Exhibit 10.22
STOCK OPTION AND COMPENSATION AGREEMENT
AGREEMENT made effective as of the 7th day of October, 1999 ("Effective
Date") between GlobeNet Communications Group Limited, a Bermuda company (the
"Company") and Xxxxx X. XxXxxxxxx ("Executive").
In consideration of the mutual agreements and other matters set forth
herein, the Company and Executive hereby agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to Executive the
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right and option ("Option") to purchase all or any part of an aggregate of
200,000 shares of authorized but unissued common shares of the Company, par
value U.S. $1.50 ("Shares"), on the terms and conditions set forth herein. This
Option shall not be treated as an incentive stock option within the meaning of
section 422(b) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code").
2. Option Price. The purchase price of Shares purchased pursuant to the
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exercise of this Option shall be U.S. $20.40 per share ("Option Price").
3. Vesting. Subject to the other provisions set forth herein, this Option
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shall vest and be exercisable for the percentage of the aggregate number of
Shares offered by this Option determined by the period of time from the
Effective Date to the date of such exercise, in accordance with the following
vesting schedule:
Percentage of Shares
Period of Time That are Vested
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Less than 1 year 0%
1 year 33%
1 year and 3 months 42%
1 year and 6 months 50%
1 year and 9 months 58%
2 years 67%
2 years and 3 months 75%
2 years and 6 months 83%
2 years and 9 months 91%
3 years or more 100%
Notwithstanding the above vesting schedule, Executive shall be 100% vested
in this Option upon an Evaluation Event (as defined in Section 7 hereof).
4. Exercise of Option. Subject to the earlier expiration of this Option as
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herein provided, this Option may be exercised in whole or part with respect to
the portion of this Option
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that has vested under Section 3 hereof, by written notice to the Company at its
principal executive office addressed to the attention of its General Counsel, at
any time and from time to time after the first anniversary of the Effective
Date.
This Option may be exercised only while Executive remains an employee of
the Company and will terminate and cease to be exercisable upon Executive's
termination of employment with the Company, except that:
(a) If Executive's employment with the Company terminates by reason of
Disability (as defined in the Executive Employment Agreement effective as
of October 1, 1999, by and between Executive and Company (the "Employment
Agreement")), this Option shall become 100% vested and shall be exercisable
at any time until the completion of one year after an Evaluation Event (as
defined in Section 7 hereof).
(b) If Executive dies while in the employ of the Company, Executive
shall be fully vested in this Option and Executive's estate, or the person
who acquires this Option by will or the laws of descent and distribution or
otherwise by reason of the death of Executive, may exercise this Option in
full at any time until the completion of one year after an Evaluation Event
(as defined in Section 7 hereof).
(c) If the Company terminates Executive's employment with the Company
for Cause (as defined in the Employment Agreement) or if Executive
voluntarily terminates his employment with the Company for other than Good
Reason (as defined in the Employment Agreement), this Option shall
terminate and cease to be exercisable in its entirety (including with
respect to Shares that have previously vested under Section 3 hereof).
(d) If (i) Executive terminates his employment with the Company for
Good Reason (as defined in the Employment Agreement), (ii) the Company
terminates Executive's employment with the Company for other than Cause (as
defined in the Employment Agreement), or (iii) the Company does not renew
Executive's Employment Agreement at the termination thereof, this Option
shall become 100% vested and shall be exercisable at any time until the
completion of one year after an Evaluation Event (as defined in Section 7
hereof).
Notwithstanding the above, this Option shall not be exercisable in any
event after the expiration of ten years from the Effective Date. The purchase
price of Shares as to which this Option is exercised shall be paid in full at
the time of exercise in cash (including check, bank draft or money order payable
to the order of the Company). No fraction of a Share shall be issued by the
Company upon exercise of this Option; rather, Executive shall provide a cash
payment for such amount as is necessary to effect the issuance and acceptance of
only whole Shares. Unless and until a certificate or certificates representing
such Shares shall have been issued by the Company to Executive, Executive (or
the person permitted to exercise this Option in the event of Executive's death)
shall not be or have any of the rights or privileges of a shareholder of the
Company with respect to Shares acquirable upon an exercise of this Option.
5. Administration. The Board of Directors of the Company (the "Board")
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shall have such powers and authorities related to the administration of this
Agreement as are consistent with
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the Company's memorandum of association and bye-laws and applicable law. The
Board shall have full power and authority to take all actions and to make all
determinations required or provided for under this Agreement, and shall have
full power and authority to take all such other actions and determinations not
inconsistent with the specific terms and provisions of this Agreement that the
Board deems to be necessary or appropriate to the administration of this
Agreement. All such actions and determinations shall be by an affirmative
majority vote of the Board or by unanimous consent of the Board executed in
writing in accordance with the Company's memorandum of association and bye-laws
and applicable law. The interpretation and construction by the Board of any
provision of this Agreement shall be final and conclusive.
The Board from time to time may appoint a Committee (the "Committee"). The
Board, in its sole discretion, may provide that the role of the Committee shall
be limited to making recommendations to the Board concerning any determinations
to be made and actions to be taken by the Board pursuant to or with respect to
this Agreement, or the Board may delegate to the Committee such powers and
authorities related to the administration and implementation of this Agreement,
as set forth in the preceding paragraph and in other applicable provisions, as
the Board shall determine, consistent with the Company's memorandum of
association and bye-laws and applicable law. In the event that this Agreement
provides for any action to be taken by or determination to be made by the Board,
such action may be taken by or such determination may be made by the Committee
if the power and authority to do so has been delegated to the Committee by the
Board as provided for in this Section. Unless otherwise expressly determined by
the Board, any such action or determination by the Committee shall be final,
binding and conclusive.
6. Status of Shares. Executive understands that at the time of the
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execution of this Agreement the Shares to be issued upon exercise of this Option
have not been registered under the U.S. Securities Act of 1933, as amended, any
Canadian securities laws, or other applicable securities laws ("Securities
Laws"). Until the Shares acquirable upon the exercise of this Option have been
registered for issuance under Securities Laws, the Company will not issue such
Shares unless the holder of this Option provides the Company, at its request,
with a written opinion of legal counsel, who shall be satisfactory to the
Company, addressed to the Company and satisfactory in form and substance to the
Company's counsel, to the effect that the proposed issuance of such Shares to
such Option holder may be made without registration under Securities Laws. In
the event exemption from registration under Securities Laws is available upon an
exercise of this Option, Executive (or the person permitted to exercise this
Option in the event of Executive's death), if requested by the Company to do so,
will execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with Securities Laws.
If the Executive is an employee of the Company at the time the aforesaid opinion
is provided to the Company, the Company shall bear the legal fees incurred by
the Executive in connection with the preparation of said opinion.
Executive agrees that the Shares which Executive may acquire by exercising
this Option shall be acquired for investment without a view to distribution,
within the meaning of Securities Laws, and shall not be sold, transferred,
assigned, pledged or hypothecated in the absence of an effective registration
statement for the Shares under Securities Laws or an applicable exemption from
the registration requirements of Securities Laws. Executive also agrees that
the Shares which
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Executive may acquire by exercising this Option will not be sold or otherwise
disposed of in any manner which would constitute a violation of any Securities
Laws.
In addition, Executive agrees (i) that the certificates representing the
Shares purchased under this Option may bear such legend or legends as the Board
deems appropriate in order to assure compliance with Securities Laws and (ii)
that the Company may refuse to register the transfer of the Shares purchased
under this Option in the register of members of the Company if such proposed
transfer would in the opinion of counsel satisfactory to the Company constitute
a violation of any Securities Law and that the Company may give related
instructions to its transfer agent, if any, to stop registration of the transfer
of such Shares.
7. Additional Compensation. If an Evaluation Event (as defined below)
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occurs anytime within ten years after the Effective Date and, at the time of the
Evaluation Event, (1) the Executive is an employee of the Company or (2) the
Executive is no longer employed by the Company and the employment relationship
was terminated under Section 3(a) (due to death or Disability of the Executive)
or 3(c) (due to Good Reason) of the Employment Agreement or by the Company
without Cause pursuant to Section 3(b) of the Employment Agreement; (ii) the
Investors (as defined below) have attained a Return (as defined below) on their
equity investment 9made from and after July 14, 1999) in the Company equal to
the greater of an annual compounded Return of twenty percent (20%) per year or a
total Return of seventy-two and eight-tenths percent (72-8/10%); and (iii) the
Total Value (as defined below) as of the Evaluation Event is less than
$10,000,000 (the amount by which $10,000,000 exceeds the Total Value is
hereinafter referred to as the "Shortfall Amount", then, within thirty (30) days
after Evaluation event, the Company at its discretion (but after consultation
with the Executive) shall:
(a) pay Executive the Shortfall Amount in cash;
(b) grant additional fully-vested options to Executive to purchase
Shares, which Shares shall have a Fair Market Value (as of the Evaluation
Event) equal to the sum of the Shortfall Amount and the aggregate option
price of such Shares;
(c) grant additional fully-vested options to Executive to purchase
Shares, which options shall have a Black-Scholes value (as of the
Evaluation Event) equal to the Shortfall Amount;
(d) award additional Shares to Executive (which Shares may be subject
to restrictions as reasonably required by the Company) which have a Fair
Market Value (as of the Evaluation Event) equal to the Shortfall Amount; or
(e) compensate Executive through a combination of the alternatives set
forth in (a), (b), (c) and (d) above, such that the aggregate compensation
amount equals the Shortfall Amount.
For purposes of this Section 7:
"Evaluation Event" shall be defined as the consummation of (i) an
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underwritten public offering of the Company's common shares or (ii) a private
sale (or series of related private
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sales) of 50% or more of the common shares of the Company (or merger or other
business combination having the same effect).
"Fair Market Value" means the value of a Share as determined by the Board
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in its discretion, as either: (a) the closing price of the Share on the Bermuda
Stock Exchange or other established national or regional stock exchange on which
the Shares are listed or established securities market in which the Shares are
publicly traded (the highest such closing price if there is more than one such
exchange or market) on the determination date (or if there is no such reported
closing price, the Fair Market Value shall be the mean between the highest bid
and lowest asked prices or between the high and low sale prices on such trading
day) or, if no sale of Shares is reported for such trading day, on the next
preceding day on which any sale shall have been reported; or (b) the value of a
Share as determined by the Board in good faith applying appropriate valuation
principles.
"Investors" shall be defined as the shareholders of the Company who
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invested in the Company's private placement of its common stock on July 14,
1999.
"Return" shall be defined as the percentage increase in the implicit value
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of the Investors' investment (made from and after July 14, 1999) in the Company
from July 14, 1999 to the Evaluation Event. The implicit value of such
investment shall be calculated using the percentage of the common shares in the
Company held by the Investors (without giving affect to any shares acquired
prior to the closing of the Company's private placement of shares on July 14,
1999) times the implicit value of the Company determined by reference to the
Evaluation Event. In making such calculation, there shall be no adjustment for
any control premium, overhang, lack of liquidity, taxes, transactions costs or
similar factors. The implicit value of the Investors' interest in the Company
shall, however, be increased by dividends, if any, that have been paid on the
shares acquired by the Investors on or after July 14, 1999.
"Total Value" means the sum of: (i) the greater of (A) the gross proceeds
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(and the fair market value of all other consideration) received (on or prior to,
or in respect of, the Evaluation Event) by the Executive from the Executive's
disposition of (1) any portion of this Option and (2) Shares acquired pursuant
to any exercise of this Option or (B) the Fair Market Value (as of the
Evaluation Event) of the Shares subject to this Option as referred to in (A)(1)
and the Shares as referred to in (A)(2); (ii) the Fair Market Value (as of the
Evaluation Event) of the Shares acquired pursuant to the exercise of this Option
and held by the Executive immediately after giving effect to the Evaluation
Event (but determined without giving affect to any grant or award referred to in
7(a), (b), (c), (d) and (e) above); (iii) the Fair Market Value (as of the
Evaluation Event) of the Shares previously disposed of by the Executive by way
of gift and/or charitable contribution; (iv) the Fair Market Value (as of the
Evaluation Event) of the Shares subject to this Option (but determined without
giving effect to any grant or award referred to in 7(a), (b), (c), (d) and (e)
above); and (v) the amount (or fair market value) of dividends received by the
Executive (in respect of this Option or Shares acquired in connection therewith)
prior to or on, or in connection with, any Evaluation Event, less the sum of (i)
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the aggregate Option Price paid for the Shares acquired pursuant to this Option
on or prior to the Evaluation Event; and (ii) the aggregate Option Price for the
Shares referred to in (iv) above of this definition of Total Value.
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For the avoidance of doubt, after the first (if any) Evaluation Event
occurs, there shall be no further adjustment to compensation under this
Section 7.
8. Employment Relationship. For purposes of this Agreement, Executive
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shall be considered to be in the employment of the Company as long as Executive
remains an employee of either the Company, a parent or subsidiary corporation of
the Company, or a company or a parent or subsidiary of such company assuming or
substituting a new option for this Option. Any question as to whether and when
there has been a termination of such employment, and the cause of such
termination, shall be determined pursuant to the Employment Agreement.
9. Transferability of Options. This Option shall, during an Executive's
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lifetime, be exercisable only by the Executive, and neither this Option nor any
right hereunder shall be transferable by the Executive, by operation of law or
otherwise, other than as may be provided in this Agreement or as may be provided
by will or the laws of descent and distribution. Except as may be provided in
this Agreement, this Option shall not be charged, mortgaged, pledged or
hypothecated (by operation of law or otherwise) or subject to execution,
attachment or similar processes.
10. Effect of Changes in Capitalization.
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(a) Changes in Shares. If the number of outstanding Shares is increased
or decreased or the Shares are changed into or exchanged for a different number
or kind of shares or other securities of the Company as a result of any
recapitalization, reclassification, share split, reverse split, combination of
Shares, exchange of Shares, Share dividend or other distribution payable in
share capital, or other increase or decrease in such Shares effected without
receipt of consideration by the Company occurring after the Effective Date, the
number and kinds of Shares for which this Option is outstanding shall be
adjusted proportionately and accordingly so that the proportionate interest of
the Executive immediately following such event shall, to the extent practicable,
be the same as immediately before such event. Any such adjustment in this Option
shall not change the aggregate Option Price payable with respect to Shares that
are subject to the unexercised portion of this Option outstanding but shall
include a corresponding proportionate adjustment in the Option Price per Share.
(b) Reorganization in which the Company is the Surviving or Continuing
Entity and in which no Change of Control Occurs. Subject to the following
paragraph hereof, if the Company shall be the surviving or continuing entity in
any reorganization, merger, amalgamation, or consolidation of the Company with
one or more other entities, this Option shall pertain to and apply to the
securities to which a holder of the number of Shares subject to such Option
would have been entitled immediately following such reorganization, merger,
amalgamation, or consolidation, with a corresponding proportionate adjustment of
the Option Price per Share so that the aggregate Option Price thereafter shall
be the same as the aggregate Option Price of the Shares remaining subject to the
Option immediately prior to such reorganization, merger, amalgamation, or
consolidation.
(c) Adjustments. Adjustments under this Section 10 related to Shares
or securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. No fractional Shares or
other securities shall be issued pursuant to
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any such adjustment, and any fractions resulting from any such adjustment shall
be eliminated in each case by rounding downward to the nearest whole Share.
(d) No Limitations on Company. The granting of this Option shall not
affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, amalgamate, consolidate, dissolve, or liquidate,
or to sell or transfer all or any part of its business or assets.
11. Withholding of Tax. To the extent that the exercise of this Option
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or the disposition of Shares acquired by exercise of this Option results in
compensation income to Executive for tax purposes, Executive shall deliver to
the Company at the time of such exercise or disposition such amount of money as
the Company may require to meet its obligation under applicable tax laws or
regulations, and, if Executive fails to do so, the Company is authorized to
withhold from any cash or Shares remuneration then or thereafter payable to
Executive any tax required to be withheld by reason of such resulting
compensation income. Upon an exercise of this Option, the Company is further
authorized in its discretion to satisfy any such withholding requirement out of
any cash or Shares distributable to Executive upon such exercise.
12. Binding Effect. This Agreement shall be binding upon and inure to the
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benefit of any successors to the Company and all persons lawfully claiming under
Executive.
13. Governing Law. This Agreement shall be governed by, and construed in
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accordance with, the laws of Bermuda.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Executive has executed
this Agreement, all as of the day and year first above written.
GLOBENET COMMUNICATIONS GROUP LIMITED
By: /s/ XXXXXXX XXXXX
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/s/ Xxxxx X. XxXxxxxxx
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Xxxxx X. XxXxxxxxx
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