OPTION AGREEMENT
Exhibit
10.5
THE
BOARD
OF DIRECTORS of IFT Corporation authorized and approved the Equity Incentive
Plan ("Plan"). The Plan provides for the grant of Options to employees of IFT
Corporation and its subsidiaries (“Company”). Unless otherwise provided herein
all defined terms shall have the respective meanings ascribed to them under
the
Plan.
1. Grant
of Option.
Pursuant to authority granted to it under the Plan, the Administrator
responsible for administering the Plan hereby grants to Xxxxx X. Xxxxx, as
an
employee of the Company (“Optionee”) and as of July 12, 2005 ("Grant Date"), the
following Option: 500,000. Each Option permits you to purchase one share of
IFT
Corporation’s common stock, $.01 par value per share ("Shares").
2. Character
of Options.
Pursuant to the Plan, Options granted herein may be Incentive Stock Options
or
Non-Qualified Stock Options, or both. To the extent permitted under the Plan
and
by law, such Options shall first be considered Incentive Stock
Options.
3. Exercise
Price.
The
Exercise Price for each Non-Qualified Stock Option granted herein is $.67 per
Share, and exercise price for each Incentive Stock Option granted herein shall
be $.67 per Share.
4. Exercisability.
The
exercisability of the Options granted hereby is subject to the following
performance criteria and restrictions:
4.1
Vesting
Schedule.
The
Options vest according to the following Sales Goal Thresholds:
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4.1.1
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62,500
Options upon reaching $ 5 Million in Sales during a fiscal
year;
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4.1.2
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62,500
Options upon reaching $ 10 Million in Sales during a fiscal
year;
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4.1.3
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62,500
Options upon reaching $ 15 Million in Sales during a fiscal
year;
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4.1.4
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62,500
Options upon reaching $ 20 Million in Sales during a fiscal
year;
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4.1.5
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62,500
Options upon reaching $ 25 Million in Sales during a fiscal
year;
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4.1.6
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62,500
Options upon reaching $ 30 Million in Sales during a fiscal
year;
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4.1.7
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62,500
Options upon reaching $ 35 Million in Sales during a fiscal year;
and
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4.1.8
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62,500
Options upon reaching $ 40 Million in Sales during a fiscal
year.
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4.2
Sales
Goal Thresholds Non-Repetitive.
The
Sales Goals Thresholds and number of Options referenced in Section 4.1 are
non-repetitive, which means once a particular Sales Goal Threshold has been
met
during any fiscal year, that same Sales Goal is not eligible to be used again
for additional shares during any other fiscal year (e.g. if the Sales Goal
in
4.1.1 is met during the 2005 fiscal year, then that same opportunity is not
available for any other fiscal year).
4.3
Gross
Profit Margin Requirement.
In
addition to the Sales Goal Thresholds requirement, a 27.5% Gross Profit Margin
must be achieved for the number of Options apportioned to each Sales Goal
Threshold set forth in Section 4.1 to vest. “Gross
Profit Margin”
is
calculated by taking Gross Profit and dividing it by Total Sales Revenue.
Notwithstanding the foregoing, at the sole discretion of the Company’s Board of
Directors, upon recommendation of the Compensation Committee, the Gross Profit
Margin Requirement described in this Section 4.3 may be decreased or waived
entirely for an acquisition(s) or merger or otherwise adjusted as determined
by
the Compensation Committee. This Section 4.3 in no way requires the Corporation
to make an acquisition(s) or merge with any other entity.
4.4
Vesting
Procedure.
The
determination of whether or not a particular Sales Goal Threshold and Gross
Profit Margin, including any adjustments thereto, if any, is met during a given
year is made by the Compensation Committee based on the independent annual
audited financial statements of the Company, as approved by the Audit Committee,
and ratification and approval of such determination by the Board of
Directors.
4.5
Restrictions
on Exercisability.
Options, when vested, shall be exercisable over a declining four year period
beginning on the date of hire of the Optionee, based on a 25% and 75% formula.
To illustrate:
4.5.1
Assume
62,500 Options vest in accordance with the procedures set forth in Section
4.4
on March 31, 2006 for the 2005 fiscal year, the Options are exercisable as
follows: (a) March 31, 2006 = 3,906 Options; (b) December 31, 2006 = 3,906
Options; December 31, 2007 = 3,906 Options; December 31, 2008 = 3,906 Options;
and January 31, 2009 = 46,875 Options.
4.5.2
Assume
125,000 Options vest in accordance with the procedures set forth in Section
4.4
on March 31, 2007 for the 2006 fiscal year, the Options are exercisable as
follows: (a) March 31, 2007 = 10,313 Options; (b) December 31, 2007 = 10,313
Options; (c) December 31, 2008 = 10,625 Options; and January 31, 2009 = 93,750
Options.
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5. Term
of Options.
The
term of each Option granted herein shall be for a term of up to six (6) years
from the Grant Date, provided, however, that the term of any Incentive Stock
Option granted herein to the Optionee who is at the time of the grant, a Ten
Percent Owner, shall not be exercisable after the expiration of five (5) years
from the Grant Date.
6. Payment
of Exercise Price.
Options
represented hereby may be exercised in whole or in part by delivering to the
Company your payment of the Exercise Price of the Option so exercised
(i) in cash, by check or cash equivalent, (ii) by tender to the
Company of shares of Stock owned by the Participant having a Fair Market Value
not less than the exercise price; (iii) by tender to the Company of a written
consent to accept a reduction in the number of shares of Stock to which the
Option relates (“Reduced
Number of Shares”),
which
Reduced Number of Shares, when ascribed a value, shall be equal to the exercise
price of the balance of shares of Stock covered by the Option; (iv) by delivery
of a properly executed notice of exercise together with irrevocable instructions
to a broker providing for the assignment to the Company of the proceeds of
a
sale or loan with respect to some or all of the shares being acquired upon
the
exercise of the Option (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time
to
time by the Board of Governors of the Federal Reserve System) (a "Cashless
Exercise"),
(v) by such other consideration as may be approved by the Committee
from
time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Company reserves, at any and all times, the right,
in
the Company's sole and absolute discretion, to establish, decline to approve
or
terminate any program or procedures for the exercise of Options by means of
a
Cashless Exercise.
7. Limits
on Transfer of Options.
The
Option granted herein shall not be transferable by you otherwise than by will
or
by the laws of descent and distribution, except for gifts to family members
subject to any specific limitation concerning such gift by the Administrator
in
its discretion; provided, however, that you may designate a beneficiary or
beneficiaries to exercise your rights and receive any Shares purchased with
respect to any Option upon your death. Each Option shall be exercisable during
your lifetime only by you or, if permissible under applicable law, by your
legal
representative. No Option herein granted or Shares underlying any Option shall
be pledged, alienated, attached or otherwise encumbered, and any purported
pledge, alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company. Notwithstanding the foregoing, to the extent
permitted by the Administrator, in its discretion, an Option shall be assignable
or transferable subject to the applicable limitations, if any, described in
the
General Instructions to Form S-8 Registration Statement under the
Securities Act of 1933, as amended.
8. Termination
of Employment.
If your
employment is terminated with the Company, the Option and any unexercised
portion shall be subject to the provisions below:
(a) Upon
the
termination of your employment with the Company, to the extent not theretofore
exercised, your Option shall continue to be valid; provided, however,
that:
(i) If
the
Participant shall die while in the employ of the Company or during the one
(1)
year period, whichever is applicable, specified in clause (ii) below and at
a
time when such Participant was entitled to exercise an Option as herein
provided, the legal representative of such Participant, or such Person who
acquired such Option by bequest or inheritance or by reason of the death of
the
Participant, may, not later than fifteen (15) months from the date of death,
exercise such Option, to the extent not theretofore exercised, in respect of
any
or all of such number of Shares specified by the Administrator in such Option;
and
(ii) If
the
employment of any Participant to whom such Option shall have been granted shall
terminate by reason of the Participant's retirement (at such age upon such
conditions as shall be specified by the Board of Directors), disability (as
described in Section 22(e) of the Code) or dismissal by the Company other than
for cause (as defined below), and while such Participant is entitled to exercise
such Option as herein provided, such Participant shall have the right to
exercise such Option so granted, to the extent not theretofore exercised, in
respect of any or all of such number of Shares as specified by the Administrator
in such Option, at any time up to one (1) year from the date of termination
of
the Optionee's employment by reason of retirement or dismissal other than for
cause or disability, provided, that if the Optionee dies within such twelve
(12)
month period, subclause (i) above shall apply.
(b) If
you
voluntarily terminate your employment, or are discharged for cause, any Options
granted hereunder shall forthwith terminate with respect to any unexercised
portion thereof.
(c) If
any
Options granted hereunder shall be exercised by your legal representative if
you
should die or become disabled, or by any person who acquired any Options granted
hereunder by bequest or inheritance or by reason of death of any such person
written notice of such exercise shall be accompanied by a certified copy of
letters testamentary or equivalent proof of the right of such legal
representative or other person to exercise such Options.
(d) For
all
purposes of the Plan, the term "for cause" shall mean "cause" as defined in
the
Plan or your employment agreement with the Company.
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9. Restriction;
Securities Exchange Listing.
All
certificates for shares delivered upon the exercise of Options granted herein
shall be subject to such stop transfer orders and other restrictions as the
Administrator may deem advisable under the Plan or the rules, regulations and
other requirements of the Securities and Exchange Commission and any applicable
federal or state securities laws, and the Administrator may cause a legend
or
legends to be placed on such certificates to make appropriate reference to
such
restrictions. If the Shares or other securities are traded on a national
securities exchange, the Company shall not be required to deliver any Shares
covered by an Option unless and until such Shares have been admitted for trading
on such securities exchange.
10. Adjustments.
If
there is any change in the capitalization of the Company affecting in any manner
the number or kind of outstanding shares of Common Stock of the Company, whether
by stock dividend, stock split, reclassification or recapitalization of such
stock, or because the Company has merged or consolidated with one or more other
corporations (and provided the Option does not thereby terminate pursuant to
Section 5 hereof), then the number and kind of shares then subject to the Option
and the price to be paid therefor shall be appropriately adjusted by the Board
of Directors; provided, however, that in no event shall any such adjustment
result in the Company's being required to sell or issue any fractional shares.
Any such adjustment shall be made without change in the aggregate purchase
price
applicable to the unexercised portion of the option, but with an appropriate
adjustment to the price of each Share or other unit of security covered by
this
Option.
11. Change
in Control.
In the
event of a Change in Control (as defined in the Plan), the surviving,
continuing, successor, or purchasing entity or parent thereof, as the case
may
be (the "Acquiror"),
may,
without the consent of any Participant, either assume the Company's rights
and
obligations under outstanding Options or substitute for outstanding Options
substantially equivalent options for the Acquiror's stock. In the event the
Acquiror elects not to assume or substitute for outstanding Options in
connection with a Change in Control, the Committee shall provide that any
unexercised and/or unvested portions of outstanding Options shall be immediately
exercisable and vested in full as of the date thirty (30) days prior to the
date
of the Change in Control. The exercise and/or vesting of any Option that was
permissible solely by reason of this Section 11 shall be conditioned upon the
consummation of the Change in Control. Any Options which are not assumed by
the
Acquiror in connection with the Change in Control nor exercised as of the time
of consummation of the Change in Control shall terminate and cease to be
outstanding effective as of the time of consummation of the Change in
Control.
12. Amendment
to Options Herein Granted.
The
Options granted herein may not be amended without your consent.
13. Withholding
Taxes.
As
provided in the Plan, the Company may withhold from sums due or to become due
to
Optionee from the Company an amount necessary to satisfy its obligation to
withhold taxes incurred by reason of the disposition of the Shares acquired
by
exercise of the Options in a disqualifying disposition (within the meaning
of
Section 421(b) of the Code), or may require you to reimburse the Company in
such
amount.
IFT
CORPORATION
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/s/
Xxxxxxxx Xxxxx, Secretary
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7/12/05
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/s/
Xxxxxx Xxxxxx
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7/12/05
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Xxxxxxxx
Xxxxx
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Date
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Witness
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Date
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Corporate
Secretary
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OPTIONEE
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/s/
Xxxxx
X. Xxxxx
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7/12/05
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7/12/05
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Xxxxx
X. Xxxxx
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Date
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Witness
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Date
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