SJW CORP. STOCK OPTION DIVIDEND EQUIVALENT RIGHTS AGREEMENT
EXHIBIT
10.16
STOCK
OPTION
DIVIDEND EQUIVALENT RIGHTS
AGREEMENT
RECITALS
A. The
Board has adopted the Plan for the purpose of retaining the services of selected
Employees and non-employee members of the Board (or the board of directors of
any Parent or Subsidiary).
B. Participant
has this day been granted an Option under the Plan which provides for dividend
equivalent rights with respect to the shares of Common Stock subject to that
Option.
C. The
purpose of this Agreement is to set forth the terms and conditions governing
those dividend equivalent rights.
D. All
capitalized terms in this Agreement shall have the meaning assigned to them in
the Plan and the Notice of Grant and Stock Option Agreement evidencing the
granted Option (collectively, the "Option Agreement").
NOW, THEREFORE, it is hereby
agreed as follows:
1. An
Option Deferred Stock Account with respect to the Option will be established for
the Participant on the books and records of the Corporation.
2. Each
time a dividend is paid on the Corporation’s outstanding shares of Common Stock
after the Grant Date, the Option Deferred Stock Account will be credited with a
dollar amount equal to the amount of that dividend paid per share multiplied by
the number of shares of Common Stock at the time subject to the Option (plus the
number of shares previously credited to the Option Deferred Stock Account
pursuant to the dividend equivalent rights hereunder) as of the record date for
the dividend; provided,
however, that no further amounts shall be credited after the earlier of the fourth
anniversary of the Grant Date or the first exercise of the Option.
3. As
of the first business day in January each year, the cash dividend amounts
credited to the Option Deferred Stock Account during the immediately preceding
calendar year shall be converted into a book entry of an additional
number of shares of Common Stock determined by dividing (i) those cash dividend
equivalent amounts by (ii) the average of the Fair Market Value per share of
Common Stock on each of the dates in the immediately preceding calendar year on
which those dividend amounts were credited to the Option Deferred Stock
Account.
4. The
shares credited to the Option Deferred Stock Account will vest at the same time
and in the same manner as the Option Shares to which they are attributable vest.
The shares which so vest shall be distributed to the Participant in the form of
actual shares of Common Stock issued under the Plan on the earlier of
the following dates (the “Distribution Date”): (i) the fourth anniversary of the
Grant Date of the Option or (ii) the date of the Participant’s Separation from
Service or as soon after such Distribution Date as administratively practicable,
but in no event later than the end of the calendar year in which the
Distribution Date occurs or (if later) the fifteenth day of the third calendar
month following such date. Such payment shall be subject to the Corporation’s
collection of all applicable withholding taxes. In no event shall any shares of
Common Stock credited to the Option Deferred Stock Account be distributed to the
Participant if and to the extent those shares do not vest in accordance with the
foregoing provisions.
5. Notwithstanding
any provision to the contrary in the Plan, the Option Agreement or this
Agreement, no distribution which becomes due and payable hereunder by reason of
the Participant’s Separation from Service shall be made to the Participant prior
to the earlier of (i)
the first day of the seventh (7th) month following the date of
such Separation from Service or (ii) the date of his or her death,
if the Participant is a Specified Employee at the time of such
Separation from Service and such
delayed commencement is otherwise required in order to avoid a prohibited
distribution under Section 409A(a)(2) of the Internal Revenue Code (the
“Code”). Upon the expiration of the applicable deferral period, all
distributions deferred pursuant to this subparagraph shall be paid in a lump sum
to the Participant.
6. For
purposes of this Agreement, the following definitions shall be
in effect:
(i) Participant
shall be deemed to be an Employee
for so long as he or she is in the employ of at least one member of the Employer
Group, subject to the control and direction of the employer entity as to both
the work to be performed and the manner and method of performance.
(ii) Employer
Group means (i) the Corporation and (ii) each of the other members of the
controlled group that includes the Corporation, as determined in accordance with
Sections 414(b) and (c) of the Code, except that in applying Sections 1563(1),
(2) and (3) for purposes of determining the controlled group of corporations
under Section 414(b), the phrase “at least 50 percent” shall be used instead of
“at least 80 percent” each place the latter phrase appears in such sections and
in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of
determining trades or businesses that are under common control for purposes of
Section 414(c), the phrase “at least 50 percent” shall be used instead of “at
least 80 percent” each place the latter phrase appears in
Section 1.4.14(c)-2 of the Treasury Regulations.
(iii) Separation from
Service means the Participant’s cessation of Employee status by reason of
his or her death, retirement or termination of employment. The Participant shall
be deemed to have terminated employment for such purpose at such time as the
level of his or her bona fide services to be performed as an Employee (or
non-employee consultant) permanently decreases to a level that is not more than
twenty percent (20%) of the average level of services he or she rendered as an
Employee during the immediately preceding thirty-six (36) months (or such
shorter period for which he or she may have rendered such service). Any such
determination as to Separation from Service, however, shall be made in
accordance with the applicable standards of the Treasury Regulations issued
under Code Section 409A. In addition to the foregoing, a Separation from Service
will not be deemed to have occurred while an Employee is on military leave, sick
leave or other bona fide leave of absence if the period of such leave does not
exceed six (6) months or any longer period for which such Employee’s right to
reemployment with one or more members of the Employer Group is provided either
by statute or contract; provided,
however, that in the event of an Employee’s leave of absence due to any
medically determinable physical or mental impairment that can be expected to
result in death or to last for a continuous period of not less than six (6)
months and that causes such individual to be unable to perform his or her duties
as an Employee, no Separation from Service shall be deemed to occur during the
first twenty-nine (29) months of such leave. If the period of leave
exceeds six (6) months (or twenty-nine (29) months in the event of disability as
indicated above) and the Employee’s right to reemployment is not provided either
by statute or contract, then such Employee will be deemed to have a Separation
from Service on the first day immediately following the expiration of such six
(6)-month or twenty-nine (29)-month period.
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(iv) Specified
Employee means a “key employee” (within the meaning of that term under
Code Section 416(i)), as determined by the Executive Compensation Committee of
the Board in accordance with the applicable standards of Code Section 409A and
the Treasury Regulations thereunder and applied on a consistent basis to all
non-qualified deferred compensation plans of the Employer Group subject to Code
Section 409A. The Specified Employees shall be identified on December
31 of each calendar year and shall have that status or the twelve (12)-month
period beginning on April 1 of the following calendar year.
7. This
Agreement and the Dividend Equivalent Rights evidenced hereby are made and
granted pursuant to the Plan and are in all respects limited by and subject to
the terms of the Plan and the Option Agreement.
IN WITNESS WHEREOF, the
parties have executed this Agreement as of the _______ day of _______________,
2008.
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By:
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Title:
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PARTICIPANT
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