SCRIPPS BANK
1998 OUTSIDE DIRECTORS STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Scripps Bank 1998 Outside Directors
Stock Option Plan (the "PLAN") is hereby established effective as of July 28,
1998 (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group (as defined below) and its
shareholders by providing an incentive to attract and retain highly qualified
persons to serve as Outside Directors (as defined below) of the Bank (as defined
below) and by creating additional incentive for Outside Directors to promote the
growth and profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board (as defined below) or the date on which
all of the shares of Stock (as defined below) available for issuance under the
Plan have been issued and all restrictions on such shares under the terms of the
Plan and the agreements evidencing Options (as defined below) granted under the
Plan have lapsed.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "BANK" means Scripps Bank, a California banking
corporation, or any successor corporation thereto.
(b) "BOARD" means the Board of Directors of the Bank.
If one or more Committees have been appointed by the Board to administer the
Plan, "Board" also means such Committee(s).
(c) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(d) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by
the Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law.
(e) "CONSULTANT" means any person, including an advisor,
engaged by a Participating Company to render services other than as an Employee
or a Director.
1
(f) "DIRECTOR" means a member of the Board or the board
of directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan.
(h) "FAIR MARKET VALUE" means, as of any date, the value
of a share of Stock or other property as determined by the Board, in its sole
discretion, or by the Bank, in its sole discretion, if such determination is
expressly allocated to the Bank herein, subject to the following:
(i) If, on such date, there is a public market
for the Stock, the Fair Market Value of a share of Stock shall be the closing
sale price of a share of Stock (or the mean of the closing bid and asked prices
of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq
Stock Market, the over-the-counter market or such national or regional
securities exchange or market system constituting the primary market for the
Stock, as reported in the WALL STREET JOURNAL or such other source as the Bank
deems reliable. If the relevant date does not fall on a day on which the Stock
has traded on such securities exchange or market system, the date on which the
Fair Market Value shall be established shall be the last day on which the Stock
was so traded prior to the relevant date, or such other appropriate day as shall
be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public market
for the Stock, the Fair Market Value of a share of Stock shall be as determined
by the Board without regard to any restriction other than a restriction which,
by its terms, will never lapse.
(i) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan.
(j) "OPTIONEE" means a person who has been granted one
or more Options.
(k) "OPTION AGREEMENT" means a written agreement between
the Bank and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee.
(l) "OUTSIDE DIRECTOR" means a Director of the Bank who
is not an Employee.
(m) "PARENT CORPORATION" means any present or future
"parent corporation" of the Bank, as defined in Section 424(e) of the Code.
(n) "PARTICIPATING COMPANY" means the Bank or any Parent
Corporation or Subsidiary Corporation.
2
(o) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.
(p) "SERVICE" means the Optionee's service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. The Optionee's Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the corporation for which the Optionee performs Service ceasing to be a
Participating Company.
(q) "STOCK" means the common stock of the Bank, as
adjusted from time to time in accordance with Section 4.2.
(r) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Bank, as defined in Section 424(f) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
use of the term "or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION. The Plan shall be administered by the Board. All
questions of interpretation of the Plan or of any Option shall be determined by
the Board, and such determinations shall be final and binding upon all persons
having an interest in the Plan or such Option. Any officer of a Participating
Company shall have the authority to act on behalf of the Bank with respect to
any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Bank herein, provided the officer
has apparent authority with respect to such matter, right, obligation,
determination or election.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be one hundred thousand (100,000) and shall
consist of authorized but unissued shares or reacquired shares of Stock or any
combination thereof. If an outstanding Option for any reason expires or is
terminated or canceled or shares of Stock acquired, subject to repurchase, upon
the exercise of an Option are repurchased by the Bank, the shares of Stock
allocable to the unexercised portion of such Option, or such repurchased shares
of Stock, shall again be available for issuance under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Bank, appropriate adjustments shall be made in the number and class of shares
subject to the Plan, to the "Initial Option" and "Annual Option" (as defined in
3
Section 6.1), and to any outstanding Options, and in the exercise price of any
outstanding Options. If a majority of the shares which are of the same class as
the shares that are subject to outstanding Options are exchanged for, converted
into, or otherwise become (whether or not pursuant to an "Ownership Change
Event" as defined in Section 8.1) shares of another corporation (the "NEW
SHARES"), the Board may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise price of, the
outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded down to the nearest whole number, and in no event may the
exercise price of any Option be decreased to an amount less than the par value,
if any, of the stock subject to the Option.
5. ELIGIBILITY AND TYPE OF OPTIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. An Option shall be granted
only to a person who, at the time of grant, is an Outside Director.
5.2 OPTIONS AUTHORIZED. Options shall be nonstatutory stock
options; that is, options which are not treated as incentive stock options
within the meaning of Section 422(b) of the Code.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
Option Agreements specifying the number of shares of Stock covered thereby, in
such form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
6.1 GRANT OF OPTIONS. Subject to execution by an Outside
Director of the appropriate Option Agreement, Options shall be granted without
further action of the Board, as follows:
(a) INITIAL OPTION. Each person who is (i) serving as
an Outside Director on the Effective Date, or (ii) first elected or appointed as
an Outside Director after the Effective Date shall be granted an Option to
purchase one thousand (1,000) shares of Stock on the Effective Date or the date
of such initial election or appointment, respectively (an "INITIAL OPTION").
Notwithstanding anything herein to the contrary, an Initial Option shall not be
granted to a Director of the Bank who previously did not qualify as an Outside
Director but subsequently becomes an Outside Director as a result of the
termination of his or her status as an Employee.
(b) ANNUAL OPTION. Beginning on January 1, 1999, each
Outside Director (including any Director who previously did not qualify as an
Outside Director but who subsequently becomes an Outside Director) shall be
granted an Option to purchase one thousand (1,000) shares of Stock on the date
of the "Shareholders' Meeting", provided such person remains an Outside Director
after the Shareholders' Meeting (an "ANNUAL OPTION"). The Shareholders' Meeting
for an Outside Director who was serving on the Board on the Effective
4
Date shall be the annual meeting of shareholders of the Participating Company
following the Effective Date and successive annual meetings of the
shareholders thereafter. The Shareholders' Meeting for an Outside Director
who is elected or appointed to the Board after the Effective Date shall be
the annual meeting of shareholders of the Participating Company following
such election or appointment and successive annual meetings of the
shareholders thereafter.
(c) RIGHT TO DECLINE OPTION. Notwithstanding the
foregoing, any person may elect not to receive an Option by delivering written
notice of such election to the Board no later than the day prior to the date
such Option would otherwise be granted. A person so declining an Option shall
receive no payment or other consideration in lieu of such declined Option. A
person who has declined an Option may revoke such election by delivering written
notice of such revocation to the Board no later than the day prior to the date
such Option would be granted pursuant to Section 6.1(a) or (b), as the case may
be.
6.2 EXERCISE PRICE. The exercise price per share of Stock
subject to an Option shall be the Fair Market Value of a share of Stock on the
date the Option is granted.
6.3 EXERCISE PERIOD. Each Option shall terminate and cease to
be exercisable on the date five years after the date of grant of the Option
unless earlier terminated pursuant to the terms of the Plan or the Option
Agreement.
6.4 RIGHT TO EXERCISE OPTIONS.
(a) INITIAL OPTIONS. Except as otherwise provided in
the Plan or in the Option Agreement, an Initial Option shall be exercisable on
and from the date which is one year after the date on which the Initial Option
was granted (the "Initial Option Vesting Date") until the termination thereof.
(b) ANNUAL OPTIONS. Except as otherwise provided in the
Plan or in the Option Agreement, an Annual Option shall be exercisable on and
from the date which is one year after the date on which the Annual Option was
granted (the "Annual Option Vesting Date") until the termination thereof.
6.5 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by the assignment of the proceeds of a sale or
loan with respect to some or all of the shares being acquired upon the exercise
of the Option (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a "CASHLESS EXERCISE"), or (iii) by
any combination thereof.
5
(b) CASHLESS EXERCISE. The Bank reserves, at any and
all times, the right, in the Bank's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.
6.6 TAX WITHHOLDING. The Bank shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value equal to all or any part of the
federal, state, local and foreign taxes, if any, required by law to be withheld
by the Participating Company Group with respect to such Option or the shares
acquired upon exercise thereof. Alternatively or in addition, in its sole
discretion, the Bank shall have the right to require the Optionee to make
adequate provision for any such tax withholding obligations of the Participating
Company Group arising in connection with the Option or the shares acquired upon
exercise thereof. The Bank shall have no obligation to deliver shares of Stock
until the Participating Company Group's tax withholding obligations have been
satisfied.
7. STANDARD FORM OF OPTION AGREEMENT.
7.1 GENERAL. Each Option shall comply with and be subject to
the terms and conditions set forth in the appropriate form of Nonstatutory Stock
Option Agreement adopted by the Board concurrently with its adoption of the Plan
and as amended from time to time.
7.2 AUTHORITY TO VARY TERMS. The Board shall have the
authority from time to time to vary the terms of any of the standard forms of
Option Agreement described in this Section 7 either in connection with the grant
or amendment of an individual Option or in connection with the authorization of
a new standard form or forms; provided, however, that the terms and conditions
of any such new, revised or amended standard form or forms of Option Agreement
are not inconsistent with the terms of the Plan.
8. CHANGE IN CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Bank:
(i) the direct or indirect sale or exchange in a
single or series of related transactions by the shareholders of the Bank of more
than fifty percent (50%) of the voting stock of the Bank;
(ii) a merger or consolidation in which the Bank
is a party;
(iii) the sale, exchange, or change in all or
substantially all of the assets of the Bank; or
(iv) a liquidation or dissolution of the Bank.
6
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Bank immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Bank's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Bank or the corporation or corporations to which
the assets or the stock of the Bank were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Bank or the Transferee Corporation(s),
as the case may be, either directly or through one or more subsidiary
corporations. The Board shall have the right to determine whether multiple
sales or exchanges of the voting stock of the Bank or multiple Ownership Change
Events are related, and its determination shall be final, binding and
conclusive.
8.2 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a
Change in Control, any unexercisable or unvested portion of the outstanding
Options shall be immediately exercisable and vested in full as of the date ten
days prior to the date of the Change in Control. The exercise or vesting of any
Option that was permissible solely by reason of this Section 8.2 shall be
conditioned upon the consummation of the Change in Control. In addition, the
surviving, continuing, successor, or purchasing corporation or parent
corporation thereof, as the case may be (the "ACQUIRING CORPORATION"), may
either assume the Bank's rights and obligations under outstanding Options or
substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. For purposes of this Section 8.2, an Option
shall be deemed assumed if, following the Change in Control, the Option confers
the right to purchase in accordance with its terms and conditions, for each
share of Stock subject to the Option immediately prior to the Change in Control,
the consideration (whether stock, cash or other securities or property) to which
a holder of a share of Stock on the effective date of the Change in Control was
entitled. Any Options which are neither assumed or substituted for by the
Acquiring Corporation in connection with the Change in Control nor exercised as
of the date of the Change in Control shall terminate and cease to be outstanding
effective as of the date of the Change in Control. Notwithstanding the
foregoing, shares acquired upon exercise of an Option prior to the Change in
Control and any consideration received pursuant to the Change in Control with
respect to such shares shall continue to be subject to all applicable provisions
of the Option Agreement evidencing such Option except as otherwise provided in
such Option Agreement. Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the outstanding Options immediately
prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a
Change in Control is the surviving or continuing corporation and immediately
after such Ownership Change Event less than fifty percent (50%) of the total
combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the outstanding Options shall not terminate.
7
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an Option shall be exercisable only by the Optionee or the Optionee's
guardian or legal representative. No Option shall be assignable or transferable
by the Optionee, except by will or by the laws of descent and distribution.
10. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board is delegated shall be indemnified by the Bank against all
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan, or any right granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Bank) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such person is
liable for gross negligence, bad faith or intentional misconduct in duties;
provided, however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Bank, in writing, the
opportunity at its own expense to handle and defend the same.
11. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or
amend the Plan at any time. However, subject to changes in applicable law,
regulations or rules that would permit otherwise, without the approval of the
Bank's shareholders, there shall be (a) no increase in the total number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), and (b) no other amendment of the Plan that would
require approval of the Bank's shareholders under any applicable law, regulation
or rule. In any event, no termination or amendment of the Plan may adversely
affect any then outstanding Option, or any unexercised portion thereof, without
the consent of the Optionee, unless such termination or amendment is necessary
to comply with any applicable law, regulation or rule.
IN WITNESS WHEREOF, the undersigned Secretary of the Bank certifies that
the foregoing Scripps Bank 1998 Outside Directors Stock Option Plan was duly
adopted by the Board on April 15, 1998.
--------------------------------------
M. Catherine Wright, Secretary
8
PLAN HISTORY
April 15, 1998 Board adopts Plan, with an initial reserve of 100,000
shares.
July 28, 1998 Shareholders approve Plan, with an initial reserve of
100,000 shares.
9