EXHIBIT 99.2
FIRST FINANCIAL BANCORP
INCENTIVE STOCK OPTION AGREEMENT
1. Grant. First Financial Bancorp, a California corporation (the
-----
"Company"), hereby grants to ____________________________ (the "Optionee"), an
option (the "Option") to purchase a total of _____________ shares of common
stock of the Company, at the price determined as provided herein, and in all
respects subject to the terms, definitions and provisions of the First Financial
Bancorp 1997 Stock Option Plan (the "Plan"). The 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, the Company 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 him, 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 agrees to notify the Company in writing within 5 days
--------------------------------------------------------------
after the date of any such disposition.
--------------------------------------
Optionee further understands that: (a) if Optionee is unable to
continue employment with the Company 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 the Company
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, the exercise more than three (3) months following
termination will result in the Option being taxed as a non-qualified stock
option).
24
Optionee acknowledges, and the Company affirms, that the methodology by
which the Fair Market Value of the Shares has been determined by the Company
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 the Company 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 the Company on the Grant Date.
4. Exercise of Option. This Option shall be exercisable during its term
------------------
in accordance with the provisions of Section 6 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.
(b) Minimum Exercise. This Option may not be exercised for less
----------------
than 10 Shares nor for a fraction of a Share.
25
(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 the Company 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 the Company'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 the Company 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 the Company 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 the Company. In addition, payment may be made in any
of the following forms as indicated by an "x" in the preceding 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 6 months and which
are surrendered to the Company 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 exercise of the
Option.
( ) Exercise/Sale. Payment may be made by the delivery
-------------
(on a form prescribed by the Company) of an irrevocable
direction to a securities broker approved by the Company to sell
Shares and to deliver all or part of the sales proceeds to the
Company 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 the Company) of an irrevocable
direction to pledge Shares to a securities broker or lender
approved by the Company, as security for a loan, and to deliver
all or part of the loan proceeds to the Company 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
----------------------
Service terminates:
(i) As a result of such Optionee's death or Total and
Permanent Disability, the term of the Option shall expire twelve
months after such death or Total and Permanent Disability but not
later than the expiration date specified in Section 5 below.
26
(ii) As a result of termination by the Company for
cause, the term of the Option shall expire thirty days after the
Company's notice or advice of such termination is dispatched to
Optionee, but not later than the 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 the Company, or the deliberate disregard of rules of the
Company which results in loss, damage or injury to the Company, the
unauthorized disclosure of any of the secrets or confidential
information of the Company, the inducement of any client or customer
of the Company to break any contract with the Company, or the
inducement of any principal for whom the Company acts as agent to
terminate such agency relationship, the engagement in any conduct
which constitutes unfair competition with the Company, 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
Service. As used in this paragraph (ii), Company includes
Subsidiaries of the Company.
(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 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 or consultant of the Company or a Subsidiary. The
Company and its Subsidiaries reserve the right to terminate the service of any
employee or consultant 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 the Company, 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, the Company shall make
appropriate adjustments in the number of Shares covered by the Option and in the
Exercise Price of the Option.
27
In the event that the Company 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 4(e)(i) 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
the Company (if the Company 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, 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 issue by the Company 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
the Company 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.
GRANT DATE: ____________, 199_
FIRST FINANCIAL BANCORP
By: ______________________________
___________________, Duly
Authorized on Behalf of
First Financial Bancorp
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
28
