<PAGE>
SCHEDULE 14C INFORMATION
Definitive Information Statement
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/X/ Definitive Information Statement
NEXTLINK COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
N/A
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
------------------------------------------------------------------------
(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):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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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:
N/A
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(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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<PAGE>
NEXTLINK COMMUNICATIONS, INC.
500 - 108(TH) AVENUE N.E., SUITE 2200
BELLEVUE, WASHINGTON 98004
(425) 519-3953
INFORMATION STATEMENT
We have sent you this information statement to inform you of an amendment to
the NEXTLINK Communications, Inc. Stock Option Plan. The amendment authorizes an
additional 5,000,000 shares of our Class A common stock to be issued under the
Stock Option Plan, increasing the maximum number of shares authorized for
issuance under the plan to 41,000,000, as adjusted for NEXTLINK's recent 100%
stock dividend. The amendment also provides that the maximum number of shares of
Class A common stock with respect to which options may be granted to any
individual in any calendar year is limited to the maximum number of shares
authorized for issuance under the plan. Our Board of Directors has unanimously
approved the amendment. In addition, the amendment was approved by written
consent of a stockholder that holds shares of NEXTLINK common stock with a
majority of the total voting power of all shares of outstanding common stock.
Because we are a corporation organized under the laws of the State of Delaware,
our stockholders may take action by written consent without a meeting.
This information statement is designed to inform you of the amendment to the
Stock Option Plan. It also summarizes information that we are required to
provide to you under the rules of the Securities and Exchange Commission. In
addition, this information statement serves as the notice that we are required
to provide to you under the laws of Delaware that action has been taken by less
than all stockholders of NEXTLINK by a written consent without a meeting of
stockholders.
This information statement is being mailed on or about November 23, 1999.
The amendment will become effective 20 days after the date on which we mail this
information statement to all stockholders of NEXTLINK.
INFORMATION ABOUT VOTES NECESSARY TO APPROVE THE AMENDMENT
Eagle River Investments, LLC approved the amendment to the Stock Option Plan
by a written consent dated October 19, 1999. Eagle River holds 37,743,574 shares
of Class B common stock, which represent approximately 57% of the total votes
attributable to all shares of common stock on that date.
Approval of the amendment to the Stock Option Plan requires an affirmative
vote of the majority of the total votes attributable to NEXTLINK's common stock.
NEXTLINK has issued two classes of common stock, Class A and Class B common
stock. We use the term "common stock" when referring to Class A and Class B
common stock together. Each share of Class A common stock is entitled to one
vote. As of October 19, 1999, there were 74,212,578 shares of Class A common
stock outstanding. Each share of Class B common stock is entitled to ten votes.
As of October 19, 1999, there were 58,906,550 shares of Class B common stock
outstanding. The holders of NEXTLINK's 14% Senior Exchangeable Redeemable
Preferred Stock and 6 1/2% Cumulative Convertible Preferred Stock are not
entitled to vote on matters such as the amendment to the Stock Option Plan.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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AMENDMENT OF STOCK OPTION PLAN
In January 1997, the stockholders approved the Stock Option Plan. We
presently are authorized to issue 36,000,000 shares of Class A common stock upon
the exercise of options granted under the Stock Option Plan, as adjusted for
NEXTLINK's 100% stock dividend paid on August 27, 1999. Effective October 19,
1999, our Board of Directors amended the Stock Option Plan to increase by
5,000,000 the number of shares that may be issued under the plan, increasing the
maximum number of shares authorized for issuance under the plan to 41,000,000.
The amendment also provides that the maximum number of shares of Class A common
stock with respect to which options may be granted to any individual in any
calendar year is limited to the maximum number of shares authorized for issuance
under the plan. Following the Board's action, Eagle River Investments, LLC,
which holds shares of common stock with a majority of the voting power
attributable to all shares of outstanding common stock, approved the amendment
by written consent.
The purpose of the Stock Option Plan is to promote company success by
providing a performance incentive for certain officers, employees, and
individuals who provide services to us, and to enable these individuals to
acquire or increase their proprietary interest in our success. Currently, the
Board feels that granting options to substantially all employees of NEXTLINK
provides an important incentive that is intended to promote company success. The
Board believes that the number of shares previously available for issuance were
insufficient to achieve the purpose of the Stock Option Plan over the term of
the plan and that the additional shares authorized are necessary to carry out
the purpose of the Stock Option Plan.
DESCRIPTION OF THE STOCK OPTION PLAN
The Board has appointed and authorized the Compensation Committee of the
Board to administer the Stock Option Plan, and its members currently are
Dennis M. Weibling and William A. Hoglund. When the Compensation Committee is
acting in its capacity as administrator of the Stock Option Plan, we refer to it
as the Plan Administrator. The Board may remove members from, or add members to,
the Compensation Committee at any time. The Board fills all vacancies on the
Compensation Committee, however caused.
Within the parameters established by the Stock Option Plan, the Plan
Administrator has the sole discretion to determine all terms and conditions of
options granted under the Stock Option Plan. These determinations include:
- selection of the individuals receiving option grants,
- the number of shares available under each option,
- the exercise price,
- the time or times at which options may be exercised, and
- whether all of the options may be exercisable at one time or in increments
over time.
Separate option grants under the Stock Option Plan need not be identical in
any respect, even when made simultaneously. The Plan Administrator provides each
optionee with an option agreement, which describes the relevant terms of the
option.
The Plan Administrator acts as the manager of the Stock Option Plan, and
possesses discretionary authority to determine all matters relating to the
options to be granted. The Plan Administrator has the sole authority to
interpret the provisions of the Stock Option Plan, any option issued under the
Stock Option Plan, and any rule or regulation applicable to the Stock Option
Plan. The Plan Administrator's interpretation is conclusive and binding on all
interested parties, so long as the interpretation and
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construction with respect to incentive stock options corresponds to the
requirements of the Internal Revenue Code of 1986 and related Internal Revenue
Service regulations.
The Plan Administrator may modify or amend outstanding options granted under
the Stock Option Plan. A modification or amendment, however, may not impair or
diminish any of the rights of any optionee or any of the obligations of NEXTLINK
without the consent of the optionee. Except as otherwise provided in the Stock
Option Plan, no outstanding option shall be terminated without the consent of
the optionee. Unless the optionee agrees otherwise, any change or adjustment to
an outstanding incentive stock option shall be made so as not to cause the
option to cease qualifying as an incentive stock option.
The Stock Option Plan terminates on January 15, 2007. No stock options may
be granted under the Stock Option Plan on or after January 15, 2007.
The Board has reserved the right to terminate, modify, or amend the Stock
Option Plan. The Board, however, must obtain stockholder approval for any
amendment that:
- increases the number of shares of Class A common stock available under the
Stock Option Plan,
- changes the determination of who is eligible to receive an option, or
- requires stockholder approval under applicable law.
The stock available for issuance under the Stock Option Plan are shares of
our authorized but unissued Class A common stock. As a consequence of the
amendment to the Stock Option Plan, a total of 41,000,000 shares may be issued
under the plan. The maximum number of shares with respect to which options may
be granted to any one individual may not exceed the total number of shares
authorized for issuance under the plan. When an option expires or terminates for
any reason, the number of unexercised or forfeited shares subject to the option
may again become available for grant under the Stock Option Plan.
With respect to grants of the shares authorized under the amendment, because
the officers and employees of NEXTLINK who may participate and the amount of
their options are determined by the Plan Administrator in its discretion, it is
not possible to state the names or positions of, or the number of options that
may be granted to, NEXTLINK's officers and employees in the future. As a
consequence, we have omitted the New Plan Benefits table.
Incentive stock options may be granted only to employees of NEXTLINK (or a
parent or subsidiary corporation of NEXTLINK), including Board members who also
are employees of NEXTLINK (or employees of a parent or subsidiary corporation of
NEXTLINK). Nonqualified options may be granted to employees and non-employee
consultants of NEXTLINK (or a corporate or non-corporate parent or subsidiary),
including non-employee Board members. Certain limitations apply to 10%
stockholders. NEXTLINK currently employs approximately 3,300 persons, each of
whom is eligible to receive options under the Stock Option Plan.
The Stock Option Plan requires that the purchase price per share of Class A
common stock under each incentive stock option be not less than the fair market
value of the Class A common stock on the date the option is granted, except
where the option is a substituted or assumed option from another plan, and the
exercise price relates to the original exercise price, in accordance with
applicable provisions of the Internal Revenue Code. Certain additional
limitations apply to the grant of incentive stock options to 10% stockholders.
The aggregate shares of Class A common stock available to an optionee
through incentive stock options that are exercisable for the first time during a
calendar year may not exceed $100,000 in value. For purposes of this limit, the
Class A common stock must be valued at its fair market value as of the option
grant date. To the extent an incentive stock option exceeds this limitation, it
shall be considered a nonqualified stock option.
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An option holder desiring to exercise an option must notify NEXTLINK in
writing of his or her intention to exercise an option for the number of shares
specified in the notice and pay to NEXTLINK the full purchase price provided in
the option. Payment of the purchase price may be by any method provided for in
an optionee's individual option agreement, which may provide that payments may
be made in cash, by check, by delivering a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to
NEXTLINK the amount of sale proceeds necessary to pay the exercise price, or
under the cashless exercise procedures set forth in the Stock Option Plan.
For tax purposes, NEXTLINK is required to withhold from the optionee's
compensation or collect from the optionee an amount for federal, state and local
taxes resulting from the optionee's compensation income, if any, at the time of
exercise. See "Federal Income Tax Consequences Relating to the Stock Option
Plan" below. At its discretion, NEXTLINK may require an optionee who receives
shares of stock to reimburse NEXTLINK for any such taxes required to be withheld
and may withhold any distribution in whole or in part until NEXTLINK is so
reimbursed. In lieu of such withholding or reimbursement, NEXTLINK has the right
to withhold from any other cash amounts due or to become due from NEXTLINK to
the optionee an amount equal to such taxes or to retain and withhold a number of
shares that have a market value not less than the amount of such taxes required
to be withheld as reimbursement for any such taxes and cancel any such shares so
withheld.
An optionee must exercise his or her option, if at all, before it expires.
Each individual option agreement specifies a term after which such option
expires. Such term shall not exceed ten years with respect to incentive stock
options, 15 years with respect to nonqualified options and five years in the
case of a 10% stockholder. Notwithstanding an individual option agreement's
stated term, in most cases, an option expires three months after termination of
the employment of the individual to whom the option was granted (unless the
termination is for cause, as defined in the Stock Option Plan, in which case the
option shall expire immediately). Special rules apply in the event of an
optionee's death or disability. In addition, options shall terminate if the
stockholders of NEXTLINK receive cash, stock, or other property in exchange for
or in connection with their shares of Class A common stock as a result of a
merger, consolidation, acquisition of property or stock, separation,
reorganization, or liquidation of NEXTLINK (other than a mere reincorporation,
creation of a holding company, or merger in which NEXTLINK's stockholders
maintain a proportionate ownership interest in the survivor corporation). Prior
to such an event, the optionee shall have the right to exercise his or her
option, in whole or in part, to the extent vested.
Options granted under the Stock Option Plan and the rights and privileges
conferred thereby may not be transferred, assigned, pledged, or hypothecated in
any manner (whether by operation of law or otherwise), other than by will or
applicable laws of descent and distribution. Nonqualified stock options,
however, may be transferred to a revocable trust established by the optionee for
his or her descendants, to an immediate family member, or to a partnership in
which only immediate family members or such estate-planning trusts are partners.
Options shall not be subject to execution, attachment, or similar process. Upon
any attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of
any option under the Stock Option Plan, or any rights or privileges conferred by
the Stock Option Plan, contrary to the provisions of the Stock Option Plan, or
upon the sale or levy or any attachment or similar process upon the rights and
privileges conferred by the Stock Option Plan, such option shall thereupon
terminate and become void. No person may create a lien on any funds, securities,
or other property held under the Stock Option Plan.
The issuance of the additional shares of Class A common stock upon the
exercise of options is subject to registration with the Securities and Exchange
Commission of such shares.
The closing price of NEXTLINK's Class A common stock as reported on the
Nasdaq Stock Market on November 18, 1999 was $56.9375.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE STOCK OPTION PLAN
The federal income tax consequences of an employee's participation in the
Stock Option Plan are complex and subject to change. The following discussion is
only a summary of the general rules applicable to the Stock Option Plan as of
the date hereof. The application of state and local income taxes and other
federal taxes is not discussed.
INCENTIVE STOCK OPTIONS
If an option granted under the Stock Option Plan is treated as an incentive
stock option, the optionee will not recognize any income upon either the grant
or the exercise of the option, and NEXTLINK will not be allowed a deduction for
federal tax purposes upon such a grant or exercise. Upon a sale of the shares,
the tax treatment to the optionee and NEXTLINK will depend primarily upon
whether the optionee has met certain holding period requirements at the time he
or she sells the shares. In addition, as discussed below, the exercise of an
incentive stock option may subject the optionee to alternative minimum tax
liability.
If an optionee exercises an incentive stock option and does not dispose of
the shares received within two years after the date of grant of such option or
within one year after the transfer of the shares to him or her, any gain
realized upon the disposition will be treated as a gain from the sale of stock
and taxed at capital gain rates. The capital gain rates are subject to change
and vary depending on how long the shares have been held.
If the optionee disposes of the shares either within two years after the
date the option is granted or within one year after the transfer of the shares
to him or her, such disposition will be treated as a disqualifying disposition
and an amount equal to the lesser of (i) the fair market value of the shares on
the date of exercise minus the purchase price, or (ii) the amount realized on
the disposition minus the purchase price, will be taxed as ordinary income to
the optionee in the taxable year in which the disposition occurs. However, in
the case of gifts, sales to related parties, and certain other transactions, the
full difference between the fair market value of the stock and the purchase
price will be treated as compensation income. The excess, if any, of the amount
realized upon disposition over the fair market value at the time of the exercise
of the option will be treated as gain from the sale of stock and taxed at
capital gain rates if the optionee has held the shares for more than one year
following the exercise of the option. The capital gain rates are subject to
change and vary depending on how long the shares have been held. In the event of
a disqualifying disposition, NEXTLINK may withhold income taxes from the
optionee's compensation with respect to the ordinary income realized by the
optionee as a result of the disqualifying disposition.
In general, there will be no federal income tax deductions allowed to
NEXTLINK upon the grant, exercise, or termination of an incentive stock option.
However, in the event an optionee sells or disposes of stock received on the
exercise of an incentive stock option in a disqualifying disposition, NEXTLINK
will be entitled to a deduction for federal income tax purposes in an amount
equal to the ordinary income, if any, recognized by the optionee upon
disposition of the shares, provided that the deduction is not otherwise
disallowed under the Internal Revenue Code.
The exercise of an incentive stock option may subject an optionee to
alternative minimum tax liability. The excess of the fair market value of the
shares at the time an incentive stock option is exercised over the purchase
price of the shares is included in an optionee's alternative minimum taxable
income, even though it is not included in taxable income for purposes of
determining the optionee's regular tax liability. Consequently, an optionee may
be obligated to pay alternative minimum tax in the year he or she exercises an
incentive stock option.
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NONQUALIFIED STOCK OPTIONS
Nonqualified stock options granted under the Stock Option Plan do not
qualify as "incentive stock options" and will not qualify for any special tax
benefits to the optionee. An optionee generally will not recognize any taxable
income at the time he or she is granted a nonqualified option. However, upon its
exercise, the optionee will recognize ordinary income for federal tax purposes
measured by the excess of the then fair market value of the shares over the
exercise price. The income realized by the optionee will be subject to income
and other employee withholding taxes.
The optionee's basis for determination of gain or loss upon the subsequent
disposition of shares acquired upon the exercise of a nonqualified stock option
will be the amount paid for such shares plus any ordinary income recognized as a
result of the exercise of such option. Upon disposition of any shares acquired
pursuant to the exercise of a nonqualified stock option, the difference between
the sale price and the optionee's basis in the shares will be treated as a gain
or loss from the sale of stock and taxed at capital gain or loss rates if the
optionee has held the shares for more than one year following the exercise of
the option. The capital gain rates are subject to change and vary depending on
how long the shares have been held.
In general, there will be no federal income tax deduction allowed to
NEXTLINK upon the grant or termination of a nonqualified stock option or a sale
or disposition of the shares acquired upon the exercise of a nonqualified stock
option. However, upon the exercise of a nonqualified stock option, NEXTLINK will
be entitled to a deduction for federal income tax purposes equal to the amount
of ordinary income that an optionee is required to recognize as a result of the
exercise, provided that the deduction is not otherwise disallowed under the
Internal Revenue Code.
NO APPROVAL REQUIRED
The Board has unanimously approved the amendment to the Stock Option Plan.
Eagle River Investments, LLC, which holds a majority of the total number of
votes attributable to all shares of outstanding common stock, the only class of
capital stock of NEXTLINK outstanding and entitled to vote on such matters, has
adopted a resolution approving the amendment by written consent in lieu of a
meeting pursuant to Section 228(a) of the Delaware General Corporation Law. The
Board has not solicited any proxies or consents from any other stockholders in
connection with this action.
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended December 31,
1998, 1997 and 1996, individual compensation information for the Chief Executive
Officer of NEXTLINK, and each of the four most highly compensated executive
officers of NEXTLINK who were serving as executive officers at December 31,
1998, and any former executive officer who was not an executive officer at
December 31, 1998, but was one of the four most highly compensated individuals
at NEXTLINK during 1998 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------ ------
SECURITIES
UNDERLYING ALL OTHER
OPTIONS COMPENSATION
YEAR SALARY ($) BONUS($)(1) (#)(2) ($)(3)
-------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Wayne M. Perry.......................... 1998 8,023 -- 150 --
Chief Executive Officer (4) 1997 -- -- 882,672 --
1996 -- -- -- --
George M. Tronsrue III.................. 1998 247,115 223,000 150 5,152
President, Chief Operating Officer(5) 1997 43,535 70,000 510,000 --
1996 -- -- -- --
Kathleen H. Iskra....................... 1998 180,077 92,874 380,150 8,000
Vice President, Chief Financial 1997 126,923 68,100 63,554 6,130
Officer and Treasurer 1996 121,233 62,250 135,490 1,575
R. Gerard Salemme....................... 1998 212,885 410,000(6) 225,000 8,000
Senior Vice President External Affairs 1997 126,154 -- 132,400 --
and Industry Relations 1996 -- -- -- --
Jan Loichle............................. 1998 180,077 92,874 360,150 8,000
Vice President, Chief Integration 1997 123,424 65,938 63,554 6,476
Officer (7) 1996 109,075 32,040 75,028 5,498
James F. Voelker (8).................... 1998 284,615 250,000 500,000 10,000
1997 218,509 225,000 3,373,012 8,641
1996 160,600 200,000 30,000 6,523
</TABLE>
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(1) Includes bonuses for the corresponding fiscal years that were paid
subsequent to the stated calendar year end.
(2) Represents options to acquire shares of Class A common stock. Share figures
have been retroactively restated to reflect NEXTLINK's 100% stock dividend,
paid on August 27, 1999 to stockholders of record on August 18, 1999.
Effective January 31, 1997, NEXTLINK Communications, L.L.C. was merged with
and into NEXTLINK Communications, Inc. The information for 1996 presented in
this table reflects the grant of options for the purchase of Class A Common
Stock under NEXTLINK's Stock Option Plan in substitution for options granted
previously pursuant to the Amended and Restated Equity Option Plan of
NEXTLINK Communications, L.L.C.
(3) Represents contributions made by NEXTLINK on behalf of the executive officer
under NEXTLINK's 401(k) Plan.
(4) Mr. Perry became Chief Executive Officer of NEXTLINK on July 21, 1997. Prior
to that date, Mr. Perry was a Director of NEXTLINK since June 1997.
Effective March 26, 1999, Mr. Perry
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resigned as Chief Executive Officer, although he retained his position as
Vice Chairman of the Board of Directors. Steven W. Hooper, NEXTLINK's
Chairman of the Board of Directors, filled the position of Chief Executive
Officer that was vacated by Mr. Perry. Effective September 21, 1999, the
Board of Directors appointed Daniel F. Akerson as NEXTLINK's Chairman and
Chief Executive Officer, at which time Mr. Hooper resigned his positions as
Chairman and Chief Executive Officer and was appointed Vice Chairman.
(5) Effective October 7, 1999, Mr. Tronsrue resigned as NEXTLINK's President and
Chief Operating Officer.
(6) Includes a signing bonus paid in 1998 at Mr. Salemme's one-year anniversary.
(7) Effective June 9, 1999, Ms. Loichle was appointed Vice President, Chief
Integration Officer. Prior to that date, Ms. Loichle served as Vice
President, Chief of Local Exchange Operations.
(8) Effective July 17, 1998, Mr. Voelker resigned as President and from
NEXTLINK's Board of Directors and the Board of Directors elected George M.
Tronsrue III, who had been serving as NEXTLINK's Chief Operating Officer, to
fill the position of President vacated by Mr. Voelker.
OPTION GRANTS IN LAST FISCAL YEAR
Share and per share figures (including exercise or base price figures) have
been retroactively restated to reflect NEXTLINK's 100% stock dividend, paid on
August 27, 1999 to stockholders of record on August 18, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES GRANTED TO ANNUAL RATES OF STOCK PRICE
UNDERLYING EMPLOYEES IN EXERCISE OR APPRECIATION FOR OPTION TERMS ($)
OPTIONS FISCAL YEAR BASE PRICE ------------------------------------------
NAME GRANTED (#) (%) ($/SH) EXPIRATION DATE 0% 5% 10%
- ---- ----------- ------------ ----------- ----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wayne M. Perry........... 150(1) * 11.28 December 16, 2008 0 1,064 2,697
George M. Tronsrue III... 150(1) * 11.28 December 16, 2008 0 1,064 2,697
Kathleen H. Iskra........ 200,000(2) 1.30 12.25 January 21, 2008 0 1,540,792 3,904,669
140,000(3) 0.91 18.00 August 14, 2008 0 1,470,792 3,834,669
150(1) * 11.28 December 16, 2008 0 1,064 2,697
40,000(4) 0.26 11.28 December 16, 2008 0 283,789 719,176
R. Gerard Salemme........ 200,000(5) 1.30 10.625 October 1, 2008 0 1,153,150 3,094,907
25,000(4) 0.16 11.28 December 16, 2008 0 177,368 449,485
Jan Loichle.............. 210,000(6) 1.36 12.25 January 21, 2008 0 1,617,831 4,099,902
110,000(3) 0.71 18.00 August 14, 2008 0 1,155,622 3,012,954
150(1) * 11.28 December 16, 2008 0 1,064 2,697
40,000(4) 0.26 11.28 December 16, 2008 0 283,789 719,176
James F. Voelker......... 500,000(7) 3.24 12.25 July 15, 2008 2,500,000 7,924,216 16,246,029
</TABLE>
- ------------------------
* Represents 0.0009875% of total options granted to employees in 1998.
(1) Granted on December 17, 1998 and is fully exercisable as of the date of
grant.
(2) Granted on January 22, 1998 and becomes exercisable ratably over four years
at 25% per year.
(3) Granted on August 14, 1998 and becomes exercisable over four years, 10% as
of December 31, 1998, and 22.5% as of the first through fourth anniversary
of the date of grant.
(4) Granted on December 17, 1998 and becomes exercisable ratably over four years
at 25% per year.
(5) Granted on October 2, 1998 and becomes exercisable ratably over four years
at 25% per year.
(6) Granted on January 22, 1998 and becomes exercisable ratably over two years
at 50% per year.
(7) Granted on July 16, 1998 and becomes exercisable ratably over four years at
25% per year. Market value on the date of grant was $17.25.
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AGGREGATED FISCAL YEAR END OPTION VALUES
Share figures have been retroactively restated to reflect NEXTLINK's 100%
stock dividend, paid on August 27, 1999 to stockholders of record on August 18,
1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
SHARES UNDERLYING UNEXERCISED OPTIONS MONEY OPTIONS AT FISCAL YEAR
ACQUIRED ON AT FISCAL END ($)
EXERCISE VALUE ------------------------------- -----------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wayne M. Perry.......... -- -- 220,818 662,004 2,256,215 6,767,336
George M. Tronsrue
III................... 127,500 1,036,416 102,150 280,500 1,043,131 2,867,411
R. Gerard Salemme....... -- -- 33,100 324,300 338,365 1,800,251
Kathleen H. Iskra....... 21,702 327,075 36,356 468,176 279,378 1,750,083
Jan Loichle............. 4,412 41,034 51,328 444,136 515,497 1,664,998
James F. Voelker........ 725,218 9,378,616 1,352,420 848,658 19,064,689 5,254,045
</TABLE>
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
We have entered into an employment agreement with James F. Voelker,
NEXTLINK's former President, expiring on December 31, 1999, subject to earlier
termination under certain conditions. Under this agreement, Mr. Voelker will
receive a base salary at a rate equivalent to an annual salary of $275,000 from
July 16, 1998 to December 31, 1999. Mr. Voelker will also receive an annual
bonus of $250,000 for each of 1998 and 1999. In the event that NEXTLINK
terminates Mr. Voelker's employment without cause, he is entitled to his salary
and bonus for the remainder of the term of the agreement. All stock options
which had been granted to Mr. Voelker prior to the date we entered into the
employment agreement will continue to vest according to their original vesting
schedules through December 31, 2000. On December 31, 2000, all unvested options
will then immediately vest. Mr. Voelker's employment agreement also contains
non-competition and confidentiality provisions.
We have entered into an employment agreement with George M. Tronsrue III,
expiring on October 6, 2001, subject to earlier termination. The agreement
provides for a base salary of $235,000 and $255,000 for the first and second
years of employment, respectively, and no less than $255,000 for each year
thereafter, subject to negotiation. The agreement also provides for a bonus
payment of $140,000 in the first year of employment, and bonuses thereafter to
be determined based upon the performance of Mr. Tronsrue and NEXTLINK. In
addition, in connection with the execution of this employment agreement,
NEXTLINK granted Mr. Tronsrue options to purchase 510,000 shares of Class A
Common Stock, 25% of which vested immediately and the remainder of which vest in
tranches over the four years following Mr. Tronsrue's employment date. The
options have an exercise price of $3.965 per share. Mr. Tronsrue's employment
agreement also contains confidentiality provisions. Effective October 7, 1999,
Mr. Tronsrue resigned as President and Chief Operating Officer of NEXTLINK, and
his employment with NEXTLINK was terminated. In connection with Mr. Tronsrue's
resignation, we amended his employment agreement to provide, upon termination of
his employment, a lump sum payment of $255,000, acceleration of vesting of
options to purchase 25,000 shares of Class A common stock and medical and dental
benefits for one year, or, if earlier, until he commences employment with a
third party.
We have entered into an agreement with Jan Loichle in connection with her
appointment as Vice President, Chief Integration Officer. The agreement provides
that, if Ms. Loichle is employed with NEXTLINK as of December 31, 2000, then as
of that date all of stock options that remain unvested will vest immediately. In
addition, if Ms. Loichle's employment is terminated by NEXTLINK without cause,
NEXTLINK will pay to her compensation that she would otherwise receive under the
agreement through December 31, 2000 and all of her stock options will
immediately become fully vested. Under certain circumstances and subject to
certain conditions, in the event of a change of control of
9
<PAGE>
NEXTLINK, the following options to purchase shares of Class A common stock
granted to Ms. Loichle shall vest in full: an option to purchase 75,028 shares
granted in August 1996, an option to purchase 17,654 shares granted in
January 1997, an option to purchase 28,246 shares granted in June 1997, an
option to purchase 17,654 shares granted in July 1997, an option to purchase
110,000 shares granted in August 1998, and an option to purchase 40,000 shares
granted in December 1998.
The vesting of certain options granted to some Named Executive Officers
accelerate under certain circumstances. The vesting of an option to purchase
882,672 shares of Class A Common Stock granted to Mr. Perry in June 1997, an
option to purchase 132,400 shares of Class A Common Stock granted to
Mr. Salemme in June 1997, and an option to purchase 200,000 shares of Class A
Common Stock granted to Mr. Salemme in October 1998 accelerates in the event
that Craig O. McCaw, or an entity or entities he controls, no longer has control
of a majority of the votes of NEXTLINK. In addition, the option to purchase
200,000 shares of Class A Common Stock granted to Mr. Salemme in October 1998
provides for acceleration of vesting upon the happening of certain mergers,
sales of substantially all of NEXTLINK's assets, acquisitions of voting power of
NEXTLINK, and changes in the composition of NEXTLINK's Board of Directions, or
upon liquidation or dissolution of NEXTLINK. In all other cases, these options
become fully vested over four years.
COMPENSATION OF DIRECTORS
Each director is entitled to reimbursement for out-of-pocket expenses
incurred for each Board or Committee meeting attended. Mr. Hooper received
$8,023 in 1998 for services as Chairman of the Board. No other compensation was
paid to any directors in 1998.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of October 1, 1999, with
respect to the beneficial ownership of NEXTLINK's common stock of persons known
to NEXTLINK to be the beneficial owners of more than five percent of a class of
NEXTLINK common stock (other than officers and directors). Share figures have
been retroactively restated to reflect NEXTLINK's 100% stock dividend paid on
its common stock on August 27, 1999. The information below has been derived from
reports filed with the Securities and Exchange Commission by, or representations
received from, the holders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------------------------
PERCENT OF PERCENT OF
TOTAL TOTAL
AMOUNT AND PERCENT SHARES VOTING
NAME AND ADDRESS OF TITLE OF NATURE OF OF OUTSTANDING POWER
BENEFICIAL OWNER CLASS OWNERSHIP CLASS (%) (%) (%)
- ---------------------------------------------------- -------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Eagle River Investments, LLC(1)..................... Class A 0 0
2300 Carillon Point Class B 37,743,574 64.25 28.45 57.07
Kirkland, WA 98033
Ampersand Telecom, LLC.............................. Class A 0 0
1332 Anacapa, Suite 200 Class B 19,445,298 33.10 14.66 29.40
Santa Barbara, CA 93101
The Ampersand Telecom Trust(2)...................... Class A 0 0
1332 Anacapa, Suite 200 Class B 19,445,298 33.10 14.66 29.40
Santa Barbara, CA 93101
Wendy P. McCaw(3)................................... Class A 0 0
1332 Anacapa, Suite 200 Class B 19,445,298 3.10 14.66 29.40
Santa Barbara, CA 93101 3
Putnum(4)........................................... Class A 13,569,264 18.35
One Post Office Square Class B 0 0 10.23 2.05
Boston, MA 02109
Janus Capital....................................... Class A 9,427,540 12.75 0
100 Filmore Street Class B 0 7.11 1.43
Denver, CO 80206
FMR Capital(5)...................................... Class A 5,077,120 0 6.87
82 Devonshire Street Class B 0 3.83 *
Boston, MA 02109
BWP, Inc............................................ Class A 3,939,800 5.33
707 S.W. Washington, 8(th) Floor Class B 0 0 2.97 *
Portland, OR 97205
</TABLE>
- ------------------------------
(1) Eagle River has pledged substantially all of its shares of NEXTLINK stock to
secure a credit arrangement.
(2) The Ampersand Telecom Trust is the Managing Member of Ampersand Telecom, LLC
and has sole right to vote on all matters affecting Ampersand Telecom, LLC.
(3) Wendy P. McCaw is the sole beneficiary of The Ampersand Telecom Trust, a
revocable trust. The trustee of the Trust, Gregory Parker, may exercise his
duties under the trust only pursuant to the written directions of Wendy P.
McCaw.
(4) Of this amount, 2,300,990 shares are beneficially held by Putnam Voyage
Fund, and 4,916,800 shares are held by Putnam OTC & Emerging Growth Fund.
(5) Of this amount, 5,026,442 shares are beneficially held by: Fidelity
Management & Research Company, a wholly-owned subsidiary of FMR, as a result
of acting as an investment advisor, Edward C. Johnson 3d, Chairman of FMR,
and owner of 12.0% of its outstanding voting stock, and Abigail Johnson, a
director of FMR, and owner of 24.5% of its outstanding voting stock.
* Less than 1%.
11
<PAGE>
The following table sets forth information, as of October 1, 1999, with
respect to the beneficial ownership of NEXTLINK's common stock by
(1) NEXTLINK's Board of Directors, (2) each of the Named Executive Officers, and
(3) all directors and executive officers as a group. In general, "beneficial
ownership" includes those shares a director or executive officer has the power
to vote, or the power to transfer, and stock options that are exercisable
currently or become exercisable within 60 days. Except as otherwise noted, the
persons named in the table below have sole voting and investment power with
respect to all shares shown as beneficially owned by them. Share figures have
been retroactively restated to reflect NEXTLINK's 100% stock dividend paid on
its common stock on August 27, 1999.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
--------------------------------------------------
PERCENT OF PERCENT OF
TOTAL TOTAL
AMOUNT AND PERCENT SHARES VOTING
NAME AND ADDRESS OF TITLE OF NATURE OF OF OUTSTANDING POWER
BENEFICIAL OWNER CLASS OWNERSHIP CLASS (%) (%) (%)
- ---------------------------------------------------- -------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Dan Akerson......................................... Class A 0 0
Class B 0 0 * *
William A. Hoglund.................................. Class A 16,800(2) *
Class B 0 0 * *
Steven W. Hooper.................................... Class A 312,818(3) *
Class B 117,650 * * *
Nicolas Kauser...................................... Class A 150 *
Class B 0 0 * *
Craig O. McCaw...................................... Class A 13,240 *
Class B 38,588,068(4) 65.69 29.09 58.34
Sharon L. Nelson.................................... Class A 22,066 *
Class B 0 0 * *
Gregory Parker...................................... Class A 4,000 *
Class B 19,445,298(5) 33.10 14.66 29.40
Wayne M. Perry...................................... Class A 516,766(6) *
Class B 117,650 * * *
Jeffrey S. Raikes................................... Class A 122,066 *
Class B 0 0 * *
Dennis Weibling..................................... Class A 3,000 *
Class B 37,743,574(7) 64.25 28.45 57.07
George M. Tronsrue III.............................. Class A 116,038 *
Class B 0 0 * *
Kathleen H. Iskra................................... Class A 168,380 *
Class B 0 0 * *
R. Gerard Salemme................................... Class A 131,350 *
Class B 0 0 * *
Jan Loichle......................................... Class A 280,480 *
Class B 0 0 * *
James F. Voelker (8)................................ Class A 1,803,453(9) 2.43
Class B 289,716(10) * 1.57 *
All directors and executive officers as a group..... Class A 1,909,230(11) 2.53
(18 persons) Class B 58,268,666(11) 98.70 44.76 87.81
</TABLE>
- ------------------------------
(1) In accordance with Commission rules, each beneficial owner's holdings have
been calculated assuming full exercise of outstanding options exercisable by
such owner within 60 days after October 1, 1999, but no exercise of
outstanding options held by any other person.
(2) Includes 6,500 shares of Class A common stock that Mr. Hoglund holds as
trustee of trusts for the benefit of his children. Mr. Hoglund disclaims
beneficial ownership of such shares.
12
<PAGE>
(3) Includes 42,000 shares of Class A common stock held by Mr. Hooper as trustee
of trusts for the benefit of his children and 50,000 shares of stock
Class A common stock held by irrevocable trusts for the benefit of
Mr. Perry's four children, for which Mr. Perry exercises no voting or
investment control.
(4) Includes 37,743,574 shares of Class B common stock held beneficially by
Mr. McCaw as a result of his ownership interests in Eagle River. Pursuant to
the terms of the Stock Distribution Agreement between Mr. McCaw and
Wendy P. McCaw, Mr. McCaw holds a proxy to vote the number of shares of
NEXTLINK stock held by Wendy P. McCaw that, when added to all NEXTLINK
capital stock held by Mr. McCaw or any of his affiliates or over which they
have voting rights, are necessary for Mr. McCaw to hold 51% of the voting
power of NEXTLINK. No shares owned or controlled by Wendy P. McCaw are
included in the beneficial holdings of Mr. McCaw.
(5) Mr. Parker is a member of Ampersand Telecom, LLC. Mr. Parker disclaims
beneficial ownership of such shares, except to the extent of his pecuniary
interest therein.
(6) Includes 7,280 shares of Class A common stock held by Mr. Perry's children.
Mr. Perry disclaims beneficial ownership of such shares.
(7) Mr. Weibling, who is President of Eagle River, Inc., an affiliate of Eagle
River, disclaims beneficial ownership in all securities held by Eagle River,
except to the extent of his pecuniary interest therein. Mr. Weibling is a
member of Eagle River.
(8) Effective July 17, 1998, Mr. Voelker resigned from NEXTLINK's Board of
Directors and as President of NEXTLINK.
(9) Includes 180,000 shares of Class A common stock that Mr. Voelker holds as
trustee of trusts for the benefit of his children.
(10) Includes shares of Class B common stock that are eligible for acquisition
upon exercise of a currently exercisable stock option, which has been
exercised in part, resulting in the issuance of 2,862,628 shares (all of
which have been converted into Class A common stock).
(11) See notes above.
* Less than 1%.
By Order of the Board of Directors,
[SIG]
R. Bruce Easter, Jr. Secretary
Bellevue, Washington
November 19, 1999
13
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
STOCK OPTION PLAN
(as amended on September 30, 1997, December 31, 1997, February 5, 1998,
February 4, 1999, May 3, 1999 and October 19, 1999)
SECTION 1. PURPOSE. The purpose of this Stock Option Plan (this "Plan")
is to provide a means whereby Nextlink Communications, Inc. (the "Company") or
any parent or subsidiary of the Company, as defined in Subsection 5.9 (the
"related entities"), may continue to attract, motivate and retain selected
employees, officers and independent contractors who can materially contribute to
the Company's growth and success, and to encourage stock ownership in the
Company through granting incentive stock options or nonqualified stock options,
or both, to purchase the Class A Common Stock of the Company (as defined in
Section 3), so that such key employees and other persons and entities will more
closely identify their interests with those of the Company and its shareholders.
In addition, options under this Plan may serve as replacement options for
options issued under the Equity Option Plan sponsored by the Company's
predecessor.
SECTION 2. ADMINISTRATION. This Plan shall be administered by the Board
of Directors of the Company (the "Board") or, in the event the Board shall
appoint or authorize a committee to administer this Plan, by such committee.
The administrator of this Plan shall hereinafter be referred to as the "Plan
Administrator."
2.1 PROCEDURES. The Board may designate one of the members of the
Plan Administrator as chairperson. The Plan Administrator may hold meetings at
such times and places as it shall determine. The acts of a majority of the
members of the Plan Administrator present at meetings at which a quorum exists,
or acts reduced to or approved in writing by all Plan Administrator members,
shall be valid acts of the Plan Administrator.
2.2 RESPONSIBILITIES. Except for the terms and conditions explicitly
required in this Plan, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted under
this Plan, including selection of the individuals to be granted options, the
number of shares to be subject to each option, the exercise price, and all other
terms and conditions of the options. Grants under this Plan need not be
identical in any respect, even when made simultaneously. The interpretation and
construction by the Plan Administrator of any terms or provisions of this Plan
or any option issued under this Plan, or of any rule or regulation promulgated
in connection with this Plan, shall be conclusive and binding on all interested
parties, so long as such interpretation and construction with respect to
incentive stock options correspond to the requirements of Section 422 of the
Internal Revenue Code (the "Code"), as amended, and the regulations thereunder.
2.3 SECTION 16(b) COMPLIANCE AND BIFURCATION OF PLAN. In the event
the Company registers any of its equity securities pursuant to Section 12(b) or
12(g) of the Exchange Act, it is the intention of the Company that this Plan,
and options granted under this Plan, comply in all respects with Rule 16b-3
under the Exchange Act and, if any Plan provision is later found not to be in
compliance with such Section, the provision shall be deemed null and void, and
in all events this Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3.
Page 1 - STOCK OPTION PLAN
<PAGE>
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the use of any provision of this Plan to participants who are
officers and directors subject to Section 16(b) of the Exchange Act without
so restricting, limiting or conditioning other Plan participants.
SECTION 3. STOCK SUBJECT TO THIS PLAN. The stock subject to this Plan
shall be the Company's Class A Common Stock (the "Class A Common Stock"),
presently authorized but unissued or now held or subsequently acquired by the
Company as treasury shares. Subject to adjustment as provided in Section 7 of
this Plan, the aggregate amount of Class A Common Stock to be delivered upon the
exercise of all options granted under this Plan shall not exceed 41,000,000
shares (the "Plan Maximum") as such Class A Common Stock was constituted on the
effective date of this Plan. If any option granted under this Plan expires or
is surrendered, canceled, terminated or exchanged for another option for any
reason without having been exercised in full, the unpurchased shares subject to
such option shall again be available for purposes of this Plan, including use as
replacement options that may be granted in exchange for such surrendered,
canceled or terminated options.
SECTION 4. ELIGIBILITY. An incentive stock option may be granted only to
an individual who, at the time the option is granted, is an employee of the
Company (or a corporate related entity, as described in Section 5.9) and who the
Board may from time to time select for participation in this Plan. Members of
the Board shall not be eligible for grants of incentive stock options unless
they are also employees of the Company. At the discretion of the Plan
Administrator, employees and independent contractors of the Company (including
nonemployee directors) or any related entity may receive nonqualified stock
options. Notwithstanding anything to the contrary herein, the maximum number of
shares of Class A Common Stock with respect to which options may be granted to
any individual in any calendar year shall not exceed the Plan Maximum, as such
number may change from time to time. Any party to whom an option is granted
under this Plan shall be referred to in this Plan as an "Optionee."
SECTION 5. TERMS AND CONDITIONS OF OPTIONS. Options granted under this
Plan shall be evidenced by written agreements that contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan. Notwithstanding the
foregoing, options shall include or incorporate by reference the following terms
and conditions:
5.1 NUMBER OF SHARES. The maximum number of shares that may be
purchased pursuant to the exercise of each option, which number shall be as
established by the Plan Administrator.
5.2 PRICE OF SHARES. The price per share at which each option is
exercisable (the "exercise price") shall be as established by the Plan
Administrator, provided that the Plan Administrator shall act in good faith to
establish the exercise price as follows:
5.2.1 INCENTIVE STOCK OPTIONS AND NONQUALIFIED STOCK OPTIONS.
With respect to incentive stock options intended to qualify under Section 422 of
the Code, and subject to Subsection 5.2.2 below, the exercise price shall be not
less than the fair market value per share
Page 2 - STOCK OPTION PLAN
<PAGE>
of the Class A Common Stock at the time the option is granted, except with
respect to the substitution of a new option for an old option, or an
assumption of an old option, in accordance with Code Section 424(a). With
respect to nonqualified stock options, the exercise price shall be the amount
set by the Plan Administrator.
5.2.2 INCENTIVE STOCK OPTIONS TO GREATER THAN 10% SHAREHOLDERS.
With respect to incentive stock options granted to greater than 10% shareholders
of the Company, the exercise price shall be as required by Section 6.
5.2.3 FAIR MARKET VALUE. The fair market value per share of the
Class A Common Stock for the purpose of determining the exercise price under
this Section 5.2 shall be determined as follows:
(a) if the Common Stock is listed on any established stock
exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") System, the fair market value shall be
the closing sales price for such stock (or the closing bid, if no sales were
reported), as quoted on such system or exchange for the last market trading
date prior to the time of determination as reported in The Wall Street
Journal or such other source as the Plan Administrator deems reliable;
(b) if the Common Stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the fair
market value shall be the mean between the high and low asked prices for the
Common Stock on the last market trading date prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Plan Administrator deems reliable; or
(c) In the absence of an established market for the Common
Stock, fair market value shall be determined by the Plan Administrator in
good faith at the time the option is granted.
5.3 TERM AND MATURITY. Subject to the restrictions contained in
Section 6 with respect to granting incentive stock options to greater than 10%
shareholders of the Company, the term of each incentive stock option shall be 10
years from the date it is granted unless a shorter period of time is established
by the Plan Administrator, but in no event shall the term of any incentive stock
option exceed 10 years. The term of each nonqualified stock option shall be 15
years from the date it is granted, unless a shorter period of time is
established by the Plan Administrator in the individual option agreement. To
ensure that the Company or related entities will achieve the purpose and receive
the benefits contemplated in this Plan, any option granted under this Plan
shall, unless this condition is waived or modified by the Plan Administrator in
the agreement evidencing the option, or by subsequent resolution of the Plan
Administrator, be exercisable according to the following schedule:
Page 3 - STOCK OPTION PLAN
<PAGE>
<TABLE>
<CAPTION>
Period of Optionee's Continuous Portion of Total Option
Relationship With the Company or Which is Exercisable
Related Entity from the Date the
Option is Granted
<S> <C>
After one year 25%
After two years 50%
After three years 75%
After four years 100%
</TABLE>
5.4 EXERCISE. Subject to the vesting schedule described in
subsection 5.3 above, if any, and to any additional holding period required by
applicable law, each option may be exercised in whole or in part; provided,
however, that only whole shares will be issued pursuant to the exercise of any
option and that the exercise price shall not be less than the par value per
share of the Class A Common Stock at the time the option is exercised. During
an Optionee's lifetime, any stock options granted under this Plan are personal
to him or her and are exercisable solely by such Optionee, except as provided in
Section 5.8. Options shall be exercised by delivery to the Company of notice of
the number of shares with respect to which the option is exercised, together
with payment of the exercise price.
5.5 PAYMENT OF EXERCISE PRICE. Payment of the option exercise price
shall be made in full at the time the notice of exercise of the option is
delivered to the Company and shall be in cash, bank certified or cashier's check
or personal check (unless at the time of exercise the Plan Administrator in a
particular case determines not to accept a personal check) for the Class A
Common Stock being purchased.
The Plan Administrator can determine at the time the option is
granted for incentive stock options, or at any time before exercise for
nonqualified stock options, that additional forms of payment will be permitted,
including installment payments on such terms and over such period as the Plan
Administrator may determine in its discretion. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws and regulations and state corporate
law), an option may be exercised by:
(a) delivery of shares of stock of the Company held by an
Optionee having a fair market value equal to the exercise price, such fair
market value to be determined in good faith by the Plan Administrator;
(b) delivery of a full-recourse promissory note executed by the
Optionee, provided that (i) such note delivered in connection with an incentive
stock option shall, and such note delivered in connection with a nonqualified
stock option may, in the sole discretion of the Plan Administrator, bear
interest at a rate specified by the Plan Administrator but in no case less than
the rate required to avoid imputation of interest (taking into account any
exceptions to the imputed interest rules) for federal income tax purposes; (ii)
the Plan Administrator in its sole discretion shall specify the term and other
provisions of such note at the time an incentive stock
Page 4 - STOCK OPTION PLAN
<PAGE>
option is granted or at any time prior to exercise of a nonqualified stock
option; (iii) the Plan Administrator may require that the Optionee pledge the
Optionee's shares to the Company for the purpose of securing the payment of
such note and may require that the certificate representing such shares be
held in escrow in order to perfect the Company's security interest; (iv) the
note provides that 90 days following the Optionee's termination of employment
with the Company or a related entity, the entire outstanding balance under
the note shall become due and payable, if not previously due and payable; and
(v) the Plan Administrator in its sole discretion may at any time restrict or
rescind this right upon notification to the Optionee;
(c) delivery of a properly executed exercise notice, together
with irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price and any federal, state
or local withholding tax obligations that may arise in connection with the
exercise; provided, that the Plan Administrator, in its sole discretion, may at
any time determine that this Subparagraph (c), to the extent the instructions to
the broker call for an immediate sale of the shares, shall not be applicable to
any Optionee who is subject to Section 16(b) of the Exchange Act if such
transaction would result in a violation of Section 16(b), or is not an employee
at the time of exercise;
(d) delivery of a properly executed exercise notice, together
with a request by the Optionee for the Company to pay the exercise price by
withholding from the shares that would otherwise be issued that number of shares
having a fair market value equal to the option exercise price; provided, the
Plan Administrator retains complete discretion to honor or deny the Optionee's
request for such a method of exercise.
5.6 SHAREHOLDERS' AGREEMENT. To the extent required by the Plan
Administrator upon exercise of an option the Optionee shall agree to enter into
and be bound by the agreement then in effect, if any, between the Company and
its shareholders relating to the repurchase by the Company of its outstanding
Class A Common Stock.
5.7 WITHHOLDING TAX REQUIREMENT. The Company or any related entity
shall have the right to retain and withhold from any payment of cash or Class A
Common Stock under this Plan the amount of taxes required by any government to
be withheld or otherwise deducted and paid with respect to such payment. At its
discretion, the Company may require an Optionee receiving shares of Class A
Common Stock to reimburse the Company or a related entity for any such taxes
required to be withheld and may withhold any distribution in whole or in part
until the Company, or related entity, is so reimbursed. In lieu of such
withholding or reimbursement, the Company (or related entity) shall have the
right to withhold from any other cash amounts due or to become due from the
Company (or related entity) to the Optionee an amount equal to such taxes or to
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld as reimbursement for any such taxes
and cancel (in whole or in part) any such shares so withheld.
5.8 NONTRANSFERABILITY OF OPTION. Options granted under this Plan
and the rights and privileges conferred by this Plan may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable
Page 5 - STOCK OPTION PLAN
<PAGE>
laws of descent and distribution; provided, with respect to a non-qualified
stock option, an Optionee may transfer the option to a revocable trust
created by the Optionee for the benefit of his or her descendants, to an
immediate family member or to a partnership in which only immediate family
members or such trusts are partners. Options under this Plan shall not be
subject to execution, attachment or similar process. Any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of any option
under this Plan or of any right or privilege conferred by this Plan, contrary
to the Code or to the provisions of this Plan, or the sale or levy or any
attachment or similar process upon the rights and privileges conferred by
this Plan shall be null and void. Notwithstanding the foregoing, an Optionee
may during the Optionee's lifetime, designate a person who may exercise the
option after the Optionee's death by giving written notice of such
designation to the Plan Administrator. Such designation may be changed from
time to time by the Optionee by giving written notice to the Plan
Administrator revoking any earlier designation and making a new designation.
5.9 TERMINATION OF RELATIONSHIP. If the Optionee's employment
relationship with the Company or any related entity ceases for any reason other
than termination for cause, death or permanent and total disability, and unless
by its terms the option sooner terminates or expires, then the Optionee may
exercise, for a period of three months after such cessation, that portion of the
Optionee's option which is exercisable at the time of such cessation. The
Optionee's option, however, shall terminate at the end of the three month period
following such cessation as to all Shares for which it has not been exercised,
unless such provision is waived in the agreement evidencing the option or by
resolution adopted by the Plan Administrator. If, in the case of an incentive
stock option, an Optionee's relationship with the Company or related entity
changes (i.e., from employee to nonemployee, such as a consultant), such change
shall constitute a termination of an Optionee's employment with the Company or
related entity and the Optionee's incentive stock option shall terminate in
accordance with this subsection. Upon the expiration of the three month period
following cessation of employment, the Plan Administrator shall have sole
discretion in a particular circumstance to extend the exercise period following
such cessation beyond that specified above. If, however, in the case of an
incentive stock option, the Optionee does not exercise the Optionee's option
within three months after cessation of employment, the option will no longer
qualify as an incentive stock option under the Code.
Upon an Optionee's termination of employment for cause, all of
the optionee's outstanding (i.e., unexercised) options issued under this Plan
shall immediately expire and no longer be available for exercise. For purposes
of this Plan, a termination shall be considered for "cause" if the termination
is attributable to the Optionee's: (a) Embezzlement; (b) use of illegal drugs
or alcohol that materially impairs the Optionee's ability to fulfill his or her
duties as an employee or independent contractor; (c) willful disclosure of trade
secrets or confidential information of the Company; (d) dishonesty which results
in substantial harm to the Company; or (e) conviction or confession of a
criminal felony.
If an Optionee's relationship with the Company or any related
entity ceases because of a permanent and total disability, the Optionee's option
shall not terminate, and in the case of an incentive stock option, shall not
cease to be treated as an incentive stock option, until the end of the 12-month
period following such cessation (unless by its terms it sooner terminates
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and expires). As used in this Plan, the term "permanent and total
disability" has the same meaning provided in Code Section 22(e)(3).
For purposes of this subsection 5.9, a transfer of relationship
between or among the Company and/or any related entity shall not be deemed to
constitute a cessation of relationship with the Company or any of its related
entities. For purposes of this subsection 5.9, with respect to incentive stock
options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
As used in this Plan, the term "related entity," when referring
to a subsidiary, shall mean any business entity (other than the Company) which,
at the time of the granting of the option, is in an unbroken chain of entities
ending with the Company, if stock or voting interests possessing 50% or more of
the total combined voting power of all classes of stock or other ownership
interests of each of the entities other than the Company is owned by one of the
other entities in such chain. When referring to a parent entity, the term
"related entity" shall mean any entity in an unbroken chain of entities ending
with the Company if, at the time of the granting of the option, each of the
entities other than the Company owns stock or other ownership interests
possessing 50% or more of the total combined voting power of all classes of
stock (or other ownership interests) in one of the other entities in such chain.
In addition, with respect to an incentive stock option, the definition of
"related entity" as used in this Plan shall apply by only considering entities
that are corporations.
5.10 DEATH OF OPTIONEE. If an Optionee dies while he or she has a
relationship with the Company or any related entity or dies within the three
month period (or 12-month period in the case of totally disabled Optionees)
following cessation of such relationship, any option held by such Optionee to
the extent that the Optionee would have been entitled to exercise such option,
may be exercised within one year after his or her death by the personal
representative of his or her estate or by the person or persons to whom the
Optionee's rights under the option shall pass by will or by the applicable laws
of descent and distribution.
5.11 STATUS OF SHAREHOLDER. Neither the Optionee nor any party to
which the Optionee's rights and privileges under the option may pass shall be,
or have any of the rights or privileges of, a shareholder of the Company with
respect to any of the shares issuable upon the exercise of any option granted
under this Plan unless and until such option has been exercised.
5.12 CONTINUATION OF EMPLOYMENT. Nothing in this Plan or in any
option granted pursuant to this Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of a related entity, or to interfere in
any way with the right of the Company or of any related entity to terminate his
or her employment or other relationship with the Company or a related entity at
any time.
5.13 MODIFICATION AND AMENDMENT OF OPTION. Subject to the
requirements of Code Section 422 with respect to incentive stock options and to
the terms and conditions and within
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the limitations of this Plan, the Plan Administrator may modify or amend
outstanding options granted under this Plan. The modification or amendment of
an outstanding option shall not, without the consent of the Optionee, impair
or diminish any of his or her rights or any of the obligations of the Company
under such option. Except as otherwise provided in this Plan, no outstanding
option shall be terminated without the consent of the Optionee. Unless the
Optionee agrees otherwise, any changes or adjustments made to outstanding
incentive stock options granted under this Plan shall be made in such a
manner so as not to constitute a "modification" as defined in Code Section
424(h) and so as not to cause any incentive stock option issued hereunder to
fail to continue to qualify as an incentive stock option as defined in Code
Section 422(b).
5.14 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS. As to all
incentive stock options granted under the terms of this Plan, to the extent that
the aggregate fair market value (determined at the time the incentive stock
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the Optionee during any calendar year
(under this Plan and all other incentive stock option plans of the Company, a
related entity or a predecessor corporation) exceeds $100,000, those options (or
the portion of an option) beyond the $100,000 threshold shall be treated as
nonqualified stock options. The previous sentence shall not apply if the
Internal Revenue Service publicly rules, issues a private ruling to the Company,
any Optionee, or any legatee, personal representative or distributee of an
Optionee or issues regulations changing or eliminating such annual limit.
SECTION 6. GREATER THAN 10% SHAREHOLDERS.
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS. If incentive
stock options are granted under this Plan to employees who own more than 10% of
the total combined voting power of all classes of stock of the Company or any
related entity, the term of such incentive stock options shall not exceed five
years and the exercise price shall be not less than 110% of the fair market
value of the Class A Common Stock at the time the incentive stock option is
granted. This provision shall control notwithstanding any contrary terms
contained in an option agreement or any other document.
6.2 ATTRIBUTION RULE. For purposes of subsection 6.1, in determining
stock ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its shareholders, partners or beneficiaries. If an employee or a person
related to the employee owns an unexercised option or warrant to purchase stock
of the Company, the stock subject to that portion of the option or warrant which
is unexercised shall not be counted in determining stock ownership. For
purposes of this Section 6, stock owned by an employee shall include all stock
actually issued and outstanding immediately before the grant of the incentive
stock option to the employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The aggregate
number and class of shares for which options may -be granted under this Plan,
the number and class of shares covered by each outstanding option and the
exercise price per share thereof (but not the total
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price), and each such option, shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Class A Common Stock
of the Company resulting from a split-up or consolidation of shares or any
like capital adjustment, or the payment of any stock dividend.
7.1 EFFECT OF LIQUIDATION, REORGANIZATION OR CHANGE IN CONTROL.
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK. Except as
provided in subsection 7.1.2, upon a merger (other than a merger of the
Company in which the holders of Class A Common Stock immediately prior to the
merger have the same proportionate ownership of Class A Common Stock in the
surviving corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization (other than a
mere reincorporation or the creation of a holding company) or liquidation of
the Company, as a result of which the shareholders of the Company receive
cash, stock or other property in exchange for or in connection with their
shares of Class A Common Stock, any option granted under this Plan shall
terminate. Notwithstanding the foregoing, the Optionee shall have the right
immediately prior to any such merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation to exercise such option
in whole or in part, to the extent the vesting requirements set forth in this
Plan have been satisfied, unless stated otherwise in the Optionee's
individual option agreement.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE. If
the shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Class A Common Stock in
any transaction involving a merger (other than a merger of the Company in
which the holders of Class A Common Stock immediately prior to the merger
have the same proportionate ownership of common stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation or reorganization (other than a mere
reincorporation or the creation of a holding company), all options granted
under this Plan shall be converted into options to purchase shares of
Exchange Stock unless the Company and the corporation issuing the Exchange
Stock, in their sole discretion, determine that any or all such options
granted under this Plan shall not be converted into options to purchase
shares of Exchange Stock, but instead shall terminate in accordance with the
provisions of subsection 7.1.1. The amount and price of converted options
shall be determined by adjusting the amount and price of the options granted
under this Plan in the same proportion as used for determining the number of
shares of Exchange Stock the holders of the Class A Common Stock receive in
such merger, consolidation, acquisition of property or stock, separation or
reorganization. Unless accelerated by the Board, the vesting schedule set
forth in the option agreement shall continue to apply for the Exchange Stock.
7.1.3 CHANGE IN CONTROL. In the event of a "Change in
Control," as defined in Section 7.1.4 below, of the Company after the Company
has registered any of its equity securities pursuant to Section 12(b) or
12(g) of the Exchange Act, unless otherwise determined by the Board prior to
the occurrence of such Change in Control, any options or portions of such
options outstanding as of the date such Change in Control is determined to
have occurred that are not yet fully vested shall not become fully vested
merely by the occurrence of a Change in Control.
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<PAGE>
7.1.4 DEFINITION OF "CHANGE IN CONTROL." For purposes of this
Plan, a "Change in Control" shall mean (a) the first approval by the Board or
by the stockholders of the Company of an Extraordinary Event, (b) a Purchase,
or (c) a Board Change.
For purposes of the Plan, an "Extraordinary Event" shall mean any
of the following actions:
(i) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of Class A Common Stock would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of
common stock immediately prior to the merger have substantially the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger;
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially
all, the assets of the Company; or
(iii) the adoption of any plan or proposal for liquidation or
dissolution of the Company.
For purposes of the Plan, a "Purchase" shall mean the acquisition
by any person (as such term is defined in Section 13(d) of the Exchange Act)
of any shares of Class A Common Stock or securities convertible into Class A
Common Stock) without the prior approval of a majority of the Continuing
Directors (as defined below) of the Company, if after making such acquisition
such person is the beneficial owner (as such term is defined in Rule 13d-3
under the Exchange Act) directly or indirectly of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities (calculated as provided in paragraph (d) of such Rule
13d-3).
For purposes of the Plan, a "Board Change" shall have occurred if
individuals who constitute the Board of the Company at the time of adoption
of this Plan (the "Continuing Directors") cease for any reason to constitute
at least a majority of the Board, provided that any person becoming a
Director subsequent to the date of adoption of this Plan whose nomination for
election was approved by a vote of at least a majority of the Continuing
Directors (other than a nomination of an individual whose initial assumption
of office is in connection with an actual threatened election contest
relating to the election of the Directors of the Company, as such terms are
used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be deemed
to be a Continuing Director.
7.2 FRACTIONAL SHARES. In the event of any adjustment in the number
of shares covered by any option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL. All Section 7 adjustments
shall be made by the Board, and its determination as to what adjustments shall
be made, and the extent of such adjustments, shall be final, binding and
conclusive. Unless an Optionee agrees otherwise, any
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change or adjustment to an incentive stock option shall be made in such a
manner so as not to constitute a "modification" as defined in Code Section
424(h) and so as not to cause his or her incentive stock option issued under
this Plan to fail to continue to qualify as an incentive stock option as
defined in Code Section 422(b).
SECTION 8. SECURITIES REGULATION. Shares shall not be issued with
respect to an option granted under this Plan unless the exercise of such option
and the issuance and delivery of such shares pursuant to the exercise of such
option shall comply with all relevant provisions of law, including, without
limitation, any applicable state securities laws, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance, including the availability of an exemption from
registration for the issuance and sale of any shares under this Plan. Inability
of the Company to obtain from any regulatory body having jurisdiction, the
authority deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares under this Plan or the unavailability of an
exemption from registration for the issuance and sale of any shares under this
Plan shall relieve the Company of any liability in respect of the nonissuance or
sale of such shares as to which such requisite authority shall not have been
obtained.
As a condition to the exercise of an option, the Company may
require the Optionee to represent and warrant at the time of any such exercise
that the shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation, may be stamped on stock
certificates in order to assure exemption from registration. The Plan
Administrator may also require such other action or agreement by the Optionees
as may from time to time be necessary to comply with the federal and state
securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE
REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.
Should any of the Company's capital stock of the same class as
the stock subject to options granted under this Plan be listed on a national
securities exchange, all stock issued under this Plan if not previously listed
on such exchange shall be authorized by that exchange for listing on such
exchange prior to the issuance of such stock.
SECTION 9. AMENDMENT AND TERMINATION.
9.1 BOARD ACTION. The Board may at any time suspend, amend or
terminate this Plan, provided that except as set forth in Section 7, the
approval of the Company's shareholders is necessary within 12 months before or
after the adoption by the Board of any amendment which will:
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(a) increase the number of shares which are to be reserved
for the issuance of options under this Plan;
(b) permit the granting of stock options to a class of
persons other than those presently permitted to receive stock options under this
Plan; or
(c) require shareholder approval under applicable law,
including Section 16(b) of the Exchange Act.
Any amendment to this Plan that would constitute a "modification"
to incentive stock options outstanding on the date of such amendment shall not
be applicable to outstanding incentive stock options, but shall have prospective
effect only, unless individual Optionees agree otherwise.
9.2 AUTOMATIC TERMINATION. Unless sooner terminated by the Board,
this Plan shall terminate ten years from the earlier of (a) the date on which
this Plan is adopted by the Board or (b) the date on which this Plan is approved
by the shareholders of the Company. No option may be granted after such
termination or during any suspension of this Plan. The amendment or termination
of this Plan shall not, without the consent of the option holder, alter or
impair any rights or obligations under any option previously granted under this
Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN. This Plan shall become effective
upon adoption by the Board so long as it is approved by the Company's
shareholders any time within 12 months before or after the adoption of this
Plan.
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