SILICON VALLEY BANCSHARES
1997 EQUITY INCENTIVE PLAN
ADOPTED DECEMBER 19, 1996
APPROVED BY SHAREHOLDERS APRIL 17, 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Silicon Valley Bancshares, a California corporation.
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(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of common stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Company's common stock) on the day of determination, as reported
in THE WALL STREET JOURNAL or such other source as the Board deems reliable.
(2) In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
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(o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means a
right granted pursuant to subsection 8(b)(3) of the Plan.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does
not receive compensation (directly or indirectly) from the Company or its
parent or subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would
not be required under Item 404(a) of Regulation S-K promulgated pursuant to
the Securities Act ("Regulation S-K")), does not possess an interest in any
other transaction as to which disclosure would be required under Item 404(a)
of Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "OPTIONEE" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is
not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in
any capacity other than as a Director, or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
(w) "PLAN" means this 1997 Equity Incentive Plan.
(x) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(y) "SECURITIES ACT" means the Securities Act of 1933, as amended.
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(z) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(aa) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(bb) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
(cc) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
a Stock Appreciation Right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares with respect to
which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees of the Board composed of one (1) or more members (the "Committee").
In the discretion of the Board, the Committee may be composed of two (2) or more
Non-Employee Directors and/or
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Outside Directors. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, (and references in this Plan to
the Board shall thereafter be to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate nine hundred thousand (900,000) shares of the
Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. Shares subject to Stock Appreciation
Rights exercised in accordance with Section 8 of the Plan shall not be available
for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant.
(c) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options and Stock
Appreciation Rights covering more than two hundred fifty thousand (250,000)
shares of the Company's common stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
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(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Option (whether an Incentive
Stock Option or a Nonstatutory Stock Option) may be granted with an exercise
price lower than that set forth in the preceding sentence if such Option is
granted pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii)
at the discretion of the Board or the Committee, at the time of the grant of
the Option, (A) by delivery to the Company of other common stock of the
Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or
to whom the Option is transferred pursuant to subsection 6(d), or (C) in any
other form of legal consideration acceptable to the Board. In the case of
any deferred payment arrangement, interest shall be compounded at least
annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option
shall only be transferable by the Optionee upon such terms and conditions as
are set forth in the Option Agreement for such Nonstatutory Stock Option, as
the Board or the Committee shall determine in its sole discretion. The
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who,
in the event of the death of the Optionee, shall thereafter be entitled to
exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem
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appropriate. The provisions of this subsection 6(e) are subject to any
Option provisions governing the minimum number of shares as to which an
Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability or for Cause), the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionee's
Continuous Status as an Employee, Director or Consultant (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of
the term of the Option as set forth in the Option Agreement. If, at the date
of termination, the Optionee is not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for
issuance under the Plan.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates for Cause, then the Option shall immediately terminate,
and the shares covered by such Option shall revert to and again become
available for issuance under the Plan. "Cause" shall be defined as an act of
embezzlement, fraud, dishonesty, or breach of fiduciary duty to the Company,
a deliberate disregard of the rules of the Company which results in loss,
damage or injury to the Company, any unauthorized disclosure of any of the
secrets or confidential information of the Company, inducing any client or
customer of the Company to break any contract with the Company or inducing
any principal for whom the Company acts as agent to terminate such agency
relations, or engaging in any conduct which constitutes unfair competition
with the Company, or any act which results in Optionee being removed from any
office of the Company by any bank regulatory agency.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as
an Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange
Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the Option Agreement, or (ii) the tenth
(10th) day after the last date on which such exercise would result in such
liability under Section 16(b) of the Exchange Act. Finally, an Optionee's
Option Agreement may also provide that if the exercise of the Option
following the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (other than upon the Optionee's death or disability)
would be prohibited at any time solely because the issuance of shares would
violate the registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of
the Option, or (ii) the expiration of a period of three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant during which the exercise of the Option would not be in violation
of such registration requirements.
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(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of
the term of the Option as set forth in the Option Agreement. If, at the date
of termination, the Optionee is not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event an Optionee's Continuous Status as
an Employee, Director or Consultant terminates as a result of Optionee's
death, the Option may be exercised (to the extent the Optionee was entitled
to exercise the Option as of the date of death) by the Optionee's estate, by
a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the option upon the
Optionee's death pursuant to subsection 6(d), but only within the period
ending on the earlier of (i) the date twelve (12) months following the date
of death (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of such Option as set forth in
the Option Agreement. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become
available for issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and
the shares covered by such Option shall revert to and again become available
for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any unvested shares
so purchased may be subject to a repurchase right in favor of the Company or
to any other restriction the Board determines to be appropriate.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate agreements need not be identical, but each
stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement, but in no event shall the
purchase price be less than eighty-five percent
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(85%) of the stock's Fair Market Value on the date such award is made.
Notwithstanding the foregoing, the Board or the Committee may determine that
eligible participants in the Plan may be awarded stock pursuant to a stock
bonus agreement in consideration for past services actually rendered to the
Company or for its benefit.
(b) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains subject to the terms of the
agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event a Participant's Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of stock held by that person which have not vested as of the
date of termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. Except as
provided in subsection 5(c), no limitation shall exist on the aggregate amount
of cash payments the Company may make under the Plan in connection with the
exercise of a Stock Appreciation Right.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall, except as
specifically set forth in this Section
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8, be subject to the same terms and conditions applicable to the particular
Option grant to which it pertains. Tandem Stock Appreciation Rights will
require the holder to elect between the exercise of the underlying Option for
shares of stock and the surrender, in whole or in part, of such Option for an
appreciation distribution. The appreciation distribution payable on the
exercised Tandem Right shall be in cash (or, if so provided, in an equivalent
number of shares of stock based on Fair Market Value on the date of the
Option surrender) in an amount up to the excess of (A) the Fair Market Value
(on the date of the Option surrender) of the number of shares of stock
covered by that portion of the surrendered Option in which the Optionee is
vested over (B) the aggregate exercise price payable for such vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on
an exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will
be granted independently of any Option and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions
applicable to Nonstatutory Stock Options as set forth in Section 6. They
shall be denominated in share equivalents. The appreciation distribution
payable on the exercised Independent Right shall be not greater than an
amount equal to the excess of (A) the aggregate Fair Market Value (on the
date of the exercise of the Independent Right) of a number of shares of
Company stock equal to the number of share equivalents in which the holder is
vested under such Independent Right, and with respect to which the holder is
exercising the Independent Right on such date, over (B) the aggregate Fair
Market Value (on the date of the grant of the Independent Right) of such
number of shares of Company stock. The appreciation distribution payable on
the exercised Independent Right shall be in cash or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date
of the exercise of the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, (i) the repricing of any outstanding Options and/or
any Stock Appreciation Rights under the Plan and/or (ii) with the consent of the
affected holders of Options and/or Stock Appreciation Rights, the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of stock,
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but having an exercise price per share not less than eighty-five percent
(85%) of the Fair Market Value (one hundred percent (100%) of the Fair Market
Value in the case of an Incentive Stock Option) or, in the case of a 10%
shareholder (as described in subsection 5(b)) receiving a new grant of an
Incentive Stock Option, not less than one hundred ten percent (110%) of the
Fair Market Value) per share of stock on the new grant date. Notwithstanding
the foregoing, the Board or the Committee may grant an Option and/or Stock
Appreciation Right with an exercise price lower than that set forth above if
such Option and/or Stock Appreciation Right is granted as part of a
transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option or Stock Appreciation Right canceled under
this Section 9 shall continue to be counted against the maximum award of Options
and Stock Appreciation Rights permitted to be granted pursuant to subsection
5(c) of the Plan. The repricing of an Option and/or Stock Appreciation Right
under this Section 9, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and/or Stock Appreciation
Right and the grant of a substitute Option and/or Stock Appreciation Right; in
the event of such repricing, both the original and the substituted Options and
Stock Appreciation Rights shall be counted against the maximum awards of Options
and Stock Appreciation Rights permitted to be granted pursuant to subsection
5(c) of the Plan. The provisions of this subsection 9(b) shall be applicable
only to the extent required by Section 162(m) of the Code.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register
under the Securities Act either the Plan, any Stock Award or any stock issued
or issuable pursuant to any such Stock Award. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
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12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e), 7(d) or 8(b), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director or Consultant nor any person to whom a
Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to,
any shares subject to such Stock Award unless and until such person has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without cause the right of the Company's Board of Directors
and/or the Company's shareholders to remove any Director as provided in the
Company's Bylaws and the provisions of the California Corporations Code, or the
right to terminate the relationship of any Consultant subject to the terms of
such Consultant's agreement with the Company or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d),
7(b) or 8(b), as a condition of exercising or acquiring stock under any Stock
Award, (1) to give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
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then applicable securities laws. The Company may, upon advice of counsel to
the Company, place legends on stock certificates issued under the Plan as
such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving
the receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person during any calendar year pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the type(s)
and number of securities and price per share of stock subject to such
outstanding Stock Awards. Such adjustments shall be made by the Board or the
Committee, the determination of which shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated as a "transaction not involving the receipt of consideration by the
Company.)"
(b) In the event of "Change in Control," all outstanding Stock Awards
shall immediately become one hundred percent (100%) vested, and the Board shall
notify all participants that their outstanding Stock Awards shall be fully
exercisable for a period of three (3) months (or such other period of time not
exceeding six (6) months as is determined by the Board at the time of grant)
from the date of such notice, and any unexercised Stock Awards shall terminate
upon the expiration of such period.
"Change in Control" means the occurrence of any of the following events:
(1) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or consolidation
which would result in beneficial owners of the total voting power in the
election of directors represented by the voting securities ("Voting Securities")
of the Company outstanding immediately prior thereto continuing to beneficially
own securities representing (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the total
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Voting Securities of the Company, or of such surviving entity, outstanding
immediately after such merger or consolidation;
(2) the shareholders of the Company approve a plan of liquidation or
dissolution of the Company or approve an agreement for the sale, lease, exchange
or other transfer or disposition by the Company of all or substantially all of
the Company's assets;
(3) any person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than (A) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or (B) a corporation
owned directly or indirectly by the shareholders of the Company in substantially
the same proportions as their beneficial ownership of stock in the Company, is
or becomes the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, of the securities of the Company
representing fifty percent (50%) or more of the Voting Securities; or
(4) (A) (1) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in beneficial owners of Voting Securities
of the Company outstanding immediately prior thereto continuing to
beneficially own securities representing (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more than
twenty-five percent (25%) of the total Voting Securities of the Company, or
of such surviving entity, outstanding immediately after such merger or
consolidation, or (2) any person (as such term is used in Sections 13(d) or
14(d) of the Exchange Act), other than (a) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or (b) a
corporation owned directly or indirectly by the shareholders of Company in
substantially the same proportions as their ownership of stock in the
Company, is or becomes the beneficial owner (within the meaning or Rule 13d-3
under the Exchange Act), directly or indirectly, of the securities of the
Company representing twenty-five percent (25%) or more of the Voting
Securities of such corporation, and
(B) within twelve (12) months of the occurrence of such event,
a change in the composition of the Company's Board occurs as a result of
which sixty percent (60%) or fewer of the directors are Incumbent Directors.
"Incumbent Directors" shall mean directors who either
(A) are directors of the Company as of the date hereof;
(B) are elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the directors of the Company
who are Incumbent Directors described in (A) above at the time of such
election or nomination; or
(C) are elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the directors of the Company
who are Incumbent Directors described in (A) or (B) above at the time of such
election or nomination.
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Notwithstanding the foregoing, "Incumbent Directors" shall not include an
individual whose election or nomination to the Board occurs in order to
provide representation for a person or group of related persons who have
initiated or encouraged an actual or threatened proxy contest relating to the
election of directors of the Company.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding Stock Awards granted under the Plan. However,
except as provided in paragraph 13 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for shareholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on December 18, 2006 which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the shareholders of the Company, whichever is earlier. No Stock Awards may
be granted under the Plan while the Plan is suspended or after it is terminated.
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(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the written consent of the person to whom the Stock Award was
granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the shareholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board, and, if required, an appropriate permit has been issued by the
Commissioner of Corporations of the State of California.
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