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EXHIBIT 10.11.1
NET2000 GROUP, INC.
PREFERRED STOCK 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 ▇▇▇▇ ▇. ▇▇▇▇▇▇ (the
"Optionee").
WHEREAS, the Company wishes to grant an option to purchase shares of the
Company's Series A Preferred Stock to the Optionee;
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
21,898 shares of the Company's Series A Preferred 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.
Section 1.2 - Option Price
The purchase price of the shares of stock covered by the option shall be
$3.425 per share, the fair market value for a share of the Company's Series A
Preferred Stock as of the effective date of this Agreement, as determined in
good faith by the Board of Directors of the Company.
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
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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 this Agreement. 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 Company 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 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 this Agreement 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 this Agreement:
(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 Company;
(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;
(c) A bona fide written representation and agreement, in a form
satisfactory to the Company, 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
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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 Company 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 Company 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 Company, 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.
(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 upon full compliance with the terms and
conditions contained in this Agreement.
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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 as follows: 21,400 shares vest
immediately and 498 shares vest on January 1, 1998.
Section 2.6 - Duration of Option
Except as specified below, the option granted hereunder shall expire ten
months from the effective date of grant. Notwithstanding the foregoing, the
option may expire prior to ten months 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.
(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 (90) 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.
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ARTICLE III
MISCELLANEOUS
Section 3.1 - Administration
The Company 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 Company
in good faith shall be final and binding upon the Optionee, the Company and all
other interested persons. No member of the Company 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.
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 3.5, 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
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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 - Governing Law.
This Agreement shall be construed, interpreted and enforced in accordance
with the laws of the Commonwealth of Virginia.
Section 3.8 - Amendment.
This Agreement may be amended or modified only by a written instrument
executed by both the Company and the Optionee.
Section 3.9 - 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.
Section 3.10 - Notification of Disposition
The Optionee shall give prompt notice to the Company of any disposition
or other transfer of any shares of stock acquired under this Agreement if such
disposition or transfer is made within two (2) years from the date of the
exercise of an option with respect to such shares. Such notice shall specify the
date of such disposition or other transfer and the amount realized, in cash,
other property, assumption of indebtedness or other consideration, by the
Optionee in such disposition or other transfer.
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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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., President
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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