Exhibit 10.9
PUBLIC STORAGE, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
Public Storage, Inc., a California corporation (the "Company"), sets
forth herein the terms of its 1996 Stock Option and Incentive Plan (the "Plan")
as follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and
retain highly qualified officers, key employees, outside directors, and other
persons to advance the interests of the Company by providing such persons with
stronger incentives to continue to serve the Company and its affiliates (as
defined herein) and to expend maximum effort to improve the business results and
earnings of the Company. The Plan is intended to accomplish this objective by
providing to eligible persons an opportunity to acquire or increase a direct
proprietary interest in the operations and future success of the Company. To
this end, the Plan provides for the grant of stock options, restricted stock and
restricted stock units in accordance with the terms hereof. Stock options
granted under the Plan may be non-qualified stock options or incentive stock
options, as provided herein, except that stock options granted to outside
directors shall in all cases be non-qualified stock options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any
company or other trade or business that controls, is controlled by or is under
common control with such person within the meaning of Rule 405 of Regulation C
under the 1933 Act (as defined herein).
2.2 "Award Agreement" means the stock option agreement, restricted
stock agreement, restricted stock unit agreement or other written agreement
between the Company and a Grantee that evidences and sets out the terms and
conditions of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in Section
14 hereof.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended.
2.6 "Committee" means a Committee of, and designated from time to time
by resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate, and each of whom shall qualify in all respects as a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act
or any successor rule or regulation. Commencing on the Effective Date, and until
such time as the Board shall determine otherwise, the Committee shall be the
Audit Committee of the Board.
2.7 "Company" means Public Storage, Inc.
2.8 "Effective Date" means August 13, 1996, the date on which the Plan
was adopted by the Board.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.10 "Fair Market Value" means the value of a share of Stock,
determined as follows: if on the Grant Date or other determination date the
Stock is listed on an established national or regional stock exchange, is
admitted to quotation on the Nasdaq National Market, or is publicly traded on an
established securities market, the Fair Market Value of a share of Stock shall
be the closing price of the Stock on such exchange or in such market (the
highest such closing price if there is more than one such exchange or market) on
the Grant Date or such other determination date (or if there is no such reported
closing price, the Fair Market Value shall be the mean between the highest bid
and lowest asked prices or between the high and low sale prices on such trading
day) or, if no sale of Stock is reported for such trading day, on the next
preceding day on which any sale shall have been reported. If the Stock is not
listed on such an exchange, quoted on such system or traded on such a market,
Fair Market Value shall be the value of the Stock as determined by the Committee
in good faith.
2.11 "Grant" means an award of an Option, Restricted Stock or
Restricted Stock Units under the Plan.
2.12 "Grant Date" means (a) for Grants other than Grants to Outside
Directors, the later of (i) the date as of which the Committee approves the
Grant or (ii) the date as of which the Grantee and the Company or Service
Provider enter into the relationship resulting in the Grantee's becoming
eligible to receive a Grant, and (b) for Grants to Outside Directors, the date
on which such Grant is made in accordance with Section 7 hereof.
2.13 "Grantee" means a person who receives or holds an Option,
Restricted Stock or Restricted Stock Units under the Plan.
2.14 "Incentive Stock Option" means an "incentive stock option" within
the meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.15 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.16 "Option Period" means the period during which Options may be
exercised as set forth in Section 11 hereof.
2.17 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.18 "Other Agreement" shall have the meaning set forth in Section 14
hereof.
2.19 "Outside Director" means a member of the Board who is not an
officer or employee of the Company.
2.20 "Plan" means the Public Storage, Inc. 1996 Stock Option and
Incentive Plan.
2.21 "Reporting Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.22 "Restricted Period" means the period during which Restricted Stock
or Restricted Stock Units are subject to restrictions or conditions pursuant to
Section 13.2 hereof.
2.23 "Restricted Stock" means shares of Stock, awarded to a Grantee
pursuant to Section 13 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.24 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant
to Section 13 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.25 "Securities Act" means the Securities Act of 1933, as now in
effect or as hereafter amended.
2.26 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
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provider or affiliate of the Company, or any corporation or other entity in
which the Company owns at least a ninety percent (90%) economic interest, and
employees of any of the foregoing, as such persons may be designated from time
to time by the Committee pursuant to Section 6 hereof.
2.27 "Stock" means the common stock, par value $0.10 per share, of the
Company.
2.28 "Subsidiary" means any "subsidiary corporation" of the Company
within the meaning of Section 425(f) of the Code.
2.29 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in Section 11.2 hereof.
3. ADMINISTRATION OF THE PLAN
3.1 General. The Plan shall be administered by the Committee. The Board
may remove members, add members, and fill vacancies on the Committee from time
to time, all in accordance with the Company's articles of incorporation and
by-laws and applicable law; provided, however, that each member of the Committee
shall at all times qualify in all respects as a "non-employee director" within
the meaning of Rule 16b-3 under the Exchange Act or any successor rule or
regulation.
3.2 Plenary Authority of the Committee. Subject to Section 3.4 hereof,
the Committee shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's articles of
incorporation and by-laws and applicable law. The Committee shall have full
power and authority to take all actions and to make all determinations required
or provided for under the Plan, any Grant or any Award Agreement, and shall have
full power and authority to take all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan that the
Committee deems to be necessary or appropriate to the administration of the
Plan, any Grant or any Award Agreement. All such actions and determinations
shall be by the affirmative vote of a majority of the members of the Committee
present at a meeting or by unanimous consent of the Committee executed in
writing in accordance with the Company's articles of incorporation and by-laws
and applicable law. The interpretation and construction by the Committee of any
provision of the Plan, any Grant or any Award Agreement shall be final and
conclusive.
3.3 Discretionary Grants. Subject to Section 3.4 hereof and to the
other terms and conditions of the Plan, the Committee shall have full and final
authority to designate Grantees, (i) to determine the type or types of Grant to
be made to a Grantee, (ii) to determine the number of shares of Stock to be
subject to a Grant, (iii) to establish the terms and conditions of each Grant
(including, but not limited to, the exercise price of any Option, the nature and
duration of any restriction or condition (or provision for lapse thereof)
relating to the vesting, exercise, transfer, or forfeiture of a Grant or the
shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options), (iv) to prescribe the
form of each Award Agreement evidencing a Grant, and (v) to amend, modify, or
supplement the terms of any outstanding Grant; provided, however, that the
Committee shall not have the authority to reduce the exercise price of any
outstanding Option other than pursuant to Section 17 hereof. Such authority
specifically includes the authority, in order to effectuate the purposes of the
Plan but without amending the Plan, to modify Grants to eligible individuals who
are foreign nationals or are individuals who are employed outside the United
States to recognize differences in local law, tax policy, or custom. As a
condition to any subsequent Grant, the Committee shall have the right, at its
discretion, to require Grantees to return to the Company Grants previously
awarded under the Plan. Subject to the terms and conditions of the Plan, any
such new Grant shall be upon such terms and conditions as are specified by the
Committee at the time the new Grant is made.
3.4 Grants to Outside Directors. With respect to Grants of Options to
Outside Directors pursuant to Section 7 hereof, the Committee's responsibilities
under the Plan shall be limited to taking all legal actions necessary to
document the Options so granted, to interpret the Award Agreements evidencing
such Options, to maintain appropriate records and reports regarding such
Options, and to take all acts authorized by this Plan or otherwise reasonably
necessary to effect the purposes hereof.
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3.5 No Liability. No member of the Board or of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Grant or Award Agreement.
3.6 Applicability of Rule 16b-3. Those provisions of the Plan that make
express reference to Rule 16b-3 under the Exchange Act shall apply only to
Reporting Persons.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 17 hereof, the number of
shares of Stock available for issuance under the Plan shall be 3,850,000. Stock
issued or to be issued under the Plan shall be authorized but unissued shares.
If any shares covered by a Grant are not purchased or are forfeited, or if a
Grant otherwise terminates without delivery of any Stock subject thereto, then
the number of shares of Stock counted against the aggregate number of shares
available under the Plan with respect to such Grant shall, to the extent of any
such forfeiture or termination, again be available for making Grants under the
Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date. The Plan shall be effective as of the Effective
Date, subject to approval of the Plan within one year of the Effective Date, by
a majority of the votes cast on the proposal at a meeting of shareholders,
provided that the total votes cast represent a majority of all shares entitled
to vote. Upon approval of the Plan by the shareholders of the Company as set
forth above, all Grants made under the Plan on or after the Effective Date shall
be fully effective as if the shareholders of the Company had approved the Plan
on the Effective Date. If the shareholders fail to approve the Plan within one
year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect.
5.2 Term. The Plan has no termination date; however, no Incentive Stock
Option may be granted on or after the tenth anniversary of the Effective Date.
6. DISCRETIONARY GRANTS
6.1 Company or Subsidiary Employees. Grants (including Grants of
Incentive Stock Options) may be made under the Plan to any employee of the
Company or of any Subsidiary, including any such employee who is an officer or
director of the Company or of any Subsidiary, as the Committee shall determine
and designate from time to time.
6.2 Service Providers. Grants may be made under the Plan to any Service
Provider whose participation in the Plan is determined by the Committee to be in
the best interests of the Company and is so designated by the Committee;
provided, however, that Grants to Service Providers who are not employees of the
Company or of any Subsidiary shall not be Incentive Stock Options.
6.3 Successive Grants. An eligible person may receive more than one
Grant, subject to such restrictions as are provided herein.
7. GRANTS TO OUTSIDE DIRECTORS
7.1 Initial Grants of Options. Each Outside Director who is initially
elected to the Board on or after the Effective Date shall, upon the date of his
or her initial election by the Board or the shareholders of the Company,
automatically be awarded a Grant of an Option, which shall not be an Incentive
Stock Option, to purchase 15,000 shares of Stock (which amount shall be subject
to adjustment as provided in Section 17 hereof).
7.2 Subsequent Grants of Options. Immediately following each Annual
Meeting of Shareholders of the Company held after the Effective Date, each
Outside Director then duly elected and serving (other than an Outside Director
initially elected to the Board at such Annual Meeting of Shareholders) shall
automatically be awarded a Grant of an Option, which shall not be an Incentive
Stock Option, to purchase 2,500 shares of Stock (which amount shall be subject
to adjustment as provided in Section 17 hereof); provided, however, that no
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Outside Director shall be eligible to receive a Grant of Options under this
Section 7.2 unless such person attended, in person or by telephone, at least
seventy-five percent of the meetings held by the Board during the immediately
preceding calendar year (or such portion thereof during which the Outside
Director served on the Board).
7.3 Vesting. Options granted to Outside Directors pursuant to Sections
7.1 and 7.2 shall vest in three equal annual installments in accordance with the
schedule set forth in the first sentence of Section 11.1 hereof.
8. LIMITATIONS ON GRANTS
8.1 Limitation on Shares of Stock Subject to Grants. The maximum number
of shares of Stock subject to Options that can be awarded under the Plan to any
person eligible for a Grant under Section 6 hereof is 2,500,000 during the first
ten years after the Effective Date and 250,000 per year thereafter. The maximum
number of shares of Restricted Stock that can be awarded under the Plan
(including for this purpose any shares of Stock represented by Restricted Stock
Units) to any person eligible for a Grant under Section 6 hereof is 250,000 per
year.
8.2 Limitations on Incentive Stock Options. An Option shall constitute
an Incentive Stock Option only (i) if the Grantee of such Option is an employee
of the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the shares of Stock with respect to which all Incentive Stock Options held by
such Grantee become exercisable for the first time during any calendar year
(under the Plan and all other plans of the Grantee's employer and its
affiliates) does not exceed $100,000. This limitation shall be applied by taking
Options into account in the order in which they were granted.
9. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or
forms as the Committee shall from time to time determine. Award Agreements
granted from time to time or at the same time need not contain similar
provisions but shall be consistent with the terms of the Plan. Each Award
Agreement evidencing a Grant of Options shall specify whether such Options are
intended to be non-qualified stock options or Incentive Stock Options.
10. OPTION PRICE
The Option Price of each Option shall be fixed by the Committee and
stated in the Award Agreement evidencing such Option. The Option Price shall be
the aggregate Fair Market Value on the Grant Date of the shares of Stock subject
to the Option; provided, however, that in the event that a Grantee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the Company's outstanding Stock), the Option Price
of an Option granted to such Grantee that is intended to be an Incentive Stock
Option shall be not less than the greater of the par value of a share of Stock
or 110 percent of the Fair Market Value of a share of Stock on the Grant Date.
In no case shall the Option Price of any Option be less than the par value of a
share of Stock.
11. VESTING, TERM AND EXERCISE OF OPTIONS
11.1 Vesting and Option Period. Unless otherwise provided in an Award
Agreement evidencing the Grant of an Option, each Option granted under the Plan
shall become exercisable in accordance with the following schedule: (i) prior to
the first anniversary of the Grant Date, the Option shall not be exercisable;
(ii) on the first anniversary of the Grant Date, the Option shall become
exercisable with respect to one-third of the shares of Stock subject to such
Option; (iii) on the second anniversary of the Grant Date, the Option shall
become exercisable with respect to an additional one-third of the shares of
Stock subject to such Option and (iv) on the third anniversary of the Grant
Date, the Option shall become exercisable with respect to the remaining shares
of Stock subject to such Option and shall remain exercisable in full up to (but
not including) the Termination Date (as defined in Section 11.2 hereof). For
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purposes of this Section 11.1, fractional numbers of shares of Stock subject to
an Option shall be rounded down to the next nearest whole number. The period
during which any Option shall be exercisable in accordance with the foregoing
schedule shall constitute the "Option Period" with respect to such Option.
11.2 Term. Each Option granted under the Plan shall terminate, and all
rights to purchase shares of Stock thereunder shall cease, upon the expiration
of ten years from the date such Option is granted, or under such circumstances
and on such date prior thereto as is set forth in the Plan or as may be fixed by
the Committee and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
11.3 Acceleration. Any limitation on the exercise of an Option
contained in any Award Agreement may be rescinded, modified or waived by the
Committee, in its sole discretion, at any time and from time to time after the
Grant Date of such Option, so as to accelerate the time at which the Option may
be exercised. Notwithstanding any other provision of the Plan, no Option shall
be exercisable in whole or in part prior to the date the Plan is approved by the
shareholders of the Company as provided in Section 5.1 hereof.
11.4 Termination of Employment or Other Relationship. Upon the
termination (i) of the employment of a Grantee with the Company or a Service
Provider, (ii) of a Service Provider's relationship with the Company, or (iii)
of an Outside Director's service to the Company, other than, in the case of
individuals, by reason of death or "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code), any Option or portion thereof held by
such Grantee that has not vested in accordance with the provisions of Section
11.1 hereof shall terminate immediately, and any Option or portion thereof that
has vested in accordance with the provisions of Section 11.1 hereof but has not
been exercised shall terminate at the close of business on the thirtieth day
following the Grantee's termination of service, employment, or other
relationship, unless the Committee, in its discretion, extends the period during
which the Option may be exercised (which period may not be extended beyond the
original term of the Option). Upon termination of an Option or portion thereof,
the Grantee shall have no further right to purchase shares of Stock pursuant to
such Option or portion thereof. Whether a leave of absence or leave on military
or government service shall constitute a termination of employment for purposes
of the Plan shall be determined by the Committee, which determination shall be
final and conclusive. For purposes of the Plan, a termination of employment,
service or other relationship shall not be deemed to occur if the Grantee is
immediately thereafter employed with the Company or any other Service Provider,
or is engaged as a Service Provider or an Outside Director of the Company.
Whether a termination of a Service Provider's or an Outside Director's
relationship with the Company shall have occurred shall be determined by the
Committee, which determination shall be final and conclusive.
11.5 Rights in the Event of Death. If a Grantee dies while employed by
the Company or a Service Provider, or while serving as a Service Provider or an
Outside Director, all Options granted to such Grantee shall fully vest on the
date of death, and the executors or administrators or legatees or distributees
of such Grantee's estate shall have the right, at any time within one year after
the date of such Grantee's death (or such longer period as the Committee, in its
discretion, may determine prior to the expiration of such one-year period) and
prior to termination of the Option pursuant to Section 11.2 above, to exercise
any Option held by such Grantee at the date of such Grantee's death.
11.6 Rights in the Event of Disability. If a Grantee terminates
employment with the Company or a Service Provider, or (if the Grantee is a
Service Provider who is an individual or is an Outside Director) ceases to
provide services to the Company, in either case by reason of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Grantee, such Grantee's Options shall continue to vest, and shall be exercisable
to the extent that they are vested, for a period of one year after such
termination of employment or service (or such longer period as the Committee, in
its discretion, may determine prior to the expiration of such one-year period),
subject to earlier termination of the Option as provided in Section 11.2 above.
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Whether a termination of employment or service is to be considered by reason of
"permanent and total disability" for purposes of the Plan shall be determined by
the Committee, which determination shall be final and conclusive.
11.7 Limitations on Exercise of Option. Notwithstanding any other
provision of the Plan, in no event may any Option be exercised, in whole or in
part, prior to the date the Plan is approved by the shareholders of the Company
as provided herein, or after ten years following the date upon which the Option
is granted, or after the occurrence of an event referred to in Section 17 hereof
which results in termination of the Option.
11.8 Method of Exercise. An Option that is exercisable may be exercised
by the Grantee's delivery to the Company of written notice of exercise on any
business day, at the Company's principal office, addressed to the attention of
the Committee. Such notice shall specify the number of shares of Stock with
respect to which the Option is being exercised and shall be accompanied by
payment in full of the Option Price of the shares for which the Option is being
exercised. The minimum number of shares of Stock with respect to which an Option
may be exercised, in whole or in part, at any time shall be the lesser of (i)
100 shares or such lesser number set forth in the applicable Award Agreement and
(ii) the maximum number of shares available for purchase under the Option at the
time of exercise. Payment of the Option Price for the shares purchased pursuant
to the exercise of an Option shall be made (i) in cash or in cash equivalents;
(ii) through the tender to the Company of shares of Stock, which shares shall be
valued, for purposes of determining the extent to which the Option Price has
been paid thereby, at their Fair Market Value on the date of exercise; or (iii)
by a combination of the methods described in (i) and (ii). The Committee may
provide, by inclusion of appropriate language in an Award Agreement, that
payment in full of the Option Price need not accompany the written notice of
exercise provided that the notice of exercise directs that the certificate or
certificates for the shares of Stock for which the Option is exercised be
delivered to a licensed broker acceptable to the Company as the agent for the
individual exercising the Option and, at the time such certificate or
certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of federal and/or other taxes which the Company may in its judgment, be
required to withhold with respect to the exercise of the Option. An attempt to
exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Unless otherwise stated in the applicable
Award Agreement, an individual holding or exercising an Option shall have none
of the rights of a shareholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock
or to direct the voting of the subject shares of Stock ) until the shares of
Stock covered thereby are fully paid and issued to him. Except as provided in
Section 17 hereof, no adjustment shall be made for dividends, distributions or
other rights for which the record date is prior to the date of such issuance.
11.9 Delivery of Stock Certificates. Promptly after the exercise of an
Option by a Grantee and the payment in full of the Option Price, such Grantee
shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.
12. TRANSFERABILITY OF OPTIONS
Each Option granted pursuant to this Plan shall, during a Grantee's
lifetime, be exercisable only by the Grantee or his or her permitted
transferees, and neither the Option nor any right thereunder shall be
transferable by the Grantee, by operation of law or otherwise, other than as may
be provided in the Award Agreement evidencing such Option or as may be provided
by will or the laws of descent and distribution. Except as may be provided in
the Award Agreement evidencing an Option, no Option shall be pledged or
hypothecated (by operation of law or otherwise) or subject to execution,
attachment or similar processes.
13. RESTRICTED STOCK
13.1 Grant of Restricted Stock or Restricted Stock Units. The Committee
may from time to time grant Restricted Stock or Restricted Stock Units to
persons eligible to receive such Grants as set forth in Section 6 hereof,
subject to such restrictions, conditions and other terms as the Committee may
determine.
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13.2 Restrictions. At the time a Grant of Restricted Stock or
Restricted Stock Units is made, the Committee shall establish a period of time
(the "Restricted Period") applicable to such Restricted Stock or Restricted
Stock Units. The minimum Restricted Period which may be provided for by the
Committee with respect to Restricted Stock or Restricted Stock Units the vesting
of which is subject solely to the passage of time and/or continued employment
shall be three years, subject to earlier expiration of the Restricted Period
upon the death, disability, retirement or other termination of service of the
Grantee, or upon a change in control of the Company, in accordance with the
provisions of the Plan. Each Grant of Restricted Stock or Restricted Stock Units
may be subject to a different Restricted Period. The Committee may, in its sole
discretion, at the time a Grant of Restricted Stock or Restricted Stock Units is
made, prescribe restrictions in addition to or other than the expiration of the
Restricted Period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the
Restricted Stock or Restricted Stock Units. Such performance objectives shall be
established in writing by the Committee prior to the ninetieth day of the year
in which the Grant is made and while the outcome is substantially uncertain.
Performance objectives shall be based on Stock price, market share, sales,
earnings per share, return on equity or costs. Performance objectives may
include positive results, maintaining the status quo or limiting economic
losses. Subject to the second sentence of this Section 13.2, the Committee also
may, in its sole discretion, shorten or terminate the Restricted Period or waive
any other restrictions applicable to all or a portion of the Restricted Stock or
Restricted Stock Units. Neither Restricted Stock nor Restricted Stock Units may
be sold, transferred, assigned, pledged or otherwise encumbered or disposed of
during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Committee with respect to such Restricted Stock
or Restricted Stock Units.
13.3 Restricted Stock Certificates. The Company shall issue, in the
name of each Grantee to whom Restricted Stock has been granted, stock
certificates representing the total number of shares of Restricted Stock granted
to the Grantee, as soon as reasonably practicable after the Grant Date. The
Secretary of the Company shall hold such certificates for the Grantee's benefit
until such time as the Restricted Stock is forfeited to the Company, or the
restrictions lapse.
13.4 Rights of Holders of Restricted Stock. Unless the Committee
otherwise provides in an Award Agreement, holders of Restricted Stock shall have
the right to vote such Stock and the right to receive any dividends declared or
paid with respect to such Stock. The Committee may provide that any dividends
paid on Restricted Stock must be reinvested in shares of Stock, which may or may
not be subject to the same vesting conditions and restrictions applicable to
such Restricted Stock. All distributions, if any, received by a Grantee with
respect to Restricted Stock as a result of any stock split, stock dividend,
combination of shares, or other similar transaction shall be subject to the
restrictions applicable to the original Grant.
13.5 Rights of Holders of Restricted Stock Units. Unless the Committee
otherwise provides in an Award Agreement, holders of Restricted Stock Units
shall have no rights as stockholders of the Company. The Committee may provide
in an Award Agreement evidencing a Grant of Restricted Stock Units that the
holder of such Restricted Stock Units shall be entitled to receive, upon the
Company's payment of a cash dividend on its outstanding Stock, a cash payment
for each Restricted Stock Unit held equal to the per-share dividend paid on the
Stock. Such Award Agreement may also provide that such cash payment will be
deemed reinvested in additional Restricted Stock Units at a price per unit equal
to the Fair Market Value of a share of Stock on the date that such dividend is
paid.
13.6 Termination of Employment or Other Relationship. Upon the
termination of the employment of a Grantee with the Company or a Service
Provider, or of a Service Provider's relationship with the Company, in either
case other than, in the case of individuals, by reason of death or "permanent
and total disability" (within the meaning of Section 22(e)(3) of the Code), any
Restricted Stock or Restricted Stock Units held by such Grantee that has not
vested, or with respect to which all applicable restrictions and conditions have
not lapsed, shall immediately be deemed forfeited, unless the Committee, in its
discretion, determines otherwise. Upon forfeiture of Restricted Stock or
Restricted Stock Units, the Grantee shall have no further rights with respect to
such Grant, including but not limited to any right to vote Restricted Stock or
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any right to receive dividends with respect to shares of Restricted Stock or
Restricted Stock Units. Whether a leave of absence or leave on military or
government service shall constitute a termination of employment for purposes of
the Plan shall be determined by the Committee, which determination shall be
final and conclusive. For purposes of the Plan, a termination of employment,
service or other relationship shall not be deemed to occur if the Grantee is
immediately thereafter employed with the Company or any other Service Provider,
or is engaged as a Service Provider. Whether a termination of a Service
Provider's relationship with the Company shall have occurred shall be determined
by the Committee, which determination shall be final and conclusive.
13.7 Rights in the Event of Death. If a Grantee dies while employed by
the Company or a Service Provider or while serving as a Service Provider, all
Restricted Stock or Restricted Stock Units granted to such Grantee shall fully
vest on the date of death, and the shares of Stock represented thereby shall be
deliverable in accordance with the terms of the Plan to the executors,
administrators, legatees or distributees of the Grantee's estate.
13.8 Rights in the Event of Disability. If a Grantee terminates
employment with the Company or a Service Provider, or (if the Grantee is a
Service Provider who is an individual) ceases to provide services to the
Company, in either case by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, such
Grantee's Restricted Stock or Restricted Stock Units shall continue to vest in
accordance with the applicable Award Agreement for a period of one year after
such termination of employment or service (or such longer period as the
Committee, in its discretion, may determine prior to the expiration of such
one-year period), subject to the earlier forfeiture of such Restricted Stock or
Restricted Stock Units in accordance with the terms of the applicable Award
Agreement. Whether a termination of employment or service is to be considered by
reason of "permanent and total disability" for purposes of the Plan shall be
determined by the Committee, which determination shall be final and conclusive.
13.9 Delivery of Stock and Payment Therefor. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to shares of
Restricted Stock or Restricted Stock Units shall lapse, and, upon payment by the
Grantee to the Company, in cash or by check, of the aggregate par value of the
shares of Stock represented by such Restricted Stock or Restricted Stock Units,
a stock certificate for such shares shall be delivered, free of all such
restrictions, to the Grantee or the Grantee's beneficiary or estate, as the case
may be.
14. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Grantee with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
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Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee's sole discretion, to designate those rights, payments, or benefits
under this Plan, any Other Agreements, and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
Grantee under this Plan be deemed to be a Parachute Payment.
15. REQUIREMENTS OF LAW
15.1 General. The Company shall not be required to sell or issue any
shares of Stock under any Grant if the sale or issuance of such shares would
constitute a violation by the Grantee, any other individual exercising an
Option, or the Company of any provision of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of any shares
subject to a Grant upon any securities exchange or under any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of shares hereunder, no shares of Stock may be
issued or sold to the Grantee or any other individual exercising an Option
pursuant to such Grant unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Company, and any delay caused thereby shall in no way affect
the date of termination of the Grant. Specifically, in connection with the
Securities Act, upon the exercise of any Option or the delivery of any shares of
Restricted Stock or Stock underlying Restricted Stock Units, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered by such Grant, the Company shall not be required to sell or issue
such shares unless the Committee has received evidence satisfactory to it that
the Grantee or any other individual exercising an Option may acquire such shares
pursuant to an exemption from registration under the Securities Act. Any
determination in this connection by the Committee shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable until
the shares of Stock covered by such Option are registered or are exempt from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction apply) shall be deemed conditioned upon the effectiveness
of such registration or the availability of such an exemption.
15.2 Rule 16b-3. It is the intent of the Company that Grants pursuant
to the Plan and the exercise of Options granted hereunder will qualify for the
exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any
provision of the Plan or action by the Committee does not comply with the
requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Committee, and shall not affect the
validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the
Board may exercise its discretion to modify this Plan in any respect necessary
to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not been
made; provided, however, that the Board shall not, without approval of the
Company's shareholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul a Grant if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this Section 16 or
Section 17 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Grant theretofore awarded under the Plan.
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17. EFFECT OF CHANGES IN CAPITALIZATION
17.1 Changes in Stock. If the number of outstanding shares of Stock is
increased or decreased or the shares of Stock are changed into or exchanged for
a different number or kind of shares or other securities of the Company on
account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the Effective
Date, the number and kinds of shares for which Grants of Options, Restricted
Stock and Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and kind
of shares for which Grants are outstanding shall be adjusted proportionately and
accordingly so that the proportionate interest of the Grantee immediately
following such event shall, to the extent practicable, be the same as
immediately before such event. Any such adjustment in outstanding Options shall
not change the aggregate Option Price payable with respect to shares that are
subject to the unexercised portion of the Option outstanding but shall include a
corresponding proportionate adjustment in the Option Price per share.
17.2 Reorganization in Which the Company Is the Surviving Entity and in
Which No Change of Control Occurs. Subject to Section 17.3 hereof, if the
Company shall be the surviving entity in any reorganization, merger, or
consolidation of the Company with one or more other entities, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing a Grant of
Restricted Stock, any restrictions applicable to such Restricted Stock shall
apply as well to any replacement shares received by the Grantee as a result of
the reorganization, merger or consolidation.
17.3 Reorganization, Sale of Assets or Sale of Stock Which Involves a
Change of Control. Subject to the exceptions set forth in the last sentence of
this Section 17.3, (i) upon the occurrence of a "Change of Control" (as defined
below), all outstanding shares of Restricted Stock and Restricted Stock Units
shall be deemed to have vested, and all restrictions and conditions applicable
to such shares of Restricted Stock and Restricted Stock Units shall be deemed to
have lapsed immediately prior to the occurrence of such Change of Control, and
(ii) fifteen days prior to the scheduled consummation of a Change of Control,
all Options outstanding hereunder shall become immediately exercisable and shall
remain exercisable for a period of fifteen days. Any exercise of an Option
during such fifteen-day period shall be conditioned upon the consummation of the
Change of Control and shall be effective only immediately before the
consummation of the Change of Control. Upon consummation of any Change of
Control, the Plan and all outstanding but unexercised Options shall terminate.
The Committee shall send written notice of an event that will result in such a
termination to all individuals who hold Options not later than the time at which
the Company gives notice thereof to its shareholders. For purposes of this
Section 17.3, a "Change of Control" shall be deemed to occur upon (i) the
dissolution or liquidation of the Company or upon a merger, consolidation, or
reorganization of the Company with one or more other entities in which the
Company is not the surviving entity, (ii) a sale of substantially all of the
assets of the Company to another entity, or (iii) any transaction (including
without limitation a merger or reorganization in which the Company is the
surviving corporation) which results in any person or entity (other than B.
Wayne Hughes and members of his family and their affiliates) owning 50% or more
of the combined voting power of all classes of stock of the Company. This
Section 17.3 shall not apply to any Change of Control to the extent that (A)
provision is made in writing in connection with such Change of Control for the
continuation of the Plan or the assumption of the Options, Restricted Stock and
Restricted Stock Units theretofore granted, or for the substitution for such
Options, Restricted Stock and Restricted Stock Units of new options, restricted
stock and restricted stock units covering the stock of a successor corporation,
or a parent, subsidiary or affiliate thereof, with appropriate adjustments as to
the number and kind of shares and exercise prices, in which event the Plan and
Options, Restricted Stock and Restricted Stock Units theretofore granted shall
11
continue in the manner and under the terms so provided or (B) a majority of the
full Board determines that such Change of Control shall not trigger application
of the provisions of this Section 17.3.
17.4 Adjustments. Adjustments under this Section 17 related to shares
of Stock or securities of the Company shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. No
fractional shares or other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share.
17.5 No Limitations on Company. The making of Grants pursuant to the
Plan shall not affect or limit in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations, or changes of its capital
or business structure or to merge, consolidate, dissolve, or liquidate, or to
sell or transfer all or any part of its business or assets.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company or any Service Provider
either to increase or decrease the compensation or other payments to any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company or a Service Provider. No provision in
the Plan or in any Grant awarded or Award Agreement entered into pursuant to the
Plan shall be construed to confer upon any individual the right to remain in the
service of the Company as a director (including as an Outside Director), or
shall interfere with or restrict in any way the rights of the Company's
shareholders to remove any director pursuant to the provisions of the California
General Corporation Law, as from time to time amended. In addition,
notwithstanding anything contained in the Plan to the contrary, unless otherwise
stated in the applicable Award Agreement, no Grant awarded under the Plan shall
be affected by any change of duties or position of the Optionee (including a
transfer to or from the Company or a Service Provider), so long as such Grantee
continues to be a director, officer, consultant, employee, or independent
contractor (as the case may be) of the Company or a Service Provider. The
obligation of the Company to pay any benefits pursuant to this Plan shall be
interpreted as a contractual obligation to pay only those amounts described
herein, in the manner and under the conditions prescribed herein. The Plan shall
in no way be interpreted to require the Company to transfer any amounts to a
third party trustee or otherwise hold any amounts in trust or escrow for payment
to any participant or beneficiary under the terms of the Plan. No Grantee shall
have any of the rights of a shareholder with respect to the shares of Stock
subject to an Option except to the extent the certificates for such shares of
Stock shall have been issued upon the exercise of the Option.
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
20. WITHHOLDING TAXES
The Company, a Subsidiary or a Service Provider, as the case may be,
shall have the right to deduct from payments of any kind otherwise due to a
Grantee any Federal, state, or local taxes of any kind required by law to be
withheld with respect to the vesting of or other lapse of restrictions
applicable to Restricted Stock or Restricted Stock Units or upon the issuance of
any shares of Stock upon the exercise of an Option. At the time of such vesting,
lapse, or exercise, the Grantee shall pay to the Company, the Subsidiary or the
Service Provider, as the case may be, any amount that the Company, the
Subsidiary or the Service Provider may reasonably determine to be necessary to
satisfy such withholding obligation. Subject to the prior approval of the
12
Company, the Subsidiary or the Service Provider, which may be withheld by the
Company, the Subsidiary or the Service Provider, as the case may be, in its sole
discretion, the Grantee may elect to satisfy such obligations, in whole or in
part, (i) by causing the Company, the Subsidiary or the Service Provider to
withhold shares of Stock otherwise issuable to the Grantee or (ii) by delivering
to the Company, the Subsidiary or the Service Provider shares of Stock already
owned by the Grantee. The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair
Market Value of the shares of Stock used to satisfy such withholding obligation
shall be determined by the Company, the Subsidiary or the Service Provider as of
the date that the amount of tax to be withheld is to be determined. A Grantee
who has made an election pursuant to this Section 20 may satisfy his or her
withholding obligation only with shares of Stock that are not subject to any
repurchase, forfeiture, unfulfilled vesting, or other similar requirements.
21. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
22. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Committee,
in its sole discretion.
23. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall
include the plural form, the masculine gender shall include the feminine gender,
etc., as the context requires.
24. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined
to be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
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25. GOVERNING LAW
The validity and construction of this Plan and the instruments
evidencing the Grants awarded hereunder shall be governed by the laws of the
State of California.
* * *
The Plan was duly adopted and approved by the Board of Directors of the
Company as of the 13th day of August, 1996.
/S/ SARAH HASS
----------------------------------
Sarah Hass
Secretary of the Company
The Plan was duly approved by the shareholders of the Company on the
7th day of October, 1996.
/S/ SARAH HASS
----------------------------------
Sarah Hass
Secretary of the Company
The Plan was duly amended by the Board of Directors of the Company on
the 7th day of October, 1996.
/S/ SARAH HASS
----------------------------------
Sarah Hass
Secretary of the Company
The Plan was duly amended by the Board of Directors of the Company on
the 11th day of November, 1997.
/S/ SARAH HASS
----------------------------------
Sarah Hass
Secretary of the Company
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