Exhibit 4.31
[Standard Form]
NON-QUALIFIED STOCK OPTION AGREEMENT
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THIS AGREEMENT (the "Agreement") is made as of ____________ (the "Date of
Grant") by and between Focal Communications Corporation, a Delaware corporation
(the "Company"), and __________________ (the "Optionee").
1. Definitions. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Company's 1998 Equity and
Performance Incentive Plan (the "Plan").
2. Grant of Stock Option. Subject to and upon the terms, conditions
and restrictions set forth in this Agreement and in the Plan, the Company hereby
grants to the Optionee as of the Date of Grant a stock option (the "Option") to
purchase _____________ shares of Common Stock (the "Optioned Shares"). The
Option may be exercised from time to time in accordance with the terms of this
Agreement. The price at which the Optioned Shares may be purchased pursuant to
this Option shall be _____________ per share, subject to adjustment as
hereinafter provided (the "Option Price"). The Option is intended to be a non-
qualified stock option and shall not be treated as an "incentive stock option"
within the meaning of that term under Section 422 of the Code, or any successor
provision thereto.
3. Term of Option. The term of the Option shall commence on the
Date of Grant and, unless earlier terminated in accordance with Section 7
hereof, shall expire ten (10) years from the Date of Grant.
4. Vesting of Option. Subject to the expiration or earlier
termination of the Option, the Optioned Shares granted hereby shall become
exercisable as follows:
(i) after one (1) year from the Date of Grant, the Optionee may purchase
up to ____________ percent (__%) of the Optioned Shares;
(ii) after two (2) years from the Date of Grant, the Optionee may purchase
up to ____________ percent (__%) of the Optioned Shares;
(iii) after three (3) years from the Date of Grant, the Optionee may
purchase up to ____________ percent (__%) of the Optioned Shares; and
(iv) after four (4) years from the Date of Grant, the Optionee may purchase
up to ___________ percent (__%) of the Optioned Shares.
To the extent the Option is exercisable, it may be exercised in whole or in
part. In no event shall the Optionee be entitled to acquire a fraction of one
Optioned Share pursuant to this Option. The
Optionee shall be entitled to the privileges of ownership with respect to
Optioned Shares purchased and delivered to him or her only upon the exercise of
all or part of this Option.
5. Transferability of Option. [(a) Except as provided in Section
5(b) below,] the Option granted hereby shall be neither transferable nor
assignable by the Optionee other than by will or by the laws of descent and
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee, or in the event of his or her legal incapacity, by his or her
guardian or legal representative acting on behalf of the Optionee. Any
purported transfer or encumbrance in violation of the provisions of this Section
5 shall be void, and the other party to any such purported transaction shall not
obtain any rights to or interest in the Option.
[(b) Notwithstanding Section 5(a) above, the Option may be transferred
by the Optionee, without payment of consideration therefor, to any Eligible
Transferee; provided, however, that (i) such transfer will not be effective
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until ten (10) days following the delivery of notice of such transfer to the
Company and such transfer is thereafter effected in accordance with any terms
and conditions that shall have been made applicable thereto by the Company or
the Board; and (ii) any such Eligible Transferee shall be subject to the same
terms and conditions hereunder as the Optionee.]/1/
6. Notice of Exercise; Payment. To the extent then exercisable, the
Option may be exercised by written notice to the Company stating the number of
Optioned Shares for which the Option is being exercised and the intended manner
of payment. The date of such notice shall be the exercise date. Payment equal to
the aggregate Option Price of the Optioned Shares being exercised shall be
tendered in full with the notice of exercise to the Company either (i) in cash
or by check acceptable to the Company, (ii) by the tender to the Company of
shares of Common Stock owned by the Optionee for at least 6 months and
registered in the name of the Optionee having an aggregate fair market value on
the date of exercise equal to the total Option Price, such fair market value to
be determined based on the Market Value per Share on the date of exercise, (iii)
by delivery of irrevocable instructions to a financial institution or broker to
deliver promptly to the Company sale or loan proceeds with respect to the shares
sufficient to pay the total Option Price, (iv) through the written election of
the Optionee to have shares of Common Stock withheld by the Company from the
shares otherwise to be received, with such withheld shares having an aggregate
fair market value on the date of exercise equal to the total Option Price of the
shares being purchased, or (v) by any combination of the payment methods
specified in clauses (i) through [(iv)] hereof. Within ten (10) days thereafter,
the Company shall direct the due issuance of the Optioned Shares so purchased.
7. Conditions and Limitations on Right to Exercise Option.
Notwithstanding the provisions of Sections 3 and 4 hereof,
(a) Except as otherwise provided in Section 7(b) hereof, this Option may
not be exercised unless the Optionee is, at the time of exercise, an employee of
the Company or a Subsidiary (as defined in the Plan) and has been employed by
the Company or a Subsidiary continuously since the Date of Grant. If the
Optionee returns to active employment with the Company or a Subsidiary after
having been on an approved leave of absence from the Company or a Subsidiary,
the Optionee shall
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/1/ Add for senior executive grants only.
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be treated as if continuously employed during the period of such leave of
absence. This Option may not, however, be exercised by the Optionee while on a
leave of absence from active employment with the Company or a Subsidiary, unless
such exercise is expressly approved in writing by the Board; and
(b) (i) If the Optionee ceases to be employed by the Company or a
Subsidiary (other than by reason of death, Disability (as defined below) or
retirement), the Option granted hereby, to the extent the Optionee was entitled
to exercise it at the date of termination of employment, may be exercised at any
time within three months after such termination but not after the date of
termination of the Option. Any part of the Option not so exercised shall
expire. Notwithstanding the foregoing, if Optionee's employment is terminated
for Cause (as defined below), then this Option shall thereupon terminate and
thereafter be unexercisable.
(ii) If the Optionee retires after reaching age 65, all or any part
of this Option which has not yet been exercised, whether otherwise eligible
for immediate exercise by the terms of this Agreement or not, may be
exercised at any time within three months after the Optionee's retirement
but not after the date of expiration of the Option.
(iii) If the Optionee retires after attaining age 55 but not age 65,
the Board, in its sole discretion, may permit all or any part of this
Option which has not yet been exercised, whether otherwise eligible for
immediate exercise by the terms of this Agreement or not, to be exercised
within three months after the Optionee's retirement but not after the date
of expiration of the Option.
(iv) If the Optionee's employment is terminated by reason of death
or Disability, all or any part of this Option which has not yet been
exercised, whether otherwise eligible for immediate exercise by the terms
of this Agreement or not, may be exercised at any time within one year
after such termination but not after the date of expiration of the option.
As used in this Agreement, "Cause" means (i) the Optionee's willful or
repeated failure substantially to perform the duties of his or her position with
the Company (other than any such failure resulting from his or her Disability
(as defined below)), which failure is not or cannot be cured within five
business days after the Company has given written notice thereof to the Optionee
specifying in detail the particulars of the acts or omissions deemed to
constitute such failure; (ii) the engaging by the Optionee in willful misconduct
which is materially injurious to the Company; (iii) the engaging by the Optionee
in any act of moral turpitude that is reasonably likely to materially and
adversely affect the Company or its business; or (iv) the Optionee's conviction
of, or entry of a plea of nolo contendere with respect to, any felony. For
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purposes of this definition, no act, or failure to act, on the Optionee's part
shall be considered "willful" unless done, or omitted to be done, by the
Optionee in bad faith and without reasonable belief that the Optionee's action
or omission was in the best interests of the Company. The Optionee shall not be
deemed to have been terminated for Cause unless and until the Board finds that
the Optionee's termination for Cause is justified and has given the Optionee
written notice of termination, specifying in detail the particulars of the
Optionee's conduct found by the Board to justify such termination for Cause.
As used in this Agreement, "Disability" means the inability of the Optionee
to perform his or her position with the Company by reason of a medically
determined physical or mental impairment which has existed for a continuous
period of at least 26 weeks and which, in the
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judgment of a physician who certifies to such judgment, is expected to be of
indefinite duration or result in imminent death.
This Agreement shall not be exercisable for any number of Optioned Shares
in excess of the number of Optioned Shares for which this Agreement is then
exercisable, pursuant to Sections 4 and 8 hereof, on the date of termination of
employment.
8. Acceleration of Option. Notwithstanding the provisions of
Section 4, the Option granted hereby shall become immediately exercisable in
full in the event of (i) a Change of Control, (ii) the Optionee's Disability if
the Optionee becomes Disabled while an employee of the Company, (iii) the death
of the Optionee if such death occurs while the Optionee is employed by the
Company, (iv) the Optionee's retirement from the Company after attaining age 65,
or (v) in the Board's sole discretion, the Optionee's retirement after attaining
age 55 but not age 65.
9. No Employment Contract. Nothing contained in this Agreement
shall confer upon the Optionee any right with respect to continuance of
employment by the Company or a Subsidiary, nor limit or affect in any manner the
right of the Company or a Subsidiary to terminate the employment or adjust the
compensation of the Optionee.
10. Taxes and Withholding. If the Company or any Subsidiary shall be
required to withhold any federal, state, local or foreign tax in connection with
the exercise of the Option, and the amounts available to the Company or such
Subsidiary for such withholding are insufficient, the Optionee shall pay the tax
or make provisions that are satisfactory to the Company or such Subsidiary for
the payment thereof. The Optionee may elect to satisfy all or any part of any
such withholding obligation by surrendering to the Company a portion of the
Optioned Shares that are issued or transferred to the Optionee upon the exercise
of the Option, and the Optioned Shares so surrendered by the Optionee shall be
credited against any such withholding obligation at the Market Value per Share
of such shares on the date of such surrender. The Company will pay any and all
issue and other taxes in the nature thereof which may be payable by the Company
in respect of any issue or delivery upon a purchase pursuant to this Option.
11. Compliance with Law. The Company shall make reasonable efforts
to comply with all applicable federal and state securities laws; provided,
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however, that notwithstanding any other provision of this Agreement, the Option
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shall not be exercisable if the exercise thereof would result in a violation of
any such law.
12. Adjustments. The Board shall make or provide for such
adjustments in the number of Optioned Shares covered by this Option, in the
Option Price applicable to such Option, and in the kind of shares covered
thereby, as the Board may determine is equitably required to prevent dilution or
enlargement of the Optionee's rights that otherwise would result from (a) any
stock dividend, stock split, combination of shares, recapitalization, or other
change in the capital structure of the Company, (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation, or other distribution of assets or issuance of rights or warrants
to purchase securities, or (c) any other corporate transaction or event having
an effect similar to any of the foregoing. In the event of any such transaction
or event, the Board may provide in substitution for this Option such alternative
consideration as it may determine to be equitable in the circumstances and may
require in connection therewith the surrender of this Option.
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13. Available Shares. The Company shall at all times until the
expiration of the Option reserve and keep available, either in its treasury or
out of its authorized but unissued shares of Common Stock, the full number of
Optioned Shares deliverable upon the exercise of this Option.
14. Relation to Other Benefits. Any economic or other benefit to the
Optionee under this Agreement shall not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company or a
Subsidiary and shall not affect the amount of any life insurance coverage
available to any beneficiary under any life insurance plan covering employees of
the Company or a Subsidiary.
15. Amendments. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
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of the Optionee under this Agreement without the Optionee's consent.
16. Rights as a Stockholder. The Optionee shall have none of the
rights of a stockholder with respect to the shares of Common Stock subject to
this Option until such shares are issued to the Optionee upon exercise of the
Option.
17. Severability. In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
18. Relation to Plan. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistent provisions between
this Agreement and the Plan, the Plan shall govern. The Board acting pursuant
to the Plan, as constituted from time to time, shall, except as expressly
provided otherwise herein, have the right to determine any questions that arise
in connection with this Option or its exercise.
19. Successors and Assigns. Without limiting Section 5 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of the
Optionee, and the successors and assigns of the Company.
20. Notices. Any notice to the Company provided for herein shall be
in writing to the Company, marked Attention: Corporate Secretary at Focal
Communications Corporation, 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000,
and any notice to the Optionee shall be addressed to said Optionee at his or her
address currently on file with the Company. Except as otherwise provided
herein, any written notice shall be deemed to be duly given if and when hand
delivered, or five (5) business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid, or
three (3) business days after having been sent by a nationally recognized
overnight courier service such as Federal Express, UPS or Purolator, addressed
as aforesaid. Any party may change the address to which notices are to be given
hereunder by written
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notice to the other party as herein specified, except that notices of changes of
address shall be effective only upon receipt.
21. Governing Law. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of Delaware,
without giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer as of the day and year first above
written.
FOCAL COMMUNICATIONS CORPORATION
By:_______________________________________________
Its:______________________________________________
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Agreement and accepts the Option granted hereunder, subject to
the terms and conditions of the Plan and the terms and conditions hereinabove
set forth.
_____________________________________________
Optionee
Date:_____________________________________________
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