EXHIBIT 99.2
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FNB BANCORP
INCENTIVE STOCK OPTION AGREEMENT
1. Grant. FNB Bancorp, a California corporation ("FNB"), hereby grants
to ___________________________ (the "Optionee"), an option (the "Option") to
purchase a total of _______ shares of common stock of FNB (the "Shares"), at the
price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the FNB Bancorp Stock Option Plan (the "Plan").
The Optionee has been provided with a copy of the Plan. Capitalized terms
defined in the Plan shall have the same defined meanings herein.
2. Nature of the Option. This Option is intended to qualify as an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). However, FNB does not represent or warrant that
this Option qualifies as an incentive stock option. Optionee acknowledges that
Optionee is responsible to consult with Optionee's own tax advisor regarding the
tax effects of the Option and the requirements necessary to obtain income tax
treatment under Section 422 of the Code, including, but not limited to, holding
period requirements.
Optionee further understands that, if Optionee disposes of any Shares
received under this Option within two (2) years after the Grant Date of the
Option specified below or within one (1) year after such Shares are transferred
to Optionee, then Optionee will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an amount
generally measured by the difference between the Exercise Price and the lower of
the fair market value of the Shares at the date of the exercise or the fair
market value of the Shares at the date of disposition. Optionee understands
that, if Optionee disposes of such Shares at any time after the expiration of
such two-year and one-year holding periods, any gain on such sale will be taxed
as long-term capital gain. Optionee further understands that, under the
provisions of the Taxpayer Relief Act of 1997, the maximum tax rate on net
capital gains has been reduced for assets held longer than eighteen (18) months,
as compared to the one year holding period. Optionee agrees to notify FNB in
writing within five (5) days after the date of any such disposition.
Optionee further understands that: (a) if Optionee is unable to
continue employment with FNB as a result of a total and permanent disability (as
defined in Section 22(e)(3) of the Code), and if the other requirements for
incentive stock option treatment contained in Section 422 of the Code are
satisfied, Optionee will be entitled to exercise the Option within twelve (12)
months of such termination without defeating incentive stock option treatment;
but (b) if Optionee is unable to continue employment with FNB as a result of
disability which is not total and permanent (as defined in Section 22(e)(3) of
the Code), the Option will not qualify as an incentive stock option unless it is
exercised within three (3) months of the date of termination (i.e., while the
Option may be exercised for a period of twelve (12) months after such
termination, an exercise more than three (3) months following termination will
result in the Option being taxed as a nonstatutory stock option).
Optionee acknowledges, and FNB affirms, that the methodology by which
the fair market value of the Shares has been determined by FNB represents a good
faith attempt, as defined in the Code and the regulations thereunder, at
reaching an accurate appraisal of the fair market value of the Shares; and FNB
shall not be responsible for any additional tax liability incurred by Optionee
in the event that the Internal Revenue Service were to determine that the Option
does not qualify as an incentive stock option for any reason.
3. Exercise Price. The Exercise Price is $____________ for each share
of Common Stock, which price is not less than the fair market value per share of
the common stock of FNB on the date of grant, being the date hereof (the "Grant
Date").
4. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Sections 7 and 8 of the Plan as follows:
(a) Right to Exercise. This Option shall vest cumulatively from
the date of grant of the Option, exercisable during a period of ________ months
after the Grant Date as follows:
(1) This Option may be exercised immediately to the
extent of not more than ____ percent (__%) of the Shares;
(2) Upon or after the expiration of _________ (__)
months from the Grant Date, this Option may be exercised to the extent
of an additional ____ percent (__%) of the Shares;
(3) Upon or after the expiration of _________ (__)
months from the Grant Date, this Option may be exercised to the extent
of an additional ____ percent (__%) of the Shares;
(4) Upon or after the expiration of _________ (__)
months from the Grant Date, this Option may be exercised to the extent
of an additional ____ percent (__%) of the Shares; and
(5) Upon or after the expiration of _________ (__)
months from the Grant Date, this Option may be exercised to the extent
of an additional ____ percent (__%) of the Shares.
Any portion of the Option not exercised shall accumulate and can be
exercised any time prior to or upon the expiration of _________ (__) months from
the Grant Date.
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(b) Minimum Exercise. This Option may not be exercised for less
than ten (10) Shares nor for a fraction of a Share.
(c) Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the Option and specify
the number of Shares in respect of which the Option is being exercised. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of FNB accompanied by payment of the
Exercise Price specified in Section 3 above.
No Shares will be issued pursuant to the exercise of the Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange or inter-dealer quotation system upon
which the shares of FNB's common stock may then be listed or quoted. Assuming
such compliance, the Shares shall be considered transferred to the Optionee on
the date on which the Option is exercised with respect to such Shares. An
Optionee shall have no rights as a shareholder of FNB with respect to any Shares
until the issuance of a stock certificate to the Optionee for such Shares.
(d) Method of Payment. The entire Exercise Price of Shares issued
under this Option shall be payable in cash or by certified check, official bank
check, or the equivalent thereof acceptable to FNB at the time when such Shares
are purchased. Such payment also shall include the amount of any withholding tax
obligation which may arise in connection with the exercise, as determined by
FNB. In addition, subject to Section 8 below, payment may be made in any of the
following forms as indicated by an "x" in the relevant parenthesis:
( ) Surrender of Stock. Payment of all or part of the
Exercise Price and any withholding taxes may be made all or in part with Shares
which have already been owned by the Optionee or Optionee's representative for
more than six (6) months and which are surrendered to FNB in good form for
transfer. Such Shares shall be valued at their fair market value on the date
when the new Shares are purchased pursuant to the exercise of the Option.
( ) Exercise/Sale. Payment may be made by the delivery (on
a form prescribed by FNB) of an irrevocable direction to a securities broker
approved by FNB to sell Shares and to deliver all or part of the sales proceeds
to FNB in payment of all or part of the Exercise Price and any withholding
taxes.
( ) Exercise/Pledge. Payment may be made by the delivery
(on a form prescribed by FNB) of an irrevocable direction to pledge Shares to a
securities broker or lender approved by FNB, as security for a loan, and to
deliver all or part of the loan proceeds to FNB in payment of all or part of the
Exercise Price and any withholding taxes.
(e) Termination of Service. In the event that the Optionee's
status as an employee of FNB terminates:
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(i) As a result of such Optionee's death or total and
permanent disability, the term of the Option shall expire twelve (12) months
after such death or total and permanent disability but not later than the
original expiration date specified in Section 5 below.
(ii) As a result of termination by FNB for cause, the
term of the Option shall expire as of the date on which FNB's notice or advice
of such termination is dispatched to Optionee, but not later than the original
expiration date specified in Section 5 below. For purposes of this paragraph
(ii), "cause" shall mean an act of embezzlement, fraud, dishonesty, breach of
fiduciary duty to FNB, or the deliberate disregard of rules of FNB which results
in loss, damage or injury to FNB, the unauthorized disclosure of any of the
secrets or confidential information of FNB, the inducement of any client or
customer of FNB to break any contract with FNB, or the inducement of any
principal for whom FNB acts as agent to terminate such agency relationship, the
engagement in any conduct which constitutes unfair competition with FNB, the
removal of Optionee from office by any court or bank regulatory agency, or such
other similar acts which the Committee in its discretion determines to
constitute good cause for termination of Optionee's employment. As used in this
paragraph (ii), FNB includes Affiliates of FNB.
(iii) As a result of termination for any reason other
than total and permanent disability, death or cause, the term of the Option
shall expire three (3) months after such termination, but not later than the
original expiration date specified in Section 5 below.
Neither the Plan nor this Option shall be deemed to give Optionee a
right to remain an employee of FNB or an Affiliate. FNB and its Affiliates
reserve the right to terminate the employment of any employee at any time, with
or without cause, subject to applicable laws and the terms of any written
employment agreement.
5. Term of Option. Subject to earlier termination as provided in the
Plan, this Option shall terminate __ years from the Grant Date of this Option,
and may be exercised during such term only in accordance with the Plan and the
terms of this Option.
6. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will, by written beneficiary designation or by the
laws of descent and distribution, and may be exercised during the lifetime of
Optionee only by Optionee. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
7. Adjustment of Shares. In the event of a subdivision of the
outstanding shares of common stock of FNB, a declaration of a dividend payable
in Shares, a declaration of a dividend payable in a form other than Shares in an
amount that has a material effect on the value of Shares, a combination or
consolidation of the outstanding shares of common stock (by reclassification or
otherwise) into a lesser number of Shares, a recapitalization, a spin-off or a
similar occurrence, FNB shall make appropriate adjustments in the number of
Shares covered by the Option and in the Exercise Price of the Option.
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In the event that FNB is a party to a merger or other reorganization,
the Option shall be subject to the agreement of merger or reorganization.
Subject to the provisions of Section 12 of the Plan, such agreement may provide,
without limitation, for the assumption of all outstanding options by the
surviving corporation or its parent, for their continuation by FNB (if FNB is a
surviving corporation), for payment of a per-Share cash settlement equal to the
difference between the amount to be paid for one Share under such agreement and
the Exercise Price, or for the acceleration of the exercisability followed by
the cancellation of any option not exercised, in all cases without the
optionees' consent. Any cancellation shall not occur until after such
acceleration is effective and optionees have been notified of such acceleration
and have had reasonable opportunity to exercise their options.
Except as provided in this Section 7, Optionee shall have no rights by
reason of any subdivision or consolidation of shares of stock of any class, the
payment of any dividend or any other increase or decrease in the number of
shares of stock of any class. Any issuance by FNB of shares of stock of any
class, or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or Exercise Price of Shares subject to the Option. The grant of this
Option pursuant to the Plan shall not affect in any way the right or power of
FNB to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
Optionee further understands and agrees that FNB may cause an
appropriate restrictive legend or legends to be placed upon any certificate(s)
evidencing the Shares, and may issue appropriate "stop-transfer" instructions to
FNB's transfer agent, U.S. Stock Transfer Corporation, in order to ensure
compliance with relevant federal and state securities laws, as described
hereinabove.
GRANT DATE: _________________
FNB BANCORP
By: ___________________________________
Title ___________________________________
Optionee represents that Optionee is familiar with the terms and
provisions of this Option and hereby accepts the same subject to all the terms
and provisions hereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board of Directors or its duly
appointed Committee upon any questions arising under the Plan.
Dated: ____________________ _________________________________________
Optionee
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