EXHIBIT 4g
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
21st CENTURY TELECOM GROUP, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is entered into between 21st
Century Telecom Group, Inc., an Illinois corporation (the "Company"), and Xxxxxx
X. Xxxxxx (the "Executive"), effective November 24, 1999 (the "Date of Grant").
1. Grant of Option. The Company hereby grants to the Executive a stock
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option (the "Option") to purchase 322,000 shares (the "Shares") of the
Company's common stock, no par value (the "Common Stock"), at a purchase price
of $10.00 per Share, subject to the approval of the shareholders of the Company
meeting the requirements of Section 280G(b)(5) of the Internal Revenue Code of
1986, as amended (the "Code"). The terms of the Option with respect to fifty
percent (50%) of the Shares (the "Initial Vesting Options") shall differ, in
those respects set forth hereinafter, from the terms of the Option with respect
to the other fifty percent (50%) of the Shares (the "Later Vesting Options").
The Option is not granted pursuant to any stock option plan and is not
intended to quality as an incentive stock option described in Section 422 of the
Code. All provisions of this Agreement are to be construed in conformity with
this intention.
2. Term. Except as provided below, the Option shall be valid for a term
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commencing on the Date of Grant and ending at 5:00 p.m. Central Time on the last
day preceding the tenth (10th) anniversary of the Date of Grant (the
"Termination Date"), unless fully exercised or terminated earlier.
(a) Option Rights Upon Resignation with Notice on or before March 31,
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2001 or Upon Termination by the Company for Misconduct. If the Executive's
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employment with the Company is terminated (i) by the Company due to the
Executive's "Misconduct" (as defined below in this Section 2(a)), or (ii)
by the Executive "with Notice" (as defined below in this Section 2(a)) on
or before March 31, 2001, then the Executive shall continue vesting in the
Option through the last day of the calendar month in which such termination
occurred (or, in the case of termination "with Notice," the last day of the
applicable notice period) and thereafter shall cease vesting in the Option,
and the Option shall be terminated, with respect to any Shares unvested as
of that last day of the month. The Executive shall be entitled to exercise
the Option, to the extent vested, at any time or times during the 90-day
period following such termination of employment, but in no event after the
Termination Date. Unless sooner terminated, this Option shall terminate in
its entirety upon the expiration of such 90-day period.
For purposes of this Agreement, "Misconduct" means the Executive's
willful misconduct or gross neglect of duty (including, without limitation,
a material breach by the Executive of the Employment Agreement by and
between the Company and the Executive, dated March 6, 1998 (the "Employment
Agreement") or the Executive's gross, willful or wanton negligence in
performing his duties under his Employment Agreement), which materially
adversely affects, or is reasonably likely to materially adversely affect,
the financial condition, operations, business or
prospects of the Company, which is not cured within fifteen (15) days after the
Executive's receipt of written notice thereof.
For purposes of this Agreement, termination "with Notice" means a
termination of the Executive's employment with the Company (i) by the Executive
for no reason or for any reason other than "Good Reason," as defined in Section
2(b), pursuant to two (2) months' prior written notice thereof by the Executive
to the Company, or (ii) by the Company at any time following receipt of such two
(2) months' notice.
(b) Option Rights Upon Termination for Good Reason or Other Reason. If the
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Executive's employment with the Company is terminated (i) by the Company for no
reason or for any reason other than the Executive's Misconduct, then the
Executive shall immediately vest in the Option with respect to any Shares that
are not already vested on the date of such termination. The Executive shall be
entitled to exercise the Option as to any and all Shares at any time or times on
or before the Termination Date.
For purposes of this Agreement, "Good Reason" means (i) the failure of the
Company's Board of Directors (the "Board) to nominate the Executive for re-
election to the Board during the "Employment Period, as defined in the
Employment Agreement, or the failure of the shareholders to re-elect the
Executive to the Board, (ii) a material adverse diminution in the Executive's
title, functions, duties or responsibilities as an employee of the Company,
(iii) any material breach of the Employment Agreement by the Company, or (iv)
any reduction in the Executive's "Annual Base Salary" or "Annual Bonus," as
defined in the Employment Agreement, provided that, in each case, the cause for
the termination for Good Reason is not cured within sixty (60) days following
receipt by the Company of written notice thereof from the Executive.
For purposes of this Agreement, "Disability" means the Executive's failure
or inability to perform his duties under his Employment Agreement or, upon
termination of the Employment Agreement, his duties of employment under any
successor employment agreement or employment relationship with the Company or
its successor, for a continuous period of six (6) months as a result of any
physical and/or mental disability which, in the Company's reasonable
determination, renders the Executive incapable of performing his services
thereunder or serving in the capacity of a senior executive of a company in the
telecommunications industry and is in accordance with the standards for
disability as set forth in any long-term disability plan or insurance policy
maintained by the Company covering the Executive and similarly situated senior
executives of the Company.
(c) Other Termination of Employment. If the Executive's employment with the
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Company is terminated by the Executive on or before March 21, 2001, other than a
termination "with Notice" or for "Good Reason," then the Executive shall
continue vesting in the Option through the last day of the calendar month in
which such termination occurred and thereafter shall cease vesting in the
Option, and the Option shall be terminated, with respect to any Shares unvested
as of that last day of the month. The Executive shall be entitled to exercise
the Option, to the extent vested, during the 30-day period following the last
vesting date, but in no event after the Termination Date. Unless sooner
terminated, this Option shall terminate in its entirety upon the expiration of
such 30-day period.
3. Vesting. During the term provided in Section 2, the Option may
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be exercised in whole or in part only to the extent vested. The Executive shall
be fully vested in the Initial Vesting Options as of the Date of Grant. The
Executive shall become vested, subject to Section 2 hereof, in 3,354.2 Later
Vesting Options on the last day of each month in the period from December 1999
through October 2003, and in 3,352.6 Later Vesting Options on the last day of
November 2003. Nothwithstanding the foregoing, immediately prior to a "Change in
Control," as defined below in this Section 3, the Option, to the extent then
outstanding, shall become 100% vested and immediately exercisable.
For purposes of this Agreement, "Change in Control" means the occurrence of
any one of the following events:
(a) any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or which contemplates that all
or substantially all of the business and/or assets of the Company shall be
controlled by another corporation or a recapitalization in which the
shareholders of the Company on January 30, 1997 do not continue to
beneficially own more than 50% of the continued voting power of the
Company's securities, having the right to vote (whether presently or upon
exercise, conversion or exchange of any such securities) in the election of
directors;
(b) any sale, lease, exchange or transfer (in one transaction or
series of related transactions) of all or substantially all of the assets
of the Company and/or corporations or other entities of which the majority
voting power or equity interest is owned directly or indirectly by the
Company;
(c) the day of implementation of any plan or proposal for the
liquidation or dissolution of the Company which has been approved by the
shareholders of the Company;
(d) any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act), other than the shareholders of the Company on January
30, 1997, shall become the beneficial owner of securities of the Company
representing more than 50% of the combined voting power of the Company's
securities having the right to vote (whether presently or upon exercise,
conversion or exchange of any such securities) in the election of
directors; or
(e) a "Qualified Public Offering" as such term is defined in the Stock
Purchase Agreement by and among the Company and the parties thereto dated
January 30, 1997;
provided, however, that notwithstanding paragraphs (a) through (d) hereof, a
Change in Control shall not be deemed to occur unless the shareholders of the
Company on January 30, 1997, receive cash or stock or other equivalent
consideration for their shares.
4. Procedure for Exercise. Exercise of the Option or a portion thereof
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shall be effected by the giving of written notice to the Company by the
Executive (or, after his death, by a person described in the next sentence),
stating the number of Shares with respect to which he intends to exercise the
Option. Following the death of the Executive, any vested portion of the Option
may be exercised by the Executive's personal representative or by the legatee or
distributee to whom the Executive's rights under the Option shall pass by will
or by the laws of descent and distribution. The Company will issue the Shares
with respect to which the Option is exercised upon payment in full of the
purchase price (determined by multiplying the number of Shares with respect to
which the Option is exercised by the per Share purchase price set forth in
Section 1 hereof) in accordance with Section 5 hereof.
5. Payment for Shares. Payment of the purchase price for any Shares
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purchased pursuant to the Option shall be made in any combination of the
following methods: (i) by cash, (ii) by shares of Common Stock having an
aggregate "Fair Market Value" (as defined in the 21st Century Cable TV, Inc.
Stock Option Plan, effective January 30, 1997), as determined on the date of
delivery, equal to the purchase price, (iii) by delivery of irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds necessary to pay for all Common Stock acquired through such
exercise and any tax withholding obligations resulting from such exercise, or
(iv) at the request of the Executive, if the Common Stock is not publicly
traded, or in the discretion of the Compensation Committee of the Board (the
"Committee") if the Common Stock is publicly traded, by cash for the par value
of the Common Stock plus a promissory note for the balance of the purchase
price, which note shall contain substantially the terms and conditions set forth
in Exhibit A of the Stock Option Agreement by and between the Company and the
Executive, dated March 6, 1998 (or such other terms as may be mutually agreed
upon by the Committee and the Executive), including without limitation the right
to repay the note partially or wholly with Common Stock. The purchase price may
be paid in Shares which were received by the Executive upon exercise of the
Option. If the purchase price is paid pursuant to (iv) of this Section 5, the
Executive shall be obligated to secure such indebtedness by pledging or
otherwise hypothecating to the Company the Shares being purchased.
6. Reservation of Shares. The Company shall reserve and set apart and
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have at all times, free from preemptive rights, a number of shares of authorized
but unissued Common Stock deliverable upon the exercise of this Option
sufficient to enable it at any time to fulfill all its obligations hereunder.
7. Option Not Transferable and Subject to Certain Restrictions. The
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Option may not be sold, pledged, assigned, or transferred in any manner other
than by will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined in Section 414(p) of the Code; provided,
however, that the Option may be transferred to (i) a trust or limited
partnership or other entity which has as its exclusive beneficiaries or equity
owners the Executive or members of his immediate family, and (ii) any members of
the immediate family of the Executive. For purposes of this Section 7,
"immediate family" means the Executive's wife, children, step-children and
grandchildren, including relationships arising from legal adoption.
8. Withholding Tax. The Company shall have the right to withhold in cash
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or Shares of Common Stock, at the election of the Committee if the Common Stock
is not publicly traded, and at the election of the Executive if the Common Stock
is publicly traded, with respect to any payments made to the Executive under
this Agreement any taxes required by law to be withheld because of such
payments.
9. No Right to Employment. Nothing herein contained shall confer on the
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Executive any right to continuation of employment by the Company or its
subsidiaries, or interfere with the right of the Company or its subsidiaries to
terminate at any time the employment of the Executive, or, except as to Shares
actually delivered, confer any rights as a shareholder upon the holder hereof.
10. Compliance with Securities Laws.
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(a) The Option shall not be exercisable and the Shares shall not be
issued pursuant to any exercise of the Option unless the exercise of the
Option and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of applicable laws, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the Shares may then
be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) As a condition to the exercise of the Option, the Company may
require the Executive to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such representation is required by any
law.
(c) As a condition to exercise of the Option, if the Shareholders
Agreement dated as of January 30, 1997, by and between the Company and its
Shareholders (as such term is defined therein), is still in effect, the
Executive shall be required to execute a counterpart and become a party
thereto.
11. Participation Rights. In the event of a sale of equity securities by
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or on behalf of one or more of the Company's shareholders (in one transaction
or a series of transactions) or any merger, share exchange, consolidation or
other reorganization or business combination of the Company resulting in a
Change in Control, the Executive shall be given timely notice thereof and shall
have the right to surrender the Option in such sale and receive, on a pro rata
basis, the amount as to which the Option could be converted if it was exercised
immediately prior to such transaction, less the Option Price.
12. Adjustments. The Committee shall make any adjustments it deems
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necessary to prevent accretion, or to protect against dilution, in the number
and kind of shares with respect to any unexercised portion of the Option, in the
number and kind of shares covered thereby and in the applicable price in the
event of a stock split or stock dividend.
13. Entire Agreement. This Agreement constitutes the entire agreement
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between the parties concerning the subject matter hereof and supersedes all
prior and contemporaneous agreements between the Company and the Executive
relating to the subject matter hereof.
14. Amendment. This Agreement may be amended and/or terminated at any time
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by mutual agreement of the Company and the Executive, and shall not be amended
in a manner adverse to the Executive without the Executive's written consent.
15. Governing Law. The construction and operation of this Agreement shall
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be governed by the internal laws of the State of Illinois, notwithstanding any
choice of law provision.
16. Definition of "Company." Except where the context otherwise requires,
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the term "Company" shall include 21st Century Telecom Group Inc. and its
affiliates.
The Company and the Executive executed this Agreement as of January 11,
2000.
COMPANY:
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21ST CENTURY TELECOM GROUP INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
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Title: CFO
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EXECUTIVE
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/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
WAIVER AGREEMENT
WHEREAS, 21st Century Telecom Group, Inc., or its predecessors or
subsidiaries (collectively, the "Company") has granted stock options (the
"Options") to the undersigned ("Optionee") under one or more of the Company's
option plans or agreements (collectively, the "Plans"); and
WHEREAS, the Company has entered into an Agreement and Plan of Merger dated
as of December 12, 1999 among RCN CORPORATION, 21st HOLDING CORP., and 21st
CENTURY TELECOM GROUP, INC. (the "Merger Agreement"), which provides for the
conversion of the Options into stock options for RCN Corporation ("RCN") with
substantially the same terms and conditions as the existing options, subject to
adjustment of the number of shares and the option price; and
WHEREAS, the Company has amended or intends to amend the Plans as necessary
to eliminate (1) the acceleration of vesting of stock options on a "Change in
Control" of the Company (as defined in the Plan) and (2) the right to receive a
cash payment equal to the excess of the value of the option stock over the
option price on a "Change in Control" of the Company, both conditioned on the
closing of the transaction described in the Merger Agreement; and
WHEREAS, the effectiveness of the Plan amendments described above, as
applied to previously-granted Options, is subject to the consent of Optionee;
NOW, THEREFORE:
1. Optionee consents to the elimination of the accelerated vesting and/
or cash-out rights described above, as applied to the Options (and any
other options to acquire capital stock of the Company held by
Optionee), and agrees that:
(a) Upon the closing of the transaction described in the Merger Agreement
(the "Closing") the Options will be converted into options for common
stock of RCN Corporation, with the number of shares subject to the
Options and the option price adjusted in accordance with the Merger
Agreement.
(b) As of April 20, 2000, Optionee has previously been granted 600,200
Options to acquire common stock of the Company which are vested and
unvested, as follows:
I II III
Name of Plan Number of Vested Options Number of Unvested Options
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21st Century Telecom Group,
Inc., Xxxxxx Xxxxxx Option Plan,
1999 Stock Option Agreement 174,417 147,583
Stock Option Agreement
Between 21st Century Telecom
Group, Inc., and Xxxxxx Xxxxxx 214,445 63,755
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2. Optionee acknowledges that the Stock Option Agreement between 21st
Century Telecom Group Inc. and Xxxxxx Xxxxxx, dated November 24, 1999 (the
"November 1999 Agreement"), is hereby amended as follows:
a. Section (ii) is hereby deleted from the first paragraph of Section 2
(b).
b. The definition of "Good Reason" is hereby amended as follows: Section
(i) and (iii) are deleted. Section (ii) is restated as follows: "(ii) a
material adverse diminution in the Executive's responsibilities as an
employee of the Company (but not including a relocation, a change from
Executive's position as Senior Vice President Business Management and
Operations to another role within the Company of equal level, or a
change in reporting relationships within the Company)."Section (iv) is
restated as follows: "any material reduction in the Executive's
"Annual Base Salary" as set forth in the employment letter dated of
even date herewith.
c. Section 11 is hereby deleted.
3. Optionee acknowledges that the 21st Century Group, Inc. Stock Option
Agreement between you and 21st Century Telecom Group, Inc., dated as of
March 6, 1998 (the "March 1998 Agreement"), is hereby amended as follows:
b. The definition of Good Reason for purposes of Section 2(c) shall be the
definition of Good Reason in the Stock Option Agreement between
Optionee and the Company, dated November 24, 1999, as amended.
c. Section 10 is hereby deleted.
4. All of the Vested Options identified in Column II shall be unaffected, and
shall continue to be exercisable in accordance with the terms of the grant as
stated in the terms of the Plans except as amended herein, and subject to the
restrictions set forth in the offer letter between Optionee and RCN dated
as of even date herewith.
5. Notwithstanding the above and the terms of the Plans as amended herein, no
Unvested Options identified in Column III shall vest by virtue of the Closing
and no such Unvested Options shall vest until May 1, 2001. On May 1, 2001,
all such Unvested Options shall become vested, provided that Optionee is in
continuous service to the Company or its successors from the date of the
Waiver Agreement through May 1, 2001. All other terms of the option
agreements shall remain unchanged, except as set forth herein or in the offer
letter.
6. Optionee further acknowledges and understands that under the Merger
Agreement, RCN Corporation has undertaken to register the shares of RCN
common stock subject to the Options on Form S-8, as soon as reasonably
practicable following the Closing, which will facilitate the marketability of
the shares subject to the Options following the Closing.
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