options may be used for general corporate and business
purposes.
13. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the
Optionee to exercise such option.
14. APPROVAL OF SHAREHOLDERS.
The Plan must be approved by the holders of a majority of the
outstanding shares of Common Stock of the Corporation no later than 12
months after it is adopted by the Board of Directors of the Corporation.
Immediately upon obtaining such approval, the Plan shall be
appropriately endorsed by duly authorized officers of the Corporation.
No Option or other Incentive Award granted under the Plan may be
exercised until the shareholders of the Corporation have approved the
Plan.
15. SECURITIES LAWS COMPLIANCE.
Notwithstanding anything contained herein, the Corporation
shall not be obligated to grant any Option under this Plan or to sell or
issue any share pursuant to any Option agreement executed pursuant to
the Plan unless such grant of an Option or sale of Stock upon exercise
of an Option is at such time effectively registered or exempt from
registration under the Securities Act of 1933, as amended, and is
qualified or exempt from qualification under the California Corporate
Securities Law of 1968.
16. TERM OF PLAN.
Unless previously terminated by the Board of Directors, this
Plan shall be effective on September 10, 1994, and shall terminate at
the close of business on September 10, 2004, and no Incentive Awards
shall be granted under it thereafter. Termination of the Plan shall not
affect any Option or other Incentive Award theretofore granted.
SDNB FINANCIAL CORP., a California
corporation
By:/s/Murray L. Galinson
Murray L. Galinson, President
By:/s/Howard W. Brotman
Howard W. Brotman, Secretary