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Exhibit 10.242
THE CHARLES SCHWAB
CORPORATION
1987 STOCK OPTION
PLAN
(Restated to include
Amendments through September 25, 2002)
Article
1. Introduction.
The purpose of the
1987 Stock Option Plan, as Amended and Restated (the
“Plan”) is to enable The Charles Schwab Corporation and
its subsidiaries to attract and retain directors, officers, and
other key employees and to provide such persons with additional
incentive to advance the interests of the Company. The Plan was
initially adopted on March 24, 1987, and was amended on
July 29, 1987, April 17, 1989, September 17, 1996 and
October 22, 1997. The Plan is hereby restated and amended as
of October 22, 1997, and the terms of this Restatement shall apply
to all awards granted under the Plan on or after such date. The
Plan shall terminate not more than ten (10) years from the
date the Plan initially was adopted. The Plan will provide for
Awards in the form of Restricted Shares, Performance Share Awards
or Options, which may constitute incentive stock options or
nonstatutory stock options. The Plan shall be governed by, and
construed in accordance with, the laws of the State of
Delaware.
Article
2. Administration.
2.1 The
Committee. The Plan shall be administered by
the Committee. The Committee shall consist of two or more
Non-Employee Directors, who shall be appointed by the
Board.
2.2 Committee
Responsibilities. The Committee shall select
the Key Employees who are to receive Awards under the Plan,
determine the amount, vesting requirements and other conditions of
such Awards, may interpret the Plan, and make all other decisions
relating to the operation of the Plan. The Committee may adopt such
rules or guidelines as it deems appropriate to implement the Plan.
The Committee’s determinations under the Plan shall be final
and binding on all persons.
Article
3. Limitation on Awards.
The aggregate
number of Restricted Shares, Performance Share Awards and Options
awarded under the Plan shall not exceed 1,616,000 (including those
shares awarded prior to the amendment of the Plan). If any
Restricted Shares, Performance Share Awards or Options are
forfeited, or if any Performance Share Awards terminate for any
other reason without the associated Common Shares being issued, or
if any Options terminate for any other reason before being
exercised, then such Restricted Shares, Performance Share Awards or
Options shall again become available for Awards under the Plan. The
limitation of this Article 3 shall be subject to adjustment
pursuant to Article 10. Any Common Shares issued pursuant to the
Plan may be authorized but unissued shares or treasury
shares.
Article
4. Eligibility.
4.1 General
Rule. Key Employees shall be eligible for
designation as Participants by the Committee.
4.2 Ten-Percent
Stockholders. A Key Employee who owns more
than 10 percent of the total combined voting power of all classes
of outstanding stock of the Company or any of its Subsidiaries
shall not be eligible for the grant of an ISO unless (a) the
Exercise price under such ISO is at least 110 percent of the Fair
Market Value of a Common Share on the date of grant and
(b) such ISO by its terms is not exercisable after the
expiration of five years from the date of grant.
4.3 Attribution
Rules. For purposes of Section 4.2, in
determining stock ownership, a Key Employee shall be deemed to own
the stock owned, directly or indirectly, by or for his or her
brothers, sisters, spouse, ancestors or lineal descendants. Stock
owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or
beneficiaries. Stock with respect to which the Key Employee holds
an option shall not be counted.
4.4 Outstanding
Stock. For purposes of Section 4.2,
“outstanding stock” shall include all stock actually
issued and outstanding immediately after the grant of the ISO to
the Key Employee. “Outstanding stock” shall not include
treasury shares or shares authorized for issuance under outstanding
options held by the Key Employee or by any other person.
Article 5.
Options.
5.1 Stock Option
Agreement. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and
conditions of the Plan, and may be subject to any other terms and
conditions which are not inconsistent with the Plan and which the
Committee deems appropriate for inclusion in a Stock Option
Agreement. The provisions of the various Stock Option Agreements
entered into under the Plan need not be identical. The Committee
may designate all or any part of an Option as an ISO. The Committee
may designate all or any part of an Option as an ISO (or, in the
case of a Key Employee who is subject to the tax laws of a foreign
jurisdiction, as an option qualifying for favorable tax treatment
under the laws of such foreign jurisdiction).
5.2 Options
Nontransferability. No Option granted under
the Plan shall be transferable by the Optionee other than by will
or the laws of descent and distribution. An Option may be exercised
during the lifetime of the Optionee only by him or her. No Option
or interest therein may be transferred, assigned, pledged or
hypothecated by the Optionee during his or her lifetime, whether by
operation of law or otherwise, or be made subject to execution,
attachment or similar process.
5.3 Number of
Shares. Each Stock Option Agreement shall
specify the number of Common Shares subject to the Option and shall
provide for the adjustment of such number in accordance with
Article 10. Each Stock Option Agreement shall also specify whether
the Option is an ISO or an NSO.
5.4 Exercise
Price. Each Stock Option Agreement shall
specify the Exercise Price. The Exercise Price under an Option
shall not be less than 100 percent of the Fair Market Value of a
Common Share on the date of grant, except as otherwise provided in
Section 4.2. Subject to the preceding sentence, the Exercise Price
under any Option shall be determined by the Committee. The Exercise
Price shall be payable in accordance with Article 6.
5.5 Exercisability and Term. Each Stock
Option Agreement shall specify the date when all or any installment
of the Option is to become exercisable. The Stock Option Agreement
shall also specify the term of the Option. The term of an ISO shall
in no event exceed 10 years from the date of grant, and
Section 4.2 may require a shorter term. Subject to the
preceding sentence, the Committee shall determine when all or any
part of an Option is to become exercisable and when such Option is
to expire; provided that, in appropriate cases, the Company shall
have the discretion to extend the term of an Option or the time
within which, following termination of employment, an Option may be
exercised, or to accelerate the exercisability of an Option. A
Stock Option Agreement may provide for expiration prior to the end
of its term in the event of the termination of the Optionee’s
employment and shall provide for the suspension of vesting when an
employee is on a leave of absence for a period in excess of six
months in appropriate cases, as determined by the Company; provided
that the exercisability of Options shall be accelerated in the
event of the Participant’s death or Disability and, in the
case of Retirement, the exercisability of all outstanding Options
shall be accelerated, other than any Options that had been granted
within two years of the date of the Optionee’s Retirement.
NSOs may also be awarded in combination with Restricted Shares, and
such an Award may provide that the NSOs will not be exercisable
unless the related Restricted Shares are forfeited. In addition,
NSOs granted under this Section 5 may be granted subject to
forfeiture provisions which provide for forfeiture of the Option
upon the exercise of tandem awards, the terms of which are
established in other programs of the Company.
5.6 Limitation on Amount of
ISOs. The aggregate fair market value
(determined at the time the ISO is granted) of the Common Shares
with respect to which ISOs are exercisable for the first time by
the Optionee during any calendar year (under all incentive stock
option plans of the Company) shall not exceed $100,000; provided,
however, that all or any portion of an Option which cannot be
exercised as an ISO because of such limitation shall be treated as
an NSO.
5.7 Effect of Change in Control. The
Committee (in its sole discretion) may determine, at the time of
granting an Option, that such Option shall become fully exercisable
as to all Common Shares subject to such Option immediately
preceding any Change in Control with respect to the
Company.
5.8 Restrictions on Transfer of Common
Shares. Any Common Shares issued upon
exercise of an Option shall be subject to such special forfeiture
conditions, rights of repurchase, rights of first refusal and other
transfer restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock Option
Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Common Shares.
5.9 Authorization of Replacement
Options. Concurrently with the grant of any
Option to a Participant, the Committee may authorize the grant of
Replacement Options. If Replacement Options have been authorized by
the Committee with respect to a particular award of Options (the
“Underlying Options”), the Option Agreement with
respect to the Underlying Options shall so state, and the terms and
conditions of the Replacement Options shall be provided therein.
The grant of any Replacement Options shall be effective only upon
the exercise of the Underlying Options through the use of Common
Shares pursuant to Section 6.2 or Section 6.3. The number
of Replacement Options shall equal the number of Common Shares used
to exercise the Underlying Options, and, if the Option Agreement so
provides, the number of Common Shares used to satisfy any tax
withholding requirements incident to the exercise of the Underlying
Options
in accordance with
Section 12.2. Upon the exercise of the Underlying Options, the
Replacement Options shall be evidenced by an amendment to the
Underlying Option Agreement. Notwithstanding the fact that the
Underlying Option may be an ISO, a Replacement Option is not
intended to qualify as an ISO. The Exercise Price of a Replacement
Option shall be no less than the Fair Market Value of a Common
Share on the date the grant of the Replacement Option becomes
effective. The term of each Replacement Option shall be equal to
the remaining term of the Underlying Option. No Replacement Options
shall be granted to Optionees when Underlying Options are exercised
pursuant to the terms of the Plan and the Underlying Option
Agreement following termination of the Optionee’s employment.
The Committee, in its sole discretion, may establish such other
terms and conditions for Replacement Options as it deems
appropriate.
5.10 Options
Granted to Non-United States Key Employees. In the case of Key
Employees who are subject to the tax laws of a foreign
jurisdiction, the Company may issue Options to such Key Employees
that contain terms required to conform with any requirements for
favorable tax treatment imposed by the laws of such foreign
jurisdiction, or as otherwise may be required by the laws of such
foreign jurisdiction. The terms of any such Options shall be
governed by the Plan, subject to the terms of any Addendum to the
Plan specifically applicable to such Options.
5.11 Effect of Job
Elimination. Notwithstanding anything to the contrary contained in
the Plan or in any Stock Option Agreement or Stock Award Agreement
entered into with respect to an Award pursuant to the Plan, in the
case of a Participant who is an Officer, and who becomes entitled
to receive payments with respect to a Severance Period pursuant to
the Charles Schwab Severance Pay Plan (the “Severance
Plan”) on account of a Job Elimination, the terms of the Plan
and any Stock Option Agreement or Stock Award Agreement entered
into with respect to an Award shall be applied by treating the
Participant as if the Participant had terminated employment on the
Participant’s Termination Date. For purposes of applying this
Section, the terms Officer, Severance Period, Termination Date, and
Job Elimination shall have the meanings set forth in the Severance
Plan.
Article
6. Payment for Option Shares.
6.1 General
Rule. The entire Exercise Price of Common
Shares issued upon exercise of Options shall be payable in cash at
the time when such Common Shares are purchased, except as
follows:
(a) In the case of
an ISO granted under the Plan, payment shall be made only pursuant
to the express provisions of the applicable Stock Option Agreement.
However, the Committee may specify in the Stock Option Agreement
that payment may be made pursuant to Section 6.2 or
6.3.
(b) In the case of
an NSO, the Committee may at any time accept payment pursuant to
Section 6.2 or 6.3.
6.2 Surrender of
Stock. To the extent that this
Section 6.2 is applicable, payment for all or any part of the
Exercise Price may be made with Common Shares which are surrendered
to the Company. Such Common Shares shall be valued at their Fair
Market Value on the date when the new Common Shares are purchased
under the Plan. In the event that the Common Shares being
surrendered are Restricted Shares that have not yet become vested,
the same restrictions shall be imposed upon the new Common Shares
being purchased.
6.3 Exercise/Sale. To
the extent this Section 6.3 is applicable, payment may be made
by the delivery (on a form prescribed by the Company) of an
irrevocable direction to Charles Schwab & Co., Inc. to
sell Common Shares (including the Common Shares to be issued upon
exercise of the Options) and to deliver all or part of the sales
proceeds to the Company in payment of all or part of the Exercise
Price and any withholding taxes.
Article
7. Restricted Shares and Performance Share
Awards.
7.1 Time, Amount
and Form of Awards. The Committee may grant
Restricted Shares or Performance Share Awards with respect to an
Award Year during such Award Year or at any time thereafter. Each
such Award shall be evidenced by a Stock Award Agreement between
the Award recipient and the Company. The amount of each Award of
Restricted Shares or Performance Share Awards shall be determined
by the Committee. Awards under the Plan may be granted in the form
of Restricted Shares or Performance Share Awards or in any
combination thereof, as the Committee shall determine at its sole
discretion at the time of the grant. Restricted Shares or
Performance Share Awards may also be awarded in combination with
NSOs, and such an Award may provide that the Restricted Shares or
Performance Share Awards will be forfeited in the event that the
related NSOs are exercised.
7.2 Payment for
Restricted Share Awards. To the extent that
an Award is granted in the form of Restricted Shares, the Award
recipient, as a condition to the grant of such Award, shall be
required to pay the Company in cash an amount equal to the par
value of such Restricted Shares.
7.3 Vesting or
Issuance Conditions. Each Award of
Restricted Shares shall become vested, in full or in installments,
upon satisfaction of the conditions specified in the Stock Award
Agreement. Common Shares shall be issued pursuant to Performance
Share Awards in full or in installments upon satisfaction of the
issuance conditions specified in the Stock Award Agreement. The
Committee shall select the vesting conditions in the case of
Restricted Shares, or issuance conditions in the case of
Performance Share Awards, which may be based upon the
Participant’s service, the Participant’s performance,
the Company’s performance or such other criteria as the
Committee may adopt; provided that, in the case of an Award of
Restricted Shares where vesting is based entirely on the
Participant’s service, (i) vesting shall be accelerated
in the event of the Participant’s death or Disability;
(ii) in the case of Retirement, vesting shall be accelerated
for all Restricted Shares that had been granted more than two years
prior to the date of the Participant’s Retirement; and
(iii) vesting shall be suspended when an employee is on a
leave of absence for a period in excess of six months in
appropriate cases, as determined by the Company. The Committee, in
its sole discretion, may determine, at the time of making an Award
of Restricted Shares, that such Award shall become fully vested in
the event that a Change in Control occurs with respect to the
Company. The Committee, in its sole discretion, may determine, at
the time of making a Performance Share Award, that the issuance
conditions set forth in such Award shall be waived in the event
that a Change in Control occurs with respect to the
Company.
7.4 Form of
Settlement of Performance Share
Awards. Settlement of Performance Share
Awards shall only be made in the form of Common Shares. Until a
Performance Share Award is settled, the number of Performance Share
Awards shall be subject to adjustment pursuant to Article
10.
7.5 Death of
Recipient. Any Common Shares that are to be issued pursuant to a
Performance Share Award after the recipient’s death shall be
delivered or distributed to the recipient’s beneficiary or
beneficiaries. Each recipient of a Performance Share Award under
the Plan shall designate one or more beneficiaries for this purpose
by filing the prescribed form with the Company. A beneficiary
designation may be changed by filing the prescribed form with the
Company at any time before the Award recipient’s death. If no
beneficiary was designated or if no designated beneficiary survives
the Award recipient, then any Common Shares that are to be issued
pursuant to a Performance Share Award after the recipient’s
death shall be delivered or distributed to the recipient’s
estate. The Committee, in its sole discretion, shall determine the
form and time of any distribution(s) to a recipient’s
beneficiary or estate.
Article
8. Claims Procedures.
Claims for benefits
under the Plan shall be filed in writing with the Committee on
forms supplied by the Committee. Written notice of the disposition
of a claim shall be furnished to the claimant within 90 days after
the claim is filed. If the claim is denied, the notic
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