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EXHIBIT 4.1
THE CONCENTRIC NETWORKS
UNITED KINGDOM
LIMITED SHARE OPTION SCHEME
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TABLE OF CONTENTS
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Page
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1. Name of the Scheme.............................................................. 1
PART A.................................................................................... 1
2. Definitions and interpretation.................................................. 1
3. Selection of Eligible Employees................................................. 1
4. Grant of Options................................................................ 1
5. Exercise of an Option........................................................... 1
6. Period of Option and provisions for Participants leaving the Group.............. 1
7. Variation of capital............................................................ 1
8. Exchange of Options............................................................. 1
9. Takeover and liquidation........................................................ 1
10. Rights attaching to shares allotted pursuant to an Option....................... 1
11. Availability of shares.......................................................... 1
12. General......................................................................... 1
PART B.................................................................................... 11
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The Concentric Networks United Kingdom Limited Share Option Scheme
1. Name of the Scheme
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The Concentric Networks United Kingdom Limited Share Option Scheme is
divided into two parts. Part A is the Concentric Networks United Kingdom
Limited Approved Share Option Scheme (the "Scheme"). Part B is the Concentric
Networks United Kingdom Limited Unapproved Share Option Scheme (the "Unapproved
Scheme").
PART A
2. Definitions and interpretation
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2.1 For the purposes of the Scheme, unless the context otherwise requires,
the following words and expressions shall have the following meanings:
"the Adoption Date" means the date on which the Scheme is approved
by the Inland Revenue;
"the Appropriate Period" has the same meaning as in paragraph 15(2) of
Schedule 9 to the Taxes Act;
"Associated Company" has the same meaning as in Section 187(2) of the
Taxes Act;
"the Auditors" means the auditors for the time being of the
Company (acting as experts and not as
arbitrators);
"the Board" means the board of directors of the Company or
the persons appointed by the board of directors
of the Company to act as a committee for all or
any matters relating to the Scheme;
"the Company" means Concentric Network Corporation registered
in Delaware;
"Control" has the same meaning as in section 840 of the
Taxes Act and "controlled" shall be construed
accordingly;
"Date of Grant" means the date on which an Option is, was, or is
to be granted under the Scheme;
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"Disability" means total and permanent disability, as
evidenced to the satisfaction of the Board;
"Eligible Employee" means a person who is at the relevant Date of
Grant:
(A) a Full-Time Director or a Qualifying
Employee in either case of a company selected by
the Board to participate in the Scheme;
(B) not precluded by paragraph 8 of Schedule 9
to the Taxes Act from participating in the
Scheme;
"Full-Time Director" means a director of the Company and/or any
Subsidiary whose terms of office or employment
require him to work for at least twenty-five
hours per week (excluding meal breaks);
"Group" means the Company and the Subsidiaries;
"Option" means an option to acquire Scheme Shares granted
pursuant to the Scheme;
"Option Price" in relation to any Scheme Share means an amount
determined by the Board being equal to or
greater than the amount determined to be the
market value on the Date of Grant of an Ordinary
Share in accordance with the provisions of Part
VIII of the Taxation of Chargeable Gains Act
1992 and agreed for the purposes of the Scheme
with the Inland Revenue Shares Valuation
Division prior to the date on which an Option is
granted to a Participant;
"Ordinary Shares" means shares of common stock of the Company;
"Participant" means any person who for the time being
participates in the Scheme;
"Qualifying Employee" means an employee of the Company and/or a
Subsidiary (who is not a director of the Company
or a Subsidiary);
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"Qualifying Employment" means office or employment either as a Full-Time
Director or as a Qualifying Employee as the case
may be;
"Record Date" in relation to any particular payment of
dividend or the making of any other distribution
to the Company's stockholders means the date on
which any such stockholder must duly be
recognised as such by the Company in order to
have the right to receive such dividend or other
distribution;
"the Rules" means these rules as from time to time amended;
"the Scheme" means The Concentric Networks United Kingdom
Limited Share Option Scheme constituted and
governed by the Rules;
"Scheme Shares" means Ordinary Shares which satisfy the
conditions specified in Paragraphs 10 to 14 of
Schedule 9 to the Taxes Act to be acquired by a
Participant on the exercise by him of an Option;
"Subsidiary" means any body corporate of which the Company is
for the time being to be taken to have Control
and which is a subsidiary of the Company within
section 736 of the Companies Act 1985;
"Subsisting Option" means an Option which has neither lapsed nor
been exercised;
"Taxes Act" means the Income and Corporation Taxes Act 1988.
2.2 Where the context so permits the singular shall include the plural
and vice versa and the masculine shall include the feminine.
2.3 Reference to any Act shall include any statutory modification,
amendment or re-enactment thereof.
3. Selection of Eligible Employees
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3.1 The Board may from time to time at its discretion grant an Option to
an Eligible Employee to be selected in each case at the discretion of the Board
on the terms of the Scheme.
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4. Grant of Options
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4.1 Subject to the limitations referred to herein, the Board shall
determine the number of Scheme Shares to be included in an Option.
4.2 The Board shall grant Options subject to such objective conditions to
be met before the Option may be exercised as the Board may determine.
4.3 As soon as practicable after Options have been granted the Board shall
issue to each Participant an Option Certificate in the form of a deed specifying
the option price and the date upon which the Option may first be exercised,
carrying a statement to the effect of Rule 4.4 and stating any conditions as
specified in Rule 4.2. The Option Certificate may also contain other terms and
conditions which are relevant to the Option.
4.4 An Option shall be personal to the Eligible Employee to whom it is
granted and shall not be capable of assignment. Any purported assignment,
pledge, disposal of or dealing with an Option shall cause the Option to lapse
forthwith.
4.5 The amount payable for each Scheme Share in the event of the Option
being exercised shall be the Option Price.
4.6 Any Option granted to an Eligible Employee shall be limited and take
effect so that at the Date of Grant of such Option the aggregate of:
(A) the market value of Ordinary Shares comprised in such Option; and
(B) the market value of Ordinary Shares comprised in any Subsisting
Options which have been granted to that Eligible Employee; and
(C) the market value of any shares he may acquire in pursuance of
options granted to him (and not exercised) under any other scheme approved under
Schedule 9 to the Taxes Act and established by the Company or any Associated
Company of the Company providing for the grant of options to acquire shares
(other than a savings related share option scheme) shall not exceed
(Pounds)30,000 (or such other amount as may be prescribed by Paragraph 28 of
Schedule 9 to the Taxes Act from time to time).
For the purposes of this rule "market value" shall be calculated in
accordance with Paragraph 28 of Schedule 9 to the Taxes Act at the respective
Dates of Grant.
4.7 Subject to the provisions of Rule 7, the total number of Ordinary
Shares issued or remaining to be issued on the exercise of Options granted under
the Scheme shall not exceed 1,000,000 Ordinary Shares. For the avoidance of
doubt, shares subject to an Option which has lapsed, been cancelled or
surrendered shall not count towards the above limits.
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5. Exercise of an Option
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5.1 An Option shall be exercised by delivering to the Secretary of the
Company a notice duly signed by the Participant in a form approved by the Board
together with payment by cheque or in cash of the Option Price for each Scheme
Share to be acquired and delivery of the Option certificate for amendment or
cancellation as the case may be. An Option may be exercised in part but may not
be exercised in respect of a fraction of a Scheme Share.
5.2 Subject to any necessary consents and to an Option having been
exercised in accordance with the provisions of Rule 5.1, the Board shall as soon
as practicable and in any event not later than 30 days after the exercise of an
Option make an allotment or procure the transfer to the Participant or his
nominee of the number of Scheme Shares specified in the notice exercising the
Option.
5.3 No Option may be exercised at any time when the shares which may be
thereby acquired are not Scheme Shares.
5.4 Where the exercise of an Option is conditional on satisfaction of
performance conditions pursuant to Rule 4.2, the Option may not be exercised
until such conditions are satisfied PROVIDED THAT:
(A) the Board may waive or vary such condition where an Option
becomes exercisable pursuant to Rules 6.4, 6.5, 6.6 or Rule 9; or
(B) where as a result of events occurring the Board considers that
the satisfaction of different conditions (being no more difficult for the
Participant to satisfy) prior to exercise of the Option would be a fairer
measure of the performance the Board may, acting fairly and reasonably, vary
such conditions.
6. Period of Option and provisions for Participants leaving the Group
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6.1 An Option may not be exercised later than the day specified in the
Option Certificate (the "Expiration Date"). An Option (if it has not already
ceased to be exercisable) shall lapse on the Expiration Date. The Expiration
Date may not be later than the day before the tenth anniversary of the date that
the Option was granted.
6.2 Except as provided in Rule 9, an Option may first be exercised in
accordance with the terms set out in the Option Certificate which may provide,
among other things, that the Option may become exercisable in installments.
6.3 Except as provided in Rules 6.4, 6.5 and 6.6 no Option may be
exercised unless the Participant shall have been in Qualifying Employment since
the date of the grant of such Option.
6.4 Subject to Rule 6.1, if a Participant ceases to be in Qualifying
Employment by reason of Disability, the Participant may exercise an Option to
the extent the Option is exercisable on the
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date of cessation of employment. The Participant may only exercise such Option
within the period of time specified in the Option Certificate (the "Termination
Period"). If the Termination Period is not specified in the Option Certificate,
the Participant may exercise such Option within 12 months of the date of
cessation of employment and shall thereafter cease to have any rights to
exercise that Option.
6.5 Subject to Rule 6.1, if a Participant dies whilst in Qualifying
Employment, his personal representatives may within the Termination Period
(which shall not exceed 12 months from the date of death) exercise an Option to
the extent the Option was exercisable on the date of the Participant's death. If
the Termination Period is not specified in the Option Certificate, his personal
representatives may exercise such Option within 12 months of the Participant's
death and shall thereafter cease to have any rights to exercise that Option.
6.6 Subject to Rule 6.1, if a Participant ceases to be in Qualifying
Employment for any reason other than those specified in Rules 6.4 or 6.5, the
Participant may within the Termination Period exercise an Option to the extent
the Option is exercisable on the date of cessation of employment. If the
Termination Period is not specified in the Option Certificate, the Participant
may exercise such Option within 3 months of the cessation of his employment and
shall thereafter cease to have any rights to exercise that Option.
6.7 If a Participant (or his personal representatives) shall cease to have
any rights to exercise an Option under this Rule such Option shall lapse.
6.8 A female Participant whose employment has been terminated in
circumstances such that, pursuant to the Employment Rights Act 1996, she has a
right to return to work shall be deemed for the purposes of the Rules not to
have ceased to be in Qualifying Employment until such time as she is no longer
capable, pursuant to the said Act, of exercising a right to return to work and
has not exercised such right.
6.9 Notwithstanding the foregoing provisions, no Option may be exercised
when the Participant to whom it was granted is precluded from participating in
the Scheme by virtue of paragraph 8 of Schedule 9 to the Taxes Act.
6.10 Unless the Board provides otherwise, a Participant shall not be in
Qualifying Employment during any unpaid leave of absence.
7. Variation of capital
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7.1 In the event of any variation in or reorganisation of the share
capital of the Company whether by way of capitalisation or offer by way of
rights or reduction, sub-division or consolidation of shares then:
(A) the Option Price in respect of any Options granted pursuant to
the Scheme; and/or
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(B) the number of Scheme Shares subject to any such Option;
shall be varied by the Board in such manner as the Auditors advise to be in
their opinion fair and reasonable. Such variation by the Board shall be final
and binding on the Participants and the Company.
7.2 In no circumstances shall the Option Price as reduced or adjusted
pursuant to Rule 7.1 in respect of any Scheme Share be less than the nominal
value of such share.
7.3 Every alteration or variation made pursuant to this Rule shall be
subject to the prior approval of the Board of Inland Revenue shall be notified
forthwith by the Board to the Participants.
8. Exchange of Options
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8.1 This Rule 8 applies where a company ("the Acquiring Company")
(A) obtains Control of the Company as a result of:
(1) a general offer to acquire the whole of the issued share
capital of the Company (other than that which is already owned by it) made on a
condition such that if satisfied the Acquiring Company will have Control of the
Company; or
(2) a general offer to acquire all the Ordinary Shares (or such
Ordinary Shares as are not already owned by the Acquiring Company); or
(B) obtains Control of the Company in pursuance of a compromise or
arrangement sanctioned by the Court; or
(C) becomes bound or entitled to acquire Ordinary Shares.
8.2 If as a result of the events specified in Rule 8.1(A) and 8.1(B) the
Acquiring Company has obtained Control of the Company, or if the Acquiring
Company becomes bound or entitled to acquire shares in the Company as specified
in Rule 8.1(C), the Company shall seek the agreement of the Acquiring Company
and if such agreement is obtained the Company shall forthwith notify each
Participant thereof and any Subsisting Option may at any time during the
Appropriate Period be released by the Participant for a new Option which
satisfies the conditions that it:
(A) is over shares in the Acquiring Company or a company which has
Control of the Acquiring Company which satisfy the conditions specified in
paragraphs 10 to 14 of Schedule 9 to the Taxes Act (and the terms "Ordinary
Shares" and "Scheme Shares" in this Scheme shall thereafter be construed
accordingly);
(B) is the right to acquire such number of Scheme Shares as has on
acquisition of the new Option an aggregate market value equal to the aggregate
market value of the Scheme Shares subject to the old Option immediately before
its release;
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(C) has an Option Price per Scheme Share such that the total amount
payable on exercise is equal to the total amount payable on exercise of the old
Option; and
(D) is otherwise in identical terms to the old Option and for this
purpose references to "the Company" shall, unless the context otherwise
requires, be deemed to refer to "the Acquiring Company" or, as the case may be,
to the other company over whose shares the new Option is granted.
The new Option shall for all other purposes of the Scheme be treated
as having been acquired at the same time as the old Option in respect of which
it is granted.
8.3 The provisions of this Rule 8 shall apply with any consequential
amendments in the event that Control of the Acquiring Company itself changes as
a result of the events specified in Rule 8.1.
9. Takeover and liquidation
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9.1 If the agreement of the Acquiring Company (as defined in Rule 8.1)
cannot be obtained for the release of Subsisting Options for new options in
accordance with Rule 8.2, then subject to Rules 6.1 and 6.3 a Participant may at
any time within 6 months of the date upon which the offer described in Rule
8.1(A) becomes unconditional or the scheme of arrangement described in Rule
8.1(B) becomes effective exercise any Subsisting Options (either in whole or in
part) which are then held by him. At the end of the 6 month period, all
Subsisting Options shall lapse.
9.2 If the agreement of the Acquiring Company (as defined in Rule 8.1)
cannot be obtained for the release of Subsisting Options for new options in
accordance with Rule 8.2 and the Acquiring Company becomes entitled or bound to
acquire any Ordinary Shares a Participant shall be entitled (subject to Rules
6.1 and 6.3) to exercise any Subsisting Options (either in whole or in part)
which he holds at any time that the offeror is so entitled or bound. Upon the
Acquiring Company ceasing to be either so entitled or bound all Subsisting
Options shall lapse.
9.3 If the Court sanctions a compromise or arrangement proposed for the
purpose of or in connection with a scheme for the reconstruction of the Company
or its amalgamation with any other company or companies, a Participant shall be
entitled (subject to Rules 6.1 and 6.3) to exercise any Subsisting Options
(either in whole or in part) which he holds within the period of [6 months]
following the date of sanction by the Court and upon the expiry of such period
all Subsisting Options shall lapse.
9.4 If a notice of a meeting to consider a resolution for any other
voluntary winding up of the Company shall be given, the Board in its discretion
may provide that a Participant shall forthwith and until 10 days prior to the
commencement of the winding up be entitled (subject to Rules 6.1 and 6.3) to
exercise any Subsisting Option then held by him including Subsisting Options in
respect of Scheme Shares which would not otherwise yet have become exercisable.
Subject to the foregoing provisions of this Rule all Subsisting Options shall
lapse on the winding up of the Company.
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9.5 Upon the Board becoming aware that any of the events referred to above
has happened the effect thereof shall be notified forthwith by the Board to the
Participants.
10. Rights attaching to shares allotted pursuant to an Option
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All Scheme Shares allotted pursuant to the exercise of any Option shall as
to voting, dividend, transfer and other rights including those arising in the
liquidation of the Company, rank equally in all respects and as to one class
with the Ordinary Shares of the Company in issue as at the date of such
allotment, save that any allotment made after the earlier of the date of
announcement of a proposed dividend or other distribution and the Record Date of
a proposed dividend or other distribution shall be made upon terms that the
Ordinary Shares so allotted are not entitled to participate therein.
11. Availability of shares
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The Company will at all times keep sufficient authorised but unissued
Ordinary Shares or have under its control sufficient issued Ordinary Shares to
permit the exercise of all unexercised Options.
12. General
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12.1 Participation in the Scheme by a Participant is a matter entirely
separate from, and shall not affect, his pension rights and terms of employment
and, in particular (but without prejudice to the generality of the foregoing),
if a Participant shall cease for any reason (including, but without prejudice to
the generality of the foregoing, his wrongful dismissal) to be employed by or
hold office in the Company and/or any Subsidiary he shall not be entitled by way
of compensation for loss or otherwise howsoever, to any sum or benefit to
compensate him for the loss of any right or benefit under the Scheme.
12.2 The Company shall maintain all necessary books of account and records
relating to the Scheme.
12.3 The Scheme shall in all respects be administered by the Board which
may make such Rules not being inconsistent with the terms and conditions hereof
for the conduct of the Scheme as the Board thinks fit. Any dispute regarding the
interpretation of the Rules or the terms of any Option shall be determined by
the Board (upon such advice as it shall consider necessary) and its decision
shall be final and binding.
12.4 The Board may alter this Scheme in any respect except that:
(A) no alteration may be made which would alter to the disadvantage
of a Participant any rights already accrued to him except with his prior written
consent; and
(B) following the approval of the Scheme under Schedule 9 to the
Taxes Act, no alteration shall have effect until approved by the Board of Inland
Revenue.
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12.5 A Participant who is a director of the Company may, notwithstanding
his interest, vote on any resolution of the Board or the board of directors of
the Company concerning the Scheme (other than in respect of his own
participation therein) and may retain any benefits under the Scheme.
12.6 The Board or the Company in general meeting may at any time terminate
the Scheme and in such event no further Options will be granted but the
subsisting rights of Participants will not thereby be affected.
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PART B
1. This Part B will be known as the Concentric Networks United Kingdom Limited
Unapproved Share Option Scheme (the "Unapproved Scheme"). The Unapproved Scheme
has been adopted to provide for the grant of options to acquire shares to
employees and directors of the Group in cases where the Board wishes to grant
the employees or directors Options in addition to, or as an alternative to, the
grant of Options under Part A.
2. For the purposes of the Unapproved Scheme, the Rules shall apply subject to
the amendments provided for in paragraph 3. In applying the Rules, references
to the "Scheme" in Part A shall be construed as references to the Unapproved
Scheme in this Part B.
3. The amendments are as follows:
(A) Amend the definition of "the Adopting Date" to read:
"means the date on which the Board passes a resolution adopting the
Scheme".
(B) Delete (B) from the definition of "Eligible Employee".
(C) Amend the definition of "Scheme Shares" to read:
"means Ordinary Shares to be acquired by a Participant on the exercise
by him of an Option".
(D) Delete Rule 4.6 and renumber Rule 4.7.
(E) Delete Rule 5.3 and renumber Rule 5.4 and 5.3.
(F) Insert a new Rule 6.4 as follows:
"Exercise of an Option shall only be effective provided that as
regards any income tax and employee national insurance contributions
liability arising to the Participant on exercise either:
(A) such liability may be deducted in full from the Participant's
emoluments in accordance with regulations under Section 203 Taxes
Act; or
(B) the Participant appoints the Company as his agent to sell
sufficient Ordinary Shares acquired on exercise to meet such
liability; or
(C) the notice of exercise is accompanied by payment of a sum equal
to the tax due."
(G) Delete Rule 6.9.
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(H) Delete Rule 7.3.
(I) Replace Rule 8.2 with the following:
"If as a result of the events specified in Rule 8.1(A) and 8.1(B)
the Acquiring Company has obtained Control of the Company, or if
the Acquiring Company becomes bound or entitled to acquire shares
in the Company as specified in Rule 8.1(C), the Company shall
seek the agreement of the Acquiring Company and if such agreement
is obtained the Company shall forthwith notify each Participant
thereof and any Subsisting Option may at any time during the
Appropriate Period be released by the Participant for a new
Option on terms agreed between the Company and the Acquiring
Company and certified by the Auditors as fair and reasonable".
(J) Delete Rule 12.4(B).
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