GOLDEN WEST FINANCIAL CORPORATION

2005 STOCK INCENTIVE PLAN

SECTION 1.    PURPOSE.

The Company’s Board of Directors adopts the Golden West Financial Corporation 2005 Stock Incentive Plan effective as of April 27, 2005 (the “Effective Date”), conditioned upon and subject to the approval of the Company’s stockholders.

The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by offering Key Employees an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest; to encourage such selected persons to continue to provide services to the Company; and to attract to the Company new individuals with outstanding qualifications.

The Plan seeks to achieve this purpose by providing for Awards in the form of Options (which may be Incentive Stock Options or Nonstatutory Stock Options), Stock Appreciation Rights, Stock Grants and Stock Units.

The Plan shall be governed by, and construed in accordance with, the laws of the State of California (except its choice-of-law provisions). Capitalized terms shall have the meaning provided in Section 2 unless otherwise provided in this Plan or the applicable Stock Option Agreement, SAR Agreement, Stock Grant Agreement or Stock Unit Agreement.

SECTION 2.    DEFINITIONS.

(a)     “Affiliate” means any entity, whether now or hereafter existing, other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity. For purposes of determining an individual’s “Service,” this definition shall include any entity other than a Subsidiary, if the Company, a Parent and/or one or more Subsidiaries own not less than 50% of such entity.

(b)     “Award” means any award of an Option, SAR, Stock Grant or Stock Unit under the Plan.

(c)     “Board” means the Board of Directors of the Company, as constituted from time to time.

(d)     “Cashless Exercise” means an arrangement in which payment may be made all or in part by delivery of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price and any applicable tax withholding obligations (up to the maximum amount permitted by applicable law) relating to the exercised Option.

(e)     “Change In Control” except as may otherwise be provided in an applicable Award Agreement, means the occurrence of any of the following:

 

(i)   The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization;

 

 

 

(ii)   The sale, transfer or other disposition of all or substantially all of the Company’s assets;

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(iii)   Any transaction as a result of which any person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company’s then outstanding voting securities. For purposes of this paragraph (iii) and paragraph (iv), the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude:

 

 

 

 

(A) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a subsidiary of the Company,

 

 

 

 

 

(B) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock of the Company, and

 

 

 

 

 

(C) the Company;

 

 

 

 

(iv)   A change in the composition of the Board, as a result of which fewer than one-half of the incumbent directors are directors who had been directors of the Company on the date 24 months prior to the date of any transaction that resulted in a person becoming the beneficial owner, directly or indirectly, of securities of the Company representing at least 20% of the total voting power represented by the Company’s then outstanding voting securities; or

 

 

 

(v)   A complete liquidation or dissolution of the Company.

 

 

 

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s outstanding stock immediately before such transactions.

(f)     “Code” means the Internal Revenue Code of 1986, as amended.

(g)    “Committee” means a committee described in Section 3.

(h)     “Common Stock” means the Company’s common stock.

(i)     “Company” means Golden West Financial Corporation, a Delaware corporation.

(j)     “Covered Employees” means those persons who are subject to the limitations of Code Section 162(m).

(k)    “Disability” means that the Key Employee is unable 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.

(1)    “Employee” means any individual who is a common-law employee of the Company, a Parent, a Subsidiary or an Affiliate.

(m)   “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(n)    “Exercise Price” means, in the case of an Option, the amount for which a Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. In the case of a SAR, “Exercise Price” means an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value in determining the amount payable upon exercise of such SAR.

(o)     “Fair Market Value” means the market price of a Share, determined as follows:

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(i)          If the Shares were traded on the NYSE on the date in question, then the Fair Market Value shall be equal to the last per Share trading price reported by the NYSE for such date; and

 

 

 

(ii)          If the Shares were not traded on the NYSE on the date in question, then the Fair Market Value shall be equal to the last per Share trading price reported by the NYSE for the last trading date immediately prior to the date in question.

 

 

 

Whenever possible, the Fair Market Value shall be based on the trading prices of the Shares as reported by the NYSE on its MarkeTrac or similar reporting service. In the event the NYSE does not report the last per Share trading price of the Shares, then the Fair Market Value shall be based on the last per Share trading price on the NYSE for the date in question as reported in the Western Edition of the Wall Street Journal. If the Shares are no longer traded on the NYSE, then the Fair Market Value shall be based on the applicable listing exchange where the Shares are traded or quoted as reported in the Western Edition of the Wall Street Journal. Such determination shall be conclusive and binding on all persons.

(p)    “Grant” means any grant of an Award under the Plan.

(q)    “Incentive Stock Option” or “ISO” means an incentive stock option described in section 422(b) of the Code.

(r)     “Key Employee” means an Employee who has been selected by the Committee to receive an Award under the Plan.

(s)     “Non-Employee Director” means a member of the Board who is not an Employee.

(t)     “Nonstatutory Stock Option” or NSO” means a stock option that is not an ISO.

(u)    “NYSE” means the New York Stock Exchange.

(v)    “Option” means an ISO or NSO granted under the Plan entitling the Optionee to purchase Shares.

(w)   “Optionee” means an individual, estate or other entity that holds an Option.

(x)    “Parent” means a “parent corporation” of the Company, whether now or hereafter existing, as defined in section 424(e) of the Code.

(y)    “Participant” means an individual, estate or other entity that holds an Award.

(z)    “Performance Goals” means one or more objective measurable performance factors as determined by the Committee with respect to each Performance Period based upon one or more factors, including, but not limited to: (i) return on average assets; (ii) return on average equity; (iii) earning per share; (iv) diluted earnings per share; (v) ratio of general and administrative expenses to average assets; (vi) ratio of non-performing assets to total assets; (vii) asset growth; (viii) earnings; (ix) net earnings; (x) capital level maintenance; (xi) loan loss coverage; (xii) ratio of non-interest expense to pre-tax earnings; and (xiii) ratio of pre-tax earnings to net interest income and non-interest income.

(aa)   “Performance Period” means any period not exceeding 36 months as determined by the Committee, in its sole discretion. The Committee may establish different Performance Periods for different Participants, and the Committee may establish concurrent or overlapping Performance Periods.

(bb)   “Plan” means this Golden West Financial Corporation 2005 Stock Incentive Plan as it may be amended from time to time.

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(cc)    “Re-Pricing” means the lowering or reduction of the Exercise Price of any outstanding Option and/or SAR in a manner described by Item 402(i)(l) of SEC Regulation S-K (or its successor provision).

(dd)    “SAR Agreement” means the agreement described in Sections 8 evidencing each Award of a Stock Appreciation Right.

(ee)    “SEC” means the Securities and Exchange Commission.

(ff)    “Section 16 Persons” means those officers, directors or other persons who are subject to Section 16 of the Exchange Act.

(gg)    “Securities Act” means the Securities Act of 1933, as amended.

(hh)    “Service” means service as an Employee. A Participant’s Service does not terminate if he or she is a common-law employee and the Participant (i) takes a bona fide leave of absence that was approved by the Company in writing and the terms of the leave provide for continued service crediting, (ii) changes the terms of his or her employment with the Company from full-time to part-time status as approved by the Company in writing and the terms of the change in status provide for continued service crediting, or (iii) when continued service crediting is required by applicable law. However, for purposes of determining whether an Option is entitled to continuing ISO status, a common-law employee’s Service will be treated as terminating ninety (90) days after such Employee went on leave, unless such Employee’s right to return to active work is guaranteed by law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work The Committee determines which leaves and changes in employment status count toward Service, and when Service terminates for all purposes under the Plan.

(ii)     “Share” means one share of Common Stock

(jj)     “Stock Appreciation Right” or “SAR” means a stock appreciation right awarded under the Plan.

(kk)   “Stock Grant” means Shares awarded under the Plan.

(ll)     “Stock Grant Agreement” means the agreement described in Section 9 evidencing each Award of a Stock Grant.

(mm) “Stock Option Agreement” means the agreement described in Section 6 evidencing each Grant of an Option.

(nn)   “Stock Unit” means a bookkeeping entry representing the equivalent of one Share, as awarded under the Plan.

(oo)  “Stock Unit Agreement” means the agreement described in Section 10 evidencing each Award of a Stock Unit.

(pp)  “Subsidiary” means a “subsidiary corporation” of the Company, whether now or hereafter existing, as defined in section 424(f) of the Code.

(qq)  “10-Percent Shareholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries. In determining stock ownership, the attribution rules of section 424(d) of the Code shall be applied.

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SECTION 3.     ADMINISTRATION.

(a)     The Committee.   The Board’s Compensation and Stock Option Committee, or a successor committee designated by the Board, shall administer the Plan as the Committee.  The Committee members shall all be (i) “independent directors” as defined under the listing standards of the NYSE, (ii) “outside directors” as defined under section 162(m) of the Code, and (iii) “non-employee directors” as defined under Rule 16b-3 of the Exchange Act. Notwithstanding the previous sentence, failure of the Committee members to satisfy the foregoing requirements shall not invalidate any Awards granted by such Committee. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and assume all powers and authority conferred upon the Committee under the Plan.

(b)     Authority of the Committee.   Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. Such actions shall include:

 

(i)

selecting Key Employees who are to receive Awards under the Plan;

 

(ii)

determining the type, number, vesting requirements and other features and conditions of such Awards and amending such Awards;

 

(iii)

correcting any defect, supplying any omission, or reconciling any inconsistency in the Plan or any Stock Option Agreement, SAR Agreement, Stock Grant Agreement or Stock Unit Agreement;

 

(iv)

accelerating the vesting, or extending the post-termination exercise term, of Awards at any time and under such terms and conditions as it deems appropriate;

 

(v)

interpreting the Plan;

 

(vi)

authorizing the waiver or amendment of any term under a Stock Option Agreement, SAR Agreement, Stock Grant Agreement or Stock Unit Agreement; and

 

(vii)

making 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.

(c)     Delegation of Authority.   If the Chief Executive Officer of the Company also serves on the Board, the Committee may delegate to such Chief Executive Officer the power and authority to administer the Plan with respect to Key Employees who are not Section 16 Persons or Covered Employees; to grant Awards to such Key Employees; to determine all terms of such Awards; and to make any other determinations or take any actions required by, or that may be made in the discretion of, the Committee with respect to such Awards. The Committee shall receive a periodic summary of grants made under a delegation pursuant to this paragraph. The Committee may revoke a delegation of authority hereunder at any time.

(d)     Modifications or Assumption of Awards.   Within the limitations of the Plan, the Committee may modify, extend or assume outstanding options or may accept the cancellation of outstanding Options, SARs, Stock Grants or Stock Units (whether granted by the Company or by another issuer) in return for the grant of new Options, SARs, Stock Grants or Stock Units for the same or a different number of Shares and, in the case of Options or SARs, at the same or a different Exercise Price. Notwithstanding the preceding sentence or anything to the contrary, except as an adjustment to prevent the dilution or enlargement of rights under the Plan pursuant to Section 11, the Re-Pricing of outstanding Options and SARs is not permitted.  No modification of an Option, SAR, Stock Grant or Stock Unit shall, without the consent of the Participant, alter or impair his or her rights or obligations under such Award.

(e)     Buyout of Awards.   The Committee may at any time (i) offer to buy out for a payment in cash or cash equivalents (including without limitation Shares valued at Fair Market Value that may or may not be issued from this Plan) an Award previously granted or (ii) authorize a Participant to elect to cash out an Award previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.

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(f)     Indemnification.   To the greatest extent permitted by applicable law, each member of the Committee and of the Board (and their delegees) shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or any Stock Option Agreement, SAR Agreement, Stock Grant Agreement or Stock Unit Agreement, and (ii) from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit or proceeding against him or her, provided he or she shall give the Company an opportunity, at its expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any other power that the Company may have to indemnify them or hold them harmless.

SECTION 4.     ELIGIBILITY.

(a)     General Rules. Only Employees shall be eligible for designation as Key Employees by the Committee.

(b)     Incentive Stock Options.   Only Key Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. A Key Employee who is a 10-Percent Shareholder shall not be eligible for the grant of an ISO unless the requirements set forth in section 422(c)(5) of the Code are satisfied.

(c)     Performance Conditions. The Committee may, in its discretion, include performance conditions in an Award. If performance conditions are included in Awards to Covered Employees, then such Awards will be subject to the achievement of Performance Goals established by the Committee. Such Performance Goals shall be established and administered pursuant to the requirements of Code Section 162(m). Before any Shares underlying an Award or any Award payments are released to a Covered Employee with respect to a Performance Period, the Committee shall first certify in writing that the Performance Goals for such Performance Period have been satisfied. Awards with performance conditions that are granted to Key Employees who are not Covered Employees need not comply with the requirements of Code Section 162(m).

(d)     Termination of Service.   Unless the applicable Stock Option Agreement, SAR Agreement, Stock Grant Agreement or Stock Unit Agreement provides otherwise, the following rules shall govern the vesting, exercisability and term of outstanding Awards held by a Participant in the event of termination of such Participant’s Service: (i) upon termination of Service for any reason, all unvested portions of any outstanding Awards shall be forfeited without consideration and the vested portions of any outstanding Stock Units shall be settled upon termination; (ii) if the Service of a Participant is terminated for any reason other than by death or Disability, then the vested portion of the Participant’s then-outstanding Options/SARs may be exercised within thirty days after the date of such termination; or (iii) if the Service of a Participant is terminated due to death or Disability, the vested portion of the Participant’s then-outstanding Options/SARs may be exercised within twelve months after the date of termination of Service.

SECTION 5.    SHARES SUBJECT TO PLAN.

(a)     Basic Limitations.  The stock issuable under the Plan shall be authorized but unissued Shares or treasury Shares. The aggregate number of Shares reserved for Awards under the Plan shall not exceed 25,000,000 Shares. The aggregate number of Shares that may be issued in connection with any single type of Award (NSOs, ISOs, SARs, Stock Grants or Stock Units) under the Plan shall be 25,000,000 Shares. Without limiting the foregoing, ISOs covering not more than 25,000,000 shares may be issued under the Plan.

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(b)     Additional Shares.   If Awards are forfeited, canceled or terminate for any other reason before being exercised, then the Shares underlying such Awards shall again become available for Awards under the Plan.   If SARs are exercised or Stock Units are settled in Shares, then only the number of Shares (if any) actually issued in settlement of such SARs or Stock Units shall reduce the number available under Section 5(a) and the balance shall again become available for Awards under the Plan. If a Participant pays the exercise price of an Option by surrendering previously owned Shares and/or, as permitted by the Committee, pays any withholding tax obligation with respect to an Award by electing to have Shares withheld or by surrendering previously owned Shares, the surrendered Shares and the Shares withheld to pay taxes shall be available for issuance under the Plan and shall not count toward the maximum number of shares that may be issued under the Plan as set forth in Section 5(a).

(c)     Limits on Awards.   In a single taxable year of the Company, no Key Employee shall receive grants of (i) Options that, in the aggregate, represent the right to purchase in excess of 500,000 Shares and/or (ii) SARs, Stock Grants or Stock Units that, in the aggregate, represent the right to receive the issuance of in excess of 200,000 shares. Notwithstanding the foregoing limitation, in the first year of a Key Employee’s employment with the Company (or Subsidiary or Affiliate), a Key Employee may receive grants of (iii) Options that, in the aggregate, represent the right to purchase up to 1,000,000 Shares and/or (iv) SARs, Stock Grants or Stock Units that, in the aggregate, represent the right to receive the issuance of up to 400,000 shares.

SECTION 6.      TERMS AND CONDITIONS OF OPTIONS.

(a)     Stock Option Agreement.   Each Grant 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 that are not inconsistent with the Plan and that the Committee deems appropriate for inclusion in a Stock Option Agreement (including without limitation any performance conditions). The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.   A Stock Option Agreement may provide that new Options will be granted automatically to the Optionee when he or she exercises the prior Options.  The Stock Option Agreement shall also specify whether the Option is an ISO or an NSO.

(b)     Number of Shares.   Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number (and Exercise Price) in accordance with Section 11.

(c)     Exercise Price.   An Option’s Exercise Price shall be determined by the Committee and set forth in a Stock Option Agreement. To the extent required by applicable law or regulations, the Exercise Price of an ISO shall not be less than 100% of the Fair Market Value (110% for ISOs granted to 10-Percent Shareholders) of a Share on the date of Grant.   In the case of an NSO, a Stock Option Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the NSO is outstanding.

(d)     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, provided that the term of an ISO shall in no event exceed ten (10) years from the date of Grant.  An ISO that is granted to a 10-Percent Shareholder shall have a maximum term of five (5) years. No Option can be exercised after the expiration date provided in the applicable Stock Option Agreement.  A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee’s death, Disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s service.  In no event shall the Company be required to issue fractional Shares upon the exercise of an Option.

SECTION 7.      PAYMENT FOR OPTION SHARES.

The entire Exercise Price of Shares shall be payable upon the exercise of an Option in cash (whether paid by the Participant or by the Participant’s securities broker in the case of a Cashless Exercise) and/or, in the discretion of the Committee, by (i) tendering Shares which have already been owned by the Optionee having an aggregate Fair Market Value on the date of Option exercise equal to the entire Exercise Price, or (ii) any other means which the Committee, in its sole discretion, determines to provide legal consideration for the Shares and to be consistent with the purposes of the Plan.

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SECTION 8.     TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.

(a)     SAR Agreement.   Each Award of a SAR under the Plan shall be evidenced by a SAR Agreement between the Participant and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan (including without limitation any performance conditions). A SAR Agreement may provide for a maximum limit on the amount of any payout notwithstanding the Fair Market Value on the date of exercise of the SAR.  The provisions of the various SAR Agreements entered into under the Plan need not be identical.    SARs may be granted in consideration of a reduction in the Participant’s other compensation.

(b)     Number of Shares. Each SAR Agreement shall specify the number of Shares to which the SAR pertains and is subject to adjustment of such number in accordance with Section 11.

(c)     Exercise Price.   Each SAR Agreement shall specify the Exercise Price.  A SAR Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding. The Exercise Price of a SAR shall not be less than 100% of the Fair Market Value on the date of Grant.

(d)     Exercisability and Term.   Each SAR Agreement shall specify the date when all or any installment of the SAR is to become exercisable.  The SAR Agreement shall also specify the term of the SAR which shall not exceed ten years from the date of Grant.   A SAR Agreement may provide for accelerated exercisability in the event of the Participant’s death, Disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant’s Service.   SARs may be awarded in combination with Options or Stock Grants, and such an Award may provide that the SARs will not be exercisable unless the related Options or Stock Grants are forfeited.   A SAR may be included in an ISO only at the time of Grant but may be included in an NSO at the time of Grant or at any subsequent time, but not later than six months before the expiration of such NSO. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.

(e)     Exercise of SARs.   If, on the date when a SAR expires, the Exercise Price under such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such portion. Upon exercise of a SAR, the Participant shall receive from the Company (i) Shares, (ii) cash or (iii) any combination of Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the Exercise Price of the Shares.

SECTION 9.    TERMS AND CONDITIONS FOR STOCK GRANTS.

(a)     Time, Amount and Form of Awards.   Awards under this Section 9 may be granted in the form of a Stock Grant.  A Stock Grant may also be awarded in combination with NSOs, and such an Award may provide that the Stock Grant will be forfeited in the event that the related NSOs are exercised.

(b)     Stock Grant Agreement.   Each Stock Grant awarded under the Plan shall be evidenced by a Stock Grant Agreement between the Participant and the Company.  Each Stock Grant Agreement shall specify the number of Shares to which the Stock Grant pertains and is subject to adjustment of such number in accordance with Section 11. Each Stock Grant shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan that the Committee deems appropriate for inclusion in the applicable Stock Grant Agreement (including without limitation any performance conditions). The provisions of the Stock Grant Agreements entered into under the Plan need not be identical.

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(c)     Payment for Stock Grants.   Stock Grants may be issued with or without cash consideration under the Plan.

(d)     Vesting Conditions.   Each Stock Grant may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Grant Agreement. A Stock Grant Agreement may provide for accelerated vesting in the event of the Participant’s death, Disability or retirement or other events.

(e)     Voting and Dividend Rights.   The holder of a Stock Grant awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders. A Stock Grant Agreement, however, may require that the holder of such Stock Grant invest any cash dividends received in additional Shares subject to the Stock Grant. Such additional Shares subject to the Stock Grant shall be subject to the same conditions and restrictions as the Stock Grant with respect to which the dividends were paid.  Such additional Shares subject to the Stock Grant shall not reduce the number of Shares available for issuance under Section 5.

SECTION 10.    TERMS AND CONDITIONS OF STOCK UNITS.

(a)     Stock Unit Agreement.   Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement between the Participant and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan (including without limitation any performance conditions).   The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical.    Stock Units may be granted in consideration of a reduction in the Participant’s other compensation.

(b)     Number of Shares.  Each Stock Unit Agreement shall specify the number of Shares to which the Stock Unit Grant pertains and is subject to adjustment of such number in accordance with Section 11.

(c)     Payment for Awards.   To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients.

(d)     Vesting Conditions.   Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in portions, upon satisfaction of the conditions specified in the Stock Unit Agreement.   A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant’s death, Disability or retirement or other events.

(e)     Voting and Dividend Rights.   The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents.  Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the Stock Unit is outstanding.  Dividend equivalents may be converted into additional Stock Units.   Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend equivalents which are not paid shall be subject to the same conditions and restrictions as the Stock Units to which they attach.

(f)     Form and Time of Settlement of Stock Units.   Settlement of vested Stock Units may be made in the form of (a) cash, (b) Shares or (c) any combination of cash and Shares, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award. Methods of converting Stock Units into cash may include, without limitation, a method based on the average Fair Market Value of Shares over a series of trading days.  Vested Stock Units may be settled in a lump sum.   The distribution will occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed.   Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 11.

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(g)     Creditors’ Rights.   A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement.

SECTION 11.   PROTECTION AGAINST DILUTION.

(a)     Automatic Adjustments.   In the event of a stock-split effected through a declaration of a dividend payable in Shares, the number of Shares available for future Awards under Section 5(a), the per person Share limits under Section 5(c), the number of Shares covered by each outstanding Award, and the Exercise Price under each outstanding Option or SAR shall automatically adjust, as of the date the dividend is paid, in the same proportion as the stock-split.

(b)     Discretionary Adjustments.   In the event of a subdivision of the outstanding Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Shares (by reclassification or otherwise) into a lesser number of Shares, a recapitalization, reorganization, merger, liquidation, spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its reasonable discretion, deems appropriate in order to prevent the dilution or enlargement of rights hereunder in one or more of:

 

(i)

the number of Shares available for future Awards under Section 5(a) and the per person Share limits under Section 5(c);

 

 

 

 

(ii)

the number of Shares covered by each outstanding Award; or

 

 

 

 

(iii)

the Exercise Price under each outstanding Option or SAR.

(c)     Participant Rights.   Except as provided in this Section 11, a Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. If by reason of an adjustment pursuant to this Section 11 a Participant’s Award covers additional or different shares of stock or securities, then such additional or different shares and the Award in respect thereof shall be subject to all of the terms, conditions and restrictions which were applicable to the Award and the Shares subject to the Award prior to such adjustment.

(d)     Fractional Shares.   Any adjustment of Shares pursuant to this Section 11 shall be rounded down to the nearest whole number of Shares.  Under no circumstances shall the Company be required to authorize or issue fractional Shares and no consideration must be provided as a result of any fractional Shares not being issued or authorized.

SECTION 12. EFFECT OF A CHANGE IN CONTROL.

(a)     Merger or Reorganization. In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization, unless the merger or other reorganization constitutes a Change in Control and as such may be subject to Section 12(b). The merger or other reorganization agreement may provide, without limitation, for the assumption of outstanding Awards by the surviving corporation or its parent, for their continuation by the Company (if the Company is a surviving corporation), for accelerated vesting, or for their cancellation with or without consideration, in all cases without the consent of the Participant. If the agreement of merger or reorganization does not provide for the assumption, continuation or acceleration of the outstanding Awards, all outstanding Awards shall fully vest and be fully exercisable immediately prior to the merger or other reorganization.

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(b)     Acceleration.   The Committee may determine, at the time of granting an Award or thereafter, that such Award shall become fully vested and exercisable as to all Shares subject to such Award in the event that a Change in Control occurs with respect to the Company.

SECTION 13.    LIMITATIONS ON RIGHTS.

(a)     Retention Rights.   Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain an employee of the Company, a Parent, a Subsidiary or an Affiliate. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate the Service of any person at any time, and for any reason, subject to applicable laws, the Company’s Certificate of Incorporation and Bylaws and a written employment agreement (if any).

(b)     Stockholders’ Rights.   A Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any Shares covered by his or her Award until such person becomes entitled to receive such Common Stock, has satisfied any applicable withholding or tax obligations relating to the Award and has been issued the applicable stock certificate by the Company. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date when such certificate is issued, except as expressly provided in Section 11.

(c)     Restrictions on Shares.   Any Shares issued pursuant to an Award shall be subject to such rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. In no event shall the Company be required to issue fractional Shares under this Plan.

(d)     Transferability of Awards.   Except as otherwise provided in the applicable Stock Option Agreement, SAR Agreement, Stock Grant Agreement or Stock Unit Agreement, and then only to the extent permitted by applicable law, no Option, SAR, unvested Stock Grant, or Stock Unit shall be transferable by the Participant other than by will or by the laws of descent and distribution. Except as otherwise provided in the applicable Stock Option Agreement or SAR Agreement, an Option or SAR may be exercised during the lifetime of the Participant only or by the Participant or his or her guardian or legal representative.  No Option, SAR, unvested Stock Grant, Stock Unit or interest therein may be anticipated, assigned, pledged or hypothecated by the Participant during his or her lifetime, or be made subject to execution, attachment or similar creditor’s process, whether voluntarily, involuntarily or by operation of law. Any act in violation of this Section 13(d) shall be void.

(e)     Regulatory Requirements.   Any other provision of the Plan notwithstanding, the obligation of the Company to issue Shares under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Company reserves the right to restrict, in whole or in part, the delivery of Shares pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such Shares, to their registration, qualification or listing or to an exemption from registration, qualification or listing.

(f)     Dissolution.  To the extent not previously exercised or settled, all outstanding Options, SARs, unvested Stock Grants and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company.

SECTION 14. WITHHOLDING TAXES.

(a)     General.   A Participant shall make arrangements acceptable to the Company for the satisfaction of any withholding tax obligations that arise in connection with his or her Award. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied. The Committee may, in its discretion, also permit a Participant to satisfy withholding or income tax obligations related to an Award through a Cashless Exercise or through a sale of Shares underlying the Award.

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(b)     Share Withholding.   If a public market for the Company’s Shares exists, the Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired. Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. In no event may the Company allow Shares to be withheld in an amount that exceeds the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes. Any payment of taxes by assigning Shares to the Company may be subject to restrictions, including, but not limited to, any restrictions required by rules of the SEC.

SECTION 15.    DURATION AND AMENDMENTS.

(a)     Term of the Plan.   The Plan, as set forth herein, subject to the approval of the Company’s stockholders, shall become effective on the Effective Date. In the event that the stockholders fail to approve the Plan on or before the Effective Date, the Plan shall be null and void. The Plan shall terminate on the date that is ten (10) years after its Effective Date and may be terminated on any earlier date pursuant to Section 15(b). This Plan will not in any way affect outstanding awards that were, or awards that may be, issued under other Company employee stock option plans.

(b)     Right to Amend or Terminate the Plan.   The Board may amend or terminate the Plan at any time and for any reason.   The termination of the Plan, or any amendment thereof, shall not affect any Award previously granted under the Plan. No Awards shall be granted under the Plan after the Plan’s termination. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules.

SECTION 16.    EXECUTION.

To record the adoption of the Plan by the Board, the Company has caused its duly authorized officer to execute this Plan on behalf of the Company.

 

GOLDEN WEST FINANCIAL CORPORATION

 

 

 

 

 

 

 

By

/s/ MICHAEL ROSTER

 

 


 

 

Michael Roster
Executive Vice President and Secretary