EXHIBIT 10.9
FINANCIAL INDUSTRIES CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is made and entered into as
of June 4, 2003, (the "Agreement Date"), between Financial Industries
Corporation, a Texas corporation (the "Company"), and William P. Tedrow (the
"Optionee").
RECITALS:
WHEREAS, the Company desires to employ Optionee to be President of FIC
Financial Services, Inc., a Nevada corporation and subsidiary of the Company
("FICFS"), and as a Vice President of the Company.
WHEREAS, in order to retain the Optionee, the Company has concluded that
the Optionee requires certain incentives, including, without limitation, an
option to purchase shares of common stock of the Company (the "Common Stock").
NOW, THEREFORE, in consideration of the foregoing premises, the parties to
this Agreement agree as follows:
1. Grant. Subject to the terms and conditions set forth in this
Agreement, the Company hereby grants the Optionee an option to purchase up
to 150,000 shares of Common Stock (the "Option"). The exercise price of the
Option shall be $13.07 per share (the "Exercise Price").
2. Term. The Options will expire on December 31, 2006 (the "Expiration
Date"), unless sooner terminated pursuant to the terms of this Agreement.
3. Exercise.
(a) Exercisability. The Option may be exercised only if
Qualifying Premiums (as defined below) for the Determination Period
(as defined below) exceed $200,000,000. The exercise of the Option
shall be subject to the filing of appropriate documents with, and to
the extent necessary, approval of, the Commissioner of Insurance of
the State of Washington and such notices and consents as may be
required under the insurance laws of any jurisdiction in which any of
the Company or its subsidiaries is domiciled or does business. The
Option may only be exercised once by delivery of written notice to the
Company, signed by the Optionee, indicating that the Option is being
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exercised and specifying the number of shares of Common Stock the
Optionee will acquire. Such notice may not be given until final
determination of Qualifying Premiums pursuant to Section 3(b). Unless
earlier exercised, the Option expires on December 31, 2006. The
closing of the exercise of the Option pursuant to this Section 3(a)
shall occur within ten (10) business days following delivery of the
written exercise notice, the Exercise Price shall be paid in
immediately available funds at the closing, and the acquired shares of
Common Stock shall be delivered to the Optionee at the closing free
and clear of any and all liens, claims and encumbrances (other than
any such liens, claims and encumbrances created by the Optionee).
(b) Qualifying Premiums. As used in this Agreement, (i)
"Qualifying Premiums" means the aggregate amount of collected premiums
for life insurance or annuity products issued by the Company or any
insurance company affiliate of the Company as of the date hereof and
any insurance company which becomes an affiliate of the Company after
the date hereof, unless such future affiliate, at the time that the
Company entered into a letter of intent or other expression of intent
or purchase contract, whichever is earliest, (i) was engaged in the
marketing and sale of life insurance policies, annuity contracts or
other financial related products for the senior (over age 55) market
(the "Senior Business") for at least 12 months (to include, without
limitation, assumed reinsurance and direct written premiums by any
such person) and (ii) derived more than fifty percent (50%) of its
revenues from the Senior Business, that, in each case, are marketed by
or through any insurance company affiliate of the Company (except as
provided above), FICFS whether through a contact made by an employee
or agent of FICFS or a marketing relationship developed through FICFS
(including Equita Financial and Insurance Services of Texas, Inc.), or
any of their respective agents, and (ii) "Determination Period" means
the period beginning on July 1, 2003 and ending on December 31, 2005.
Within ten (10) business days following the end of the Determination
Period, the Company shall deliver to the Optionee a written
calculation of Qualifying Premiums specifying in reasonable detail the
basis for such calculation. Any disagreements with respect to the
Qualifying Premiums amount shall be resolved using the dispute
resolution mechanisms set forth in Section 9.8 that certain Employment
Agreement of even date herewith, between the Company and the Optionee
(the "Employment Agreement").
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(c) Certain Adjustment Events.
(i) In case the Company shall hereafter (A) pay a dividend
or make a distribution on its capital stock in shares of Common
Stock, (B) subdivide its outstanding shares of Common Stock into
a greater number of shares, (C) combine its outstanding shares of
Common Stock into a smaller number of shares or (D) issue by
reclassification of its Common Stock other securities of the
Company, the kind and amount of Common Stock and other securities
shall be adjusted so that the Optionee upon the exercise of the
Option shall be entitled to receive the number of shares of
Common Stock or other securities of the Company that the Optionee
would have owned immediately following such action had the Option
been exercised immediately prior thereto.
(ii) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the
Company is a party other than a merger or consolidation in which
the Company is the continuing corporation, or in case of any sale
or conveyance to another entity of all or substantially all of
the assets of the Company, or in the case of any statutory
exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third
corporation into the Company), the Optionee shall have the right
thereafter to exercise the Option and receive the kind and amount
of securities, cash or other property that the Optionee would
have owned or have been entitled to receive immediately after
such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had the Option been
exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance. The above provisions of
this Section 3(c) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances.
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(iii) Whenever the number of shares of Common Stock
purchasable upon the exercise of the Option is adjusted, as
herein provided, the Exercise Price shall be adjusted by
multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the
number of shares of Common Stock purchasable upon exercise of the
Option immediately prior to such adjustment, and the denominator
of which shall be the number of the shares of Common Stock so
purchasable immediately thereafter.
(iv) Whenever the number of shares of Common Stock
purchasable upon the exercise of the Option or the Exercise Price
is adjusted, as herein provided, the Company shall promptly mail
by first class mail, postage prepaid, to the Optionee notice of
such adjustment setting forth a brief statement of the facts
requiring such adjustment and the computation by which such
adjustment was made.
(v) In the event that the Company makes a distribution to
its shareholders (other than cash dividends that in the aggregate
do not exceed, in any calendar year, an annualized rate of 3% of
the closing price for the Company's Common Stock as reported on
the NASDAQ National Market or other exchange or quotation system
on which the Common Stock is traded on the trading day prior to
the date of declaration of any such cash dividend) or undertakes
some other capital change or transaction that the Company's Board
of Directors in its reasonable judgment determines is a
distribution, change or transaction that warrants an adjustment
similar to those provided in this Section 3(c) based upon the
intent hereof but with respect to which the provisions hereof are
not specifically applicable, adjustments to the number of shares
of Common Stock purchasable upon exercise of the Option and the
Exercise Price shall be made as a result of such distribution,
change or transaction.
(d) Reservation of Common Stock. The Company covenants that it
will, at all times during which the Option remains exercisable,
maintain a sufficient number of authorized and unissued shares of
Common Stock (or shares of Common Stock held in treasury) to fully
comply with the provisions of this Agreement.
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4. Investment Intent; Legends. The Optionee agrees that the shares of
Common Stock acquired upon exercise of the Option shall be acquired for his
own account for investment only and not with a view to, or for resale in
connection with, any distribution or public offering hereof within the
meaning of the Securities Act of 1933, as amended (the "Act"), or other
applicable securities laws. If the Company so determines, any stock
certificates issued upon exercise of the Option shall bear a legend to the
effect that the shares have been so acquired. The Company may, but in no
event shall be required to, bear any expenses of complying with the Act,
other applicable securities laws, or the rules and regulations of any
national securities exchange or other regulatory authority in connection
with the registration, qualification, or transfer, as the case may be, of
the Option or any shares of Common Stock acquired upon the exercise
thereof. The Optionee will not transfer the shares acquired pursuant to the
Option unless (a) the Company previously shall have been furnished with an
opinion of counsel, satisfactory to it, to the effect that such transfer
will not involve any violation of the Act or other applicable securities
laws, or (b) the shares shall have been duly registered in compliance with
the Act and other applicable securities laws.
5. Transferability. The Option shall not be transferable except by
will or by the laws of descent and distribution. Except as otherwise
expressly provided herein, during the Optionee's lifetime, the Option may
be exercised only by him. No assignment or transfer of the Option, whether
voluntary or involuntary, by operation of law or otherwise, except a
transfer by will or by the laws of descent or distribution, shall vest in
the assignee or transferee any interest or right whatsoever in the Option.
6. No Rights as Shareholder. The Optionee shall not have any rights as
a shareholder of the Company with respect to any of the shares subject to
the Option, except to the extent that such shares shall have been purchased
and transferred to him. The Company shall not be required to issue or
transfer any certificates for shares purchased upon exercise of the Option
until all applicable requirements of law have been complied with and, if
such shares have been registered pursuant to Section 4 hereof, such shares
shall have been duly listed on any securities exchange on which the Common
Stock may then be listed.
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7. No Right to Employment. The Option shall not confer on the Optionee
any right to continue in the service of the Company or any of its
subsidiaries or affect the right of the Company or any subsidiary to
terminate Optionee's employment at any time; and nothing contained in this
Agreement shall be deemed a waiver or modification of any provision
contained in any agreement between the Optionee and the Company or any
parent or subsidiary thereof, including, without limitation, the Employment
Agreement. The Option shall not affect the right of the Company or any
parent or subsidiary thereof to reclassify, recapitalize, or otherwise
change its capital or debt structure or to merge, consolidate, convey any
or all of its assets, dissolve, liquidate, wind up, or otherwise
reorganize.
8. Termination of Employment.
(a) Capitalized terms used in this Section 8, but not otherwise
defined, shall have the meanings given to such terms in the Employment
Agreement.
(b) If Optionee's employment with the Company and FICFS is
terminated for any reason, other than by the Company for Cause or by
the Optionee without Good Reason, prior to the Expiration Date, the
Options shall expire on the Expiration Date. In the event of an
Optionee's death prior to the Expiration Date, the Option may be
exercised by the legal representatives of the Optionee or any persons
to whom the Option is transferred by will or by the laws of descent
and distribution in accordance with and under the terms of this
Agreement. The shares acquired under the foregoing provision shall be
subject to this Agreement and the transferee shall execute such
agreements as the Company requires to evidence that the transferee is
bound by such agreements. In the event of the Optionee's Disability
prior to the Expiration Date, the Options may be exercised by the
Optionee or his legal representatives in accordance with and under the
terms of this Agreement.
(c) If the Company terminates Optionee's employment with the
Company and FICFS for Cause, or Optionee terminates Optionee's
employment with the Company and FICFS without Good Reason, then the
Option shall automatically expire concurrent with such termination, if
prior to the Expiration Date.
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9. Interpretation of Agreement. All disputes, controversies or claims
arising out of or relating to this Agreement or the performance, breach,
validity, interpretation or enforcement hereof, will be resolved by using
dispute resolution mechanisms set forth in Section 9.8 of the Employment
Agreement.
10. Withholding for Tax Purposes. Any amount of Common Stock that is
payable or transferable to the Optionee hereunder may be reduced by any
amount or amounts which the Company is required to withhold under the then
applicable provisions of the Internal Revenue Code of 1986, as amended, or
any other federal, state or local tax withholding requirement. If the
Optionee does not elect to satisfy withholding requirements in this
fashion, the issuance of the shares of Common Stock payable or transferable
to the Optionee hereunder shall be contingent upon the Optionee's
satisfaction of any withholding obligations that may apply and the
Optionee's presentation of evidence satisfactory to the Board that such
withholding obligations have been satisfied.
11. Notice. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered, sent by telecopy,
sent by mail, or sent by overnight courier. Any notice required or
permitted to be delivered hereunder will be deemed to be delivered on the
date that it is personally delivered; if sent by telecopy, on the date that
it is electronically confirmed; if sent by overnight courier, or the next
business day following the dates so sent; or, whether actually received or
not, on the third business day after it is deposited in the United States
mail, certified or registered, postage prepaid, addressed to the person who
is to receive it at the address that such person has theretofore specified
by written notice delivered in accordance herewith. The Company or Optionee
may change, at any time and from time to time, by written notice to the
other, the address that it or he or she had therefore specified for
receiving notices. Until changed in accordance herewith, the Company and
the Optionee specify their respective addresses as set forth below:
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Company:
Financial Industries Corporation
6500 River Place Blvd., Building One
Austin, Texas 78730
Attn: Gene Payne and Ted Fleron
Facsimile No.: (512) 404-5051
Optionee:
At his most recent address on file with the Company
12. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without regard to the
principles of conflict of laws.
IN WITNESS WHEREOF, the Company and Optionee have caused this Agreement to
be executed as of the day and year first above written.
FINANCIAL INDUSTRIES CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
OPTIONEE
By: __________________________________
William P. Tedrow
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