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EXHIBIT 10.1.1
NEXTLINK COMMUNICATIONS, INC.
STOCK OPTION PLAN
(as amended on September 30, 1997, December 31, 1997, February 5, 1998,
February 4, 1999, May 3, 1999, October 19, 1999, February 16, 2000
and May 24, 2000)
SECTION 1. Purpose. The purpose of this Stock Option Plan (this "Plan")
is to provide a means whereby Nextlink Communications, Inc. (the "Company") or
any parent or subsidiary of the Company, as defined in Subsection 5.9 (the
"related entities"), may continue to attract, motivate and retain selected
employees, officers and independent contractors who can materially contribute to
the Company's growth and success, and to encourage stock ownership in the
Company through granting incentive stock options or nonqualified stock options,
or both, to purchase the Class A Common Stock of the Company (as defined in
Section 3), so that such key employees and other persons and entities will more
closely identify their interests with those of the Company and its shareholders.
In addition, options under this Plan may serve as replacement options for
options issued under the Equity Option Plan sponsored by the Company's
predecessor.
SECTION 2. Administration. This Plan shall be administered by the Board
of Directors of the Company (the "Board") or, in the event the Board shall
appoint or authorize a committee to administer this Plan, by such committee. The
administrator of this Plan shall hereinafter be referred to as the "Plan
Administrator."
2.1 Procedures. The Board may designate one of the members of the
Plan Administrator as chairperson. The Plan Administrator may hold meetings at
such times and places as it shall determine. The acts of a majority of the
members of the Plan Administrator present at meetings at which a quorum exists,
or acts reduced to or approved in writing by all Plan Administrator members,
shall be valid acts of the Plan Administrator.
2.2 Responsibilities. Except for the terms and conditions
explicitly required in this Plan, the Plan Administrator shall have the
authority, in its discretion, to determine all matters relating to the options
to be granted under this Plan, including selection of the individuals to be
granted options, the number of shares to be subject to each option, the exercise
price, and all other terms and conditions of the options. Grants under this Plan
need not be identical in any respect, even when made simultaneously. The
interpretation and construction by the Plan Administrator of any terms or
provisions of this Plan or any option issued under this Plan, or of any rule or
regulation promulgated in connection with this Plan, shall be conclusive and
binding on all interested parties, so long as such interpretation and
construction with respect to incentive stock options correspond to the
requirements of Section 422 of the Internal Revenue Code (the "Code"), as
amended, and the regulations thereunder.
2.3 Section 16(b) Compliance and Bifurcation of Plan. In the event
the Company registers any of its equity securities pursuant to Section 12(b) or
12(g) of the Exchange Act, it is the intention of the Company that this Plan,
and options granted under this Plan, comply in all respects with Rule 16b-3
under the Exchange Act and, if any Plan provision is later found not to be in
compliance with such Section, the provision shall be deemed null and void, and
in all
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events this Plan shall be construed in favor of its meeting the requirements of
Rule 16b-3. Notwithstanding anything in this Plan to the contrary, the Board, in
its absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the use of any provision of this Plan to participants who are officers
and directors subject to Section 16(b) of the Exchange Act without so
restricting, limiting or conditioning other Plan participants.
SECTION 3. Stock Subject to This Plan. The stock subject to this Plan
shall be the Company's Class A Common Stock (the "Class A Common Stock"),
presently authorized but unissued or now held or subsequently acquired by the
Company as treasury shares. Subject to adjustment as provided in Section 7 of
this Plan, the aggregate amount of Class A Common Stock to be delivered upon the
exercise of all options granted under this Plan shall not exceed 51,500,000
shares (the "Plan Maximum") as such Class A Common Stock was constituted on the
effective date of this Plan. If any option granted under this Plan expires or is
surrendered, canceled, terminated or exchanged for another option for any reason
without having been exercised in full, the unpurchased shares subject to such
option shall again be available for purposes of this Plan, including use as
replacement options that may be granted in exchange for such surrendered,
canceled or terminated options.
SECTION 4. Eligibility. An incentive stock option may be granted only to
an individual who, at the time the option is granted, is an employee of the
Company (or a corporate related entity, as described in Section 5.9) and who the
Board may from time to time select for participation in this Plan. Members of
the Board shall not be eligible for grants of incentive stock options unless
they are also employees of the Company. At the discretion of the Plan
Administrator, employees and independent contractors of the Company (including
nonemployee directors) or any related entity may receive nonqualified stock
options. Notwithstanding anything to the contrary herein, the maximum number of
shares of Class A Common Stock with respect to which options may be granted to
any individual in any calendar year shall not exceed the Plan Maximum, as such
number may change from time to time. Any party to whom an option is granted
under this Plan shall be referred to in this Plan as an "Optionee."
SECTION 5. Terms and Conditions of Options. Options granted under this
Plan shall be evidenced by written agreements that contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan. Notwithstanding the
foregoing, options shall include or incorporate by reference the following terms
and conditions:
5.1 Number of Shares. The maximum number of shares that may be
purchased pursuant to the exercise of each option, which number shall be as
established by the Plan Administrator.
5.2 Price of Shares. The price per share at which each option is
exercisable (the "exercise price") shall be as established by the Plan
Administrator, provided that the Plan Administrator shall act in good faith to
establish the exercise price as follows:
5.2.1 Incentive Stock Options and Nonqualified Stock
Options. With respect to incentive stock options intended to qualify under
Section 422 of the Code, and subject
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to Subsection 5.2.2 below, the exercise price shall be not less than the fair
market value per share of the Class A Common Stock at the time the option is
granted, except with respect to the substitution of a new option for an old
option, or an assumption of an old option, in accordance with Code Section
424(a). With respect to nonqualified stock options, the exercise price shall be
the amount set by the Plan Administrator.
5.2.2 Incentive Stock Options to Greater than 10%
Shareholders. With respect to incentive stock options granted to greater than
10% shareholders of the Company, the exercise price shall be as required by
Section 6.
5.2.3 Fair Market Value. The fair market value per share of
the Class A Common Stock for the purpose of determining the exercise price under
this Section 5.2 shall be determined as follows:
(a) if the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the fair market value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported), as quoted on such system or exchange for the last market trading date
prior to the time of determination as reported in The Wall Street Journal or
such other source as the Plan Administrator deems reliable;
(b) if the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the fair
market value shall be the mean between the high and low asked prices for the
Common Stock on the last market trading date prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Plan
Administrator deems reliable; or
(c) In the absence of an established market for the
Common Stock, fair market value shall be determined by the Plan Administrator in
good faith at the time the option is granted.
5.3 Term and Maturity. Subject to the restrictions contained in
Section 6 with respect to granting incentive stock options to greater than 10%
shareholders of the Company, the term of each incentive stock option shall be 10
years from the date it is granted unless a shorter period of time is established
by the Plan Administrator, but in no event shall the term of any incentive stock
option exceed 10 years. The term of each nonqualified stock option shall be 15
years from the date it is granted, unless a shorter period of time is
established by the Plan Administrator in the individual option agreement.
To ensure that the Company or related entities will achieve the purpose
and receive the benefits contemplated in this Plan, any option granted under
this Plan on or before June 15, 2000 shall, unless this condition is waived or
modified by the Plan Administrator in the agreement evidencing the option, or by
subsequent resolution of the Plan Administrator, be exercisable according to the
following schedule:
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<TABLE>
<CAPTION>
Period of Optionee's Continuous Relationship With the Company or Related Entity Portion of Total Option
from the Date the Option is Granted Which is Exercisable
<S> <C>
After one year............................................................. 25%
After two years............................................................ 50%
After three years.......................................................... 75%
After four years........................................................... 100%
</TABLE>
Following four (4) years of continuous relationship with the Company or
Related Entity from the date the option is granted, the option will be 100%
vested.
To ensure that the Company or related entities will achieve the purpose
and receive the benefits contemplated in this Plan, any option granted under
this Plan on or after June 16, 2000 shall, unless this condition is waived or
modified by the Plan Administrator in the agreement evidencing the option, or by
subsequent resolution of the Plan Administrator, be exercisable according to the
following schedule:
<TABLE>
<CAPTION>
Period of Optionee's Continuous Relationship With the Company or Related Entity Portion of Option
from the Date the Option is Granted Which Becomes Exercisable
<S> <C>
After one year............................................................. 25%
Monthly thereafter......................................................... 2.083%
</TABLE>
Following four (4) years of continuous relationship with the Company or
Related Entity from the date the option is granted, the option will be 100%
vested.
5.4 Exercise. Subject to the vesting schedule described in
subsection 5.3 above, if any, and to any additional holding period required by
applicable law, each option may be exercised in whole or in part; provided,
however, that only whole shares will be issued pursuant to the exercise of any
option and that the exercise price shall not be less than the par value per
share of the Class A Common Stock at the time the option is exercised. During an
Optionee's lifetime, any stock options granted under this Plan are personal to
him or her and are exercisable solely by such Optionee, except as provided in
Section 5.8. Options shall be exercised by delivery to the Company of notice of
the number of shares with respect to which the option is exercised, together
with payment of the exercise price.
5.5 Payment of Exercise Price. Payment of the option exercise
price shall be made in full at the time the notice of exercise of the option is
delivered to the Company and shall be in cash, bank certified or cashier's check
or personal check (unless at the time of exercise the Plan Administrator in a
particular case determines not to accept a personal check) for the Class A
Common Stock being purchased.
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The Plan Administrator can determine at the time the option is
granted for incentive stock options, or at any time before exercise for
nonqualified stock options, that additional forms of payment will be permitted,
including installment payments on such terms and over such period as the Plan
Administrator may determine in its discretion. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws and regulations and state corporate
law), an option may be exercised by:
(a) delivery of shares of stock of the Company held by an Optionee
having a fair market value equal to the exercise price, such fair market value
to be determined in good faith by the Plan Administrator;
(b) delivery of a full-recourse promissory note executed by the
Optionee, provided that (i) such note delivered in connection with an incentive
stock option shall, and such note delivered in connection with a nonqualified
stock option may, in the sole discretion of the Plan Administrator, bear
interest at a rate specified by the Plan Administrator but in no case less than
the rate required to avoid imputation of interest (taking into account any
exceptions to the imputed interest rules) for federal income tax purposes; (ii)
the Plan Administrator in its sole discretion shall specify the term and other
provisions of such note at the time an incentive stock option is granted or at
any time prior to exercise of a nonqualified stock option; (iii) the Plan
Administrator may require that the Optionee pledge the Optionee's shares to the
Company for the purpose of securing the payment of such note and may require
that the certificate representing such shares be held in escrow in order to
perfect the Company's security interest; (iv) the note provides that 90 days
following the Optionee's termination of employment with the Company or a related
entity, the entire outstanding balance under the note shall become due and
payable, if not previously due and payable; and (v) the Plan Administrator in
its sole discretion may at any time restrict or rescind this right upon
notification to the Optionee;
(c) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price and any federal, state or local
withholding tax obligations that may arise in connection with the exercise;
provided, that the Plan Administrator, in its sole discretion, may at any time
determine that this Subparagraph (c), to the extent the instructions to the
broker call for an immediate sale of the shares, shall not be applicable to any
Optionee who is subject to Section 16(b) of the Exchange Act if such transaction
would result in a violation of Section 16(b), or is not an employee at the time
of exercise;
(d) delivery of a properly executed exercise notice, together with
a request by the Optionee for the Company to pay the exercise price by
withholding from the shares that would otherwise be issued that number of shares
having a fair market value equal to the option exercise price; provided, the
Plan Administrator retains complete discretion to honor or deny the Optionee's
request for such a method of exercise.
5.6 Shareholders' Agreement. To the extent required by the Plan
Administrator upon exercise of an option the Optionee shall agree to enter into
and be bound by the agreement
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then in effect, if any, between the Company and its shareholders relating to the
repurchase by the Company of its outstanding Class A Common Stock.
5.7 Withholding Tax Requirement. The Company or any related entity
shall have the right to retain and withhold from any payment of cash or Class A
Common Stock under this Plan the amount of taxes required by any government to
be withheld or otherwise deducted and paid with respect to such payment. At its
discretion, the Company may require an Optionee receiving shares of Class A
Common Stock to reimburse the Company or a related entity for any such taxes
required to be withheld and may withhold any distribution in whole or in part
until the Company, or related entity, is so reimbursed. In lieu of such
withholding or reimbursement, the Company (or related entity) shall have the
right to withhold from any other cash amounts due or to become due from the
Company (or related entity) to the Optionee an amount equal to such taxes or to
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld as reimbursement for any such taxes
and cancel (in whole or in part) any such shares so withheld.
5.8 Nontransferability of Option. Options granted under this Plan
and the rights and privileges conferred by this Plan may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable laws of descent and
distribution; provided, with respect to a non-qualified stock option, an
Optionee may transfer the option to a revocable trust created by the Optionee
for the benefit of his or her descendants, to an immediate family member or to a
partnership in which only immediate family members or such trusts are partners.
Options under this Plan shall not be subject to execution, attachment or similar
process. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any option under this Plan or of any right or privilege conferred by
this Plan, contrary to the Code or to the provisions of this Plan, or the sale
or levy or any attachment or similar process upon the rights and privileges
conferred by this Plan shall be null and void. Notwithstanding the foregoing, an
Optionee may during the Optionee's lifetime, designate a person who may exercise
the option after the Optionee's death by giving written notice of such
designation to the Plan Administrator. Such designation may be changed from time
to time by the Optionee by giving written notice to the Plan Administrator
revoking any earlier designation and making a new designation.
5.9 Termination of Relationship. If the Optionee's employment
relationship with the Company or any related entity ceases for any reason other
than termination for cause, death or permanent and total disability, and unless
by its terms the option sooner terminates or expires, then the Optionee may
exercise, for a period of three months after such cessation, that portion of the
Optionee's option which is exercisable at the time of such cessation. The
Optionee's option, however, shall terminate at the end of the three month period
following such cessation as to all Shares for which it has not been exercised,
unless such provision is waived in the agreement evidencing the option or by
resolution adopted by the Plan Administrator. If, in the case of an incentive
stock option, an Optionee's relationship with the Company or related entity
changes (i.e., from employee to nonemployee, such as a consultant), such change
shall constitute a termination of an Optionee's employment with the Company or
related entity and the Optionee's incentive stock option shall terminate in
accordance with this subsection. Upon the expiration of the three month period
following cessation of employment, the Plan Administrator shall have
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sole discretion in a particular circumstance to extend the exercise period
following such cessation beyond that specified above. If, however, in the case
of an incentive stock option, the Optionee does not exercise the Optionee's
option within three months after cessation of employment, the option will no
longer qualify as an incentive stock option under the Code.
Upon an Optionee's termination of employment for cause, all of the
optionee's outstanding (i.e., unexercised) options issued under this Plan shall
immediately expire and no longer be available for exercise. For purposes of this
Section 5.9, a termination shall be considered for "cause" if the termination is
attributable to the Optionee's: (a) Embezzlement; (b) use of illegal drugs or
alcohol that materially impairs the Optionee's ability to fulfill his or her
duties as an employee or independent contractor; (c) willful disclosure of trade
secrets or confidential information of the Company; (d) dishonesty which results
in substantial harm to the Company; or (e) conviction or confession of a
criminal felony.
If an Optionee's relationship with the Company or any related
entity ceases because of a permanent and total disability, the Optionee's option
shall not terminate, and in the case of an incentive stock option, shall not
cease to be treated as an incentive stock option, until the end of the 12-month
period following such cessation (unless by its terms it sooner terminates and
expires). As used in this Plan, the term "permanent and total disability" has
the same meaning provided in Code Section 22(e)(3).
For purposes of this subsection 5.9, a transfer of relationship
between or among the Company and/or any related entity shall not be deemed to
constitute a cessation of relationship with the Company or any of its related
entities. For purposes of this subsection 5.9, with respect to incentive stock
options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
As used in this Plan, the term "related entity," when referring to
a subsidiary, shall mean any business entity (other than the Company) which, at
the time of the granting of the option, is in an unbroken chain of entities
ending with the Company, if stock or voting interests possessing 50% or more of
the total combined voting power of all classes of stock or other ownership
interests of each of the entities other than the Company is owned by one of the
other entities in such chain. When referring to a parent entity, the term
"related entity" shall mean any entity in an unbroken chain of entities ending
with the Company if, at the time of the granting of the option, each of the
entities other than the Company owns stock or other ownership interests
possessing 50% or more of the total combined voting power of all classes of
stock (or other ownership interests) in one of the other entities in such chain.
In addition, with respect to an incentive stock option, the definition of
"related entity" as used in this Plan shall apply by only considering entities
that are corporations.
5.10 Death of Optionee. If an Optionee dies while he or she has a
relationship with the Company or any related entity or dies within the three
month period (or 12-month period in the case of totally disabled Optionees)
following cessation of such relationship, any option held
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by such Optionee to the extent that the Optionee would have been entitled to
exercise such option, may be exercised within one year after his or her death by
the personal representative of his or her estate or by the person or persons to
whom the Optionee's rights under the option shall pass by will or by the
applicable laws of descent and distribution.
5.11 Status of Shareholder. Neither the Optionee nor any party to
which the Optionee's rights and privileges under the option may pass shall be,
or have any of the rights or privileges of, a shareholder of the Company with
respect to any of the shares issuable upon the exercise of any option granted
under this Plan unless and until such option has been exercised.
5.12 Continuation of Employment. Nothing in this Plan or in any
option granted pursuant to this Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of a related entity, or to interfere in
any way with the right of the Company or of any related entity to terminate his
or her employment or other relationship with the Company or a related entity at
any time.
5.13 Modification and Amendment of Option. Subject to the
requirements of Code Section 422 with respect to incentive stock options and to
the terms and conditions and within the limitations of this Plan, the Plan
Administrator may modify or amend outstanding options granted under this Plan.
The modification or amendment of an outstanding option shall not, without the
consent of the Optionee, impair or diminish any of his or her rights or any of
the obligations of the Company under such option. Except as otherwise provided
in this Plan, no outstanding option shall be terminated without the consent of
the Optionee. Unless the Optionee agrees otherwise, any changes or adjustments
made to outstanding incentive stock options granted under this Plan shall be
made in such a manner so as not to constitute a "modification" as defined in
Code Section 424(h) and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as defined
in Code Section 422(b).
5.14 Limitation on Value for Incentive Stock Options. As to all
incentive stock options granted under the terms of this Plan, to the extent that
the aggregate fair market value (determined at the time the incentive stock
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the Optionee during any calendar year
(under this Plan and all other incentive stock option plans of the Company, a
related entity or a predecessor corporation) exceeds $100,000, those options (or
the portion of an option) beyond the $100,000 threshold shall be treated as
nonqualified stock options. The previous sentence shall not apply if the
Internal Revenue Service publicly rules, issues a private ruling to the Company,
any Optionee, or any legatee, personal representative or distributee of an
Optionee or issues regulations changing or eliminating such annual limit.
SECTION 6. Greater Than 10% Shareholders.
6.1 Exercise Price and Term of Incentive Stock Options. If
incentive stock options are granted under this Plan to employees who own more
than 10% of the total combined voting power of all classes of stock of the
Company or any related entity, the term of such incentive stock options shall
not exceed five years and the exercise price shall be not less than
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110% of the fair market value of the Class A Common Stock at the time the
incentive stock option is granted. This provision shall control notwithstanding
any contrary terms contained in an option agreement or any other document.
6.2 Attribution Rule. For purposes of subsection 6.1, in
determining stock ownership, an employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. If an
employee or a person related to the employee owns an unexercised option or
warrant to purchase stock of the Company, the stock subject to that portion of
the option or warrant which is unexercised shall not be counted in determining
stock ownership. For purposes of this Section 6, stock owned by an employee
shall include all stock actually issued and outstanding immediately before the
grant of the incentive stock option to the employee.
SECTION 7. Adjustments Upon Changes in Capitalization. The aggregate
number and class of shares for which options may -be granted under this Plan,
the number and class of shares covered by each outstanding option and the
exercise price per share thereof (but not the total price), and each such
option, shall all be proportionately adjusted for any increase or decrease in
the number of issued shares of Class A Common Stock of the Company resulting
from a split-up or consolidation of shares or any like capital adjustment, or
the payment of any stock dividend.
7.1 Effect of Liquidation, Reorganization or Change in Control.
7.1.1 Cash, Stock or Other Property for Stock. Except as
provided in subsection 7.1.2, upon a merger (other than a merger of the Company
in which the holders of Class A Common Stock immediately prior to the merger
have the same proportionate ownership of Class A Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than a mere reincorporation
or the creation of a holding company) or liquidation of the Company, as a result
of which the shareholders of the Company receive cash, stock or other property
in exchange for or in connection with their shares of Class A Common Stock, any
option granted under this Plan shall terminate. Notwithstanding the foregoing,
the Optionee shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to exercise such option in whole or in part, to the extent the
vesting requirements set forth in this Plan have been satisfied, unless stated
otherwise in the Optionee's individual option agreement.
7.1.2 Conversion of Options on Stock for Stock Exchange.
If the shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Class A Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Class A Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted under this Plan shall be converted into
options to purchase shares
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of Exchange Stock unless the Company and the corporation issuing the Exchange
Stock, in their sole discretion, determine that any or all such options granted
under this Plan shall not be converted into options to purchase shares of
Exchange Stock, but instead shall terminate in accordance with the provisions of
subsection 7.1.1. The amount and price of converted options shall be determined
by adjusting the amount and price of the options granted under this Plan in the
same proportion as used for determining the number of shares of Exchange Stock
the holders of the Class A Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization. Unless
accelerated by the Board, the vesting schedule set forth in the option agreement
shall continue to apply for the Exchange Stock.
7.1.3 Change in Control.
(a) In the event of a "Change in Control", as defined in
Section 7.1.4(b) below, of the Company, except as provided in Section
7.1.3(b) or unless otherwise determined by the Board prior to the
occurrence of such a Change in Control, any options or portions of such
options outstanding as of the date such a Change in Control is determined
to have occurred that are not yet fully vested shall not become fully
vested merely by the occurrence of a Change in Control.
(b) Notwithstanding anything to the contrary in Section
7.1.3(a), each outstanding option granted prior to February 16, 2000
(other than those options described in Section 7.1.3.(d)) shall be deemed
to be amended to provide that, and each option granted on or after such
date shall provide that, unless otherwise expressly determined in a
resolution duly adopted by the Board on the date of grant or such later
date on which the Board may ratify such grant, such option shall (1) if
the Optionee is a Nonaffiliate Director, immediately become fully
exercisable upon the occurrence of an Acceleration Change of Control of
the Company or (2) if the Optionee is recognized by the Company or any of
the related entities as a regular full time employee who is subject to
U.S. income tax withholding, immediately become fully exercisable upon
the termination of the Optionee's employment by the Company or any of the
related entities without Cause during the Accelerated Vesting Period or,
in the case of an Optionee who is an Executive, upon the termination of
the Optionee's employment by the Optionee for Good Reason during the
Accelerated Vesting Period; provided, however, that this Section 7.1.3(b)
shall be deemed void ab initio and shall be of no force or effect, if it
should be determined that any such provision would prevent a proposed
merger or other business combination that is intended by the parties
thereto to be accounted for as a pooling of interests from being so
accounted for.
(c) With respect to options that, as of February 16, 2000,
incorporate a definition of change of control that provides for
accelerated vesting solely in the event that Craig O. McCaw, or an entity
or entities he controls, no longer controls a majority of the votes of
the Company (or language to that effect), Section 7.1.3(b) shall
supplement such provision and each holder of such an option shall be
entitled to the benefits of Section 7.1.3(b), but Section 7.1.3(b) shall
not be deemed to modify, replace or impair such options' existing change
of control provisions.
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(d) Notwithstanding anything to the contrary in Section
7.1.3(b), Section 7.1.3(b) shall not apply to the following options
granted prior to February 16, 2000:
(i) options granted to any employee whose employment
relationship is subject, as of February 16, 2000, to severance in
connection with the relocation of the Company's headquarters from
Bellevue, Washington to Reston, Virginia, where such employee is
entitled to benefits under the NEXTLINK Headquarters Relocation
Retention and Severance Pay Plan and Summary Plan Description for
Headquarters Personnel;
(ii) options granted to any employee whose employment
relationship is subject, as of February 16, 2000, to severance in
connection with the reorganization and restructuring of the
Company's regional divisions, where such employee is entitled to
benefits under the NEXTLINK Severance Pay Plan and Summary Plan
Description; and
(iii) options (A) that, by their terms, incorporate the
definition of "Change in Control" set forth in Section 7.1.4(b) of
this Plan as in effect prior to the February 16, 2000 amendment
thereto and provide for accelerated vesting upon the occurrence of
such a "Change in Control", or (B) that provide for acceleration
upon a change of control pursuant to the terms of an employment
agreement or otherwise, excluding those options referenced in
Section 7.1.3(c).
7.1.4 Definitions.
(a) For purposes of Section 7.1.3, the following defined terms
shall have the following meanings:
"Acceleration Change of Control" shall mean the occurrence of any
of the following events:
(A) The Company is merged or consolidated or reorganized into
or with another company or other legal entity, other than a
merger or consolidation or reorganization into or with an
entity that is an affiliate of Craig O. McCaw, and as a
result of such merger, consolidation or reorganization less
than a majority of the combined voting power of the
then-outstanding securities of such company or person
immediately after such transaction is held directly or
indirectly in the aggregate by the holders of voting
securities of the Company immediately prior to such sale or
transfer, including voting securities issuable upon
exercise or conversion of options, warrants or other
securities or rights;
(B) The Company sells or otherwise transfers all or
substantially all of its assets to any other company or
other legal entity, other than such a sale or transfer to a
company or legal entity that is an affiliate of Craig O.
Page 11-STOCK OPTION PLAN
<PAGE> 12
McCaw, and as a result of such sale or other transfer of
assets, less than a majority of the combined voting power
of the then-outstanding securities of such company or
person immediately after such sale or transfer is held
directly or indirectly in the aggregate by the holders of
voting securities of the Company immediately prior to such
sale or transfer, including voting securities issuable upon
exercise or conversion of options, warrants or other
securities or rights;
(C) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), disclosing that any
person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) other than Craig O.
McCaw and his affiliates has become the beneficial owner
(as the term "beneficial owner" is defined under Rule 13d-3
or any successor rule or regulation promulgated under the
Exchange Act) of securities representing 50% or more of the
voting securities of the Company, including voting
securities issuable upon exercise or conversion of options,
warrants or other securities or rights;
(D) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or
any successor schedule, form or report or item therein)
that a change in control of the Company has occurred;
(E) Notwithstanding the foregoing provisions of subparagraphs
(C) and (D) hereof, an "Acceleration Change of Control"
shall not be deemed to have occurred solely because (x) the
Company, (y) an entity in which the Company directly or
indirectly beneficially owns 50% or more of the voting
securities, or (z) any Company-sponsored employee stock
ownership plan or other employee benefit plan of the
Company, either files or becomes obligated to file a report
or proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the
Exchange Act, disclosing beneficial ownership by it of
voting securities, whether in excess of 50% or otherwise,
or because the Company reports that a change of control of
the Company has or may have occurred or will or may occur
in the future by reason of such beneficial ownership;
(F) Notwithstanding the foregoing provisions of subparagraphs
(A) through (D) above, no Acceleration Change of Control
shall result from a merger, consolidation or reorganization
of the Company with any entity in which Eagle River
Investments, L.L.C. has invested at least $10,000,000 in
equity prior to such merger, consolidation or
reorganization.
Page 12-STOCK OPTION PLAN
<PAGE> 13
"Accelerated Vesting Period" means the period beginning on the
effective date of an Acceleration Change of Control and ending on the first
anniversary of such effective date.
"Cause" means (i) the conviction of a felony involving an
intentional act of fraud, embezzlement or theft in connection with one's duties
or otherwise in the course of one's employment with an Employer, (ii) the
intentional and wrongful damaging of property, contractual interests or business
relationships of an Employer, (iii) the intentional and wrongful disclosure of
secret processes or confidential information of an Employer in violation of an
agreement with or a policy of an Employer, or (iv) intentional conduct contrary
to an Employer's announced policies or practices (including those contained in
the Corporation's Employee Handbook) where either:
(A) the nature and/or severity of the conduct or its
consequences typically would have resulted in immediate
termination based on the Corporation's established employee
termination or disciplinary practices in place on the
Reference Date; or
(B) the employee has been provided with written notice
detailing the relevant policy or practice and the nature of
the objectionable conduct or other violation, and within 20
business days of the receipt of such notice the employee
has not remedied the violation or ceased to engage in the
objectionable conduct.
"Executive" means any individual employed by the Company or any of
the related entities in a position having a salary grade of EX3, EX2 or EX1 (as
the Company's salary grades are established and in existence on February 16,
2000, and adjusting as appropriate for any changes to the Company's system of
classifying its employees by salary grades implemented subsequent to such date).
"Good Reason" means that an Executive shall have made a good faith
determination that one or more of the following has occurred:
(i) any significant and adverse change in the Executive's
duties, responsibilities and authority, as compared in each
case to the corresponding circumstances in place on the
Reference Date;
(ii) a relocation of the Executive's principal work location as
established on the Reference Date to a location that is
more than 30 miles away from such location;
(iii) a reduction in the Executive's salary or bonus potential
that is not in either case agreed to by the Executive, or
any other significant adverse financial consequences
associated with the Executive's employment as compared to
the corresponding circumstances in place on the Reference
Date; or
Page 13-STOCK OPTION PLAN
<PAGE> 14
(iv) a breach by any Employer of its obligations under any
agreement to which the Employer and the Executive are
parties that is not cured within 20 business days following
the Employer's receipt of a written notice from the
Executive specifying the particulars of such breach in
reasonable detail.
"Nonaffiliate Director" means a person who (i) is serving (or who
has been elected or appointed and has agreed to serve) as a member of the Board,
(ii) is not an officer or employee of the Company or any of the related entities
or a beneficial owner of 10 percent or more of the outstanding common stock of
the Company and (iii) was not elected or appointed as a member of the Board
pursuant to or in connection with any contractual or other commitment on the
part of the Company to cause such person to be elected or appointed, or to
nominate or otherwise advance such person for election or appointment, as a
member of the Board.
"Reference Date" means the day before the effective date of any
Acceleration Change of Control of the Company.
(b) Solely with respect to options outstanding as of February
16, 2000 in which the grant agreement evidencing such option incorporates
the definition of "Change in Control" set forth in this Plan as in effect
prior to this amendment and provide for accelerated vesting upon the
occurrence of such a "Change of Control", the following definition shall
apply:
A "Change in Control" shall mean (a) the first approval by the
Board or by the stockholders of the Company of an Extraordinary Event, (b) a
Purchase, or (c) a Board Change.
An "Extraordinary Event", for purposes of Section 7.1.4(b), shall
mean any of the following actions:
(i) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to
which shares of Class A Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which
the holders of common stock immediately prior to the merger have
substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially
all, the assets of the Company; or
(iii) the adoption of any plan or proposal for liquidation or
dissolution of the Company.
A "Purchase", for purposes of Section 7.1.4(b), shall mean the
acquisition by any person (as such term is defined in Section 13(d) of the
Exchange Act) of any shares of Class A Common Stock or securities convertible
into Class A Common Stock) without the prior approval of a majority of the
Continuing Directors (as defined below) of the Company, if after making
Page 14-STOCK OPTION PLAN
<PAGE> 15
such acquisition such person is the beneficial owner (as such term is defined in
Rule 13d-3 under the Exchange Act) directly or indirectly of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities (calculated as provided in paragraph (d) of such
Rule 13d-3).
A "Board Change", for purposes of Section 7.1.4(b), shall have
occurred if individuals who constitute the Board of the Company at the time
of adoption of this Plan (the "Continuing Directors") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
Director subsequent to the date of adoption of this Plan whose nomination for
election was approved by a vote of at least a majority of the Continuing
Directors (other than a nomination of an individual whose initial assumption of
office is in connection with an actual threatened election contest relating to
the election of the Directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) shall be deemed to be a
Continuing Director.
7.2 Fractional Shares. In the event of any adjustment in the
number of shares covered by any option, any fractional shares resulting from
such adjustment shall be disregarded and each such option shall cover only the
number of full shares resulting from such adjustment.
7.3 Determination of Board to Be Final. All Section 7 adjustments
shall be made by the Board, and its determination as to what adjustments shall
be made, and the extent of such adjustments, shall be final, binding and
conclusive. Unless an Optionee agrees otherwise, any change or adjustment to an
incentive stock option shall be made in such a manner so as not to constitute a
"modification" as defined in Code Section 424(h) and so as not to cause his or
her incentive stock option issued under this Plan to fail to continue to qualify
as an incentive stock option as defined in Code Section 422(b).
SECTION 8. Securities Regulation. Shares shall not be issued with respect
to an option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant to the exercise of such option
shall comply with all relevant provisions of law, including, without limitation,
any applicable state securities laws, the Securities Act of 1933, as amended,
the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance, including the availability of an exemption from registration
for the issuance and sale of any shares under this Plan. Inability of the
Company to obtain from any regulatory body having jurisdiction, the authority
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any shares under this Plan or the unavailability of an exemption from
registration for the issuance and sale of any shares under this Plan shall
relieve the Company of any liability in respect of the nonissuance or sale of
such shares as to which such requisite authority shall not have been obtained.
As a condition to the exercise of an option, the Company may
require the Optionee to represent and warrant at the time of any such exercise
that the shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any relevant
Page 15-STOCK OPTION PLAN
<PAGE> 16
provision of the aforementioned laws. At the option of the Company, a
stop-transfer order against any shares of stock may be placed on the official
stock books and records of the Company, and a legend indicating that the stock
may not be pledged, sold or otherwise transferred unless an opinion of counsel
is provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on stock
certificates in order to assure exemption from registration. The Plan
Administrator may also require such other action or agreement by the Optionees
as may from time to time be necessary to comply with the federal and state
securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE
REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.
Should any of the Company's capital stock of the same class as the
stock subject to options granted under this Plan be listed on a national
securities exchange, all stock issued under this Plan if not previously listed
on such exchange shall be authorized by that exchange for listing on such
exchange prior to the issuance of such stock.
SECTION 9. Amendment and Termination.
9.1 Board Action. The Board may at any time suspend, amend or
terminate this Plan, provided that except as set forth in Section 7, the
approval of the Company's shareholders is necessary within 12 months before or
after the adoption by the Board of any amendment which will:
(a) increase the number of shares which are to be reserved
for the issuance of options under this Plan;
(b) permit the granting of stock options to a class of
persons other than those presently permitted to receive stock options under this
Plan; or
(c) require shareholder approval under applicable law,
including Section 16(b) of the Exchange Act.
Any amendment to this Plan that would constitute a "modification"
to incentive stock options outstanding on the date of such amendment shall not
be applicable to outstanding incentive stock options, but shall have prospective
effect only, unless individual Optionees agree otherwise.
9.2 Automatic Termination. Unless sooner terminated by the Board,
this Plan shall terminate ten years from the earlier of (a) the date on which
this Plan is adopted by the Board or (b) the date on which this Plan is approved
by the shareholders of the Company. No option may be granted after such
termination or during any suspension of this Plan. The amendment or termination
of this Plan shall not, without the consent of the option holder, alter or
impair any rights or obligations under any option previously granted under this
Plan.
Page 16-STOCK OPTION PLAN
<PAGE> 17
SECTION 10. Effectiveness of This Plan. This Plan shall become effective
upon adoption by the Board so long as it is approved by the Company's
shareholders any time within 12 months before or after the adoption of this
Plan.
Page 17-STOCK OPTION PLAN
