EXHIBIT 10.194
THE CHARLES SCHWAB CORPORATION
1992 STOCK INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into as of _____________________ between
THE CHARLES SCHWAB CORPORATION, a Delaware corporation (the "Company"), and
_____________________ (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Board has adopted and the stockholders of the Company
have approved The Charles Schwab Corporation 1992 Stock Incentive Plan, as
amended (the "Plan") in order to provide selected Key Employees and
Non-Employee Directors with an opportunity to acquire Common Shares; and
WHEREAS, the Committee has determined that the Optionee is a Key
Employee and that it would be in the best interests of the Company and its
stockholders to grant the stock option described in this Agreement (the
"Option") to the Optionee as an inducement to enter into or remain in the
service of the Company or its subsidiaries and as an incentive for
extraordinary efforts during such service:
NOW, THEREFORE, the Optionee and the Company agree to the
provisions set forth in this Agreement. The Optionee signifies agreement
with all of the terms and conditions of this Agreement by failing to provide
written objection to the Company to any of the terms hereunder within 30 days
of receipt of this Agreement, and in any event by exercising an Option
granted hereunder.
SECTION 1. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company
hereby grants to the Optionee the option to purchase _____ Common Shares for
the amount of $_____ per Common Share (the "Exercise Price"), which is agreed
to be 100% of the Fair Market Value thereof on the Date of Grant. The number
of Common Shares subject to this Option and the Exercise Price shall be
subject to adjustment under certain limited circumstances as provided in
Article 10 of the Plan.
(b) 1992 STOCK INCENTIVE PLAN. This Option is granted pursuant to
the Plan, the provisions of which are incorporated into this Agreement by
reference, and a copy of which is available upon request at no charge to the
Optionee from the Company. In the event of any
inconsistency between the provisions of the Plan and the provisions of this
Agreement, the provisions of the Plan shall prevail.
(c) TAX TREATMENT. This Option is intended to qualify as an
incentive stock option described in Section 422(b) of the Code.
(d) EXPIRATION DATE. Notwithstanding any other provision
contained herein, this Option shall expire not later than the date
immediately preceding the tenth anniversary of the Date of Grant.
SECTION 2. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement or as permitted by
the Plan, this Option, and any interest therein, shall not be transferred,
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to sale under execution, attachment or
similar process.
SECTION 3. RIGHT TO EXERCISE OPTION.
(a) VESTING. This Option shall become exercisable by the Optionee
with respect to the total number of Common Shares subject to this Option as
set forth under Section 1(a) above (the "Total Award Common Shares"), subject
to the continued employment of the Optionee by the Company or its
subsidiaries on each date either set forth below, and subject to the
provisions of Section 3(e) hereof, in annual increments of the Total Award
Common Shares beginning on the first anniversary of the Date of Grant, such
that (i) no portion of this Option will be exercisable prior to such first
anniversary of the Date of Grant; (ii) upon and after such first anniversary
of the Date of Grant, the Optionee may purchase up to twenty-five percent
(25%) of the Total Award Common Shares, provided the optionee has been
continually employed by the Company or its subsidiaries since the date of
grant; (iii) upon and after the second, third and fourth anniversaries of
the Date of Grant, respectively, the Optionee may purchase an additional
twenty-five percent (25%) of the Total Award Common Shares, provided in each
case that the Optionee has been continually employed by the Company or its
subsidiaries since the Date of Grant.
(b) MINIMUM NUMBER OF SHARES. This Option shall be exercisable
for at least 100 Common Shares (without regard to adjustments to the number
of Common Shares subject to this Option pursuant to Article 10 of the Plan)
or, if less, (i) the number of shares with respect to which this Option has
become vested under Section 3(a) above, or (ii) all of the remaining Common
Shares subject to this Option.
(c) FULL VESTING ON CHANGE IN CONTROL. Notwithstanding
subparagraph (a) hereof, this Option shall become fully exercisable as to the
Total Award Common Shares immediately preceding any Change in Control with
respect to the Company. In the event that the
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Committee determines that a Change in Control is likely to occur, the Company
shall so advise the Optionee, and the provisions of this subparagraph (c)
shall take effect as of the date ten (10) days prior to the anticipated date
of such Change in Control.
(d) ACCELERATED VESTING IN CERTAIN CASES. Notwithstanding
subparagraph (a) hereof, if the Optionee terminates employment with the
Company and its subsidiaries on account of death or Disability, all options
granted hereunder shall become fully exerciseable. Moreover, if the Optionee
terminates employment with the Company and its subsidiaries on account of
Retirement, all options granted hereunder shall become fully exerciseable,
but only if such Retirement occurs at least two (2) years after the date of
grant.
(e) VESTING CONTINGENT ON SATISFACTORY PERFORMANCE.
Notwithstanding subparagraph (a) hereof, the continued accrual of vesting
pursuant to subparagraph (a) is contingent upon the Optionee's satisfactory
job performance, and the Company may, in its sole discretion, upon notice to
the Optionee suspend or delay the vesting of Options hereunder for any period
of time in the event that the Company determines, within its sole discretion,
that the Optionee's performance is unsatisfactory.
(f) SUSPENSION OF VESTING DURING CERTAIN LEAVES OF ABSENCE.
Notwithstanding subparagraph (a) hereof, the continued accrual of vesting
pursuant to subparagraph (a) shall be suspended during the period of time in
which the Optionee is on a leave of absence of more than six months for any
reason other than (i) medical reasons, (ii) pregnancy disability, (iii) a
leave qualifying under the Family and Medical Leave Act, or (iv) workers'
compensation.
SECTION 4. EXERCISE OF OPTION.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's
representative may exercise this Option by giving written notice to the
Company (or its designee) pursuant to Section 9(d). The notice shall specify
the election to exercise this Option, the date of exercise, the number of
Common Shares for which it is being exercised and the form of payment. The
notice shall be signed by the person or persons exercising this Option. In
the event that this Option is being exercised by the representative of the
Optionee, the notice shall be accompanied by proof satisfactory to the
Company of the representative's right to exercise this Option. The Purchase
Price for Common Shares shall be paid in a form that conforms to Sections 6.1
through 6.3 of the Plan at the time such notice is given.
(b) ISSUANCE OF SHARES. After receiving a proper notice of
exercise, the Company shall cause to be issued a certificate or certificates
for the Common Shares so purchased, registered in the name of the person
exercising this Option. The Company shall cause such certificate or
certificates to be delivered to or upon the order of the person exercising
this Option.
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SECTION 5. TERM.
(a) BASIC TERM. This Option shall in any event expire on the date
specified in Section 1(d).
(b) TERMINATION OF EMPLOYMENT. Subject only to the provisions of
Section 3(d), upon the Optionee's termination of employment with the Company
and its subsidiaries for any reason, whether as a result of any voluntary or
involuntary event of termination of employment (including a termination of
employment as may be provided for or determined under an employment contract,
if any, entered into between the Company or its subsidiary and the Optionee)
(each, a "Termination Event"), no unvested portion of the Total Award Common
Shares thereafter shall vest or become exercisable. With respect to the
vested or exercisable portion of the Total Award Common Shares as of the date
of such a Termination Event, this Option shall expire on the earlier of (i)
the expiration date specified in Section 1(d) or (ii) whichever of the
following is applicable: (A) in the case of a Termination Event resulting
from death or Disability, the date one year following such Termination Event;
or (B) in all other cases, the date three (3) months following such
Termination Event.
(c) DIVESTMENT OF OPTIONS. Notwithstanding anything to the
contrary contained herein, this Option shall immediately become forfeited and
expire in the event that the Company terminates the Optionee's employment on
account of conduct inimical to the best interests of the Company, including,
without limitation, conduct constituting a violation of law or Company
policy, fraud, theft, conflict of interest, dishonesty or harassment. The
determination whether the Optionee's employment has been terminated on
account of conduct inimical to the best interests of the Company shall be
made by the Company in its sole discretion.
SECTION 6. LEGALITY OF INITIAL ISSUANCE.
No Common Shares shall be issued upon the exercise of this Option
unless and until the Company has determined that:
(a) A registration statement for the Common Shares is effective
under the Securities Act or an exemption from the registration
requirements thereof has been perfected;
(b) Any applicable listing requirement of any stock exchange on
which Common Shares are listed has been satisfied; and
(c) Any other applicable provisions of state or federal law have
been satisfied.
SECTION 7. NO REGISTRATION RIGHTS.
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The Company may, but shall not be obligated to, register or qualify
the Common Shares for resale or other disposition by the Optionee under the
Securities Act or any other applicable law.
SECTION 8. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of
Common Shares under the Plan have been registered under the Securities Act or
have been registered or qualified under the securities laws of any state, the
Company may impose restrictions upon the sale, pledge or other transfer of
such Common Shares (including the placement of appropriate legends on stock
certificates) if, in the judgment of the Company and its counsel, such
restrictions are necessary or desirable in order to achieve compliance with
the provisions of the Securities Act, the securities laws of any state or any
other law.
(b) INVESTMENT INTENT AT EXERCISE. If the Common Shares under the
Plan are not registered under the Securities Act but an exemption is
available which requires an investment representation or other
representation, the Optionee shall represent and agree at the time of
exercise that the Common Shares being acquired upon exercising this Option
are being acquired for investment, and not with a view to the sale or
distribution thereof, and shall make such other representations as are deemed
necessary or appropriate by the Company and its counsel.
(c) ADMINISTRATION. Any determination by the Company and its
counsel in connection with any of the matters set forth in this Section 8
shall be conclusive and binding on the Optionee and all other persons.
SECTION 9. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. To the extent required by applicable
federal, state, local or foreign law the Optionee shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise by reason of the exercise of an Option hereunder and
no Option may be exercised unless such obligation is satisfied.
(b) RIGHTS AS A STOCKHOLDER. Neither the Optionee nor the
Optionee's representative shall have any rights as a stockholder with respect
to any Common Shares subject to this Option until certificates for such
Common Shares have been issued in the name of the Optionee or the Optionee's
representative.
(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be
construed as giving the Optionee the right to be retained as an employee of
the Company or its subsidiaries. The Company reserves the right to terminate
the Optionee's employment at any time for any reason, subject only to the
terms of any written employment contract entered into between the Company and
the Optionee.
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(d) NOTICE. Any notice required by the terms of this Agreement
shall be given in writing and shall be deemed effective upon personal
delivery or upon deposit with the appropriate postal service, by registered
or certified mail with postage and fees prepaid and addressed to the party
entitled to such notice at the address shown below such party's signature on
this Agreement, or at such other address as such party may designate by ten
(10) days advance written notice to the other party to this Agreement.
Notwithstanding the foregoing, no notice of exercise, as required by Section
4(a), shall be effective until actual receipt thereof by the Company or its
designee.
(e) ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire agreement between the parties hereto with regard to the subject matter
hereof; provided, however, that in the event of any inconsistency or conflict
between any provision hereof and the terms of the Plan, the terms of the Plan
shall control.
(f) CHOICE OF LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such
laws are applied to contracts entered into and performed in such State.
SECTION 10. DEFINITIONS.
(a) Capitalized terms defined in the Plan shall have the same
meaning when used in this Agreement.
(b) "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events after the effective date of the Plan as set out in Section
15.1 of the Plan:
(1) A change in control required to be reported pursuant to
Item 6(e) of Schedule 14A of Regulation 14A under the Securities Exchange Act
of 1934, as amended (the "Exchange Act");
(2) A change in the composition of the Company's Board of
Directors (the "Board"), as a result of which fewer than two-thirds of the
incumbent directors are directors who either (i) had been directors of the
Company 24 months prior to such change or (ii) were elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of
the directors who had been directors of the Company 24 months prior to such
change and who were still in office at the time of the election or nomination;
(3) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 20 percent or more of
the combined voting power of the Company's then outstanding securities
ordinarily (and apart from rights accruing under special circumstances)
having the right to vote at elections of directors (the "Base Capital
Stock"); provided, however, that any change in the relative beneficial
ownership of securities of any person resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities, shall be
disregarded until such
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person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company.
(c) "COMMON SHARE" shall mean one share of the common stock of the
Company.
(d) "DATE OF GRANT" shall mean the date of this Agreement, which
is the date first written above.
(e) "FAIR MARKET VALUE" shall mean the market price of a Common
Share, determined by the Committee as follows:
(1) If the Common Share was traded on a stock exchange on the
date in question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite-transactions report for such date;
(2) If the Common Share was traded over-the-counter on the
date in question and was classified as a national market issue, then the Fair
Market Value shall be equal to the last transaction price quoted by the
NASDAQ system for such date;
(3) If the Common Share was traded over-the-counter on the
date in question but was not classified as a national market issue, then the
Fair Market Value shall be equal to the mean between the last reported
representative bid and asked prices quoted by the NASDAQ system for such
date; and
(4) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good faith on
such basis as it deems appropriate.
(f) "PURCHASE PRICE" shall mean the Exercise Price multiplied by
the number of Common Shares with respect to which this Option is being
exercised.
(g) "RETIREMENT" shall mean a termination of employment of the
Optionee occurring at any time after the Optionee (i) has attained fifty (50)
years of age, and (ii) completed seven (7) years of service, as determined
pursuant to the terms of the Charles Schwab Profit Sharing and Employee Stock
Ownership Plan.
(h) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
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