<PAGE> 1
EXHIBIT 10.1
CAPROCK COMMUNICATIONS CORP.
1998 EQUITY INCENTIVE PLAN
ADOPTED AUGUST 24, 1998
1. PURPOSE OF THE PLAN.
The purpose of the Plan is to provide a means by which selected Employees
of and Consultants to the Company and its Affiliates may be given an opportunity
to acquire a proprietary interest in the Company. Under the Plan, the Company
may provide various types of long-term incentive awards, including Stock
Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock
Reload Options and Other Stock-Based Awards, in order to retain the services of
persons who are now Employees of or Consultants to the Company and its
Affiliates, to secure and retain the services of new Employees and Consultants,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates. Stock Options granted under the Plan
may be Incentive Stock Options or Nonqualified Stock Options, as determined by
the Committee at the time of grant of an Option and subject to the applicable
provisions of Section 422 of the Code and the regulations promulgated
thereunder.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "Affiliate" means, with respect to any Person, any Parent or Subsidiary
of such Person, whether such Parent or Subsidiary is now or hereafter existing.
(b) "Agreement" means the agreement between the Company and the Holder
setting forth the terms and conditions of an Award under the Plan.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code and the applicable laws of any
foreign country or jurisdiction where Options are, or will be, granted under the
Plan.
(d) "Award" means an award of Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Stock Reload Options or Other Stock-Based
Awards under the Plan.
(e) "Beneficial Owner" means a "beneficial owner" as defined in Rule 13d-3
of the Exchange Act.
(f) "Board" means the Board of Directors of the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Change of Control" means the occurrence at any time after the
effective time of the Mergers of (i) any Person or Group of Persons becoming for
the first time the Beneficial Owner, directly or indirectly, of more than fifty
percent (50%) of the total combined voting power of all classes of capital stock
of the Company normally entitled to vote for the election of directors of the
Company ("Voting Stock"), other than as a result of a transfer or series of
related transfers of Voting Stock from a Person or Group of Persons who
immediately prior to such transfer or transfers was the Beneficial Owner, and
who after giving effect to such transfer or transfers continues to be the
Beneficial Owner, of more than fifty percent (50%) of the Voting Stock of the
Company; (ii) a merger (other than the Mergers) or consolidation of the Company
with or into another Person or the merger of another Person into the Company as
a consequence of which those Persons who held all of the Voting Stock of the
Company immediately prior to such merger or consolidation do not hold either
directly or indirectly a majority of the Voting Stock of the Company (or, if
applicable, the surviving company of such merger or consolidation) after the
consummation of such merger or consolidation; (iii) the sale of all or
substantially all of the assets of the Company to any Person or Group of Persons
(other than to an entity which owns a majority or more of the Common Stock of
the Company, a Subsidiary of the Company, or to an entity whose equity interests
are owned directly or indirectly by the Company or by an
<PAGE> 2
entity which owns directly or indirectly a majority or more of the Common Stock
of the Company); or (iv) any event or series of events (which event or series of
events must include a proxy fight or proxy solicitation with respect to the
election of directors of the Company made in opposition to the nominees
recommended by the Continuing Directors) during any period of 12 consecutive
months all or any portion of which is after the effective time of the Mergers,
as a result of which a majority of the Board of Directors of the Company
consists of individuals other than Continuing Directors; provided, however, that
a "Change of Control" shall not be deemed to have occurred as a result of the
Mergers.
(i) "Committee" means the Compensation Committee of the Board of Directors.
(j) "Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
(k) "Company" means CapRock Communications Corp.
(l) "Consultant" means (i) any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services and (ii) any Director of the Company, whether such
Director is compensated for such services or not.
(m) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company or any Affiliate 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 or between the
Company or any Affiliate or any successor. A leave of absence approved by the
Company shall include sick leave, military leave, or any other personal 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. 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 Holder shall cease to be treated for tax purposes as an Incentive Stock
Option and shall be treated for tax purposes as a Nonqualified Stock Option.
(n) "Deferred Stock" means Stock to be received at the end of a specified
deferral period under an Award made pursuant to Section 10 below.
(o) "Director" means a member of the Board of Directors of the Company.
(p) "Employee" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. The payment of a Director's fee
by the Company shall not be sufficient to constitute "employment" by the
Company.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(r) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other source as the
Committee deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Committee.
(s) "Group" means a "group" as such term is used in Section 13(d)(3) of the
Exchange Act.
(t) "Holder" means a person who has received an Award under the Plan.
<PAGE> 3
(u) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(v) "Mergers" means the proposed combination of the businesses of CapRock
Telecommunications Corp., CapRock Fiber Network, Ltd., and IWL Communications
contemplated by the Agreement and Plan of Merger and Plan of Exchange entered
into on February 16, 1998.
(w) "Nonqualified Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(x) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(y) "Option" means a Stock Option granted pursuant to the Plan.
(z) "Option Agreement" shall mean the written option agreement,
substantially in the form attached hereto as Exhibit A (or such other form as
may be approved by the Committee for use under the Plan pursuant to Section
3(b)(v) hereof), between the Company and Holder evidencing the grant of an
Option.
(aa) "Optioned Stock" means the Common Stock subject to an Option.
(bb) "Other Stock-Based Awards" means awards (other than Stock Options,
Stock Appreciation Rights, Restricted Stock, Deferred Stock and Stock Reload
Options) denominated or payable in, valued in whole or in part by reference to,
or otherwise based on, or related to shares of Common Stock.
(cc) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(dd) "Person" means an individual or entity.
(ee) "Plan" means this 1998 Equity Incentive Plan.
(ff) "Restricted Stock" means Stock, received under an Award made pursuant
to Section 9 below, that is subject to restrictions under said Section 9.
(gg) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor rule thereto.
(hh) "Section 16(b)" means Section 16(b) of the Exchange Act.
(ii) "SAR Value" means the excess of the Fair Market Value of one share of
Common Stock over the exercise price per share specified in a related Stock
Option in the case of a Stock Appreciation Right granted in tandem with a Stock
Option and the Stock Appreciation Right price per share in the case of a Stock
Appreciation Right awarded on a free standing basis, in each case multiplied by
the number of shares in respect of which the Stock Appreciation Right shall be
exercised, on the date of exercise.
(jj) "Share" means a share of the Common Stock of the Company.
(kk) "Stock" means the Common Stock of the Company.
(ll) "Stock Appreciation Right" means the right, pursuant to an Award
granted under Section 8 hereof, to recover an amount equal to the SAR Value.
(mm) "Stock Option" means any Option to purchase shares of Stock which is
granted pursuant to the Plan.
(nn) "Stock Reload Option" means any option granted under Section 7(e) as a
result of the payment of the exercise price of a Stock Option and/or the
withholding tax related thereto in the form of Stock owned by the Holder or the
withholding of Stock by the Company.
(oo) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, including without
limitation, in the case of the Company, IWL Communications,
<PAGE> 4
Incorporated and CapRock Telecommunications Corp. (f/k/a CapRock Communications
Corp.) and including without limitation CapRock Fiber Network, Ltd.
(pp) "Tandem Stock Appreciation Right" means a Stock Appreciation Right
granted in tandem with all or part of any Stock Option granted under the Plan.
3. ADMINISTRATION OF THE PLAN.
(a) Plan Administration. The Plan at all times shall be administered by the
Committee, which shall be comprised solely of not less than two members who
shall be (i) "Non-Employee Directors" within the meaning of Rule 16b-3 and (ii)
unless otherwise determined by the Board of Directors, "outside directors"
within the meaning of Treasury Regulation Section 1.162-27(e)(3) under Section
162(m) of the Code.
(b) Powers of the Committee. Subject to the provisions of the Plan and
subject to the approval of any relevant authorities, including the approval, if
required, of any stock exchange upon which the Common Stock is listed, the
Committee shall have the full authority to award: (i) Stock Options, (ii) Stock
Appreciation Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock
Reload Options and/or (vi) Other Stock-Based Awards. For purposes of
illustration and not of limitation, the Committee shall have the authority
(subject to the express provisions of the Plan):
(i) to determine the Fair Market Value of the Common Stock;
(ii) to select the Consultants and Employees to whom Awards may from
time to time be granted hereunder;
(iii) to determine whether and to what extent Awards or any
combination thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each such
Award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price of an
Option; any specified performance goals or other criteria which must be
attained for the vesting of an Award; any restrictions or limitations; and
any vesting, exchange, surrender, cancellation, acceleration, termination,
exercise or forfeiture provisions; and
(vii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Holders of
any Awards. No member of the Board or any Committee administering the Plan shall
be liable for any action taken or determination made in good faith with respect
to the Plan or any Option granted hereunder.
4. STOCK SUBJECT TO THE PLAN.
The maximum aggregate number of Shares that may be acquired by Holders of
any Awards granted under the Plan is 5,000,000 shares and the maximum number of
Shares that may be acquired by an individual Holder under the Plan shall not
exceed 2,500,000 (in each case subject to adjustment as provided in Section 12
of the Plan). The Shares may be authorized but unissued or reacquired Common
Stock.
If any shares of Stock that have been granted pursuant to a Stock Option
cease to be subject to a Stock Option, or if any shares of Stock that are
subject to any Stock Appreciation Right, Restricted Stock, Deferred Stock award,
Reload Stock Option or Other Stock-Based Award granted hereunder are forfeited
or any such award otherwise terminates without a payment being made to the
Holder in the form of Stock, such shares shall again be available for
distribution in connection with future grants and awards under the Plan. Only
net shares issued upon a stock-for-stock exercise (including stock used for
withholding taxes) shall be counted against the number of shares available under
the Plan.
<PAGE> 5
5. ELIGIBILITY.
(a) Awards may be made or granted to key employees, officers, directors and
consultants of the Company who are deemed to have rendered or to be able to
render significant services to the Company or its Subsidiaries and who are
deemed to have contributed or to have the potential to contribute to the success
of the Company. No Incentive Stock Option shall be granted to any person who is
not an employee of the Company or a Subsidiary at the time of grant.
(b) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonqualified Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company or any Affiliate) exceeds $100,000, such Options shall be treated for
tax purposes as Nonqualified Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted. For purposes of this Section 5(b), the Fair Market Value of the
Shares shall be determined as of the time the Option with respect to such Shares
is granted.
(c) Neither the Plan nor any Award shall confer upon any Holder any right
with respect to continuation of his or her employment or consulting relationship
with the Company or any Affiliate, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued upon exercise
of an Option shall be such price as is determined by the Committee, but in the
case of an Incentive Stock Option:
(i) granted to an Employee who, at the time of grant of such Option,
owns stock representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any Affiliate, the per Share
exercise price shall not be less than 110% of the Fair Market Value per
Share on the date of grant; and
(ii) granted to any other Employee, the per Share exercise price shall
not be less than 100% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Committee (and, in the case of an Incentive Stock Option, shall be determined at
the time of grant). Such consideration shall be paid, to the extent permitted by
applicable statutes and regulations at the time the Option is exercised, either
(i) in cash or check, or (ii) at the discretion of the Committee, in one or a
combination of the following ways (which may be in combination with or in lieu
of payment by cash or check): (A) by delivery to the Company of other Shares of
Common Stock of the Company to be valued at their Fair Market Value on the
exercise date, (B) according to a deferred payment or other arrangement with the
Person to whom the Option is granted or to whom the Option is transferred
pursuant to Section 15, (C) withholding of Shares that would otherwise be issued
upon the exercise of the Option, valued at their Fair Market Value on the
exercise date, or (D) in any other form of legal consideration that may be
acceptable to the Committee. In making its determination as to the type of
consideration to accept, the Committee shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company. In addition,
such consideration shall be accompanied by the delivery by the Optionee of a
properly executed exercise notice together with such other documentation as the
Committee and a broker, if applicable, shall require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price.
7. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Committee, including performance criteria
<PAGE> 6
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan. The total number of Shares subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable with respect
to some or all of the Shares allotted to that period and may be exercised with
respect to some or all of the Shares allotted to such period and/or any prior
period as to which the Option became vested but was not fully exercised.
An Option may not be exercised for a fraction of a Share. Exercise of an
Option in any manner shall result in a decrease in the number of Shares that
thereafter may be available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
Subject to Section 18, an Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option Agreement by the Person entitled to exercise the Option
and full payment for the Shares with respect to which the Option is exercised
has been received by the Company. To the extent required by applicable federal,
state, local or foreign law, an Optionee shall make arrangements satisfactory to
the Company for the satisfaction of any withholding tax obligations that arise
by reason of an Option exercise or any sale of Shares, which obligations may, as
authorized by the Committee, consist of any consideration and method of payment
allowable under Section 6(b) hereof. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote, receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment shall be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 12 hereof.
(b) Termination of Employment or Consulting Relationship. Subject to
paragraph (c) below, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant, such Optionee may exercise his or her
Option to the extent that the Optionee was entitled to exercise it at the date
of such termination; provided, however, that such Option may be exercised only
within such period of time as is determined by the Committee at the date of
grant. Such time period shall not, in the case of an Incentive Stock Option,
exceed three (3) months after the date of such termination and shall not, in any
case, be later than the expiration date of the term of such Option as set forth
in the Option Agreement. To the extent that the Optionee was not entitled to
exercise the Option at the date of such termination, or if the Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan. An Optionee's Continuous Status as an Employee or Consultant shall
not be terminated in the event of Optionee's change of status from an Employee
to a Consultant or from a Consultant to an Employee; provided, however, that in
the event of an Optionee's change of status from an Employee to a Consultant,
any Incentive Stock Option granted to such Employee shall automatically cease to
be treated for tax purposes as an Incentive Stock Option and shall be treated
for tax purposes as a Nonqualified Stock Option on the day three months and one
day following such change of status.
(c) Disability of Optionee. In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of his or her
disability, the Optionee may, but only within twelve (12) months from the date
of such termination (and in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise the Option to the
extent he or she otherwise was entitled to exercise it at the date of such
termination. If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, then in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically cease to be treated for tax purposes
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonqualified Stock Option on the day three months and one day following such
termination. To the extent that the Optionee was not entitled to exercise the
Option at the date of termination, or if the Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
<PAGE> 7
(d) Death of Optionee. In the event of the death of an Optionee, the Option
may be exercised at any time within twelve (12) months following the date of
death (but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement) by the Optionee's estate or by any Person
who acquired the right to exercise the Option by bequest or inheritance (the
"Option Beneficiary"), but only to the extent that the Optionee was entitled to
exercise the Option on the date of death. To the extent that, at the time of
death, the Optionee was not entitled to exercise the Option, or if the Option
Beneficiary does not exercise the Option within the time specified herein, the
Option shall terminate and the Shares covered by such Option shall revert to the
Plan.
(e) Stock Reload Option. The Committee may also grant to the Holder
(concurrently with the grant of an Incentive Stock Option and at or after the
time of grant in the case of a Non-Qualified Stock Option) a Stock Reload Option
up to the amount of shares of Stock held by the Holder for at least six months
and used to pay all or part of the exercise price of an Option and, if any,
withheld by the Company as payment for withholding taxes. Such Stock Reload
Option shall have an exercise price of the Fair Market Value as of the date of
the Stock Reload Option grant. Unless the Committee determines otherwise, a
Stock Reload Option may be exercised commencing one year after it is granted and
shall expire on the date of expiration of the Option to which the Stock Reload
Option is related.
8. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in tandem
with (i.e., Tandem Stock Appreciation Right) or in conjunction with all or part
of any Stock Option granted under the Plan or may be granted on a free-standing
basis. In the case of a Non-Qualified Stock Option, a Tandem Stock Appreciation
Right may be granted either at or after the time of the grant of such
Non-Qualified Stock Option. In the case of an Incentive Stock Option, a Tandem
Stock Appreciation Right may be granted only at the time of the grant of such
Incentive Stock Option.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to the
following terms and conditions:
(i) Exercisability. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Stock
Options to which they relate shall be exercisable in accordance with the
provisions of Section 7 hereof and this Section 8 and may be subject to the
Code with respect to related Incentive Stock Options and such additional
limitations on exercisability as shall be determined by the Committee and
set forth in the Agreement. Other Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee and set forth in the Agreement.
(ii) Termination. A Tandem Stock Appreciation Right shall terminate
and shall no longer be exercisable upon the termination or exercise of the
related Stock Option, except that, unless otherwise determined by the
Committee at the time of grant, a Tandem Stock Appreciation Right granted
with respect to less than the full number of shares covered by a related
Stock Option shall not be reduced until after the number of shares
remaining under the related Stock Option equals the number of shares
covered by the Tandem Stock Appreciation Right.
(iii) Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by a Holder by surrendering the applicable portion of the related
Stock Option. Upon such exercise and surrender, the Holder shall be
entitled to receive such amount in the form determined pursuant to Section
8(b)(iv) below. Stock Options which have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent the related Tandem
Stock Appreciation Rights have been exercised.
(iv) Receipt of SAR Value. Upon the exercise of a Stock Appreciation
Right, a Holder shall be entitled to receive up to, but not more than, an
amount in cash and/or shares of Stock equal to the SAR Value with the
Committee having the right to determine the form of payment.
(v) Shares Affected Upon Plan. Upon the exercise of a Tandem Stock
Appreciation Right, the Stock Option or part thereof to which such Tandem
Stock Appreciation Right is related shall be deemed
<PAGE> 8
to have been exercised for the purpose of the limitation set forth in
Section 4 hereof on the number of shares of Common Stock to be issued under
the Plan, but only to the extent of the number of shares, if any, issued
under the Tandem Stock Appreciation Right at the time of exercise based
upon the SAR Value.
9. RESTRICTED STOCK.
(a) Grant. Shares of Restricted Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded, the number of shares to be awarded, the price
(if any) to be paid by the Holder, the time or times within which such Awards
may be subject to forfeiture ("Restriction Period"), the vesting schedule and
rights to acceleration thereof, and all other terms and conditions of the
Awards.
(b) Terms and Conditions. Each Restricted Stock Award shall be subject to
the following terms and conditions:
(i) Certificates. Restricted Stock, when issued, will be represented
by a stock certificate or certificates registered in the name of the Holder
to whom such Restricted Stock shall have been awarded. During the
Restriction Period, certificates representing the Restricted Stock and any
securities constituting Retained Distributions (as defined below) shall
bear a legend to the effect that ownership of the Restricted Stock (and
such Retained Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and conditions provided in
the Plan and the Agreement. Such certificates shall be deposited by the
Holder with the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit transfer to the
Company of all or any portion of the Restricted Stock and any securities
constituting Retained Distributions that shall be forfeited or that shall
not become vested in accordance with the Plan and the Agreement.
(ii) Rights of Holder. Restricted Stock shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. The Holder
will have the right to vote such Restricted Stock, to receive and retain
all regular cash dividends and other cash equivalent distributions as the
Board may in its sole discretion designate, pay or distribute on such
Restricted Stock and to exercise all other rights, powers and privileges of
a holder of Common Stock with respect to such Restricted Stock, with the
exceptions that (A) the Holder will not be entitled to delivery of the
stock certificate or certificates representing such Restricted Stock until
the Restriction Period shall have expired and unless all other vesting
requirements with respect thereto shall have been fulfilled; (B) the
Company will retain custody of the stock certificate or certificates
representing the Restricted Stock during the Restriction Period; (C) other
than regular cash dividends and other cash equivalent distributions as the
Board may in its sole discretion designate, pay or distribute, the Company
will retain custody of all distributions ("Retained Distributions") made or
declared with respect to the Restricted Stock (and such Retained
Distributions will be subject to the same restrictions, terms and
conditions as are applicable to the Restricted Stock) until such time, if
ever, as the Restricted Stock with respect to which such Retained
Distributions shall have been made, paid or declared shall have become
vested and with respect to which the Restriction Period shall have expired;
(D) a breach of any of the restrictions, terms or conditions contained in
this Plan or the Agreement or otherwise established by the Committee with
respect to any Restricted Stock or Retained Distributions will cause a
forfeiture of such Restricted Stock and any Retained Distributions with
respect thereto.
(iii) Vesting: Forfeiture. Upon the expiration of the Restriction
Period with respect to each Award of Restricted Stock and the satisfaction
of any other applicable restrictions, terms and conditions (A) all or part
of such Restricted Stock shall become vested in accordance with the terms
of the Agreement, and (B) any Retained Distributions with respect to such
Restricted Stock shall become vested to the extent that the Restricted
Stock related thereto shall have become vested. Any such Restricted Stock
and Retained Distributions that do not vest shall be forfeited to the
Company and the Holder shall not
<PAGE> 9
thereafter have any rights with respect to such Restricted Stock and
Retained Distributions that shall have been so forfeited.
10. DEFERRED STOCK.
(a) Grant. Shares of Deferred Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the eligible persons to whom and the time or times at which grants of Deferred
Stock shall be awarded, the number of shares of Deferred Stock to be awarded to
any person, the duration of the period ("Deferral Period") during which, and the
conditions under which receipt of the shares will be deferred, and all the other
terms and conditions of the Awards.
(b) Terms and Conditions. Each Deferred Stock Award shall be subject to the
following terms and conditions:
(i) Certificates. At the expiration of the Deferral Period (or the
Additional Deferral Period referred to in Section 10(b)(iii) below, where
applicable), share certificates shall be delivered to the Holder, or his
legal representative, representing the number equal to the shares covered
by the Deferred Stock Award.
(ii) Vesting; Forfeiture. Upon the expiration of the Deferral Period
(or the Additional Deferral Period, where applicable) with respect to each
Award of Deferred Stock and the satisfaction of any other applicable
limitations, terms or conditions, such Deferred Stock shall become vested
in accordance with the terms of the Agreement. Any Deferred Stock that does
not vest shall be forfeited to the Company and the Holder shall not
thereafter have any rights with respect to such Deferred Stock that has
been so forfeited.
(iii) Additional Deferral Period. A Holder may request to, and the
Committee may at any time, defer the receipt of an Award (or an installment
of an Award) for an additional specified period or until a specified event
("Additional Deferral Period"). Subject to any exceptions adopted by the
Committee, such request must generally be made at least one year prior to
expiration of the Deferral Period for such Deferred Stock Award (or such
installment).
11. OTHER STOCK-BASED AWARDS.
(a) Grant and Exercise. Other Stock-Based Awards may be awarded, subject to
limitations under applicable law, that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, shares
of Common Stock, as deemed by the Committee to be consistent with the purposes
of the Plan, including, without limitation, purchase rights, shares of Common
Stock awarded which are not subject to any restrictions or conditions,
convertible or exchangeable debentures, or other rights convertible into shares
of Common Stock and Awards valued by reference to the value of securities of or
the performance of specified Subsidiaries. Other Stock-Based Awards may be
awarded either alone or in addition to or in tandem with any other Awards under
this Plan or any other plan of the Company.
(b) Eligibility For Other Stock-Based Awards. The Committee shall determine
the eligible persons to whom and the time or times at which grants of such Other
Stock-Based Awards shall be made, the number of shares of Common Stock to be
awarded pursuant to such Awards, and all other terms and conditions of the
Awards.
(c) Terms and Conditions. Each Other Stock-Based Award shall be subject to
such terms and conditions as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Award, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Award, as well as
<PAGE> 10
the price per share of Common Stock covered by each such outstanding Award,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company. The conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible or exchangeable into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or exercise price of shares of Common
Stock subject to an Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Committee shall notify the Holder at least
fifteen (15) days prior to such proposed action. To the extent it has not been
previously exercised, the Award shall terminate immediately prior to the
consummation of such proposed action; provided, however, that the Committee may,
in the exercise of its sole discretion in such instances, declare that any Award
shall terminate as of an earlier date fixed by the Committee and give each
Holder the right to exercise his or her rights as to all or any part of the
Award, including Shares as to which the Award would not otherwise be
exercisable.
(c) Merger or Asset Sale. Subject to Section 12(d), in the event of the
merger of the Company into, or the consolidation of the Company with, another
corporation in which the shareholders of the Company receive cash or securities
of another issuer, or any combination thereof, in exchange for their shares of
Common Stock, or the sale of all or substantially all of the assets of the
Company, each outstanding Award shall be assumed or an equivalent option or
right substituted by the successor corporation or an Affiliate of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the Award, the Holder shall fully vest in and have the right to
exercise the Award (provided it has not already terminated), including Shares as
to which it would not otherwise be vested or exercisable. If an Award becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger, consolidation or sale of assets, the Committee shall notify the
Holder that the Award shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Award shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Award shall
be considered assumed if, following the merger, consolidation or sale of assets,
the option substituted for such Award confers the right to purchase or receive,
for each Share of Stock subject to the Award immediately prior to the merger,
consolidation or sale of assets, the per Share consideration (whether stock,
cash, or other securities or property) received in the merger, consolidation or
sale of assets by holders of Common Stock (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares); provided, however, that if such consideration
received in the merger, consolidation or sale of assets is not solely common
stock of the successor corporation or its Parent (if any), the Committee may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Award, for each Share of Stock subject to
the Award, to be solely common stock of the successor corporation or its Parent
(if any) equal in fair market value to the per Share consideration received by
holders of Common Stock in the merger, consolidation or sale of assets.
(d) Change of Control. Notwithstanding anything to the contrary, the
Committee may grant Awards which provide for the acceleration of the vesting of
Shares subject to the Award upon a Change of Control. Such provisions shall be
set forth in the Agreement.
(e) Further Adjustments. In the event of any change of a type described in
paragraphs (a) or (c) above, the Committee shall make any further adjustment to
the maximum number of Shares which may be acquired under the Plan pursuant to
the exercise of Awards, the maximum number of Shares for which Awards may be
granted to any one Employee and the number of Shares and price per Share subject
to outstanding Awards as shall be equitable to prevent dilution or enlargement
of rights under such Awards, and the determination of the Committee as to these
matters shall be conclusive and binding on the Holder; provided, however, that
(i) each such adjustment with respect to an Incentive Option shall comply with
the rules of Section 424(a) of the Code (or any successor provision) and (ii) in
no event shall any adjustment be
<PAGE> 11
made which would render any Incentive Stock Option granted hereunder other than
an "incentive stock option" as defined in Section 422 of the Code.
(f) No Limitation on Right to Merge, Etc. The grant of Awards pursuant to
the Plan shall not restrict in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve, liquidate, or sell or
transfer all or any part of its business or assets.
13. TERM OF PLAN.
The Plan shall become effective upon the earlier to occur of its adoption
by the Committee or its approval by the shareholders of the Company, as
described in Section 21 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 17 of the Plan.
14. TERM 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 grant thereof; and provided further that in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Affiliate, the term of the Option shall
be no more than five (5) years from the date of grant thereof.
15. NON-TRANSFERABILITY OF AWARDS.
An Incentive Stock Option shall not be transferrable except by will or by
the laws of descent and distribution and shall be exercisable during the
lifetime of the Person to whom the Incentive Stock Option is granted only by
such Person. Any other Award, including a Nonqualified Stock Option, shall not
be transferrable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order, as defined by the Code or by
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder (a "QDRO"), and shall be exercisable during the lifetime of
the Person to whom the Option is granted only by such Person or any transferee
pursuant to a QDRO.
16. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the date on which
the Committee makes the determination granting such Award, or such other date as
is determined by the Committee. Notice of the determination shall be given to
each Employee or Consultant to whom an Award is so granted within a reasonable
time after the date of such grant.
17. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may amend or terminate the Plan in any respect whatsoever,
provided that any such amendment or termination of the Plan shall not affect
Award already granted and such Award shall remain in full force and effect as if
the Plan had not been amended or terminated. In addition, to the extent
necessary and desirable to comply with Rule 16b-3 (or any other applicable law
or regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
18. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to an Award unless the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
Applicable Laws, including, without limitation, the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed or any automatic quotation system upon which the
Shares may then be quoted, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
<PAGE> 12
The Company may require any Optionee or other Holder, as a condition of
receiving Shares pursuant to an Award, (i) to give written assurances
satisfactory to the Company as to the Holder's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matter, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Award; (ii) to give written assurances satisfactory to the
Company stating that such Person is acquiring the Shares subject to the Award
for such Person's own account and not with any present intention of selling or
otherwise distributing such Shares; and (iii) to deliver such other
documentation as may be necessary to comply with federal and state securities
laws. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the Shares upon the
exercise of the Award has been registered under a then currently effective
registration statement under the Securities Act and all applicable state
securities laws, or (ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Shares, and may enter stop-transfer orders
against the transfer of the Shares issued upon the exercise of an Award.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
19. RESERVATION OF SHARES.
The Company, during the term of the Plan, shall at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
20. AGREEMENTS.
Options shall be evidenced by Option Agreements in such form as the
Committee shall approve from time to time. Other Awards shall be evidenced by
similar Agreements.
21. SHAREHOLDER APPROVAL.
Continuance of the Plan shall be subject to approval by the shareholders of
the Company within twelve (12) months before or after the date the Plan is
adopted. Such shareholder approval shall be obtained to the extent and in manner
required under Applicable Laws and the rules of any stock exchange upon which
the Common Stock is listed or any automatic quotation system upon which the
Common Stock is quoted.
22. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options or other Awards shall
constitute general funds of the Company.
23. MISCELLANEOUS.
(a) Acceleration of Vesting. The Committee shall have the power to
accelerate the time at which an Award may first be exercised or the time during
which an Award or any part thereof will vest, notwithstanding the provisions in
the Award Agreement stating the time at which it may first be exercised or the
time during which it will vest.
(b) Rule 16b-3. With respect to Persons subject to Section 16 of the
Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 and with respect to such Persons all
transactions shall be subject to such conditions regardless of whether they are
expressly set forth in the Plan or the Award Agreement. To the extent any
provision of the Plan or action by the Committee fails to so
<PAGE> 13
comply, it shall not apply to such Persons or their transactions and shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Committee.
(c) Grants Exceeding Allotted Shares. If the number of shares of Stock
subject to an Award granted pursuant to the Plan exceeds, as of the date of
grant, the number of Shares that may be issued under the Plan without additional
shareholder approval, such Award shall be void with respect to such excess
Shares, unless shareholder approval of an amendment sufficiently increasing the
number of Shares subject to the Plan is timely obtained in accordance with
Section 17 of the Plan.
(d) Notice. Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the Secretary of the Company and
shall become effective when it is received. Any written notice to Holders
required by any provisions of the Plan shall be addressed to the Holder at the
address on file with the Company and shall become effective three days after it
is mailed by certified mail, postage prepaid to such address or at the time of
delivery if delivered sooner by messenger or overnight courier.
(e) Savings Clause. Notwithstanding any other provision hereof, the Plan is
intended to qualify as a plan pursuant to which Incentive Stock Options may be
issued under Section 422 of the Code. If the Plan or any provision of the Plan
shall be held to be invalid or to fail to meet the requirements of Section 422
of the Code or the regulations promulgated thereunder, such invalidity or
failure shall not affect the remaining parts of the Plan, but rather it shall be
construed and enforced as if the Plan or the affected provision thereof, as the
case may be, complied in all respects with the requirements of Section 422 of
the Code.
(f) Governing Law. The Plan and all rights and obligations thereunder shall
be construed in accordance with and governed by the laws of the State of Texas
without regard to its conflict of laws rules.
<PAGE> 14
EXHIBIT A
CAPROCK COMMUNICATIONS CORP.
1998 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's name and address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of this Option Agreement and the Plan,
including the provisions thereof relating to increases in the number of shares
covered by this Option upon the occurrence of certain specified events, as
follows:
<TABLE>
<S> <C>
Grant Number.....................
Date of Grant....................
Vesting Commencement Date........
Exercise Price per Share......... $
Total Number of Shares Granted...
Total Exercise Price............. $
Type of Option:.................. Incentive Stock Option
Nonqualified Stock Option
Term/Expiration Date: (No more
than 10 years from date of
grant, 5 years for certain
grants)
</TABLE>
Vesting Schedule
This Option may be exercised, in whole or in part, in accordance with the
following schedule. Except only as specifically provided elsewhere herein or in
the Plan, this Option shall be exercisable in the following cumulative
installments:
[NOTE: TO BE COMPLETED UPON GRANT OF OPTIONS]
Termination Period
You may exercise this Option for three months (or such shorter period
provided for elsewhere herein) after your employment or consulting relationship
with the Company terminates, or for such longer period upon your death or
disability as provided in the Plan. If your status changes from Employee to
Consultant or Consultant to Employee, this Option Agreement shall remain in
effect. In no case may you exercise this Option after the Term/Expiration Date
as provided above. Notwithstanding the foregoing, in the event the Company
terminates your employment for Cause (as defined below), this Option will
terminate on the date of the termination of your employment and will not be
exercisable thereafter. For purposes of this Agreement, "Cause" means the
occurrence of any of the following events or reasons:
(a) Optionee's conviction for a felony offense or commission by
Optionee of any act abhorrent to the community that the Company considers
materially damaging to or tending to discredit the reputation of the
Company;
(b) Dishonesty, fraud, willful misconduct, unlawful discrimination or
theft on the part of Optionee;
<PAGE> 15
(c) Optionee's using for his or her own benefit any confidential or
proprietary information of the Company, or willfully or negligently
divulging any such information to third parties without the prior written
consent of the Company;
(d) Optionee's public drunkenness, public use of illegal substances or
drugs or the use, possession, distribution or being under the influence of
alcohol or illegal substances or drugs in the workplace (the only exception
is that Optionee may consume alcohol reasonably and responsibly, if he or
she so chooses, at legitimate business events and functions where alcohol
is legally available); or
(e) the determination by the Company that Optionee has continually
failed or refused to comply, after notice of and a reasonable opportunity
to cure such failure or refusal, with the policies, standards, regulations,
instructions, or directions of the Company as they currently exist or as
they may be modified from time to time.
II. AGREEMENT
1. Grant of Option. CapRock Communications Corp. (the "Company") hereby
grants to the Optionee named in Section I hereof (the "Optionee") an option
(the"Option") to purchase the total number of shares of Common Stock (the
"Shares") set forth in Section I hereof, at the exercise price per share set
forth in Section I hereof (the "Exercise Price") subject to the terms,
definitions and provisions of the 1998 Stock Option Plan (the "Plan") adopted by
the Company, which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option Agreement.
If designated in Section I hereof as an Incentive Stock Option, this Option
is intended (subject to Section 5(b) of the Plan) to qualify as an Incentive
Stock Option as defined in Section 422 of the Code.
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in Section I hereof
and with the applicable provisions of the Plan and this Option Agreement.
In the event of Optionee's death, disability or other termination of the
employment or consulting relationship, this Option shall be exercisable in
accordance with the applicable provisions of the Plan and this Option
Agreement.
(b) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached hereto as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which
the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such shares
of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee
and shall be delivered in person or by certified mail to the Secretary of
the Company. The written notice shall be accompanied by payment of the
Exercise Price. This Option shall be deemed to be exercised upon receipt by
the Company of such written notice accompanied by the Exercise Price.
The Optionee shall, upon notification of the amount due (if any) as a
result of the exercise of the Option and prior to or concurrent with delivery of
the certificate representing the Shares, pay to the Company as provided in the
Plan amounts necessary to satisfy applicable federal, state and local tax
withholding requirements.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed
or any automatic quotation system upon which the Shares may then be quoted.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Method of Payment. The purchase price of Optioned Shares acquired
pursuant to the Option shall be paid as set forth in the Plan. THE USE OF SHARES
OF STOCK ACQUIRED OR TO BE ACQUIRED
<PAGE> 16
TO PAY FOR EXERCISED SHARES MAY HAVE INCOME TAX CONSEQUENCES FOR THE OPTIONEE.
4. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, and may
not be exercised if the issuance of such Shares upon such exercise or the method
of payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations as
promulgated by the Federal Reserve Board.
5. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution or as
otherwise set forth in the Plan and may be exercised during the lifetime of
Optionee only by Optionee or a permitted transferee as set forth in the Plan.
The terms of the Plan and this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
6. Term of Option. This Option may be exercised only within the term set
out in Section I hereof, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Sections 5 and 6 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) shareholders shall
apply to this Option.
7. Tax Consequences. The grant and/or exercise of the Option will have
federal and state income tax consequences. THE OPTIONEE SHOULD CONSULT A TAX
ADVISER UPON THE GRANT OF THE OPTION AND BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES ACQUIRED UPON EXERCISE, PARTICULARLY WITH RESPECT TO HIS
OR HER STATE'S TAX LAWS.
8. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and this Option Agreement may not be
amended except by means of a writing signed by the Company and Optionee. This
Option Agreement is governed by Texas law except for that body of law pertaining
to conflict of laws.
<PAGE> 17
9. Warranties, Representations and Covenants. The undersigned Optionee
warrants and represents that he or she has reviewed the Plan and this Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all
provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Committee
upon any questions relating to the Plan and Option Agreement. Optionee further
agrees to notify the Company upon any change in the residence address indicated
below. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS OPTION AGREEMENT, NOR IN THE PLAN, WHICH IS INCORPORATED
HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO
CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE
IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
CAPROCK COMMUNICATIONS CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Optionee:
------------------------------------
Signature
------------------------------------
Print Name
------------------------------------
Residence Address
------------------------------------
Area Code/Telephone Number
<PAGE> 18
EXHIBIT A
CAPROCK COMMUNICATIONS CORP.
1998 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
CapRock Communications Corp.
Two Galleria Tower, Suite 1925
13455 Noel Road
Dallas, Texas 75240-6638
Attention: Secretary
1. Exercise of Option. Effective as of today, , 199 , the
undersigned ("Purchaser") hereby elects to purchase shares (the "Shares")
of the Common Stock of CapRock Communications Corp. (the "Company") under and
pursuant to the 1998 Stock Option Plan (the "Plan") and the Stock Option
Agreement dated , 199 (the "Option Agreement"). The purchase price for
the Shares shall be $ , as specified in the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares of . THE USE OF SHARES OF STOCK ACQUIRED
OR TO BE ACQUIRED FOR EXERCISED SHARES MAY HAVE INCOME TAX CONSEQUENCES FOR THE
OPTIONEE.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. The Purchaser shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any Shares
subject for which such Option is exercised including, but not limited to, rights
to vote or to receive dividends unless and until the Purchaser has satisfied all
requirements for exercise of the Option pursuant to its terms, the certificates
evidencing such Shares have been issued and the Purchaser has become a record
holder of such Shares. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date all the conditions set forth above are
satisfied, except as provided in Section 12 of the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE> 19
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and this Agreement may not be amended except by means of a writing
signed by the Company and Purchaser. This Agreement is governed by Texas law
except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: CAPROCK COMMUNICATIONS CORP.
------------------------------------ By:
Signature ------------------------------------
------------------------------------ Its:
Print Name ------------------------------------
Address: Address:
------------------------------------ Two Galleria Tower, Suite 1925
13455 Noel Road
------------------------------------ Dallas, Texas 75240-6638
<PAGE> 20
CAPROCK COMMUNICATIONS CORP.
FIRST AMENDMENT TO
1998 EQUITY INCENTIVE PLAN
On or about June 20, 1998, CapRock Communications Corp., a Texas
corporation (the "Company"), adopted the CapRock Communications Corp. 1998
Equity Incentive Plan (the "Plan"). The Company desires to amend the Plan as set
forth herein:
1. The definition of "Committee" as set forth in Section 2(i) of the Plan
is hereby amended to read in its entirety as set forth below:
(i) "Committee" means (a) the Compensation Committee of the Board of
Directors with respect to Awards granted to all Employees and Consultants
(other than "Non-Employee Directors" of the Company within the meaning of
Rule 16b-3) and (b) the entire Board of Directors with respect to Awards
granted to "Non-Employee Directors" of the Company within the meaning of
Rule 16b-3.
2. A definition entitled "Continuing Directors of the Company" is hereby
added as new Section 2(m) of the Plan to read in its entirety as set forth
below:
(m) "Continuing Directors of the Company" means, with the respect to
any period of 12 consecutive months, (i) any members of the Board of
Directors of the Company on the first day of such period, (ii) any members
of the Board of Directors of the Company elected after the first day of
such period at any annual meeting of shareholders who were nominated by the
Board of Directors or a committee thereof, if a majority of the members of
the Board of Directors or such committee were Continuing Directors of the
Company within the meaning of clause (i) above at the time of such
nomination, and (iii) any members of the Board of Directors of the Company
elected to succeed Continuing Directors of the Company by the Board of
Directors or a committee thereof, if a majority of the members of the Board
of Directors or such committee were Continuing Directors of the Company
within the meaning of clause (i) or (ii) above at the time of such
election.
3. Existing Section 2(m), "Continuous Status as an Employee or Consultant,"
through existing Section 2(oo), "Tandem Stock Appreciation Right," are hereby
re-lettered as Sections 2(n) through 2(pp), respectively, of the Plan.
4. The remaining terms and provisions of the Plan shall continue in full
force and effect.
5. This First Amendment to the Plan was adopted by the Board of Directors
on October 7, 1999.
<PAGE> 21
CAPROCK COMMUNICATIONS CORP.
SECOND AMENDMENT TO
1998 EQUITY INCENTIVE PLAN
On or about June 20, 1998, CapRock Communications Corp., a Texas
corporation (the "Company"), adopted the CapRock Communications Corp. 1998
Equity Incentive Plan (the "Plan"), which was amended on October 7, 1999. The
Company desires to further amend the Plan as set forth herein:
1. The first paragraph of Section 4 of the Plan, entitled "Stock Subject to
Plan," is hereby amended to read in its entirety as set forth below:
"4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 12 of the Plan, the total
number of Shares available for grant under the Plan shall be that number of
shares equal to 20% of the shares of Common Stock of the Company issued and
outstanding (such determination as to the number of Shares available for grant
to be made on June 1, 2000 and October 1, 2000 and, in each calendar year
thereafter, as of January 1, April 1, July 1, and October 1 of each such year
for which the Plan is in effect); provided that in no event may more than fifty
million (50,000,000) Shares be cumulatively available for the grant of Awards
under the Plan and the maximum number of Shares that may be acquired by an
individual Holder under the Plan shall not exceed 2,500,000 (in each case,
subject to adjustment as provided in Section 12 of the Plan). The Shares may be
authorized but unissued or reacquired Common Stock."
2. The remaining terms and provisions of the Plan shall continue in full
force and effect.
3. This Second Amendment to the Plan was adopted by the Board of Directors
on April 24, 2000.
