<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
FiberNet Telecom Group, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
FIBERNET TELECOM GROUP, INC.
June 27, 2000
Dear Stockholder,
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of FiberNet Telecom Group, Inc. (the "Company") to be held at 10:00 a.m. on
Thursday, July 27, 2000, at the office of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., which is located at the Chrysler Center, 666 Third Avenue,
25th Floor, New York, New York.
At the Annual Meeting, you will be asked to elect seven persons to the Board
of Directors. The Company will also seek Stockholder approval to amend and
restate the Company's 1999 Stock Option Plan (as amended through January 14,
2000) to expand the Company's ability to grant performance and non-performance
based equity awards, including restricted stock, performance awards, stock
appreciation rights and other types of awards based on the Company's Common
Stock and to increase the aggregate number of shares of Common Stock
authorized for issuance thereunder. In addition, the Company will also ask the
stockholders to ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants. The Board of Directors recommends the approval
of each of these proposals. Finally, you will be asked to act on such other
business as may properly come before the Annual Meeting.
We hope you will be able to attend the Annual Meeting. Whether you plan to
attend the Annual Meeting or not, it is important that your shares are
represented. Therefore, you are urged to promptly complete, sign, date and
return the enclosed proxy card in accordance with the instructions set forth
on the card. This will ensure your proper representation at the Annual
Meeting.
Sincerely,
/s/ Michael S. Liss
Michael S. Liss
President and Chief Executive
Officer
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
<PAGE>
FIBERNET TELECOM GROUP, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held July 27, 2000
----------------
To the Stockholders of
FiberNet Telecom Group, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of FiberNet Telecom Group,
Inc., a Delaware corporation (the "Company"), will be held at 10:00 a.m. on
Thursday, July 27, 2000, at the office of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., which is located at the Chrysler Center, 666 Third Avenue,
25th Floor, New York, New York for the following purposes:
1. To elect seven members to the Board of Directors to serve for a term
ending in 2001.
2. To consider and act upon a proposal to amend and restate the Company's
1999 Stock Option Plan (as amended through January 14, 2000) to expand
the Company's ability to grant performance and non-performance based
equity awards, including restricted stock, performance awards, stock
appreciation rights and other types of awards based on the Company's
Common Stock and to increase by 5,500,000 shares the aggregate number of
shares of Common Stock authorized for issuance thereunder.
3. To consider and act upon a proposal to ratify the appointment of Arthur
Andersen LLP as the Company's independent public accountants for the
fiscal year ending December 31, 2000.
4. To transact such other business as may be properly brought before the
Annual Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on June 7, 2000, as
the record date for the determination of Stockholders entitled to notice of
and to vote at the Annual Meeting and at any adjournments thereof.
All Stockholders are cordially invited to attend the Annual Meeting.
Representation of at least a majority of all outstanding shares of voting
stock is required to constitute a quorum, and therefore whether you plan to
attend the Annual Meeting or not, you are requested to complete, sign, date
and return the enclosed proxy card as soon as possible in accordance with the
instructions on the proxy card. A pre-addressed, postage prepaid return
envelope is enclosed for your convenience.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Roy (Trey) D. Farmer III
Roy (Trey) D. Farmer III
Secretary
June 27, 2000
<PAGE>
FIBERNET TELECOM GROUP, INC.
570 LEXINGTON AVENUE, 3rd FLOOR
NEW YORK, NEW YORK 10022
(212) 405-6200
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of FiberNet Telecom Group, Inc., a Delaware corporation
(the "Company"), of proxies, in the accompanying form, to be used at the
Annual Meeting of Stockholders to be held at the offices of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., Chrysler Center, 666 Third Avenue, 25th
Floor, New York, New York, on Thursday, July 27, 2000, at 10:00 a.m., and any
adjournments thereof (the "Meeting").
Where the Stockholder specifies a choice on the enclosed proxy card as to
how his or her shares are to be voted on a particular matter, the shares will
be voted accordingly. If no choice is specified, the shares will be voted FOR
the election of the seven nominees for director named herein, FOR the proposal
to amend and restate the Company's 1999 Stock Option Plan (as amended through
January 14, 2000) (the "1999 Plan") to expand the Company's ability to grant
performance and non-performance based equity awards, including restricted
stock, performance awards, stock appreciation rights and other types of awards
based on the Company's Common Stock and to increase by 5,500,000 shares the
aggregate number of shares of Common Stock authorized for issuance thereunder
and FOR the ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending December
31, 2000. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date.
Any Stockholder who has executed a proxy but is present at the Meeting, and
who wishes to vote in person, may do so by revoking his or her proxy as
described in the preceding sentence. Shares represented by valid proxies in
the form enclosed, received in time for use at the Meeting and not revoked at
or prior to the Meeting, will be voted at the Meeting. The presence, in person
or by proxy, of the holders of a majority of the outstanding shares of the
Company's common stock, par value $.001 per share ("Common Stock"), is
necessary to constitute a quorum at the Meeting.
The affirmative vote of a majority of the shares voted affirmatively or
negatively at the Meeting is required to approve each proposal, other than the
election of directors which requires a plurality of the shares voted
affirmatively or negatively at the Meeting. With respect to the tabulation of
votes on the matters proposed for the consideration of the Stockholders at the
Meeting, abstentions and broker non-votes will have no effect on the vote.
The close of business on June 7, 2000, has been fixed as the record date for
determining the Stockholders entitled to notice of and to vote at the Meeting.
As of the close of business on June 7, 2000, the Company had 28,495,932 shares
of Common Stock and 83,688 shares of Series C Preferred Stock outstanding and
entitled to vote. Holders of Common Stock are entitled to one vote per share
and holders of Series C Preferred Stock are entitled to 117.03 votes per share
on all matters to be voted on by Stockholders. The holders of Series C
Preferred Stock vote together with the holders of Common Stock as one class.
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company. In
addition, the Company will reimburse brokerage firms and other persons
representing beneficial owners of Common Stock of the Company for their
expenses in forwarding proxy material to such beneficial owners. Solicitation
of proxies by mail may be supplemented by telephone, telegram, telex and
personal solicitation by the directors, officers or employees of the Company.
No additional compensation will be paid for such solicitation.
This Proxy Statement and the accompanying proxy are being mailed on or about
June 27, 2000 to all Stockholders entitled to notice of and to vote at the
Meeting.
The Annual Report to Stockholders for the fiscal year ended December 31,
1999 ("Fiscal 1999"), and the Form 10-QSB for the quarterly period ended March
31, 2000, are being mailed to the Stockholders with this Proxy Statement but
do not constitute a part hereof.
<PAGE>
SHARE OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of June 7, 2000,
concerning the ownership of voting securities of (i) each member of the Board
of Directors of the Company, (ii) each executive officer of the Company named
in the Annual Compensation Table appearing under "Executive Compensation,"
below, (iii) all current Directors and executive officers of the Company as a
group and (iv) each beneficial owner of more than 5% of the outstanding shares
of any class of voting securities.
<TABLE>
<CAPTION>
Number of Shares
Title of Class Name and Address of Beneficial Owner Beneficially Owned Percent of Class
-------------- ------------------------------------ ------------------ ----------------
<S> <C> <C> <C>
Common Stock SMFS, Inc.(1) 6,900,000 24.2
12-12 43rd Avenue
Long Island City, New York 11101
Common Stock Metromedia Fiber Network 5,000,000 17.5
Services, Inc.
1 North Lexington Avenue
White Plains, NY 10601
Common Stock LTJ Group, Inc.(1) 4,161,556 14.6
61 Old Well Road
Rochester, New York 1462
Common Stock Michael S. Liss (2) 340,753 1.2
c/o 570 Lexington Ave, 3rd Floor
New York, NY 10022
Common Stock Executive officers and 482,850 1.7
directors as a group
Series C Preferred Stock Alexander Enterprise Holdings Corp. 8,511 10.2
499 Park Avenue, 24th Floor
New York, NY 10022
Series C Preferred Stock Burden Direct Investment Fund III 9,456 11.3
10 East 53rd Street, 32nd Floor
New York, NY 10022
Series C Preferred Stock Penny Lane Partners L.P. 7,092 8.5
767 5th Avenue
New York, NY 10153
Series C Preferred Stock Pequot Scout Fund, L.P. 9,456 11.3
500 Nyala Farm Road
Westport, CT 06880
Series C Preferred Stock Signal Equity Partners, L.P. 43,499 52.0
10 East 53rd Street, 32nd Floor
New York, NY 10022
Series C Preferred Stock Richard E. Sayers (3) 946 1.1
3625 Ridge Run
Canandaigua, NY 14424
Series C Preferred Stock Executive officers and directors as a group 946 1.1
</TABLE>
2
<PAGE>
--------
(1) Pursuant to the Stockholders Agreement dated May 7, 1999, between the
Company and certain stockholders (as defined therein) (the "Stockholders
Agreement"), SMFS, Inc., LTJ Group, Inc. and LPS Consultants, Inc. granted
irrevocable proxies to Signal Equity Partners, L.P., Trident Telecom
Partners, LLC and Concordia Telecom Management, L.L.C. to vote all of
their shares at all meetings of stockholders. The proxy terminates upon
the earliest to occur of (i) a transfer of all shares owned by the
stockholder that granted the proxy; (ii) a qualified public offering, as
defined in the Stockholders Agreement; or (iii) three years from the date
of the Stockholders Agreement.
(2) Michael S. Liss, the Company's President and Chief Executive Officer,
beneficially owns these shares through Concordia Telecom Management,
L.L.C.
(3) Richard E. Sayers, a director of the Company, beneficially owns these
shares through Taurus Telecommunications, Inc.
As of June 7, 2000, the Company had 28,495,932 shares of Common Stock
outstanding, 83,688 shares of Series C Preferred Stock outstanding, and
approximately 56 million shares outstanding on a fully-diluted basis, assuming
the conversion of all outstanding convertible securities and the exercise of
all outstanding options and warrants.
3
<PAGE>
MANAGEMENT
Directors
The Company's Certificate of Incorporation and By-Laws provide for the
Company's business to be managed by or under the direction of the Board of
Directors. Under the Company's Certificate of Incorporation and By-laws, the
number of directors is fixed from time to time by the Board of Directors. The
Board of Directors currently consists of seven members. Directors are elected
for a period of one year and thereafter serve until the next annual meeting at
which their successors are duly elected by the stockholders.
Pursuant to the Stockholders Agreement, SMFS, Inc., LTJ Group, Inc. and LPS
Consultants, Inc. granted irrevocable proxies to Signal Equity Partners, L.P.
("Signal"), Trident Telecom Partners, LLC ("Trident") and Concordia Telecom
Management, L.L.C. to vote all of their shares at all meetings of
stockholders. Pursuant to a Letter Agreement dated May 7, 1999, Signal and
Trident as Managing Purchasers and parties to a Securities Purchase Agreement
dated as of the same date between the Company and the purchasers named
therein, and as parties to the Stockholders Agreement, agreed that as long as
Signal remains a Majority in Interest (as defined in the Securities Purchase
Agreement), it will take all necessary and permitted action to ensure that two
of the directors of the Company will be designated by Trident.
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Timothy P. Bradley...... 38 Director
Steven G. Chrust........ 50 Director
Roy (Trey) D. Farmer
III.................... 29 Executive Vice President, Director
Michael S. Liss......... 46 President, Chief Executive Officer, Director
Charles J. Mahoney...... 62 Director
Richard E. Sayers....... 63 Director
William Vrattos......... 31 Director
</TABLE>
The following biographical information is furnished as to each nominee for
election as a director and each of the current directors:
TIMOTHY P. BRADLEY has served as a director of the Company since May 7,
1999. Mr. Bradley is a Managing Partner and co-founder of Signal, a private
equity investment fund focused on the telecommunications and information
technology industries. Mr. Bradley also co-founded Signal Partners LLC, a
financial advisory firm whose clients included Fortune 500 companies and
premier private equity funds. Previously, Mr. Bradley was a general partner at
the Exeter Group, a private equity investment fund. Prior to working in the
private equity industry, Mr. Bradley was a practicing attorney in New York
City. He has a B.A. from Yale University, a J.D. from New York University
School of Law, and an M.B.A. from Columbia Business School.
STEVEN G. CHRUST has served as a director of the Company since December 8,
1999. He is Founder and President of SGC Advisory Services, Inc., an
advisory/money-management firm specializing in telecommunications and
technology, and has been involved with the telecommunications and financial
services industry for over 25 years. He was co-founder and served as Vice
Chairman of Winstar Communications, Inc. from 1995 through 1998. Previously,
Mr. Chrust was Director of Technology Research at Sanford C. Bernstein & Co.
Mr. Chrust was Chairman of the Association for Local Telecommunications
Services (ALTS), the national organization representing facilities-based
competitive local exchange carriers. Mr. Chrust has a B.A. from Baruch
College.
ROY (TREY) D. FARMER III has served as the Executive Vice President and a
director of the Company since May 11, 1999. From 1998 to 1999, he was a
partner of Sterling Capital LLC. Prior to joining Sterling Capital, Mr. Farmer
worked with a group of strategic consulting firms based in New York City that
repositioned technology companies. He has an A.B. from Princeton University,
an M.Ed. from Harvard University and an M.A.R. from Yale University.
4
<PAGE>
MICHAEL S. LISS has served as a director and as President and Chief
Executive Officer of the Company since May 11, 1999. From 1994 to 1999, he was
a Managing Director of Lazard Freres & Co. LLC, and prior to that he was a
Senior Managing Director of Bear, Stearns & Co. Inc. Mr. Liss has a B.A. from
Columbia University, a J.D. from Yale Law School and a M.P.P.M. from the Yale
School of Management.
CHARLES J. MAHONEY has served as a director of the Company since May 7,
1999. He is presently President and Chief Executive Officer of Arcade Building
Services, a wholly owned subsidiary of Tishman Speyer Properties, L.P. From
1990 to 2000, he was a Senior Managing Director and Managing Director with
Tishman Speyer Properties. Prior to his employment at Tishman Speyer
Properties, Mr. Mahoney held positions at the Helmsley Organization and at Con
Edison. He holds a B.S. from C.W. Post College.
RICHARD E. SAYERS has served as a director of the Company since May 7, 1999.
Since 1996, he has served as the President of Taurus Telecommunications, Inc.,
a private consulting company in the telecommunications industry. From 1994 to
1996, Mr. Sayers was the Vice Chairman of ACC Corp. and President of its
international group, serving as Chairman of ACC Telenterprises (ACC-Canada)
and Chairman of ACC Long Distance, United Kingdom. Mr. Sayers has nearly 40
years of executive level experience in the telecommunications industry. He has
a B.S. from Union College.
WILLIAM VRATTOS has served as a director of the Company since September 29,
1999. Since 1997, he has been a Managing Director of Georgica Advisors LLC,
focusing on the firm's public and private investments in the media,
communications and entertainment industries. Prior to that Mr. Vrattos worked
in the investment banking division of Morgan Stanley & Co. Incorporated from
1991 until 1997. He also currently serves as a Director and Chairman of the
Finance Committee of Listing Services Solutions, Inc., a privately held
telecommunications service company. Mr. Vrattos has a B.A. from Dartmouth and
an M.B.A. from Harvard University.
Committees of the Board of Directors and Meetings
Meeting Attendance. During Fiscal 1999, there were six meetings of the Board
of Directors. The Compensation Committee of the Board of Directors did not
meet in Fiscal 1999. The Board of Directors also acted by unanimous written
consent on nine occasions pursuant to Nevada law during this period.
Additionally, the Compensation Committee acted by unanimous written consent on
twelve occasions pursuant to Nevada law during this period. No director
attended fewer than 75% of the total number of meetings of the Board during
Fiscal 1999, except for Steven G. Chrust and Charles J. Mahoney.
Audit Committee. During the last Fiscal Year, the Company did not have an
Audit Committee. On February 16, 2000, the Board of Directors appointed an
Audit Committee. The Audit Committee has three members, Richard E. Sayers,
Steven G. Chrust and William Vrattos. The Audit Committee's duties and
authority include reviewing the Company's annual financial statements and
Annual Report on Form 10-K, consulting with the Company's independent public
accountants and representatives of management, considering matters relating to
accounting policy and internal controls, reviewing the scope of internal and
external audits, reviewing the appropriateness of accounting principles used
in financial reporting and the adequacy of financial operating controls,
recommending independent public accountants to the Board of Directors,
monitoring, reviewing and approving external auditing services and fees,
reviewing related party transactions, and such other duties as the Board of
Directors may determine.
Compensation Committee. The Compensation Committee has three members,
Timothy P. Bradley, Michael S. Liss and Charles J. Mahoney. The Compensation
Committee administers the Company's 1999 Plan and reviews, approves and makes
recommendations on the Company's compensation policies, practices and
procedures to ensure that legal and fiduciary responsibilities of the Board of
Directors are carried out and that such policies, practices and procedures
contribute to the success of the Company.
5
<PAGE>
Nominating Committee. The Company does not have a standing Nominating
Committee.
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee has three members, Timothy P. Bradley, Michael S. Liss
and Charles J. Mahoney. While Mr. Liss, the Chief Executive Officer and
President of the Company, will participate in decisions relating to executive
officers, he will not vote on matters relating to his own compensation. No
executive officer of the Company serves as a member of the board of directors
or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or
Compensation Committee.
Compensation of Directors
The Company reimburses ordinary and necessary out-of-pocket-expenses
incurred by non-employee directors in connection with their services,
including attendance at meetings of the Board of Directors.
Directors who are not employees of the Company or any affiliate are entitled
to receive options under the Company's 1999 Plan. Options for 225,000 shares
were granted under this formula during Fiscal 1999. In addition, 250,000
options to purchase the Company's Common Stock were granted to such directors
outside of the 1999 Plan.
Executive Officers
The names of, and certain information regarding, executive officers of the
Company who are not also directors, are set forth below. The Company has
employment agreements with the President and Chief Executive Officer, the
Executive Vice President, and all Senior Vice Presidents.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Les Hankinson............... 48 Senior Vice President--Sales and Marketing
Lance L. Mickel............. 48 Senior Vice President--Network Operations
Allan Zendle................ 47 Senior Vice President--Engineering
Jon A. DeLuca............... 28 Vice President--Finance
</TABLE>
LES HANKINSON has served as the Senior Vice President of Sales and Marketing
of the Company since October 4, 1999. Mr. Hankinson has more than 27 years of
executive level experience in the telecommunications industry. From 1991 to
1999, he was with British Telecommunications plc ("BT"), where he was
responsible for Worldwide Wholesale Sales and Marketing for Carrier Services
as well as Internet and Multimedia. As Vice President and General Manager-
Internet Sales and Marketing, he was responsible for launching BT's line of
products aimed at the wholesale and retail Internet market. Mr. Hankinson has
also held executive positions at Sprint, MCI WorldCom, Satellite Business
Systems, and Cable & Wireless. He attended George Mason University and
completed a Telecommunications Master's Program at the Telecommunications
Engineering Staff College in London, England.
LANCE L. MICKEL has served as the Senior Vice President of Network
Operations since January 18, 2000. Mr. Mickel has more than 28 years of
executive level experience with AT&T. From 1971 to 2000, Mr. Mickel was
employed by AT&T, most recently as general manager for AT&T's global network
services serving IBM and other large enterprise accounts. Prior to that time,
he was responsible for managing AT&T's global network of voice, data, IP,
wireless, international and local services from its global network operations
center. In addition to leading the design of AT&T's new global network
operations center, Mr. Mickel played an integral role in repositioning the
operations of numerous AT&T business units. He attended College of DuPage.
6
<PAGE>
ALLAN ZENDLE has served as the Senior Vice President of Engineering of the
Company since May 26, 2000. Mr. Zendle has over 18 years of experience in
executive level technology management positions in the telecommunications
industry. From 1996 to 2000, Mr. Zendle served as Vice President, Architecture
and Advanced Technology for Winstar Communications where he pioneered the
development and implementation of next generation fixed wireless broadband
local networks. Mr. Zendle was also responsible for Winstar's network
architecture planning, advanced technology evaluation, end-user services
engineering and management of Winstar's Network Interoperability Lab. Previous
employers include Bell Atlantic and MCI, where responsibilities included the
management of large scale domestic and international network and systems
engineering programs and development of next generation telecommunications
services based on newly emerging technologies. Mr. Zendle has a B.S. from
Frostburg University, and has several telecommunications patents pending.
JON A. DELUCA has served as the Vice President of Finance of the Company
since June 14, 1999. From 1997 to 1999, Mr. DeLuca was a Managing Director of
Lago Industries, LLC, a private merchant banking firm. Prior to that, he was
employed in the Leveraged Finance Groups of Lazard Freres & Co. LLC and
Bear, Stearns & Co. Inc. Mr. DeLuca has a B.A. from Trinity College.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth summary information as to compensation
received by the Company's Chief Executive Officer and each of the other most
highly compensated persons who were serving as executive officers of the
Company as of December 31, 1999, and who earned in excess of $100,000 for
services rendered to the Company during Fiscal 1999 (collectively, the "named
executive officers").
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- -------------------------------
Awards Payouts
----------------------- -------
Restricted Securities
Stock Underlying LTIP All other
Year Salary Bonus Awards Options/SARs Payouts Compensation
---- ------- ------ ---------- ------------ ------- ------------
($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Michael S. Liss (1)..... 1999 158,653 -- -- 1,005,000 -- --
President, CEO &
Director
Roy (Trey) D. Farmer III 1999 107,757 15,000 -- 340,000 -- --
(2)....................
Executive Vice
President & Director
</TABLE>
--------
(1) Mr. Liss was elected as an executive officer of the Company on May 7,
1999, at an annual base salary of $250,000.
(2) Mr. Farmer was elected as an executive officer of the Company on May 7,
1999, at an annual base salary of $175,000.
The following table provides information regarding the grant of stock
options during Fiscal 1999 to the named executive officers.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
% of
Number Total
of Options
Shares Granted
Covered to
by Employees Exercise
Option in Fiscal Price Expiration
Name Grant Year ($/share) Date
---- ------- --------- --------- ----------
<S> <C> <C> <C> <C>
Michael S. Liss..................... 125,000 4.4 4.000 5/11/2009
440,000 15.4 3.750 12/3/2009
440,000 15.4 6.000 12/3/2009
Roy (Trey) D. Farmer III............ 125,000 4.4 4.000 5/11/2009
215,000 7.5 5.000 12/3/2009
</TABLE>
Option Exercises in Last Fiscal Year and Fiscal Year-End Values
None of the executive officers exercised stock options during Fiscal 1999.
The following table provides information regarding the number of shares
covered by both exercisable and unexercisable stock options held by each of
the named executive officers as of December 31, 1999, and the values of the
"in-the-money" options, which values represent the positive spread between the
exercise price of any such option and the fiscal year-end value of the
Company's Common Stock. In addition, this table includes the number of shares
covered by both exercisable and unexercisable stock options as of December 31,
1999, and the values of "in-the-money" options, which values represent the
positive spread between the exercise price of any such option and the fiscal
year-end value of the Company's Common Stock.
8
<PAGE>
<TABLE>
<CAPTION>
Value of the Unexercised
Number of Securities In-The-Money Options at
Underlying Unexercised Fiscal Year-End at Fiscal
Shares Options Year-End (1)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Liss......... -- -- 83,125 921,875 $924,765.62 $9,485,859.30
Roy (Trey) D. Farmer
III.................... -- -- 83,125 256,875 $924,765.62 $2,642,734.30
</TABLE>
--------
(1) The value of unexercised in-the-money options at fiscal year end assumes
a fair market value for the Company's Common Stock of $15.125, the
closing sale price per share of the Company's Common Stock as reported by
the OTC Bulletin Board on December 31, 1999.
Employment Contracts, Termination of Employment and Change of Control
Arrangements
On May 7, 1999, the Company entered into executive employment agreements
with Michael S. Liss and Roy (Trey) D. Farmer III. The material provisions of
these agreements are as follows:
Term: The agreements with Mr. Liss and Mr. Farmer provide for a term of two
years.
Position: The terms of the agreements with Mr. Liss and Mr. Farmer provide
that Mr. Liss will serve as President, Chief Executive Officer and Board
member of the Company and Mr. Farmer will serve as Executive Vice President of
the Company.
Compensation: Under these agreements, Mr. Liss will receive an annual base
salary of a minimum of $250,000, and Mr. Farmer will receive an annual base
salary minimum of $175,000, both of which shall be subject to increase at the
discretion of the Board of Directors (or a committee thereof) of the Company.
Mr. Liss and Mr. Farmer are eligible to receive a cash bonus at the reasonable
discretion of the Board of Directors. In addition, Mr. Liss and Mr. Farmer are
each entitled to receive Incentive Stock Options (as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code")) for 25,000 shares
(or such lesser amount then allowed under the Code) of the Company's Common
Stock with an exercise price equal to the fair market value of the Common
Stock as of May 5, 1999, pursuant to the 1999 Plan. Mr. Liss and Mr. Farmer
are also each entitled to receive non-qualified stock options to purchase up
to 100,000 shares of the Common Stock of the Company at $4.75 per share.
Termination: If the Company terminates Mr. Liss or Mr. Farmer without cause
or Mr. Liss or Mr. Farmer terminates their agreement for good reason, they
will be entitled to receive twelve months severance equal to their then
current base salary and all of the options granted to them under their
employment agreement shall vest and they shall have twelve months thereafter
to exercise such options.
Other Provisions: The agreements for Mr. Liss and Mr. Farmer contain a one
year post-termination non-compete and non-solicitation provision.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Overview
This report relates to compensation decisions made by the Compensation
Committee. This report shall not be deemed incorporated by any general
statement incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933 (The "Securities Act") or the Exchange Act of
1934 (the "Exchange Act"), except to the extent it specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
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The Compensation Committee, which consists of Timothy P. Bradley, Michael S.
Liss and Charles J. Mahoney is responsible for establishing and administering
the Company's executive compensation policies. This report addresses the
compensation policies for Fiscal 1999 as they affected Mr. Liss, in his
capacity as President and Chief Executive Officer of the Company, and the
other executive officers of the Company.
General Compensation Policy
The objectives of the Company's executive compensation program are to:
. Provide a competitive compensation package that will attract and retain
superior talent and reward performance.
. Support the achievement of desired Company performance.
. Align the interests of executives with the long-term interests of
stockholders through award opportunities that can result in ownership of
Common Stock, thereby encouraging the achievement of superior results
over an extended period.
Executive Officer Compensation Program
The Company's executive officer compensation program is comprised of: (i)
base salary, which is set on an annual basis; (ii) annual incentive bonuses,
which are based on the achievement of objectives and Company performance; and
(iii) long-term incentive compensation in the form of periodic stock option
grants, with the objective of aligning the executive officers' long-term
interests with those of the stockholders and encouraging the achievement of
superior results over an extended period.
The Compensation Committee performs annual reviews of executive compensation
to confirm the competitiveness of the overall executive compensation packages
as compared with companies who compete with the Company to attract and retain
employees.
Base Salary
The Compensation Committee reviews base salary levels for the Company's
executive officers on an annual basis. Base salaries are set competitively
relative to companies in the communications industry and other comparable
companies. In determining salaries the Compensation Committee also takes into
consideration individual experience and performance. The Compensation
Committee seeks to compare the salaries paid by companies similar in size and
industry to the Company. Within this comparison group, the Company seeks to
make comparisons to executives at a comparable level of experience, who have a
comparable level of responsibility and expected level of contribution to the
Company's performance. In setting base salaries, the Compensation Committee
also takes into account the intense level of competition among communications
companies to attract talented personnel.
Annual Incentive Bonuses
The Company, along with each executive officer, establishes goals related
specifically to that officer's areas of responsibility. The Compensation
Committee determines the amount of each executive's bonus based on a
subjective assessment by the Compensation Committee of the officer's progress
toward achieving the established goals. Bonuses are awarded on an annual
basis.
Long-term Incentive Compensation
Long-term incentive compensation, in the form of stock options, allows the
executive officers to share in any appreciation in the value of the Company's
Common Stock. The Compensation Committee believes that stock option
participation aligns executive officers' interests with those of the
stockholders. The amounts of the
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awards are designed to reward past performance and create incentives to meet
long-term objectives. Awards are made at a level calculated to be competitive
within the communications industry as well as a broader group of companies of
comparable size. In determining the amount of each grant, the Compensation
Committee takes into account the number of shares held by the executive prior
to the grant as well as the performance of the Company and the individual
executive.
Chief Executive Officer Compensation
Mr. Liss was appointed to the position of President and Chief Executive
Officer in May 1999. In Fiscal 1999, Mr. Liss received a base salary of
$158,653. This is consistent with the range of salary levels received by his
counterparts in companies in the communications industry and other comparable
companies. The Compensation Committee believes Mr. Liss has managed the
Company well in a challenging business climate and has continued to move the
Company towards its long-term objectives.
In addition, the Company granted stock options to Mr. Liss to purchase
1,005,000 shares of Common Stock in Fiscal 1999. This option package is
designed to align the interests of Mr. Liss with those of the Company's
stockholders with respect to short-term operating results and long term
increases in the price of the Company's stock. The grant of these options is
consistent with the goals of the Company's stock option program as a whole.
Tax Considerations
The Compensation Committee's compensation strategy is to be cost and tax
effective. Therefore, the Compensation Committee's policy is to preserve
corporate tax deductions, while maintaining the flexibility to approve
compensation arrangements that it deems to be in the best interests of the
Company and its stockholders, but that may not always qualify for full tax
deductibility.
THE COMPENSATION COMMITTEE:
Timothy P. Bradley
Michael S. Liss
Charles J. Mahoney
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Performance Graph
The following graph compares the quarterly percentage change in the
Company's cumulative total stockholder return on its Common Stock during a
period commencing on November 24, 1997 (the date on which the Company
completed its merger with Desert Native Designs, Inc., a Nevada corporation,
and on which the merged entity began engaging in the Company's current line of
business) and ending on December 31, 1999 (as measured by dividing (A) the
difference between the Company's share price at the end and the beginning of
the measurement period by (B) the share price at the beginning of the
measurement period) with the cumulative total return of The Nasdaq Stock
Market and the Company's peer group during such period. It should be noted
that the Company has not paid any dividends on the Common Stock, and no
dividends are included in the representation of the Company's performance. The
stock price performance on the graph below is not necessarily indicative of
future price performance.
TOTAL SHAREHOLDER RETURNS
[LINE GRAPH]
Company Name / Index 24Nov97 Dec97 Dec98 Dec99
------------------------------------------------------------------------------
FIBERNET TELECOM GROUP INC 100 88.12 27.44 260.33
NASDAQ US INDEX 100 99.29 139.92 252.78
PEER GROUP 100 112.42 205.76 458.90
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers, and any
persons holding more than 10% of the outstanding common stock of the Company
to file reports with the Securities and Exchange Commission (the "SEC")
concerning their initial ownership of common stock and any subsequent changes
in that ownership.
Based solely on its review of the copies of such forms received by it, or
written representations from reporting persons that no other reports were
required for those persons, the Company believes that, during Fiscal 1999 all
reports required to be filed pursuant to Section 16(a) of the Exchange Act
were filed on a timely basis except (a) an Initial Statement of Beneficial
Ownership on Form 3 was filed late by Steven G. Chrust, and (b) Statements of
Changes in Beneficial Ownership on Forms 4 were filed late by Michael S. Liss,
Richard E. Sayers and William Vrattos for one December 1999 event, by Signal
Equity Partners, L.P. for two December 1999 events and by Trident Telecom
Partners LLC for three December 1999 events.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, the Company made payments to Petrocelli Electric Co., a related
party, of approximately $1.3 million for consulting and contracting services
rendered. Mr. Santo Petrocelli, former Chairman of the Company, is the
President and Chief Executive Officer of Petrocelli Electric Co. and
Petrocelli Electrical Services and the principal of SMFS, Inc., a stockholder
in the Company. Other consulting fees paid to related parties included
approximately: (i) $96,000 to Richard E. Sayers, a current Director of the
Company, (ii) $85,000 to Frank Chiaino, the former President and Chief
Executive Officer of the Company, and (iii) $83,000 to Landtel
Telecommunications. Mr. Joseph Tortoretti is the majority stockholder of
Landtel Telecommunications and a principal of LTJ Group, Inc., a stockholder
of the Company. The Company also issued approximately 973,000 warrants and
shares of Common Stock as consideration for accounts payable of $527,000 due
to related parties, including Petrocelli Electric Co., LPS Consultants, Inc.,
Landtel Telecommunications and Frank Chiaino. Mr. Lawrence Polan, a former
Director of the Company, is also Vice President and Chief Financial Officer
for Petrocelli Electric Co. In addition, he controls LPS Consultants, Inc.
The Company capitalized services from Petrocelli Electrical Services of
approximately $2.5 million and $12,000 during 1998 and 1997, respectively.
Additionally, the Company expensed approximately $140,000 and $20,000 of
consultant fees from this related party during 1998 and 1997, respectively.
The Company capitalized services of approximately $57,000 and $6,000 of
consulting services from Landtel Communications during 1998 and 1997,
respectively. Additionally, the Company expensed approximately $57,000 and
$100,000 of consultant fees from this related party during 1998 and 1997,
respectively. The Company purchased approximately $75,000 of consulting fees
from LPS Consultants, Inc. during 1998.
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
PROPOSAL 1
ELECTION OF DIRECTORS
Under the Company's Certificate of Incorporation and By-Laws, the number of
directors is fixed from time to time by the Board of Directors. The Board of
Directors has fixed the size of the Board at seven directorships. The Board of
Directors currently consists of the following seven members: Timothy P.
Bradley, Steven G. Chrust, Roy (Trey) D. Farmer III, Michael S. Liss, Charles
J. Mahoney, Richard E. Sayers and William Vrattos.
On May 23, 2000, the Board of Directors voted to nominate and recommend to
the Stockholders the re-election of each of the current members of the Board
of Directors for a term expiring at the Annual Meeting of Stockholders in
2001. At each annual meeting of Stockholders, directors are elected for a full
term of one year to succeed those directors whose terms are expiring.
Directors chosen to fill vacancies on the board shall hold office for a term
expiring at the next annual meeting of Stockholders.
Unless authority to vote for either of the nominees named above is withheld,
the shares represented by the enclosed proxy will be voted FOR the election as
directors of such nominees. In the event that any nominee shall become unable
or unwilling to serve, the shares represented by the enclosed proxy will be
voted for the election of such other person as the Board of Directors may
recommend in his place. The Board has no reason to believe that any nominee
will be unable or unwilling to serve.
A plurality of the shares voted affirmatively or negatively at the Meeting
is required to elect each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF TIMOTHY P. BRADLEY, STEVEN
G. CHRUST, ROY (TREY) D. FARMER III, MICHAEL S. LISS, CHARLES J. MAHONEY,
RICHARD E. SAYERS AND WILLIAM VRATTOS AS DIRECTORS, AND PROXIES SOLICITED BY
THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED
OTHERWISE ON THE PROXY.
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PROPOSAL 2
APPROVE AMENDMENT AND RESTATEMENT OF THE COMPANY'S
1999 STOCK OPTION PLAN
EQUITY INCENTIVE PLAN
General
On May 23, 2000, the Board approved an Equity Incentive Plan (the "Equity
Incentive Plan"), subject to stockholder approval, which amends and restates
the Company's 1999 Plan. The Equity Incentive Plan continues to allow the
Company to grant stock options, but expands the Company's ability to grant
other performance and non-performance based equity awards, including
restricted stock, performance awards, stock appreciation rights ("SARs") and
other types of awards based on the Company's Common Stock (collectively,
"Awards"), and makes certain other changes as discussed below. The Board has
determined that it is in the best interests of the Company to make the changes
in the Equity Incentive Plan because the range of Awards will enhance the
Company's ability to help attract and retain motivated executives and other
key employees of high quality. The variety of Awards authorized to be granted
under the Equity Incentive Plan also enables the Company to have a
comprehensive compensation program that will help executives and other
employees to acquire or increase their proprietary interest in the Company,
thereby promoting a closer alignment of interests between them and the
Company's stockholders. Therefore, the Board views the Equity Incentive Plan
as a key component of the Company's compensation program.
The terms and conditions of the amended and restated Equity Incentive Plan
shall supersede the terms and conditions of any option granted under the 1999
Plan if the participant and the Company enter into a written agreement to
effect the changes and to the extent that such terms and conditions do not
result in adverse tax consequences to the participant and/or adverse
accounting treatment to the Company with respect to the option.
Reason for Stockholder Approval
The Board seeks stockholder approval of the Equity Incentive Plan for a
number of reasons, including satisfying certain legal requirements and
providing tax advantages to the Company and participants. In addition,
approval of the Equity Incentive Plan will meet a requirement of listing
shares on the NASDAQ securities exchange.
Stockholder approval of the material terms of performance Awards to certain
executives under the Equity Incentive Plan allows the Board to preserve the
Company's ability to claim tax deductions for compensation, to the greatest
extent practicable. In particular, Section 162(m) of the Internal Revenue Code
(the "Code") limits the deductions a publicly held company can claim for
compensation in excess of $1 million paid to certain executive officers
(typically, the officers who are "named executive officers" in the summary
compensation table in a company's proxy statement). "Performance-based"
compensation is an exception to this $1 million deductibility cap, but
stockholder approval is necessary for such Awards to qualify as "performance-
based" compensation under Section 162(m) of the Code.
If the stockholders approve the Equity Incentive Plan, performance Awards
intended by the Committee, as defined below in "Administration," to qualify as
"performance-based" compensation will be payable only upon achievement of pre-
established performance goals, subject to any additional requirements and
terms as the Committee may establish and in accordance with the provisions of
Section 162(m) of the Code. Such performance Awards can be used to place
strong emphasis on the building of value for all stockholders. For purposes of
Section 162(m) of the Code, stockholder approval of the Equity Incentive Plan
will also be deemed to include approval of the eligibility of executive
officers and other eligible persons to participate in the Equity Incentive
Plan, the individual limitations on the number of shares subject to Awards
(described below), and the general business criteria upon which performance
objectives for performance Awards are based. Stockholder approval of general
business criteria, without specific targeted levels of performance, qualifies
performance
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awards for a period of approximately five years. Therefore, stockholder
approval of such business criteria will continue to meet the requirements of
Section 162(m) of the Code until 2005. Please note that stockholder approval
of the performance goals inherent in stock options and SARs is not subject to
a time limit under Section 162(m) of the Code.
In addition, stockholder approval will also allow the Committee to grant
stock options that can be designated as "incentive stock options," which
provides tax advantages to participants. (Please see "Federal Income Tax
Implications," which explains these tax advantages.)
Description of the Equity Incentive Plan
The following briefly describes the material features of the Equity
Incentive Plan, and is qualified, in its entirety, by reference to the full
text of the Equity Incentive Plan, a copy of which is attached to this Proxy
Statement as Exhibit A.
1. Shares Available and Award Limitations. The number of shares of Common
Stock reserved and available for the grant of Awards under the Equity
Incentive Plan will be 10,000,000 shares. This number compares to 4,500,000
shares available for grants of options under the 1999 Plan. In addition,
unlike the 1999 Plan, if the Company issues or delivers shares (other than
those shares issued or delivered pursuant to Awards under the Equity Incentive
Plan) during the ten year term of the Equity Incentive Plan, then each time
shares are issued or delivered, 10% of such newly issued or delivered shares
will become available for the grant of Awards under the Equity Incentive Plan.
Other than the Company's 1999 Plan and the proposed amended and restated
Equity Incentive Plan, the Company has no other plan in effect under which
options and stock-based Awards may be granted to employees. The number of
shares available under the Plan is subject to adjustment in the event of stock
splits, stock dividends, and other extraordinary events (discussed further
below).
For Awards of restricted stock and performance units and/or performance
shares, the Equity Incentive Plan limits the number of shares that may be
issued pursuant to these Awards to an aggregate of 10% of the shares,
respectively, reserved under the Equity Incentive Plan. For Awards of options
designated as "incentive stock options" (intended to meet the requirements of
Section 422 of the Code), the aggregate number of shares that may be subject
to such options shall not exceed the initial 10,000,000 shares reserved under
the Equity Incentive Plan. Shares available for Awards under the Equity
Incentive Plan may be either authorized and unissued shares or shares held in
or acquired for the Company's treasury.
In certain circumstances, shares subject to an outstanding Award may again
become available for issuance pursuant to other Awards available under the
Equity Incentive Plan. For example, shares subject to canceled, forfeited or
expired Awards or to Awards settled in cash or otherwise terminated without
issuance of shares to a participant, and shares withheld by or surrendered to
the Company to satisfy any tax withholding obligations or in payment of the
exercise price of an Award, will again become available for the grant of new
Awards under the Equity Incentive Plan. In addition, shares subject to an
Award granted in substitution for an award of a company or business acquired
by the Company or a subsidiary will not count against the number of shares
reserved and available. On June 20, 2000, the closing price of the Company's
Common Stock as listed on the NASDAQ was $13.375 per share.
In order to qualify Awards as "performance-based" compensation (as discussed
above), the Equity Incentive Plan also limits the number of shares subject to
Awards that may be granted to any one participant in any given fiscal year.
Under this individual limitation, the maximum aggregate number of shares that
may be granted pursuant to Awards is 1,500,000, subject to adjustment for
splits and other extraordinary corporate events. This limit includes the
number of shares that may be paid to a participant pursuant to the exercise or
settlement of an Award. In addition, the Equity Incentive Plan limits the
amount of cash that may be paid to an individual pursuant to an exercise or
settlement of an Award in any given fiscal year to a maximum aggregate payout
of $20,000,000.
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In the event of a recapitalization, stock split, stock dividend,
reorganization, business combination, or other similar corporate transaction
or event affecting the Common Stock, adjustments may be made to the number and
kind of shares available for issuance of Awards or subject to any outstanding
Awards.
2. Eligibility. Under both the 1999 Plan and the Equity Incentive Plan,
current and future employees (including officers), non-employee directors, and
consultants of the Company and its subsidiaries are eligible to participate in
and receive a grant or grants of an Award under the Equity Incentive Plan.
Individuals to whom the Company or a subsidiary has offered employment may
also be granted Awards, but such individuals may not receive any payment or
exercise any right relating to the Award until he or she has commenced
employment or the providing of services. Currently, approximately 130
individuals would be eligible to receive Awards under the Equity Incentive
Plan. Of this total, approximately 120 individuals are employees, 5
individuals are non-employee directors and 5 individuals are consultants.
3. Administration. The Equity Incentive Plan is administered by the
Compensation Committee (the "Committee") of the Board or another committee
appointed by the Board to administer the Equity Incentive Plan. (References
herein to the "Committee" mean the Committee or the full Board exercising
authority with respect to a given Award.) The Committee will consist of at
least two members who are non-employee directors within the meaning of the
Securities and Exchange Commission Rule 240.16b-3.
Subject to the terms and conditions of the Equity Incentive Plan, the
Committee has the authority to designate which eligible individuals will
receive Awards, to determine the type and number of Awards to be granted, to
decide the number of shares to subject to the Awards, to specify the time or
times at which Awards will be granted, exercisable or settled (including any
performance conditions to be satisfied in connection therewith), and to
provide any other terms, conditions or restrictions of such Awards. The
Committee also has the authority to interpret and establish rules and
regulations relating to the Equity Incentive Plan and any individual
agreements entered pursuant to the Equity Incentive Plan, and make all other
determinations that may be necessary or advisable for administration of the
Equity Incentive Plan. When interpreting the terms and provisions of the
Equity Incentive Plan, the decisions of the Committee are final and binding
upon all interested individuals. Nothing in the Equity Incentive Plan prevents
the Committee from authorizing payment of other compensation, including
bonuses based upon performance, to officers and employees, including the
executive officers.
4. Stock Options and SARs. As discussed above, under the 1999 Plan the
Committee was only authorized to grant stock options to eligible participants.
Under the Equity Incentive Plan, the Committee is authorized to grant both
stock options and SARs. Stock options may be either designated as non-
qualified stock options or incentive stock options, which are intended to meet
the requirements of Section 422 of the Code such that a participant can
receive potentially favorable tax treatment. SARs may be granted either alone
or in tandem with a stock option, and entitle the participant to receive the
excess of the fair market value of a share on the exercise date (or other
specified date) over the grant price of the SAR. The Committee has discretion
to determine the terms and conditions of each stock option and SAR granted
under the Equity Incentive Plan, including the grant date, option price or
payment amount of an SAR, the term of each option or SAR, exercise conditions
and restrictions, conditions of forfeitures, and any other terms, conditions
and restrictions consistent with the terms of the Equity Incentive Plan, all
of which will be evidenced in an individual Award agreement between the
participant and the Company. Generally, the terms of an option or SAR will
provide for post-employment exercise for specified period of time, determined
by the Committee. If not otherwise specified by the Committee, the Equity
Incentive Plan provides that options will become immediately exercisable and
remain exercisable for one year (or the remainder of their term, if shorter)
upon a participant's termination due to death, disability or retirement. This
post-termination exercise period differs from the 1999 Plan, where options not
otherwise exercisable expired upon termination by reason of death, disability
or retirement and the exercisable portion of an option remained exercisable
for one year in the case of death or disability and three months in the case
of retirement.
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Certain limitations apply to incentive stock options and SARs granted in
tandem with incentive stock options. These limitations include a maximum term
of ten years (5 years for 10% owners of the Company, as determined under the
Code), a minimum exercise price of fair market value of a share as of the date
of grant (110% of the fair market value of a share for 10% owners), and
restrictions on transferability of the incentive stock option or SAR.
Payment for shares purchased pursuant to an option under the Equity
Incentive Plan may be made in cash, shares, through broker-assisted cashless
exercise procedures, or by surrender of other outstanding Awards having a fair
market value equal to the exercise price. In contrast, under the 1999 Plan,
payment was allowed only in cash or shares.
5. Restricted Stock. Under the Equity Incentive Plan, the Committee also
would be authorized to make Awards of restricted stock, which entitles the
participant to all of the rights of a stockholder of the Company, including
the right to vote the shares and the right to receive any dividends, unless
otherwise determined by the Committee. Prior to the end of a "restricted
period," shares received as restricted stock may not be sold, transferred or
otherwise disposed of by participants, and may be forfeited in the event of
termination of employment. The Committee will generally establish the
restricted period, but if no restricted period is provided, it will be three
years for restrictions lapsing due to time or one year for restrictions
lapsing due to the achievement of performance goals. Whether a participant
will have rights to receive unvested shares of restricted stock following
termination of employment is determined by the Committee, in its discretion,
and will be provided for in the individual agreement covering the grant of the
award. If the Committee does not provide for such contingencies, then if the
participant's employment terminates due to death, disability or retirement,
all restrictions will lapse and the shares will become fully vested. If the
participant's employment terminates for any other reason, the participant will
forfeit any unvested shares of restricted stock.
6. Performance-Based Awards. The expanded Equity Incentive Plan would allow
the Committee to grant performance-based Awards, which may be either
performance units (having an initial value determined by the Committee) or
performance shares (having a value equal to the fair market value of the
shares on the grant date). The Equity Incentive Plan also authorizes the
Committee to grant performance-based Awards to named executives that meet the
requirements of Section 162(m) of the Code, which will then allow the Company
to fully deduct the amount of the performance-based Award. Generally,
performance-based Awards require a participant to satisfy pre-established
performance goals over a performance period, established by the Committee. The
performance goals may consist of one or more business criteria and achievement
of targeted performance levels based on such criteria may be a condition of
the grant of the Awards, their exercisability or settlement of such Awards
under the Equity Incentive Plan. Upon satisfaction of the performance goals at
the end of the performance period, a participant will receive a payout in
either cash or shares, as determined by the Committee, equal to the aggregate
value of the performance units and/or shares at the end of the performance
period. Unless the Committee determines otherwise, if the participant's
employment or other service with the Company terminates due to death,
disability or retirement during the performance period, the participant will
receive a prorated payout of the value of the performance units and/or shares.
If the participant's employment terminates for any other reason, he or she
will forfeit any and all rights to receive a payout pursuant to the Award.
The business criteria to be used by the Committee in establishing
performance goals applicable to those performance-based Awards to named
executives will be selected from among the following performance measurements:
revenue; primary or fully-diluted earnings per share; earnings before
interest, taxes, depreciation, and/or amortization; pretax income; cash flow
from operations; total cash flow; return on equity; return on capital; return
on assets; net operating profits after taxes; economic value added; total
stockholder return or return on sales; or any individual performance objective
which is measured solely in terms of quantitative targets related to the
Company or the Company's business; or any combination thereof. In addition,
such performance goals may be based in whole or in part upon the performance
of the Company, a subsidiary, division and/or other operational unit under one
or more of such measures. The Committee is also authorized to adjust, in its
discretion, the targeted performance levels or in response to changes in
applicable laws, regulations, or
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accounting principles, except that adjustments to Awards intended to qualify
as "performance-based" generally must conform to requirements under Section
162(m) of the Code, and may not increase the payment under the Award.
7. Other Terms of Awards. Unlike the 1999 Plan, under the Equity Incentive
Plan the Committee may permit participants to defer receipt of cash payable
upon the settlement of all or part of an Award or delivery of shares issuable
pursuant to the exercise of the Award upon such rules and procedures as the
Committee may establish. Under both the 1999 Plan and the Equity Incentive
Plan, the Committee may satisfy any tax withholding obligations by deducting a
sufficient amount from payments to be made to a participant, requiring a
participant to remit an amount sufficient to fulfill the obligations, or
withholding shares otherwise issuable upon exercise or settlement of Awards.
Generally, Awards granted under the Equity Incentive Plan may not be
transferred, pledged, disposed, or otherwise encumbered except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
participant's death. However, under the modifications to the Equity Incentive
Plan, where not prohibited by the Code or other applicable law, the Committee
may permit transfers of Awards upon certain conditions.
8. Change of Control. Unless a participant's Award agreement provides
otherwise, under the Equity Incentive Plan if there is a change in control
(defined below) of the Company, outstanding Awards will immediately vest and
be fully exercisable, any restrictions, deferral of settlement and forfeiture
conditions of such Awards will lapse, and goals relating to performance-based
Awards will be deemed met or exceeded to the extent specified in the
performance-based Award agreements. For purposes of the Equity Incentive Plan,
a change in control means (A) the Company is merged, consolidated or
reorganized into or with another corporation or other legal person (an
"Acquiror") and as a result of such merger, consolidation or reorganization,
less than 51% of the outstanding voting securities or other capital interests
of the surviving, resulting or acquiring corporation or other legal person are
owned in the aggregate by the stockholders of the Company, directly or
indirectly, immediately prior to such merger, consolidation or reorganization,
other than by the Acquiror or any corporation or other legal person
controlling, controlled by or under common control with the Acquiror; (B) the
Company sells all or substantially all of its business and/or assets to an
Acquiror, of which less than 51% of the outstanding voting securities or other
capital interests are owned in the aggregate by the stockholders of the
Company, directly or indirectly, immediately prior to such sale, other than by
any corporation or other legal person controlling, controlled by or under
common control with the Acquiror; (C) there is a report filed on Schedule 13D
or Schedule 14D (or any successor schedule form or report), each as
promulgated pursuant to the Exchange Act, disclosing that any person or group
(as the terms "person" and "group" are used in Section 13(d) or Section 14(d)
of the Exchange Act and the rules and regulations promulgated thereunder) has
become the beneficial owner (as the term "beneficial owner" is defined under
Rule l3d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 20% or more of the issued and outstanding shares of voting securities
of Company; (D) during any period of two consecutive years, the "Continuing
Directors" cease to constitute at least a majority of the Board; or (E) any
other event that the Board determines shall constitute a Change in Control for
purposes of the Equity Incentive Plan. For purposes of the foregoing,
Continuing Directors means, during any two year period, the directors still in
office who either were directors at the beginning of the two year period or
who were directors elected to the Board and whose election or nomination was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the two year period or whose
election to the Board was previously so approved.
The Board and the Continuing Directors may determine that an event that
otherwise would constitute a change in control will not result in accelerated
vesting and exercisability of Awards or other enhancements of rights under the
Equity Incentive Plan. In such circumstances, steps must be taken so that the
Award or Awards remains outstanding, with appropriate adjustments, after any
merger or other transaction is completed, that the value of the Award is not
materially impaired, and that a participant will be entitled to enhanced
rights under the Award if he or she later is terminated other than for cause
or terminates for good reason within two years after the event.
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9. Forfeitures of Awards and Rights of Setoff. The provisions described in
this Section 9 are new to the Equity Incentive Plan. Unless the Committee
determines otherwise, a participant's violation of certain restrictive
covenants will trigger forfeiture of any unexercised option (whether or not
vested) or other Award that is not settled and will impose upon the
participant an obligation to repay to the Company the amount of any gain
realized upon the exercise of an option or settlement of other Award that
occurs within six months prior to the violation of the restrictive covenants.
The covenants relate to restrictions on the participant's ability to compete
with the Company or solicit its customers or employees, and to the
participant's duty to keep information about the Company confidential. With
respect to options, the gain will equal the difference between the option
price and the fair market value of a share on the date of exercise times the
number of shares purchased pursuant to the option as of such date. With
respect to any other Award, the gain will equal the cash and/or the fair
market value of the shares paid or payable to the participant minus any cash
and/or the fair market value of any shares paid by the participant to the
Company as a condition of or in connection with such settlement (other than an
award that would have itself then been forfeitable and excluding any tax
withholding payments). The Committee, in its discretion, may waive, in whole
or in part, the Company's right to forfeiture and repayment of any Award gain.
In addition, any amounts payable or shares issuable pursuant to Awards
granted under the Equity Incentive Plan to a participant may be offset (or
reduced) by any amount the participant may owe to the Company.
10. Amendment and Termination of the Equity Incentive Plan. The Board may
amend, suspend or terminate the Equity Incentive Plan or the Committee's
authority to grant Awards thereunder, without stockholder approval unless
stockholder approval is required by law, regulation, or stock exchange rule.
The Board may, in its discretion, submit other amendments to stockholders for
approval, such as an amendment to increase the number of shares authorized for
issuance pursuant to Awards under the Equity Incentive Plan. Under amendment
provisions of the Equity Incentive Plan, stockholder approval will not
necessarily be required for amendments that might increase the cost of the
Equity Incentive Plan or broaden eligibility. Unless terminated earlier, the
Equity Incentive Plan will terminate at such time that all shares subject to
Awards have been issued or purchased, or ten years from the date of adoption
by the Board.
Because future Awards under the Equity Incentive Plan will be granted in the
discretion of the Committee, the type, number, recipients, and other terms of
such Awards cannot be determined at this time. Information regarding the
Company's recent practices with respect to annual, long-term, and stock-based
compensation under other plans and stock options under such Plans is presented
above in the Proxy Statement. See "Summary Compensation" on page 9, and in
note 5 to the Company's financial statements for the year ended December 31,
1999, in the Annual Report that accompanies this Proxy Statement.
Federal Income Tax Implications
The following generally describes the federal income tax implications
associated with the with Awards granted under the Equity Incentive Plan.
1. Options and SARs. There are three points in time when a participant and
the Company could potentially incur federal income tax consequences: date of
grant, upon exercise, and upon disposition. First, when an option (including a
stock-based Award in the nature of a purchase right) or an SAR is granted to a
participant, the participant does not recognize any income for federal income
tax purposes on the date of grant. The Company similarly does not have any
federal income tax consequences at the date of grant. Second, depending upon
the type of option, the exercise of an option may or may not result in the
recognition of income for federal income tax purposes. With respect to an
incentive stock option, a participant will not recognize any ordinary income
upon the option's exercise (except that the alternative minimum tax may
apply). However, a participant will generally recognize ordinary income upon
the exercise of a non-qualified stock option. In this case, the participant
will recognize income equal to the difference between the option price and the
fair market value of shares purchased pursuant to the option on the date of
exercise. With respect to the exercise of an SAR, the participant must
generally recognize ordinary income equal to the cash received.
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Incentive stock options are subject to certain holding requirements before a
participant can dispose of the shares purchased pursuant to the exercise of
the option and receive capital gains treatment on any income realized from the
exercise of the option. Satisfaction of the holding periods determines the tax
treatment of any income realized upon exercise. If a participant disposes of
shares acquired upon exercise of an incentive stock option before the end of
the applicable holding periods, the participant must generally recognize
ordinary income equal to the lesser of (i) the fair market value of the shares
at the date of exercise of the incentive stock option minus the exercise price
or (ii) the amount realized upon the disposition of the shares minus the
exercise price. Any excess of the fair market value on the date of such
disposition over the fair market value on the date of exercise must be
recognized as capital gains by the participant. If a participant disposes
shares acquired upon the exercise of an incentive stock option after the
applicable holding periods have expired, such disposition generally will
result in short-term or long-term capital gain or loss measured by the
difference between the sale price and the participant's tax "basis" in such
shares (generally, in such case, the tax "basis" is the exercise price).
Generally, the Company will be entitled to a tax deduction in an amount
equal to the amount recognized as ordinary income by the participant in
connection with the exercise of options and SARs. However, the Company is
generally not entitled to a tax deduction relating to amounts that represent a
capital gains to a participant. Accordingly, if the participant satisfies the
requisite holding period prior to disposition to receive the favorable tax
treatment accorded incentive stock options, the Company will not be entitled
to any tax deduction with respect to an incentive stock option. In the event
the participant has a disqualifying disposition, the Company will be entitled
to a tax deduction in an amount equal to the amount that the participant
recognized as ordinary income.
2. Other Awards. With respect to other Awards granted under the Equity
Incentive Plan that result in a transfer to the participant of cash or shares
or other property and that does not contain any restrictions as to their
transferability and are not subject to a substantial risk of forfeiture, the
participant must generally recognize ordinary income equal to the cash or the
fair market value of shares or other property actually received. Except as
discussed below, the Company generally will be entitled to a deduction for the
same amount. With respect to Awards involving shares or other property that
contain restrictions as to their transferability and are subject to a
substantial risk of forfeiture, the participant must generally recognize
ordinary income equal to the fair market value of the shares or other property
received at the time the shares or other property become transferable or are
no longer subject to a substantial risk of forfeiture, whichever occurs first.
Except as discussed below, the Company generally will be entitled to a
deduction in an amount equal to the ordinary income recognized by the
participant. A participant may elect to be taxed at the time of he or she
receives shares (e.g., restricted stock) or other property rather than upon
the lapse of transferability restrictions or the substantial risk of
forfeiture. However, if the participant subsequently forfeits such shares or
property he or she would not be entitled to any tax deduction, including a
capital loss, for the value of the shares or property on which he or she
previously paid tax.
3. Deductibility for Performance-Based Compensation. As discussed above,
compensation that qualifies as "performance-based" compensation is excluded
from the $1 million deductibility cap of Section 162(m) of the Code, and
therefore remains fully deductible by the company that pays it. Under the
Equity Incentive Plan, options granted with an exercise price or grant price
at least equal to 100% of fair market value of the underlying shares at the
date of grant will be, and Awards which are conditioned upon achievement of
performance goals may be, intended to qualify as such "performance-based"
compensation. A number of requirements must be met, however, in order for
particular compensation to so qualify. Accordingly, there can be no assurance
that such compensation under the Equity Incentive Plan will be fully
deductible under all circumstances. In addition, other Awards under the Equity
Incentive Plan generally will not so qualify, so that compensation paid to
certain executives in connection with such Awards may, to the extent it and
other compensation subject to Section 162(m)'s deductibility cap exceed $1
million in a given year, be subject to the limitation of Section 162(m).
The foregoing discussion provides only a general description of the
application of federal income tax laws to certain types of Awards under the
Equity Incentive Plan. This discussion is intended for the information of
20
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stockholders considering how to vote at the Annual Meeting and not as tax
guidance to participants in the Equity Incentive Plan, as the consequences may
vary with the types of Awards granted, the identity of the recipients and the
method of payment or settlement. Different tax rules may apply, including in
the case of variations in transactions that are permitted under the Equity
Incentive Plan (such as payment of the exercise price of an option by
surrender of previously acquired shares). The summary does not address the
effects of other federal taxes (including possible "golden parachute" excise
taxes) or taxes imposed under state, local, or foreign tax laws.
The affirmative vote of a majority of the shares voted affirmatively or
negatively at the Meeting is required to approve the amendment and restatement
of the 1999 Plan.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE AMENDMENT AND RESTATEMENT
OF THE 1999 PLAN TO EXPAND THE COMPANY'S ABILITY TO GRANT PERFORMANCE AND NON-
PERFORMANCE BASED EQUITY AWARDS, INCLUDING RESTRICTED STOCK, PERFORMANCE
AWARDS, STOCK APPRECIATION RIGHTS AND OTHER TYPES OF AWARDS BASED ON THE
COMPANY'S COMMON STOCK AND TO INCREASE BY 5,500,000 SHARES THE AGGREGATE
NUMBER OF SHARES FOR WHICH STOCK OPTIONS MAY BE GRANTED UNDER THE 1999 PLAN,
AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF SUCH AMENDMENT
UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
PROPOSAL 3
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP, independent public
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 2000. The Board proposes that the Stockholders ratify
this appointment, although such ratification is not required under Delaware
law or the Company's Certificate of Incorporation or By-Laws. Arthur Andersen
LLP audited the Company's financial statements for Fiscal 1999. The Company
expects that representatives of Arthur Andersen LLP will be present at the
Meeting, with the opportunity to make a statement if they so desire, and will
be available to respond to appropriate questions.
The affirmative vote of a majority of the shares voted affirmatively or
negatively at the Meeting is required to ratify the appointment of the
independent public accountants.
In the event that ratification of the appointment of Arthur Andersen LLP as
the independent public accountants for the Company is not obtained at the
Meeting, the Board of Directors will reconsider its appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS, AND
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
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APPRAISAL RIGHTS
Under Delaware law, no appraisal rights are available to dissenting
stockholders in regard to any of the Proposals.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented to
the Meeting. If any other business is properly brought before the Meeting, it
is intended that proxies in the enclosed form will be voted in respect thereof
in accordance with the judgment of the persons voting the proxies.
STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for inclusion in the
Company's proxy statement and form of proxy relating to the 2001 Annual
Meeting of Stockholders, in addition to meeting the requirements of the SEC's
rules governing such proposals, the proposal must be received by the Company
at its principal executive offices not later than February 27, 2001. In the
event the Company receives notice not later than May 13, 2001 of a stockholder
proposal intended to be presented at the 2001 Annual Meeting of Stockholders
and which is not included in the Company's proxy materials, then so long as
the Company includes in its proxy statement for such Annual Meeting advice on
the nature and matter and how the named proxyholders intend to vote the shares
for which they have received discretionary authority, such proxyholders may
exercise discretionary authority with respect to such proposal, except to the
extent limited by the SEC's rules governing stockholder proposals.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE URGED TO
FILL OUT, SIGN, DATE AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE.
By order of the Board of Directors:
/s/ Roy (Trey) D. Farmer III
Roy (Trey) D. Farmer III
Secretary
June 27, 2000
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FIBERNET TELECOM GROUP, INC.
EQUITY INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
SECTION 1. ESTABLISHMENT, OBJECTIVES, AND DURATION........................ 2
1.1 Establishment of the Plan........................................... 2
1.2 Purpose of the Plan................................................. 2
1.3 Duration of the Plan................................................ 2
SECTION 2. DEFINITIONS.................................................... 2
SECTION 3. ADMINISTRATION................................................. 5
3.1 Plan Administrator.................................................. 5
3.2 Authority of the Administrator...................................... 6
3.3 Decisions Binding................................................... 6
SECTION 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS.................. 6
4.1 Shares Available for Awards......................................... 6
4.2 Individual Participant Limitations.................................. 7
4.3 Adjustments in Authorized Shares.................................... 7
SECTION 5. ELIGIBILITY AND PARTICIPATION.................................. 7
5.1 Eligibility......................................................... 7
5.2 Participation....................................................... 7
SECTION 6. STOCK OPTIONS.................................................. 7
6.1 Grant of Options and Award Agreement................................ 7
6.2 Option Price........................................................ 8
6.3 Term of Options..................................................... 8
6.4 Exercise of Options................................................. 8
6.5 Payment............................................................. 8
6.6 Termination of Employment, Service as a Director, or Consulting
Arrangement......................................................... 9
6.7 Restrictions on Share Transferability............................... 9
6.8 Nontransferability of Options....................................... 10
6.9 Prior Option Grants................................................. 10
SECTION 7. STOCK APPRECIATION RIGHTS...................................... 10
7.1 Grant of SARs and Award Agreement................................... 10
7.2 Term of SARs........................................................ 10
7.3 Exercise of Tandem SARs............................................. 10
7.4 Exercise of Non-Tandem SARs......................................... 11
7.5 Payment of SAR Amount............................................... 11
7.6 Termination of Employment, Service as a Director, or Consulting
Arrangement......................................................... 11
7.7 Nontransferability of SARs.......................................... 11
SECTION 8. RESTRICTED STOCK............................................... 11
8.1 Grant of Restricted Stock and Award Agreement....................... 11
8.2 Transferability..................................................... 12
8.3 Other Restrictions.................................................. 12
8.4 Voting Rights....................................................... 12
8.5 Dividends and Other Distributions................................... 12
8.6 Termination of Employment, Service as a Director, or Consulting
Arrangement......................................................... 12
SECTION 9. PERFORMANCE UNITS AND PERFORMANCE SHARES....................... 13
9.1 Grant of Performance Units/Shares and Award Agreement............... 13
9.2 Value of Performance Units/Shares................................... 13
9.3 Earning of Performance Units/Shares................................. 13
</TABLE>
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<TABLE>
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9.4 Form and Timing of Payment of Performance Units/Shares............. 13
9.5 Termination of Employment, Service as a Director, or Consulting
Arrangement........................................................ 14
9.6 Nontransferability................................................. 14
SECTION 10. PERFORMANCE MEASURES.......................................... 14
SECTION 11. AWARD FORFEITURES............................................. 15
11.1 Forfeiture of Options and Other Awards and Gains Realized Upon
Prior Option Exercises or Award Settlements........................ 15
11.2 Events Triggering Forfeiture....................................... 16
11.3 Agreement Does Not Prohibit Competition or Other Participant
Activities......................................................... 17
11.4 Administrator Discretion........................................... 17
SECTION 12. BENEFICIARY DESIGNATION....................................... 17
SECTION 13. DEFERRALS..................................................... 17
SECTION 14. RIGHTS AND OBLIGATIONS OF PARTIES............................. 17
14.1 No Guarantee of Employment or Service Rights....................... 17
14.2 Participation...................................................... 18
14.3 Right of Setoff.................................................... 18
14.4 Section 83(b) Election............................................. 18
14.5 Disqualifying Disposition Notification............................. 18
SECTION 15. CHANGE OF CONTROL............................................. 18
SECTION 16. AMENDMENT, MODIFICATION, AND TERMINATION...................... 19
16.1 Amendment, Modification, and Termination........................... 19
16.2 Awards Previously Granted.......................................... 19
SECTION 17. WITHHOLDING................................................... 20
17.1 Tax Withholding.................................................... 20
17.2 Share Withholding.................................................. 20
SECTION 18. SUCCESSORS.................................................... 20
SECTION 19. MISCELLANEOUS................................................. 20
19.1 Unfunded Plan...................................................... 20
19.2 Forfeitures; Fractional Shares..................................... 20
19.3 Compliance with Code Section 162(m)................................ 20
19.4 Gender and Number.................................................. 21
19.5 Severability....................................................... 21
19.6 Requirements of Law................................................ 21
19.7 Securities Law Compliance.......................................... 21
19.8 Governing Law...................................................... 21
</TABLE>
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FIBERNET TELECOM GROUP, INC.
EQUITY INCENTIVE PLAN
PREAMBLE
The FiberNet Telecom Group, Inc. Equity Incentive Plan, as set forth herein,
amends and restates the FiberNet Telecom Group, Inc. 1999 Stock Option Plan,
as amended. The Plan is intended to incorporate the provisions of the 1999
Stock Option Plan and permit FiberNet Telecom Group, Inc., a Delaware
corporation (the "Company"), to provide additional forms of equity based
incentives in order to attract and retain highly motivated employees and to
provide them with opportunities to acquire a proprietary interest in the
Company.
SECTION 1.
Establishment, Objectives, and Duration
1.1 Establishment of the Plan. The Company hereby amends and restates the
FiberNet Telecom Group, Inc. 1999 Stock Option Plan and renames it the
FiberNet Telecom Group, Inc. Equity Incentive Plan, as set forth herein.
Subject to approval by the Company's stockholders, the Plan shall become
effective as of May 23, 2000 (the "Effective Date") and shall remain in effect
as provided below in Section 1.3.
1.2 Purpose of the Plan. The purpose of the Plan is to benefit the Company
and its subsidiaries and affiliated companies by enabling the Company to offer
to certain present and future employees, directors and consultants stock based
incentives and other equity interests in the Company, thereby giving them a
stake in the growth and prosperity of the Company and encouraging the
continuance of their services with the Company or subsidiaries or affiliated
companies.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date and
shall remain in effect, subject to the right of the Board of Directors to
amend or terminate the Plan at any time pursuant to Section 16 hereof, until
all Shares subject to it shall have been purchased or acquired according to
the Plan's provisions. However, in no event may an Award (defined below in
Section 2) be granted under the Plan on or after May 22, 2010.
SECTION 2.
Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
"Administrator" means the Board or the Compensation Committee of the Board,
as described below in Section 3.
"Award" means, individually or collectively, a grant under the Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares or Performance Units.
"Award Agreement" means a written agreement between the Company and each
Participant that sets forth the terms and provisions applicable to an Award or
Awards granted to each Participant under the Plan, and is a condition to the
grant of an Award or Award hereunder.
"Board" means the Board of Directors of the Company.
"Cause" means, as determined by the Administrator, in its sole discretion,
termination of the Participant's employment, service as a Director, or
consulting arrangement with the Company or any Subsidiary because of:
(a) In the case where there is no employment, change in control or
similar agreement in effect between the Participant and the Company or a
Subsidiary, or where there is such an agreement, but a termination for
2
<PAGE>
"cause" would not be permitted under such agreement at that time or the
agreement does not define "cause" (or similar words),
(i) the Participant's dishonesty, theft or conviction of any crime or
offense involving money or property of the Company or any Subsidiary,
(ii) the Participant's gross negligence, gross incompetence, or
willful misconduct in the performance of his or her duties,
(iii) the Participant's willful and continued failure or refusal to
perform his or her duties (other than any such failure resulting from
the Participant's Disability), or
(iv) such other act or omission as determined in the Administrator's
sole discretion.
(b) In the case where there is an employment, change in control or
similar agreement in effect between the Participant and the Company or a
Subsidiary that defines "cause" (or similar words), and a termination for
"cause" would be permitted under such agreement at that time, such
termination of employment, service as a Director, or consulting arrangement
is or would be deemed to be for "cause" as defined in such agreement.
"Change of Control" of the Company shall mean:
(a) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person (an "Acquiror") and as a result
of such merger, consolidation or reorganization, less than 51% of the
outstanding voting securities or other capital interests of the surviving,
resulting or acquiring corporation or other legal person are owned in the
aggregate by the stockholders of the Company, directly or indirectly,
immediately prior to such merger, consolidation or reorganization, other
than by the Acquiror or any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(b) The Company sells all or substantially all of its business and/or
assets to an Acquiror, of which less than 51% of the outstanding voting
securities or other capital interests are owned in the aggregate by the
stockholders of the Company, directly or indirectly, immediately prior to
such sale, other than by any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(c) There is a report filed on Schedule 13D or Schedule 14D (or any
successor schedule form or report), each as promulgated pursuant to the
Exchange Act, disclosing that any person or group (as the terms "person"
and "group" are used in Section 13(d) or Section 14(d) of the Exchange Act
and the rules and regulations promulgated thereunder) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule l3d-
3 or any successor rule or regulation promulgated under the Exchange Act)
of 20% or more of the issued and outstanding shares of voting securities of
Company;
(d) During any period of two consecutive years, the Continuing Directors
cease to constitute at least a majority of the Board; or
(e) Any other event that the Board determines shall constitute a Change
in Control for purposes of the Plan.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation thereto.
"Company" means FiberNet Telecom Group, Inc., a Delaware corporation, as
well as any successor to such entity as provided in Section 18 herein.
"Continuing Directors" means, during any two year period, the Directors
still in office who either were Directors at the beginning of the two year
period or who were Directors elected to the Board and whose election or
nomination was approved by a vote of at least two-thirds of the Directors then
still in office who were Directors at the beginning of the two year period or
whose election to the Board was previously so approved.
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"Director" means any individual who is a member of the Board.
"Disability" means, unless otherwise provided for in an employment, change
of control or similar agreement in effect between the Participant and the
Company or a Subsidiary, the inability of an Employee, Director or consultant
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death, or which has lasted or can be expected to last for a continuous period
of not less than 12 months, as determined by the Administrator, based upon
medical evidence.
"Effective Date" means May 23, 2000, the effective date of this amended and
restated Plan.
"Employee" means any employee of the Company or any Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor act thereto.
"Fair Market Value" means (i) for purposes of establishing any Option Price
as of the date of the Award, unless otherwise required by any applicable
provision of the Code or any regulations issued thereunder, or unless the
Administrator otherwise determines, the closing sales price for the Shares, if
applicable, or the average of the last bid and ask prices of the Shares on or
before 4:00 p.m. eastern time (as reported by Bloomberg, L.P.); and (ii) for
purposes of the valuation of any Shares delivered in payment of the Option
Price upon the exercise of an Option, for purposes of the valuation of any
Shares withheld in payment of the Option Price or to pay taxes due on an
Award, or for purposes of the exercise of any SAR or conversion of a
Performance Unit, unless the Administrator otherwise determines, the closing
sales price for the Shares, if applicable, or the average of the last bid and
ask prices of the Shares on or before 4:00 p.m. eastern time (as reported by
Bloomberg, L.P.) on the date of exercise (or if the date of exercise is not a
trading day, on the trading day next preceding the date of exercise).
"Good Reason" shall mean, with respect to the termination of a Participant's
employment, service as a Director or consulting arrangement,
(a) In the case where there is no employment, change in control or
similar agreement in effect between the Participant and the Company or a
Subsidiary, or where there is such an agreement but the agreement does not
define "good reason" (or similar words) or a "good reason" termination
would not be permitted under such agreement at that time because other
conditions were not satisfied, a voluntary termination of an employment
arrangement, service as a Director or consulting arrangement due to "good
reason" as the Administrator, in its sole discretion, decides to treat as
"Good Reason" termination; or
(b) In the case where there is an employment, change in control or
similar agreement in effect between the Participant and the Company or a
Subsidiary that defines "good reason" (or similar words) and a "good
reason" termination would be permitted under such agreement at that time,
such termination is or would be deemed to be for "good reason" (or similar
words) as defined in such agreement.
"Incentive Stock Option" or "ISO" means an option to purchase Shares that is
intended to meet the requirements of Code Section 422, as described in Section
6 herein.
"Insider" shall mean an individual who is, on the relevant date, an officer,
Director or more than ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
"Named Executive Officer" means a Participant who is one of the group of
covered employees as defined in the regulations promulgated under Code Section
162(m), or any successor statute.
"Nonqualified Stock Option" or "NQSO" means an option to purchase Shares
granted under Section 6 herein and which is not intended to meet the
requirements of Code Section 422.
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"Option" means an Incentive Stock Option or a Nonqualified Stock Option, as
described in Section 6 herein.
"Option Price" means the per share purchase price of a Share purchased
pursuant to an Option.
"Participant" means an Employee, prospective Employee, Director or
consultant who has outstanding an Award granted under the Plan.
"Performance-Based Exception" means the exception for performance-based
compensation from the tax deductibility limitations of Code Section 162(m).
"Performance Period" means the time period during which performance goals
must be achieved with respect to an Award, as determined by the Administrator.
"Performance Share" means an Award granted to a Participant, as described in
Section 9 herein.
"Performance Unit" means an Award granted to a Participant, as described in
Section 9 herein.
"Period of Restriction" means the period during which the transfer of Shares
of Restricted Stock is limited in some way, and the Shares are subject to a
substantial risk of forfeiture, as provided in Section 8 herein.
"Plan" means the FiberNet Telecom Group, Inc. Equity Incentive Plan, an
amendment and restatement of the Company's 1999 Stock Option Plan, as set
forth herein.
"Restricted Stock" means an Award granted to a Participant pursuant to
Section 8 herein.
"Retirement" means the Participant's termination of employment with the
Company or its Subsidiaries on or after the date on which the Participant
reaches age 55 if he or she has at least ten years of service with the
Company, or reaches age 65 regardless of his or her years of service.
Notwithstanding the foregoing, the Administrator may, in its sole discretion,
determine that a Participant has met the criteria for a Retirement termination
from the Company.
"Share" or "Shares" means shares of common stock of the Company, par value
$.001.
"Stock Appreciation Right" or "SAR" means an Award, granted alone or in
connection with a related Option, designated as an SAR, pursuant to the terms
of Section 7 herein.
"Subsidiary" means any corporation, partnership, joint venture, affiliate,
or other entity in which the Company is at least a majority-owner of all
issued and outstanding equity interests or has a controlling interest.
"Tandem SAR" means an SAR that is granted in connection with a related
Option pursuant to Section 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when
a Share is purchased under the Option, the Tandem SAR shall similarly be
forfeited).
"Non-Tandem SAR" means an SAR that is granted independently of any Options,
as described in Section 7 herein.
SECTION 3.
Administration
3.1 Plan Administrator. The Administrator of the Plan shall be the
Compensation Committee of the Board, or any other committee appointed by the
Board. The Compensation Committee or other committee appointed to administer
the Plan shall consist of not less than two (2) non-Employee Directors of the
Company,
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within the meaning of Rule 16b-3 of the Exchange Act. The Board may, from time
to time, remove members from, or add members to, the Compensation Committee.
Any vacancies on the Compensation Committee shall be filled by members of the
Board. The foregoing notwithstanding, the Board shall perform the functions of
the Administrator for purposes of granting Awards to non-Employee Directors.
However, the Board shall not have exclusive authority with respect to other
aspects of non-Employee Director Awards.
If and to the extent that no committee exists that has the authority to
administer the Plan, the Board shall administer the Plan. Acts of a majority
of the Administrator at which a quorom is present, or acts reduced to or
approved in writing by unanimous consent of the members of the Administrator,
shall be valid acts of the Administrator.
3.2 Authority of the Administrator. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Administrator shall have full power to select
Employees, Directors, and consultants who shall participate in the Plan;
determine the sizes and types of Awards; determine the terms and conditions of
Awards in a manner consistent with the Plan; construe and interpret the Plan
and any agreement or instrument entered into under the Plan; establish, amend,
or waive rules and regulations for the Plan's administration; and (subject to
the provisions of Section 16 herein) amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the sole
discretion of the Administrator as provided in the Plan. Further, the
Administrator shall make all other determinations, which may be necessary or
advisable for the administration of the Plan. As permitted by law, the
Administrator may delegate the authority granted to it herein.
3.3 Decisions Binding. All determinations and decisions made by the
Administrator pursuant to the provisions of the Plan and all related orders
and resolutions of the Board shall be final, conclusive and binding on all
persons, including the Company, its stockholders, Employees, Participants, and
their estates and beneficiaries.
SECTION 4.
Shares Subject to the Plan and Maximum Awards
4.1 Shares Available for Awards.
(a) The Shares available for Awards may be either authorized and unissued
Shares or Shares held in or acquired for the treasury of the Company. The
aggregate number of Shares that may be issued or used for reference
purposes under the Plan or with respect to which Awards may be granted
shall not exceed (i) 10,000,000 Shares (subject to adjustment as provided
in Section 4.3); plus (ii) 10% of the number of Shares issued or delivered
by the Company during the term of the Plan other than issuances or
deliveries under the Plan or other incentive compensation plan of the
Company; provided, however, that the aggregate number of Shares with
respect to which ISOs may be granted shall not exceed the number specified
under item (i) above, and provided further, that up to an aggregate of 10%
of the authorized Shares under the Plan may be issued with respect to
Awards of Restricted Stock and up to an aggregate of 10% of the authorized
Shares under the Plan may be issued with respect to Awards of Performance
Units and/or Performance Shares.
(b) Upon:
(i) a payout of a Non-Tandem SAR, Tandem SAR, or Restricted Stock
award in the form of cash;
(ii) a cancellation, termination, expiration, forfeiture, or lapse
for any reason (with the exception of the termination of a Tandem SAR
upon exercise of the related Options, or the termination of a related
Option upon exercise of the corresponding Tandem SAR) of any Award; or
(iii) payment of an Option Price and/or payment of any taxes arising
upon exercise of an Option or payout of any Award with previously
acquired Shares or by withholding Shares which otherwise would be
acquired on exercise or issued upon such payout,
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the number of Shares underlying any such Award that were not issued as a
result of any of the foregoing actions shall again be available for the
purposes of Awards under the Plan. In addition, in the case of any Award
granted in substitution for an award of a company or business acquired by
the Company or a Subsidiary, Shares issued or issuable in connection with
such substitute Award shall not be counted against the number of Shares
reserved under the Plan, but shall be available under the Plan by virtue of
the Company's assumption of the plan or arrangement of the acquired company
or business.
4.2 Individual Participant Limitations. Unless and until the Administrator
determines that an Award to a Named Executive Officer shall not be designed to
comply with the Performance-Based Exception, the following rules shall apply
to grants of such Awards under the Plan:
(a) Subject to adjustment as provided in Section 4.3 herein, the maximum
aggregate number of Shares (including Options, SARs, Restricted Stock,
Performance Units and Performance Shares to be paid out in Shares) that may
be granted in any one fiscal year to a Participant shall be 1,500,000.
(b) The maximum aggregate cash payout (including Performance Units and
Performance Shares paid out in cash) with respect to Awards granted in any
one fiscal year that may be made to any Participant shall be $20,000,000.
4.3 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of the Company, an
adjustment shall be made in the number and class of Shares available for
Awards, the number and class of and/or price of Shares subject to outstanding
Awards granted under the Plan and the number of Shares set forth in Sections
4.1 and 4.2, as may be determined to be appropriate and equitable by the
Administrator, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to any Award
shall always be a whole number.
SECTION 5.
Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in the Plan include all
current and future Employees (including officers), persons who have been
offered employment by the Company or a Subsidiary (provided that such
prospective Employee may not receive any payment or exercise any right
relating to an Award until such person has commenced employment with the
Company or Subsidiary), Directors and consultants of the Company and its
Subsidiaries, as determined by the Administrator, including Employees who
reside in countries other than the United States of America.
5.2 Participation. Subject to the provisions of the Plan, the Administrator
shall determine and designate, from time to time, the Employees, prospective
Employees, Directors and consultants of the Company and any Subsidiary to whom
Awards shall be granted, the terms of such Awards, and the number of Shares
subject to such Award.
SECTION 6.
Stock Options
6.1 Grant of Options and Award Agreement.
(a) Option Grant. Subject to the terms and provisions of the Plan,
Options may be granted to one or more Participants in such number, upon
such terms and provisions, and at any time and from time to time, as
determined by the Administrator, in its sole discretion. The Administrator
may grant either Nonqualified Stock Options or Incentive Stock Options, and
shall have complete discretion in determining the number of
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Options of each granted to each Participant (subject to Section 4 herein).
Each Option grant shall be evidenced by a resolution of the Administrator
approving the Option grant.
(b) Award Agreement. The Company and each Participant to whom an Option
is granted shall execute an Award Agreement, effective as of the date of
grant, which shall specify the Option Price, the term of the Option, the
number of Shares subject to the Option, and such other provisions as the
Administrator shall determine, and which are not inconsistent with the
terms and provisions of the Plan. The Award Agreement shall also specify
whether the Option is intended to be an ISO within the meaning of Code
Section 422. If such Option is not designated as an ISO, such Option shall
be deemed a NQSO.
6.2 Option Price. The Administrator shall designate the Option Price for
each Share subject to an Option under the Plan, provided that such Option
Price for Options designated as ISOs shall not be less than one hundred
percent (100%) of the Fair Market Value of Shares subject to an Option on the
date the Option is granted, and which Option Price may not be subsequently
changed by the Administrator except pursuant to Section 4.3 hereof or to the
extent provided in the Award Agreement. With respect to a Participant who
owns, directly or indirectly, more than ten percent (10%) of the total
combined voting power of all classes of the stock of the Company or any
Subsidiary, the Option Price of Shares subject to an ISO shall be at least one
hundred and ten percent (110%) of the Fair Market Value of such Shares on the
date of grant.
6.3 Term of Options. Each Option granted to an Employee shall expire at
such time as the Administrator shall determine at the time of grant, but in no
event shall be exercisable later than the tenth (10th) anniversary of the date
of grant. Notwithstanding the foregoing, with respect to ISOs, in the case of
a Participant who owns, directly or indirectly, more than ten percent (10%) of
the total combined voting power of all classes of the stock of the Company or
any Subsidiary, no such ISO shall be exercisable later than the fifth (5th)
anniversary of the date of grant.
6.4 Exercise of Options. Options granted under this Section 6 shall be
exercisable at such times and be subject to such restrictions and conditions
as the Administrator shall in each instance approve, which need not be the
same for each grant or for each Participant, and shall be set forth in the
applicable Award Agreement. Notwithstanding the preceding sentence, the Fair
Market Value of Shares to which ISOs are exercisable for the first time by any
Participant during any calendar year may not exceed $100,000. Any ISOs that
become exercisable in excess of such amount shall be deemed NQSOs to the
extent of such excess. If the Award Agreement does not specify the time or
times at which the Option shall first become exercisable, such an Option shall
become exercisable by the Participant (i) to a maximum cumulative extent of
one-third of the Shares covered by the Option on the first anniversary of the
date of grant, and (ii) to a maximum cumulative extent of two-thirds of the
Shares covered by the Option on the second anniverary of the date of grant,
and (iii) to a maximum cumulative extent of 100% of the Shares covered by the
Option on the third anniversary of the date of grant.
6.5 Payment. Options granted under this Section 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price upon exercise of
any Option shall be payable to the Company in full either:
(a) in cash or its equivalent,
(b) by tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price,
(c) by withholding Shares that otherwise would be acquired on exercise
having an aggregate Fair Market Value at the time of exercise equal to the
total Option Price,
(d) by tendering other Awards payable under the Plan, or
(e) by a combination of (a), (b), (c) and/or (d).
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The Administrator also may allow cashless exercise as permitted under
Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means that the Administrator determines to be
consistent with the Plan's purpose and applicable law. As soon as practicable
after receipt of a written notification of exercise and full payment, the
Company shall deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of Shares
purchased under the Option(s).
In connection with the exercise of Options granted under the Plan, the
Company may make loans to the Participants as the Administrator, in its sole
discretion, may determine. Such loans shall be subject to the following terms
and conditions and such other terms and conditions as the Administrator shall
determine not inconsistent with the Plan. Such loans shall bear interest at
such rates as the Administrator shall determine from time to time, which rates
may be below then current market rates or may be made without interest. In no
event may any such loan exceed the Fair Market Value, at the date of exercise,
of the shares covered by the Option, or portion thereof exercised by the
Participant. Any loan made pursuant to this Section 6.5 shall comply with
Regulation U issued by the Board of Governors of the Federal Reserve System
pursuant to the Exchange Act.
6.6 Termination of Employment, Service as a Director, or Consulting
Arrangement. The Administrator, in its sole discretion, shall set forth in
the applicable Award Agreement the extent to which a Participant shall have
the right to exercise the Option or Options following termination of his or
her employment, service as a Director, or consulting arrangement with the
Company and/or its Subsidiaries. Such provisions need not be uniform among all
Options issued pursuant to the Plan, and may reflect distinctions based on the
reasons for such termination, including, but not limited to, termination for
Cause or Good Reason, or reasons relating to the breach or threatened breach
of restrictive covenants. Subject to Section 15, in the event that a
Participant's Award Agreement does not set forth such provisions, the
following provisions shall apply:
(a) Death, Disability and Retirement. In the event that each of the
Participant's employment, service as a Director and consulting arrangement
with the Company and/or any Subsidiary terminates by reason of death,
Disability or Retirement, all of his or her Options shall immediately
become fully vested and shall remain exercisable until the earlier of (A)
the remainder of the term of the Option, or (B) 12 months after the date of
such termination. In the case of the Participant's death, the Participant's
beneficiary or estate may exercise the Option.
(b) Termination for Cause. In the event that each of the Participant's
employment, service as a Director and consulting arrangement with the
Company terminates for Cause, all Options shall expire immediately and all
rights to purchase Shares (vested or nonvested) under the Option shall
cease.
(c) Other Termination. In the event that each of the Participant's
employment, service as a Director and consulting arrangement with the
Company terminates for any reason other than death, Disability, Retirement
or for Cause, all Options held by the Participant shall expire and all
rights to purchase Shares thereunder shall terminate immediately.
Notwithstanding the preceding sentence, all Options as to which the
Participant has a vested right to exercise the Option immediately prior to
such termination shall remain exercisable until the earlier of (A) the
remainder of the term of the Option, or (B) 90 days from the date of
termination.
6.7 Restrictions on Share Transferability. The Administrator may impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Section 6 as it may deem advisable, including, without
limitation, restrictions under applicable Federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws
applicable to such Shares.
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6.8 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all
ISOs granted to a Participant under the Plan shall be exercisable during
his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, or as provided by the Administrator, no NQSO
granted under this Section 6 may be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or by the laws
of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, all NQSOs granted to a Participant under
this Section 6 shall be exercisable during his or her lifetime only by such
Participant.
6.9 Prior Option Grants. The terms and conditions of this amended and
restated Plan shall supersede, amend and modify the terms and conditions of
any written agreement covering an Option granted to a Participant under the
Plan prior to the Effective Date; provided that this Section 6.9 shall only
apply if the Participant and the Company enter into a written agreement to
effect the amendments and/or modifications. Notwithstanding the preceding
sentence, to the extent that an amendment and/or modification would result in
adverse tax consequences to the Participant and/or adverse accounting
treatment with respect to the Option, such amendment and/or modification shall
not be effective.
SECTION 7.
Stock Appreciation Rights
7.1 Grant of SARs and Award Agreement.
(a) SAR Grant. Subject to the terms and conditions of the Plan, SARs may
be granted to Participants at any time and from time to time as shall be
determined by the Administrator. The Administrator may grant Non-Tandem
SARs, Tandem SARs, or any combination of these forms of SARs. The
Administrator shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Section 4 herein) and,
consistent with the provisions of the Plan, in determining the terms and
conditions pertaining to such SARs. The Administrator shall designate, at
the time of grant, the grant price of a Non-Tandem SAR, which grant price
shall be at least equal to the Fair Market Value of a Share on the date of
grant of the SAR. The grant price of Tandem SARs shall equal the Option
Price of the related Option. Grant prices of SARs shall not subsequently be
changed by the Administrator, except pursuant to Section 4.3 hereof.
(b) Award Agreement. The Company and each Participant to whom an SAR is
granted shall execute an Award Agreement that shall specify the grant
price, the term of the SAR, and such other provisions as the Administrator
shall determine, and which are not inconsistent with the terms and
provisions of the Plan.
7.2 Term of SARs. The term of a SAR granted under the Plan shall be
determined by the Administrator, in its sole discretion; provided, however,
that unless otherwise designated by the Administrator, such term shall not
exceed ten (10) years from the date of grant.
7.3 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable. Notwithstanding any other provision of the Plan to the contrary,
with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem
SAR will expire no later than the expiration of the underlying ISO; (ii) the
value of the payout with respect to the Tandem SAR may be for no more than one
hundred percent (100%) of the difference between the Option Price of the
underlying ISO and the Fair Market Value of the Shares subject to the
underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem
SAR may be exercised only when the Fair Market Value of the Shares subject to
the ISO exceeds the Option Price of the ISO.
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7.4 Exercise of Non-Tandem SARs. Non-Tandem SARs may be exercised upon
whatever terms and conditions the Administrator, in its sole discretion,
imposes upon them.
7.5 Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The excess of the Fair Market Value of a Share on the date of
exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the sole discretion of the Administrator, the payment upon SAR exercise
may be in cash, in Shares of equivalent value, or in some combination thereof.
7.6 Termination of Employment, Service as a Director, or Consulting
Arrangement. The Administrator, in its sole discretion, shall set forth in the
applicable Award Agreement the extent to which a Participant shall have the
right to exercise the SAR or SARs following termination of his or her
employment, service as a Director, or consulting arrangement with the Company
and/or its Subsidiaries. Such provisions need not be uniform among all SARs
issued pursuant to the Plan, and may reflect distinctions based on the reasons
for such termination, including, but not limited to, termination for Cause or
Good Reason, or reasons relating to the breach or threatened breach of
restrictive covenants. Subject to Section 15, in the event that a
Participant's Award Agreement does not set forth such provisions, the
following provisions shall apply:
(a) Death, Disability and Retirement. In the event that each of the
Participant's employment, service as a Director and consulting arrangement
with the Company and/or any Subsidiary terminates by reason of death,
Disability or Retirement, all of his or her SARs shall immediately become
fully vested (subject to Section 15) and shall remain exercisable until the
earlier of (A) the remainder of the term of the SAR, or (B) 12 months after
the date of such termination. In the case of the Participant's death, the
Participant's beneficiary or estate may exercise the SAR.
(b) Termination for Cause. In the event that each of the Participant's
employment, service as a Director and consulting arrangement with the
Company terminates for Cause, all SARs shall expire immediately and all
rights thereunder shall cease.
(c) Other Termination. In the event that each of the Participant's
employment, service as a Director and consulting arrangement with the
Company terminates for any reason other than death, Disability, Retirement
or for Cause, all SARs held by the Participant shall expire and all rights
thereunder shall terminate immediately. Notwithstanding the preceding
sentence, all SARs to which the Participant has a vested right to exercise
the SAR immediately prior to such termination shall be exercisable until
the earlier of (A) the remainder of the term of the SAR, or (B) 90 days
from the date of termination.
7.7 Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime
only by such Participant.
SECTION 8.
Restricted Stock
8.1 Grant of Restricted Stock and Award Agreement.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Administrator, at any time and from time to time, may grant
Shares of Restricted Stock to Participants in such amounts as the
Administrator shall determine.
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(b) Award Agreement. The Company and each Participant to whom an award of
Restricted Stock is granted shall execute an Award Agreement that shall
specify the Period or Periods of Restriction, the number of Shares of
Restricted Stock granted, and such other provisions as the Administrator
shall determine pursuant to Section 8.3 or otherwise, and which shall not
be inconsistent with the terms and provisions of the Plan. If no Period of
Restriction is set forth in the Award Agreement, the Period of Restriction
shall be three years for restrictions lapsing due to the passage of time
and one year for restrictions lapsing due to the achievement of performance
goals.
8.2 Transferability. Except as provided in this Section 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, voluntarily or
involuntarily, until the end of the applicable Period of Restriction
established by the Administrator and specified in the Restricted Stock Award
Agreement, or upon earlier satisfaction of any other conditions, as specified
by the Administrator in its sole discretion and set forth in the Restricted
Stock Award Agreement. All rights with respect to the Restricted Stock granted
to a Participant under the Plan shall be available during his or her lifetime
only to such Participant.
8.3 Other Restrictions. Subject to Section 10 herein, the Administrator may
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable including without
limitation, a requirement that Participants pay a stipulated purchase price
for each Share of Restricted Stock, restrictions based upon the achievement of
specific performance goals (Company-wide, Subsidiary-wide, divisional, and/or
individual), time-based restrictions on vesting, which may or may not be
following the attainment of the performance goals, sales restrictions under
applicable stockholder agreements or similar agreements, and/or restrictions
under applicable Federal or state securities laws. The Company shall retain
the certificates representing Shares of Restricted Stock in the Company's
possession until such time as all conditions and/or restrictions applicable to
such Shares have been satisfied.
Except as otherwise provided in this Section 8 or in any Award Agreement,
Shares of Restricted Stock covered by each Restricted Stock grant made under
the Plan shall become freely transferable by the Participant after the last
day of the applicable Period of Restriction.
8.4 Voting Rights. Unless otherwise designated by the Administrator at the
time of grant, Participants to whom Shares of Restricted Stock have been
granted hereunder may exercise full voting rights with respect to those Shares
during the Period of Restriction.
8.5 Dividends and Other Distributions. Unless otherwise designated by the
Administrator at the time of grant, Participants holding Shares of Restricted
Stock granted hereunder shall be credited with regular cash dividends paid
with respect to the underlying Shares while they are so held during the Period
of Restriction. The Administrator may apply any restrictions to the dividends
that the Administrator deems appropriate. Without limiting the generality of
the preceding sentence, if the grant or vesting of Shares of Restricted Stock
granted to a Named Executive Officer is designed to comply with the
requirements of the Performance-Based Exception, the Administrator may apply
any restrictions it deems appropriate to the payment of dividends declared
with respect to such Shares of Restricted Stock, such that the dividends
and/or the Shares of Restricted Stock maintain eligibility for the
Performance-Based Exception. In the event that any dividend constitutes a
derivative security or an equity security pursuant to the rules under Section
16 of the Exchange Act, such dividend shall be subject to a vesting period
equal to the remaining vesting period of the Shares of Restricted Stock with
respect to which the dividend is paid.
8.6 Termination of Employment, Service as a Director, or Consulting
Arrangement. The Administrator, in its sole discretion, shall set forth in the
applicable Award Agreement the extent to which the Participant shall have the
right to receive unvested Shares of Restricted Stock following termination of
the Participant's employment, service as a Director, or consulting arrangement
with the Company and/or its Subsidiaries. Such provisions need not be uniform
among all Shares of Restricted Stock issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of employment
including; but not limited
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to, termination of employment for Cause or Good Reason, or reasons relating to
the breach or threatened breach of restrictive covenants; provided, however
that, except in the cases of terminations connected with a Change of Control
and terminations by reason of death or Disability, the vesting of Shares of
Restricted Stock that qualify for the Performance-Based Exception and that are
held by Named Executive Officers shall not occur prior to the time they
otherwise would have, but for the employment termination. Subject to Section
15, in the event that a Participant's Award Agreement does not set forth such
termination provisions, the following termination provisions shall apply:
(a) Death, Disability and Retirement. Unless the Award qualifies for the
Performance-Based Exception, in the event that each of a Participant's
employment, service as a Director, and consulting arrangement with the
Company and/or its Subsidiaries is terminated due to death, Disability or
Retirement, all Shares of Restricted Stock of such Participant shall
immediately become fully vested on the date of termination and the
restrictions shall lapse.
(b) Other Termination. In the event that each of a Participant's
employment, service as a Director, and consulting arrangement with the
Company and/or its Subsidiaries is terminated for any reason other than
death, Disability or Retirement, all Shares of Restricted Stock that are
unvested at the date of termination shall be forfeited to the Company.
SECTION 9.
Performance Units and Performance Shares
9.1 Grant of Performance Units/Shares and Award Agreement.
(a) Grant of Performance Unit/Shares. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants
in such amounts and upon such terms, and at any time and from tune to time,
as shall be determined by the Administrator, which shall not be
inconsistent with the terms and provisions of the Plan and shall be set
forth in an Award Agreement.
(b) Award Agreement. The Company and each Participant to whom Performance
Units and/or Performance Shares is granted shall execute an Award Agreement
that shall specify the initial value of the Award, the performance goals
and the Performance Period, as the Administrator shall determine, and which
are not inconsistent with the terms and provisions of the Plan.
9.2 Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Administrator at the time of grant.
Each Performance Share shall have an initial value equal to the Fair Market
Value of a Share on the date of grant. The Administrator shall set performance
goals in its sole discretion which, depending on the extent to which they are
met will determine the number and/or value of Performance Units and/or
Performance Shares that will be paid out to the Participant. For purposes of
this Section 9, the time period during which the performance goals must be met
shall be called a Performance Period.
9.3 Earning of Performance Units/Shares.Subject to the terms of the Plan,
after the applicable Performance Period has ended, the holder of Performance
Units and/or Performance Shares shall be entitled to receive payout on the
number and value of Performance Units and/or Performance Shares earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance goals have been achieved, as
established by the Administrator.
9.4 Form and Timing of Payment of Performance Units/Shares. Except as
provided below, payment of earned Performance Units and/or Performance Shares
shall be made in a single lump sum as soon as reasonably practicable following
the close of the applicable Performance Period. Subject to the terms of the
Plan, the Administrator, in its sole discretion, may pay earned Performance
Units and/or Performance Shares in the form of cash or in Shares (or in a
combination thereof) which have an aggregate Fair Market Value equal to the
value of the earned Performance Units and/or Performance Shares at the close
of the applicable Performance Period. Such Shares may be granted subject to
any restrictions deemed appropriate by the Administrator.
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At the time of grant or shortly thereafter, the Administrator, at its sole
discretion and in accordance with terms designated by the Administrator, may
provide for a voluntary and/or mandatory deferral of all or any part of an
otherwise earned Performance Unit and/or Performance Share Award.
At the sole discretion of the Administrator, Participants may be entitled to
receive any dividends declared with respect to Shares which have been earned
in connection with grants of Performance Units and/or Performance Shares which
have been earned, but not yet distributed to Participants (such dividends
shall be subject to the same accrual, forfeiture, and payout restrictions as
apply to dividends earned with respect to Shares of Restricted Stock, as set
forth in Section 8.6 herein). In addition, Participants may, at the sole
discretion of the Administrator, be entitled to exercise their voting rights
with respect to such Shares.
9.5 Termination of Employment, Service as a Director, or Consulting
Arrangement. The Administrator, in its sole discretion, shall set forth in the
applicable Award Agreement the extent to which the Participant shall have the
right to receive payment for Performance Units and/or Performance Shares
following termination of the Participant's employment, service as a Director,
or consulting arrangement with the Company and/or its Subsidiaries. Such
provisions need not be uniform among all Performance Units and/or Performance
Shares granted pursuant to the Plan, and may reflect distinctions based on the
reasons for such termination including; but not limited to, termination for
Cause or Good Reason, or reasons relating to the breach or threatened breach
of restrictive covenants. Subject to Section 15, in the event that a
Participant's Award Agreement does not set forth such termination provisions,
the following termination provisions shall apply:
(a) Death, Disability and Retirement. Subject to Section 15, in the event
that each of a Participant's employment, service as a Director, and
consulting arrangement with the Company and/or its Subsidiaries is
terminated during a Performance Period due to death, Disability or
Retirement, the Participant shall receive a prorated payout of the
Performance Units and/or Performance Shares, unless the Administrator
determines otherwise. The prorated payout shall be determined by the
Administrator, shall be based upon the length of time that the Participant
held the Performance Units and/or Performance Shares during the Performance
Period, and shall further be adjusted based on the achievement of the
preestablished performance goals. Subject to Section 15, unless the
Administrator determines otherwise in the event of a termination due to
death, Disability or Retirement payment of earned Performance Units and/or
Performance Shares shall be made at the same time as payments are made to
Participants who did not terminate employment during the applicable
Performance Period.
(b) Other Termination. Subject to Section 15, in the event that each of a
Participant's employment, service as a Director, and consulting arrangement
with the Company and/or its Subsidiaries is terminated during a Performance
Period for any reason other than death, Disability or Retirement, all
Performance Units and/or Performance Shares shall be forfeited by the
Participant to the Company.
9.6 Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units and/or Performance Shares may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, a Participant's rights
under the Plan shall be exercisable during the Participant's lifetime only by
the Participant or the Participant's legal representative.
SECTION 10.
Performance Measures
Unless and until the Administrator proposes for stockholder vote and
stockholders approve a change in the general performance measures set forth in
this Section 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Named Executive Officers that are
designed to qualify for the Performance-Based Exception, the performance goals
to be used for purposes of such grants shall be established by the
Administrator in writing and stated in terms of the attainment of specified
levels of or percentage changes in any one or more of the following
measurements: revenue; primary or fully-diluted earnings per Share; earnings
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before interest, taxes, depreciation, and/or amortization; pretax income; cash
flow from operations; total cash flow; return on equity; return on capital;
return on assets; net operating profits after taxes; economic value added;
total stockholder return or return on sales; or any individual performance
objective which is measured solely in terms of quantitative targets related to
the Company or the Company's business; or any combination thereof. In
addition, such performance goals may be based in whole or in part upon the
performance of the Company, a Subsidiary, division and/or other operational
unit under one or more of such measures.
The degree of payout and/or vesting of such Awards designed to qualify for
the Performance-Based Exception shall be determined based upon the written
certification of the Administrator as to the extent to which the performance
goals and any other material terms and conditions precedent to such payment
and/or vesting have been satisfied. The Administrator shall have the sole
discretion to adjust the determinations of the degree of attainment of the
preestablished performance goals; provided, however, that the performance
goals applicable to Awards which are designed to qualify for the Performance-
Based Exception, and which are held by Named Executive Officers, may not be
adjusted so as to increase the payment under the Award (the Administrator
shall retain the sole discretion to adjust such performance goals upward, or
to otherwise reduce the amount of the payment and/or vesting of the Award
relative to the preestablished performance goals).
In the event that applicable tax and/or securities laws change to permit
Administrator sole discretion to alter the governing performance measures
without obtaining stockholder approval of such changes, the Administrator
shall have sole discretion to make such changes without obtaining stockholder
approval. In addition, in the event that the Administrator determines that it
is advisable to grant Awards which shall not qualify for the Performance-Based
Exception, the Administrator may make such grants without satisfying the
requirements of Code Section 162(m) and, thus, which use performance measures
other than those specified above.
SECTION 11.
Award Forfeitures
11.1 Forfeiture of Options and Other Awards and Gains Realized Upon Prior
Option Exercises or Award Settlements. Unless otherwise determined by the
Administrator, each Award granted hereunder shall be subject to the following
additional forfeiture conditions, to which the Participant, by accepting an
Award hereunder, agrees. If any of the events specified in Section 11.2 occurs
(a "Forfeiture Event"), all of the following forfeitures will result:
(a) The unexercised portion of any Option, whether or not vested, and any
other Award not then settled (except for an Award that has not been settled
solely due to an elective deferral pursuant to Section 13 by the
Participant and otherwise is not forfeitable in the event of any
termination of service of the Participant) will be immediately forfeited
and canceled upon the occurrence of the Forfeiture Event; and
(b) The Participant will be obligated to repay to the Company, in cash,
within five business days after demand is made therefor by the Company, the
total amount of Award Gain (as defined herein) realized by the Participant
upon each exercise of an Option or settlement of an Award (regardless of
any elective deferral pursuant to Section 13) that occurred on or after (i)
the date that is six months prior to the occurrence of the Forfeiture
Event, if the Forfeiture Event occurred while the Participant was employed
by the Company or a Subsidiary, or (ii) the date that is six months prior
to the date the Participant's employment by, service as a Director with, or
consulting arrangement with the Company or a Subsidiary terminated, if the
Forfeiture Event occurred after the Participant ceased to be so employed.
For purposes of this Section, the term "Award Gain" shall mean (i) in
respect of a given Option exercise, the product of (X) the Fair Market
Value per Share at the date of such exercise (without regard to any
subsequent change in the market price of shares) minus the Option Price
times (Y) the number of shares as to which the Option was exercised at that
date, and (ii) in respect of any other settlement of an Award granted to
the Participant, the Fair Market Value of the cash or Shares paid or
payable to Participant (regardless of any elective deferral pursuant to
Section 13) less any cash or the Fair Market Value of any
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Shares or property (other than an Award or award that would have itself
then been forfeitable hereunder and excluding any payment of tax
withholding) paid by the Participant to the Company as a condition of or in
connection such settlement.
11.2 Events Triggering Forfeiture. The forfeitures specified in Section 11.1
will be triggered upon the occurrence of any one of the following Forfeiture
Events at any time during the Participant's employment by, service as a
Director with, or consulting arrangement with the Company or a Subsidiary
during the one-year period following termination of such employment, service
or consulting arrangement:
(a) Non-Solicitation. The Participant, for his or her own benefit or for
the benefit of any other person, company or entity, directly or indirectly,
(i) induces or attempts to induce or hires or otherwise counsels, induces
or attempts to induce or hire or otherwise counsel, advise, encourage or
solicit any person to leave the employment of or the service for the
Company or any Subsidiary, (ii) hires or in any manner employs or retains
the services of any individual employed by or providing services to the
Company or any Subsidiary as of the date of his or her termination of
employment, or employed by or providing services to the Company or any
Subsidiary subsequent to such termination, (iii) solicits, pursues, calls
upon or takes away, any of the customers of the Company or any Subsidiary,
(iv) solicits, pursues, calls upon or takes away, any potential customer of
the Company or any Subsidiary that has been the subject of a bid, offer or
proposal by the Company or any Subsidiary, or of substantial preparation
with a view to making such a bid, proposal or offer, within six (6) months
prior to such Participant's termination of employment with the Company or
any Subsidiary, or (v) otherwise interferes with the business or accounts
of the Company or any Subsidiary.
(b) Non-Competition. The Participant engages in "competition" (as defined
below in this subparagraph (b)) with the Company or any Subsidiary in any
locality or region of the United States in which the Company or any
Subsidiary had operations at the time of, or within six (6) months prior
to, the termination of the Participant's employment with the Company or any
Subsidiary, or in which, during the six (6) months period prior to the
termination of the Participant's employment with the Company or any
Subsidiary, the Company or any Subsidiary had made substantial plans with
the intention of establishing operations in such locality or region;
provided that, it shall not be a violation of this provision for the
Participant to become the registered or beneficial owner of up to five
percent (5%) of any class of the capital stock of a competing corporation
registered under the Exchange Act provided that the Participant does not
actively participate in the business of such corporation until the one-year
period following the Participant's termination ends.
For purposes of the Plan, "competition" means the Participant engages in,
or otherwise directly or indirectly is employed by or acts as a consultant
or lender to, or is a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permits the Participant's name
to be used in connection with, the activities of any other business or
organization anywhere in the United States that directly or indirectly
designs, develops, operates, builds or manufactures in-building
communications transmission networks, or any other business of the Company
or any Subsidiary at any time during or following the Participant's
employment with the Company or any Subsidiary.
(c) Confidential Information. The Participant discloses to any person or
entity or makes use of any "confidential or proprietary information" (as
defined below in this subparagraph (c)) for his or her own purpose or for
the benefit of any person or entity, except as may be necessary in the
ordinary course of employment with or other service to the Company or any
Subsidiary. Such "confidential or proprietary information" of the Company
or any Subsidiary, includes, but is not limited to, the design,
development, operation, building or manufacturing of in-building
communications transmission networks, the identity of the Company's or any
Subsidiary's customers, the identity of representatives of customers with
whom the Company or any Subsidiary has dealt, the kinds of services
provided by the Company or any Subsidiary to customers and offered to be
performed for potential customers, the manner in which such services are
performed or offered to be performed, the service needs of actual or
prospective customers, pricing information, information concerning the
creation, acquisition or disposition of products and services,
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customer maintenance listings, computer software and hardware applications
and other programs, personnel information, information identifying,
relating to or concerning investors in the Company or any Subsidiary, joint
venture partners of the Company or any Subsidiary, business partners of the
Company or any Subsidiary or other entities providing financing to the
Company or any Subsidiary, real estate and leasing opportunities,
communications and telecommunications operations and processes, zoning and
licensing matters, relationships with, or matters involving, landlords
and/or property owners, and other trade secrets.
11.3 Agreement Does Not Prohibit Competition or Other Participant
Activities. Although the conditions set forth in this Section 11 shall be
deemed to be incorporated into an Award, the Plan does not thereby prohibit
the Participant from engaging in any activity, including but not limited to
competition with the Company and its Subsidiaries. Rather, the non-occurrence
of the Forfeiture Events set forth in Section 11.2 is a condition to the
Participant's right to realize and retain value from his or her compensatory
Awards, and the consequence under the Plan if the Participant engages in an
activity giving rise to any such Forfeiture Event are the forfeitures
specified herein. This provision shall not preclude the Company and the
Participant from entering into other written agreements concerning the subject
matter of Sections 11.1 and 11.2 and, to the extent any terms of this Section
11 are inconsistent with any express terms of such agreement, this Section 11
shall not be deemed to modify or amend such terms.
11.4 Administrator Discretion. The Administrator may, in its sole
discretion, waive in whole or in part the Company's right to forfeiture under
this Section, but no such waiver shall be effective unless evidenced by a
writing signed by a duly authorized officer of the Company. In addition, the
Administrator may impose additional conditions on Awards, by inclusion of
appropriate provisions in the document evidencing or governing any such Award.
SECTION 12.
Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke
all prior designations by the same Participant, shall be in a form prescribed
by the Company, and will be effective only when filed by the Participant in
writing with the Secretary of the Company during the Participant's lifetime.
In the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
SECTION 13.
Deferrals
The Administrator may permit a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise
be due to such Participant upon the exercise of any Option or by virtue of the
lapse or waiver of restrictions with respect to Restricted Stock, or the
satisfaction of any requirements or goals with respect to Performance
Units/Shares. If any such deferral election is required or permitted, the
Administrator shall, in its sole discretion, establish rules and procedures
for such payment deferrals.
SECTION 14.
Rights and Obligations of Parties
14.1 No Guarantee of Employment or Service Rights. Nothing in the Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or consulting arrangement at any time, nor confer
upon any Participant any right to continue in the employ of or consulting
arrangement with the Company or any Subsidiary.
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For purposes of the Plan, temporary absence from employment because of
illness, vacation, approved leaves of absence, and transfers of employment
among the Company and its Subsidiaries, shall not be considered to terminate
employment or to interrupt continuous employment. Temporary cessation of the
provision of consulting services because of illness, vacation or any other
reason approved in advance by the Company shall not be considered a
termination of the consulting arrangement or an interruption of the continuity
thereof. Conversion of a Participant's employment relationship to a consulting
arrangement shall not result in termination of previously granted Awards.
14.2 Participation. No Employee, Director or consultant shall have the
right to be selected to receive an Award under the Plan, or, having been so
selected, to be selected to receive a future Award.
14.3 Right of Setoff. The Company or any Subsidiary may, to the extent
permitted by applicable law, deduct from and set off against any amounts the
Company or Subsidiary may owe to the Participant from time to time, including
amounts payable in connection with any Award, owed as wages, fringe benefits,
or other compensation owed to the Participant, such amounts as may be owed by
the Participant to the Company, although the Participant shall remain liable
for any part of the Participant's payment obligation not satisfied through
such deduction and setoff. By accepting any Award granted hereunder, the
Participant agrees to any deduction or setoff under this Section 14.
14.4 Section 83(b) Election. No election under Section 83(b) of the Code (to
include in gross income in the year of transfer the amounts specified in Code
Section 83(b)) or under a similar provision of the laws of a jurisdiction
outside the United States may be made, unless expressly permitted by the terms
of the Award Agreement or by action of the Administrator in writing prior to
the making of such election. In any case in which a Participant is permitted
to make such an election in connection with an Award, the Participant shall
notify the Company of such election within ten days of filing notice of the
election with the Internal Revenue Service or other governmental authority, in
addition to any filing and notification required pursuant to regulations
issued under Code Section 83(b) or other applicable provision.
14.5 Disqualifying Disposition Notification. If any Participant shall make
any disposition of Shares delivered pursuant to the exercise of an Incentive
Stock Option under the circumstances described in Code Section 421(b)
(relating to certain disqualifying dispositions), such Participant shall
notify the Company of such disposition within (10) ten days thereof.
SECTION 15.
Change of Control
Upon the occurrence of a Change of Control, unless otherwise specifically
prohibited under applicable laws, or by the rules and regulations of any
governing governmental agencies or national securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become
immediately exercisable, and shall remain exercisable throughout their
entire term;
(b) Any Period of Restriction and other restrictions imposed on
Restricted Shares shall lapse; and
(c) Unless otherwise specified in a Participant's Award Agreement at time
of grant, the maximum payout opportunities attainable under all outstanding
Awards of Performance Units and Performance Shares shall be deemed to have
been fully earned for the entire Performance Period(s) as of the effective
date of the Change of Control. The vesting of all such Awards shall be
accelerated as of the effective date of the Change of Control, and in full
settlement of such Awards, there shall be paid out in cash to Participants
within thirty (30) days following the effective date of the Change of
Control the maximum of payout opportunities associated with such
outstanding Awards.
The foregoing provisions of this Section 15 notwithstanding, the Board and
the Continuing Directors may determine that no Change in Control shall be
deemed to have occurred or that some or all of the enhancements
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to the rights of Participants under outstanding Awards upon a Change in
Control, as provided under this Section 15 or the Award Agreement, shall not
apply to specified Awards if, prior to the later of occurrence of the
specified event that would otherwise constitute a Change in Control (the
"Event") or the expiration of seven days after the Company has obtained actual
notice that such Event has occurred, the following conditions have been met:
(i) The Board and the Continuing Directors of the Company then in office,
each by a majority vote thereof, determine that the occurrence of such
Event shall not be deemed to be a Change in Control hereunder, shall not be
deemed to be a Change in Control with respect to one or more specified
Participants, or shall not result in specified enhancements to the rights
of one or more Participants that would otherwise be triggered by the
occurrence of a Change in Control; and
(ii) The Participant holding an Award affected by action of the Board and
Continuing Directors under this Section 15 shall be protected by legally
binding obligations of the Company as follows:
(A) Such Award either shall remain outstanding following consummation
of all transactions involved in or contemplated by such Change in
Control or shall be assumed and adjusted by the surviving entity
resulting from such transactions, and the Continuing Directors
determine, in either case, that changes in the terms of the Award
resulting from such transactions will not materially impair its value
to the Participant or his or her opportunity for future appreciation in
respect of such Award; and
(B) If, within two years following the Event, the Participant's
employment by the Company or the surviving entity that has assumed the
obligations under the Award (or by an affiliate) is terminated by such
employer without Cause, or is terminated by the Participant for Good
Reason, such Participant's rights in respect of such Award shall be no
less favorable than would be the case if a Change in Control had
occurred (without any limitation on the enhancement of the
Participant's rights) immediately prior to the Participant's
termination of employment.
SECTION 16.
Amendment, Modification, and Termination
16.1 Amendment, Modification, and Termination. The Board may amend, suspend
or terminate the Plan or the Administrator's authority to grant Awards under
the Plan without the consent of stockholders or Participants; provided,
however, that any amendment to the Plan shall be submitted to the Company's
stockholders for approval not later than the earliest annual meeting for which
the record date is after the date of such Board action if such stockholder
approval is required by any federal or state law or regulation or the rules of
any stock exchange or automated quotation system on which the Shares may then
be listed or quoted and the Board may otherwise, in its sole discretion,
determine to submit other amendments to the Plan to stockholders for approval;
and provided further, that, without the consent of an affected Participant, no
such Board action may materially and adversely affect the rights of such
Participant under any outstanding Award. The Administrator shall have no
authority to waive or modify any other Award term after the Award has been
granted to the extent that the waived or modified term was mandatory under the
Plan.
16.2 Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
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SECTION 17.
Withholding
17.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of the Plan.
17.2 Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted
Stock, or upon any other taxable event arising as a result of Awards granted
hereunder, Participants may elect, subject to the approval of the
Administrator, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory total tax which would
be imposed on the transaction. All such elections shall be irrevocable, made
in writing, signed by the Participant, and shall be subject to any
restrictions or limitations that the Administrator, in its sole discretion,
deems appropriate.
SECTION 18.
Successors
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect merger,
consolidation, purchase of all or substantially all of the business and/or
assets of the Company or otherwise.
SECTION 19.
Miscellaneous
19.1 Unfunded Plan. The Plan is intended to constitute an "unfunded" plan
for incentive and deferred compensation. With respect to any payments not yet
made to a Participant or obligation to deliver Shares pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided that the Administrator may authorize the creation of trusts and
deposit therein cash, Shares, other Awards or other property, or make other
arrangements to meet the Company's obligations under the Plan. Such trusts or
other arrangements shall be consistent with the "unfunded" status of the Plan
unless the Administrator otherwise determines with the consent of each
affected Participant.
19.2 Forfeitures; Fractional Shares. Unless otherwise determined by the
Administrator, in the event of a forfeiture of an Award with respect to which
a Participant paid cash consideration, the Participant shall be repaid the
amount of such cash consideration. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Administrator shall determine
whether cash, other Awards or other property shall be issued or paid in lieu
of such fractional Shares or whether such fractional Shares or any rights
thereto shall be forfeited or otherwise eliminated.
19.3 Compliance with Code Section 162(m). The Company intends that Options
and SARs granted to Named Executive Officers and other Awards designated as
Awards to Named Executive Officers shall constitute qualified "performance-
based compensation" within the meaning of Code Section 162(m) and regulations
thereunder, unless otherwise determined by the Administrator at the time of
allocation of an Award. Accordingly, the terms of Sections 4.2, 6, 7, 8.5,
8.6, 9 and 10, including the definitions of Named Executive Officer and other
terms used therein, shall be interpreted in a manner consistent with Code
Section 162(m) and regulations thereunder. The foregoing notwithstanding,
because the Administrator cannot determine with certainty whether a
20
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given Participant will be a Named Executive Officer with respect to a fiscal
year that has not yet been completed, the term Named Executive Officer as used
herein shall mean only a person designated by the Administrator as likely to
be a Named Executive Officer with respect to a specified fiscal year. If any
provision of the Plan or any Award Agreement relating to a Performance Award
that is designated as intended to comply with Code Section 162(m) does not
comply or is inconsistent with the requirements of Code Section 162(m) or
regulations thereunder, such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements, and no provision shall
be deemed to confer upon the Administrator or any other person sole discretion
to increase the amount of compensation otherwise payable in connection with
any such Award upon attainment of the applicable performance objectives.
19.4 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
19.5 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
19.6 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
19.7 Securities Law Compliance. With respect to Insiders, transactions under
the Plan are intended to comply with all applicable conditions of Rule 16b-3
or its successors under the Exchange Act. To the extent any provision of the
Plan or action by the Administrator fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Administrator.
19.8 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Delaware.
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FIBERNET TELECOM GROUP, INC.
THIS PROXY IS BEING SOLICITED BY FIBERNET TELECOM GROUP, INC.'S
BOARD OF DIRECTORS
The undersigned, revoking any previous proxies relating to these shares, hereby
acknowledges receipt of the Notice and Proxy Statement dated June 27, 2000, in
connection with the Annual Meeting to be held at 10:00 a.m. on Thursday, July
27, 2000 at the office of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
which is located at the Chrysler Center, 666 Third Avenue, 25th Floor, New York,
New York and hereby appoints Michael S. Liss and Jon A. DeLuca, and each of them
(with full power to act alone), the attorneys and proxies of the undersigned,
with power of substitution to each, to vote all shares of the common stock or
Series C Preferred Stock of FiberNet Telecom Group, Inc. registered in the name
provided herein which the undersigned is entitled to vote at the 2000 Annual
Meeting of Stockholders, and at any adjournments thereof, with all the powers
the undersigned would have if personally present. Without limiting the general
authorization hereby given, said proxies are, and each of them is, instructed to
vote or act as follows on the proposals set forth in said Proxy.
This Proxy when executed will be voted in the manner directed herein. If no
direction is made this Proxy will be voted FOR the election of Directors and FOR
Proposals 2 and 3.
(Continued and to be signed on reverse side)
<PAGE>
<TABLE>
<CAPTION>
FIBERNET TELECOM GROUP, INC.
Annual Meeting of Stockholders
July 27, 2000
Please date, sign and mail your proxy card as soon as possible.
The Board of Directors recommends a vote FOR Proposals 1 through 3.
Please mark your
votes as in this [ X ]
example.
<S> <C> <C> <C>
1. Election of Directors (or if any FOR WITHHOLD
nominee is not available for [ ] [ ] Nominees: Timothy P. Bradley
election, such substitute as the Steven G. Chrust
Board of Directors may designate). Roy (Trey) D. Farmer III
Michael S. Liss
Charles J. Mahoney
Richard E. Sayers
William Vrattos
___________________________________
For all nominees except as noted above.
[ ]
Signature: ________________________________________ Date ________________
FOR AGAINST ABSTAIN
2 Proposal to amend and restate the [ ] [ ] [ ]
Company's 1999 Stock Option Plan (as
amended through January 14, 2000) and to
increase by 5,500,000 shares the
aggregate number of shares of Common
Stock authorized for issuance
thereunder.
3. Proposal to ratify the appointment of [ ] [ ] [ ]
Arthur Andersen LLP as FiberNet
Telecom Group, Inc.'s independent
public accountants for the fiscal
year ending December 31, 2000.
In their discretion the proxies are authorized to vote upon such other matters
as may properly come before the meeting or any adjournments thereof.
If you wish to vote in accordance with the Board of Directors' recommendations,
just sign below. You need not mark any boxes.
Signature: ________________________________________ Date ________________
NOTE: Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
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