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Exhibit (d)(1)(B)(iii)
OUTPERFORMANCE OPTION AGREEMENT
UNDER THE
RCN CORPORATION
1997 EQUITY INCENTIVE PLAN
THIS AGREEMENT is made as of the 23rd of October, 2001 (the
"Grant Date"), by and between RCN Corporation, a Delaware corporation (the
"Company"), and ((First_Name)) ((Last_Name)) (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is now employed by the Company in a key
capacity, and the Company desires to have Employee remain in such employment and
to afford Employee the opportunity to be paid incentive compensation measured by
reference to the value of Common Stock, thereby strengthening Employee's
commitment to the welfare of the Company and promoting an identity of interest
between Employee and stockholders of the Company;
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. Plan. The terms and provisions of the Company's 1997 Equity
Incentive Plan (the "Plan") are incorporated herein by reference. In the event
of a conflict or inconsistency between discretionary terms and provisions of the
Plan and the express provisions of this Agreement, this Agreement shall govern
and control. In all other instances of conflicts or inconsistencies or
omissions, the terms and provisions of the Plan shall govern and control.
2. Grant of Outperformance Options. Subject to the terms and
conditions set forth herein and in the Plan, the Company hereby grants to the
Employee, during the period commencing on the date of this Agreement and ending
ten (10) years from the date hereof (the "Termination Date"), [_____]
Outperformance Options. The Initial Price of each Outperformance Option shall be
$[_____]. The Adjusted Price shall be determined in accordance with Section 8(c)
of the Plan. For this purpose, the applicable index shall be the S&P 500 Index.
3. Vesting. The Options shall vest and become exercisable over
a period of five years from the date hereof. Subject to the terms and conditions
set forth herein, Employee may exercise the Option to purchase up to one
sixtieth (1/60th) of the shares of Stock subject to the Option (rounded to the
lowest full number) after one full month has elapsed from the Grant Date, and
additional one sixtieth (1/60th) (rounded to the lowest full number) on the date
of each of the succeeding 59 months corresponding to the date of the month on
which the Grant Date falls.
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4. Termination of Employment.
(a) If prior to the Termination Date (as defined in
Section 2 herein), the Employee ceases to be employed by the Company by reason
of a Normal Termination, retirement, or termination by the Company without
Cause, or if the Employee voluntarily terminates employment with the Company,
all vesting with respect to the Outperformance Options will cease and the
Outperformance Options, to the extent they were vested at the time of such
cessation of employment, may be exercised until the earlier of the Termination
Date or 90 days after the date of such cessation of employment.
(b) If the Employee ceases to be employed by the
Company prior to the Termination Date by reason of Disability or death, the
Employee will be fully and immediately vested with respect to the Outperformance
Options, and the Employee (or in the event of death, the executor or
administrator of the estate of the Employee or the person or persons to whom the
Outperformance Options shall have been validly transferred by the executor or
administrator pursuant to will or the laws of descent and distribution) will
have the right, until the earlier of the Termination Date or one year after the
date of termination due to Disability or death, to exercise the Outperformance
Options.
(c) If the Employee's employment with the Company is
terminated by the Company for Cause, unless otherwise provided by the Committee,
the Outperformance Options, to the extent not exercised prior to such
termination, shall lapse and be canceled.
(d) After the expiration of any exercise period
described in either of paragraphs 4(a), 4(b) or 4(c) hereof, the Outperformance
Options shall terminate together with all of the Employee's rights hereunder, to
the extent not previously exercised.
5. Method of Exercising Outperformance Option.
(a) The Employee may exercise any or all of the
vested Outperformance Options, by delivering to the Company a written notice
signed by the Employee stating the number of Outperformance Options that the
Employee has elected to exercise at that time. The Company will deliver to the
Employee, with respect to and in cancellation of each Outperformance Option
being exercised, a payment, in cash, shares of Stock, or a combination of cash
and shares of Stock (as determined by the Committee at the date of exercise) in
an amount equal to (or, in the case of shares, having a Fair Market Value equal
to) the product of (i) the closing price of a share of Stock on the trading day
immediately preceding the date of exercise, less the Adjusted Price, multiplied
by (ii) the Multiplier. The Multiplier shall be rounded to three decimal places,
and be determined as follows:
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IF OUTPERFORMANCE PERCENTAGE IS: THE MULTIPLIER WILL EQUAL:
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0% or less 0
More than 0% but less than 11% (Outperformance Percentage x 8/11) x 100
e.g., if Outperformance Percentage = 5%, Multiplier =
(.05 x 8/11) x 100 = 3.636
11% or more 8.0
(b) At the time of exercise, the Employee shall pay
to the Company such amount as the Company deems necessary to satisfy its
obligations to withhold Federal, state or local income or other taxes incurred
by reason of the exercise or the transfer of shares thereupon.
6. Issuance of Cash or Shares. As promptly as practical after
receipt of such written notification and full payment of any required tax
withholding amount, the Company will issue or transfer to the Employee cash or
shares, in an amount determined pursuant to Section 5(a) hereof. In the case of
shares, the Company will deliver to the Employee a certificate or certificates
therefor, registered in the Employee's name. If, upon such exercise, the Company
does not have enough shares authorized for issuance and is contractually
prohibited or limited pursuant to a debt covenant or other agreement from
transferring sufficient cash, the payment of cash or shares will be subject to
shareholder approval of sufficient additional shares, or amendment of the
relevant agreement, at the Company's option.
7. Company; Employee.
(a) The term "Company" as used in this Agreement with
reference to employment shall include the Company and its subsidiaries. The term
"subsidiary" as used in this Agreement shall mean any subsidiary of the Company
as defined in Section 424(f) of the Code.
(b) Whenever the word "Employee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the executors, the administrators, or the
person or persons to whom the Outperformance Options may be transferred by will
or by the laws of descent and distribution, the word "Employee" shall be deemed
to include such person or persons.
8. Rights of Stockholder. The Employee or a transferee of the
Outperformance Options shall have no rights as a stockholder with respect to any
shares of Stock potentially payable pursuant to the exercise of the
Outperformance Options until Employee shall have become the holder of record of
such share, and no adjustment shall be made for dividend or distributions or
other rights in respect of such share for which the record date is prior to the
date upon which Employee shall become the holder of record thereof.
9. Compliance with Law. Notwithstanding any of the provisions
hereof, the Employee hereby agrees that Employee will not exercise the
Outperformance Options, and that
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the Company will not be obligated to issue or transfer any shares to the
Employee hereunder, if the exercise hereof or the issuance or transfer of such
shares shall constitute a violation by the Employee or the Company of any
provisions of any laws or regulation of any governmental authority. Any
determination in this connection by the Committee shall be final, binding and
conclusive. The Company shall in no event be obliged to register any securities
pursuant to the Securities Act of 1933 (as now in effect or as hereafter
amended) or to take any other affirmative action in order to cause the exercise
of the Outperformance Options or the issuance or transfer of shares pursuant
thereto to comply with any laws or regulation of any governmental authority.
10. Notice. Every notice or other communication relating to
this Agreement shall be in writing, and shall be mailed to or delivered to the
party for whom it is intended at such address as may from time to time be
designated by it in a notice mailed or delivered to the other party as herein
provided, provided that, unless and until some other address be so designated,
all notices or communications by the Employee to the Company shall be mailed or
delivered to the RCN Human Resources Department at its principal executive
office, and all notices or communications by the Company to the Employee may be
given to the Employee personally or may be mailed to Employee at the Employee's
last known address, as reflected in the Company's records.
11. Binding Effect. This Agreement shall be binding upon the
heirs, executors, administrators and successors of the parties hereto.
12. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
13. Effect of Change in Control. In the event of a Change in
Control, notwithstanding the vesting schedule set forth in paragraph 3 above,
all of the Outperformance Options will be fully vested and the Company or its
successor will pay to the Employee an amount of cash (less required withholding)
equal to the value of each unexercised Outperformance Option, assuming for this
purpose that each Outperformance Option had been exercised after the closing of
trading of Stock on the day during the 60-day period ending on the date of the
Change in Control which produces the highest such value.
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14. Golden Parachute Gross-Up.
(a) In the event it is determined (as hereafter
provided) that any payment or distribution by the Company to or for the benefit
of the Employee pursuant to the terms of the Award Agreement, whether paid or
payable or distributed or distributable, including without limitation the lapse
or termination of any restriction on or the vesting or exercisability of an
Outperformance Option granted under the Award Agreement (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code (or any successor
provision thereto) or to any similar tax imposed by state or local law, or any
interest or penalties with respect to such excise tax (such tax or taxes,
together with any such interest and penalties, are hereafter collectively
referred to as the "Excise Tax"), then the Employee will be entitled to receive
an additional payment or payments (a "Gross-Up Payment") in an amount equal to
the Excise Tax plus any penalties or taxes imposed on the Employee by virtue of
such Gross-Up Payment such that, after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, the Employee retains
the full value of an Award, with the exception of any regular income taxes owed
by the Employee on account of its exercise.
(b) Subject to the provisions of Section 15(f)
hereof, all determinations required to be made under this Award Agreement,
including whether an Excise Tax is payable by the Employee and the amount of
such Excise Tax and whether a Gross-Up Payment is required and the amount of
such Gross-Up Payment, will be made by an outside "Big 5" or similar
international accounting firm chosen by the Company (the "Accounting Firm"). The
Employee will direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the Employee within 15
calendar days after the date of the Change in Control, and any other such time
or times as may be requested by the Company or the Employee. If the Accounting
Firm determines that any Excise Tax is payable by the Employee, the Company will
pay the required Gross-Up Payment to the Employee within five business days
after receipt of such determination and calculations. If the Accounting Firm
determines that no Excise Tax is payable by the Employee, it will, at the same
time as it makes such determination, furnish the Employee with an opinion
(addressed to both the Employee and the Company) or other evidence reasonably
acceptable to the Employee that he has substantial authority not to report any
Excise Tax on his federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of the Gross-Up Payment
will be binding upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to Section
15(d) hereof and the Employee thereafter is required to make a payment of any
Excise Tax, the Employee will direct the Accounting Firm to determine the amount
of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and the Employee as
promptly as possible. The
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amount of any such Underpayment will be promptly paid by the Company to, or for
the benefit of, the Employee within five business days after receipt of such
determination and calculations.
(c) The Company and the Employee will each provide
the Accounting Firm access to and copies of any books, records and documents in
the possession of the Company or the Employee, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determination
contemplated by Section 15(b) hereof.
(d) The federal, state and local income and other tax
returns filed by the Employee will be prepared and filed on a consistent basis
with the determination of the Accounting Firm, with respect to the Excise Tax
payable by the Employee. The Employee will make proper payment of the amount of
any Excise Tax, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority and such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Employee's federal income tax return, or
corresponding state and local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Employee will within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for
its services in connection with the determinations and calculations contemplated
by Sections 15(b) and (d) hereof will be borne by the Company. If such fees and
expenses are initially advanced by the Employee, the Company will reimburse the
Employee the full amount of such fees and expenses within five business days
after the receipt from the Employee of a statement therefor and reasonable
evidence of his payment thereof.
(f) The Employee will notify the Company in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of a Gross-Up Payment. Such notification will be
given as promptly as practicable but no later than 10 business days after the
Employee actually receives notice of such claim and the Employee will further
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid (in each case, to the extent known by the Employee). The
Employee will not pay such claim prior to the earlier of (a) the expiration of
the 30-calendar-day period following the date on which he gives such notice to
the Company and (b) the date that any payment of amount with respect to such
claim is due. If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim, the Employee
will (i) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company, (ii) take
such action in connection with contesting such claim as the Company will
reasonably request in writing from time to time, including without limitation
accepting legal representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably selected by the
Company, (iii) cooperate with the Company in good faith in order effectively to
contest such claim, and (iv) permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company will
bear and pay directly all costs and expenses (including interest and
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penalties) incurred in connection with such contest and will indemnify and hold
harmless the Employee, on an after-tax basis, from and against any Excise Tax or
income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limiting the foregoing provisions of this Section 15(f), the Company may, at its
option, control all proceedings taken in connection with the contest of any
claim contemplated by this Section 15(f) and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim (provided, however, that the
Employee may participate therein at his own cost and expense) and may, at its
option, either direct the Employee to pay the tax claimed and xxx for a refund
or contest the claim in any permissible manner, and the Employee agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company will determine; provided, however, that if the Company directs the
Employee to pay the tax claimed and xxx for a refund, the Company will advance
the amount of such payment to the Employee on an interest-free basis and will
indemnify and hold the Employee harmless, on an after-tax basis, from any Excise
Tax or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance: and provided further, however, that any extension
of the statute of limitations relating to payment of taxes for the taxable year
of the Employee with respect to which the contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's control
of any such contested claim will be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Employee will be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue service or any other taxing authority.
(g) If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 15(f) hereof, the Employee
receives any refund with respect to such claim, the Employee will (subject to
the Company's complying with the requirements of Section 15(f) hereof) promptly
pay to the Company the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after the receipt by
the Employee of an amount advanced by the Company pursuant to Section 15(f)
hereof, a determination is made that the Employee will not be entitled to any
refund with respect to such claim and the Company does not notify the Employee
in writing of it intent to contest such denial or refund prior to the expiration
of 30 calendar days after such determination, then such advance will be forgiven
and will not be required to be repaid and the amount of such advance will
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid pursuant to this Award Agreement.
(h) If Employee takes action to enforce this Section
15 against the Company (which for this purpose shall include making preparations
for taking such enforcement action), and such enforcement action is in whole or
in part successful (whether by decision of a court or arbitrator, by settlement,
by mutual agreement of Employee and the Company or otherwise), the Company shall
promptly pay directly or, at Employee's election, reimburse Employee for, all
legal and other expert fees and expenses incurred by Employee in connection with
such action.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
RCN CORPORATION
By:_______________________
Xxxxx X. XxXxxxx
Chairman and Chief Executive Officer
_________________________
Optionee Signature
_________________________
Print Optionee Name
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