EXHIBIT 10.5
AMENDED
INCENTIVE STOCK OPTION PLAN OF
VERTEX INTERACTIVE, INC.
1. Purpose
This Incentive Stock Option Plan (the "Plan") is intended as an
incentive and to encourage stock ownership by certain officers, directors
and key executive employees of Vertex Industries, Inc. (the "Corporation")
so that they may acquire or increase their proprietary interest in the
success of the Corporation, and to encourage them to remain in the employ
of the Corporation. It is further intended that options issued pursuant to
this Plan shall constitute qualified incentive stock options within the
meaning of section 422A of the 1954 Internal Revenue Code, as amended (the
"Code").
2. Administration
The Plan shall be administered by a committee appointed by the
Board of Directors of the Corporation (the "Committee"). The Committee
shall consist of two or more members of the Corporation's Board of
Directors. The Board of Directors may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board of Directors. The Committee
shall select one of its members as Chairman, and shall hold meetings at
such times and places as it may determine. Action by a majority of the
Committee, whether taken at a meeting of the Committee or approved in
writing by a majority of the members of the Committee, shall be the valid
acts of the Committee. The Committee shall from time to time at its
discretion, consult with management of the Corporation and make
recommendations to the Board of Directors with respect to officers,
directors and the key executive employees who shall be granted options and
the amount of stock to be optioned to each.
The interpretation and construction by the Committee of any
provisions of the Plan or of any option granted under it shall be final
unless otherwise determined by the Board of Directors. No member of the
Board of Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option
granted under it.
3. Eligibility
The persons who shall be eligible to receive options shall be such
officers, directors and key employees of the Corporation as the Board of
Directors shall select from time to time from among those nominated by the
Committee. An optionee may hold more than one option, but only on the terms
and subject to the restrictions hereafter set forth. No person shall be
eligible to receive an option for a larger number of shares than is
recommended for him by the committee.
4. Stock
The stock subject to the options shall be shares of the
Corporation's authorized but unissued or reacquired common stock at the
then existing par value per share hereafter sometimes called Common Stock.
The aggregate number of shares which may be issued under options shall not
exceed 4,000,000 shares of Common Stock. The aggregate number of shares
which may be issued pursuant to this Plan shall be subject to adjustment as
provided in Article 5 (h) of the Plan.
1
5. Terms and conditions of Options
Stock options granted pursuant to the Plan shall be authorized by
the Board of Directors and shall be evidenced by agreements in such form as
the Committee shall from time to time recommend and the Board of Directors
shall from time to time approve, which agreements shall comply with and be
subject to the following terms and conditions:
a. Optionee's Agreement
Each optionee shall not be required to be employed by the
Corporation for any length of time and the Corporation shall be under
no obligation to retain the optionee in its employ for any period.
b. Number of Shares
(1) Each option shall state the number of shares to which it
pertains.
(2) If the aggregate fair market of the shares of stock
(determined as of the time of grant of such option(s) with respect to which
incentive stock options are exercisable for the first time by an optionee
during any calendar year (under all such plans of the Corporation and its
parent and subsidiary corporations, if any) exceeds $100,000, then only the
first $100,000 of such shares so purchased will be treated as exercised
under this Plan, and any excess over $100,000 so purchased shall be treated
as options which are not incentive stock options; provide, however, that
this rule shall be applied by taking options into account in the order or
sequence in which they were granted.
(3) For purposes of computing the annual limitation, the fair
market value of Common Stock of the Corporation granted under this Plan
shall be aggregated with the fair market value of any other stock of the
Corporation granted to such optionee under this Plan or any other plan or
plans maintained by the Corporation.
c. Option Price
Each option shall state the option price, which shall be not less
than 100% of the fair market value of the shares of Common Stock of the
Corporation on the date of the granting of the option; provided, however,
that if the option is granted to an optionee who, at the time of the grant,
owns (as determined in accordance with P425(d) of the Code) stock of the
Corporation possessing more than 10% of the total voting power of all
classes of stock of the Corporation, then the option price shall be not
less than 110% of the fair market value of the shares of Common Stock of
the Corporation on the date of the granting of the option.
During such time as such stock is not listed upon an established
stock exchange or the NASDAQ System the fair market value per share shall
be the mean between dealer "bid" and "ask" prices of the Common Stock in
the New York over-the-counter market on the day the option is granted, as
reported by the National Association of Securities Dealers, Inc. If the
stock is listed upon an established stock exchange(s) or NASDAQ system,
such fair market value shall be deemed to be the highest closing price of
the Common Stock on such stock exchange(s) or such system on the day the
option is granted or if no sale of the Corporation's Common Stock shall
have been made on any stock exchange(s) or such system on that day, on the
next preceding day on which there was a sale of such stock. If the stock is
neither listed on an established stock exchange or such system nor traded
over-the-counter, the Committee shall determine such fair market value
under the general principles of valuing the stock of corporations whose
shares are not publicly traded. Subject to the foregoing, the Board of
Directors and the Committee in fixing the option price shall have full
authority and discretion and be fully protected in doing so.
d. Medium and Time of Payment
2
The option price shall be payable in cash, or by check, upon the
exercise of the option; provided, however, the Board of Directors, in its
sole discretion, may accept other forms of payment, including, but not
limited to, other stock of the Corporation then owned by Optionee.
e. Term and Exercise of Option
(1) Each option shall specify the dates upon which such options
can be exercised, and shall designate the maximum number of shares granted
by the option that can be exercised on such dates. To the extent that the
maximum number of shares permitted to be exercised on such date or dates
are not so exercised, such shares may be so exercised at any subsequent
date not later than ten (10) years after the option was granted; provided,
however, that no option granted to an optionee who, at the time of the
grant, owns stock of the Corporation (as determined in accordance with
425(d) of the Code) possessing more than 10% of the total voting power of
all classes of stock of the Corporation, shall be exercisable more than
five (5) years after such option was granted.
(2) During the lifetime of the optionee, the option shall be
exercisable only by him and shall not be assignable or transferable by him
and no other person shall acquire any rights herein.
f. Termination of Employment Except Death
(1) In the event that an optionee shall voluntarily terminate his
employment with the Corporation other than as a result of his death and
shall be no longer in its employ, subject to the condition that no option
shall be exercisable after the expiration of ten (10) years from the date
it is granted (or after the expiration of five (5) years if such shorter
period is applicable), such optionee shall have the right to exercise the
option at any time within 30 days after such termination of employment, but
only to the extent his right to exercise such option had accrued as
specified in such option and had not previously been exercised at the date
of his termination from employment. Whether authorized leaves of absence or
absence for military or governmental service shall constitute termination
of employment, for the purposes of the Plan, shall be determined by the
Committee, which determination, unless overruled by the Board of Directors,
shall be final and conclusive.
(2) The Board of Directors, at its sole discretion, may redeem any
options of a voluntarily terminated employee that such voluntarily
terminated employee had a right to exercise at the time of his termination
and had not previously exercised by paying to such voluntarily terminated
employee an amount equal to the difference between the option price and the
then fair market value of the stock, as determined in accordance with
Article 5(c) of the Plan.
(3) In the event that an optionee shall have his employment with
the Corporation involuntarily terminated for reasons other than his death,
any options held by such employee and not exercised as of such termination
may be exercised within 30 days thereof to the extent currently exercisable
otherwise they shall be cancelled, and no longer be exercisable.
g. Death of Optionee and Transfer of Option
If the optionee shall die while in the employ of the Corporation
and shall not have fully exercised the option, an option may be exercised,
subject to the condition that no option shall be exercisable after the
expiration of ten (10) years from the date it is granted, (or after the
expiration of five (5) years, if such shorter period is applicable), at any
time within one (1) year after the optionee's death, by the executors,
administrators or personal representatives of the optionee or by any person
or persons who shall have acquired the option directly from the optionee by
bequest or inheritance, but only to the extent that the optionee's right to
exercise such option had accrued as specified in the option at the time of
his death and had not previously been exercised.
No option shall be transferrable by the optionee otherwise than by
will or the laws of descent and distribution.
3
h. Stock Dividends, Adjustments and Other Changes
Subject to any required action by the stockholders, the number
of shares of Common Stock covered by each outstanding option, and the
price per share thereof in each such option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of
Common Stock of the Corporation resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but only on
the Common Stock) or any other increase or decrease in the number of
such shares effected without receipt of consideration by the
Corporation.
Subject to any required action by the stockholders, if the
Corporation shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain to and apply to
the securities to which a holder of the number of shares of Common
Stock subject to the option would have been entitled. A dissolution or
liquidation of the Corporation or a merger or consolidation in which
the Corporation is not the surviving corporation, shall cause each
outstanding option to terminate; provided, however, that each optionee
shall, in such event, have the right immediately prior to such
dissolution or liquidation, or merger or consolidation in which the
Corporation is not the surviving corporation, to exercise his option in
whole or in part without regard to the exercise limitations contained
in the option.
In the event of a change in the Common Stock of the
Corporation as presently constituted, which is limited to a change of
all of its authorized shares into the same number of shares with a
stated par value the shares resulting from any such change shall be
deemed to be the Common Stock within the meaning of the Plan.
To the extent of the foregoing adjustments related to stock or
securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive, provided that each option granted pursuant to this Plan
shall not be adjusted in a manner that causes the option to fail to
continue to qualify as an incentive stock option within the meaning of
422A of the Code.
Except as hereinbefore expressly provided in the Article 5(h),
the optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spin-off of assets or stock of
another corporation, and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to the option.
The grant of an option pursuant to the Plan shall not affect
in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or any part of its business or
assets.
i. Rights as a Stockholder
An optionee or a transferee of an option shall have no rights
as a stockholder with respect to any shares covered by his option until
the date of the issuance of a stock certificate to him for such shares.
No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Article 5 (h) hereof.
j. Modification, Extension and Renewal of Options
Subject to the terms and conditions and within the limitations
of the Plan, the Board of Directors may
4
modify, extend or renew outstanding options granted under the Plan, or
accept the surrender of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new options in
substitution therefor (to the extent not theretofore exercised). The
Board of Directors shall not, however, modify any outstanding options
so as to specify a lower price or accept the surrender of outstanding
options and authorize the granting of new options in substitution
therefore specifying a lower price. Notwithstanding the foregoing,
however, no modification of an option shall, without the consent of
the optionee, alter or impair any rights or obligations under any
option theretofore granted under the Plan.
k. Investment Purpose
Each option under the Plan shall be granted on the condition
that the purchases of Common Stock thereunder shall be for investment
purposes, and not with a view to resale or distribution except that in
the event the Common Stock subject to such option is registered under
the Securities Act of 1933, as amended, or in the event a resale of
such stock without such registration would otherwise be permissible,
such condition shall be inoperative if in the opinion of counsel for
the Corporation such condition is not required under the Securities Act
of 1933 or any other applicable law, regulation, or rule of any
governmental agency. Each optionee shall give the Company an investment
letter, in a form prescribed by the Board of Directors, as a condition
precedent to the issuance of certificates representing shares exercised
by such optionee.
l. Other Provisions
The option agreements authorized under the Plan shall contain
such other provisions, including, without limitations, restrictions
upon the exercise of the option, as the Committee and the Board of
Directors of the Corporation shall deem advisable. Any such option
agreement shall contain such limitations and restrictions upon the
exercise of the option, and the amount of such option, as shall be
necessary in order that such option will be an "incentive stock option"
as defined in 422A of the Code or to conform to any change in the law.
6. Term of Plan
Options may be granted pursuant to the Plan from time to time
within a period of ten years (10) from the date the Plan is adopted, or
the date the Plan is approved by the Stockholders, whichever is
earlier.
7. Indemnification of Committee
In addition to such other rights of indemnification as they
may have as directors or as members of the Committee, the members of
the Committee shall be indemnified by the Corporation against the
reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or
any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any option granted
thereunder, and against all amounts paid by them in settlement thereof
provided such settlement is approved by independent legal counsel
selected by the Corporation) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged to such action, suit or
proceeding that such Committee member is liable for negligence or
misconduct in the performance of his duties; provided that within 60
days after institution of any such action, suit or proceeding a
Committee member shall in writing offer the Corporation the opportunity
at its own expense, to handle and defend the same.
8. Amendment of the Plan
The Board of Directors of the Corporation may, insofar as
permitted by law, from time to time, with respect to any shares at the
time not subject to options, suspend or discontinue the Plan or revise
or amend it in
5
any respect whatsoever except that, without approval of the
stockholders, no such revision or amendment shall change to number of
shares subject to the Plan, change the designation of the class of
employees eligible to receive options, decrease the price at which
options may be granted, remove the administration of the Plan from the
committee, or render any member of the Committee eligible to receive an
option under the Plan while serving thereon. Furthermore, the Plan may
not, without the approval of the stockholders, be amended in any manner
that will cause options issued under it to frail to meet the
requirements of incentive stock options as defined in 422A of the Code.
9. Application of Funds
The proceeds received by the Corporation from the sale of
Common Stock pursuant to options will be used for general corporation
purposes.
10. No Obligation to Exercise Option
The granting of an option shall impose no obligation upon the
optionee to exercise such option.
11. Effective Date; Approval of Stockholders
The Plan shall not take effect until approved by the holders
of a majority of the outstanding shares of Common Stock of the
Corporation, which approval must occur within the period beginning
twelve months before and ending twelve months after the date the Plan
is adopted by the Board of Directors; provided, however, that no
options shall be granted under the Plan after October 9, 2005.
Amended 2/14/00
6