FORM OF
INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE ISLANDS BANCORP
2002 STOCK INCENTIVE PLAN
THIS
AWARD is made as of
the Grant Date by ISLANDS BANCORP (the "Company")
to _________________ (the "Optionee").
Upon
and subject to the Terms and Conditions attached hereto and
incorporated herein by reference, the Company hereby awards as of
the Grant Date
to Optionee
an incentive stock option (the "Option"), as
described below, to
purchase the Option Shares.
A.
Grant Date:
______________.
B.
Type of Option:
Incentive Stock Option.
C.
Plan under which
granted: Islands Bancorp 2002 Stock Incentive Plan.
D.
Option Shares:
All or any part of shares of the Company's no par value
common stock
(the "Common Stock"),
subject to adjustment as provided
in the attached Terms and Conditions.
E.
Exercise Price:
$_____ per share, subject to adjustment as provided in
the attached
Terms and Conditions. The Exercise Price is, in the
judgment of the Committee, not less than 100% of the Fair Market
Value
of a share of Common Stock on the Grant Date or,
in the case of an
Over 10% Owner, not less than 110% of the Fair Market Value of a
share
of Common Stock on the Grant Date.
F.
Option
Period: The Option may be exercised only during the
Option
Period which
commences on the Grant
Date and ends, generally, on the
earliest of (a) the tenth (10th) anniversary of the Grant Date
(unless
the Optionee
is an Over 10% Owner, in which case the fifth
(5th)
anniversary of
the Grant Date); (b) three (3) months
following the
date the Optionee ceases to be an employee
of the Company (including
any Parent or
Subsidiary) for any reason other than death, Disability
or termination
with Cause; (c) one (1) year following the
date the
Optionee ceases to be an employee of the Company (including any
Parent
or Subsidiary)
due to death or Disability; or (d) the date the
Optionee ceases to be an employee of the Company (including any
Parent
or Subsidiary)
due to a termination with Cause;
provided, however,
that the Option may be
exercised as to no more than the vested Option
Shares, determined
pursuant to the
Vesting Schedule. Note that other
limitations to
exercising
the Option, as described in the
attached
Terms and Conditions, may apply.
G.
Vesting
Schedule: The Option
Shares shall become vested in accordance
with Schedule 1 hereto.
IN
WITNESS WHEREOF, the Company has executed and
sealed this Award as of
the Grant Date set forth above.
ISLANDS BANCORP
By:
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Title:
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TERMS AND CONDITIONS
TO
THE
INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE ISLANDS BANCORP
2002 STOCK INCENTIVE PLAN
1.
Exercise of Option.
Subject to the provisions provided herein or in
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the Award made pursuant to the Islands Bancorp 2002 Stock Incentive
Plan:
(a)
the Option may be exercised with respect to all or any portion
of
the vested Option Shares at any time during the
Option Period by the
delivery to
the Company, at its
principal place of business, of a written
notice of exercise in
substantially the form attached hereto as Exhibit 1,
which shall
be actually delivered to the Company no
earlier than thirty
(30)
days and no later than ten (10) days prior to the
date upon which
Optionee desires to exercise all or any portion of the Option;
and
(b)
payment to the Company of the Exercise Price multiplied by the
number of Option
Shares being purchased (the "Purchase Price") as provided
in
Section 3.
(c)
Notwithstanding any
other provision of this Agreement, in the
event that the capital
of the Company falls below the minimum requirements
determined by
the primary federal regulator of the Company (the
"Regulator"), the
Regulator may direct the Company to require the Optionee
to
exercise, or otherwise forfeit, the Option
in whole or in part. If the
Regulator gives such direction, the Company will notify the
Optionee within
forty-five (45)
days from the date the Regulator
notifies the Company in
writing that
the Optionee must
exercise, or otherwise forfeit, the Option
in
whole or in part. If the Optionee does not exercise the
Option in
accordance with the
Company's direction within twenty-one (21) days of the
Company's notification
to the Optionee, the
Committee may provide for the
cancellation of the Option.
Upon acceptance
of such notice and receipt of payment
in full of the Purchase
Price and,
if applicable, any
withholding taxes, the Company shall cause to be
issued a certificate representing the Option Shares purchased.
2.
Withholding. To
the extent the Option is deemed to be a
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Non-Qualified Stock
Option in accordance with Section 18
hereof, the Optionee
must satisfy his
federal, state and local, if any, withholding taxes imposed by
reason of the exercise of the Option either by
paying to the Company the full
amount of the withholding obligation (i) in
cash; (ii) by tendering shares of
Common Stock
which have been owned
by the Optionee for at least six (6) months
prior to the date of exercise having a Fair Market
Value (as defined in the
Plan) equal to the withholding obligation; (iii) by electing,
irrevocably and in
writing in
substantially the form of Exhibit 2 (the "Withholding Election"),
to
have the smallest number of whole shares of Common Stock withheld
by the Company
which, when multiplied
by the Fair Market Value (as defined in the Plan) of the
Common Stock
as of the date the Option is
exercised, is sufficient to satisfy
the amount
of minimum required withholding tax obligations; or (iv) by
any
combination of the
above. Optionee may
make a Withholding Election only if the
following conditions are met:
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<PAGE>
(a)
the Withholding
Election is made on or prior to the date
on
which the amount of tax required to be withheld is
determined (the "Tax
Date") by executing and delivering to the Company a properly
completed
Notice of Withholding
in substantially the form attached hereto as Exhibit
2;
and
(b)
any Withholding
Election will be irrevocable; however, the
Committee (as defined
in the Plan) may, in its sole discretion, disapprove
and
give no effect to the Withholding Election.
3.
Purchase Price.
Payment of the Purchase Price for all Option Shares
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purchased pursuant
to the exercise of an Option shall be made in cash or
certified check
or, if and when the Common Stock becomes
traded by brokers,
whether on
a national securities exchange or otherwise, by receipt of the
Purchase Price
in cash from a broker,
dealer or other "creditor" as defined by
Regulation T
issued by the Board of Governors of the Federal
Reserve System
following delivery
by the Optionee to the Committee of
instructions in a form
acceptable to
the Committee
regarding delivery to such broker, dealer or other
creditor of
that number of Option Shares with respect to
which the Option is
exercised.
4.
Rights as Shareholder.
Until the stock
certificates reflecting the
----------------------
Option Shares accruing to the Optionee upon exercise of the Option
are issued to
the Optionee, the Optionee shall have no rights as a shareholder
with respect to
such Option
Shares. The Company shall make no
adjustment for any dividends or
distribu-tions or other rights on or with respect to Option Shares
for which the
record date
is prior to the issuance of that
stock certificate, except as the
Plan or the attached Award otherwise provides.
5.
Restriction on
Transfer of Option and of Option Shares. The Option
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evidenced hereby
is nontransferable other than by will
or the laws of descent
and distribution
and shall be exercisable during the
lifetime of the Optionee
only by the Optionee (or in the event of his Disability, by his
personal
representative) and
after his death, only by his legatee or the executor of his
estate.
6.
Changes in Capitalization.
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(a)
If the number of
shares of Common Stock shall be increased or
decreased by
reason of a subdivision or combination of
shares of Common
Stock, the
payment of a stock dividend in shares of
Common Stock or any
other increase
or decrease in the number of shares of Common Stock
outstanding effected
without receipt of consideration by the
Company, an
appropriate adjustment
shall be made by the Committee, in a manner
determined in its sole
discretion, in the number and kind of Option Shares
and
in the Exercise Price.
(b)
If the Company shall be the surviving corporation in any
merger, consolidation, reorganization, extraordinary dividend,
spin-off, or
other change
in capital structure
of the Company or its Common Stock, the
Optionee shall
be entitled to
purchase the number and class of securities
to
which a holder of the number of shares of
Common Stock subject to the
Option at the time of the transaction would
have been entitled to receive
as
a result of such transaction, and a corresponding
adjustment, where
appropriate, shall be
made in the Exercise Price. In the event of a Change
in
Control or other
corporate transaction pursuant to which the Company is
not
the surviving entity, the Committee may provide for the
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<PAGE>
assumption of
the Option by the
surviving entity or the substitution of a
new
option, adjusted in a manner similar to that contemplated by the
immediately preceding
sentence; however, if
the surviving entity does not
agree to the assumption or substitution of the
Option, the Committee may
elect to terminate the Option Period as of the effective date of
the Change
in
Control in consideration of the payment to
the Optionee of the sum of
the
difference
between the then Fair
Market Value of the Common Stock and
the
Exercise Price for each vested Option Share which has not been
exercised as of the
effective date of the Change in Control. A dissolution
or
liquidation of the Company shall cause the Option to terminate as
to any
portion thereof
not exercised as of
the effective date of the dissolution
or
liquidation.
(c)
The existence
of the Plan and the
Option granted pursuant to
this
Agreement shall not affect in any way the right or power of the
Company to
make or authorize any adjustment, reclassification,
reorganization or
other change in its capital or business
structure, any
merger or consolidation of the Company, any issue of debt or equity
securities
having preferences or priorities as to
the Common Stock or the
rights thereof, the
dissolution or liquidation of the Company, any sale or
transfer of
all or any part of its business or assets, or any
other
corporate act
or proceeding. Any adjustment
pursuant to this Section may
provide, in the Committee's discretion, for the elimination without
payment
therefor of
any fractional shares that might
otherwise become subject to
any
Option.
7.
Special Limitation on Exercise. No purported exercise of the
Option
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shall be effective
without the approval of the Committee, which may be withheld
to the extent that the exercise, either individually or in the aggregate
together with
the exercise of other previously
exercised stock options and/or
offers and
sales pursuant to any
prior or contemplated offering of securities,
would, in the sole and absolute judgment of the Committee, require
the filing of
a registration
statement with the United States Securities and Exchange
Commission or
with the securities commission of any
state. If a
registration
statement is
not in effe
