Form 4: Copart CFO Granted 150,000 Stock Options

Copart's Chief Financial Officer, Leah C. Stearns, was granted 150,000 stock options with an exercise price of $46.57, subject to service and performance-based vesting conditions.

Summary

• Leah C. Stearns, Chief Financial Officer of Copart Inc. (CPRT), was granted 150,000 stock options.
• The transaction date for these grants was September 16, 2025.
• The exercise price for all options is $46.57 per share.
• The options expire on September 16, 2035.
• The grants are made under the Amended and Restated 2007 Equity Incentive Plan.
• The options are divided into two tranches of 75,000 shares each, with distinct vesting conditions.
• The first tranche of 75,000 options vests 20% on the first anniversary of the grant date, with the balance vesting over the subsequent 48 months.
• The second tranche of 75,000 options vests 20% on the first anniversary of the grant date, with the balance vesting monthly over the subsequent 48 months, subject to a performance-based condition.
• The performance condition for the second tranche requires Copart's common stock price to be equal to or greater than $58.21 (125% of the exercise price) at the time of exercise and for each of the twenty consecutive trading days preceding the exercise date.

Sentiment

Score: 7

Explanation: The grant of stock options to a key executive is a standard practice that aligns management's interests with shareholder value creation. The inclusion of a performance-based vesting condition for a portion of the options further strengthens this alignment by requiring significant stock price appreciation for full realization of the award.

Positives

• The granting of stock options aligns the interests of the Chief Financial Officer with shareholders, incentivizing long-term company performance.
• The performance-based vesting condition for 75,000 options requires Copart's stock price to reach at least $58.21 (125% of the exercise price) for 20 consecutive days prior to exercise, indicating a clear target for value creation.
• The long expiration date of September 16, 2035, provides a significant window for the options to become valuable.

Risks

• For the option holder, there is a risk that the performance-based vesting condition (stock price reaching $58.21 for 20 consecutive days) may not be met, preventing the exercise of 75,000 options.
• The value of the options is dependent on the future market price of Copart Inc. common stock, which is subject to market fluctuations and company performance.

Future Outlook

The stock option grants are designed to incentivize future performance, with vesting schedules extending over several years and one tranche subject to a specific stock price performance target of $58.21. This indicates management's focus on long-term value creation and stock appreciation.

Management Comments

• The award is also subject to a performance-based vesting condition, such that no portion of the otherwise vested award may be exercised unless the Copart, Inc. common stock price in trading on the Nasdaq Global Select Market is equal to or greater than $58.21 (an amount equal to 125% of the exercise price), both (i) at the time of any exercise, and (ii) at the closing price of the Copart, Inc. common stock in trading on the Nasdaq Global Select market for each of the twenty consecutive days preceding the date of any exercise.

Industry Context

Granting stock options to key executives like the Chief Financial Officer is a common practice in publicly traded companies across various industries. It serves as a critical component of executive compensation packages, aiming to align management's financial interests with those of shareholders by tying a significant portion of their potential compensation to the company's stock performance. The inclusion of performance-based vesting conditions, such as a specific stock price target, is also a growing trend, reflecting a move towards more rigorous performance alignment in executive incentives.

Comparison to Industry Standards

• The structure of the stock option grant, including service-based vesting over several years and a performance-based condition, is consistent with best practices in executive compensation within the broader market.
• Many companies, particularly in the technology and growth sectors, utilize similar equity incentive plans to attract and retain top talent. For example, companies like Tesla or Amazon frequently use stock-based compensation with multi-year vesting to incentivize long-term commitment and performance.
• The specific performance hurdle of 125% of the exercise price ($58.21) is a clear, measurable target, comparable to performance metrics seen in other S&P 500 companies' long-term incentive plans, which often include relative total shareholder return (TSR) or absolute stock price targets.

Corporate Governance

Related Party Transactions

• The stock option grant to the Chief Financial Officer is a form of related party transaction, as it involves compensation to an executive officer.

Stakeholder Impact

• Shareholders: Potential positive impact through increased alignment of executive incentives with long-term stock performance and value creation.
• Employees: May signal stability in executive leadership and a commitment to performance-based compensation structures.
• Management: Provides a significant long-term incentive and potential wealth creation opportunity tied directly to company success.

Next Steps

• The options will begin vesting on the first anniversary of the grant date (September 16, 2026).
• The remaining balance of the first tranche will vest over the subsequent 48 months.
• The remaining balance of the second tranche will vest monthly over the subsequent 48 months, subject to the performance condition.
• The Chief Financial Officer may exercise the vested options, provided the performance condition for the second tranche is met.

Key Dates

Keywords

Copart, CPRT, Stock Options, Executive Compensation, SEC Form 4, Insider Transaction, Leah C. Stearns, Chief Financial Officer, Equity Incentive Plan, Performance Vesting