EXHIBIT A
SJW CORP.
STOCK OPTION 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. Optionee is to render valuable services to the
Corporation, and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection
with the Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the
meaning assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to
Optionee, as of the Grant Date, an option to purchase up to the
number of Option Shares specified in the Grant Notice at the
Exercise Price. The Option Shares shall be purchasable from
time to time during the option term specified in Paragraph 2, as
set forth herein.
2. Option Term. This option shall have a maximum term
of ten (10) years measured from the Grant Date and shall
accordingly expire at the close of business on the Expiration
Date, unless sooner terminated in accordance with Paragraph 5 or
6.
3. Limited Transferability. This option shall be
neither transferable nor assignable by Optionee other than by
will or the laws of descent and distribution following
Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee. However, Optionee may designate one
or more persons as the beneficiary or beneficiaries of this
option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or
beneficiaries upon the Optionee's death while holding this
option. Such beneficiary or beneficiaries shall take the
transferred option subject to all the terms and conditions of
this Agreement, including (without limitation) the limited time
period during which this option may, pursuant to Paragraph 5, be
exercised following Optionee's death.
4. Dates of Exercise. This option shall become
exercisable for the Option Shares in one or more installments as
specified in the Grant Notice. As the option becomes
exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the
accumulated installments until the Expiration Date or sooner
termination of the option term under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date should any of the
following provisions become applicable:
(a) Should Optionee cease to remain in Service for
any reason (other than death, Disability, Normal Retirement or
Good Cause) while this option is outstanding, then Optionee
shall have a period of ninety (90) days (commencing with the
date of such cessation of Service) during which to exercise this
option, but in no event shall this option be exercisable at any
time after the Expiration Date.
(b) Should Optionee die while this option is
outstanding, then the personal representative of Optionee's
estate or the person or persons to whom the option is
transferred pursuant to Optionee's will or the laws of descent
and distribution following Optionee's death shall have the right
to exercise this option. However, if Optionee dies while
holding this option and has an effective beneficiary designation
in effect for this option at the time of his or her death, then
the designated beneficiary or beneficiaries shall have the
exclusive right to exercise this option following Optionee's
death. Any such right to exercise this option shall lapse, and
this option shall cease to be outstanding, upon the earlier of
(i) the expiration of the four (4)-year period measured from the
date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of
Disability or Normal Retirement while this option is
outstanding, then Optionee shall have a period of four (4) years
(commencing with the date of such cessation of Service) during
which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the
aggregate for more than the number of Option Shares (if any) in
which Optionee is, at the time of Optionee's cessation of
Service, vested pursuant to the Vesting Schedule specified in
the Grant Notice, provided that (i) this shall be subject to the
special vesting acceleration provisions of Xxxxxxxxx 0, (xx) if
termination occurs by reason of Normal Retirement, then during
the limited period of post-service exercisability as set forth
in Paragraph (c) above, the option will continue to vest as if
the Optionee continued in Service during such period, and (iii)
if termination occurs by reason of Death or Disability, then
option will vest automatically upon such termination. Upon the
expiration of such limited exercise period, this option shall
terminate and cease to be outstanding for any exercisable Option
Shares for which the option has not been exercised.
(e) Should Optionee's Service be terminated for
Good Cause or should Optionee otherwise engage in any misconduct
which could result in a termination for Good Cause while this
option is outstanding, then this option shall terminate
immediately and cease to remain outstanding.
6. Special Acceleration of Option.
(a) This option, to the extent outstanding at the
time of a Change in Control, but not otherwise fully
exercisable, shall automatically accelerate so that this option
shall, immediately prior to the effective date of such Change in
Control, become exercisable for all of the Option Shares at the
time subject to this option and may be exercised for any or all
of those Option Shares as fully vested shares of Common Stock.
However, this option shall not become exercisable on such an
accelerated basis, if and to the extent this option is to be
assumed by the successor corporation (or parent thereof) or
substituted with equivalent options, except pursuant to
paragraph (b), below.
(b) In the event of a Qualifying Termination
following a Change in Control pursuant to which this option is
to be assumed by the successor corporation (or parent thereof)
and substituted with equivalent options, the Option, to the
extent outstanding at the time of such Qualifying Termination
but not otherwise fully exercisable, shall automatically
accelerate so that the Option shall become immediately
exercisable for all the Option Shares at the time subject to the
Option and may be exercised for any or all of those Option
Shares as fully vested shares.
(c) Immediately following the Change in Control,
this option shall terminate and cease to be outstanding, except
to the extent assumed by the successor corporation (or parent
thereof) or otherwise continued in effect pursuant to the terms
of the Change in Control transaction.
(d) If this option is assumed in connection with a
Change in Control or otherwise continued in effect, then this
option shall be appropriately adjusted, immediately after such
Change in Control, to apply to the number and class of
securities which would have been issuable to Optionee in
consummation of such Change in Control had the option been
exercised immediately prior to such Change in Control, and
appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the
same. To the extent the actual holders of the Corporation's
outstanding Common Stock receive cash consideration for their
Common Stock in consummation of the Change in Control, the
successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common
stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in
Control.
(e) This Agreement shall not in any way affect the
right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
7. Adjustment in Option Shares. Should any change be
made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of
shares, or other change affecting the outstanding Common Stock
as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option, and (ii) the
Exercise Price in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
8. Shareholder Rights. The holder of this option shall
not have any shareholder rights with respect to the Option
Shares until such person shall have exercised the option and
become a holder of record of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect
to all or any part of the Option Shares for which this option is
at the time exercisable, Optionee (or any other person or
persons exercising the option) must take the following actions:
(i) Execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is
exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation;
(B) shares of Common Stock held by
Optionee (or any other person or persons exercising the option),
provided that if shares acquired pursuant to the exercise of an
option are used, such shares shall be held by the Optionee for a
period of at least six (6) months (or such longer or shorter
period of time required to avoid a charge to earnings for
financial accounting purposes) before their tender to exercise
additional Option Shares; or
(C) through a special sale and remittance
procedure, if and to the extent approved by the Plan
Administrator, pursuant to which Optionee (or any other person
or persons exercising the option) shall concurrently provide
irrevocable instructions (i) to a brokerage firm (reasonably
satisfactory to the Corporation for purposes of administering
such procedure) to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus
all applicable income and employment taxes required to be
withheld by the Corporation by reason of such exercise, and
(ii) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm on such
settlement date in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered
to the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option
(if other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining
Optionee) for the satisfaction of all applicable income and
employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise Date,
the Corporation shall issue to or on behalf of Optionee (or any
other person or persons exercising this option) a certificate
for the purchased Option Shares, with the appropriate legends
affixed thereto.
(c) In no event may this option be exercised for
any fractional shares.
10. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of
the Option Shares upon such exercise shall be subject to
compliance by the Corporation and Optionee with all applicable
requirements of law relating thereto and with all applicable
regulations of any Stock Exchange on which the Common Stock may
be listed for trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of
any Common Stock pursuant to this option shall relieve the
Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its
best efforts to obtain all such approvals.
11. Successors and Assigns. Except to the extent
otherwise provided in Paragraphs 3 and 6, the provisions of this
Agreement shall inure to the benefit of, and be binding upon,
the Corporation and its successors and assigns and Optionee,
Optionee's assigns, the legal representatives, heirs and
legatees of Optionee's estate and any beneficiaries of this
option designated by Optionee.
12. Notices. Any notice required to be given or
delivered to the Corporation under the terms of this Agreement
shall be in writing and addressed to the Corporation at its
principal corporate offices. Any notice required to be given or
delivered to Optionee shall be in writing and addressed to
Optionee at the address indicated below Optionee's signature
line on the Grant Notice. All notices shall be deemed effective
upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.
13. Construction. This Agreement and the option
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. All decisions of the Plan Administrator with respect to
any question or issue arising under the Plan or this Agreement
shall be conclusive and binding on all persons having an
interest in this option.
14. Governing Law. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of
the State of California without resort to that State's conflict-
of-laws rules.
15. Excess Shares. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of
Common Stock which may without shareholder approval be issued
under the Plan, then this option shall be void with respect to
those excess shares, unless shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock
issuable under the Plan is obtained in accordance with the
provisions of the Plan.
16. Additional Terms Applicable to an Incentive Option.
In the event this option is designated an Incentive Option in
the Grant Notice, the following terms and conditions shall also
apply to the grant:
(a) This option shall cease to qualify for favorable
tax treatment as an Incentive Option if (and to the extent) this
option is exercised for one or more Option Shares: (A) more than
three (3) months after the date Optionee ceases to be an
Employee for any reason other than death or Disability or (B)
more than twelve (12) months after the date Optionee ceases to
be an Employee by reason of Disability. The Optionee shall not
be deemed to cease to be an Employee during a period of military
leave, sick leave or other personal leave approved by the
Corporation; provided, however, that for a leave which exceeds
ninety (90) days, the Optionee shall be deemed, for purposes of
determining the period within which this option may be exercised
as an Incentive Option (if designated as such in the Grant
Notice), to cease to be an Employee on the ninety-first (91st)
day of such leave, unless the right of that Optionee to return
to Service as an Employee following such leave is guaranteed by
law or statute.
(b) No installment under this option shall qualify
for favorable tax treatment as an Incentive Option if (and to
the extent) the aggregate Fair Market Value (determined at the
Grant Date) of the Common Stock for which such installment first
becomes exercisable hereunder would, when added to the aggregate
value (determined as of the respective date or dates of grant)
of the Common Stock or other securities for which this option or
any other Incentive Options granted to Optionee prior to the
Grant Date (whether under the Plan or any other option plan of
the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should such One
Hundred Thousand Dollar ($100,000) limitation be exceeded in any
calendar year, this option shall nevertheless become exercisable
for the excess shares in such calendar year as a Non-Statutory
Option.
(c) Should the exercisability of this option be
accelerated upon a Change in Control, then this option shall
qualify for favorable tax treatment as an Incentive Option only
to the extent the aggregate Fair Market Value (determined at the
Grant Date) of the Common Stock for which this option first
becomes exercisable in the calendar year in which the Change in
Control transaction occurs does not, when added to the aggregate
value (determined as of the respective date or dates of grant)
of the Common Stock or other securities for which this option or
one or more other Incentive Options granted to Optionee prior to
the Grant Date (whether under the Plan or any other option plan
of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation be
exceeded in the calendar year of such Change in Control, the
option may nevertheless be exercised for the excess shares in
such calendar year as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this option,
one or more other options to purchase Common Stock which become
exercisable for the first time in the same calendar year as this
option, then the foregoing limitations on the exercisability of
such options as Incentive Options shall be applied on the basis
of the order in which such options are granted.
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify SJW Corp. (the "Corporation") that I elect
to purchase __________ shares of the Corporation's Common Stock
(the "Purchased Shares") at the option exercise price of
$__________ per share (the "Exercise Price") pursuant to that
certain option (the "Option") granted to me under the
Corporation's Long-Term Incentive Plan on ____________________,
__________.
Concurrently with the delivery of this Exercise Notice to
the Corporation, I shall hereby pay to the Corporation the
Exercise Price for the Purchased Shares in accordance with the
provisions of my agreement with the Corporation (or other
documents) evidencing the Option and shall deliver whatever
additional documents may be required by such agreement as a
condition for exercise. Alternatively, I may utilize the
special broker-dealer sale and remittance procedure specified in
my agreement to effect payment of the Exercise Price.
____________________, __________
Date
______________________________
Optionee
Address: ____________________
______________________________
Print name in exact manner
it is to appear on the
stock certificate: ______________________________
Address to which certificate
is to be sent, if different from
address above: ______________________________
______________________________
Social Security Number: ______________________________
APPENDIX
The following definitions shall be in effect under the
Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall be deemed to take place on the
occurrence of any of the following events:
(i) The acquisition, directly or indirectly by any
person or related group of persons (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), but other than
the Corporation or a person that directly or indirectly
controls, is controlled by, or is under, control with the
Corporation or an employee benefit plan maintained by any such
entity, of beneficial ownership (as defined in Rule 13d-3 of the
Exchange Act) of securities of the Corporation that results in
such person or related group of persons beneficially owning
securities representing 30% or more of the combined voting power
of the Corporation's then-outstanding securities;
(ii) A merger, recapitalization, consolidation, or
other similar transaction to which the Corporation is a party,
unless securities representing at least 50% of the combined
voting power of the then-outstanding securities of the surviving
entity or a parent thereof are immediately thereafter
beneficially owned, directly or indirectly and in substantially
the same proportion, by the persons who beneficially owned the
Corporation's outstanding voting securities immediately before
the transaction;
(iii) A sale, transfer or disposition of all or
substantially all of the Corporation's assets, unless securities
representing at least 50% of the combined voting power of the
then-outstanding securities of the entity acquiring the
Corporation's assets or parent thereof are immediately
thereafter beneficially owned, directly or indirectly and in
substantially the same proportion, by the persons who
beneficially owned the Corporation's outstanding voting
securities immediately before the transaction,
(iv) A merger, recapitalization, consolidation, or
other transaction to which the Corporation is a party or the
sale, transfer, or other disposition of all or substantially all
of the Corporation's assets if, in either case, the directors of
the Corporation immediately prior to consummation of the
transaction do not, upon consummation of the transaction,
constitute at least a majority of the board of directors of the
surviving entity or the entity acquiring the Corporation's
assets, as the case may be, or a parent thereof (for this
purpose, any change in director composition that is anticipated
or pursuant to an understanding or agreement in connection with
a transaction will be deemed to have occurred at the time of the
transaction); or
(v) A change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (a) have been Board members since the
beginning of such period or (b) have been elected or nominated
for election as Board members during such period by at least a
majority of the Board members who were described in clause (a)
or who were previously so elected or approved and who were still
in office at the time the Board approved such election or
nomination;
provided that no Change in Control shall occur if the
result of the transaction is to give more ownership or control
of the Corporation to any person or related group of persons who
hold securities representing more than thirty percent (30%) of
the combined voting power of the Corporation's outstanding
securities as of March 3, 2003.
D. Code shall mean the Internal Revenue Code of 1986, as
amended.
E. Common Stock shall mean shares of the Corporation's
common stock.
F. Corporation shall mean SJW Corp., a California
corporation, and any successor corporation to all or
substantially all of the assets or voting stock of SJW Corp.
which shall by appropriate action adopt the Plan.
G. Disability shall mean the permanent and total
disability of an individual as determined pursuant to Section
22(e)(3) of the Code.
H. Employee shall mean an individual who is in the employ
of the Corporation (or any Parent or Subsidiary), 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.
I. Exercise Date shall mean the date on which the option
shall have been exercised in accordance with Paragraph 9 of the
Agreement.
J. Exercise Price shall mean the exercise price per Option
Share as specified in the Grant Notice.
K. Expiration Date shall mean the date on which the option
expires as specified in the Grant Notice.
L. Fair Market Value means the value of the Common Stock
on the American Stock Exchange as of the close of the trading
day.
M. Good Cause shall mean:
(i) the commission of any act or omissions that result
in substantial harm to the business or property of the
Corporation (or any Parent or Subsidiary) and that constitute
dishonesty, intentional breach of fiduciary obligation or
intentional wrongdoing, or
(ii) the Optionee's conviction of a criminal violation
involving fraud or dishonesty.
The foregoing definition shall not in any way preclude
or restrict the right of the Corporation (or any Parent or
Subsidiary) to discharge or dismiss Optionee or any other person
in the Service of the Corporation (or any Parent or Subsidiary)
for any other acts or omissions, but such other acts or
omissions shall not be deemed, for purposes of the Plan or this
Agreement, to constitute grounds for termination for Good Cause.
N. Good Reason shall exist with respect to an Optionee, if
and only if, without the Optionee's express written consent:
(i) there is a significant change in the nature or the
scope of the Optionee's authority or in his or her overall
working environment;
(ii) the Optionee is assigned duties materially
inconsistent with his or her present duties, responsibilities
and status;
(iii) there is a reduction in the sum of Optionee's rate
of base salary and target bonus; or
the Corporation changes by fifty-five (55) miles or more the
principal location in which the Optionee is required to perform
services;
provided that, in the case of each such reason, that the
Corporation has not cured such condition within 30 days of
written notice by the Optionee to the Corporation that such
condition exists and constitutes Good Reason.
X. Xxxxx Date shall mean the date of grant of the option
as specified in the Grant Notice.
X. Xxxxx Notice shall mean the Notice of Grant of Stock
Option accompanying the Agreement, pursuant to which Optionee
has been informed of the basic terms of the option evidenced
hereby.
Q. Incentive Option shall mean an option which satisfies
the requirements of Code Section 422.
R. Non-Statutory Option shall mean an option not intended
to satisfy the requirements of Code Section 422.
S. Normal Retirement shall mean an Optionee's termination
of Service with the Corporation or an Affiliate under
circumstances which make such Optionee eligible for an immediate
pension benefit to be paid by the Corporation, or an Affiliate,
or, in the case of an Optionee who is a Non-Employee Board
Member, any termination of Service unless such termination is
due to misconduct, as determined by the Plan Administrator in
its sole discretion.
T. Notice of Exercise shall mean the notice of exercise in
the form attached hereto as Exhibit I.
U. Option Shares shall mean the number of shares of Common
Stock subject to the option as specified in the Grant Notice.
V. Optionee shall mean the person to whom the option is
granted as specified in the Grant Notice.
W. Parent shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with
the Corporation, provided each corporation in the unbroken chain
(other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one
of the other corporations in such chain.
X. Plan shall mean the Corporation's Long-Term Incentive
Plan.
Y. Plan Administrator shall mean either the Board or a
committee of the Board acting in its capacity as administrator
of the Plan.
Z. Qualifying Termination shall mean: (i) a termination of
Optionee's Service in immediate anticipation of, or at any time
after execution of a definitive agreement to effect a Change of
Control or within twenty-four (24) months after the effective
date of a Change in Control effected by the Optionee's employer
for any reason other than Good Cause or (ii) a termination of
Optionee's Service at any time within twenty-four (24) months
after the effective date of a Change in Control effected
voluntarily on the part of the Optionee for Good Reason.
AA. Service shall mean the Optionee's performance of
services for the Corporation (or any Parent or Subsidiary) in
the capacity of an Employee, or as a non-employee member of the
board of directors. Except to the extent otherwise required by
law, no Service credit shall be given for vesting purposes
hereunder for any period the Optionee is on a leave of absence.
BB. Stock Exchange shall mean the American Stock Exchange,
the New York Stock Exchange or the Nasdaq National Market.
CC. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with
the Corporation, provided each corporation (other than the last
corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one
of the other corporations in such chain.
