STOCK OPTION AGREEMENT
(Stepped Vesting)
This Stock Option Agreement ("Agreement") is made and entered into as of
the Date of Grant indicated below by and between XXXXX FINANCIAL, a
California corporation (the "Company"), and the person named below as
Employee.
WHEREAS, Employee is an employee of the Company, and
WHEREAS, the compensation committee of the Board of Directors of the
Company (the "Committee") has approved the grant to Employee of an option to
purchase shares of the common stock, no par value, of the Company (the
"Common Stock"), on the other terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:
1. GRANT OF OPTION; CERTAIN TERMS AND CONDITIONS. The Company hereby
grants to Employee, and Employee hereby accepts, as of the Date of Grant, an
option to purchase the number of shares of Common Stock indicated below (the
"Option Shares") at the Exercise Price per share indicated below, which
option shall expire at 5:00 o'clock p.m., Pacific Time, on the Expiration
Date indicated below and shall be subject to all of the terms and conditions
set forth in this Agreement (the "Option"). The Option shall become
exercisable to purchase ("vest with respect to") the Option Shares as
indicated below.
Employee:
Date of Grant: October 26, 1996
Number of share purchasable:
Exercise Price per share: $19.00
Vesting Period: 20% upon Date of Grant and 20% per year on
each anniversary of Date of Grant.
Expiration Date: October 25, 2006
The Option is not intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code (an "Incentive Stock Option").
2. TERMINATION OF OPTION.
(a) Termination of Employment.
(i) TERMINATION WITHIN ONE YEAR AFTER CHANGE OF CONTROL. In the
event that Employee shall cease to be an employee of the Company or any of
its subsidiaries (such event shall be referred to herein as the "Termination"
of Employee's "Employment") for any reason, or for no reason, within one year
after a Change of Control (as hereinafter defined), then the Option shall
terminate upon the earlier of the Expiration Date or the first anniversary of
the date of such Termination of Employment. "Change of Control" shall mean
the first to occur of the following events:
(X) any date upon which the directors of the Company who were nominated
by the Board of Directors (the "Board") for election as directors or
appointed by the Board cease to constitute a majority of the directors of
the Company;
(Y) the date of the first public announcement that any person or
entity, together with all Affiliates and Associates (as such capitalized
terms are defined in Rule 12b-2 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) of such person or entity,
shall have become the Beneficial Owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of voting securities of the Company representing 50%
or more of the voting power of the Company (a "50% Stockholder"), provided,
however, that the terms "person" and "entity," as used in this clause (Y),
shall not include (1) the Company or any of its subsidiaries, (2) any
employee benefit plan of the Company or any of its subsidiaries including
the Company's Employee Stock Ownership Plan, (3) any entity holding voting
securities of the Company for or pursuant to the terms of any such plan or
(4) any person or entity if the transaction that resulted in such person or
entity becoming a 50% Stockholder was approved in advance by the Board; or
(Z) a reorganization, merger or consolidation of the Company (other
than an reorganization, merger or consolidation the sole purpose of which is
to change the Company's domicile solely within the United States) the
consummation of which results in the outstanding securities of any class
then subject to the Option being exchanged for or converted into cash,
property and/or a different kind of securities.
2
(ii) RETIREMENT. If Employee's Employment is Terminated by reason of
Employee's retirement in accordance with the Company's then-current retirement
policy ("Retirement"), and a Change of Control shall not have occurred within
one year prior thereto, then the Option shall terminate upon the earlier of the
Expiration Date or the first anniversary of the date of such Retirement.
(iii) DEATH OR PERMANENT DISABILITY. If Employee's Employment is
Terminated by reason of the death or Permanent Disability (as hereinafter
defined) of Employee, and a Change of Control shall not have occurred within
one year prior thereto, then the Option shall terminate upon the earlier of
the Expiration Date or the first anniversary of the date of such Termination
of Employment. "Permanent Disability" shall mean the inability to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than 12 months. Employee shall not be deemed to have a Permanent
Disability until proof of the existence thereof shall have been furnished to
the Board in such form and manner, and at such times, as the Board may
require. Any determination by the Board that Employee does not have a
Permanent Disability shall be final and binding upon the Company and Employee.
(iv) OTHER TERMINATION. If Employee's Employment is Terminated
for no reason, or for any reason other than Retirement, death or Permanent
Disability, and a Change of Control shall not have occurred within one year
prior thereto, then the Option shall terminate upon the earlier of the
Expiration Date or 30 days after the date of such Termination of Employment.
(b) DEATH FOLLOWING TERMINATION OF EMPLOYMENT. Notwithstanding anything
to the contrary in this Agreement, if Employee shall die at any time after
the Termination of his or her Employment and prior to the termination of this
Option, then the Option shall terminate on the earlier of the Expiration Date
or the first anniversary of the date of such death.
(c) OTHER EVENTS CAUSING TERMINATION OF OPTION. Notwithstanding anything
to the contrary in this Agreement, the Option shall terminate upon the
consummation of any of the following events, or, if later, the thirtieth day
following the first date upon which such event shall have been approved by
both the Board and the shareholders of the Company:
(i) the dissolution of the Company; or
(ii) a sale of substantially all of the property and assets of the
Company, unless the terms of such sale shall provide otherwise.
3. ADJUSTMENTS. In the event that the outstanding securities of the
class then subject to the Option are increased, decreased or exchanged for or
converted into cash, property and/or a different number or kind of
securities, or cash, property and/or
3
securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, reclassification, dividend (other than a regular, quarterly
cash dividend) or other distribution, stock split, reverse stock split,
spin-off or the like, or in the event that substantially all of the property
and assets of the Company are sold, then, unless such event shall cause the
Option to terminate pursuant to Section 2(c) hereof, the Committee shall make
appropriate and proportionate adjustments in the number and type of shares or
other securities or cash or other property that may thereafter be acquired
upon the exercise of the Option; provided, however, that any such adjustments
in the Option shall be made without changing the aggregate Exercise Price of
the then unexercised portion of the Option.
4. EXERCISE. The Option shall be exercisable during Employee's lifetime
only by Employee or by his or her guardian or legal representative, and after
Employee's death only by the person or entity entitled to do so under
Employee's last will and testament or applicable intestate law. The Option
may only be exercised by the delivery to the Company of a written notice of
such exercise, which notice shall specify the number of Option Shares to be
purchased (the "Purchased Shares") and the aggregate Exercise Price for such
shares (the "Exercise Notice"), together with payment in full of such
aggregate Exercise Price in cash or by check payable to the Company or, in
whole or in part:
(a) by the delivery to the Company of a promissory note in a form
and amount satisfactory to the Committee; or
(b) by the delivery to the Company of a certificate or certificates
representing shares of Common Stock which have been held by Employee for at
least six months, duly endorsed or accompanied by a duly executed stock
powers, which delivery effectively transfers to the Company good and valid
title to such shares, free and clear of any pledge, commitment, lien, claim
or other encumbrance (such shares to be valued on the basis of the aggregate
fair market value (as determined by the Committee in their good faith and
reasonable judgment) thereof on the date of such exercise).
5. PAYMENT OF WITHHOLDING TAXES. If the Company becomes obligated to
withhold an amount on account of any tax imposed as a result of the exercise
of the Option, including, without limitation, any federal, state, local or
other income tax, or any F.I.C.A., state disability insurance tax or other
employment tax, then Employee shall, on the first day upon which the Company
becomes obligated to pay such amount to the appropriate taxing authority, pay
such amount to the Company in cash or by check payable to the Company, or, in
whole or in part, by the delivery to the Company of a certificate or
certificates representing shares of Common Stock, duly endorsed or
accompanied by duly executed stock powers, which delivery effectively
transfers to the Company good and valid title to such shares, free and clear
of any pledge, commitment, lien, claim or other encumbrance or by instructing
the Company to withhold and retain that number of shares otherwise issuable
upon exercise of the Option having an aggregate fair market value (as
determined by the Committee in their good faith and reasonable judgment)
equal to such amount.
4
6. NOTICES. All notices and other communications required or permitted
to be given pursuant to this Agreement shall be in writing and shall be
deemed given if delivered personally or five days after mailing by certified
or registered mail, postage prepaid, return receipt requested, to the Company
at 000 Xxxxx Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000, Attention:
Chief Financial Officer, or to Employee at the address set forth beneath his
or her signature on the signature page hereto, or at such other addresses as
they may designate by written notice in the manner aforesaid.
7. STOCK EXCHANGE REQUIREMENTS; APPLICABLE LAWS. Notwithstanding
anything to the contrary in this Agreement, the Option may not be exercised
and no certificate representing all or any part of the shares issuable
hereunder shall be issued or delivered, if (a) such shares have not been
admitted to listing upon official notice of issuance on each stock exchange
upon which shares of that class are then listed or (b) in the opinion of
counsel to the Company, such exercisability, issuance or delivery would cause
the Company to be in violation of or to incur liability under any federal,
state or other securities law, or any requirement of any stock exchange
listing agreement to which the Company is a party, or any other requirement
or law or of any administrative or regulatory body having jurisdiction over
the Company.
8. NONTRANSFERABILITY. Neither the Option nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner other than by will or the laws of descent and
distribution.
9. PLAN. The Option is being awarded pursuant to the Plan, as in effect
on the Date of Grant, and is subject to all the terms and conditions of the
Plan, as the same may be amended from time to time provided, however, that no
such amendment shall deprive Employee, without his or her consent, of the
Option or any of Employee's rights under this Agreement. The interpretation
and construction by the Committee of the Plan, this Agreement and such rules
and regulations as may be adopted by the Committee for the purpose of
administering the Plan shall be final and binding upon the Employee. Until
the Option shall be exercised or be forfeited, the Company shall, upon
written request therefor, send a copy of the Plan, in its current form, to
the holder of record of the Option.
10. SHAREHOLDER RIGHTS. No person or entity shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of any Option
Shares until the Option shall have been duly exercised to purchase such
Option Shares in accordance with the provisions of this Agreement.
11. EMPLOYMENT RIGHTS. No provision of this Agreement or of the Option
granted hereunder shall (a) confer upon Employee any right to continue in the
employ of the Company or any of its subsidiaries, (b) affect the right of the
Company and each of its subsidiaries to terminate the employment of Employee,
with or without cause, or (c) confer upon Employee any right to participate
in any employee welfare or benefit plan or other program of the Company or
any of its subsidiaries other than participation in the Plan pursuant to this
Agreement. Employee hereby acknowledges and agrees that the Company and each
of its subsidiaries may terminate the employment of Employee at any
5
time and for any reason, or for no reason, unless Employee and the Company or
such subsidiary are parties to a written employment agreement that expressly
provides otherwise.
12. GOVERNING LAW. This Agreement and the Option granted hereunder
shall be governed by and construed and enforced in accordance with the laws
of the State of California.
13. FINANCIAL STATEMENTS. So long as this Option is outstanding, the
Company shall provide annual audited financial statements to the Employee.
IN WITNESS WHEREOF, the Company and Employee have duly executed this
Agreement as of the Date of Grant.
XXXXX FINANCIAL
By:
----------------------------
Title:
EMPLOYEE
-------------------------------
Signature
-------------------------------
Xxxxxx Xxxxxxx
-------------------------------
Xxxx, Xxxxx and Zip Code
-------------------------------
Social Security Number
6
