EXHIBIT 10.141
THE CHARLES SCHWAB CORPORATION
1992 STOCK INCENTIVE PLAN
(RESTATED TO INCLUDE AMENDMENTS
THROUGH OCTOBER 18, 1994)
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board of Directors on March 26, 1992. The
purpose of the Plan is to promote the long-term success of the Company and the
creation of incremental stockholder value by (a) encouraging Non-Employee
Directors and Key Employees to focus on long-range objectives, (b) encouraging
the attraction and retention of Non-Employee Directors and Key Employees with
exceptional qualifications and (c) linking Non-Employee Directors and Key
Employees directly to stockholder interests. The Plan seeks to achieve this
purpose by providing for Awards in the form of Restricted Shares, Performance
Share Awards or Options, which may constitute incentive stock options or
nonstatutory stock options. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
ARTICLE 2. ADMINISTRATION.
2.1 The Committee. The Plan shall be administered by the
Committee. The Committee shall consist of two or more disinterested directors
of the Company, who shall be appointed by the Board. A member of the Committee
shall not be eligible to receive any award under the Plan, other than Options
granted under Section 4.2.
2.2 Disinterested Directors. A member of the Board shall be
deemed to be "disinterested" only if he or she satisfies such requirements as
the Securities and Exchange Commission may establish for disinterested
administrators acting under plans intended to qualify for exemption under Rule
16b-3 (or its successor) under the Exchange Act.
2.3 Committee Responsibilities. The Committee shall select the
Key Employees who are to receive Awards under the Plan, determine the amount,
vesting requirements and other conditions of such Awards, may interpret the
Plan, and make all other decisions relating to the operation of the Plan. The
Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons.
ARTICLE 3. LIMITATION ON AWARDS.
The aggregate number of Restricted Shares, Performance Share Awards
and Options awarded under the Plan shall not exceed 6,550,000 (including those
shares awarded prior to the amendment of the Plan). If any Restricted Shares,
Performance Share Awards or Options are forfeited, or if any Performance Share
Awards terminate for any other reason without the associated Common Shares
being issued, or if any Options terminate for any other reason before
being exercised, then such Restricted Shares, Performance Share Awards or
Options shall again become available for Awards under the Plan. The
limitation of this Article 3 shall be subject to adjustment pursuant to Article
10. Any Common Shares issued pursuant to the Plan may be authorized but
unissued shares or treasury shares.
Subject to the overall limit on the aggregate shares set forth above,
the following limitations shall apply: (a) The maximum number of Common Shares
which may be granted subject to an Option to any one Participant in any one
fiscal year shall be 500,000; and (b) The maximum number of Restricted Shares
or Performance Share Awards which may be granted to any one Participant in any
one fiscal year shall be 200,000.
ARTICLE 4. ELIGIBILITY.
4.1 General Rule. Except as provided in Section 4.2, only Key
Employees shall be eligible for designation as Participants by the Committee.
4.2 Non-Employee Directors. Non-Employee Directors shall be
entitled to receive the NSOs described in this Section 4.2 (and no other
Awards).
(a) Each Non-Employee Director shall receive an NSO covering 1,000
Common Shares for each Award Year with respect to which he or she
serves as a Non-Employee Director on the grant date described in
subsection (b) below;
(b) The NSO for a particular Award Year shall be granted to each
Non-Employee Director as of May 15 of each Award Year, and if May 15
is not a business day, then the grant shall be made on and as of the
next succeeding business day;
(c) Each NSO shall be exercisable in full at all times during
its term;
(d) The term of each NSO shall be 10 years; provided, however,
that any unexercised NSO shall expire on the date that the Optionee
ceases to be a Non-Employee Director or a Key Employee for any reason
other than death or disability. If an Optionee ceases to be a
Non-Employee Director or Key Employee on account of death or
disability, any unexercised NSO shall expire on the earlier of the
date 10 years after the date of grant or one year after the date of
death or disability of such Director; and
(e) The Exercise Price under each NSO shall be equal to the Fair
Market Value on the date of grant and shall be payable in any of the
forms described in Article 6.
4.3 Ten-Percent Stockholders. A Key Employee who owns more than
10 percent of the total combined voting power of all classes of outstanding
stock of the Company or any of its Subsidiaries shall not be eligible for the
grant of an ISO unless (a) the Exercise price under such ISO is at least 110
percent of the Fair Market Value of a Common Share on the date of grant and (b)
such ISO by its terms is not exercisable after the expiration of five years
from the date of grant.
2
4.4 Attribution Rules. For purposes of Section 4.3, in
determining stock ownership, a Key Employee shall be deemed to own the stock
owned, directly or indirectly, by or for his or her brothers, sisters, spouse,
ancestors or lineal descendants. Stock owned, directly or indirectly, by or for
a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which the Key Employee holds an option shall not be counted.
4.5 Outstanding Stock. For purposes of Section 4.3, "outstanding
stock" shall include all stock actually issued and outstanding immediately
after the grant of the ISO to the Key Employee. "Outstanding stock" shall not
include treasury shares or shares authorized for issuance under outstanding
options held by the Key Employee or by any other person.
ARTICLE 5. OPTIONS.
5.1 Stock Option Agreement. Each grant of an Option under the
Plan shall be evidenced by a Stock Option Agreement between the Optionee and
the Company. Such Option shall be subject to all applicable terms and
conditions of the Plan, and may be subject to any other terms and conditions
which are not inconsistent with the Plan and which the Committee deems
appropriate for inclusion in a Stock Option Agreement. The provisions of the
various Stock Option Agreements entered into under the Plan need not be
identical. The Committee may designate all or any part of an Option as an ISO,
except for Options granted to Non-Employee Directors under Section 4.2.
5.2 Options Nontransferability. No Option granted under the Plan
shall be transferable by the Optionee other than by will or the laws of descent
and distribution. An Option may be exercised during the lifetime of the
Optionee only by him or her. No Option or interest therein may be transferred,
assigned, pledged or hypothecated by the Optionee during his or her lifetime,
whether by operation of law or otherwise, or be made subject to execution,
attachment or similar process.
5.3 Number of Shares. Each Stock Option Agreement shall specify
the number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 10. Each Stock Option
Agreement shall also specify whether the Option is an ISO or an NSO.
5.4 Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price under an Option shall not be less than 100
percent of the Fair Market Value of a Common Share on the date of grant, except
as otherwise provided in Section 4.3. Subject to the preceding sentence, the
Exercise Price under any Option shall be determined by the Committee. The
Exercise Price shall be payable in accordance with Article 6.
5.5 Exercisability and Term. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option. The term of an ISO shall in no event exceed 10 years
3
from the date of grant, and Section 4.3 may require a shorter term. Subject to
the preceding sentence, the Committee shall determine when all or any part of
an Option is to become exercisable and when such Option is to expire; provided
that, in appropriate cases, the Company shall have the discretion to extend the
term of an Option or the time within which, following termination of
employment, an Option may be exercised, or to accelerate the exercisability of
an Option. A Stock Option Agreement may provide for accelerated exercisability
in the event of the Optionee's death, disability, retirement, or other
termination of employment and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's employment. Except
as provided in Section 4.2, NSOs may also be awarded in combination with
Restricted Shares, and such an Award may provide that the NSOs will not be
exercisable unless the related Restricted Shares are forfeited. In addition,
NSOs granted under this Section 5 may be granted subject to forfeiture
provisions which provide for forfeiture of the Option upon the exercise of
tandem awards, the terms of which are established in other programs of the
Company.
5.6 Limitation on Amount of ISOs. The aggregate fair market value
(determined at the time the ISO is granted) of the Common Shares with respect
to which ISOs are exercisable for the first time by the Optionee during any
calendar year (under all incentive stock option plans of the Company) shall not
exceed $100,000; provided, however, that all or any portion of an Option which
cannot be exercised as an ISO because of such limitation shall be treated as an
NSO.
5.7 Effect of Change in Control. The Committee (in its sole
discretion) may determine, at the time of granting an Option, that such Option
shall become fully exercisable as to all Common Shares subject to such Option
immediately preceding any Change in Control with respect to the Company.
5.8 Restrictions on Transfer of Common Shares. Any Common Shares
issued upon exercise of an Option shall be subject to such special forfeiture
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine. Such restrictions shall be set
forth in the applicable Stock Option Agreement and shall apply in addition to
any general restrictions that may apply to all holders of Common Shares.
5.9 Authorization of Replacement Options. Concurrently with the
grant of any Option to a Participant (other than NSOs granted pursuant to
Section 4.2), the Committee may authorize the grant of Replacement Options. If
Replacement Options have been authorized by the Committee with respect to a
particular award of Options (the "Underlying Options"), the Option Agreement
with respect to the Underlying Options shall so state, and the terms and
conditions of the Replacement Options shall be provided therein. The grant of
any Replacement Options shall be effective only upon the exercise of the
Underlying Options through the use of Common Shares pursuant to Section 6.2 or
Section 6.3. The number of Replacement Options shall equal the number of Common
Shares used to exercise the Underlying Options, and, if the Option Agreement so
provides, the number of Common Shares used to satisfy any tax withholding
requirements incident to the exercise of the Underlying Options in accordance
with Section 13.2. Upon the exercise of the Underlying Options, the Replacement
Options shall be evidenced by an amendment to the Underlying Option Agreement.
Notwithstanding the fact that the Underlying Option may be an ISO, a
Replacement Option is not intended to qualify as an ISO. The Exercise
4
Price of a Replacement Option shall be no less than the Fair Market Value of a
Common Share on the date the grant of the Replacement Option becomes effective.
The term of each Replacement Option shall be equal to the remaining term of the
Underlying Option. No Replacement Options shall be granted to Optionees when
Underlying Options are exercised pursuant to the terms of the Plan and the
Underlying Option Agreement following termination of the Optionee's employment.
The Committee, in its sole discretion, may establish such other terms and
conditions for Replacement Options as it deems appropriate.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 General Rule. The entire Exercise Price of Common Shares
issued upon exercise of Options shall be payable in cash at the time when such
Common Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall be
made only pursuant to the express provisions of the applicable Stock
Option Agreement. However, the Committee may specify in the Stock
Option Agreement that payment may be made pursuant to Section 6.2 or
6.3.
(b) In the case of an NSO, the Committee may at any time accept
payment pursuant to Section 6.2 or 6.3.
6.2 Surrender of Stock. To the extent that this Section 6.2 is
applicable, payment for all or any part of the Exercise Price may be made with
Common Shares which are surrendered to the Company; provided, however, that
such Common Shares which are surrendered must have been beneficially owned by
the Participant for at least six (6) months prior to the date such shares are
surrendered. Such Common Shares shall be valued at their Fair Market Value on
the date when the new Common Shares are purchased under the Plan. In the event
that the Common Shares being surrendered are Restricted Shares that have not
yet become vested, the same restrictions shall be imposed upon the new Common
Shares being purchased.
6.3 Exercise/Sale. To the extent this Section 6.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to Charles Schwab & Co., Inc. to sell Common Shares
(including the Common Shares to be issued upon exercise of the Options) 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; provided, however, that
certain restrictions may be imposed by the Committee on persons who are
considered a director or officer of the Company, to the extent required by
Section 16 of the Exchange Act or any rule thereunder.
ARTICLE 7. RESTRICTED SHARES AND PERFORMANCE SHARE AWARDS.
7.1 Time, Amount and Form of Awards. The Committee may grant
Restricted Shares or Performance Share Awards with respect to an Award Year
during such Award Year or at any time thereafter. Each such Award shall be
evidenced by a Stock Award Agreement between the
5
Award recipient and the Company. The amount of each Award of Restricted Shares
or Performance Share Awards shall be determined by the Committee. Awards under
the Plan may be granted in the form of Restricted Shares or Performance Share
Awards or in any combination thereof, as the Committee shall determine at its
sole discretion at the time of the grant. Restricted Shares or Performance
Share Awards may also be awarded in combination with NSOs, and such an Award
may provide that the Restricted Shares or Performance Share Awards will be
forfeited in the event that the related NSOs are exercised.
7.2 Payment for Restricted Share Awards. To the extent that an
Award is granted in the form of Restricted Shares, the Award recipient, as a
condition to the grant of such Award, shall be required to pay the Company in
cash an amount equal to the par value of such Restricted Shares.
7.3 Vesting or Issuance Conditions. Each Award of Restricted
Shares shall become vested, in full or in installments, upon satisfaction of
the conditions specified in the Stock Award Agreement. Common Shares shall be
issued pursuant to Performance Share Awards in full or in installments upon
satisfaction of the issuance conditions specified in the Stock Award Agreement.
The Committee shall select the vesting conditions in the case of Restricted
Shares, or issuance conditions in the case of Performance Share Awards, which
may be based upon the Participant's service, the Participant's performance, the
Company's performance or such other criteria as the Committee may adopt. A
Stock Award Agreement may also provide for accelerated vesting or issuance, as
the case may be, in the event of the Participant's death, disability or
retirement. The Committee, in its sole discretion, may determine, at the time
of making an Award of Restricted Shares, that such Award shall become fully
vested in the event that a Change in Control occurs with respect to the
Company. The Committee, in its sole discretion, may determine, at the time of
making a Performance Share Award, that the issuance conditions set forth in
such Award shall be waived in the event that a Change in Control occurs with
respect to the Company.
The Committee shall have the discretion to adjust the payouts
associated with Awards downward. Unless and until (i) the rules set forth under
Code Section 162(m) permit discretionary adjustments to increase payouts; or
(ii) the Committee determines that compliance with Code Section 162(m) is not
desired with respect to some or all Named Executive Officers, no payout
associated with an Award held by a Named Executive Officer shall be
discretionarily adjusted upward in a manner that would eliminate the ability of
the Award to satisfy the "performance-based" exception under Treasury
Regulation Section 1.162 - 27(e)(2).
7.4 Form of Settlement of Performance Share Awards. Settlement of
Performance Share Awards shall only be made in the form of Common Shares. Until
a Performance Share Award is settled, the number of Performance Share Awards
shall be subject to adjustment pursuant to Article 10.
7.5 Death of Recipient. Any Common Shares that are to be issued
pursuant to a Performance Share Award after the recipient's death shall be
delivered or distributed to the recipient's beneficiary or beneficiaries. Each
recipient of a Performance Share Award under the Plan shall designate one or
more beneficiaries for this purpose by filing the prescribed form with
6
the Company. A beneficiary designation may be changed by filing the prescribed
form with the Company at any time before the Award recipient's death. If no
beneficiary was designated or if no designated beneficiary survives the Award
recipient, then any Common Shares that are to be issued pursuant to a
Performance Share Award after the recipient's death shall be delivered or
distributed to the recipient's estate. The Committee, in its sole discretion,
shall determine the form and time of any distribution(s) to a recipient's
beneficiary or estate.
ARTICLE 8. CLAIMS PROCEDURES.
Claims for benefits under the Plan shall be filed in writing with the
Committee on forms supplied by the Committee. Written notice of the disposition
of a claim shall be furnished to the claimant within 90 days after the claim is
filed. If the claim is denied, the notice of disposition shall set forth the
specific reasons for the denial, citations to the pertinent provisions of the
Plan, and, where appropriate, an explanation as to how the claimant can perfect
the claim. If the claimant wishes further consideration of his or her claim,
the claimant may appeal a denied claim to the Committee (or to a person
designated by the Committee) for further review. Such appeal shall be filed in
writing with the Committee on a form supplied by the Committee, together with a
written statement of the claimant's position, no later than 90 days following
receipt by the claimant of written notice of the denial of his or her claim. If
the claimant so requests, the Committee shall schedule a hearing. A decision on
review shall be made after a full and fair review of the claim and shall be
delivered in writing to the claimant no later than 60 days after the
Committee's receipt of the notice of appeal, unless special circumstances
(including the need to hold a hearing) require an extension of time for
processing the appeal, in which case a written decision on review shall be
delivered to the claimant as soon as possible but not later than 120 days after
the Committee's receipt of the appeal notice. The claimant shall be notified in
writing of any such extension of time. The written decision on review shall
include specific reasons for the decision, written in a manner calculated to be
understood by the claimant, and shall specifically refer to the pertinent Plan
provisions on which it is based. All determinations of the Committee shall be
final and binding on Participants and their beneficiaries.
ARTICLE 9. VOTING RIGHTS AND DIVIDENDS.
9.1 Restricted Shares.
(a) All holders of Restricted Shares who are not Named Executive
Officers shall have the same voting, dividend, and other rights as
the Company's other stockholders.
(b) During the period of restriction, Named Executive Officers
holding Restricted Shares granted hereunder shall be credited with
all regular cash dividends paid with respect to all Restricted Shares
while they are so held. If a dividend is paid in the form of cash,
such cash dividend shall be credited to Named Executive Officers
subject to the same restrictions on transferability and
forfeitability as the Restricted Shares with respect to which they
were
7
paid. If any dividends or distributions are paid in shares of Common
Stock, the shares of Common Stock shall be subject to the same
restrictions on transferability and forfeitability as the Restricted
Shares with respect to which they were paid. Subject to the
succeeding paragraph, and to the restrictions on vesting and the
forfeiture provisions, all dividends credited to a Named Executive
Officer shall be paid to the Named Executive Officer within
forty-five (45) days following the full vesting of the Restricted
Shares with respect to which such dividends were earned.
In the event that any dividend constitutes a "derivative
security" or an "equity security" pursuant to Rule 16(a) under the
Exchange Act, such dividend shall be subject to a vesting period
equal to the longer of: (i) the remaining vesting period of the
Restricted Shares with respect to which the dividend is paid; or (ii)
six (6) months. The Committee shall establish procedures for the
application of this provision.
Named Executive Officers holding Restricted Shares shall have
the same voting rights as the Company's other stockholders.
9.2 Performance Share Awards. The holders of Performance Share
Awards shall have no voting or dividend rights until such time as any Common
Shares are issued pursuant thereto, at which time they shall have the same
voting, dividend and other rights as the Company's other stockholders.
ARTICLE 10. PROTECTION AGAINST DILUTION; ADJUSTMENT OF AWARDS.
10.1 General. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares, a
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a lesser number of Common Shares, a
recapitalization, a spinoff or a similar occurrence, the Committee shall make
appropriate adjustments in one or more of (a) the number of Options, Restricted
Shares and Performance Share Awards available for future Awards under Article
3, (b) the number of Performance Share Awards included in any prior Award which
has not yet been settled, (c) the number of Common Shares covered by each
outstanding Option or (d) the Exercise Price under each outstanding Option.
10.2 Reorganizations. In the event that the Company is a party to
a merger or other reorganization, outstanding Options, Restricted Shares and
Performance Share Awards shall be subject to the agreement of merger or
reorganization. Such agreement may provide, without limitation, for the
assumption of outstanding Awards by the surviving corporation or its parent,
for their continuation by the Company (if the Company is a surviving
corporation), for accelerated vesting or for settlement in cash.
10.3 Reservation of Rights. Except as provided in this Article 10,
a Participant shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any stock
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 Common Shares subject to an Option. The grant of an Award
pursuant to the Plan shall not affect in any way the right or power of the
8
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.
ARTICLE 11. LIMITATION OF RIGHTS.
11.1 Employment Rights. Neither the Plan nor any Award granted
under the Plan shall be deemed to give any individual a right to remain
employed by the Company or any Subsidiary. The Company and its Subsidiaries
reserve the right to terminate the employment of any employee at any time, with
or without cause, subject only to a written employment agreement (if any).
11.2 Stockholders' Rights. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the issuance of a stock
certificate for such Common Shares. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date when
such certificate is issued, except as expressly provided in Articles 7, 9 and
10.
11.3 Creditors' Rights. A holder of Performance Share Awards shall
have no rights other than those of a general creditor of the Company.
Performance Share Awards represent unfunded and unsecured obligations of the
Company, subject to the terms and conditions of the applicable Stock Award
Agreement.
11.4 Government Regulations. Any other provision of the Plan
notwithstanding, the obligations of the Company with respect to Common Shares
to be issued pursuant to the Plan shall be subject to all applicable laws,
rules and regulations, and such approvals by any governmental agencies as may
be required. The Company reserves the right to restrict, in whole or in part,
the delivery of Common Shares pursuant to any Award until such time as:
(a) Any legal requirements or regulations have been met relating
to the issuance of such Common Shares or to their registration,
qualification or exemption from registration or qualification under
the Securities Act of 1933, as amended, or any applicable state
securities laws; and
(b) Satisfactory assurances have been received that such Common
Shares, when issued, will be duly listed on the New York Stock
Exchange or any other securities exchange on which Common Shares are
then listed.
ARTICLE 12. LIMITATION OF PAYMENTS.
12.1 Basic Rule. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer
in the nature of compensation to or for the benefit of a Participant, whether
paid or payable (or transferred or transferable) pursuant to the terms of this
Plan or otherwise (a "Payment"), would be nondeductible for federal income tax
purposes because of the provisions concerning "excess parachute payments" in
section 280G of the Code,
9
then the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount; provided, however, that the Committee, at
the time of making an Award under this Plan or at any time thereafter, may
specify in writing that such Award shall not be so reduced and shall not be
subject to this Article 12. For purposes of this Article 12, the "Reduced
Amount" shall be the amount, expressed as a present value, which maximizes
the aggregate present value of the Payments without causing any Payment to
be nondeductible by the Company because of section 280G of the Code.
12.2 Reduction of Payments. If the Auditors determine that any
Payment would be nondeductible because of section 280G of the Code, then the
Company shall promptly give the Participant notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount, and the Participant
may then elect, in his or her sole discretion, which and how much of the
Payments shall be eliminated or reduced (as long as after such election, the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 12, present
value shall be determined in accordance with section 280G(d)(4) of the Code.
All determinations made by the Auditors under this Article 12 shall be binding
upon the Company and the Participant and shall be made within 60 days of the
date when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan, and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.
12.3 Overpayments and Underpayments. As a result of uncertainty in
the application of section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments will have
been made by the Company which should not have been made (an "Overpayment") or
that additional Payments which will not have been made by the Company could
have been made (an "Underpayment"), consistent in each case with the
calculation of the Reduced Amount hereunder. In the event that the Auditors,
based upon the assertion of a deficiency by the Internal Revenue Service
against the Company or the Participant which the Auditors believe has a high
probability of success, determine that an Overpayment has been made, such
Overpayment shall be treated for all purposes as a loan to the Participant
which he or she shall repay to the Company on demand, together with interest at
the applicable federal rate provided in section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by the Participant to the
Company if and to the extent that such payment would not reduce the amount
which is subject to taxation under section 4999 of the Code. In the event that
the Auditors determine that an Underpayment has occurred, such Underpayment
shall promptly be paid or transferred by the Company to or for the benefit of
the Participant, together with interest at the applicable federal rate provided
in section 7872(f)(2) of the Code.
10
12.4 Related Corporations. For purposes of this Article 12, the
term "Company" shall include affiliated corporations to the extent determined
by the Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 13. WITHHOLDING TAXES.
13.1 General. To the extent required by applicable federal, state,
local or foreign law, the recipient of any payment or distribution under the
Plan shall make arrangements satisfactory to the Company for the satisfaction
of any withholding tax obligations that arise by reason of such payment or
distribution. The Company shall not be required to make such payment or
distribution until such obligations are satisfied.
13.2 Nonstatutory Options, Restricted Shares or Performance Share
Awards. The Committee may permit an Optionee who exercises NSOs, or who
receives Awards of Restricted Shares, or who receives Common Shares pursuant to
the terms of a Performance Share Award, to satisfy all or part of his or her
withholding tax obligations by having the Company withhold a portion of the
Common Shares that otherwise would be issued to him or her under such Awards.
Such Common Shares shall be valued at their Fair Market Value on the date when
taxes otherwise would be withheld in cash. The payment of withholding taxes by
surrendering Common Shares to the Company, if permitted by the Committee, shall
be subject to such restrictions as the Committee may impose, including any
restrictions required by rules of the Securities and Exchange Commission.
ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARD.
Any Award granted under the Plan shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any creditor's
process, whether voluntarily, involuntarily or by operation of law. However,
this Article 14 shall not preclude (i) a Participant from designating a
beneficiary to succeed, after the Participant's death, to those of the
Participant's Awards (including without limitation, the right to exercise any
unexercised Options) as may be determined by the Company from time to time in
its sole discretion, or (ii) a transfer of any Award hereunder by will or the
laws of descent or distribution.
ARTICLE 15. FUTURE OF PLANS.
15.1 Term of the Plan. The Plan, as set forth herein, shall become
effective on May 8, 1992. The Plan shall remain in effect until it is
terminated under Section 15.2, except that no ISOs shall be granted after May
7, 2002.
15.2 Amendment or Termination. The Committee may, at any time and
for any reason, amend or terminate the Plan; provided, however, that any
amendment of the Plan shall be subject to the approval of the Company's
stockholders to the extent required by applicable laws, regulations or rules;
and provided further, that Section 4.2 shall not be amended more than once
every six months, other than to comport with changes in the Code or ERISA, or
the rules thereunder.
11
15.3 Effect of Amendment or Termination. No Award shall be made
under the Plan after the termination thereof. The termination of the Plan, or
any amendment thereof, shall not affect any Option, Restricted Share or
Performance Share Award previously granted under the Plan.
ARTICLE 16. DEFINITIONS.
16.1 "Award" means any award of an Option, a Restricted Share or a
Performance Share Award under the Plan.
16.2 "Award Year" means a fiscal year beginning January 1 and
ending December 31 with respect to which an Award may be granted.
16.3 "Board" means the Company's Board of Directors, as constituted from
time to time.
16.4 "Change in Control" means the occurrence of any of the
following events after the effective date of the Plan as set out in Section
15.1:
(a) A change in control required to be reported pursuant to Item
6(e) of Schedule 14A of Regulation 14A under the Exchange Act;
(b) A change in the composition of the Board, as a result of which
fewer than two-thirds of the incumbent directors are directors who
either (i) had been directors of the Company 24 months prior to such
change or (ii) were elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the directors
who had been directors of the Company 24 months prior to such change
and who were still in office at the time of the election or
nomination;
(c) Any "person" (as such term is used in sections 13(d) and 14(d)
of the Exchange Act) becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 20 percent or
more of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors
(the "Base Capital Stock"); provided, however, that any change in the
relative beneficial ownership of securities of any person resulting
solely from a reduction in the aggregate number of outstanding shares
of Base Capital Stock, and any decrease thereafter in such person's
ownership of securities, shall be disregarded until such person
increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company.
16.5 "Code" means the Internal Revenue Code of 1986, as amended.
12
16.6 "Committee" means the Compensation Committee of the Board, as
constituted from time to time.
16.7 "Common Share" means one share of the common stock of the
Company.
16.8 "Company" means The Charles Schwab Corporation, a Delaware
corporation.
16.9 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
16.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
16.11 "Exercise Price" means the amount for which one Common Share
may be purchased upon exercise of an Option, as specified by the Committee in
the applicable Stock Option Agreement.
16.12 "Fair Market Value" means the market price of a Common Share,
determined by the committee as follows:
(a) If the Common Share was traded on a stock exchange on the date
in question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite-transactions report for
such date;
(b) If the Common Share was traded over-the-counter on the date in
question and was classified as a national market issue, then the Fair
Market Value shall be equal to the last transaction price quoted by
the NASDAQ system for such date;
(c) If the Common Share was traded over-the-counter on the date in
question but was not classified as a national market issue, then the
Fair Market Value shall be equal to the mean between the last
reported representative bid and asked prices quoted by the NASDAQ
system for such date; and
(d) If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith
on such basis as it deems appropriate.
16.13 "ISO" means an incentive stock option described in section
422(b) of the Code.
16.14 "Key Employee" means a key common-law employee of the Company
or any Subsidiary, as determined by the Committee.
16.15 "Named Executive Officer" means a Participant who, as of the
date of vesting of an Award is one of a group of "covered employees," as
defined in the Regulations promulgated under Code Section 162(m), or any
successor statute.
13
16.16 "Non-Employee Director" means a member of the Board who is not
a common-law employee.
16.17 "NSO" means an employee stock option not described in sections
422 through 424 of the Code.
16.18 "Option" means an ISO or NSO, including a Replacement Option,
granted under the Plan and entitling the holder to purchase one Common Share.
16.19 "Optionee" means an individual, or his or her estate, legatee
or heirs at law that holds an Option.
16.20 "Participant" means a Non-Employee Director or Key Employee
who has received an Award.
16.21 "Performance Share Award" means the conditional right to
receive in the future one Common Share, awarded to a Participant under the
Plan.
16.22 "Plan" means this 1992 Stock Incentive Plan of The Charles
Schwab Corporation, as it may be amended from time to time.
16.23 "Replacement Option" means an Option that is granted when a
Participant uses a Common Share held or to be acquired by the Participant to
exercise an Option and/or to satisfy tax withholding requirements incident to
the exercise of an Option.
16.24 "Restricted Share" means a Common Share awarded to a
Participant under the Plan.
16.25 "Stock Award Agreement" means the agreement between the
Company and the recipient of a Restricted Share or Performance Share Award
which contains the terms, conditions and restrictions pertaining to such
Restricted Share or Performance Share Award.
16.26 "Stock Option Agreement" means the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her option.
16.27 "Subsidiary" means any corporation, if the Company and/or one
or more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the
adoption of the Plan shall be considered a Subsidiary commencing as of such
date.
14