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EXHIBIT 10.11
NET2000 GROUP, INC.
INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement (the "Agreement"), effective as of
October 27, 1997 (the "Effective Date"), is made by and between NET2000 GROUP,
INC., a Delaware corporation (the "Company"), and XXXX X. XXXXXX (the
"Optionee").
WHEREAS, the Company wishes to grant an option to purchase shares of the
Company's common stock to the Optionee pursuant to the terms of the Company's
1997 Equity Incentive Plan (the "Plan");
WHEREAS, the Company desires that the option to be granted hereunder
qualify under Section 422 of the Internal Revenue Code of 1986 as an incentive
stock option;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
GRANT OF OPTION
Section 1.1 - Grant of Option
In consideration of service to the Company and for other good and
valuable consideration, the Company grants to the Optionee an option to purchase
75,547 shares of the Company's common stock in accordance with the terms and
conditions of the Plan. The option is intended by the parties to be, and shall
be treated as, an incentive stock option to the extent allowed under applicable
law. The Optionee's rights with respect to the option shall be governed by the
terms contained herein and in the absence of such definition the Plan.
Section 1.2 - Option Price
The purchase price of the shares of stock covered by the option shall be
$0.70 per share, which is the fair market value for a share of the Company's
common stock as of the effective date of this Agreement, as determined in good
faith by the Board of Directors of the Company.
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Section 1.3 - Adjustments in Option
In the event that the outstanding shares of stock subject to the option
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend or combination
of shares, the shares subject to the option and the price per share will be
equitably adjusted to reflect such changes pursuant to Article IX of the Plan.
Such adjustment in the option shall be made without change in the total price
applicable to the unexercised portion of the option (except for any change in
the aggregate price resulting from rounding-off of share quantities or prices)
and with any necessary corresponding adjustment in the option price per share.
Any such adjustment made by the Administrator of the Plan (the "Administrator"
as defined in the Plan) shall be final and binding upon the Optionee, the
Company and all other interested persons.
ARTICLE II
EXERCISE OF OPTION
Section 2.1 - Person Eligible to Exercise.
During the lifetime of the Optionee, only the Optionee may exercise the
option or any portion thereof. After the death of the Optionee, any exercisable
portion of the option may, prior to the time when the option becomes
unexercisable under the terms of the Plan or this Agreement, be exercised by the
Optionee's personal representative or by any other person empowered to do so
under the Optionee's will, trust or under then applicable laws of descent and
distribution.
Section 2.2 - Manner of Exercise
The option, or any portion thereof, may be exercised only in accordance
with the terms of the Plan and solely by delivery to the President of the
Company of all of the following items prior to the time when the option or such
portion becomes unexercisable under the terms of the Plan:
(a) Notice in writing signed by the Optionee or the other person
then entitled to exercise the option or portion thereof, stating that the option
or portion thereof is thereby exercised, such notice complying with all
applicable rules (if any) established by the Administrator;
(b) Full payment (in cash or by cashiers' or certified check)
for the shares with respect to which such option or portion thereof is
exercised;
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(c) A bona fide written representation and agreement, in a form
satisfactory to the Administrator, signed by the Optionee or other person then
entitled to exercise such option or portion thereof, stating that the shares of
stock are being acquired for his or her own account, for investment and without
any present intention of distributing or reselling said shares, or any of them,
except as may be permitted under the Securities Act of 1933, as amended (the
"Act"), and then applicable rules and regulations thereunder, and that the
Optionee or other person then entitled to exercise such option or portion will
indemnify the Company against and hold it free and harmless from any loss,
damage, expense or liability resulting to the Company if any sale or
distribution of the shares by such person is contrary to the representation and
agreement referred to above. The Administrator may, in its absolute discretion,
take whatever additional actions it deems appropriate to ensure the observance
and performance of such representations and agreement and to effect compliance
with all federal and state securities laws or regulations. Without limiting the
generality of the foregoing, the Administrator may require an opinion of counsel
acceptable to it to the effect that any subsequent transfer of shares acquired
on an option exercise does not violate the Act and may issue stop-transfer
orders covering such shares. The written representations and agreement referred
to in the first sentence of this subsection (c), however, shall not be required
if the shares to be issued pursuant to such exercise have been registered under
the Act, and such registration is then effective in respect of such shares; and
(d) In the event the option or any portion thereof shall be
exercised pursuant to Section 2.1 by any person or persons other than the
Optionee, appropriate proof, reasonably satisfactory to the Administrator, of
the right of such person or persons to exercise the option.
(e) As a condition to the issuance of Shares upon Option
exercise (whether to the Optionee or to his beneficiary), the Company shall have
the right to withhold from payments otherwise due and owing to the Optionee (or
his beneficiary) or to require the Optionee (or his beneficiary) to remit to the
Company in cash upon demand an amount sufficient to satisfy any federal
(including FICA and FUTA amounts), state, or local withholding tax requirements
at the time the Optionee (or his beneficiary) recognizes income for federal,
state, or local tax purposes as the result of the receipt of Shares pursuant to
this Agreement.
Section 2.3 - Conditions to Issuance of Shares
(a) The Company shall not issue any shares to the Optionee until
the Optionee has executed and delivered to the Company a Stock Restriction
Agreement substantially in the form of attached Exhibit 1, and a Notice of
Exercise of Stock Option letter, substantially in the form of attached Exhibit
2.
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(b) The shares of stock deliverable upon the exercise of the
option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have been reacquired by the Company. Such shares
shall be fully paid and nonassessable and certificates representing such shares
shall be delivered to Optionee immediately upon full compliance with the terms
and conditions contained in this Agreement and the Plan.
Section 2.4 - Rights of Shareholders
The Optionee shall not be, nor have any of the rights or privileges of, a
shareholder of the Company in respect of any shares purchasable upon the
exercise of any part of the option unless and until certificates representing
such shares shall have been issued by the Company to the Optionee.
Section 2.5 - Vesting and Exercisability.
The option granted hereunder shall vest according to the schedule in this
Section 2.5 and shall be exercisable as to not more than the vested percentage
of the shares subject to the option at any point in time. The option shall
become vested according to the following schedule:
Cumulative Percentage
Date of Shares Vested
---- ----------------
Immediately 50%
11/27/98 75%
11/27/99 87.5%
11/27/00 100%
Administrator, in its sole and absolute discretion, may accelerate the
vesting of the option at any time.
Section 2.6 - Duration of Option
Except as specified below, the option granted hereunder shall expire ten
years from the effective date of grant. Notwithstanding the foregoing, the
option may expire prior to ten years from the effective date of this Agreement,
in the following circumstances:
(a) In the case of the Optionee's death, the option shall expire
on the one-year anniversary of the Optionee's death.
(b) In the case of the Optionee's total and permanent disability
and resulting termination of affiliation with the Company, the option shall
expire on the one-year anniversary date of the Optionee's last day of
affiliation with the Company.
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(c) If the Optionee ceases affiliation with the Company for any
reason other than death or disability (as described in the preceding paragraph),
the option shall lapse ninety days following the last day that the Optionee is
affiliated with the Company.
(d) Notwithstanding any provisions set forth above in this
Section 2.6, if the Optionee shall (i) commit any act of malfeasance or
wrongdoing affecting the Company or its affiliates, (ii) breach any covenant not
to compete or any material provision of any other agreement with the Company or
any affiliate, or (iii) engage in conduct that would warrant the Optionee's
discharge for cause, any unexercised part of the option shall lapse immediately
upon the earlier of the occurrence of such event or the last day the Optionee is
affiliated with the Company.
Section 2.7 - Change of Control
If there is a Change in Control, as defined below, 50% of the unvested
outstanding options to purchase Company capital stock shall immediately vest.
Notwithstanding the preceding sentence, (i) if the Optionee shall be terminated
by the Company, without cause (as defined in the Employment Agreement by and
between the Company and the Optionee of even date herewith, the "Employment
Agreement"), within three months of a Change in Control, as defined below, 100%
of the outstanding unvested options to purchase Company capital stock held by
the Optionee shall vest at the time of termination or (ii) if the Optionee shall
be terminated by the acquiring company, without cause (as defined in the
Employment Agreement), within six months following a Change in Control, as
defined below, 100% of the outstanding unvested options to purchase Company
capital stock held by the Optionee shall vest at the time of termination
Change of control shall be deemed to occur upon the first of the
following events:
(i) any person becomes the beneficial owner, directly or
indirectly, of the securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding voting securities (other
than through issuance of securities by the Company) and such person has the
ability to elect a majority of the members of the Company's Board of Directors,
if such ownership is not in place on the date of the grant:
(ii) any person becomes the beneficial owner, directly or
indirectly, of the securities of the Company sufficient to elect a majority of
the members of the Board of Directors of the Company, provided that the
Optionee's responsibilities as an employee of the Company are materially
adversely diminished by such change in control; or
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(iii) the sale of all or substantially all of the assets
of the Company, or a merger, consolidation, or similar transaction of the
company in which the Company is not the surviving entity or the Company's
stockholders immediately prior to such transaction hold less than 50% of the
voting securities of the surviving entity:
A "change in control" shall not include either of the
following events:
(i) a transaction, the sole purpose of which is to change
the state of the Company's incorporation; or
(ii) a transaction, the result of which is to sell all or
substantially all of the assets of the Company to another entity ( the
"surviving entity"); provided the surviving entity is owned directly or
indirectly by the Company's stockholders immediately following such transaction
in substantially the same proportions as their ownership of the Company's voting
capital stock immediately preceding such transaction.
ARTICLE III
MISCELLANEOUS
Section 3.1 - Administration
The Administrator shall have the power to interpret this Agreement and to
adopt such rules for the administration, interpretation and application of the
Agreement as are consistent herewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made by the
Administrator in good faith shall be final and binding upon the Optionee, the
Company and all other interested persons. No member of the Administrator shall
be personally liable for any action, determination or interpretation made in
good faith with respect to this Agreement or any similar agreement to which the
Company is a party.
Section 3.2 - Options Not Transferable
Neither the option nor any interest or right therein or part thereof
shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition is voluntary
or involuntary or by operation of law, by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy)
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that this Section 3.2 shall not prevent transfers by will or
by the applicable laws of descent and distribution.
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Section 3.3 - Shares to be Reserved
The Company shall at all times during the term of the option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.
Section 3.4 - Proceeds
The proceeds received by the Company for the sale of shares of stock
pursuant to this Agreement shall be used for general corporate purposes.
Section 3.5 - Notices
Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary and any notice to be
given to the Optionee shall be addressed to him at the address given beneath his
signature below. By a notice given pursuant to this Section 3.4, either party
may hereafter designate a different address for notices to be given to him. Any
notice which is required to be given to the Optionee shall, if the Optionee is
then deceased, be given to the Optionee's personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section. Any notice shall have been deemed duly given
when enclosed in a properly sealed envelope addressed as aforesaid, deposited
(with postage prepaid) in a United States postal receptacle.
Section 3.6 - Titles
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.
Section 3.7 - Incorporation of the Plan by Reference
The option is granted in accordance with the terms and conditions of the
Plan, the terms of which are incorporated herein by reference, and the Agreement
shall in all respects be interpreted in accordance with the Plan. Any
capitalized term used in the Agreement that is not otherwise defined in the
Agreement shall have the meaning assigned to it in the Plan.
Section 3.8 - Governing Law.
This Agreement shall be construed, interpreted and enforced in accordance
with the laws of the Commonwealth of Virginia.
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Section 3.9 - Amendment.
This Agreement may be amended or modified only by a written instrument
executed by both the Company and the Optionee.
Section 3.10 - Entire Agreement.
This Agreement, the exhibits hereto and the Plan constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of this
Agreement.
Section 3.11 - Arbitration.
The parties agree that any controversy, claim, or dispute arising out of
or relating to this Agreement, or the breach thereof, or arising out of or
relating to the employment of the Optionee, or the termination thereof,
including any claims under federal, state, or local law, shall be resolved by
arbitration in Fairfax, Virginia in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association. The parties agree that
any award rendered by the arbitrator shall be final and binding, and that
judgment upon the award may be entered in any court having jurisdiction thereof.
[signatures on next page]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties as of the Effective Date.
NET2000 GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
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Xxxxxxx X. Xxxxxx, Xx., President
XXXX X. XXXXXX
/s/ Xxxx X. Xxxxxx
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00000 Xxxxxxxxx Xxxx,
Xxxxxxxxxxxx, XX 00000
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