EXHIBIT 4.1
Primary Network Holdings, Inc. Stock Option Plan
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PRIMARY NETWORK HOLDINGS, INC.
STOCK OPTION PLAN
1. Purpose of the Plan.
The Primary Network Holdings, Inc. Stock Option Plan (the "Plan") is
intended to further the growth, development and financial success of Primary
Network Holdings, Inc. (the "Company") by providing incentives to its employees
and consultants to contribute toward the growth and profitability of the Company
and to assist the Company in obtaining and retaining the services of employees
and consultants with the ability to make such contributions. It is intended that
certain options to purchase Common Stock of the Company, par value $0.001 per
share ("Common Stock") granted hereunder will qualify as Incentive Stock Options
within the meaning of Section 422 of the Internal Revenue Code of 1986 as
amended (the "Code") ("Incentive Stock Options") and that other options granted
hereunder will not qualify as Incentive Stock Options ("non-qualified options,"
and, together with Incentive Stock Options, "options").
2. Stock Subject to the Plan.
(a) Stock Available for Grants of Options. Subject to adjustment under
Paragraph 15, the total number of shares of Common Stock that may be issued
pursuant to options granted under the Plan shall not exceed 3,468,820 shares of
Common Stock. If any option shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
again be available for the purposes of the Plan. Any shares of Common Stock
which are used as full or partial payment to the Company by an optionee of the
purchase price upon exercise of an option shall again be available for the
purposes of the Plan.
(b) Reservation of Shares. The Company will allocate and reserve the
maximum number of shares under subparagraph (a) above out of its authorized but
unissued shares of Common Stock or treasury shares held by the Company,
including shares purchased in the open market or in private transactions.
3. Administration.
The Plan shall be administered by the Board of Directors of the
Company (the "Board") or any committee appointed by, and consisting solely of
members of, the Board. Subject to the express provisions of the Plan, the Board
(or the committee thereof) shall have complete authority, in its sole
discretion, to determine the individuals to whom, and the time or times at
which, options shall be granted, the number of shares to be subject to each
option and, subject to the provisions of the Plan, the terms and conditions
thereof. In making such determination, the Board (or the committee thereof) may
take into account the nature of the services rendered by the respective
individuals, their present and potential contributions to the Company's success
and such other factors as the Board (or the committee thereof), in its sole
discretion, shall deem relevant. Subject to the express provisions of the Plan,
the Board (or the committee thereof) shall also have complete authority to
interpret the Plan, to prescribe, amend
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and rescind rules and regulations relating to it, to determine the terms and
provisions of the respective stock option agreements (which need not be
identical) and to make all other determinations necessary or advisable for the
administration of the Plan. The Board's (or the committee's) determinations on
the matters referred to in this Paragraph 3 shall be conclusive.
4. Eligibility.
Options (including Incentive Stock Options) may be granted only to
employees and consultants of the Company or its subsidiaries as determined by
the Board (or the committee thereof). As used herein, the following definitions
shall apply:
(a) The term "consultant" means any natural person who is
engaged by the Company or any subsidiary to render services and is
compensated for such services (as contemplated by Rule 701 and Form S-8
promulgated under the Securities Act of 1933, as amended (the
"Securities Act")).
(b) The term "employee" means any person employed by the
Company or any subsidiary of the Company, with the status of employment
determined based upon such minimum number of hours or periods worked as
shall be determined by the Board (or the committee thereof) in its sole
discretion, subject to any requirements of the Code.
(c) The term "optionee" means any employee or consultant who
receives an option under the Plan.
(d) The term "subsidiary" shall mean any present or future
subsidiary corporation of the Company within the meaning of Section
424(f) of the Code.
5. Time of Granting of Options.
An option grant under the Plan shall be deemed to be made on the date
on which the Board (or the committee thereof), by formal action of its members
duly recorded in the records thereof, makes an award of an option to an eligible
employee or consultant of the Company; provided that such option is evidenced by
a written option agreement (an "Option Agreement") duly executed on behalf of
the Company and on behalf of the optionee promptly after the date of the Board
(or the committee thereof) action.
6. Option Prices.
The purchase price of the Common Stock under each option shall not be
less than 100% of the fair market value of the Common Stock at the time of the
granting of the option, and in no event shall be less than $1.52 per share,
subject to adjustment in accordance with Paragraph 15 hereof. In the case of an
optionee who owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of its parent or subsidiary
corporation, the purchase price of the Common Stock under each Incentive Stock
Option shall not be less than 110% of the fair market value of the Common Stock
at the time of the granting of the option. The Board (or the committee thereof)
may adopt criterion for the determination of such fair market value as it may
determine to be appropriate and as may be provided for by the
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Board (or the committee thereof) or as may be required in order to comply with,
or to conform to the requirements of, any applicable laws or regulations.
7. Method of Exercise.
Upon exercise of options granted hereunder, the purchase price is to
be paid in full either (i) in cash, (ii) in the discretion of the Board (or the
committee thereof), by the tender to the Company of shares of the Common Stock
of the Company, owned by the optionee and registered in his or her name, having
a fair market value (determined at the time an option is granted in the same
manner as provided for in Paragraph 6 hereof) equal to the cash exercise price
of the option being exercised, (iii) in the discretion of, and upon the terms
and conditions approved by, the Board (or the committee thereof), by having
shares of Common Stock subject to such option withheld or exercising pursuant to
a "cashless exercise" procedure, or (iv) in the discretion of the Board (or the
committee thereof), by any combination of the payment methods specified in
clauses (i), (ii) and (iii) hereof; provided, however, that no shares of Common
Stock may be tendered in exercise of an option if such shares were acquired by
the optionee through the exercise of an Incentive Stock Option unless (A) such
shares have been held by the optionee for at least one year, and (B) at least
two years have elapsed since such Incentive Stock Option was granted; and
provided further that no option may be exercised for a fraction of a share of
Common Stock. The cash proceeds of the sale of Common Stock issued upon exercise
of options granted hereunder shall be added to the general funds of the Company
and used for its general corporate purposes. The shares of Common Stock of the
Company received by the Company as payment of the option price may be added to
the shares of the Common Stock of the Company held in its treasury and used for
the purposes of granting additional options under the Plan.
Upon the exercise of an option which is not an Incentive Stock Option,
the Company may withhold a number of shares sufficient to satisfy the Company's
obligation to withhold for federal and state taxes on such exercise.
The holder of an option shall have none of the rights of a stockholder
of the Company with respect to the shares subject to such option until such
shares shall have been issued to such holder upon the exercise of the option in
accordance with this Paragraph 7.
8. Incentive Stock Option Amount Limit.
The maximum aggregate fair market value (determined at the time an
option is granted in the same manner as provided for in Paragraph 6 hereof) of
the Common Stock of the Company with respect to which Incentive Stock Options
are exercisable for the first time by any optionee during any calendar year
(under all plans of the Company and its subsidiaries) shall not exceed $100,000.
9. Tern of Options.
The term of each option shall be the term stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of granting thereof or such shorter period as is prescribed in
Paragraph 10 hereof; provided further that, in the case of an optionee who owns
more than ten percent (10%) of the total combined voting
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power of all classes of stock of the Company or of its parent or subsidiary
corporation, the term of any Incentive Stock Option shall not be more than five
(5) years from the date of granting thereof or such shorter period as is
prescribed in Paragraph 10 below. Within such limit and subject to Paragraphs 10
and 11 hereof, options will be exercisable at such time or times, and subject to
such restrictions and conditions, as the Board (or the committee thereof) shall,
in each instance, approve, which need not be uniform for all optionees. At any
time after the grant of an option, the Board (or the committee thereof) may, in
its sole discretion and subject to the terms and conditions it may determine,
accelerate the period during which such option vests.
10. Termination of Employment or Consulting Relationship.
(a) In the event of termination of an optionee's continuous status as
an employee or consultant (but not in the event of an optionee's change of
status from employee to consultant (in which case an employee's Incentive Stock
Option shall automatically convert to a non-qualified option on the ninety-first
(91st) day following such change of status) or from consultant to employee),
such optionee may, but only within such period of time as is determined by the
Board (or the committee thereof) and in no event later than the expiration date
of the term of such option as set forth in the Option Agreement (with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination), exercise his or her option to the
extent that optionee was entitled to exercise it at the date of such
termination. To the extent that optionee was not entitled to exercise the option
at the date of such termination, or if optionee does not exercise such option to
the extent so entitled within the time specified herein, the option shall
terminate.
(b) In the event of the termination of an optionee's continuous status
as an employee or consultant as a result of his or her disability (as defined
below), the optionee may exercise an option, to the extent he or she was
entitled to exercise it at the date of such termination, within such period of
time as is determined by the Board (or the committee thereof) (which, in the
case of an Incentive Stock Option, shall be no later than one (1) year after the
termination of employment) and in no event later than the expiration of the term
of the option as set forth in the Option Agreement. For this purpose, a person
shall be deemed to be "disabled" if he or she is permanently and totally
disabled within the meaning of Section 22(e)(3) of the Code, which, as of the
date hereof, means that he or she is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months. A person shall be
considered disabled only if he or she furnishes such proof of disability as the
Board (or the committee thereof) may require. To the extent that optionee was
not entitled to exercise the option at the date of such termination, or if
optionee does not exercise such option to the extent so entitled within the time
specified herein, the option shall terminate.
(c) As used herein, "continuous status as an employee or consultant"
means that the employment or consulting relationship with the Company or any
subsidiary is not interrupted or terminated. Continuous status as an employee or
consultant shall not be considered interrupted in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company, any subsidiary or any successor. A leave of absence approved by the
Company shall include sick leave, military leave, or any other personal
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leave approved by an authorized representative of the Company. For purposes of
Incentive Stock Options, no such leave may exceed 90 days, unless reemployment
upon expiration of such leave is guaranteed by statute or contract, including
Company policies. If reemployment upon expiration of a leave of absence approved
by the Company is not so guaranteed, on the 91st day of such leave any Incentive
Stock Option held by the optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a non-qualified option.
The Option Agreements may contain such provisions as the Board (or the committee
thereof) shall approve with reference to the effect of approved leaves of
absence.
(d) Nothing in the Plan or in any option granted pursuant to the Plan
shall confer on any individual any right to continue in the employment of, or
consulting relationship with, the Company, any subsidiary or affiliate thereof
or to interfere in any way with the right of the Company, any subsidiary or
affiliate thereof to terminate his or her employment or consulting relationship
at any time, with or without cause.
11. Death.
In the event of the death of an individual to whom an unexpired option
has been granted under the Plan, the unexpired option may be exercised, to the
extent exercisable at the date of death, by a legatee or legatees under the
optionee's last will, or by personal representatives or distributees, at any
time within a period of one (1) year after death, but not after the expiration
of the term of the option, and only if and to the extent that the option was
exercisable at the date of death.
12. Successive Option Grants.
Successive option grants may be made to any optionee under this Plan.
13. Non-Transferability of Options, Transfer Restrictions on Option
Shares.
(a) Each option granted under the Plan shall, by its terms, be
non-transferable otherwise than by will or the laws of descent and distribution,
and an option may be exercised, during the lifetime of the holder thereof, only
by such holder. The terms of such option shall be binding upon the
beneficiaries, executors, administrators, heirs and successors of such holder.
(b) The Board (or the committee thereof), in its sole discretion, may
impose such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an option as it deems appropriate. Any such
restriction shall be set forth in the respective Option Agreement and may be
referred to on the certificates evidencing such shares. The Board (or the
committee thereof) may require the optionee to give the Company prompt notice of
any disposition of shares of Common Stock acquired upon exercise of an Incentive
Stock Option within (i) two years from the date of granting such option to such
optionee or (ii) one year after the transfer of such shares to such optionee.
The Board (or the committee thereof) may direct that the certificates evidencing
shares acquired upon exercise of an option refer to such requirement to give
prompt notice of disposition.
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14. Investment Purpose.
Each option under the Plan shall be granted only on the condition that
all purchases of stock thereunder shall be for investment purposes, and not with
a view to resale or distribution, except that the Board (or the committee
thereof) may make such provision with respect to options granted under this Plan
as it deems necessary or advisable for the release of such condition upon the
registration with the Securities and Exchange Commission of Common Stock subject
to the option, or upon the happening of any other contingency warranting the
release of such condition.
15. Adjustments Upon Changes in Capitalization or Corporate Acquisitions.
Notwithstanding any other provisions of the Plan, the option
agreements may contain such provisions as the Board (or the committee thereof)
shall determine to be appropriate for the adjustment of the number and class of
shares subject to each outstanding option, and the option prices in the event of
changes in the outstanding Common Stock by reason of stock dividends,
recapitalizations, mergers, consolidations, spin-offs, split-offs, split-ups,
combinations or exchanges of shares and the like, and, in the event of any such
change in the outstanding Common Stock, the aggregate number and class of shares
available under the Plan and the maximum number of shares as to which options
may be granted to any individual shall be appropriately adjusted by the Board
(or the committee thereof), whose determination shall be conclusive. In the
event the Company enters into a transaction described in Section 424(a) of the
Code with any other corporation, the Board (or the committee thereof) may grant
options to employees or former employees, or consultants or former consultants
of such corporation in substitution of options previously granted to them upon
such terms and conditions as shall be necessary to qualify such grant as a
substitution described in Section 424(a) of the Code.
16. Amendment and Termination.
The Board (or the committee thereof) may at any time terminate the
Plan, or make such modifications of the Plan as they shall deem advisable;
provided, however, that the Board (or the committee thereof) may not, without
further approval by the holders of Common Stock, make any modifications which,
by applicable law, require such approval. No termination or amendment of the
Plan may, without the consent of the optionee to whom any option shall
previously have been granted, adversely affect the rights of such optionee under
such option.
17. Term of Plan.
This Plan shall terminate ten (10) years after the date on which it
was initially approved and adopted by the Board (or the committee thereof) and
no option shall be granted hereunder after the expiration of such ten-year
period. Options outstanding at the termination of the Plan shall continue in
full force and effect and shall not be affected thereby.
18. Compliance with Laws.
This Plan, the granting and vesting of options under this Plan and the
issuance and delivery of shares of Common Stock and the payment of the exercise
price under this Plan or under options granted hereunder are subject to
compliance with all applicable federal and state
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laws, rules and regulations (including but not limited to state and federal
securities law and federal margin requirements) and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion of counsel
for the Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan and the
options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
19. Paragraph Headings.
Paragraph headings are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Plan.
20. Governing Law.
This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of Delaware
without regard to conflicts of laws thereof.
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IN WITNESS WHEREOF, the Company has executed the Primary Network
Holdings, Inc. Stock Option Plan as of this 27th day of July, 1999.
By:
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Brian L. Matthews
President and Chief Executive Officer
ATTEST:
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Blake Ashby, Secretary
