EXHIBIT 10.2
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STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "AGREEMENT") is made and entered into
as of February 1, 2007 (the "AGREEMENT DATE"), between Financial Industries
Corporation, a Texas corporation (the "COMPANY"), and William Prouty (the
"OPTIONEE").
RECITALS:
WHEREAS, in connection with the execution of the CEO Engagement
Agreement, dated as of the date hereof and effective February 1, 2007 (the "CEO
ENGAGEMENT AGREEMENT"), between the Company and the Optionee, the Company
desires to grant the Optionee the options set forth herein to give him added
incentive to advance the interests of the Company.
AGREEMENTS:
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 grants to the Optionee an option to purchase 150,000
shares (subject to adjustment as provided herein; as so adjusted, the "SHARES")
of common stock, $0.20 par value (the "COMMON STOCK"), of the Company, at a
price of $7.45 per share.
2. Exercise. The Option is vested and exercisable as to 50% of
the Shares as of the date hereof, and shall vest and become exercisable as to
the remaining 50% of the Shares on June 21, 2007, if the Optionee is serving as
CEO of the Company on such date, provided that in the event of a "Without Cause
Termination," or a termination by the Optionee for "Good Reason" (each as
defined in the CEO Engagement Agreement) the Option immediately shall become
vested and exercisable as to 100% of the Shares. The vested Option may be
exercised in whole or in part, from time to time, in accordance with this
Agreement, by written notice to the Company at its principal executive office,
which notice shall (a) specify the number of shares to be purchased and the
applicable purchase price to be paid therefor; (b) if the person exercising this
Option is not the Optionee himself, contain or be accompanied by satisfactory
evidence of such person's right to exercise this Option; and (c) except in the
case of a Cashless Exercise (as defined below), be accompanied by payment in
full of the purchase price in cash or by a check to the order of the Company.
Subject to Section 7(a), this Option shall expire on June 21, 2009.
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As an alternative to paying the exercise price of the Option in cash as
provided above, the Optionee, at his option, to the extent not prohibited by law
or other applicable rule, may exercise the Option in whole or in part without
further payment (a "CASHLESS EXERCISE") by surrendering the Optionee's rights to
receive a portion of the Shares otherwise issuable in respect of such exercise,
such surrendered Shares having a fair market value equal to the aggregate
exercise price for the Shares for which the Option is being exercised,
determined (A) if shares of Common Stock are then publicly traded, by reference
to the closing sale price of a share of Common Stock on the most recent trading
day preceding the date of exercise on which shares of Common Stock have traded,
as reported by the principal securities exchange or quotation service on which
such shares trade or are listed or quoted; or (B) if shares of Common Stock are
not then publicly traded, quoted, or listed, by agreement of the Company and the
Optionee, acting reasonably and in good faith, or failing agreement, by
appraisal. Upon any such Cashless Exercise, the Optionee will receive in respect
such exercise the excess of (1) the number of Shares to which the Optionee would
otherwise be entitled upon such exercise, over (2) the number of Shares so
surrendered.
3. Investment Intent. 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 Board of Directors of the Company (the "BOARD") 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. Except as provided in the CEO
Engagement Agreement, the Company shall not 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.
4. Transferability. The Option shall not be transferable except
by will or by the laws of descent and distribution. 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.
Notwithstanding anything to the contrary, the Optionee may, however, assign the
right to exercise any or all of the Option to DLB Capital Fund FNIN, LLC, a
Delaware limited liability company (the "FUND"), but the Option shall remain
subject to the terms and conditions applicable to Optionee.
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5. No Rights as Stockholder. The Optionee shall not have any
rights as a stockholder 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 Paragraph 3 hereof, such shares shall have been duly
listed on any securities exchange on which the Common Stock may then be listed.
6. No Right to Continued Engagement. 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 engagement at any time, subject to the provisions of the
CEO Engagement Agreement; and nothing contained in this Agreement shall be
deemed a waiver or modification of any provision contained in the CEO Engagement
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.
7. Termination of Engagement.
(a) If the Optionee ceases to be engaged by the Company for any
reason other than Cause (as defined in the CEO Engagement Agreement), the Option
shall expire one year after the date of termination, unless it shall have
expired earlier pursuant to its terms; provided, however, that there shall be no
acceleration of vesting of the Option and any unvested portion of the Option
shall expire immediately and become null and void (except as provided in the
first sentence of Section 2 in the event of a "Without Cause Termination" or a
termination by the Optionee for "Good Reason"). In the event of an Optionee's
death prior to such expiration, this Option may be exercised by the legal
representatives of the Optionee, any persons to whom this Option is transferred
by will or by the laws of descent and distribution or, if applicable, the Fund,
to the extent that the Optionee would have been entitled to exercise this Option
at the date of his death. The shares acquired under the foregoing provision
shall be subject to this Agreement and the transferee shall execute such
agreements as the Company reasonably requires to evidence that the transferee is
bound by this Agreement. In the event of the Optionee's disability or retirement
prior to such expiration, this Option may be exercised by the Optionee, his
legal representatives, or, if applicable, the Fund, to the extent that the
Optionee was entitled to exercise the Option at the date of the termination of
the Optionee's engagement due to disability or retirement.
(b) If the Company terminates the Optionee's engagement for Cause
(as defined in the CEO Engagement Agreement), then this Option shall expire on
the date of termination of the engagement, unless it shall have expired earlier
pursuant to its terms.
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8. Antidilution Adjustment. In the event of any change in the
number of outstanding shares of Common Stock effected without receipt of
consideration therefor by the Company by reason of a stock dividend or stock
split, the number of shares of Common Stock subject to this Option and the
exercise price shall be automatically adjusted to accurately and proportionately
reflect the effect of such change, provided that any fractional share resulting
from such adjustment may be eliminated. For the avoidance of doubt, the sale by
Investors Life Insurance Company of North America ("INVESTORS LIFE") of shares
of the Company held by Investors Life shall not trigger any anti-dilution or
other adjustment to the number of shares of the Company for purposes of this
Agreement.
9. Dissolution or Merger. If there occurs a Change of Control
Transaction, then the Option shall fully vest, but on exercise of the Option,
the Optionee shall have the right to receive, instead of the shares of Common
Stock issuable upon exercise thereof immediately prior to such dissolution,
liquidation, merger, consolidation, or other transaction, the same types and
amounts of securities, cash, and/or other property as the Optionee would have
received if he had exercised the Option to the same extent immediately prior to
such transaction and had continued to hold such securities, cash, and/or
property until the time of such subsequent exercise.
10. Governing Law. This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the laws of the
State of Texas, without regard to principles of conflicts of law of Texas or any
other jurisdiction. Subject to Section 11, the exclusive jurisdiction for any
litigation arising under or in connection with this Agreement shall be Travis
County, Texas (provided, that this limitation shall not apply if and to the
extent that the courts in Travis County, Texas, do not have or do not accept
jurisdiction over such litigation), and each party consents to personal
jurisdiction in Travis County, Texas.
11. Mandatory Arbitration. All claims, disputes, controversies,
differences or misunderstandings between the parties arising out of, or by
virtue of this Agreement or the interpretation of this Agreement which cannot be
settled or resolved by the parties hereto shall be settled or determined by
binding arbitration under the then-current rules of the American Arbitration
Association. The exclusive jurisdiction for any such arbitration shall be Travis
County, Texas, and each party consents to personal jurisdiction in Travis
County, Texas. The arbitrator will apportion attorneys' fees and costs in his or
her judgment. Either party may, however, seek injunctive relief in any court of
competent jurisdiction, pending arbitration. Judgment based on the arbitrator's
award may be entered in any court of competent jurisdiction.
12. Withholding for Tax Purposes. The Company shall be entitled to
withhold from any amounts to be paid to the Optionee or the Fund, and the
Optionee or Fund shall reimburse the Company, for any federal, state, local, or
foreign withholding or other taxes or charges that it is from time to time
required to withhold.
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13. 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:
Company:
Financial Industries Corporation
6500 River Place Boulevard
Building I
Austin, Texas 78730
Attention: General Counsel
Facsimile No.: (512) 404-5051
Optionee:
Mr. William Prouty
c/o DLB Capital
187 Danbury Road
Wilton, Connecticut 06897
Facsimile No.: (203) 761-6776
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed as of the day and year first above written, and the optionee has
hereunto set his hand.
FINANCIAL INDUSTRIES CORPORATION
By: /s/ Keith Long
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Name: Keith Long
Title: Chairman
OPTIONEE:
/s/ William Prouty
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William Prouty
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