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EXHIBIT 10.17
NON-QUALIFIED
STOCK OPTION AGREEMENT
This Agreement is made as of the 14th day of August, 1997 ("Date of
Grant") by and between EQUITY CORPORATION INTERNATIONAL, a Delaware corporation
(the "Company"), and _______________________________ (the "Employee").
To carry out the purposes of the Equity Corporation International 1994
Long-Term Incentive Plan (the "Plan") by affording the Employee the opportunity
to purchase shares of the $0.01 par value common stock of Equity Corporation
International ("Stock"), the Company and the Employee hereby agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to the
Employee the right and option (the "Option") to purchase all or any part of the
number of shares of Stock set forth below the Employee's name on the signature
page hereof, on the terms and conditions set forth herein and in the Plan. This
Option is not an incentive stock option within the meaning of Section 422(b) of
the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of Stock purchased pursuant
to the exercise of this Option shall be $22.25 per share, which is deemed to be
not less than the fair market value of the Stock subject to this Option.
3. Exercise of Option. Subject to the earlier expiration of this
Option as herein provided, this Option may be exercised, by written notice to
the Company, at any time and from time to time, but only to the extent this
Option is then vested and exercisable. This Option shall become vested and
exercisable with respect to 100% of the shares of Stock subject to the Option on
the ninth (9th) anniversary of the Date of Grant, subject to Section 4 hereof
regarding the Accelerated Vesting of the Option. With respect to an Employee
whose "Employment Relationship" (as defined in Section 8 hereof) with the
Company terminates, the Employee's vested interest in the Option shall be
determined as of such termination date and the extent to which Section 4
accelerates the vesting of the Option shall be determined only with respect to
events occurring on or before such termination date.
4. Accelerated Vesting of Option.
(a) Vesting Upon a Change-in-Control. Notwithstanding any other
provision hereof, in the event of a "Change-in-Control" of the
Company, the Option shall become vested and exercisable with
respect to 100% of the shares of Stock subject to the Option,
provided the Employee's "Employment Relationship" (as defined
in Section 8 hereof) with the Company has not terminated on or
before the effective date of such "Change-in-Control". For
purposes of this Agreement, the term "Change-in-Control" shall
have the meaning provided in the "Executive Severance
Agreement"
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dated August 14, 1997, as the same may be amended, that is
then in effect with respect to the Employee. If the Executive
Severance Agreement is not in effect on the date an alleged
Change-in-Control occurs or if the executive Severance
Agreement has been amended so that the term
"Change-in-Control" or its equivalent is not defined therein,
then the definition of the term "Change-in-Control" as set
forth in the Plan shall apply.
(b) Vesting Upon Achieving Stock Price Performance Targets.
(i) Vesting of all or a specified percentage of the
Option will be accelerated during the four-year
"Performance Period" (as defined below) based on the
per share Stock price performance of the Company's
Stock during the Performance Period, provided the
Employee's "Employment Relationship" (as defined in
Section 8 hereof) with the Company has not terminated
on or before the last day of the applicable
Performance Period. For purposes of this Agreement,
the term "Performance Period" is defined to mean the
four-year period ending on the fourth (4th)
anniversary of the Date of Grant, and shall include
three (3) consecutive one-year Performance Periods
ending on the first (1st) through the third (3rd)
anniversaries of the Date of Grant, respectively.
With respect to the full four-year Performance
Period, if the Target "Average Stock Price" of $58.50
is achieved at any time during the Performance
Period, the Option shall at that time become vested
and exercisable with respect to 100% of the shares of
Stock subject to the Option. With respect to each of
the three included one-year Performance Periods, if
the Target "Average Stock Price" set forth in the
table below for such Period is achieved at any time
during such Period, the Option shall at that time
become vested and exercisable with respect to the
specified percentage of the then unvested shares of
Stock subject to the Option. For purposes of this
Agreement, the term "Average Stock Price" is defined
to mean the average closing price per share of Stock
during any fifteen (15) consecutive trading days for
the Stock during the applicable Performance Period
determined in a manner consistent with the
determination of "Fair Market Value" under the Plan.
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Performance Period Target Average Percentage of the Then
Ending on the Stock Price Nonvested Shares Subject
Specified Date Per Share to Option Which Vest
August 14, 1998 $29.50 25%
August 14, 1999 $37.00 33%
August 14, 2000 $46.50 50%
August 14, 2001 $58.50 100%
(ii) If (A) the $58.50 Target Average Stock Price for
the four-year Performance Period described in Section
4(b)(i) hereof is not achieved, (B) the percentage
growth rate of the Standard & Poor's 500 Index for
the four-year Performance Period is less than
seventy-four percent (74%), being seventy- five
percent (75%) of its percentage growth rate
determined for the four-year period of August 14,
1993 through August 14, 1997, and (C) the Company's
per share Average Stock Price for the fifteen (15)
consecutive trading days ending with the last day of
the four-year Performance Period is equal to or
greater than $22.50 multiplied by the "Peer Group's"
average total shareholder return percentage
determined for the four-year Performance Period by
the independent accounting firm then engaged by the
Company, then the Option shall, on the last day of
the four-year Performance Period, become vested and
exercisable with respect to 100% of the shares of
Stock subject to the Option. For this purpose, the
term "Peer Group" is defined to mean Xxxxxx Group,
Inc., Service Corporation International, and Xxxxxxx
Enterprises, Inc. (and their respective successors).
(c) Vesting Upon Termination During the Four-Year Performance
Period. If (i) the Employee's "Employment Relationship" with
the Company (as defined in Section 8 hereof) terminates during
the four-year Performance Period and after August 14, 1999 by
reason of death, disability (as such term is defined in the
Executive Severance Agreement described in Section 4(a)
hereof), "Retirement" (as defined in Section 5(b) hereof), or
termination "Without Cause" (as such term is defined in the
Executive Severance Agreement described in Section 4(a)
hereof), and (ii) the Employee is not vested and exercisable
with respect to 100% of the shares of Stock subject to the
Option, then the Option shall, on the date of such
termination, become vested and exercisable with respect to the
following percentage of the shares of Stock subject to the
Option, reduced by the percentage of the shares of Stock
subject to the Option which had become vested and exercisable
prior to the Employee's termination. For this purpose, the
percentages set forth in the following table shall
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be pro rated on a fully completed monthly basis if the
Employee's termination occurs during the third or fourth years
of the Performance Period.
Number of Years From Date of Grant to Date Percentage of the Shares
Employment Relationship Terminates Subject to the Option
Which Vest
2 years or less 0%
More than 2 years but less than 3 years 50%
More than 3 years but less than 4 years 75%
4 years 100%
5. Transferability. This Option is not transferable by the
Employee otherwise than by will or the laws of descent and distribution, and may
be exercised only by Employee during his lifetime and while his Employment
Relationship with the Company continues, except that:
(a) If the Employee's Employment Relationship with the Company
terminates for any reason other than disability (as such term
is defined in the Executive Severance Agreement described in
Section 4(a) hereof), death or "Retirement" (as defined in
Section 5(b) hereof), this Option may be exercised by Employee
(or his estate or the person who acquires this Option by
bequest or inheritance or by reason of death of the Employee)
at any time during the period of three (3) months following
such termination, but only as to the number of vested and
exercisable shares of Stock subject to the Option.
(b) If the Employee's Employment Relationship with the Company
terminates by reason of disability (as such term is defined in
the Executive Severance Agreement described in Section 4(a)
hereof), death or "Retirement" (as defined below), this Option
may be exercised by Employee (or his estate or the person who
acquires this Option by bequest or inheritance or by reason of
the death of Employee) at any time during the period of one
(1) year following such termination, but only as to the number
of vested and exercisable shares of Stock subject to the
Option. For purposes of this Agreement, the term "Retirement"
is defined to mean the retirement of the Employee after the
Employee has achieved the age of 60 and has completed at least
five years of employment with the Company.
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6. Expiration of Option. Except as hereinafter provided, this
Option shall not be exercisable in any event after the expiration of ten (10)
years from the Date of Grant. The purchase price of shares as to which this
Option is exercised shall be paid in full in cash at the time of such exercise
or, if the Employee so elects, payment may be made, in whole or in part, by
delivery of a number of shares of Stock (plus cash if necessary) having a fair
market value equal to such purchase price or part thereof. Unless and until a
certificate or certificates representing such shares shall have been issued by
the Company to him, the Employee (or the person permitted to exercise this
Option in the event of the Employee's death) shall not be or have any of the
rights or privileges of a stockholder of the Company with respect to shares
acquirable upon the exercise of this Option.
7. Status of Stock. The Company has registered for issue under
the Securities Act of 1933, as amended (the "Act") the shares of Stock
acquirable upon exercise of this Option, and intends to keep such registration
effective throughout the period this Option is exercisable. In the absence of an
effective registration or an available exemption from registration under the
Securities Act of 1933, as amended (the "Act"), delivery of shares of Stock
acquirable upon exercise of this Option will be delayed until registration of
such shares is effective or an exemption from registration under the Act is
available. In the event exemption from registration under the Act is available
upon an exercise of this Option, the Employee (or the person permitted to
exercise this Option in the event of the Employee's death), if requested by the
Company to do so, will execute and deliver to the Company in writing an
agreement containing such provisions as the Company may require to assure
compliance with applicable securities laws.
No sale or disposition of share Stock acquired upon exercise of this
Option shall be made in the absence of a registration statement being on file
with respect to such shares under the Act, unless an opinion of counsel or other
evidence satisfactory to the Company that such sale or disposition will not
constitute a violation of the registration provisions of the Act or any other
applicable securities laws is first obtained.
The certificates representing shares of Stock acquired under this
Option may bear such legend as the Committee administering the Plan
("Committee") deems appropriate, referring to the provisions of this Section.
8. Employment Relationship. For purposes of this Agreement, the
Employee's "Employment Relationship" with the Company shall be defined to
include (i) any period in which he is an employee of either the Company or a
subsidiary corporation (as defined in Section 424 of the Code) of the Company,
or a corporation or a subsidiary corporation of such corporation assuming or
substituting a new option for this Option, and (ii) any period in which he is a
director of either the Company or its successor. The Employee's Employment
Relationship will terminate, for purposes of this agreement only, on the date
the Employee is neither an employee (as defined above) nor a director of the
Company or its successor. Any question as to whether and when there has been a
termination of such Employment Relationship, and the cause of such termination,
shall be determined by the Board of Directors, and the determination by such
body shall be final. Nothing in this Agreement or the Plan shall confer upon the
Employee any right to continue in the employ
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of or as a director of the Company or any of its affiliate corporations or
interfere in any way with the right of the Company or any such affiliate
corporation to terminate such employment or the right of the shareholders to
terminate such directorship at any time.
9. Withholding of Tax. Upon an exercise of this Option, the
Company (or the employing corporation) may be required to withhold United States
federal, state and local tax with respect to the realization of compensation
pursuant to such exercise. The Company (or the employing corporation) is hereby
authorized to satisfy any such withholding requirement out of (i) any cash
distributable upon such exercise, and (ii) any other cash compensation then or
thereafter payable to the Employee. To the extent that the Company in its sole
discretion determines that such sources are or may be insufficient to fully
satisfy such withholding requirement, the Employee, as a condition to the
exercise of this Option, shall deliver to the Company cash in an amount
determined by the Company to be sufficient to satisfy any such withholding
requirement.
10. Effect of Certain Changes.
(a) If there is any change in the number of issued shares of
Stock through the declaration of stock dividends, or through
recapitalization resulting in stock splits, or combinations or
exchanges of such shares, the number of shares subject to the
Option granted pursuant to this Agreement that have not been
exercised or lapsed, and the price per share of such Options
shall be proportionately adjusted by the Committee to reflect
any increase or decrease in the number of shares of Stock,
provided, however, that any fractional shares resulting from
such adjustment shall be eliminated.
(b) In the event of a change in the Stock of the Company as
presently constituted, which is limited to a change of all of
its authorized shares with a par value into the same number of
shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be a
Stock within the meaning of this Agreement and the Plan.
(c) To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made
by the Committee, whose determination in that respect shall be
final, binding and conclusive.
11. Payment of Transfer Taxes, Fees and Other Expenses. The
Company agrees to pay any and all original issue taxes and stock transfer taxes
that may be imposed on the issuance of shares acquired pursuant to exercise of
this Option, together with any and all other fees and expenses necessarily
incurred by the Company in connection therewith.
12. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of any successors to the Company and all persons lawfully
claiming under the Employee.
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13. Notices. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to the Company at 000 Xxxxx Xxxxx,
Xxxxx 000, Xxxxxx, Xxxxx, 00000, and to the Employee at the address set forth on
the last page of this Agreement or at such other address as either party may
hereafter designate in writing to the other.
14. Laws Applicable to Construction. This Option has been granted,
executed and delivered in the State of Texas, and the interpretation,
performance and enforcement of this Agreement, shall be governed by the laws of
the State of Texas, as applied to contracts executed in and performed wholly
within the State of Texas.
15. Interpretation. In the event of any ambiguity in this
Agreement, any term which is not defined in this Agreement, or any matters as to
which this Agreement is silent, the Plan shall govern including, without
limitation, the provisions thereof pursuant to which the Committee has the
power, among others, to (i) interpret the Plan, (ii) prescribe, amend and
rescind rules and regulations relating to the Plan, and (iii) make all other
determinations deemed necessary or advisable for the administration of the Plan.
16. Headings. The headings of paragraphs herein are included
solely for convenience of reference and shall not affect the meaning or
interpretation of any of the provisions of this Agreement.
17. Amendment. This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing signed by both parties
hereto. The waiver by either party of compliance with any provision of this
Agreement shall not operate or be construed as a waiver of any other provision
of this Agreement, or of any subsequent breach by such party of a provision of
this Agreement.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officers thereunto duly authorized, and the Employee has
executed this Agreement, all on the day and year first above written.
EQUITY CORPORATION INTERNATIONAL
By:
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Xxxxx X. Xxxxxx, III
Chairman of the Board
EMPLOYEE
Name of Employee:
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No. of Shares:
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ADDRESS:
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