AWARD NUMBER
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THE SOUTHLAND CORPORATION
1995 Stock Incentive Plan
1997 Award Agreement
GRANT OF NONQUALIFIED STOCK OPTION (NQSO)
The Southland Corporation (the "Company") hereby grants to ,
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SSN # (the "Participant") on November 12, 1997 (the "Date of
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Grant"), pursuant to the 1995 Stock Incentive Plan (the "Plan"), a stock option
subject to the Plan and upon the terms and conditions set forth below.
Capitalized terms used and not otherwise defined herein have the meanings
given to them in the Plan.
1. GRANT OF OPTION
Subject to the terms and conditions hereinafter set forth, the Company, with
the approval and direction of the Committee, grants to the Participant, as of
the Date of Grant, an option to purchase up to shares of Common
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Stock at a price of $2.469 per share, the Fair Market Value of the Common
Stock on the Date of Grant. Such option is hereinafter referred to as the
"Option" and the shares of stock purchasable upon exercise of the Option are
hereinafter referred to as the "Option Shares." This Option is a Non-
qualified Stock Option, and as such is not intended by the parties hereto to
be an Incentive Stock Option (as such term is defined under the Code).
2. EXERCISABILITY OF OPTIONS
Subject to such further limitations as are provided herein, the Option shall
become exercisable in five (5) installments, the Participant having the right
hereunder to purchase from the Company the following number of Option Shares
upon exercise of the Option, on and after the following dates, in cumulative
fashion:
(a) on and after the first anniversary of the Date of ▇▇▇▇▇, up to one-fifth
(ignoring fractional shares) of the total number of Option Shares;
(b) on and after the second anniversary of the Date of ▇▇▇▇▇, up to an
additional one-fifth (ignoring fractional shares) of the total number of Option
Shares;
(c) on and after the third anniversary of the Date of ▇▇▇▇▇, up to an
additional one-fifth (ignoring fractional shares) of the total number of Option
Shares;
(d) on and after the fourth anniversary of the Date of ▇▇▇▇▇, up to an
additional one-fifth (ignoring fractional shares) of the total number of Option
Shares; and
(e) on and after the fifth anniversary of the Date of ▇▇▇▇▇, the remaining
Option Shares.
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3. PERFORMANCE ACCELERATED VESTING
After the first anniversary of the Date of ▇▇▇▇▇, an additional one-fifth
(ignoring fractional shares) of the total number of Option Shares shall become
exercisable on and after each of the following events:
(a) on and after the twentieth consecutive trading day that the Closing Price
is equal to or greater than $4.00;
(b) on and after the twentieth consecutive trading day that the Closing Price
is equal to or greater than $5.00;
(c) on and after the twentieth consecutive trading day that the Closing Price
is equal to or greater than $6.50; and
(d) on and after the twentieth consecutive trading day that the Closing Price
is equal to or greater than $8.00.
4. TERMINATION OF OPTION
(a) The Option and all rights hereunder with respect thereto, to the extent
such rights shall not have been exercised, shall terminate and become null and
void after the expiration of ten (10) years from the Date of Grant (the
"Option Term").
(b) If the Participant has an exercisable Option (in whole or in part) as of
the date of the Participants voluntary termination of employment with the
Company, then the exercisable portion of such Option shall remain exercisable
for a period equal to the lesser of (1) the remainder of the Option Term or (2)
the date which is 60 days after the date of Participants voluntary
termination of employment.
(c) Upon termination of the Participants employment with the Company by reason
of Normal Retirement, the Option shall become immediately one hundred percent
(100%) vested, and the Participant shall have until the expiration of the Option
Term to exercise the Option.
(d) Upon termination of the Participants employment with the Company by reason
of Early Retirement or Disability, any portion of the Option that is not yet
vested shall continue to vest and to be exercisable in accordance with the
provisions of Sections 2 and 3 of this Award Agreement and, once vested, the
Option shall remain exercisable until the expiration of the Option Term
unless, prior thereto, the Participant reaches age 65, at which time all
remaining Options shall vest.
(e) Upon termination of the Participants employment with the Company by reason
of Divestiture, any portion of the Option that as of the date of termination is
not yet exercisable shall become null and void as of the date of termination and
the portion, if any, of the Option that is exercisable as of the date of
termination shall remain exercisable for a period equal to the lesser of (1) the
remainder of the Option Term or (2) the date which is one year after the date
of termination.
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(f) In the event of death of the Participant, regardless whether the
Participant had previously retired (either Early Retirement or Normal Re-
tirement) or was Disabled at the time of death, the Option shall become
immediately one hundred percent (100%) vested and the Participants Designated
Beneficiary shall have twelve (12) months following the Participants death
during which to exercise the Option.
(g) A transfer of the Participants employment between the Company and any
Subsidiary of the Company, shall not be deemed to be a termination of the
Participants employment.
(h) Notwithstanding any other provisions set forth herein or in the Plan,
if the Participant shall (i) commit any act of malfeasance or wrongdoing
affecting the Company or any Subsidiary of the Company, (ii) breach any cov-
enant not to compete, or employment contract with the Company or any Sub-
sidiary of the Company, or (iii) engage in conduct that would warrant the
Participants discharge for cause (excluding general dissatisfaction with the
performance of the Participants duties, but including any act of disloyalty
or any conduct clearly discrediting the Company or any Subsidiary or
Affiliate of the Company), any unexercised portion of the Option shall
immediately terminate and be void.
5. EXERCISE OF OPTIONS
(a) The Participant may exercise the Option from time to time with respect to
all or any part of the number of Option Shares then exercisable hereunder by
giving the Companys National Human Resources Manager written notice of the
intent to exercise. The notice of exercise shall specify the number of
Option Shares as to which the Option is to be exercised, the Award Number (as
indicated on the first page of the applicable Award Agreement), and the date
of the exercise thereof (the "Exercise Date"), which date shall be within
five days after the giving of such notice.
(b) On or before the Exercise Date, the Participant shall pay the full amount
of the purchase price for the Option Shares in cash (U.S. dollars) or through
the surrender of previously acquired shares of Stock valued at their Fair
Market Value on the Exercise Date. In addition, to the extent permitted by
applicable law, the Participant may arrange with a brokerage firm for that
brokerage firm, on behalf of the Participant, to pay the Company the Exercise
Price of the Option being exercised (either as a loan to the Participant or
from the proceeds of the sale of Stock issued pursuant to that exercise of
the Option), and the Company shall promptly cause the exercised shares to be
delivered to the brokerage firm. Such transactions shall be effected in
accordance with such further procedures as the Committee may establish from
time to time.
On the Exercise Date or as soon thereafter as is practicable, the Company
shall cause to be delivered to the Participant, a certificate or certificates
for the Option Shares then being purchased (out of theretofore unissued Stock
or reacquired Stock, as the Company may elect) upon full payment for such
Option Shares. The obligation of the Company to deliver Option Shares shall,
however, be subject to the condition that if at any time the Committee shall
determine in its discretion that the listing, registration or qualification
of the Option or the Option Shares upon any securities exchange or such other
securities trading system or market or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the Option or the
issuance or purchase of the Option Shares thereunder, the Option may not be
exercised in whole or in part unless such listing, registration, qualifi-
cation, consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
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(c) If the Participant fails to pay for any of the Option Shares specified in
such notice or to pay any applicable withholding tax relating thereto or fails
to accept delivery of the Option Shares, the Participants right to purchase
such Option Shares may be terminated by the Committee.
6. FAIR MARKET VALUE
As used herein, the "fair market value" of a share of Stock shall be the
Closing Price per share of Stock on The Nasdaq Stock Market, or such other
securities trading system or exchange which is the primary market on which the
Stock may then be listed or traded on the date in question, or if the Stock has
not been traded on such date, the Closing Price on the first day prior thereto
on which the Stock was so traded.
7. NO RIGHTS OF SHAREHOLDERS
Neither the Participant nor any personal representative shall be, or shall have
any of the rights and privileges of, a shareholder of the Company with respect
to any shares of Stock purchasable or issuable upon the exercise of the Option,
in whole or in part, prior to the date of exercise of the Option.
8. NON-TRANSFERABILITY OF OPTION
During the Participants lifetime, the Option shall be exercisable only by the
Participant or any guardian or legal representative of the Participant, and the
Option shall not be transferable except, in case of the death of the Participant
, by will or the laws of descent and distribution, nor shall the Option be
subject to attachment, execution or other similar process. In the event of
(a) any attempt by the Participant to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or
interest hereby conferred, the Company may terminate the Option by notice to
the Participant and it shall thereupon become null and void. Notwithstanding
the above, in the discretion of the Committee, Options may be transferable
pursuant to a QDRO.
9. RESTRICTIONS ON TRANSFER FOLLOWING EXERCISE
(a) Thirty percent (30%) of the Option Shares (the "Restricted Option Shares")
acquired upon exercise of the Option shall be delivered to Participant via a
stock certificate bearing a legend restricting the transfer or sale of such
Option Shares for a period of 24 months following the Exercise Date. Seventy
percent (70%) of the Option Shares acquired upon exercise of the Option shall
not be subject to any restriction against the transfer or sale of such Option
Shares by the Participant.
(b) If the Participants employment with the Company is voluntarily terminated
within the 24-month period following the Exercise Date (other than due to Early
Retirement or Normal Retirement) or is terminated due to cause, the Company may
repurchase the Restricted Option Shares at the Exercise Price paid by the
Participant. If the Company elects not to purchase such Restricted Option
Shares, the Participant shall continue to hold such Shares subject to the
restrictions thereon.
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(c) Upon a termination of employment as a result of death, Disability,
Divestiture, Early Retirement or Normal Retirement, any Restricted Option Shares
then held by a Participant or a Participants Designated Beneficiary shall be
released from, and no Option Shares acquired after the date of termination
shall be subject to, the restrictions on transfer or sale set forth in par-
agraph 9(a) above. Promptly after the date of any such termination, upon
receipt of certificates representing any Restricted Option Shares, the
Company shall exchange any such certificates for certificates representing
such Shares free of any restrictive legend relating to the lapsed restrictions.
10. WITHHOLDING TAX REQUIREMENTS
Following receipt of each notice of exercise of the Option, the Company
shall deliver to Participant a notice specifying the amount that Participant
is required to pay to satisfy applicable tax withholding requirements.
Participant hereby agrees to either (i) deliver to the Company by the due
date specified in such notice from the Company a check payable to the Company
and equal to the amount set forth in such notice or (ii) make other appro-
priate arrangements acceptable to the Company to satisfy such tax withholding
requirements.
11. NO RIGHT TO EMPLOYMENT
Neither the granting of the Option nor its exercise shall be construed as
granting to the Participant any right with respect to continued employment with
the Company.
12. CHANGE IN CONTROL
The Committee shall, in its sole discretion, have the right to accelerate the
vesting of any Option and to release any restrictions on the Restricted Option
Shares, in the event of a Change in Control.
13. ADJUSTMENT OF AWARDS
The terms of this Option and the number of Option Shares purchasable hereunder
shall be subject to adjustment pursuant to Sections 5(c) through (h) of the
Plan.
14. AMENDMENT OF OPTION
The Option may be amended by the Committee at any time (i) if the Committee
determines, in its sole discretion, that amendment is necessary or advisable in
the light of any additions to or changes in the Code or in the regulations
issued thereunder, or any federal or state securities law or other law or
regulation, which change occurs after the Date of Grant and by its terms
applies to the Option; or (ii) other than in the circumstances described in
clause (i), with the consent of the Participant.
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15. NOTICE
Any notice to the Company provided for in this Award Agreement shall be in
writing and addressed to the Company in care of the Manager of the Companys
Compensation and Benefits Department, and any notice to the Participant shall be
in writing and addressed to the Participant at the Participants current add-
ress shown on the records of the Company or such other address as the Part-
icipant may submit to the Company in writing. Any notice shall be deemed to
be duly given if and when properly addressed with postage prepaid, or if
personally delivered to the addressee or, in the case of notice to the
Company, if sent via telecopy to the Compensation and Benefits Departments
facsimile machine at such telephone number as may be published in the
Companys published telephone directory.
16. INCORPORATION OF PLAN BY REFERENCE
The Option is granted pursuant to the terms of the Plan, which terms are
incorporated herein by reference, and the Option shall in all respects be
interpreted in accordance with the Plan. The Committee shall interpret and
construe the Plan and this Award Agreement, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue
arising hereunder or thereunder. In the event of a conflict between the
terms of this Award Agreement and the Plan, the terms of the Plan shall
control.
17. GOVERNING LAW
The validity, construction, interpretation and effect of this Award Agreement
shall exclusively be governed by and determined in accordance with the law of
the State of Texas, except to the extent preempted by federal law, which
shall to that extent govern.
IN WITNESS WHEREOF, The Southland Corporation has caused its duly authorized
officer to execute this Grant of Nonqualified Stock Option, and the Part-
icipant has placed his or her signature hereon, effective as of the Date of
▇▇▇▇▇.
THE SOUTHLAND CORPORATION
By:
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President and Chief Executive Officer
ACCEPTED AND AGREED TO:
By:
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Participant
Participants Social Security Number: SSN
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