exv10w5






Exhibit 10.5




PLANET BEACH FRANCHISING CORPORATION

2005 STOCK OPTION PLAN




ARTICLE I



Purpose of Plan


The 2005 Stock Option Plan (the “Plan”) of Planet Beach Franchising Corporation, a
Louisiana corporation (the “Company”), adopted by the Board of Directors of the Company on
July ___, 2005, through which the Company may award options to purchase shares of the Common Stock
of the Company to employees, area representatives, directors and franchisees. The plan is expected
to benefit the shareholders of the Company by associating the interests of the option recipients
with those of the Company’s shareholders. The Plan will encourage those persons who have
substantial responsibility for its management and growth with additional incentives by allowing
them to acquire an ownership interest in the Company and thereby encouraging them to contribute to
the success of the Company and to remain in its employ. The availability and offering of stock
options under the Plan is also intended to increase the Company’s ability to attract and retain
individuals of exceptional managerial talent upon whom, in large measure, the sustained progress,
growth and profitability of the Company depends. The benefits of this Plan are not a substitute
for compensation otherwise payable to Company employees pursuant to the terms of their employment.
Proceeds for the purchase of stock pursuant to this Plan shall be used for the general business
purpose of the Company.




ARTICLE II




Definitions


For purposes of the Plan, except where the context clearly indicates otherwise, the following terms
shall have the meanings set forth below:



Board. The Board of Directors of the Company.



Code. The Internal Revenue Code of 1986, as amended, and any successor statute.



Committee. The Stock Option Committee, or such other committee of the Board which may be
designated by the Board to administer this Plan. The Committee shall be composed of two or more
directors as appointed from time to time to serve by the Board. In the absence of a Committee, the
functions of the Committee shall be performed by the Board.



Company. Planet Beach Franchising Corporation, a Louisiana corporation, and any
subsidiary.



Disability. The inability, due to illness, accident, injury, physical or mental incapacity
or other disability, of any Participant to carry out effectively his duties and obligations to the
Company or to participate effectively and actively in the management of the Company for a period of
at least 90 consecutive days or for shorter periods aggregating at least 120 days (whether or not
consecutive) during any twelve-month period, as determined in the reasonable judgment of the Board.






 









 







Date of Exercise. The date the Company accepts tender of the exercise price of the option.



Fair Market Value. The Fair Market Value of the common stock shall be determined in good
faith by the Committee.



Option. The right that is granted hereunder to a Participant to purchase from the Company
a stated number shares of Stock at the price set forth in an Agreement.



Participant. Any employee, director, area representative, or franchisee of the Company who
has been selected to participate in the Plan by the Committee or the Board.



Sale of the Company. Means (A) a merger or consolidation effecting a change in control of
the Company such that the holders as of the close of business on the date of this Agreements of the
Company’s capital stock and securities or rights convertible or exchangeable for or exercisable
into capital stock cease to have the power to elect a majority of the Company’s board of directors,
(B) a sale of all or substantially all of the Company’s assets, or (C) a sale to any person or
entity or group of affiliated persons or entities of the Company s outstanding voting securities
having the voting power to elect a majority of the Company s board of directors.



Stock. The Common Stock of the Company.




ARTICLE III




Administration


The Plan shall be administered by the Committee; provided that if for any reason the
Committee shall not have been appointed by the Board, all authority and duties of the Committee
under the Plan shall be vested in and exercised by the Board. Subject to the limitations of the
Plan, the Committee shall have the sole and complete authority to: (i) select Participants, (ii)
grant Options (as defined in Article IV below) to Participants in such forms and amounts as it
shall determine, (iii) impose such limitations, restrictions and conditions upon such Options as it
shall deem appropriate, (iv) interpret the Plan and adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan, (v) correct any defect or omission
or reconcile any inconsistency in the Plan or in any Option granted hereunder and (vi) make all
other determinations and take all other actions necessary or advisable for the implementation and
administration of the Plan. The Committee’s determinations on matters within its authority shall
be conclusive and binding upon the Participants, the Company and all other Persons. All expenses
associated with the administration of the Plan shall be borne by the Company. The Committee may,
as approved by the Board and to the extent permissible by law, delegate any of its authority
hereunder to such Persons as it deems appropriate. As of the day of this plan adoption, there is
no Committee in place and Stephen P. Smith is the only member of the Board of Directors.







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ARTICLE IV




Awards and Limitations


The Committee may grant Options to Participants in accordance with this Article IV.



Options granted under this Plan may be nonqualified stock options (“NOOs”) subject to the
provisions of Section 83 of the Code or options intended to qualify as incentive stock options
(“ISOs”) within the meaning of Section 422 of the Code or any successor provision. All
Options when granted are intended to be ISO unless a Participant’s Option Agreement explicitly
states that the Option granted thereunder is intended to be an NQO.



Exercise Price. The option exercise price per share of Common Stock shall be fixed by the
Committee.



Exercisable. Options shall be exercisable at such time or times as the Committee shall
determine at or subsequent to grant.



Payment of Exercise Price. Each Option may be exercised in whole or in part by either (a)
written notice to the Company (to the attention of the Company’s Secretary) accompanied by payment
in full of the option exercise price in cash (including check, bank draft or money order) or (b)
with the approval of the Committee, a written notice to the Company that the Company is authorized
to withhold from issuance a number of shares of Common Stock issuable upon exercise of such Option
which when multiplied by the Fair Market Value of the shares of Common Stock issuable upon exercise
of such Option is equal to the aggregate exercise price of such Option as determined in accordance
with paragraph 5.3 (and such withheld shares shall no longer be issuable under such Option).



Term of Options. The Committee shall determine the term of each Option, which term shall
in no event exceed ten years from the date of grant.



Limitations on ISOs. Notwithstanding anything in this Plan to the contrary, any Option
that is intended to be an ISO under Section 422 of the Code:





	 	(i)	 	shall have been granted within ten years from the date this Plan was adopted;
	 
	 	(ii)	 	shall have an option exercise price of not less than 100% of the Fair Market
Value of the Common Stock on the date such Option is granted or, in the case of an
individual who at the time the option is granted owns stock of the Company possessing
more than 10% of the total combined voting power of all classes of stock of the Company
(a “10% Holder”), 110% of the Fair Market Value of the Common Stock on the date
the Option is granted;
	 
	 	(iii)	 	shall not be exercisable after the expiration of five years from the date of
grant, in the case of a 10% Holder;




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	 	(iv)	 	shall not be transferable other than by will or under the laws of descent and
distribution and, during the lifetime of the Participant to whom such ISO was granted,
may be exercised only by such Participant (or his legal guardian or legal
representative);
	 
	 	(v)	 	shall be exercisable only during such Participant’s employment by the Company,
provided, however, that the Committee may, in its discretion, provide
at the time such ISO is granted that such ISO may be exercised for a period ending on
the earliest of (x) the expiration of the term of the Option as determined in
accordance with paragraph 5.6, (y) the date that is 12 months after termination of such
Participant’s employment as result of his disability or (z) the date that is three
months after termination of such Participant’s employment for any other reason. The
Committee’s discretion to extend the period during which such ISO is exercisable shall
only apply if and to the extent that (a) such Participant was entitled to exercise such
ISO on the date of termination and (b) such ISO would not have expired had such
Participant continued to be employed by the Company; and
	 
	 	(vi)	 	shall not be awarded to any Participant that is not an employee of the Company.




The aggregate Fair Market Value of the shares of Common Stock (determined as of the date the
applicable ISO was granted) with respect to which an ISO is exercisable for the first time by any
Participant during any calendar year shall not exceed $100,000 or such other amount as may
subsequently be specified by the Code; provided that to the extent such limitation is
exceeded with respect to any Option intended to be an ISO, any excess portion of such Option (as
determined under the Code) shall be deemed an NQO.



The number of shares of Common Stock with respect to which options may be granted under the Plan
(the “Options”) and which may be issued upon the exercise thereof shall not exceed, in the
aggregate, 99999 shares; provided that the type and the aggregate number of shares which
may be subject to Options shall be subject to adjustment in accordance with the provisions of
paragraph 6.8 below, and further provided that to the extent any Options expire
unexercised or are canceled, terminated or forfeited in any manner without the issuance of Common
Stock thereunder, or if any Options are exercised and the shares of Common Stock issued thereunder
are repurchased by the Company, such shares shall again be available under the Plan.




ARTICLE V




Exercise and Expiration of Options


Conditions and Limitations on Exercise. Options may be made exercisable in one or more
installments, upon the happening of certain events, upon the passage of a specified period of time,
upon the fulfillment of certain conditions or upon the achievement by the Company of certain
performance goals, as the Committee shall decide in each case when the Options are granted.







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Withholding of Taxes. The Company shall be entitled, if necessary or desirable, to
withhold from any Participant from any amounts due and payable by the Company to such Participant
(or secure payment from such Participant in lieu of withholding) the amount of any withholding or
other tax due from the Company with respect to any shares issuable under the Options, and the
Company may defer such issuance unless indemnified to its satisfaction.




Expiration of Options.





	 	(a)	 	Normal Expiration. In no event shall any part of any
Option be exercisable after the date of expiration thereof (the “Expiration
Date”), as determined by the Committee pursuant to paragraph 5.6 above.
	 
	 	(b)	 	Early Expiration Upon Termination of Employment.
Except as otherwise provided by the Committee in the Option Agreement or as
otherwise required in the Plan, any portion of a Participant’s Option that was
not vested and exercisable on the date of the termination of such Participant’s
employment shall expire and be forfeited as of such date, and any portion of a
Participant’s Option that was vested and exercisable on the date of the
termination of such Participant’s employment shall expire 30 days after the
date of the discharge, but in no event after he Expiration Date. If any
Participant dies or becomes subject to any Disability, such Participant’s
Option shall expire 180 days after the date of his death or Disability, but in
no event after the Expiration Date.





ARTICLE VI




General Provisions


Rights of Participants. Nothing in this Plan or in any Option Agreement shall interfere
with or limit in any way the right of the Company to terminate any Participant’s employment at any
time (with or without Cause), nor confer upon any Participant any right to continue in the employ
of the Company for any period of time or to continue his present (or any other) rate of
compensation, and except as otherwise provided under this Plan or by the Committee in the Option
Agreement, in the event of any Participant’s termination of employment (including, but not limited
to, the termination by the Company without Cause) any portion of such Participant’s Option that was
not previously vested and exercisable shall expire and be forfeited as of the date of such
termination. No employee shall have a right to be selected as a Participant or, having been so
selected, to be selected again as a Participant.



Written Agreement. Each Option granted hereunder to a Participant shall be embodied in a
written agreement (an “Option Agreement”) which shall be signed by the Participant and by
the President of the Company for and in the name and on behalf of the Company and shall be subject
to the terms and conditions of the Plan prescribed in the Agreement (including, but not limited to,
(i) the right of the shall designate (“Designees”) to repurchase from each Participant, and
such Participant’s transferees, all shares of Common Stock issued or issuable to such Participant
on the exercise of an Option in the event of such Participant’s termination of employment, (ii)
rights






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of first refusal granted to the Company and Designees, (iii) holdback and other registration right
restrictions in the event of a public registration of any equity securities of the Company and (iv)
any other terms and conditions which the Committee shall deem necessary and desirable).



Sale of the Company. In the event of a Sale of the Company, the Committee may provide, in
its discretion, that the Options shall become immediately exercisable by any Participants who are
employed by the Company or are members of the Board at the time of the Sale of the Company and that
such Options shall terminate if not exercised as of the date of the Sale of the Company or other
prescribed period of time.



Listing, Registration and Compliance with Laws and Regulations. Options shall be subject
to the requirement that if at any time the Committee shall determine, in its discretion, that the
listing, registration or qualification of the shares subject to the Options upon any securities
exchange or under any state or federal securities or other law or regulation, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a condition to or in
connection with the granting of the Options or the issuance or purchase of shares thereunder, no
Options may be granted or exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of any conditions not
acceptable to the Committee. The holders of such Options shall supply the Company with such
certificates, representations and information as the Company shall request and shall otherwise
cooperate with the Company in obtaining such listing, registration, qualification, consent or
approval. In the case of officers and other Persons subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, the Committee may at any time impose any limitations upon the
exercise of an Option that, in the Committee’s discretion, are necessary or desirable in order to
comply with such Section 16(b) and the rules and regulations thereunder. If the Company, as part
of an offering of securities or otherwise, finds it desirable because of federal or state
regulatory requirements to reduce the period during which any Options may be exercised, the
Committee, may, in its discretion and without the Participant’s consent, so reduce such period on
not less than 15 days written notice to the holders thereof.



Nontransferability. Options may not be transferred other than by will or the laws of
descent and distribution and, during the lifetime of the Participant, may be exercised only by such
Participant (or his legal guardian or legal representative). In the event of the death of a
Participant, exercise of Options granted hereunder shall be made only:





	 	(i)	 	by the executor or administrator of the estate of the deceased Participant or
the Person or Persons to whom the deceased Participant’s rights under the Option shall
pass by will or the laws of descent and distribution; and
	 
	 	(ii)	 	to the extent that the deceased Participant was entitled thereto at the date of
his death, unless otherwise provided by the Committee in such Participant’s Option
Agreement.




Adjustments. In the event of a reorganization, recapitalization, stock dividend or stock
split, or combination or other change in the Common Stock, the Board or the Committee shall, in
order to prevent the dilution or enlargement of rights under outstanding Options, make such
adjustments in the number and type of shares authorized by the Plan, the number and type of shares
covered






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by outstanding Options and the exercise prices specified therein as may be determined to be
appropriate and equitable. The issuance by the Company of shares of stock of any class, or options
or securities exercisable or convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale, or upon the exercise of rights or warrants to
subscribe therefor, or upon exercise or conversion of other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or price of shares of Common
Stock then subject to any Options.



Amendment, Suspension and Termination of Plan. The Board may suspend or terminate the Plan
or any portion thereof at any time and may amend it from time to time in such respects as the Board
may deem advisable; provided that no such amendment shall be made without stockholder
approval to the extent such approval is required by law, agreement or the rules of any exchange
upon which the Common Stock is listed, and no such amendment, suspension or termination shall
impair the rights of Participants under outstanding Options without the consent of the Participants
affected thereby.



Amendment, Modification and Cancellation of Outstanding Options. The Committee may amend or
modify any Option in any manner to the extent that the Committee would have had the authority under
the Plan initially to grant such Option; provided that no such amendment or modification
shall impair the rights of any Participant under any Option without the consent of such
Participant. With the Participant’s consent, the Committee may cancel any Option and issue a new
Option to such Participant.



Indemnification. In addition to such other rights of indemnification as they may have as
members of the Board or the Committee, the members of the Committee shall be indemnified by the
Company against all costs and expenses reasonably incurred by them in connection with any action,
suit or proceeding to which they or any of them may be 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 Company) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding; provided that any such Committee member shall be entitled to
the indemnification rights set forth in this paragraph only if such member has acted in good faith
and in a manner that such member reasonably believed to be in or not opposed to the best interests
of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to
believe that such conduct was unlawful, and further provided that upon the
institution of any such action, suit or proceeding a Committee member shall give the Company
written notice thereof and an opportunity, at its own expense, to handle and defend the same before
such Committee member undertakes to handle and defend it on his own behalf.





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