Exhibit 10.13
PATHNET, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement"), is made effective as of the 4th day of
August, 1997 (hereinafter called the "Date of Grant"), between PathNet, Inc., a
Delaware corporation (hereinafter called the "Company"), and Xxxxxxx X. Xxxxxx
(hereinafter called the "Participant"):
R E C I T A L S:
WHEREAS, the Company has adopted the PathNet, Inc. 1997 Stock Incentive
Plan (the "Plan"), which Plan is incorporated herein by reference and made a
part of this Agreement. Capitalized terms not otherwise defined herein shall
have the same meanings as in the Plan; and
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its stockholders to grant the option provided for
herein (the "Option") to the Participant pursuant to the Plan and the terms set
forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:
1. GRANT OF THE OPTION. The Company hereby grants to the Participant the
right and option (the "Option") to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate of 296,122 Shares,
subject to adjustment as set forth in the Plan. The purchase price of the
Shares subject to the Option shall be $3.28 per Share (the "Exercise Price").
The Option is intended to be a non-qualified stock option, and is not intended
to be treated as an option that complies with Section 422 of the Internal
Revenue Code of 1986, as amended.
2. VESTING.
(a) Subject to the Participant's continued employment with the
Company and its Subsidiaries, the Option shall vest and become exercisable
with respect to one third (1/3) of the Shares initially covered by the
Option on each of the first, second, and third anniversaries of the Date of
Grant. At any given time, the portion of the Option which has become
vested and exercisable as described above (or pursuant to Sections 2(b) and
2(d) below) is hereinafter referred to as the "Vested Portion".
(b) If the Participant's employment with the Company and its
Subsidiaries is terminated (i) by the Company or its Subsidiary (as
applicable) without "Cause" (as defined in Section 3(a) below)including
Constructive Termination (as such term is defined in the Employment
Agreement by and between the Company and Participant, dated as of the date
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hereof (the "Employment Agreement"), (ii) by the Company or its Subsidiary
(as applicable) due to the Participant's "Disability" (as defined in
Section 3(a) below), (iii) due to the Participant's death or (iv) due to
the expiration of the Term of Employment as set forth in the Employment
Agreement, then (x) the portion of the Option that would otherwise have
vested pursuant to Section 2(a) above in the calendar year in which such
termination of employment occurs shall vest and become exercisable, (y) the
Option, to the extent not then vested (after giving effect to clause (x)),
shall be canceled without consideration and (z) the Vested Portion of the
Option shall remain exercisable for the period set forth in Section 3(a).
(c) If the Participant's employment with the Company or its
Subsidiary (as applicable) is terminated for any reason not specified in
Section 2(b), the Option shall, to the extent not then vested, be canceled
without consideration and the Vested Portion of the Option shall remain
exercisable for the period set forth in Section 3(a).
(d) Notwithstanding any other provision of this Agreement to the
contrary, in the event of a Change of Control or a Qualified Public
Offering the Option shall, to the extent not then vested and not previously
canceled, immediately become fully vested and exercisable as contemplated
by Section 13 of the Plan.
3. EXERCISE OF OPTION.
(a) PERIOD OF EXERCISE. Subject to the provisions of the Plan and
this Agreement, the Participant may exercise all or any part of the Vested
Portion of the Option at any time prior to the earliest to occur of:
(i) the tenth anniversary of the Date of Grant;
(ii) two years following the date of the Participant's
termination of employment (w) by the Company or its Subsidiary
(as applicable) without Cause including Constructive Termination
(as such term is defined in the Employment Agreement) (PROVIDED,
HOWEVER, in the event Participant elects to exercise his
"cash-out" rights as set forth in Section 2(d)(iv) of the
Employment Agreement, the Vested Portion of the Option will be
"cashed-out" and will no longer be required to be exercised nor
will be exercisable) (x) by the Company or its Subsidiary (as
applicable) due to the Participant's Disability, (y) due to the
Participant's death or (z) upon expiration of the Term of
Employment (as such term is defined in the Employment Agreement);
(iii) three months following the date of the Participant's
termination of employment due to the Participant's resignation
(other than due to Disability or Constructive Termination);
(iv) the date of the Participant's termination of employment by
the Company or its Subsidiary (as applicable) for "Cause"; and
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(v) the date of any material breach of any confidentiality or
non-competition covenant or agreement entered into between the
Participant and the Company or its Subsidiary (as applicable)
whether during or following the Participant's employment with the
Company or its Subsidiary (as applicable).
For purposes of this Agreement:
"Cause" shall mean "cause" as defined in any employment agreement or
other agreement then in effect between the Participant and the Company or its
Subsidiary (as applicable) or if not defined therein or, if there shall be no
such agreement, (i) the Participant's plea of guilty or NOLO CONTENDERE to, or
conviction of, the commission of a felony offense by the Participant, (ii) a
material breach by the Participant of the fiduciary duty owed to the Company or
its Subsidiary (as applicable), (iii) a material breach by the Participant of
any confidentiality or non-competition covenant or agreement entered into
between the Participant and the Company or its Subsidiary (as applicable) or
(iv) the Participant's failure to substantially perform his or her material
duties to the Company its Subsidiary (as applicable); PROVIDED, HOWEVER, that
any claim that "Cause" exists as a result of the actions described in clauses
(ii), (iii) or (iv) above may be asserted on behalf of the Company only by a
duly adopted resolution of the Board and only after thirty (30) days prior
written notice to the Participant during which period the Participant may cure
the breach or neglect that is the basis of any such claim, if curable (provided
that no such cure period shall be provided to the Participant if the acts or
omissions resulting in such termination for Cause have arisen in the past).
"Disability" shall mean "disability" as defined in any employment
agreement or other agreement then in effect between the Participant and the
Company or its Subsidiary (as applicable) or if not defined therein or if there
shall be no such agreement, as defined in the Company's long-term disability
plan as in effect from time to time, or if there shall be no plan or if not
defined therein, the Participant's becoming physically or mentally incapacitated
and consequent inability for a period of ninety (90) or more calendar days
during any fifty-two (52) week period during the Participant's term of
employment with the Company, to fully perform the Participant's duties to the
Company or its Subsidiary (as applicable); and
The term "employment" shall be deemed to refer to (i) a Participant's
employment if the Participant is an employee of the Company or its Subsidiaries
and (ii) to a Participant's service as a non-employee director or consultant if
the Participant is a non-employee director or consultant to the Company or its
Subsidiaries.
(b) METHOD OF EXERCISE.
(i) Subject to Section 3(a), the Vested Portion of the Option
may be exercised by delivering to the Company at its principal office
written notice of intent to so exercise; PROVIDED that, the Option may
be exercised with respect to whole Shares only. Such notice shall
specify the number of Shares for which the Option is being exercised
and shall be accompanied by payment in full of the Exercise Price.
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The payment of the Exercise Price may be made in cash, or its
equivalent, or (x) by exchanging Shares owned by the Participant
(which are not the subject of any pledge or other security interest
and which have been owned by the Participant for at least 6 months),
(y) if there shall be a public market for the Shares, subject to such
rules as may be established by the Committee, through delivery of
irrevocable instructions to a broker to sell the Shares otherwise
deliverable upon the exercise of the Option and to deliver promptly to
the Company an amount equal to the aggregate exercise price, or (z)
with the consent of the Committee in its sole discretion, by the
promissory note and agreement of the Participant providing for the
payment with interest of the unpaid balance accruing at a rate not
less than needed to avoid the imputation of income under Code section
7872 and upon such terms and conditions (including the security, if
any therefor) as the Committee may determine, or by a combination of
the foregoing, provided that the combined value of all cash and cash
equivalents and the Fair Market Value of any such Shares so tendered
to the Company as of the date of such tender is at least equal to such
aggregate Exercise Price.
(ii) Notwithstanding any other provision of the Plan or this
Agreement to the contrary, the Option may not be exercised prior to
the completion of any registration or qualification of the Option or
the Shares under applicable state and federal securities or other
laws, or under any ruling or regulation of any governmental body or
national securities exchange that the Committee shall in its sole
discretion determine to be necessary or advisable.
(iii) Upon the Company's determination that the Option has been
validly exercised as to any of the Shares, the Company shall issue
certificates in the Participant's name for such Shares. However, the
Company shall not be liable to the Participant for damages relating to
any delays in issuing the certificates to him, any loss of the
certificates, or any mistakes or errors in the issuance of the
certificates or in the certificates themselves.
(iv) In the event of the Participant's death, the Vested
Portion of the Option shall remain exercisable by the Participant's
executor or administrator, or the person or persons to whom the
Participant's rights under this Agreement shall pass by will or by the
laws of descent and distribution as the case may be, to the extent set
forth in Section 3(a). Any heir or legatee of the Participant shall
take rights herein granted subject to the terms and conditions hereof.
4. NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor this Agreement
shall be construed as giving the Participant the right to be retained in the
employ of, or in any consulting relationship to, the Company or any Affiliate.
Further, the Company or an Affiliate may at any time dismiss the Participant or
discontinue any consulting relationship, free from any liability or any claim
under the Plan or this Agreement, except as otherwise expressly provided herein.
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5. LEGEND ON CERTIFICATES. The certificates representing the Shares
purchased by exercise of the Option shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under the Plan
or the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares are listed, and any
applicable Federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
6. TRANSFERABILITY. The Option may not be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by the Participant
otherwise than by will or by the laws of descent and distribution, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or any
Affiliate; provided that the designation of a beneficiary shall not constitute
an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
Notwithstanding the foregoing, the Participant may transfer the Option to a
Permitted Transferee as provided in Section 14 of the Plan. No such permitted
transfer of the Option to heirs or legatees of the Participant shall be
effective to bind the Company unless the Committee shall have been furnished
with written notice thereof and a copy of such evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions hereof. During the
Participant's lifetime, the Option is exercisable only by the Participant.
7. WITHHOLDING.
(a) The Participant may be required to pay to the Company or any
Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any payment due or transfer made under
the Option or under the Plan or from any compensation or other amount owing
to a Participant the amount (in cash, Shares, other securities, other
Awards or other property) of any applicable withholding taxes in respect of
the Option, its exercise, or any payment or transfer under the Option or
under the Plan and to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such
taxes.
(b) Without limiting the generality of clause (i) above, the
Participant may satisfy, in whole or in part, the foregoing withholding
liability by delivery of Shares owned by the Participant (which are not
subject to any pledge or other security interest and which have been owned
by the Participant for at least 6 months) with a Fair Market Value equal to
such withholding liability or by having the Company withhold from the
number of Shares otherwise issuable pursuant to the exercise of the option
a number of Shares with a Fair Market Value equal to such withholding
liability.
8. SECURITIES LAWS. Upon the acquisition of any Shares pursuant to the
exercise of the Option, the Participant will make or enter into such written
representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
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9. NOTICES. Any notice necessary under this Agreement shall be addressed
to the Company in care of its Secretary at the principal executive office of the
Company and to the Participant at the address appearing in the personnel records
of the Company for the Participant or to either party at such other address as
either party hereto may hereafter designate in writing to the other. Any such
notice shall be deemed effective upon receipt thereof by the addressee.
10. CHOICE OF LAW. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
11. OPTION SUBJECT TO PLAN.
(a) By entering into this Agreement the Participant agrees and
acknowledges that the Participant has received and read a copy of the Plan.
The Option is subject to the Plan. The terms and provisions of the Plan as
it may be amended from time to time are hereby incorporated herein by
reference. In the event of a conflict between any term or provision
contained herein and a term or provision of the Plan, the applicable terms
and provisions of the Plan will govern and prevail.
(b) Without limiting the generality of the foregoing, by entering
into this Agreement the Participant agrees and acknowledges that the Shares
which may be deliverable to the Participant hereunder upon the exercise of
the Option shall be subject to certain restrictions on transfer and other
limitations as set forth in Section 15 of the Plan.
12. SIGNATURE IN COUNTERPARTS. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
PATHNET, INC.
By: /s/ Xxxx Xxxxxxxxx
-----------------------------
Name:
Title:
Agreed to and acknowledged
as of the date first above written.
/s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
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