EXHIBIT 10.5
OPTION AGREEMENT
This Stock
Option Agreement (this "Option Agreement") is entered into as
of
July 28, 2005 between INTERLAND, INC., a
Minnesota corporation (the "Company" or
"Interland") and PETER DELGROSSO
("Executive").
Interland,
Executive and the Company are parties to an employment
agreement
dated of even date herewith (the
"Employment Agreement").
In accordance
with paragraph 4(c) of the Employment Agreement, in
connection with Executive's entering into
employment with the Company, Executive
is to receive a stock option grant with
respect to TWO HUNDRED THOUSAND
(200,000) shares of the common stock, no
par value per share, of Interland (the
"Common Stock").
Therefore, the
parties agree as follows:
1. Grant of
Non-Qualified Stock Option. Interland hereby grants to
Executive the right and option to purchase
from Interland, on the terms and
subject to the conditions set forth in this
Option Agreement, 200,000 shares of
Common Stock (such shares, the "Option
Shares"; such option, the "Option"). The
date of grant of the Option (the "Grant
Date") is July 28, 2005. THE OPTION IS
NOT TO CONSTITUTE AN INCENTIVE STOCK OPTION
WITHIN THE MEANING OF SECTION 422 OF
THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED.
2. Exercise
Price of the Option. The exercise price for the Option Shares
is $2.29 per share, the closing price of
the Common Stock on the NASDAQ National
Market on the Grant Date as reported by
Nasdaq National Market System (the
"Exercise Price").
3. Vesting of
the Option. Subject to the earlier expiration or termination
of this Option in accordance with its
terms, the Option Shares granted under
this Option Agreement will be exercisable
as follows:
(a) Time-Vested
Option Shares.
Subject to
subparagraph
3(c), the Option
Shares will vest and become exercisable at the rate of 5,555 shares per
month,
commencing August 28, 2005. On the
three-year anniversary of the Grant Date, all
unvested shares shall vest and become
exercisable
(b)
Discretionary Acceleration of Exercisability. The Compensation
Committee of the Board of Directors of
Interland (the "Compensation Committee")
may, in its sole discretion except as
provided in subparagraph 3(c), accelerate
the exercisability of all or a portion of
Option Shares without regard to
whether the requirements for exercisability
thereof in this Section 3 have been
met.
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(c) Mandatory
Acceleration of Exercisability. Upon termination of
Executive's employment pursuant to Section
5.3 of the Employment Agreement, all
shares subject to the Option will vest and
automatically become exercisable.
4. Method of
Exercise of Option.
(a) To the
extent then exercisable, Executive may exercise the Option in
whole or in part; except that no single
exercise of the Option is to be for less
than 100 Option Shares, unless at the time
of the exercise, the maximum number
of Option Shares available for purchase
under the Option is less than 100 Option
Shares. In no event is the Option to be
exercised for a fractional share of
Common Stock.
(b) To exercise
the Option, Executive shall give written notice to
Interland stating the number of shares for
which the Option is being exercised
and the intended manner of payment. The
date of this notice shall be the
exercise date. The notice must be
accompanied by payment in full of the
aggregate Exercise Price, either by cash,
check, note or any other instrument
acceptable to the Compensation Committee.
Payment in full or in part may also be
made in the form of shares of Common Stock
already owned by Executive based, in
each case, on the Market Price of the
shares of Common Stock on the date the
Option is exercised; except that in no
event is payment in full or in part for
the exercise of an Option to be made with
any Option Shares that, as of the date
of exercise of the Option, have been owned
by Executive less than six months. If
the payment is in the form of shares of
Common Stock, then the certificate or
certificates representing the those shares
must be duly executed in blank by
Executive or must be accompanied by a stock
power duly executed in blank
suitable for purposes of transferring those
shares to Interland. Fractional
shares of Common Stock will not be accepted
in payment of the purchase price of
Option Shares. Interland shall not issue
Option Shares until full payment for
them has been made.
(c) As soon as
practicable upon Interland's receipt of Executive's notice
of exercise and payment, Interland shall
direct the due issuance of the shares
so purchased.
(d) As a further
condition precedent to the exercise of this Option in
whole or in part, Executive shall comply
with all regulations and the
requirements of any regulatory authority
having control of, or supervision over,
the issuance of the shares of Common Stock
and accordingly shall execute any
documents that the Board of Directors of
Interland (the "Interland Board"), in
its sole discretion, deems necessary or
advisable to effect such compliance.
(e) In the case
of Executive's death, the Option, to the extent
exercisable, may be exercised by the
executor or administrator of Executive's
estate or by any person or persons who have
acquired the Option directly from
Executive by bequest or inheritance.
5.
Non-Transferability of Options. Executive shall not assign or
transfer
the Option, other than by will or the laws
of descent and distribution. During
Executive's lifetime, only Executive (or,
in the event of legal incapacity or
incompetency, Executive's guardian or legal
representative) may exercise the
Option. Notwithstanding the foregoing,
however, Executive, with the approval of
the Compensation Committee, may transfer
the Option for no consideration to or
2
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for the benefit of Executive's Immediate
Family (including, without limitation,
to a trust for the benefit of Executive's
Immediate Family or to a partnership
or limited liability company for one or
more members of Executive's Immediate
Family, subject to such limits as the
Compensation Committee may establish, and
the transferee(s) shall remain subject to
all the terms and conditions
applicable to the Option prior to transfer.
The term "Immediate Family" means
Executive's spouse, parents, children,
stepchildren, adoptive relationships,
sisters, brothers and grandchildren (and,
for this purpose, shall also include
Executive).
6. Termination
of Option.
(a) Unless
vested pursuant to Section 5 (d) above, the portion of the
Option that is not exercisable pursuant to
paragraph 3 as of the date of
termination of Executive's employment by
the Company will terminate
aut
