<PAGE>
As filed with the Securities and Exchange Commission on April 26, 2000
Registration No. 333-________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
---------
COVAD COMMUNICATIONS GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 77-0461529
(State of Incorporation) (I.R.S. employer identification number)
2330 CENTRAL EXPRESSWAY, SANTA CLARA, CALIFORNIA 95050
(Address of Principal Executive Office) (Zip Code)
1997 STOCK OPTION PLAN OF LASER LINK.NET, INC.
(Full Title of the "Plan")
ROBERT E. KNOWLING, JR. COPY TO:
--------
Chairman, Board of Directors, President MEREDITH S. JACKSON, ESQ.
and Chief Executive Officer ASHOK W. MUKHEY, ESQ.
Covad Communications Group, Inc. GEOFFREY M. TRACHTENBERG, ESQ.
2330 Central Expressway Irell & Manella LLP
Santa Clara, California 95050 1800 Avenue of the Stars, Suite 900
(408) 844-7500 Los Angeles, California 90067-4276
(310) 277-1010
(Name, address including zip code and telephone number, including
area code, of registrants' agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================= ====================== ======================= ====================== ======================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE (2) OFFERING PRICE REGISTRATION FEE
- --------------------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Laser Link.Net, Inc.
1997 Stock Option Plan 1,390,796 $4.766 $6,628,533.70 $1,749.93
Common Stock, $0.001 par value
======================================= ====================== ======================= ====================== ======================
</TABLE>
(1) This Registration Statement shall also cover any additional shares
of Registrant's Common Stock which become issuable under the Laser
Link.Net, Inc. 1997 Stock Option Plan by reason of any stock dividend,
stock split, recapitalization or other similar transaction effected
without the Registrant's receipt of consideration which results in an
increase in the number of the Registrant's outstanding shares of Common
Stock.
(2) Calculated solely for the purpose of this Registration Statement
under Rule 457(h) of the Securities Act of 1933, as amended (the
"Securities Act") on the basis of the weighted average exercise price per
share of options to purchase 1,390,796 shares of Covad Communications
Group, Inc. ("Covad") Common Stock. These options were originally granted
pursuant to the 1997 Stock Plan of Laser Link.Net, Inc. and were assumed
by Covad pursuant to the Agreement and Plan of Merger, dated as of March
8, 2000, between the Registrant, Lightsaber Acquisition Co., a
wholly-owned subsidiary of the Registrant, and Laser Link.Net, Inc.
("Merger Agreement"), subject to an adjustment in the number of shares
and exercise price of the original options.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION.*
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.*
*Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with Rule
428 under the Securities Act and the Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The documents listed below are incorporated by reference in this
Registration Statement on Form S-8. In addition, all documents subsequently
filed by Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to the
filing of a post-effective amendment that indicates that all securities offered
have been sold or that deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be part hereof from the date of filing of such documents.
(a) Registrant's Annual Report on Form 10-K for the year ended December
31, 1999;
(b) Registrant's Current Reports on Form 8-K filed with the SEC on
February 7, 2000, February 22, 2000, March 9, 2000 and March 23, 2000;
(c) Registrant's Registration Statement on Form 8-A12G filed with the
Commission on January 19, 1999, and including any other amendments or
reports filed for the purpose of updating such description; and
(d) Registrant's Registration Statement on Form 8-A12G filed with the
Commission on February 22, 2000, and including any other amendments
or reports filed for the purpose of updating such description, in
which there is described the terms, rights and provisions applicable
to the Registrant's Stock Purchase Rights Pursuant to a Stockholder
Protection Rights Agreement, dated as of February 15, 2000, between
the Company and BankBoston, N.A., as Rights Agent.
Any statement contained herein or in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is
incorporated or deemed to be incorporated herein by reference modifies or
supersedes such prior statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
2
<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify such person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation or is or was serving at its request in such capacity in another
corporation or business association, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
or (iv) for any transaction from which the director derived an improper personal
benefit.
As permitted by Section 102(b)(7) of the DGCL, the Registrant's Amended and
Restated Certificate of Incorporation includes a provision that limits a
director's personal liability to the Registrant or its stockholders for monetary
damages for breaches of his or her fiduciary duty as a director. Article X of
the Registrant's Amended and Restated Certificate of Incorporation provides that
no director of the Registrant shall be personally liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty to the
fullest extent permitted by the DGCL.
As permitted by Section 145 of the DGCL, the Registrant's Bylaws provide
that, to the fullest extent permitted by the DGCL, directors, officers and
certain other persons who are made, or are threatened to be made, parties to, or
are involved in, any action, suit or proceeding will be indemnified by the
Registrant with respect thereto. Article VI of the Registrant's Bylaws provides
for the indemnification of officers, directors, employees and agents of the
corporation if such person acted in good faith and in a manner reasonably
believed to be in and not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding the indemnified party had no
reason to believe his conduct was unlawful.
The Registrant maintains insurance policies under which its directors and
officers are insured, within the limits and subject to the limitations of the
policies, against expenses in connection with the
3
<PAGE>
defense of actions, suits or proceedings, and certain liabilities that might be
imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been directors or officers of the
Registrant. The Registrant also entered into agreements to indemnify the
Registrant's directors and executive officers, in addition to the
indemnification provided for in the Registrant's Amended and Restated
Certificate of Incorporation and Bylaws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
4.1 Instruments Defining the Rights of Stockholders. Reference is made to
the Registrant's Registration Statements on Form 8-A12G, together with
the amendments and exhibits thereto, filed on January 19, 1999 and
February 22, 2000, which are incorporated herein by reference pursuant
to Item 3(d).
5.1 Opinion of Irell & Manella LLP as to the legality of securities being
registered.
23.1 Consent of Irell & Manella LLP (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
99.1 1997 Stock Option Plan of Laser Link.Net, Inc.
99.2 Form of Incentive Stock Option Agreement under the Plan.
99.3 Form of Agreement to Defer Vesting for One Year.
99.4 Form of Escrow Agreement
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the
4
<PAGE>
low or high and of the estimated maximum offering range may
be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii)To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by Registrant pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Clara, State of California, on this 25th day
of April 2000.
COVAD COMMUNICATIONS GROUP, INC.,
a Delaware corporation
By: /s/ TIMOTHY LAEHY
--------------------------------
Timothy Laehy
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert E. Knowling, Jr. and Timothy Laehy,
or either of them, his true and lawful attorneys-in-fact and agents, each with
full power of substitution for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including without limitation
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each of said attorneys-in-fact
and agents full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, lawfully to
all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that either of said attorneys-in-fact and agents,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT E. KNOWLING, JR. Chairman, Board of Directors, President April 25, 2000
- ---------------------------------------- and Chief Executive Officer (principal
Robert E. Knowling, Jr. executive officer)
/s/ TIMOTHY LAEHY Chief Financial Officer (principal April 25, 2000
- ---------------------------------------- financial and accounting officer)
Timothy Laehy
Director April __, 2000
- ----------------------------------------
Robert Hawk
/s/ HELLENE RUNTAGH Director April 25, 2000
- ----------------------------------------
Hellene Runtagh
/s/ DANIEL LYNCH Director April 25, 2000
- ----------------------------------------
Daniel Lynch
/s/ FRANK MARSHALL Director April 25, 2000
- ----------------------------------------
Frank Marshall
/s/ RICH SHAPERO Director April 25, 2000
- ----------------------------------------
Rich Shapero
</TABLE>
6
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
4.1 Instruments Defining the Rights of Stockholders. Reference
is made to the Registrant's Registration Statements on
Form 8-A12G, together with the amendments and exhibits
thereto, filed on January 19, 1999 and February 22, 2000,
which are incorporated herein by reference pursuant to
Item 3(d).
5.1 Opinion of Irell & Manella LLP as to the legality of the
securities being registered.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Irell & Manella LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
99.1 1997 Stock Option Plan of Laser Link.Net, Inc.
99.2 Form of Incentive Stock Option Agreement under the Plan.
99.3 Form of Agreement to Defer Vesting for One Year.
99.4 Form of Escrow Agreement
7
<PAGE>
EXHIBIT 5.1
OPINION OF IRELL & MANELLA LLP
[Irell & Manella, LLP Letterhead]
April 25, 2000
Covad Communications Group, Inc.
2330 Central Expressway
Santa Clara, California 95050
Re: Covad Communications Group, Inc. Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to Covad Communications Group, Inc., a
Delaware corporation (the "Company") in connection with the registration on Form
S-8 (the "Registration Statement") under the Securities Act of 1933, as amended,
of an aggregate of 1,390,796 shares of the Company's Common Stock, par value
$0.001 (the "Shares") and related stock options under the 1997 Stock Option Plan
of Laser Link.Net, Inc. (the "Plan").
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the assumption of the Plan
and the options outstanding thereunder. Based on such review, we are of the
opinion that if, as and when the Shares are issued and sold (and the
consideration therefor received) pursuant to the provisions of option agreements
duly authorized under the Plan and in accordance with the Registration
Statement, such Shares will be duly authorized, legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement. In giving this consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Act, the rules and regulations of the Securities and Exchange Commission
promulgated thereunder, or Item 509 of Regulation S-K.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
/s/ Irell & Manella LLP
Irell & Manella LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-8 of our reports dated January 21, 2000 and
March 20, 2000, appearing in Covad Communications Group, Inc.'s Annual
Report on Form 10-K, as amended, for the year ended December 31, 1999.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
Walnut Creek, California
April 25, 2000
<PAGE>
EXHIBIT 99.1
LASER LINK COMMUNICATIONS, INC.
1997 STOCK OPTION PLAN
1. PURPOSE OF PLAN
The purpose of this 1997 Stock Option Plan (the "Plan") is to provide additional
incentive to officers, other key employees, and directors of, and important
consultants to, Laser Link Communications, Inc., a Pennsylvania corporation (the
"Company"), and each present or future parent or subsidiary corporation, by
encouraging them to invest in shares of the Company's common stock, $.01 par
value ("Common Stock"), and thereby acquire a proprietary interest in the
Company and an increased personal interest in the Company's continued success
and progress.
2. AGGREGATE NUMBER OF SHARES
Five hundred thousand (500,000) shares of the Company's Common Stock shall be
the aggregate number of shares which may be issued under this Plan.
Notwithstanding the foregoing, in the event of any change in the outstanding
shares of the Common Stock of the Company by reason of a stock dividend, stock
split, combination of shares, recapitalization, merger, consolidation, transfer
of assets, reorganization, conversion or what the Committee (defined in Section
4(a)), deems in its sole discretion to be similar circumstances, the aggregate
number and kind of shares which may be issued under this Plan shall be
appropriately adjusted in a manner determined in the sole discretion of the
Committee. Reacquired shares of the Company's Common Stock, as well as unissued
shares, may be used for the purpose of this Plan. Common Stock of the Company
subject to options which have terminated unexercised, either in whole or in
part, shall be available for future options granted under this Plan.
3. CLASS OF PERSONS ELIGIBLE TO RECEIVE OPTIONS
All officers and key employees of the Company and of any present or future
Company parent or subsidiary corporation are eligible to receive an option or
options under this Plan. All directors of, and important consultants to, the
Company and of any present or future Company parent or subsidiary corporation
are also eligible to receive an option or options under this Plan, except that
directors and consultants who are not employees as described in the first
sentence of this Section 3 are not eligible to receive an incentive stock option
as described in Section 5(a) hereof. The individuals who shall, in fact, receive
an option or options shall be selected by the Committee, in its sole discretion,
except as otherwise specified in Section 4 hereof. No individual may receive
options under this Plan for more than 90% of the total number of shares of the
Company's Common Stock authorized for issuance under this Plan.
4. ADMINISTRATION OF PLAN
(a) Prior to the registration of the Company's Common Stock under Section
12 of the Securities Exchange Act of 1934, this Plan shall be administered by
the Company's Board of Directors and, after such registration, by an Option
Committee ("Committee") appointed by the Company's Board of Directors. The
Committee shall consist of a
<PAGE>
minimum of two and a maximum of five members of the Board of Directors, each of
whom shall be a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)
under the Securities Exchange Act of 1934, as amended, or any future
corresponding rule, except that the failure of the Committee for any reason to
be composed solely of Non-Employee Directors shall not prevent an option from
being considered granted under this Plan. The Committee shall, in addition to
its other authority and subject to the provisions of this Plan, determine which
individuals shall in fact be granted an option or options, whether the option
shall be an incentive stock option or a non-qualified stock option (as such
terms are defined in Section 5(a)), the number of shares to be subject to each
of the options, the time or times at which the options shall be granted, the
rate of option exercisability, and, subject to Section 5 hereof, the price at
which each of the options is exercisable and the duration of the option. The
term "Committee", as used in this Plan and the options granted hereunder, refers
to the Board of Directors prior to the registration of the Company's Common
Stock under Section 12 of the Securities Exchange Act of 1934 and, after such
registration, to the Committee; prior to such registration, the Board of
Directors may consist of only one director.
(b) The Committee shall adopt such rules for the conduct of its business
and administration of this Plan as it considers desirable. A majority of the
members of the Committee shall constitute a quorum for all purposes. The vote or
written consent of a majority of the members of the Committee on a particular
matter shall constitute the act of the Committee on such matter. The Committee
shall have the right to construe the Plan and the options issued pursuant to it,
to correct defects and omissions and to reconcile inconsistencies to the extent
necessary to effectuate the Plan and the options issued pursuant to it, and such
action shall be final, binding and conclusive upon all parties concerned. No
member of the Committee or the Board of Directors shall be liable for any act or
omission (whether or not negligent) taken or omitted in good faith, or for the
exercise of an authority or discretion granted in connection with the Plan to a
Committee or the Board of Directors, or for the acts or omissions of any other
members of a Committee or the Board of Directors. Subject to the numerical
limitations on Committee membership set forth in Section 4(a) hereof, the Board
of Directors may at any time appoint additional members of the Committee and may
at any time remove any member of the Committee with or without cause. Vacancies
in the Committee, however caused, may be filled by the Board of Directors, if it
so desires.
<PAGE>
5. INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS
(a) Options issued pursuant to this Plan may be either incentive stock
options granted pursuant to Section 5(b) hereof or non-qualified stock options
granted pursuant to Section 5(c) hereof, as determined by the Committee. An
"incentive stock option" is an option which satisfies all of the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations thereunder, and a "non-qualified stock option" is an option
which either does not satisfy all of those requirements or the terms of the
option provide that it will not be treated as an incentive stock option. The
Committee may grant both an incentive stock option and a non-qualified stock
Option to the same person, or more than one of each type of option to the same
person. The option price for options issued under this Plan shall be equal at
least to the fair market value (as defined below) of the Company's Common Stock
on the date of the grant of the option. The fair market value of the Company's
Common Stock on any particular date shall mean the last reported sale price of a
share of the Company's Common Stock on any stock exchange on which such stock is
then listed or admitted to trading, or on the NASDAQ National Market System or
Small Cap NASDAQ, on such date, or if no sale took place on such day, the last
such date on which a sale took place, or if the Common Stock is not then quoted
on the NASDAQ National Market System or Small Cap NASDAQ, or listed or admitted
to trading on any stock exchange, the average of the bid and asked prices in the
over-the-counter market on such date, or if none of the foregoing, a price
determined in good faith by the Committee to equal the fair market value per
share of the Common Stock.
(b) Subject to the authority of the Committee set forth in Section 4(a)
hereof, incentive stock options issued pursuant to this Plan shall be issued
substantially in the form set forth in Appendix I hereof, which form is hereby
incorporated by reference and made a part hereof, and shall contain
substantially the terms and conditions set forth therein. Incentive stock
options shall not be exercisable after the expiration of ten years from the date
such options are granted, unless terminated earlier under the terms of the
option, except that options granted to individuals described in Section
422(b)(6) of the Code shall conform to the provisions of Section 422(c)(5) of
the Code. At the time of the grant of an incentive stock option hereunder, the
Committee may, in its discretion, amend or supplement any of the option terms
contained in Appendix I for any particular optionee, provided that the option as
amended or supplemented satisfies the requirements of Section 422 of the Code
and the regulations thereunder. Each of the options granted pursuant to this
Section 5(b) is intended, if possible, to be an "incentive stock option" as that
term is defined in Section 422(b) of the Code and the regulations thereunder. In
the event this Plan or any option granted pursuant to this Section 5(b) is in
any way inconsistent with the applicable legal requirements of the Code or the
regulations thereunder for an incentive stock option, this Plan and such option
shall be deemed automatically amended as of the date hereof to conform to such
legal requirements, if such conformity may be achieved by amendment.
(c) Subject to the authority of the Committee set forth in Section 4(a)
hereof, non-qualified stock options issued to officers and other key employees
pursuant to this Plan shall be issued substantially in the form set forth in
Appendix II hereof, which form is hereby incorporated by reference and made a
part hereof, and shall contain substantially the terms and conditions set forth
therein. Subject to the authority of the Committee set forth in Section 4(a)
hereof, non-qualified stock options issued to directors and important
consultants pursuant to this Plan shall be issued substantially in the form set
forth in Appendix III hereof, which form is hereby incorporated by reference and
made a part hereof, and shall contain substantially the terms and conditions set
forth therein.
<PAGE>
Non-qualified stock options shall expire ten years after the date they are
granted, unless terminated earlier under the option terms. At the time of
granting a non-qualified stock option hereunder, the Committee may, in its
discretion, amend or supplement any of the option terms contained in Appendix II
or Appendix III for any particular optionee.
(d) Neither the Company nor any of its current or future parent,
subsidiaries or affiliates, nor their officers, directors, shareholders, stock
option plan committees, employees or agents shall have any liability to any
optionee in the event (i) an option granted pursuant to Section 5(b) hereof does
not qualify as an "incentive stock option" as that term is used in Section 422
of the Code and the regulations thereunder; (ii) any optionee does not obtain
the tax treatment pertaining to an incentive stock option; or (iii) any option
granted pursuant to Section 5(c) hereof is an "incentive stock option."
6. AMENDMENT, SUPPLEMENT, SUSPENSION AND TERMINATION
Options shall not be granted pursuant to this Plan after the expiration of ten
years from the date the Plan is adopted by the Board of Directors of the
Company. The Board of Directors reserves the right at any time, and from time to
time, to amend or supplement this Plan in any way, or to suspend or terminate
it, effective as of such date, which date may be either before or after the
taking of such action, as may be specified by the Board of Directors; provided,
however, that such action shall not affect options granted under the Plan prior
to the actual date on which such action occurred. If an amendment or supplement
of this Plan is required by the Code or the regulations thereunder to be
approved by the shareholders of the Company in order to permit the granting of
"incentive stock options" (as that term is defined in Section 422 of the Code
and regulations thereunder) pursuant to the amended or supplemented Plan, such
amendment or supplement shall also be approved by the shareholders of the
Company in such manner as is prescribed by the Code and the regulations
thereunder. If the Board of Directors voluntarily submits a proposed amendment,
supplement, suspension or termination for shareholder approval, such submission
shall not require any future amendments, supplements, suspensions or
terminations (whether or not relating to the same provision or subject matter)
to be similarly submitted for shareholder approval.
7. EFFECTIVENESS OF PLAN
This Plan shall become effective on the date of its adoption by the Company's
Board of Directors, subject however to approval by the holders of the Company's
Common Stock in the manner as prescribed in the Code and the regulations
thereunder. Options may be granted under this Plan prior to obtaining
shareholder approval, provided such options shall not be exercisable until
shareholder approval is obtained.
8. GENERAL CONDITIONS
(a) Nothing contained in this Plan or any option granted pursuant to this
Plan shall confer upon any employee the right to continue in the employ of the
Company or any affiliated or subsidiary corporation or interfere in any way with
the rights of the Company or any affiliated or subsidiary corporation to
terminate his employment in any way.
(b) Nothing contained in this Plan or any option granted pursuant to this
Plan shall confer upon any director or consultant the right to continue as a
director of, or consultant to, the Company or any affiliated or subsidiary
corporation or interfere in any way with the rights of the Company or any
affiliated or subsidiary corporation, or their respective
<PAGE>
shareholders, to terminate the directorship of any such director or the
consultancy relationship of any such consultant.
(c) Corporate action constituting an offer of stock for sale to any person
under the terms of the options to be granted hereunder shall be deemed complete
as of the date when the Committee authorizes the grant of the option to the such
person, regardless of when the option is actually delivered to such person or
acknowledged or agreed to by him.
(d) The terms "parent corporation" and "subsidiary corporation" as used
throughout this Plan, and the options granted pursuant to this Plan, shall
(except as otherwise provided in the option form) have the meaning that is
ascribed to that term when contained in Section 422 of the Code and the
regulations thereunder, and the Company shall be deemed to be the grantor
corporation for purposes of applying such meaning.
(e) References in this Plan to the Code shall be deemed to also refer to
the corresponding provisions of any future United States revenue law.
(f) The use of the masculine pronoun shall include the feminine gender
whenever appropriate.
<PAGE>
APPENDIX I
INCENTIVE STOCK OPTION
To:
Name
Address
Date of Grant:
You are hereby granted an option, effective as of the date hereof, to purchase
__________ shares of common stock, $.01 par value ("Common Stock"), of Laser
Link Communications, Inc., a Pennsylvania corporation (the "Company") at a price
of $_______ per share pursuant to the Company's 1997 Stock Option Plan (the
"Plan").
Although your option is legally effective as of the date hereof, your right to
exercise your option does not become vested prior to your exercisability dates
described in the next succeeding paragraph.
Prior to one year from the date of grant, your option may be exercised for up to
25% of the total number of shares subject to the option minus the number of
shares previously purchased by exercise of the option (as adjusted for any
change in the outstanding shares of the Common Stock of the Company by reason of
a stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Each
succeeding year thereafter, your option may be exercised for up to an additional
25% of the total number of shares subject to the option minus the number of
shares previously purchased by exercise of the option (as adjusted for any
change in the outstanding shares of the Common Stock of the Company by reason of
a stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Thus, this
option is fully exercisable on and after _____ years after the date of grant,
except if terminated earlier as provided herein. No fractional shares shall be
issued or delivered. This option shall terminate and is not exercisable after
ten years from the date of its grant (the "Scheduled Termination Date"), except
if terminated earlier as hereafter provided.
In the event of a "Change of Control" (as defined below) of the Company, your
option may, notwithstanding the immediately preceding paragraph, be exercised
for up to 100% of the total number of shares then subject to the option minus
the number of shares previously purchased upon exercise of the option (as
adjusted for stock dividends, stock splits, combinations of shares and what the
Committee deems in its sole discretion to be similar circumstances) and your
vesting date may accelerate accordingly. A "Change of Control" shall be deemed
to have occurred upon the happening of any of the following events:
1. A change in the constituency of the Company's Board of Directors with the
result that individuals (the "Incumbent Directors") who are members of the Board
on the date
<PAGE>
hereof cease to constitute at least a majority of the Board of Directors,
provided that any individual who is elected or appointed to the Board of
Directors after the date hereof and whose nomination for election or appointment
was unanimously approved by the Incumbent Directors shall be considered an
Incumbent Director beginning on the date of his or her election to the Board of
Directors.
2. A person or group acting in concert as described in Section 13(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") acquires
beneficial ownership within the meaning of Rule 13(d)(3) promulgated under the
Exchange Act of a number of voting shares of the Company which constitutes more
than fifty percent of the shares which vote in the election of directors of the
Company.
3. Any other event deemed to constitute a "Change of Control" by the
Committee.
You may exercise your option by giving written notice to the Secretary of the
Company on forms supplied by the Company at its then principal executive office,
accompanied by payment of the option price for the total number of shares you
specify that you wish to purchase. The payment may be in any of the following
forms: (a) cash, which may be evidenced by a check and includes cash received
from a stock brokerage firm in a so-called "cashless exercise"; (b) (unless
prohibited by the Committee) certificates representing shares of Common Stock of
the Company, which will be valued by the Secretary of the Company at the fair
market value per share of the Company's Common Stock (as determined in
accordance with the Plan) on the date of delivery of such certificates to the
Company, accompanied by an assignment of the stock to the Company; or (c)
(unless prohibited by the Committee) any combination of cash and Common Stock of
the Company valued as provided in clause (b). Any assignment of stock shall be
in a form and substance satisfactory to the Secretary of the Company, including
guarantees of signature(s) and payment of all transfer taxes if the Secretary
deems such guarantees necessary or desirable.
If your employment is terminated Without Cause as defined in your Employment
Agreement with the Company dated _____________ (the "Employment Agreement") your
option will terminate the later of (i) 120 days after the date on which your
employment by the Company or a Company subsidiary is terminated or (ii) the
period of any "lock-up" agreement entered into in connection with an initial
public offering of the Company's securities registered under the Securities Act
of 1933 (an "Initial Public Offering") (but in no event later than the Scheduled
Termination Date). If your employment is terminated for Cause as defined in your
Employment Agreement or if you terminate your employment, your option will
terminate on the date on which your employment by the Company or a Company
subsidiary corporation is terminated (but in no event later than the Scheduled
Termination Date). If your employment is terminated by reason of Disability as
defined in your Employment Agreement, or death, your option will terminate one
year from the date of termination of employment due to Disability or death (but
in no event later than the Scheduled Termination Date). After the date your
employment is terminated, as aforesaid, you may exercise this option only for
the number of shares which you had a right to purchase and did not purchase on
the date your employment terminated. If you are employed by a Company subsidiary
corporation, your employment shall be deemed to have terminated on the date your
employer ceases to be a Company subsidiary corporation, unless you are on that
date transferred to the Company or another Company subsidiary corporation. Your
employment shall not be deemed to have terminated if you are transferred from
the Company to a Company subsidiary corporation, or vice versa, or from one
Company subsidiary corporation to another Company subsidiary corporation.
<PAGE>
If you die while employed by the Company or a Company subsidiary corporation,
your heirs, executor or administrator, as the case may be, may, at any time
within one year after the date of your death (but in no event later than the
Scheduled Termination Date), exercise the option as to any shares which you had
a right to purchase and did not purchase during your lifetime. If your
employment with the Company or a Company parent or subsidiary corporation is
terminated by reason of your becoming disabled (within the meaning of Section
22(e)(3) of the Code and the regulations thereunder), you or your legal guardian
or custodian may at any time within one year after the date of such termination
(but in no event later than the Scheduled Termination Date), exercise the option
as to any shares which you had a right to purchase and did not purchase prior to
such termination. Your executor, administrator, guardian or custodian must
present proof of his authority satisfactory to the Company prior to being
allowed to exercise this option.
In the event of any change in the outstanding shares of the Common Stock of the
Company by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Committee deems in its sole discretion to be similar
circumstances, the number and kind of shares subject to this option and the
option price of such shares shall be appropriately adjusted in a manner to be
determined in the sole discretion of the Committee.
This option is not transferable otherwise than by will or the laws of descent
and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option is not
exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is approved by
the shareholders of the Company in the manner prescribed by the Code and the
regulations thereunder;
(b) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as the Company may deem necessary or desirable; or
(c) During any period of time in which the Company deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Company to be legally obligated to
issue or sell more shares than the Company is legally entitled to issue or sell.
(d) Until you have paid or made suitable arrangements to pay (which may
include payment through the surrender of Common Stock, unless prohibited by the
Committee) (i) all federal, state and local income tax withholding required to
be withheld by the Company in connection with the option exercise and (ii) the
employee's portion of other federal, state and local payroll and other taxes due
in connection with the option exercise.
<PAGE>
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgments and agreements as the
Company may, in its sole discretion, deem advisable to avoid any violation of
federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under applicable state
securities laws. The shares have been acquired for investment and may not
be offered, sold, transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of 1933, as
amended, and under any applicable state securities laws or an opinion of
counsel acceptable to the Company that the proposed transaction will be
exempt from such registration."
The foregoing legend shall be removed upon registration of the legended
shares under the Securities Act of 1933, as amended, and under any applicable
state laws or upon receipt of any opinion of counsel acceptable to the Company
that said registration is no longer required.
The sole purpose of the agreements, warranties, representations and legend
set forth in the two immediately preceding paragraphs is to prevent violations
of the Securities Act of 1933, as amended, and any applicable state securities
laws.
It is the intention of the Company and you that this option shall, if
possible, be an "incentive stock option" as that term is used in Section 422(b)
of the Code and the regulations thereunder. In the event this option is in any
way inconsistent with the legal requirements of the Code or the regulations
thereunder for an "incentive stock option," this option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
Any dispute or disagreement between you and the Company with respect to any
portion of this option or its validity, construction, meaning, performance or
your rights hereunder shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association or its
successor, as amended from time to time. However,
<PAGE>
prior to submission to arbitration you will attempt to resolve any disputes or
disagreements with the Company over this option amicably and informally, in good
faith, for a period not to exceed two weeks. Thereafter, the dispute or
disagreement will be submitted to arbitration. At any time prior to a decision
from the arbitrator(s) being rendered, you and the Company may resolve the
dispute by settlement. You and the Company shall equally share the costs charged
by the American Arbitration Association or its successor, but you and the
Company shall otherwise be solely responsible for your own respective counsel
fees and expenses. The decision of the arbitrator(s) shall be made in writing,
setting forth the award, the reasons for the decision and award and shall be
binding and conclusive on you and the Company. Further, neither you nor the
Company shall appeal any such award. Judgment of a court of competent
jurisdiction may be entered upon the award and may be enforced as such in
accordance with the provisions of the award.
This option shall be subject to the terms of the Plan in effect on the date
this option is granted, which terms are hereby incorporated herein by reference
and made a part hereof. In the event of any conflict between the terms of this
option and the terms of the Plan in effect on the date of this option, the terms
of the Plan shall govern. This option constitutes the entire understanding
between the Company and you with respect to the subject matter hereof and no
amendment, supplement or waiver of this option, in whole or in part, shall be
binding upon the Company unless in writing and signed by the President of the
Company. This option and the performances of the parties hereunder shall be
construed in accordance with and governed by the laws of the State of
Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
Laser Link Communications, Inc.
By:
I hereby acknowledge receipt of a copy of the foregoing stock option and of
the Plan as of the date of grant set forth above, hereby acknowledge that this
stock option grant discharges a promise (either verbal or written) of the
Company made on or prior to the date of grant to give me a stock option, and,
having read it, hereby signify my understanding of, and my agreement with, its
terms and conditions. In consideration of the grant, I hereby release any claim
I may have against the Company with respect to any promise of a stock option
grant or other equity interest in the Company.
(Seal)
_________________________________
(Signature) (Date)
<PAGE>
APPENDIX II
NON-QUALIFIED STOCK OPTION FOR OFFICERS AND OTHER KEY EMPLOYEES
To:
Name
Address
Date of Grant:
You are hereby granted an option, effective as of the date hereof, to
purchase __________ shares of common stock, $.01 par value ("Common Stock"), of
Laser Link Communications, Inc., a Pennsylvania corporation (the "Company") at a
price of $____ per share pursuant to the Company's 1997 Stock Option Plan (the
"Plan").
Although your option is legally effective as of the date hereof, your right
to exercise your option does not become vested prior to your exercisability
dates described in the next succeeding paragraph or date of an initial public
offering ("Qualifying IPO").
Your option may first be exercised on and after one year from the date of
grant, but not before that time. On and after one year and prior to two years
from the date of grant, your option may be exercised for up to _____% of the
total number of shares subject to the option minus the number of shares
previously purchased by exercise of the option (as adjusted for any change in
the outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Each
succeeding year thereafter, your option may be exercised for up to an additional
_____% of the total number of shares subject to the option minus the number of
shares previously purchased by exercise of the option (as adjusted for any
change in the outstanding shares of the Common Stock of the Company by reason of
a stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Thus, this
option is fully exercisable on and after _____ years after the date of grant,
except if terminated earlier as provided herein. No fractional shares shall be
issued or delivered. This option shall terminate and is not exercisable after
ten years from the date of its grant (the "Scheduled Termination Date"), except
if terminated earlier as hereafter provided.
In the event of a "Change of Control" (as defined below) of the Company,
your option may, from and after the date your employment is terminated (whether
such termination be voluntary or involuntary) after the Change of Control, and
notwithstanding the immediately preceding paragraph, be exercised for up to 100%
of the total number of shares then subject to the option minus the number of
shares previously purchased upon exercise of the option (as adjusted for stock
dividends, stock splits, combinations of shares and what the Committee deems in
its sole discretion to be similar circumstances) and your vesting date may
accelerate accordingly. A "Change of Control" shall be deemed to have occurred
upon the happening of any of the following events:
1. A change in the constituency of the Company's Board of Directors with
the result that individuals (the "Incumbent Directors") who are members of the
Board on the date
<PAGE>
hereof cease to constitute at least a majority of the Board of Directors,
provided that any individual who is elected or appointed to the Board of
Directors after the date hereof and whose nomination for election or appointment
was unanimously approved by the Incumbent Directors shall be considered an
Incumbent Director beginning on the date of his or her election to the Board of
Directors.
2. A person or group acting in concert as described in Section 13(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") acquires
beneficial ownership within the meaning of Rule 13(d)(3) promulgated under the
Exchange Act of a number of voting shares of the Company which constitutes more
than fifty percent of the shares which vote in the election of directors of the
Company.
3. Any other event deemed to constitute a "Change of Control" by the
Committee.
You may exercise your option by giving written notice to the Secretary of
the Company on forms supplied by the Company at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which may be evidenced by a check and includes cash
received from a stock brokerage firm in a so-called "cashless exercise"; (b)
(unless prohibited by the Committee) certificates representing shares of Common
Stock of the Company, which will be valued by the Secretary of the Company at
the fair market value per share of the Company's Common Stock (as determined in
accordance with the Plan) on the date of delivery of such certificates to the
Company, accompanied by an assignment of the stock to the Company; or (c)
(unless prohibited by the Committee) any combination of cash and Common Stock of
the Company valued as provided in clause (b). Any assignment of stock shall be
in a form and substance satisfactory to the Secretary of the Company, including
guarantees of signature(s) and payment of all transfer taxes if the Secretary
deems such guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you, terminate
three months after the date on which your employment by the Company or a Company
subsidiary corporation is terminated (whether such termination be voluntary or
involuntary) other than by reason of disability as defined in Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, or death, in which case your option will terminate one
year from the date of termination of employment due to disability or death (but
in no event later than the Scheduled Termination Date). After the date your
employment is terminated, as aforesaid, you may exercise this option only for
the number of shares which you had a right to purchase and did not purchase on
the date your employment terminated. If you are employed by a Company subsidiary
corporation, your employment shall be deemed to have terminated on the date your
employer ceases to be a Company subsidiary corporation, unless you are on that
date transferred to the Company or another Company subsidiary corporation. Your
employment shall not be deemed to have terminated if you are transferred from
the Company to a Company subsidiary corporation, or vice versa, or from one
Company subsidiary corporation to another Company subsidiary corporation.
If you die while employed by the Company or a Company subsidiary
corporation, your heirs, executor or administrator, as the case may be, may, at
any time within one year after the date of your death (but in no event later
than the Scheduled Termination Date), exercise the option as to any shares which
you had a right to purchase and did not purchase during your lifetime. If your
employment with the Company or a Company parent or subsidiary
<PAGE>
corporation is terminated by reason of your becoming disabled (within the
meaning of Section 22(e)(3) of the Code and the regulations thereunder), you or
your legal guardian or custodian may at any time within one year after the date
of such termination (but in no event later than the Scheduled Termination Date),
exercise the option as to any shares which you had a right to purchase and did
not purchase prior to such termination. Your executor, administrator, guardian
or custodian must present proof of his authority satisfactory to the Company
prior to being allowed to exercise this option.
In the event of any change in the outstanding shares of the Common Stock of
the Company by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Committee deems in its sole discretion to be similar
circumstances, the number and kind of shares subject to this option and the
option price of such shares shall be appropriately adjusted in a manner to be
determined in the sole discretion of the Committee.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option is
not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of the Company in the manner prescribed by the Code
and the regulations thereunder;
(b) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as the Company may deem necessary or desirable; or
(c) During any period of time in which the Company deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Company to be legally obligated to
issue or sell more shares than the Company is legally entitled to issue or sell.
(d) Until you have paid or made suitable arrangements to pay (which may
include payment through the surrender of Common Stock, unless prohibited by the
Committee) (i) all federal, state and local income tax withholding required to
be withheld by the Company in connection with the option exercise and (ii) the
employee's portion of other federal, state and local payroll and other taxes due
in connection with the option exercise.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
<PAGE>
(a) The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgments and agreements as the
Company may, in its sole discretion, deem advisable to avoid any violation of
federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under applicable state
securities laws. The shares have been acquired for investment and may not
be offered, sold, transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of 1933, as
amended, and under any applicable state securities laws or an opinion of
counsel acceptable to the Company that the proposed transaction will be
exempt from such registration."
The foregoing legend shall be removed upon registration of the legended
shares under the Securities Act of 1933, as amended, and under any applicable
state laws or upon receipt of any opinion of counsel acceptable to the Company
that said registration is no longer required.
The sole purpose of the agreements, warranties, representations and legend
set forth in the two immediately preceding paragraphs is to prevent violations
of the Securities Act of 1933, as amended, and any applicable state securities
laws.
It is the intention of the Company and you that this option shall not be an
"incentive stock option" as that term is used in Section 422 of the Code and the
regulations thereunder.
NOTHING HEREIN SHALL MODIFY YOUR STATUS AS AN AT-WILL EMPLOYEE OF THE
COMPANY. FURTHER, NOTHING HEREIN GUARANTEES YOU EMPLOYMENT FOR ANY SPECIFIED
PERIOD OF TIME. THIS MEANS THAT EITHER YOU OR THE COMPANY MAY TERMINATE YOUR
EMPLOYMENT AT ANY TIME FOR ANY REASON, OR NO REASON. YOU RECOGNIZE THAT, FOR
INSTANCE, YOU MAY TERMINATE YOUR EMPLOYMENT OR THE COMPANY MAY TERMINATE YOUR
EMPLOYMENT PRIOR TO THE DATE ON WHICH YOUR OPTION BECOMES VESTED.
Any dispute or disagreement between you and the Company with respect to any
portion of this option or its validity, construction, meaning, performance or
your rights hereunder shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association or its
successor, as amended from time to time. However, prior to submission to
arbitration you will attempt to resolve any disputes or disagreements with the
Company over this option amicably and informally, in good faith, for a period
not to exceed two weeks. Thereafter, the dispute or disagreement will be
submitted to arbitration.
<PAGE>
At any time prior to a decision from the arbitrator(s) being rendered, you and
the Company may resolve the dispute by settlement. You and the Company shall
equally share the costs charged by the American Arbitration Association or its
successor, but you and the Company shall otherwise be solely responsible for
your own respective counsel fees and expenses. The decision of the arbitrator(s)
shall be made in writing, setting forth the award, the reasons for the decision
and award and shall be binding and conclusive on you and the Company. Further,
neither you nor the Company shall appeal any such award. Judgment of a court of
competent jurisdiction may be entered upon the award and may be enforced as such
in accordance with the provisions of the award.
This option shall be subject to the terms of the Plan in effect on the date
this option is granted, which terms are hereby incorporated herein by reference
and made a part hereof. In the event of any conflict between the terms of this
option and the terms of the Plan in effect on the date of this option, the terms
of the Plan shall govern. This option constitutes the entire understanding
between the Company and you with respect to the subject matter hereof and no
amendment, supplement or waiver of this option, in whole or in part, shall be
binding upon the Company unless in writing and signed by the President of the
Company. This option and the performances of the parties hereunder shall be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
Laser Link Communications, Inc.
By:
I hereby acknowledge receipt of a copy of the foregoing stock option and of
the Plan as of the date of grant set forth above, hereby acknowledge that this
stock option grant discharges a promise (either verbal or written) of the
Company made on or prior to the date of grant to give me a stock option, and,
having read it, hereby signify my understanding of, and my agreement with, its
terms and conditions. In consideration of the grant, I hereby release any claim
I may have against the Company with respect to any promise of a stock option
grant or other equity interest in the Company.
(Seal)
_________________________________
(Signature) (Date)
<PAGE>
APPENDIX III
NON-QUALIFIED STOCK OPTION FOR DIRECTORS
AND IMPORTANT CONSULTANTS
To:
Name
Address
Date of Grant:
You are hereby granted an option, effective as of the date hereof, to
purchase __________ shares of common stock, $.01 par value ("Common Stock"), of
Laser Link Communications, Inc., a Pennsylvania corporation (the "Company") at a
price of $____ per share pursuant to the Company's 1997 Stock Option Plan (the
"Plan").
Although your option is legally effective as of the date hereof, your right
to exercise your option does not become vested prior to your exercisability
dates described in the next succeeding paragraph.
Your option may first be exercised on and after one year from the date of
grant, but not before that time. On and after one year and prior to two years
from the date of grant, your option may be exercised for up to _____% of the
total number of shares subject to the option minus the number of shares
previously purchased by exercise of the option (as adjusted for any change in
the outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Each
succeeding year thereafter, your option may be exercised for up to an additional
______% of the total number of shares subject to the option minus the number of
shares previously purchased by exercise of the option (as adjusted for any
change in the outstanding shares of the Common Stock of the Company by reason of
a stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Thus, this
option is fully exercisable on and after _____ years after the date of grant,
except if terminated earlier as provided herein. No fractional shares shall be
issued or delivered. This option shall terminate and is not exercisable after
ten years from the date of its grant (the "Scheduled Termination Date"), except
if terminated earlier as hereafter provided.
In the event of a "Change of Control" (as defined below) of the Company,
your option may, from and after the date your employment is terminated (whether
such termination be voluntary or involuntary) after the Change of Control, and
notwithstanding the immediately preceding paragraph, be exercised for up to 100%
of the total number of shares then subject to the option minus the number of
shares previously purchased upon exercise of the option (as adjusted for stock
dividends, stock splits, combinations of shares and what the Committee deems in
its sole discretion to be similar circumstances) and your vesting date may
accelerate accordingly. A "Change of Control" shall be deemed to have occurred
upon the happening of any of the following events:
<PAGE>
1. A change in the constituency of the Company's Board of Directors with
the result that individuals (the "Incumbent Directors") who are members of the
Board on the date hereof cease to constitute at least a majority of the Board of
Directors, provided that any individual who is elected or appointed to the Board
of Directors after the date hereof and whose nomination for election or
appointment was unanimously approved by the Incumbent Directors shall be
considered an Incumbent Director beginning on the date of his or her election to
the Board of Directors.
2. A person or group acting in concert as described in Section 13(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") acquires
beneficial ownership within the meaning of Rule 13(d)(3) promulgated under the
Exchange Act of a number of voting shares of the Company which constitutes more
than fifty percent of the shares which vote in the election of directors of the
Company.
3. Any other event deemed to constitute a "Change of Control" by the
Committee.
You may exercise your option by giving written notice to the Secretary of
the Company on forms supplied by the Company at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which may be evidenced by a check and includes cash
received from a stock brokerage firm in a so-called "cashless exercise"; (b)
(unless prohibited by the Committee) certificates representing shares of Common
Stock of the Company, which will be valued by the Secretary of the Company at
the fair market value per share of the Company's Common Stock (as determined in
accordance with the Plan) on the date of delivery of such certificates to the
Company, accompanied by an assignment of the stock to the Company; or (c)
(unless prohibited by the Committee) any combination of cash and Common Stock of
the Company valued as provided in clause (b). Any assignment of stock shall be
in a form and substance satisfactory to the Secretary of the Company, including
guarantees of signature(s) and payment of all transfer taxes if the Secretary
deems such guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you, terminate
three months after the date on which you cease for any reason to be a director
of, or consultant to, the Company or a subsidiary corporation (whether by death,
disability, resignation, removal, failure to be reappointed, reelected or
otherwise, or the expiration of any consulting arrangement, and regardless of
whether the failure to continue as a director or consultant was for cause or
without cause or otherwise), but in no event later than ten years from the date
this option is granted. After the date you cease to be a director or consultant,
you may exercise this option only for the number of shares which you had a right
to purchase and did not purchase on the date you ceased to be a director or
consultant. If you are a director of a subsidiary corporation, your directorship
shall be deemed to have terminated on the date such company ceases to be a
subsidiary corporation, unless you are also a director of the Company or another
subsidiary corporation, or on that date became a director of the Company or
another subsidiary corporation. Your directorship or consultancy shall not be
deemed to have terminated if you cease being a director of, or consultant to,
the Company or a subsidiary corporation but are or concurrently therewith become
a director of, or consultant to, the Company or another subsidiary corporation.
<PAGE>
In the event of any change in the outstanding shares of the Common Stock of
the Company by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Committee deems in its sole discretion to be similar
circumstances, the number and kind of shares subject to this option and the
option price of such shares shall be appropriately adjusted in a manner to be
determined in the sole discretion of the Committee.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option is
not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of the Company in the manner prescribed by the Code
and the regulations thereunder;
(b) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as the Company may deem necessary or desirable; or
(c) During any period of time in which the Company deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Company to be legally obligated to
issue or sell more shares than the Company is legally entitled to issue or sell.
(d) Until you have paid or made suitable arrangements to pay (which
may include payment through the surrender of Common Stock, unless prohibited by
the Committee) (i) all federal, state and local income tax withholding required
to be withheld by the Company in connection with the option exercise and (ii)
the employee's portion of other federal, state and local payroll and other taxes
due in connection with the option exercise.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be
<PAGE>
exempt from such registration. The optionee shall execute such instruments,
representations, acknowledgments and agreements as the Company may, in its sole
discretion, deem advisable to avoid any violation of federal, state,
local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement
under the Securities Act of 1933, as amended, and under any applicable
state securities laws or an opinion of counsel acceptable to the
Company that the proposed transaction will be exempt from such
registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to the Company that
said registration is no longer required.
The sole purpose of the agreements, warranties, representations and legend
set forth in the two immediately preceding paragraphs is to prevent violations
of the Securities Act of 1933, as amended, and any applicable state securities
laws.
It is the intention of the Company and you that this option shall not be
an "incentive stock option" as that term is used in Section 422 of the Code and
the regulations thereunder.
Any dispute or disagreement between you and the Company with respect to any
portion of this option or its validity, construction, meaning, performance or
your rights hereunder shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association or its
successor, as amended from time to time. However, prior to submission to
arbitration you will attempt to resolve any disputes or disagreements with the
Company over this option amicably and informally, in good faith, for a period
not to exceed two weeks. Thereafter, the dispute or disagreement will be
submitted to arbitration. At any time prior to a decision from the arbitrator(s)
being rendered, you and the Company may resolve the dispute by settlement. You
and the Company shall equally share the costs charged by the American
Arbitration Association or its successor, but you and the Company shall
otherwise be solely responsible for your own respective counsel fees and
expenses. The decision of the arbitrator(s) shall be made in writing, setting
forth the award, the reasons for the decision and award and shall be binding and
conclusive on you and the Company. Further, neither you nor the Company shall
appeal any such award. Judgment of a court of competent jurisdiction may be
entered upon the award and may be enforced as such in accordance with the
provisions of the award.
This option shall be subject to the terms of the Plan in effect on the date
this option is granted, which terms are hereby incorporated herein by reference
and made a part hereof. In the event of any conflict between the terms of this
option and the terms of the Plan in effect on the date of this option, the terms
of the Plan shall govern. This option constitutes the entire understanding
between the Company and you with respect to the subject matter hereof and no
amendment, supplement or waiver of this option, in whole or in part, shall be
<PAGE>
binding upon the Company unless in writing and signed by the President of the
Company. This option and the performances of the parties hereunder shall be
construed in accordance with and governed by the laws of the State of
Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
LASER LINK COMMUNICATIONS, INC.
By:
I hereby acknowledge receipt of a copy of the foregoing stock option and of
the Plan as of the date of grant set forth above, hereby acknowledge that this
stock option grant discharges a promise (either verbal or written) of the
Company made on or prior to the date of grant to give me a stock option, and,
having read it, hereby signify my understanding of, and my agreement with, its
terms and conditions. In consideration of the grant, I hereby release any claim
I may have against the Company with respect to any promise of a stock option
grant or other equity interest in the Company.
(Seal)
- --------------------------------------
(Signature) (Date)
<PAGE>
EXHIBIT 99.2
FORM OF STOCK OPTION AGREEMENT UNDER THE PLAN
INCENTIVE STOCK OPTION
To:
Date of Grant:
You are hereby granted an option, effective as of the date hereof, to
purchase shares of common stock, $.01 par value ("Common Stock"), of
LaserLink.Net, Inc., a Pennsylvania corporation (the "Company") at a price of
$_____ per share pursuant to the Company's 1997 Stock Option Plan (the "Plan").
Although your option is legally effective as of the date hereof, your right
to exercise your option does not become vested prior to your exercisability
dates described in the next succeeding paragraph.
Your option may first be exercised on and after one year from the date of
grant, but not before that time. On and after one year from the date of grant,
your option may be exercised for up to 25% of the total number of shares subject
to the option minus the number of shares previously purchased by exercise of the
option (as adjusted for any change in the outstanding shares of the Common Stock
of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Committee deems in its sole discretion to
be similar circumstances). Each succeeding year thereafter, your option may be
exercised for up to an additional 25% of the total number of shares subject to
the option minus the number of shares previously purchased by exercise of the
option (as adjusted for any change in the outstanding shares of the Common Stock
of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Committee deems in its sole discretion to
be similar circumstances). Thus, this option is fully exercisable on and after
four years after the date of grant, except if terminated earlier as provided
herein. No fractional shares shall be issued or delivered. This option shall
terminate and is not exercisable after ten years from the date of its grant (the
"Scheduled Termination Date"), except if terminated earlier as hereafter
provided.
In the event of a "Change of Control" (as defined below) of the Company,
your option may, notwithstanding the immediately preceding paragraph, be
exercised for up to 100% of the total number of shares then subject to the
option minus the number of shares previously purchased upon exercise of the
option (as adjusted for stock dividends, stock splits, combinations of shares
and what the Committee deems in its sole discretion to be
<PAGE>
similar circumstances) and your vesting date may accelerate accordingly. A
"Change of Control" shall be deemed to have occurred upon the happening of any
of the following events:
1. A change in the constituency of the Company's Board of Directors with
the result that individuals (the "Incumbent Directors") who are
members of the Board on the date hereof cease to constitute at least a
majority of the Board of Directors, provided that any individual who
is elected or appointed to the Board of Directors after the date
hereof and whose nomination for election or appointment was
unanimously approved by the Incumbent Directors shall be considered an
Incumbent Director beginning on the date of his or her election to the
Board of Directors.
2. A person or group acting in concert as described in Section 13 (d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") acquires beneficial ownership within the meaning of Rule 13
(d)(3) promulgated under the Exchange Act of a number of voting shares
of the Company which constitutes more than fifty percent of the shares
which vote in the election of directors of the Company.
3. Any other event deemed to constitute a "Change of Control" by the
Committee.
You may exercise your option by giving written notice to the
Secretary of the Company on forms supplied by the Company at its then
principal executive office, accompanied by payment of the option price
for the total number of shares you specify that you wish to purchase.
The payment may be in any of the following forms: (a) cash, which may
be evidenced by a check and includes cash received from a stock
brokerage firm in a so-called "cashless exercise"; (b) (unless
prohibited by the Committee) certificates representing shares of
Common Stock of the Company, which will be valued by the Secretary of
the Company at the fair market value per share of the Company's Common
Stock (as determined in accordance with the Plan) on the date of
delivery of such certificates to the Company, accompanied by an
assignment of the stock to the Company; or (c) (unless prohibited by
the Committee) any combination of cash and Common Stock of the Company
valued as provided in clause (b). Any assignment of stock shall be in
a form and substance satisfactory to the Secretary of the Company,
including guarantees of signature(s) and payment of all transfer taxes
if the Secretary deems such guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by the
Company or a Company subsidiary corporation is terminated (whether
such termination be voluntary or involuntary) other than by reason of
disability as defined in Section 22(e)(3) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations thereunder, or
death, in which case your option will terminate one year from the date
of termination of employment due to disability or death (but in no
event later than the Scheduled Termination Date). After the date your
employment is terminated, as aforesaid, you may exercise this option
only for the number of
<PAGE>
shares which you had a right to purchase and did not purchase on the
date your employment terminated. If you are employed by a Company
subsidiary corporation, your employment shall be deemed to have
terminated on the date your employer ceases to be a Company subsidiary
corporation, unless you are on that date transferred to the Company or
another Company subsidiary corporation. Your employment shall not be
deemed to have terminated if you are transferred from the Company to a
Company subsidiary corporation, or vice versa, or from one Company
subsidiary corporation to another Company subsidiary corporation.
If you die while employed by the Company or a Company subsidiary
corporation, your heirs, executor or administrator, as the case may
be, may, at any time within one year after the date of your death (but
in no event later than the Scheduled Termination Date), exercise the
option as to any shares which you had a right to purchase and did not
purchase during your lifetime. If your employment with the Company or
a Company parent or subsidiary corporation is terminated by reason of
your becoming disabled (within the meaning of Section 22(e)(3) of the
Code and the regulations thereunder), you or your legal guardian or
custodian may at any time within one year after the date of such
termination (but in no event later than the Scheduled Termination
Date), exercise the option as to any shares which you had a right to
purchase and did not purchase prior to such termination. Your
executor, administrator, guardian or custodian must present proof of
his authority satisfactory to the Company prior to being allowed to
exercise the option.
In the event of any change in the outstanding shares of the
Common Stock of the Company by reason of a stock dividend, stock
split, combination of shares, recapitalization, merger, consolidation,
transfer of assets, reorganization, conversion or what the Committee
deems in its sole discretion to be similar circumstances, the number
and kind of shares subject to this option and the option price of such
shares shall be appropriately adjusted in a manner to be determined in
the sole discretion of the Committee.
This option is not transferable otherwise than by will or the
laws of descent and distribution, and is exercisable during your
lifetime only by you, including, for this purpose, your legal guardian
or custodian in the event of disability. Until the option price has
been paid in full pursuant to due exercise of this option and the
purchased shares are delivered to you, you do not have any rights as a
shareholder of the Company. The Company reserves the right not to
deliver to you the shares purchased by virtue of the exercise of this
option during any period of time in which the Company deems, in its
sole discretion, that such delivery would violate a federal, state,
local or securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this
option is not exercisable until all the following events occur and
during the following periods of time:
(a) Until the Plan pursuant to which this option is granted
is approved by the shareholders of the Company in the
manner prescribed by the Code and the regulations
thereunder;
<PAGE>
(b) Until this option and the optioned shares are approved
and/or registered with such federal, state and local
regulatory bodies or agencies and securities exchanges
as the Company may deem necessary or desirable; or
(c) During any period of time in which the Company deems
that the exercisability of this option, the offer to
sell the shares optioned hereunder, or the sale
thereof, may violate a federal, state, local or
securities exchange rule, regulation or law, or may
cause the Company to be legally obligated to issue or
sell more shares than the Company is legally entitled
to issue or sell.
(d) Until you have paid or made suitable arrangements to
pay (which may include payment through the surrender of
Common Stock, unless prohibited by the Committee) (i)
all federal, state and local income tax withholding
required to be withheld by the Company in connection
with the option exercise and (ii) the employee's
portion of other federal, state and local payroll and
other taxes due in connection with the option exercise.
The following two paragraphs shall be applicable if, on the date
of exercise of this option, the Common Stock to be purchased pursuant
to such exercise has not been registered under the Securities Act of
1933, as amended, and under applicable state securities laws, and
shall continue to be applicable for so long as such registration has
not occurred:
(a) The optionee hereby agrees, warrants and represents
that he will acquire the Common Stock to be issued
hereunder for his own account for investment purposes
only, and not with a view to, or in connection with,
any resale or other distribution of any of such shares,
except as hereafter permitted. The optionee further
agrees that he will not at any time make any offer,
sale, transfer, pledge or other disposition of such
Common Stock to be issued hereunder without an
effective registration statement under the Securities
Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to
the Company to the effect that the proposed transaction
will be exempt from such registration. The optionee
shall execute such instruments, representations,
acknowledgments and agreements as the Company may, in
its sole discretion, deem advisable to avoid any
violation of federal, state, local or securities
exchange rule, regulation or law.
<PAGE>
(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
"The shares represented by this certificate have
not been registered under the Securities Act of
1933, as amended, or under applicable state
securities laws. The shares have been acquired
for investment and may not be offered, sold,
transferred, pledged or otherwise disposed of
without an effective registration statement under
the Securities Act of 1933, as amended, and under
any applicable state securities laws or an
opinion of counsel acceptable to the Company that
the proposed transaction will be exempt from such
registration."
The foregoing legend shall be removed upon registration
of the legended shares under the Securities Act of
1933, as amended, and under any applicable state laws
or upon receipt of any opinion of counsel acceptable
to the Company that said registration is no longer
required.
The sole purpose of the agreements, warranties, representations and legend
set forth in the two immediately preceding paragraphs is to prevent violations
of the Securities Act of 1933, as amended, and any applicable state securities
laws.
It is the intention of the Company and you that this option shall, if
possible, be an "incentive stock option" as that term is used in Section 422(b)
of the Code and the regulations thereunder. In the event this option is in any
way inconsistent with the legal requirements of the Code or the regulations
thereunder for an "incentive stock option," this option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
NOTHING HEREIN SHALL MODIFY YOUR STATUS AS AN AT WILL EMPLOYEE OF THE
COMPANY. FURTHER, NOTHING HEREIN GUARANTEES YOU EMPLOYMENT FOR ANY SPECIFIED
PERIOD OF TIME. THIS MEANS THAT EITHER YOU OR THE COMPANY MAY TERMINATE YOUR
EMPLOYMENT AT ANY TIME FOR ANY REASON, OR NO REASON. YOU RECOGNIZE THAT, FOR
INSTANCE, YOU MAY TERMINATE YOUR EMPLOYMENT OR THE COMPANY MAY TERMINATE YOUR
EMPLOYMENT PRIOR TO THE DATE ON WHICH YOUR OPTION BECOMES VESTED.
Any dispute or disagreement between you and the Company with respect to any
portion of this option or its validity, construction, meaning, performance or
your rights hereunder shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association or its
successor, as amended from time to time. However, prior to submission to
arbitration you will attempt to resolve any disputes or disagreements with the
Company over this option amicably and informally, in good faith, for a period
not to exceed two weeks. Thereafter, the dispute or disagreement will be
submitted to arbitration. At any time prior to a decision from the arbitrator(s)
being rendered, you and the Company may resolve the dispute by settlement. You
and the Company shall equally share the costs charged by the American
Arbitration Association or
<PAGE>
its successor, but you and the Company shall otherwise be solely
responsible for your own respective counsel fees and expenses. The decision of
the arbitrator(s) shall be made in writing, setting forth the award, the reasons
for the decision and award and shall be binding and conclusive on you and the
Company. Further, neither you nor the Company shall appeal any such award.
Judgment of a court of competent jurisdiction may be entered upon the award and
may be enforced as such in accordance with the provisions of the award.
This option shall be subject to the terms of the Plan in effect on the date
this option is granted, which terms are hereby incorporated herein by reference
and made a part hereof. In the event of any conflict between the terms of this
option and the terms of the Plan in effect on the date of this option, the terms
of the Plan shall govern. This option constitutes the entire understanding
between the Company and you with respect to the subject matter hereof and no
amendment, supplement or waiver of this option, in whole or in part, shall be
binding upon the Company unless in writing and signed by the Chairman of the
Company. This option and the performances of the parties hereunder shall be
construed in accordance with and governed by the laws of the State of
Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
LaserLink.Net, Inc.
By: _________________________
I hereby acknowledge receipt of a copy of the foregoing stock option and of
the Plan as of the date of grant set forth above, hereby acknowledge that this
stock option grant discharges a promise (either verbal or written) of the
Company made on or prior to the date of grant to give me a stock option, and,
having read it, hereby signify my understanding of, and my agreement with, its
terms and conditions. In consideration of the grant, I hereby release any claim
I may have against the Company with respect to any promise of a stock option
grant or other equity interest in the Company.
- --------------------------------------- ---------------
Date
(Signature)
<PAGE>
EXHIBIT 99.3
FORM OF AGREEMENT TO DEFER VESTING FOR ONE YEAR
AGREEMENT
Agreement dated March 13, 2000 by and between ______________ ("Option
Holder") and Laser Link.Net, Inc. (the "Company").
Option Holder is the holder of options to purchase ___ shares of the
Company's Common Stock pursuant to options granted ______ (the "Options").
For good and valuable consideration, the receipt of which is hereby
acknowledged, the Option Holder agrees with the Company to amend the Options as
follows:
Notwithstanding any provision of the Options, the Option Holder agrees that
the vesting of the Options will not accelerate immediately as a result of the
merger of the Company with and into a subsidiary of Covad Communications Group,
Inc. (the "Merger"). All the Options will vest upon the one year anniversary of
the closing of the Merger unless the Option Holder's employment has been
terminated during such period (i) for Cause (as defined below) or (ii) upon the
resignation by Option Holder, other than upon death, Disability (as defined in
the Option Holder's Employment and Noncompetition Agreement dated March 10, 2000
between the Company and Option Holder (the "Employment Agreement")), a change in
location of Option Holder's employment beyond the 50 mile radius of the current
location of the Company or material diminution in Option Holder's duties with
the Company. THE PARTIES AGREE THAT THE FOREGOING PROVISIONS WILL NOT OTHERWISE
AFFECT THE VESTING OF THE OPTIONS AND EXCEPT AS SPECIFICALLY PROVIDED HEREIN THE
OPTIONS WILL CONTINUE TO VEST IN ACCORDANCE WITH THEIR CURRENT SCHEDULE(S).
"Cause" shall mean (1) Option Holder's refusal to perform Option Holder's
duties under his Employment Agreement, other than as a result of total or
partial incapacity due to
<PAGE>
physical or mental illness for a period of 30 days following written notice
by the Company to Option Holder of such refusal, (2) any act or act on Option
Holder's part constituting (A) a felony under the laws of the United States or
any state thereof, (B) dishonesty in the performance of the Option Holder's
duties under the Employment Agreement, (C) a misdemeanor involving moral
turpitude, or (D) willful malfeasance or willful misconduct in connection with
the Option Holder's duties under the Employment Agreement which in the case of
clauses A, B, C or D has a material adverse impact on the financial condition of
Covad Communications Group, Inc. or (2) the Option Holder's material breach of
the provisions of Section 9 of his Employment Agreement.
Option Holder hereby acknowledges that as a result of the Merger, his
Options will entitle him to receive the merger consideration to be received in
the Merger which consists of Covad Communications Group, Inc. Common Stock, 10%
of which is subject to the escrow provisions set forth in the Agreement and Plan
of Merger, dated as of March 8, 2000, among Covad Communications Group, Inc.,
Lightsaber Acquisition Co. and Laser Link.Net, Inc., and the exhibits attached
thereto.
Agreed to as of the date indicated above.
OPTION HOLDER
---------------------------------
LASER LINK.NET, INC.
By:__________________________________
<PAGE>
EXHIBIT 99.4
ESCROW AGREEMENT
This Escrow Agreement is made as of this ___ day of _________, 2000, by and
among [_________________] ("ESCROW AGENT"), Covad Communications Group, Inc., a
Delaware corporation ("ACQUIRER"), and James Lynch, as agent ("SHAREHOLDERS'
AGENT") of the former stockholders of Laser Link.Net, Inc., a Pennsylvania
corporation (the "COMPANY"). Capitalized terms not otherwise defined herein
shall have the meaning set forth in the Merger Agreement (as defined below).
WITNESSETH
WHEREAS, Acquirer and the company have entered into an Agreement and Plan
of Merger (the "Merger Agreement"), dated as of March 8, 2000, providing for the
merger of Lightsaber Acquisition Co., a Delaware corporation and a direct and
wholly owned subsidiary of Acquirer ("MERGER SUB"), with and into the Company
(the "MERGER"); and
WHEREAS, pursuant to Article VIII of the Merger Agreement, a copy of which
is attached hereto as Annex A ("ARTICLE VIII"), an escrow fund (the "ESCROW
FUND") will be established to compensate Acquirer for certain Damages (as
defined in Article VIII) arising out of any misrepresentation or breach of or
default in connection with any of the representations, warranties, covenants and
agreements given or made by the Company in the Merger Agreement, the Company
Disclosure Schedules or any exhibit or schedule to the Merger Agreement; and
WHEREAS, the Shareholders' Agent has been constituted as agent for and on
behalf of the former stockholders of the Company (individually a "Shareholder"
and collectively the "Shareholders") to undertake certain obligations specified
in article VIII; and
WHEREAS, Article VIII provides for an escrow Fund of 429,270 shares (which
number shall be adjusted in the manner as provided for in Section 1.6(c) of the
Merger Agreement and taking into account shares subject to outstanding,
unexercised Company Options), or 10% of the Acquirer Shares issued at the
effective Time, such escrow to be held by the Escrow Agent; and
WHEREAS, the parties hereto desire to set forth further terms and
conditions in addition to those set forth in Article VIII relating to the
operation of the Escrow Fund.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants contained herein, and intending to be legally bound, hereby agree as
follows:
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1. ESCROW AND ESCROW SHARES. Pursuant to Article VIII, Acquirer shall
deposit in escrow with the Escrow Agent, as escrow agent, within five (5)
business days of the Effective Time (as defined in the Merger Agreement) of the
Merger, a stock certificate or certificates representing 429,270 shares (which
number shall be adjusted in the manner as provided for in Section 1.6(c) of the
Merger Agreement and taking into account shares subject to outstanding,
unexercised Company Options) (the "ESCROW SHARES") which shall be registered in
the name of the Escrow Agent as nominee for the beneficial owners of such
shares. The Escrow Shares shall be held and distributed by the Escrow Agent in
accordance with the terms and conditions of Article VIII and this Agreement. The
number of escrow Shares beneficially owned by each Shareholder, the percentage
interest of each Shareholder in the Escrow Fund, the address of each Shareholder
and the taxpayer identification of each stockholder are set forth in ANNEX B
attached hereto, as amended from time to time.
2. RIGHTS AND OBLIGATIONS OF THE PARTIES. The Escrow Agent shall be
entitled to such rights and shall perform such duties of the escrow agent as set
forth herein and in Article VIII (collectively, the "DUTIES"), in accordance
with the terms and conditions of this Agreement and Article VIII. Acquirer, the
Company and the Shareholders' Agent shall be entitled to their respective rights
and shall perform their respective duties and obligations as set forth herein
and in Article VIII, in accordance with the terms hereof and thereof. In the
event that the terms of this Agreement conflict in any way with the provision of
Article VIII, Article VIII shall control.
3. ESCROW PERIOD. The Escrow Period shall terminate at the one year
anniversary of the Effective Time; provided, however, that a portion of the
Escrow Shares, which (as set forth in a Certificate of Acquirer) is necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate delivered
to the Escrow Agent prior to termination of the Escrow Period with respect to
facts and circumstances existing prior to expiration of the Escrow Period, shall
remain in the Escrow Fund until such claims have been resolved.
4. DUTIES OF ESCROW AGENT. In addition to the Duties set forth in Article
VIII, the Duties of the Escrow Agent shall include the following:
(a) The Escrow Agent shall hold and safeguard the Escrow Shares during
the Escrow Period, shall treat such Escrow Fund as a trust fund in accordance
with the terms of this Agreement and Article VIII and not as the property of
Acquirer, and shall hold and dispose of the Escrow Shares only in accordance
with the terms hereof.
(b) The Escrow Shares shall be voted by the escrow Agent in accordance
with the instructions received by the Escrow Agent from the beneficial owners of
such shares. In the absence of such instructions, the Escrow Agent shall be
under no obligation to vote such shares. The Escrow Agent need not forward proxy
information, annual or other reports or other information received from Acquirer
with respect to the Escrow Shares.
(c) Promptly following termination of the escrow Period as set forth
in Section 3 hereof, the Escrow Agent (i) shall deposit with the Acquirer's
stock transfer agent
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(which is currently Boston EquiServe L.P.) the number of Escrow Shares and other
property in the Escrow Fund in excess of the amount of such Escrow Shares or
other property (as set forth in a certificate of the Acquirer) as being
sufficient to satisfy any unsatisfied claims specified in any Officer's
Certificate theretofore delivered to the Escrow Agent prior to termination of
the Escrow Period with respect to facts and circumstances existing prior to
expiration of the Escrow Period and (ii) shall cause such transfer agent to
transfer such Escrow Shares and other property to the Shareholders. As soon as
all those claims referenced in clause (i) above have been resolved, the Escrow
Agent shall cause such transfer agent to deliver to such Shareholders all of the
Escrow Shares and other property remaining in the Escrow Fund and not required
to satisfy such claims and expenses. Each Shareholder shall receive that number
of Escrow Shares equivalent to such Shareholder's percentage interest in the
Escrow Fund as set forth in ANNEX B hereto, as amended from time to time.
(d) Pursuant to Section 8.5(b) of the Merger Agreement, for the
purpose of compensating Acquirer for its Damages pursuant to this Agreement, the
Acquirer Common Stock in the Escrow Fund shall be valued based on the average
closing price for Acquirer Common Stock for the twenty day trading period
immediately prior to the date that an indemnification claim is made (the
"ACQUIRER STOCK PRICE"). Acquirer shall set forth the Acquirer Stock Price in a
Certificate delivered to the Escrow Agent. If the value to be distributed to
Acquirer (or to any Shareholder upon a termination of the escrow) is not evenly
divisible by the Acquirer Stock Price, the Escrow Agent shall round down the
number of shares to be distributed to the next highest number of shares and
shall cause the transfer agent of the Escrow Shares to distribute that number.
In lieu of the functional interest not distributed, Acquirer shall furnish the
Escrow Agent, and the Escrow Agent (or such stock transfer agent) in turn will
distribute to Acquirer, cash equal to such fractional interest times the
Acquirer Stock Price. Acquirer shall be deemed to have purchased such
fractional interests with respect to which it has furnished funds to the Escrow
Agent. Accordingly, the Escrow Agent, upon receipt of such funds, shall deliver
the corresponding number of shares to Acquirer. In all events, Acquirer shall so
purchase only a whole number of shares. Any cash so received from Acquirer and
not so immediately distributed by the Escrow Agent shall be retained by the
Escrow Agent as part of the Escrow Fund, but need not be invested.
(e) Notwithstanding the foregoing provisions of this Section 4 or the
provisions of Section 8.5 of the Merger Agreement, the number of Escrow Shares
to be delivered to Acquirer for claims pursuant to section 8.5 of the Merger
Agreement (the "CLAIMED SHARES") shall be, for each date that an indemnification
claim is made, the product of (i) the aggregate number of Claimed Shares
multiplied by (ii) the quotient obtained by dividing (A) the number of Escrow
Shares deposited in the Escrow Fund pursuant to Section 1 of this Agreement and
Section 8.11 of the Merger Agreement by (B) 429,270 shares (which number shall
be adjusted in the manner as provided for in Section 1.6(c) of the Merger
Agreement).
5. DISTRIBUTION. Any cash dividends, dividends payable in securities or
other distributions of any kind (but excluding any shares of Acquirer capital
stock received upon a stock split or stock dividend) shall be promptly
distributed by the Escrow Agent to the beneficial
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<PAGE>
holder of the Escrow Shares to which such distribution relates, by check mailed
via first class mail, to the Shareholders at their addresses, and in the
percentage interests, set forth in ANNEX B. Any shares of Acquirer Common Stock
received by the Escrow Agent upon a stock split made in respect of any
securities in the Escrow Fund shall be added to the Escrow Fund and become a
part thereof. Any provision hereof or of Article VIII shall be adjusted to
appropriately reflect any stock split or reverse stock split.
6. EXCULPATORY PROVISIONS
(a) The Escrow Agent shall be obligated only for the performance of
such Duties as are specifically set forth herein and in Article VIII and may
rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have been signed or
presented by the proper parties, The Escrow Agent shall not be liable for
forgeries or false impersonations. The Escrow Agent shall not be liable for any
act done or omitted hereunder as escrow agent except for gross negligence or
willful misconduct. The Escrow Agent shall, in no case or event be liable for
any representations or warranties of the Company or Acquirer or for punitive,
incidental or consequential damages. Any act done or omitted pursuant to the
advice or opinion of counsel shall be conclusive evidence of the good faith of
the Escrow Agent.
(b) The Escrow Agent is hereby expressly authorized to comply with and
obey orders, judgments or decrees of any court or rulings of any arbitrators. In
case the Escrow Agent obeys or complies with any such order, judgment or decree
of any court or such ruling of any arbitrator, the Escrow Agent shall not be
liable to any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such order, judgment, decree or arbitrators'
ruling being subsequently reversed, modified, annulled, set aside, vacated or
found to have entered without jurisdiction.
(c) The Escrow Agent shall not be liable in any respect on account of
the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for thereunder,
(d) The Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations with respect to the Agreement or any
documents deposited with the Escrow Agent.
7. ALTERATION OF DUTIES. The Duties may be altered, amended, modified or
revoked only by a writing signed by all of the parties hereto.
8. REGISTRATION AND REMOVAL OF THE ESCROW AGENT. The Escrow Agent may
resign as Escrow Agent at any time with or without cause by giving at least
thirty (30) days' prior written notice to each of Acquirer and the Shareholders'
Agent, such resignation to be effective thirty (30) days following the date such
notice is given. In addition, Acquirer and the Shareholders' Agent may jointly
remove the Escrow Agent as escrow agent at any time with or
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<PAGE>
without cause, by an instrument executed by Acquirer and the Shareholders'
Agent (which may be executed in counterparts) given to the Escrow Agent, which
instrument shall designate the effective date of such removal. In the event of
any such resignation or removal, a successor escrow agent which shall be a bank
or trust company organized under the laws of the United States of America or of
the State of California or New York or the Commonwealth of Pennsylvania having
(or if such bank or trust company is a member of a bank company, its bank
holding company has) a combined capital and surplus of not less than
$50,000,000, shall be appointed by the Shareholders' Agent with the approval of
Acquirer, which approval shall not be unreasonably withheld. Any such successor
escrow agent shall deliver to Acquirer and the Shareholders' Agent a written
instrument accepting such appointment, and thereupon it shall succeed to all
the rights and duties of the escrow agent hereunder and shall be entitled to
receive the Escrow Fund.
9. FURTHER INSTRUMENTS. If the Escrow Agent reasonably requires other or
further instruments in connection with performance of the Duties, the necessary
parties hereto shall join in furnishing such instruments.
10. DUTIES. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by the Escrow Agent hereunder, the Escrow Agent is authorized
and directed to act in accordance with, and in reliance upon, the terms hereof
and of Article VIII.
11. ESCROW FEES AND EXPENSES. Acquirer shall pay the Escrow Agent such
fees, as are established by the Fee Schedule attached hereto as ANNEX C.
12. SHAREHOLDER'S AGENT EXPENSES. Upon the termination of the Escrow
Period in accordance with Section 3 hereof and in the event the Shareholder's
Agent incurs any expenses (including fees) in connection with his duties
pursuant to this Agreement and the Merger Agreement, to the extent any proceeds
remain in the Escrow Fund upon distributions, if any, to Acquirer required
hereunder, upon delivery of a certificate to the Escrow Agent by the
Shareholder's Agent detailing such expenses, the Escrow Agent shall distribute
that number of Escrow Shares as being sufficient to satisfy such expenses.
13. INDEMNIFICATION. In consideration of the Escrow Agent's acceptance
of this appointment, the Escrow Agent shall be indemnified and held harmless out
of the Escrow Account, and, to the extent not covered by the Escrow Account, by
the Acquirer, as to any liability incurred by the Escrow Agent to any person,
firm or corporation by reason of its having accepted such appointment or in
carrying out the terms hereof and of Article VIII, and to reimburse it for all
its costs and expenses, including, among other things, counsel fees and
expenses, reasonably incurred by reason of any matter as to which an indemnity
is paid; provided, however, that no indemnity shall be paid in case of the
Escrow Agent's negligence, willful misconduct or breach of this Agreement.
14. GENERAL.
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(a) Any notice given hereunder shall be in writing and shall be deemed
effective upon the earlier of personal delivery or the third day after mailing
by certified or registered mail, postage prepaid as follows:
To Acquirer:
Covad Communications Group, Inc.
2330 Central Expressway
Santa Clara, CA 95050
Attention: General Counsel
Facsimile No.: (408) 844-7680
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: John W. Carr, Esq.
Facsimile No.: (212) 455-2502
To Shareholders' Agent:
James Lynch
--------------------------------
--------------------------------
With a copy to:
--------------------------------
--------------------------------
--------------------------------
To the Escrow Agent:
--------------------------------
--------------------------------
--------------------------------
or to such other address as any party may have furnished in writing to the other
parties in the manner provided above. Any notice addressed to the Escrow Agent
shall be effective only upon receipt.
(b) The Officer's Certificate as defined in Article VIII may be signed
by the President, Vice President or Chief Financial Officer of Acquirer.
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(c) The captions in this Escrow Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Escrow Agreement.
(d) This Escrow Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one agreement.
(e) No party may, without the prior express written consent of
each other party, assign this Escrow Agreement in whole or in part. This Escrow
Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto.
(f) This Escrow Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in the State of New York, except where required to be
governed by Delaware Law or Pennsylvania Law. The parties to this Escrow
Agreement hereby agree to submit to personal jurisdiction in the State of New
York.
15. INVESTMENT OF ESCROW CASH. The Escrow Agent shall invest cash
dividends or other cash it may receive with respect to the Escrow Shares in the
SsgA U.S. Treasury Money Market Fund or, with the prior written consent of the
Shareholders' Agent, in another money market mutual fund registered under the
Investment Company Act of 1940, the principal of which is invested solely in
obligations issued or guaranteed by the United States government. All interest
or any other income earned with respect to such investment shall be retained by
the Escrow Agent as part of Escrow Fund until distributed in accordance with
other provisions of this Agreement. For tax reporting purposes, all such income
shall be allocated to the Shareholders in accordance with their pro rata
percentage interests set forth in ANNEX B.
16. TAX REPORTING MATTERS. The Acquirer and the Shareholders' Agent
on behalf of the Shareholders agree to provide the Escrow Agent with certified
tax identification numbers for each of them by furnishing appropriate forms W-9
(or Forms W-8, in the case of non-U.S. persons) and other forms and documents
that the Escrow Agent may reasonably request (collectively, "Tax Reporting
Documentation") to the Escrow Agent within 30 days, after the date hereof. The
parties hereto understand that, if such Tax Reporting Documentation is not so
certified to the Escrow Agent, the Escrow Agent may be required by the Internal
Revenue Code, as it may be amended from time to time, to withhold a portion of
any interest or other income earned on the investment of monies or other
property held by the Escrow Agent pursuant to this Agreement. The Escrow Agent
need not make any distribution of all or any portion of the Escrow Fund to any
person until such person has furnished to the Escrow Agent such Tax Reporting
Documentation as the Escrow Agent may reasonably require.
[Signature pages follow]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized,
all as of the date first written above.
COVAD COMMUNICATIONS GROUP, INC.
By:
---------------------------------
Name:
Title: Executive Vice President
[ESCROW AGENT]
By:
---------------------------------
Name:
Title:
--------------------------------------
JAMES LYNCH
--------------------------------------
[STOCKHOLDER]
--------------------------------------
[STOCKHOLDER]
--------------------------------------
[STOCKHOLDER]
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ANNEX A
<PAGE>
ANNEX B -- SHAREHOLDERS
SHAREHOLDER INTEREST IN ESCROW FUND
- ----------- -----------------------
[Name of Shareholder] [___]%
[Address]
[Taxpayer identification number]
Beneficial ownership: [__] shares of
Acquirer Common Stock
[Name of Shareholder] [___]%
[Address]
[Taxpayer identification number]
Beneficial ownership: [__] shares of
Acquirer Common Stock
[Name of Shareholder] [___]%
[Address]
[Taxpayer identification number]
Beneficial ownership: [__] shares of
Acquirer Common Stock
[Name of Shareholder] [___]%
[Address]
[Taxpayer identification number]
Beneficial ownership: [__] shares of
Acquirer Common Stock
<PAGE>
ANNEX C -- FEE SCHEDULE
