Document:

Prepared by MerrillDirect

SILICON VALLEY BANCSHARES

1997 EQUITY INCENTIVE PLAN

Adopted December 19, 1996

Approved by Shareholders April 17, 1997

Amended as of September 8, 1997

Amended as of July 20, 2000

Amended as of February 15, 2001

Amended as of April 19, 2001

Amended as of May 16, 2001

1.                       PURPOSES.

             (a)                      The
purpose of the Plan is to provide a means by which selected Employees and
Directors of and Consultants to the Company, and its Affiliates, may be given
an opportunity to benefit from increases in value of the stock of the Company
through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses, (iv) rights to purchase restricted stock, and (v)
stock appreciation rights, all as defined below.

             (b)                      The
Company, by means of the Plan, seeks to retain the services of persons who are
now Employees or Directors of or Consultants to the Company or its Affiliates,
to secure and retain the services of new Employees, Directors and Consultants,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates.

             (c)                      The
Company intends that the Stock Awards issued under the Plan shall, in the
discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof.  All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and
in such form as issued pursuant to Section 6, and a separate certificate or
certificates will be issued for shares purchased on exercise of each type of
Option.

2.                       DEFINITIONS.

             (a)                      "Affiliate" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.

             (b)                      "Board" means the Board of Directors of the Company.

             (c)                      "Code" means the Internal Revenue Code of 1986, as amended.

             (d)                      "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.

             (e)                      "Company" means Silicon Valley Bancshares, a Delaware
corporation.

             (f)                       "Concurrent Stock Appreciation Right"
or "Concurrent Right" means a right granted pursuant to subsection 8(b)(2)
of the Plan.

             (g)                      "Consultant" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant"
shall not include Directors who are paid only a director's fee by the Company
or who are not compensated by the Company for their services as Directors.

             (h)                      "Continuous Status as an Employee, Director or Consultant"
means that the
service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
The Board or the chief executive officer of the Company may determine,
in that party's sole discretion, whether Continuous Status as an Employee,
Director or Consultant shall be considered interrupted in the case of:  (i) any leave of absence approved by
the Board or the chief executive officer of the Company, including sick leave,
military leave, or any other personal leave; or (ii) transfers between the
Company, Affiliates or their successors.

             (i)                       "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation
is required to be reported to shareholders under the Exchange Act, as
determined for purposes of Section 162(m) of the Code.

             (j)                       "Director" means a member of the Board.

             (k)                     "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company.  Neither service as a Director nor payment of
a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.

             (l)                       "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

             (m)                     "Fair Market Value" means, as of any date, the value of the common stock
of the Company determined as follows:

                           (1)                      If the common stock is listed on any established
stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of common stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Company's common stock) on the day of determination,
as reported in The Wall Street Journal
or such other source as the Board deems reliable.

                           (2)                      In the absence of such markets for the common stock,
the Fair Market Value shall be determined in good faith by the Board.

 

             (n)                      "Incentive Stock Option" means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

             (o)                      "Independent Stock Appreciation Right" or "Independent Right" means a right granted pursuant to subsection 8(b)(3)
of the Plan.

             (p)                      “Non-Employee Director” means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S–K promulgated pursuant to the
Securities Act (“Regulation S-K”)), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a “non-employee director” for purposes of Rule 16b-3.

             (q)                      "Nonstatutory Stock Option" means an Option not intended to qualify as an
Incentive Stock Option.

             (r)                      "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

             (s)                      "Option" means a stock option granted pursuant to the Plan.

             (t)                       "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.  Each Option Agreement shall be subject to
the terms and conditions of the Plan.

             (u)                      "Optionee" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

             (v)                      "Outside Director" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation"
(within the meaning of the Treasury regulations promulgated under Section
162(m) of the Code), is not a former employee of the Company or an "affiliated
corporation" receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the Company
or an "affiliated corporation" at any time, and is not currently
receiving direct or indirect remuneration from the Company or an
"affiliated corporation" for services in any capacity other than as a
Director, or (ii) is otherwise considered an "outside director"
for purposes of Section 162(m) of the Code.

             (w)                     "Plan" means this 1997 Equity Incentive Plan.

             (x)                      "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect with respect to the Company at the
time discretion is being exercised regarding the Plan.

             (y)                      "Securities Act" means the Securities Act of 1933, as amended.

             (z)                      "Stock Appreciation Right" means any of the various types of rights which may
be granted under Section 8 of the Plan.

             (aa)                    "Stock Award" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.

             (bb)                    "Stock Award Agreement" means a written agreement between the Company and a
holder of a Stock Award evidencing the terms and conditions of an individual
Stock Award grant.  Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan.

             (cc)                    "Tandem Stock Appreciation Right" or "Tandem Right"
means a right
granted pursuant to subsection 8(b)(1) of the Plan.

3.          ADMINISTRATION.

             (a)                      The Plan shall be administered by the Board unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).

             (b)                      The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

                           (1)                      To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock
Option, a Nonstatutory Stock Option, a stock bonus, a right to purchase
restricted stock, a Stock Appreciation Right, or a combination of the
foregoing; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; whether a person shall be permitted to
receive stock upon exercise of an Independent Stock Appreciation Right; and the
number of shares with respect to which a Stock Award shall be granted to each
such person.

                           (2)                      To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration.  The Board, in the
exercise of this power, may correct any defect, omission or inconsistency in
the Plan or in any Stock Award Agreement, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

                           (3)                      To amend the Plan or a Stock Award as provided in
Section 14.

                           (4)                      Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the provisions of the
Plan.

             (c)                      The Board may delegate administration of the Plan to
a committee or committees of the Board composed of one (1) or more members (the
"Committee").  In the
discretion of the Board, the Committee may be composed of two (2) or more
Non-Employee Directors and/or Outside Directors.  If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, (and references in this Plan to the Board
shall thereafter be to the Committee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board.  The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan.

4.                       SHARES
SUBJECT TO THE PLAN.

             (a)                      Subject to the provisions of Section 13 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate seven-million-eight-hundred
thousand (7,800,000) shares of the Company's common stock.  If any Stock Award shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in
full, the stock not acquired under such Stock Award shall revert to and again
become available for issuance under the Plan. 
Shares subject to Stock Appreciation Rights exercised in accordance with
Section 8 of the Plan shall not be available for subsequent issuance under the
Plan.

             (b)                      The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.

5.                       ELIGIBILITY.

             (a)                      Incentive Stock Options and Stock Appreciation Rights
appurtenant thereto may be granted only to Employees.  Stock Awards other than Incentive Stock Options and Stock
Appreciation Rights appurtenant thereto may be granted only to Employees,
Directors or Consultants.

             (b)                      No person shall be eligible for the grant of an
Incentive Stock Option if, at the time of grant, such person owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates unless the exercise price of such Option is
at least one hundred ten percent (110%) of the Fair Market Value of such stock
at the date of grant and the Option is not exercisable after the expiration of
five (5) years from the date of grant.

             (c)                      Subject to the provisions of Section 13 relating to
adjustments upon changes in stock, no person shall be eligible to be granted
Options and Stock Appreciation Rights covering more than two hundred fifty
thousand (250,000) shares of the Company's common stock in any calendar year.

             (d)                      Subject to the provisions of Section 13 relating to
adjustments upon changes in stock, the total number of shares available to
grant as stock bonus awards or under restricted stock purchase agreements shall
not exceed two hundred fifty thousand (250,000) shares of the Company's common
stock in any calendar year.

 

6.                       OPTION
PROVISIONS.

             Each
Option shall be in such form and shall contain such terms and conditions as the
Board shall deem appropriate.  The
provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:

             (a)                      Term.  No Option shall be exercisable after the expiration
of ten (10) years from the date it was granted.

             (b)                      Price.  The exercise price of each Incentive Stock Option
shall be not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted; the exercise
price of each Nonstatutory Stock Option shall be not less than eighty-five
percent (85%) the Fair Market Value of the stock subject to the Option on the
date the Option is granted. 
Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a Nonstatutory Stock Option) may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.

             (c)                      Consideration.  The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or
(ii) at the discretion of the Board or the Committee, at the time of the
grant of the Option, (A) by delivery to the Company of other common stock
of the Company, (B) according to a deferred payment or other arrangement (which
may include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or
to whom the Option is transferred pursuant to subsection 6(d), or (C) in any
other form of legal consideration acceptable to the Board.  In the case of any deferred payment
arrangement, interest shall be compounded at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other
than amounts stated to be interest under the deferred payment arrangement.

             (d)                      Transferability.  An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock
Option is granted only by such person. 
A Nonstatutory Stock Option shall only be transferable by the Optionee
upon such terms and conditions as are set forth in the Option Agreement for
such Nonstatutory Stock Option, as the Board or the Committee shall determine
in its sole discretion.  The person to
whom the Option is granted may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event
of the death of the Optionee, shall thereafter be entitled to exercise the
Option.

             (e)                      Vesting.  The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal).  The Option
Agreement may provide that from time to time during each of such installment
periods, the Option may become exercisable ("vest") with respect to
some or all of the shares allotted to that period, and may be exercised with
respect to some or all of the shares allotted to such period and/or any prior
period as to which the Option became vested but was not fully exercised.  The Option may be subject to such other
terms and conditions on the time or times when it may be exercised (which may
be based on performance or other criteria) as the Board may deem
appropriate.  The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.

             (f)                       Termination of Employment
or Relationship as a Director or Consultant. 
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability or
for Cause), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement.  If, at
the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan.  If, after termination, the Optionee does not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.

             In the
event an Optionee's Continuous Status as an Employee, Director or Consultant
terminates for Cause, then the Option shall immediately terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.  "Cause"
shall be defined as an act of embezzlement, fraud, dishonesty, or breach of
fiduciary duty to the Company, a deliberate disregard of the rules of the
Company which results in loss, damage or injury to the Company, any
unauthorized disclosure of any of the secrets or confidential information of
the Company, inducing any client or customer of the Company to break any
contract with the Company or inducing any principal for whom the Company acts
as agent to terminate such agency relations, or engaging in any conduct which
constitutes unfair competition with the Company, or any act which results in
Optionee being removed from any office of the Company by any bank regulatory
agency.

             An Optionee's Option Agreement may also provide that if
the exercise of the Option following the termination of the Optionee's
Continuous Status as an Employee, Director, or Consultant (other than upon the
Optionee's death or disability) would result in liability under Section 16(b)
of the Exchange Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the Option Agreement, or (ii)
the tenth (10th) day after the last date on which such exercise would result in
such liability under Section 16(b) of the Exchange Act.  Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant (other
than upon the Optionee's death or disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option, or (ii) the expiration
of a period of three (3) months after the termination of the Optionee's
Continuous Status as an Employee, Director or Consultant during which the
exercise of the Option would not be in violation of such registration
requirements.

             (g)                      Disability of
Optionee.  In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates as a result of the Optionee's disability, the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement.  If, at
the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan.  If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.

             (h)         
Death of Optionee.  In the event an Optionee's Continuous Status as an
Employee, Director or Consultant terminates as a result of Optionee's death,
the Option may be exercised (to the extent the Optionee was entitled to
exercise the Option as of the date of death) by the Optionee's estate, by a
person who acquired the right to exercise the Option by bequest or inheritance
or by a person designated to exercise the option upon the Optionee's death
pursuant to subsection 6(d), but only within the period ending on the earlier
of (i) the date twelve (12) months following the date of death (or such longer
or shorter period specified in the Option Agreement), or (ii) the expiration of
the term of such Option as set forth in the Option Agreement.  If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan.  If, after
death, the Option is not exercised within the time specified herein, the Option
shall terminate, and the shares covered by such Option shall revert to and
again become available for issuance under the Plan.

             (i)                       Early Exercise.  The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option.  Any unvested shares so purchased may be
subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.

 

7.          TERMS OF
STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

             Each stock bonus or restricted
stock purchase agreement shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate.  The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate agreements need not be identical, but each
stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:

             (a)         Purchase Price.  The purchase price under each restricted stock purchase agreement
shall be such amount as the Board or Committee shall determine and designate in
such Stock Award Agreement, but in no event shall the purchase price be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date
such award is made. Notwithstanding the foregoing, the Board or the Committee
may determine that eligible participants in the Plan may be awarded stock
pursuant to a stock bonus agreement in consideration for past services actually
rendered to the Company or for its benefit.

             (b)         Transferability.  Rights under a stock bonus or restricted stock purchase agreement
shall be transferable by the grantee only upon such terms and conditions as are
set forth in the applicable Stock Award Agreement, as the Board or the
Committee shall determine in its discretion, so long as stock awarded under
such Stock Award Agreement remains subject to the terms of the agreement.

             (c)         Consideration.  The purchase price of stock acquired pursuant to a stock purchase
agreement shall be paid either:  (i) in
cash at the time of purchase; (ii) at the discretion of the Board or the
Committee, according to a deferred payment or other arrangement with the person
to whom the stock is sold; or (iii) in any other form of legal consideration
that may be acceptable to the Board or the Committee in its discretion.  Notwithstanding the foregoing, the Board or
the Committee to which administration of the Plan has been delegated may award
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.

             (d)         Vesting. 
Shares of stock sold or awarded under the Plan may, but need not, be
subject to a repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Board or the Committee.

             (e)         Termination of Employment or Relationship as a
Director or Consultant.  In
the event a Participant's Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of stock held by that person which have not vested as of the
date of termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.

8.                       STOCK APPRECIATION RIGHTS.

             (a)                      The Board or Committee shall have full power and
authority, exercisable in its sole discretion, to grant Stock Appreciation
Rights under the Plan to Employees or Directors of or Consultants to, the
Company or its Affiliates.  To exercise
any outstanding Stock Appreciation Right, the holder must provide written
notice of exercise to the Company in compliance with the provisions of the
Stock Award Agreement evidencing such right. 
Except as provided in subsection 5(c), no limitation shall exist on the
aggregate amount of cash payments the Company may make under the Plan in
connection with the exercise of a Stock Appreciation Right.

             (b)                      Three types of Stock Appreciation Rights shall be
authorized for issuance under the Plan:

                           (1)                      Tandem Stock Appreciation
Rights.  Tandem Stock Appreciation Rights will be granted
appurtenant to an Option, and shall, except as specifically set forth in this
Section 8, be subject to the same terms and conditions applicable to the
particular Option grant to which it pertains. 
Tandem Stock Appreciation Rights will require the holder to elect
between the exercise of the underlying Option for shares of stock and the
surrender, in whole or in part, of such Option for an appreciation
distribution.  The appreciation
distribution payable on the exercised Tandem Right shall be in cash (or, if so
provided, in an equivalent number of shares of stock based on Fair Market Value
on the date of the Option surrender) in an amount up to the excess of (A) the
Fair Market Value (on the date of the Option surrender) of the number of shares
of stock covered by that portion of the surrendered Option in which the
Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.

                           (2)                      Concurrent Stock Appreciation
Rights.  Concurrent Rights will be granted appurtenant to an
Option and may apply to all or any portion of the shares of stock subject to
the underlying Option and shall, except as specifically set forth in this
Section 8, be subject to the same terms and conditions applicable to the
particular Option grant to which it pertains. 
A Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock
to which the Concurrent Right pertains. 
The appreciation distribution payable on an exercised Concurrent Right
shall be in cash (or, if so provided, in an equivalent number of shares of
stock based on Fair Market Value on the date of the exercise of the Concurrent
Right) in an amount equal to such portion as shall be determined by the Board
or the Committee at the time of the grant of the excess of (A) the aggregate
Fair Market Value (on the date of the exercise of the Concurrent Right) of the
vested shares of stock purchased under the underlying Option which have
Concurrent Rights appurtenant to them over (B) the aggregate exercise price
paid for such shares.

 

                           (3)                      Independent Stock
Appreciation Rights.  Independent Rights will be granted independently of
any Option and shall, except as specifically set forth in this Section 8, be
subject to the same terms and conditions applicable to Nonstatutory Stock
Options as set forth in Section 6. 
They shall be denominated in share equivalents.  The appreciation distribution payable on the
exercised Independent Right shall be not greater than an amount equal to the
excess of (A) the aggregate Fair Market Value (on the date of the exercise of
the Independent Right) of a number of shares of Company stock equal to the
number of share equivalents in which the holder is vested under such
Independent Right, and with respect to which the holder is exercising the
Independent Right on such date, over (B) the aggregate Fair Market Value (on
the date of the grant of the Independent Right) of such number of shares of
Company stock.  The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Independent Right.

9.                       CANCELLATION
AND RE-GRANT OF OPTIONS.

             (a)                      The Board or the Committee shall have the authority
to effect, at any time and from time to time, 
(i) the repricing of any outstanding Options and/or any Stock
Appreciation Rights under the Plan (subject to shareholder approval) and/or
(ii) with the consent of the affected holders of Options and/or Stock
Appreciation Rights, the cancellation of any outstanding Options and/or any
Stock Appreciation Rights under the Plan and the grant in substitution therefor
of new Options and/or Stock Appreciation Rights under the Plan covering the
same or different numbers of shares of stock, but having an exercise price per
share not less than eighty-five percent (85%) of the Fair Market Value (one
hundred percent (100%) of the Fair Market Value in the case of an Incentive
Stock Option) or, in the case of a 10% shareholder (as described in subsection
5(b)) receiving a new grant of an Incentive Stock Option, not less than one
hundred ten percent (110%) of the Fair Market Value) per share of stock on the
new grant date.  Notwithstanding the
foregoing, the Board or the Committee may grant an Option and/or Stock
Appreciation Right with an exercise price lower than that set forth above if
such Option and/or Stock Appreciation Right is granted as part of a transaction
to which section 424(a) of the Code applies.

             (b)                      Shares subject to an Option or Stock Appreciation
Right canceled under this Section 9 shall continue to be counted against the
maximum award of Options and Stock Appreciation Rights permitted to be granted
pursuant to subsection 5(c) of the Plan. 
The repricing of an Option and/or Stock Appreciation Right under this
Section 9, resulting in a reduction of the exercise price, shall be deemed to
be a cancellation of the original Option and/or Stock Appreciation Right and
the grant of a substitute Option and/or Stock Appreciation Right; in the event
of such repricing, both the original and the substituted Options and Stock
Appreciation Rights shall be counted against the maximum awards of Options and
Stock Appreciation Rights permitted to be granted pursuant to subsection 5(c)
of the Plan.  The provisions of this
subsection 9(b) shall be applicable only to the extent required by Section
162(m) of the Code.

             (c)         Notwithstanding the foregoing, the
Board or Committee will need shareholder approval prior to effecting the
repricing of any outstanding Options and/or any Stock Appreciation Rights under
the Plan.  Further, the Board or
Committee will need shareholder approval prior to the cancellation and
re-granting under this Section 9 of any Option or Stock Appreciation Right, if
such cancellation and re-granting is done within six (6) months of such
cancellation.

10.                     COVENANTS OF THE COMPANY.

             (a)                      During the terms of the Stock Awards, the Company
shall keep available at all times the number of shares of stock required to
satisfy such Stock Awards.

             (b)                      The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to issue and sell shares of stock upon exercise of the Stock
Award; provided, however, that this undertaking shall not require the Company
to register under the Securities Act either the Plan, any Stock Award or any
stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Stock Awards unless and
until such authority is obtained.

11.                     USE
OF PROCEEDS FROM STOCK.

             Proceeds from the sale of stock
pursuant to Stock Awards shall constitute general funds of the Company.

12.                     MISCELLANEOUS.

             (a)                      The Board shall have the power to accelerate the
time at which a Stock Award may first be exercised or the time during which a
Stock Award or any part thereof will vest pursuant to subsection 6(e), 7(d) or
8(b), notwithstanding the provisions in the Stock Award stating the time at
which it may first be exercised or the time during which it will vest.

             (b)                      Neither an Employee, Director or Consultant nor any
person to whom a Stock Award is transferred under subsection 6(d), 7(b), or
8(b) shall be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares subject to such Stock Award unless and until
such person has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.

             (c)                      Nothing in the Plan or any instrument executed or
Stock Award granted pursuant thereto shall confer upon any Employee, Director,
Consultant or other holder of Stock Awards any right to continue in the employ
of the Company or any Affiliate (or to continue acting as a Director or
Consultant) or shall affect the right of the Company or any Affiliate to
terminate the employment of any Employee with or without cause the right of the
Company's Board of Directors and/or the Company's shareholders to remove any
Director as provided in the Company's Bylaws and the provisions of the
California Corporations Code, or the right to terminate the relationship of any
Consultant subject to the terms of such Consultant's agreement with the Company
or Affiliate.

             (d)                      To the extent that the aggregate Fair Market Value
(determined at the time of grant) of stock with respect to which Incentive
Stock Options are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.

             (e)                      The Company may require any person to whom a Stock
Award is granted, or any person to whom a Stock Award is transferred pursuant
to subsection 6(d), 7(b) or 8(b), as a condition of exercising or acquiring
stock under any Stock Award, (1) to give written assurances satisfactory
to the Company as to such person's knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters, and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising
the Stock Award; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Stock
Award for such person's own account and not with any present intention of
selling or otherwise distributing the stock. 
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon
the exercise or acquisition of stock under the Stock Award has been registered
under a then currently effective registration statement under the Securities
Act, or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to
the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the stock.

             (f)                       To the extent provided by the terms of a Stock Award
Agreement, the person to whom a Stock Award is granted may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under a Stock Award by any of the following means or by a
combination of such means:  (1)
tendering a cash payment; (2) authorizing the Company to withhold shares from
the shares of the common stock otherwise issuable to the participant as a
result of the exercise or acquisition of stock under the Stock Award; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.

13.                     ADJUSTMENTS
UPON CHANGES IN STOCK.

             (a)                      If any change is made in the stock subject to the
Plan, or subject to any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person during any calendar year pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the type(s) and
number of securities and price per share of stock subject to such outstanding
Stock Awards.  Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive.  (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the
Company.)"

             (b)                      In the event of "Change in Control,"
unless otherwise determined by the Board or Committee at the time of grant, all
outstanding Stock Awards shall immediately become one hundred percent (100%)
vested, and the Board shall notify all participants that their outstanding
Stock Awards shall be fully exercisable for a period of three (3) months (or
such other period of time not exceeding six (6) months as is determined by the
Board at the time of grant) from the date of such notice, and any unexercised
Stock Awards shall terminate upon the expiration of such period.

             "Change
in Control" means the consummation of any of the following transactions:

                           (1)                      a merger or consolidation of the Company or
Bancshares with any other corporation, other than a merger or consolidation
which would result in beneficial owners of the total voting power in the
election of directors represented by the voting securities ("Voting
Securities") of the Company or Bancshares (as the case may be) outstanding
immediately prior thereto continuing to beneficially own securities
representing (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the total
Voting Securities of the Company or Bancshares, or of such surviving entity,
outstanding immediately after such merger or consolidation;

                           (2)                      the filing of a plan of liquidation or dissolution
of the Company or the closing of the sale, lease, exchange or other transfer or
disposition by the Company or Bancshares of all or substantially all of the
Company's assets;

                           (3)                      any person (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than (A) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or Bancshares, (B) a
corporation owned directly or indirectly by the shareholders of Bancshares in
substantially the same proportions as their beneficial ownership of stock in
Bancshares, or (C) Bancshares (with respect to Bancshares' ownership of the
stock of the Company), is or becomes the beneficial owner (within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, of the
securities of the Company or Bancshares representing 50% or more of the Voting
Securities; or

                           (4)                      any person (as such term is used in Sections 13(d)
or 14(d) of the Exchange Act), other than (a) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or Bancshares,
(b) a corporation owned directly or indirectly by the shareholders of
Bancshares in substantially the same proportions as their ownership of stock in
Bancshares, or (c) Bancshares (with respect to Bancshares' ownership of the
stock of the Company) is or becomes the beneficial owner (within the meaning or
Rule 13d-3 under the Exchange Act), directly or indirectly, of the securities
of the Company or Bancshares representing 25% or more of the Voting Securities
of such corporation, and within
twelve (12) months of the occurrence of such event, a change in the composition
of the Board of Directors of Bancshares occurs as a result of which sixty
percent (60%) or fewer of the directors are Incumbent Directors.

                "Incumbent
Directors" shall mean directors who either

                                        (A)        are directors of the Company as of the
date hereof;

                                        (B)        are elected, or nominated for election,
to the Board with the affirmative votes of at least a majority of the directors
of the Company who are Incumbent Directors described in (A) above at the time
of such election or nomination; or

                                        (C)        are elected, or nominated for election,
to the Board with the affirmative votes of at least a majority of the directors
of the Company who are Incumbent Directors described in (A) or (B) above at the
time of such election or nomination.

             Notwithstanding
the foregoing, "Incumbent Directors" shall not include an individual
whose election or nomination to the Board occurs in order to provide
representation for a person or group of related persons who have initiated or
encouraged an actual or threatened proxy contest relating to the election of
directors of the Company.

14.                     AMENDMENT
OF THE PLAN AND STOCK AWARDS.

             (a)                      The Board may amend,
alter, or discontinue the Plan, but no amendment, alteration or discontinuation
shall be made which would impair the rights of an optionee under any Award
theretofore granted without the optionee's or recipient's consent, except such
an amendment made to cause the Plan to comply with applicable law, stock
exchange rules or accounting rules. In addition, no such amendment shall be
made without the approval of the Company's shareholders to the extent such
approval is required by law or agreement or if such amendment would:

                           (1)             Materially increase benefits accruing to
participants under the Plan;

                           (2)             Increase the aggregate number of
securities issued under the Plan;

                           (3)             Significantly modify the eligibility
requirements for participants in the Plan; and

                           (4)             Reprice any Incentive Stock Options or
Nonstatutory Options.

             (b)                      The
Board may amend the terms of any Stock Option or other Award theretofore
granted, prospectively or retroactively, but no such amendment (a) shall cause
a qualified award to cease to qualify for the Section 162(m) of the Code or (b)
impair the rights of any holder without the holder’s consent except such an
amendment made to cause the Plan or Award to qualify for any exemption provided
by Rule 16b-3 or (c) modify the terms of any Stock Option or other Award in a
manner inconsistent with the provisions of this Plan.

             (c)                      Subject to the above provisions, the Board
shall have the authority to amend the Plan to take into account changes in law
and tax and accounting rules as well as other developments, and to grant Awards
which qualify for beneficial treatment under such rules without shareholder
approval.

15.                         TERMINATION OR SUSPENSION OF
PLAN.

             (a)                      The Board may suspend or terminate the Plan at any
time.  Unless sooner terminated, the
Plan shall terminate on December 18, 2006 which shall be within ten (10) years
from the date the Plan is adopted by the Board or approved by the shareholders
of the Company, whichever is earlier. 
No Stock Awards may be granted under the Plan while the Plan is suspended
or after it is terminated.

             (b)                      Rights and obligations under any Stock Award granted
while the Plan is in effect shall not be impaired by suspension or termination
of the Plan, except with the written consent of the person to whom the Stock
Award was granted.

16.                     EFFECTIVE
DATE OF PLAN.

             The Plan shall become effective as determined by
the Board, but no Stock Awards granted under the Plan shall be exercised unless
and until the Plan has been approved by the shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan
is adopted by the Board, and, if required, an appropriate permit has been
issued by the Commissioner of Corporations of the State of California.Prepared by MerrillDirect

Exhibit 4.1

WISCONSIN
CENTRAL TRANSPORTATION CORPORATION

AMENDMENT
NO. 1 TO 1997 LONG-TERM INCENTIVE PLAN

             The Wisconsin Central
Transportation Corporation 1997 Long-Term Incentive Plan (“Plan”), as adopted
by the board of directors of Wisconsin Central Transportation Corporation
(“Company”) on March 21, 1997 and approved by the stockholders of the Company
on May 15, 1997, is amended as set forth below.  All capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Plan.

             Section 5.8 of the Plan is replaced
in its entirety with the following:

5.8        Change
in Control.

             (a)         Notwithstanding
any provision in this Plan or any Agreement, in the event of a Change in
Control which does not involve the merger transaction contemplated by that
certain Agreement and Plan of Merger dated as of January 29, 2001 (“Merger
Agreement”) among the Company, Canadian National Railway Company (“CN”) and WC
Merger Sub, Inc., (i) all outstanding options and SARs shall immediately become
exercisable in full, (ii) the Restriction Period applicable to any outstanding
Restricted Stock Award shall lapse, (iii) the Performance Period applicable to
any outstanding Performance Share Award shall lapse, and (iv) the Performance
Measures applicable to any outstanding Restricted Stock Award (if any) and to
any outstanding Performance Share Award shall be deemed to be satisfied at the
target level.

             (b)        Notwithstanding
any provision in this Plan or any Agreement, in the event of a Change in
Control involving the merger transaction contemplated by the Merger Agreement,
all outstanding options shall constitute an option (“Adjusted Option”) to
acquire, on the same terms and conditions as otherwise applicable to such
option (including, without limitation, the existing vesting terms and
expiration date applicable to each such option), the number of shares of CN
common stock equal to the product of (A) and (B), where (A) is the number of
shares of Common Stock subject to such option and (B) is $17.15 in cash, without
interest, divided by the average of the closing sales prices of CN common stock
on the New York Stock Exchange for the ten (10) consecutive trading days
immediately prior to and including the day preceding the effective time of the
merger contemplated by the Merger Agreement (rounded down to the nearest whole
number), at an exercise price per share of CN common stock (rounded up to the
nearest whole cent) equal to (x) divided by (y), where (x) is the aggregate
exercise price for the shares of Common Stock subject to such option and (y) is
the aggregate number of shares of CN common stock purchasable pursuant to the
Adjusted Option (as calculated immediately above); provided that, in the event
that an option is an Incentive Stock Option or the adjustment of any option as
provided above would cause the corresponding Adjusted Option to receive
variable accounting treatment, then the option price, number of shares and the
terms and conditions of exercise of the Adjusted Option corresponding to such
option shall be determined in order to comply with Section 424 of the Code.

             (c)         “Change
in Control” shall be deemed to have occurred as of:

                           (1)         The closing date of the restructuring
of the Company as a result of merger, consolidation, takeover or reorganization
unless at least a majority of the members of the Board of Directors of the
Company resulting from such merger, consolidation, takeover or reorganization
were members of the Incumbent Board; or

                           (2)         the occurrence of any other event that
is designated as being a “Change in Control” by a majority vote of the
directors of the Incumbent Board who are not also employees of the Company.

Adopted by the Board of
Directors on April 4, 2001.

Approved by Stockholders on
June 14, 2001.

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