**Exh 10.2**

 

**INVESTORS FINANCIAL SERVICES CORP.**

 

**1995 NON-EMPLOYEE DIRECTOR STOCKOPTION PLAN**

 

**AMENDED AND RESTATED AS OF FEBRUARY12, 2002**

 

 

 

           1.          Purpose.  This Non-Qualified Stock Option Plan, to beknown as the 1995 Non-Employee Director Stock Option Plan (hereinafter, this“Plan”) is intended to promote the interests of Investors Financial ServicesCorp. (hereinafter, the “Company”) by providing an inducement to obtain andretain the services of qualified persons who are not employees or officers ofthe Company to serve as members of its Board of Directors (the “Board”).

 

           2.          AvailableShares.  The total number of sharesof Common Stock, par value $.01 per share, of the Company (the “Common Stock”)for which options may be granted under this Plan shall not exceed 400,000shares, subject to adjustment in accordance with paragraph 12 of thisPlan.  Shares subject to this Plan areauthorized but unissued shares or shares that were once issued and subsequentlyreacquired by the Company.  If anyoptions granted under this Plan are surrendered before exercise or lapsewithout exercise, in whole or in part, the shares reserved therefor shallcontinue to be available under this Plan. If, in accordance with the Plan, anoptionee uses shares of common stock of the Company to pay the exercise priceof an Option, only the number of shares issued net of shares tendered inpayment of such exercise price shall be deemed to be issued for purposes ofdetermining the maximum number of shares available under the Plan.

 

           3.          Administration.  This Plan shall be administered by the Boardor by a committee appointed by the Board (the “Committee”).  In the event the Board fails to appoint orrefrains from appointing a Committee, the Board shall have all power andauthority to administer this Plan.  Insuch event, the word “Committee” wherever used herein shall be deemed to meanthe Board.  The Committee shall, subjectto the provisions of the Plan, have the power to construe this Plan, todetermine all questions hereunder, and to adopt and amend such rules andregulations for the administration of this Plan as it may deem desirable.  No member of the Board or the Committeeshall be liable for any action or determination made in good faith with respectto this Plan or any option granted under it.

 

           4.          AutomaticGrant of Options. Subject to the availability of shares under thisPlan,  each person who is a member ofthe Board immediately after the Annual Meeting of Stockholders of the Company(the “Annual Meeting”) and who is not an employee or officer of the Company (a“Non-Employee Director”) shall be automatically  granted, on the date of such Annual Meeting, without furtheraction by the Board, an option to purchase 2,500 shares of the Common Stock.  The grant shall be automatic and nondiscretionary.

 

           5.          Electionto Receive Stock Options.  Inaddition to the automatic grant of options under Section 4, subject to theavailability of shares under this Plan, each Non-Employee Director may make anelection (the “Election”) to receive, in lieu of his or her cash retainer,options to acquire shares of Common Stock. The Election must be in writing and must be delivered to the Secretaryof the Company at least six months prior to the scheduled payment date of thecash retainer which it is intended to replace.

 

           (a)         AnyElection shall be irrevocable for six months and may only be revoked after suchsix-month period by a written revocation which shall take effect six monthsafter receipt of such revocation by the Company.

 

           (b)        EachNon-Employee Director who elects to receive options in lieu of his or her cashretainer shall be granted an option to purchase shares on the first day of eachcalendar quarter provided that at least six months has lapsed since theElection.  The total number of shares ofstock to be covered by the option 

 

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shall be equal tothe quotient obtained by dividing the cash retainer by the value of an optionon the date of grant as determined using the Black-Scholes model.

 

           6.          ReloadOptions.  If an optionee makespayment for the exercise of an option granted hereunder through the delivery tothe Company of shares of the Company’s Common Stock pursuant to paragraph 11(b)of this Plan, such optionee shall be granted automatically a new “reload” stockoption.  Such new “reload” stock optionshall (i) be an option to purchase the number of shares provided asconsideration for the exercise price in connection with the exercise of theoriginal stock option, (ii) have a per share exercise price equal to the fairmarket value of such shares as of the date of exercise of the original stockoption, (iii) be immediately exercisable and have a term of ten years from thedate of the original stock option, and (iv) otherwise have the same terms andconditions as the original stock option, except that it will not provide forthe automatic grant of additional reload stock options upon its exercise.

 

           7.          OptionPrice.  The purchase price of thestock covered by an option granted pursuant to this Plan shall be 100% of thefair market value of such shares on the day the option is granted.  The option price will be subject toadjustment in accordance with the provisions of paragraph 12 of this Plan.  For purposes of this Plan, if, at the timean option is granted under the Plan, the Company’s Common Stock is publiclytraded, “fair market value” shall be determined as of the date of grant or, ifprices or quotes are unavailable for such date, the last business day for whichsuch prices or quotes are available prior to the date of grant and shall mean(i) the average (on that date) of the high and low prices of the CommonStock on the principal national securities exchange on which the Common Stockis traded, if the Common Stock is then traded on a national securitiesexchange; or (ii) the last reported sale price (on that date) of theCommon Stock on the Nasdaq National Market, if the Common Stock is not thentraded on a national securities exchange; or (iii) the closing bid price(or average of bid prices) last quoted (on that date) by an establishedquotation service for over-the-counter securities, if the Common Stock is notreported on the Nasdaq National Market List. Notwithstanding, the purchase price of the stock underlying the optionsgranted upon the pricing of the Company’s initial public offering pursuant toSection 4(a)(ii) above shall be the initial public offering price of theCompany’s Common Stock.  However, if theCommon Stock is not publicly traded at the time an option is granted under thePlan, “fair market value” shall be deemed to be the fair value of the CommonStock as determined by the Committee after taking into consideration allfactors which it deems appropriate, including, without limitation, recent saleand offer prices of the Common Stock in private transactions negotiated atarm’s length.

 

           8.          Periodof Option.  Unless sooner terminatedin accordance with the provisions of paragraph 10 of this Plan, an optiongranted hereunder shall expire on the date which is ten (10) years after thedate of grant of the option. Notwithstanding, options granted prior to January 12, 1999 shall expireon the date which is five (5) years after the date of grant.

 

           9.          (a)         Vesting of Shares andNon-Transferability of Options. Options granted under this Plan shall not be exercisable until theybecome vested.  Options granted underSection 4 of this Plan shall vest in the optionee and thus become exercisablein 36 equal monthly installments beginning on the date of grant, provided thatthe optionee has continuously served as a member of the Board through suchvesting date.  Options granted underSection 5 of this Plan shall vest in the optionee and thus become exercisableon the date of grant.

 

           The number of shares as to whichoptions may be exercised shall be cumulative, so that once the option shallbecome exercisable as to any shares it shall continue to be exercisable as tosaid shares, until expiration or termination of the option as provided in thisPlan.

 

                        (b)        Non-transferability.  Except as set forth below, (i) no optiongranted pursuant to this Plan shall be transferable by any grantee other thanby will or by the laws of descent and distribution and (ii) options grantedpursuant to this Plan may be exercised during the grantee's lifetime only bythe grantee (or, if the grantee is disabled and so long as the option remainsexercisable, by the grantee's duly appointed guardian or other legalrepresentative).  However, a grantee maytransfer an option granted pursuant to this Plan pursuant to a valid domesticrelations order or to, or for the benefit of, family members or to otherpersons for estate planning purposes. Following any such transfer, any such option shall continue to besubject to the same terms and conditions as were applicable immediately priorto transfer, and references to a grantee, to the extent relevant in thecontext, shall include references to authorized transferees.  The events and consequences of the granteeceasing to be a member of the Board set forth in a grantee's agreement pursuantto which such option is granted shall continue to be applied and triggered withreference to the original grantee, following which the option shall beexercisable by the transferee only to the extent and for the periods specifiedin such agreement.

 

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           10.        Terminationof Option Rights.

 

                        (a)         In the event an optionee ceases to be amember of the Board for any reason other than retirement, death or permanentdisability, any then unexercised portion of options granted to such optioneeshall, to the extent not then vested, immediately terminate and become void;and any portion of an option which is then vested but has not been exercised atthe time the optionee so ceases to be a member of the Board shall remainexercisable until the scheduled expiration date of the option.

 

                        (b)        In the event an optionee ceases to be amember of the Board by reason of his or her retirement, the Board may, butshall not be obligated to, accelerate and fully vest all unvested options heldby the retiring optionee.  If the Boarddetermines to accelerate the retiring optionee’s unvested options, allunexercised options shall be exercisable by the optionee until the scheduledexpiration date of the option.

 

                        (c)         In the event that an optionee ceases tobe a member of the Board by reason of his or her death or permanent disability,any option granted to such optionee shall be immediately and automaticallyaccelerated and become fully vested and all unexercised options shall beexercisable by the optionee (or by the optionee’s personal representative, heiror legatee, in the event of death) until the scheduled expiration date of theoption.

 

           11.        Exerciseof Option.  Subject to the terms andconditions of this Plan and the option agreements, an option granted hereundershall, to the extent then exercisable, be exercisable in whole or in part bygiving written notice to the Company by mail or in person addressed to theCompany, at its principal executive offices, stating the number of shares withrespect to which the option is being exercised, accompanied by payment in fullfor such shares.  Payment may be(a) in United States dollars in cash or by check, (b)  throughdelivery of shares of Common Stock having a fair market value equal as of thedate of the exercise to the cash exercise price of the Option,(c) consistent with applicable law, through the delivery of an assignmentto the Company of a sufficient amount of the proceeds from the sale of theCommon Stock acquired upon exercise of the option and an authorization to thebroker or selling agent to pay that amount to the Company, which sale shall beat the participant’s direction at the time of exercise, or (d) at thediscretion of the Committee, by any combination of (a), (b) and (c) above.  There shall be no such exercise at any onetime as to fewer than one hundred (100) shares or all of the remainingshares then purchasable by the person or persons exercising the option, iffewer than one hundred (100) shares. The Company’s transfer agent shall, on behalf of the Company, prepare acertificate or certificates representing such shares acquired pursuant toexercise of the option, shall register the optionee as the owner of such shareson the books of the Company and shall cause the fully executed certificate(s)representing such shares to be delivered to the optionee as soon as practicableafter payment of the option price in full. The holder of an option shall not have any rights of a stockholder withrespect to the shares covered by the option, except to the extent that one ormore certificates for such shares shall be delivered to him or her upon the dueexercise of the option.

 

           12.        AdjustmentsUpon Changes in Capitalization and Other Events.  Upon the occurrence of any of the following events, an optionee’srights with respect to options granted to him or her hereunder shall beadjusted as hereinafter provided:

 

                                             (a)         Stock Dividends and Stock Splits.  If the shares of Common Stock shall besubdivided or combined into a greater or smaller number of shares or if theCompany shall issue any shares of Common Stock as a stock dividend on itsoutstanding Common Stock, the number of shares of Common Stock set forth inSection 4 hereof and the number of shares of Common Stock deliverable upon theexercise of outstanding options shall be appropriately increased or decreasedproportionately, and appropriate adjustments shall be made in the purchaseprice per share to reflect such subdivision, combination or stock dividend.

 

                                             (b)        Recapitalization Adjustments.  If the Company is to be consolidated with oracquired by another entity in a merger, sale of all or substantially all of theCompany’s assets or otherwise, each option granted under this Plan which isoutstanding but unvested as of the effective date of such event shall becomeexercisable in full 15 days prior to the effective date of such event.  In the event of a reorganization,recapitalization, merger, consolidation, or any other change in the corporatestructure 

 

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                                or shares of the Company, to the extentpermitted by Rule 16b-3 under the Securities Exchange Act of 1934,adjustments in the number and kind of shares authorized by this Plan and in thenumber and kind of shares covered by, and in the option price of outstandingoptions under this Plan necessary to maintain the proportionate interest of theoptionee and preserve, without exceeding, the value of such option, shall bemade.  Notwithstanding the foregoing, nosuch adjustment shall be made which would, within the meaning of any applicableprovisions of the Internal Revenue Code of 1986, as amended, constitute amodification, extension or renewal of any Option or a grant of additionalbenefits to the holder of an Option.

 

                                             (c)         Issuances of Securities.  Except as expressly provided herein, noissuance by the Company of shares of stock of any class, or securitiesconvertible into shares of stock of any class, shall affect, and no adjustmentby reason thereof shall be made with respect to, the number or price of sharessubject to options.  No adjustmentsshall be made for dividends paid in cash or in property other than securitiesof the Company.

 

                                             (d)        Adjustments.  Upon the happening of any of the foregoingevents, the class and aggregate number of shares set forth inparagraphs 2, 4, 5 and 6 of this Plan that are subject to options whichpreviously have been or subsequently may be granted under this Plan shall alsobe appropriately adjusted to reflect such events.  The Board shall determine the specific adjustments to be madeunder this paragraph 12 and its determination shall be conclusive.

 

           13.        Restrictionson Issuance of Shares. Notwithstanding the provisions of paragraphs 4, 5, 6 and 12 of thisPlan, the Company shall have no obligation to deliver any certificate orcertificates upon exercise of an option until one of the following conditionsshall be satisfied:

 

                                            (i)           The issuance of shares with respectto which the option has been exercised is at the time of the issue of suchshares effectively registered under applicable Federal and state securitieslaws as now in force or hereafter amended; or

 

                                           (ii)           Counsel for the Company shall havegiven an opinion that the issuance of such shares is exempt from registrationunder Federal and state securities laws as now in force or hereafter amended;and the Company has complied with all applicable laws and regulations withrespect thereto, including without limitation all regulations required by anystock exchange upon which the Company’s outstanding Common Stock is thenlisted.

 

           14.        Legendon Certificates.  The certificatesrepresenting shares issued pursuant to the exercise of an option grantedhereunder shall carry such appropriate legend, and such written instructions shallbe given to the Company’s transfer agent, as may be deemed necessary oradvisable by counsel to the Company in order to comply with the requirements ofthe Securities Act of 1933 or any state securities laws.

 

           15.        Representationof Optionee.  If requested by theCompany, the optionee shall deliver to the Company written representations andwarranties upon exercise of the option that are necessary to show compliancewith Federal and state securities laws, including representations andwarranties to the effect that a purchase of shares under the option is made forinvestment and not with a view to their distribution (as that term is used inthe Securities Act of 1933).

 

           16.        OptionAgreement.  Each option grantedunder the provisions of this Plan shall be evidenced by an option agreement,which agreement shall be duly executed and delivered on behalf of the Companyand by the optionee to whom such option is granted.  The option agreement shall contain such terms, provisions andconditions not inconsistent with this Plan as may be determined by the officerexecuting it.

 

           17.        Terminationand Amendment of Plan.  Options mayno longer be granted under this Plan after October 1, 2005, and this Plan shallterminate when all options granted or to be granted hereunder are no longeroutstanding.  The Board may at any timeterminate this Plan or make such modification or amendment thereof as it deemsadvisable; provided, however, that the Board may not, withoutapproval by 

 

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the affirmativevote of the holders of a majority of the shares of Common Stock present inperson or by proxy and voting on such matter at a meeting, (a) increasethe maximum number of shares for which options may be granted under this Plan(except by adjustment pursuant to Section 12), (b) materially modifythe requirements as to eligibility to participate in this Plan,(c) materially increase benefits accruing to option holders under thisPlan or (d) amend this Plan in any manner which would causeRule 16b-3 under the Securities Exchange Act (or any successor or amendedprovision thereof) to become inapplicable to this Plan; and providedfurtherthat the provisions of this Plan specified in Rule 16b-3(c)(2)(ii)(A) (orany successor or amended provision thereof) under the Securities Exchange Actof 1934 (including without limitation, provisions as to eligibility, amount,price and timing of awards) may not be amended more than once every six months,other than to comport with changes in the Internal Revenue Code, the EmployeeRetirement Income Security Act, or the rules thereunder.  Termination or any modification or amendmentof this Plan shall not, without consent of a participant, affect his or herrights under an option previously granted to him or her.

 

           18.        Withholdingof Income Taxes.  Upon the exerciseof an option, the Company, in accordance with Section 3402(a) of the InternalRevenue Code, may require the optionee to pay withholding taxes in respect ofamounts considered to be compensation includible in the optionee’s grossincome.

 

           19.        Compliancewith Regulations.  It is theCompany’s intent that the Plan comply in all respects with Rule 16b-3under the Securities Exchange Act of 1934 (or any successor or amendedprovision thereof) and any applicable Securities and Exchange Commissioninterpretations thereof.  If anyprovision of this Plan is deemed not to be in compliance with Rule 16b-3,the provision shall be null and void.

 

           20.        GoverningLaw.  The validity and constructionof this Plan and the instruments evidencing options shall be governed by thelaws of the Commonwealth of Massachusetts, without giving effect to theprinciples of conflicts of law thereof.

 

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