STOCK OPTION
This STOCK OPTION is granted as of the 8th day of October 1999, by Global
Technologies, Ltd., a Delaware corporation (f.k.a. Interactive Flight
Technologies, Inc.) (the "Company"), to Xxxxx X. Xxxxx ("Grantee").
BACKGROUND
A. Grantee is the Chairman and Chief Executive Officer of Company.
B. Pursuant to the terms of an employment agreement entered into between
the Company and Grantee (the "Employment Agreement"), and in recognition and
consideration of the contributions that Grantee has made to the Company during
the period from September 15, 1998 to September 30, 1999 (the "Initial Period"),
during which period of time Grantee received no compensation from the Company,
and in order to incentivize Grantee with respect to the future success of the
Company and to encourage him to perform at increasing levels of effectiveness
and use his best efforts to promote the growth and profitability of the Company,
and in consideration of services to be performed, Company desires to afford
Grantee an opportunity to purchase shares of its common stock, par value $.01
per share ("Common Stock"), as hereinafter provided.
C. Any capitalized terms used but not defined herein shall have the
meanings attributed thereto in the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto,
intending to be legally bound, agree as follows:
1. GRANT OF OPTION.
(a) In consideration of the contributions that Grantee has made to Company
during the Initial Period, the Company hereby irrevocably grants to Grantee the
right and option to purchase ("Option A") all or any part of an aggregate of
Two-Hundred Fifty Thousand (250,000) shares of Common Stock (the "A Option
Shares"), at an exercise price equal to the closing sale price (or closing bid
if no sales were reported) of a share of Common Stock as reported by the Nasdaq
National Market on October 7, 1999 (or the next trading day in the event there
is no trading on such date) (the "Option Price"), during the Option Period (as
defined below) and subject to the conditions hereinafter set forth.
(b) In order to incentivize Grantee with respect to the future success of
the Company and to encourage him to perform at increasing levels of
effectiveness and use his best efforts to promote the growth and profitability
of the Company, the Company hereby irrevocably grants to Grantee the right and
option to purchase ("Option B") all or any part of an aggregate of Two-Hundred
Fifty Thousand (250,000) shares of Common Stock (the "B Option Shares") at the
Option Price, during the Option Period (as defined below) and subject to the
conditions hereinafter set forth.
(c) In order to further incentivize Grantee with respect to the future
success of the Company and to further encourage him to perform at increasing
levels of effectiveness and use his best efforts to promote the growth and
profitability of the Company, the Company hereby irrevocably grants to Grantee
the right and option to purchase ("Option C") all or any part of an aggregate of
Five Hundred Thousand (500,000) shares of Common Stock (the "C Option Shares")
at the Option Price, during the Option Period (as defined below) and subject to
the conditions hereinafter set forth.
(d) Option A, Option B and Option C shall be referred to collectively
hereinafter as the "Option" and the A Option Shares, B Option Shares and C
Option Shares shall be referred to collectively hereinafter as the "Option
Shares."
2. OPTION PERIOD. The Option may be exercised in accordance with the
provisions of Paragraphs 4 and 5 hereof during the Option Period, which shall
begin on the date hereof and shall end on the Option Expiration Date defined in
Paragraph 3 hereof. All rights to exercise the Option shall terminate on the
Option Expiration Date.
3. OPTION EXPIRATION DATE. The Option Expiration Date shall be October 8,
2009.
4. EXERCISE OF OPTION.
(a) The Option shall vest, and shall be exercisable as set forth in the
following table, provided that any portion of this Option which is exercisable
in any year, but not exercised, may be carried forward and exercised in any
future year during the term hereof:
Option A:
From and after: Number of Shares Exercisable
--------------- ----------------------------
October 8, 1999 250,000
Option B:
From and after: Number of Shares Exercisable
--------------- ----------------------------
October 8, 2000 83,334
October 8, 2001 83,333
October 8, 2002 83,333
Option C:
Option C shall vest in full on the sixth anniversary of the date
hereof; provided, however, that vesting of Option C shall be
accelerated in accordance with the three-year vesting schedule set
forth below in the event that the performance milestones set forth
below are achieved.
From and after: Number of Shares Exercisable
--------------- ----------------------------
October 8, 2000 166,667
October 8, 2001 166,666
October 8, 2002 166,666
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(b) The number of shares exercisable on each of the accelerated vesting
dates set forth above with respect to Option C shall be adjusted as follows:
(i) On each accelerated vesting date, a percentage of the total number
of Options scheduled to vest shall actually vest. This percentage shall be
determined on the basis of a sliding scale as follows:
(A) 100% of the Options scheduled to vest on a particular
accelerated vesting date shall actually vest in the event that the
Comparison Price (as defined below) on such vesting date is greater
than the Base Price (as defined below) for the preceding calendar year
by 30% or more, and this percentage shall decrease gradually to 0% in
the event that the Comparison Price on such vesting date is equal to
or less than the Base Price for such calendar year. In addition,
Grantee shall not vest with respect to any Options scheduled to vest
on a particular accelerated vesting date unless the Comparison Price
on that vesting date is greater than the Base Price for the preceding
calendar year by at least 15%, at which point 50% of the Options
scheduled to vest shall actually vest. The following example is
illustrative - Grantee would vest with respect to 50% of the 166,666
Options scheduled to vest on October 8, 2001 (i.e. 83,333 Options), in
the event that the Comparison Price on such vesting date was 15%
greater than the Base Price for the preceding calendar year;
alternatively, Grantee would vest with respect to 75% of the 166,666
Options scheduled to vest on such vesting date (i.e. 124,999.5
Options) in the event that the Comparison Price on such vesting date
is 22.5% greater than the Base Price for the preceding calendar year.
Any fraction less than a half resulting from these calculations shall
be dropped and any fractions equal to or greater than a half resulting
from these calculations shall require rounding up to the next whole
number.
(B) The guidelines set forth in paragraph (A) above shall be
modified as follows for any of calendar years 2000, 2001 or 2002 in
the event that the S & P 500 Comparison Average (as defined below) for
any of such calendar years is less than the S & P 500 Comparison
Average for the preceding calendar year. In any calendar year in which
this occurs, vesting with respect to 50% of the aggregate number of
Options scheduled to vest in such calendar year shall be determined as
set forth in paragraph (A) above, and the balance of such Options
shall vest in the event that EVA (as defined below) is greater than
zero, or, in the event that EVA is less than or equal to zero, shall
not vest on an accelerated basis.
(ii) (A) "Base Price" means the average of the last sale prices of a
share of Common Stock (or the last bid on any such day on which there were no
sales) as reported by the Nasdaq National Market on each of the 31 days
consisting of the 15 trading days immediately preceding September 30, September
30 (regardless of whether or not it is a trading day), and the 15 trading days
immediately following September 30. "Comparison Price" means the last sale price
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of a share of Common Stock as reported by the Nasdaq National Market on the
applicable vesting date (or the last bid if there were no sales on such date; or
the next trading day in the event that there was no trading on such date).
(B) "S & P 500 Comparison Average" means the average of the
Standard & Poor's 500 Composite Index as of the close of business on
each of the 31 days consisting of the 15 trading days immediately
preceding September 30, September 30 (regardless of whether or not it
is a trading day) and the 15 trading days immediately following
September 30. "EVA" means Economic Value Added of the Company for the
fiscal year ending June 30 of the calendar year for which the S & P
500 Comparison Average is being calculated, calculated in accordance
with the memorandum provided to the Company's Compensation Committee
by Xxxxx X. Xxxxxxx on November 19, 1999 (a copy of which is attached
hereto as Exhibit "A").
(iii) Notwithstanding anything to the contrary contained in this
subparagraph (b), the failure of the Comparison Price on any accelerated vesting
date to be greater than the Base Price for the preceding calendar year by 30% or
more (a "Shortfall") can be made up (i.e. any percentage of Options not vesting
on the relevant accelerated vesting date because of a Shortfall would vest on
the subsequent accelerated vesting date on which the following condition is met)
if the compounded annual growth rate in the price of a share of Common Stock was
such that the Comparison Price on the next accelerated vesting date (or the
accelerated vesting date after that one, depending on which accelerated vesting
date is the one on which the Shortfall occurred) is greater than the Base Price
for the calendar year preceding the accelerated vesting date on which the
Shortfall occurred by 30% or more. For example, if the Comparison Price on
October 8, 2000 is greater than the Base Price for 1999 by 20% (resulting in a
Shortfall, i.e. only 66.67% of the Options scheduled to vest on such accelerated
vesting date would actually vest) and the Comparison Price on October 8, 2001 is
greater than the Base Price for 1999 by at least 40.83%, then the Comparison
Price on October 8, 2001 would have increased with respect to the Base Price for
1999 at a compounded annual growth rate of 30%. In this scenario, on October 8,
2001, not only would 100% of the Options scheduled to vest on such date actually
vest, but also the 33.33% of the Options scheduled to vest on October 8, 2000
that did not so vest because of the Shortfall would actually vest.
(c) Notwithstanding anything to the contrary contained herein, Grantee may
purchase all or any portion of the unexercised balance of this Option
immediately prior to, or upon, the effective date of a Change of Control (as
defined in the following sentence). A "Change of Control" of the Company shall
mean any transaction or series of related transactions that results in a change
in the control of the Company, including, without limitation:
(i) a merger or consolidation of the Company into or with any other
entity when the Company is not the surviving entity of such merger or
consolidation;
(ii) the acquisition, directly or indirectly, by any individual,
entity or "group" (as defined in Section 13(d) of the Securities and Exchange
Act of 1934, as amended) (other than the Company, any subsidiary thereof, any
employee benefit plan of the Company or any subsidiary, or any entity holding
shares or other securities of the Company for or pursuant to the terms of such a
plan) (an "Acquirer"), of stock or options, or any combination thereof,
entitling the Acquirer to cast 25% or more of all votes (without consideration
of the rights of any class of stock to elect directors by a separate class vote)
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entitled to be cast by all stockholders of the Company in an election of the
Board of Directors of the Company;
(iii) the acquisition, directly or indirectly, by an Acquirer of a
majority of the total equity interest of the Company;
(iv) the sale or other disposition of all, or substantially all, of
the assets of the Company;
(v) the election to the Board of Directors of the Company of
individuals who would constitute a majority of the members of the Board elected
at any meeting of stockholders or by written consent (without consideration of
the rights of any class of stock to elect directors by a separate class vote),
where the election or the nomination for election by the Company's stockholders
of such directors was not approved by a vote of at least a majority of the
directors in office immediately prior to such election or nomination; or
(vi) the formation of a joint venture or partnership with the Company
for the purpose of effecting a transfer of control of, or a material interest
in, the Company (such merger, consolidation, sale or other transaction being
hereinafter referred to as a "Transaction").
There shall be excluded from the foregoing any Transaction as a result of
which (A) the holders of Common Stock prior to the Transaction retain or acquire
securities constituting a majority of the outstanding voting common stock of the
acquiring or surviving corporation or other entity in substantially the same
proportions that they owned Common Stock in the Company prior to the
Transaction, and (B) no single person or entity owns more than half of the
outstanding voting common stock of the acquiring or surviving corporation or
other entity. For purposes of this Paragraph 4, voting common stock of the
acquiring or surviving corporation or other entity that is issuable upon
conversion of convertible securities or upon exercise of warrants or options
shall be considered outstanding, and all securities that vote in the election of
directors (other than solely as the result of a default in the making of any
dividend or other payment) shall be deemed to constitute that number of shares
of voting common stock which is equivalent to the number of such votes that may
be cast by the holders of such securities.
5. MANNER OF EXERCISE. Exercise of the Option, or any portion thereof,
shall be by written notice to Company pursuant to Paragraph 11 hereof. The
notice shall be accompanied by payment in full in cash, stock of the Company, or
other property (including notes or other contractual obligations of Grantee to
make payment on a deferred basis, such as through "cashless exercise
arrangements," to the extent permitted by applicable law), or a combination
thereof, in an amount equal to the product obtained by multiplying the number of
Option Shares with respect to which the Option is then being exercised by the
Option Price. Upon receipt of such notice and payment, the Company shall deliver
a certificate or certificates representing the Option Shares purchased. The
certificate or certificates shall be delivered to or upon the written order of
the Grantee. Despite the fact that a certificate or certificates representing
the Option Shares purchased shall not have been issued, Grantee or his legal
representative, legatees or distributees, as the case may be, shall be deemed to
be a holder of any shares subject to this Option, provided that the written
notice and payment required by this Paragraph 5 have been delivered to Company.
The Option Shares that shall be purchased upon the exercise of the Option as
provided herein shall be fully paid and non-assessable.
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6. RIGHTS IN EVENT OF DEATH, DISABILITY OR TERMINATION OF EMPLOYMENT.
(a) DEATH. If Grantee dies while employed by the Company, then 50% of any
then unvested Options shall automatically vest (without any action on the part
of the Company) on the date of death. The 50% of the then unvested Options that
shall vest according to the preceding sentence shall be the 50% of the then
unvested Options that otherwise would have been the latest to vest of all then
unvested Options. The remainder of any then unvested Options shall continue to
vest according to the schedule set forth in Paragraph 4 above. Grantee's named
beneficiary shall have through the Option Expiration Date to exercise any
unexercised Options.
(b) DISABILITY. If Grantee is terminated from his employment with the
Company by reason of disability in accordance with the Employment Agreement,
then 50% of any then unvested Options shall automatically vest (without any
action on the part of the Company) on the date of such termination. The 50% of
the then unvested Options that shall vest according to the preceding sentence
shall be the 50% of the then unvested Options that otherwise would have been the
latest to vest of all then unvested Options. The remainder of any then unvested
Options shall continue to vest according to the schedule set forth in Paragraph
4 above. Grantee shall have through the Option Expiration Date to exercise any
unexercised Options.
(c) CAUSE OR RESIGNATION. If Grantee is terminated from his employment with
the Company for Cause (as defined in the Employment Agreement) in accordance
with the Employment Agreement or voluntarily leaves the employ of the Company
prior to expiration of the Employment Agreement, then all unvested Options shall
automatically terminate and be cancelled (without any action on the part of the
Company) on the effective date of termination. In addition, Grantee shall have
the opportunity on the date of such termination for Cause or Grantee's
voluntarily leaving the employ of the Company to exercise all vested but
unexercised Options. All vested Options not exercised on such date shall
thereafter automatically expire (without any action on the part of the Company).
(d) WITHOUT CAUSE. If Grantee is terminated from his employment without
Cause or terminates his employment with Company for Good Reason (as defined in
the Employment Agreement) in accordance with the Employment Agreement, then all
unvested Options shall automatically vest (without any action on the part of the
Company) immediately prior to the date of such termination. Grantee shall have
through the Option Expiration Date to exercise any unexercised Options.
7. OPTION SHARES TO BE PURCHASED FOR INVESTMENT. Unless Company has
notified Grantee pursuant to Paragraph 11 hereof that a registration statement
covering the Option Shares has become effective under the Securities Act of
1933, as amended (the "Act"), it shall be a condition to the exercise of the
Option that the Option Shares acquired upon such exercise be acquired for
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investment and not with a view to distribution. If requested by the Company upon
advice of its counsel that the same is necessary or desirable, the Grantee
shall, at the time of purchase of the Option Shares, deliver to the Company
Grantee's written representation that Grantee (a) is purchasing the Option
Shares for his own account for investment, and not with a view to public
distribution or with any present intention of reselling any of the Option Shares
(other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act); (b) has been advised and understands that (i) the Option
Shares have not been registered under the Act and are subject to restrictions on
transfer and (ii) the Company is under no obligation to register the Option
Shares under the Act or to take any action which would make available to the
Grantee any exemption from such registration; and (c) has been advised and
understands that such Option Shares may not be transferred without compliance
with all applicable federal and state securities laws.
8. CHANGES IN CAPITAL STRUCTURE. The number of Option Shares covered by
this Option and the Option Price shall be equitably adjusted in the event (the
"Event") of (i) the payment of any dividend payable in, or the making of any
distribution of, Common Stock to holders of record of Common Stock, which
increases the outstanding Common Stock; (ii) any stock split, combination of
shares, recapitalization or other similar change; (iii) the merger or
consolidation of the Company into or with any other entity; or (iv) the
reorganization, dissolution, liquidation or winding up of the Company. Grantee
shall be entitled, upon the exercise of the Option, to receive such new,
additional or other shares of stock of any class, or other property (including,
without limitation, cash and/or securities of any successor entity), as Grantee
would have been entitled to receive as a matter of law in connection with such
Event had Grantee held the Option Shares on the record date set for such Event.
The Company shall have the authority to determine the adjustments to be made
under this Paragraph 8 and any such determination shall be final, binding and
conclusive.
9. LEGAL REQUIREMENTS. If the listing, registration or qualification of the
Option Shares upon any securities exchange or under any federal or state law, or
the consent or approval of any governmental regulatory body is necessary as a
condition of or in connection with the purchase of the Option Shares, the
Company shall not be obligated to issue or deliver the certificates representing
the Option Shares as to which the Option has been exercised unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained. This Option does not hereby impose on the Company a duty
to so list, register, qualify, or effect or obtain consent or approval. If
registration is considered unnecessary by the Company or its counsel, the
Company may cause a legend to be placed on the certificates for the Option
Shares being issued calling attention to the fact that they have been acquired
for investment and have not been registered, such legend to read as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED UNLESS THERE IS A REGISTRATION
STATEMENT IN EFFECT COVERING SUCH SECURITIES OR THERE IS
AVAILABLE AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS."
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10. NO OBLIGATION TO EXERCISE OPTION. The Grantee shall be under no
obligation to exercise the Option.
11. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or when sent by certified or registered
mail, postage prepaid, properly addressed to the party entitled to receive such
notice at the address stated below; or when sent via facsimile transmission with
confirmation of transmission or via electronic mail, provided that in both of
the foregoing situations a copy of the notice so transmitted is sent to the
party entitled to receive such notice via first-class mail, postage prepaid at
the address stated below:
If to Company: Global Technologies, Ltd.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: Chief Executive Officer and President
Facsimile: (000) 000-0000
E-mail: xxxxxxxxxxx@xxxxx.xxx
If to Grantee: Xxxxx X. Xxxxx
000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Either party hereto may change such party's address, facsimile number or
e-mail address by sending notice thereof to the other party by any of the
methods set out above, provided that such change shall not be deemed effective
as against the party to whom it is sent until the notice containing such change
is actually received by such party.
12. ADMINISTRATION. This Option has been granted pursuant to the Employment
Agreement and is subject to the terms and provisions thereof. All questions of
interpretation and application of this Option shall be determined by the
Company, and such determination shall be final, binding and conclusive.
13. NOT AN EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Option shall be
construed as an agreement by the Company, express or implied, to employ Grantee
or contract for Grantee's services, to restrict the right of the Company to
discharge Grantee or cease contracting for Grantee's services or to modify,
extend or otherwise affect in any manner whatsoever, the terms of any employment
agreement or contract for services which may exist between the Grantee and the
Company.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
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15. GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of Delaware without regard to conflicts of laws
principles.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed by the parties.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
date first above written.
GLOBAL TECHNOLOGIES, LTD.
By: /s/ Xxxxx X. Xxx
----------------------------------
Xxxxx X. Xxx, President and COO
/s/ Xxxxx X. Xxxxx
----------------------------------
Xxxxx X. Xxxxx
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EXHIBIT "A"
See attached.
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