2001 Equity Participation Plan - Birch Telecom Inc.
2001 EQUITY PARTICIPATION PLAN
OF BIRCH TELECOM, INC.
1. PURPOSE OF PLAN
The 2001 Equity Participation Plan of Birch Telecom, Inc. (the "PLAN") is
designed:
(a) To promote the long term financial interests and growth of Birch
Telecom, Inc., a Delaware corporation (the "COMPANY"), and its Subsidiaries by
attracting and retaining management and personnel with the training, experience
and ability to enable them to make a substantial contribution to the success of
the Company's business;
(b) To motivate personnel by means of growth-related incentives to achieve
long range goals; and
(c) To further the identity of interests of participants with those of the
stockholders of the Company through opportunities for stock or stock-based
ownership in the Company.
2. DEFINITIONS
As used in the Plan, the following words shall have the following meanings:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMITTEE" means the Compensation Committee of the Board or another
committee of the Board designated by the Board to administer the Plan.
(d) "COMMON STOCK" or "SHARE" means the common stock of the Company, par
value $0.001 per share.
(e) "CONSULTANT" means any consultant or adviser of the Company or any of
its Subsidiaries if: (i) the consultant or adviser renders bona fide services to
the Company; (ii) the services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising transaction
and do not directly or indirectly promote or maintain a market for the Company's
securities; and (iii) the consultant or adviser is a natural person.
(f) "EMPLOYEE" means a person, including an officer, in the regular
full-time employment of the Company or one of its Subsidiaries.
(g) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(h) "FAIR MARKET VALUE" means the market price if the Shares are publicly
traded or, if the Shares are not publicly traded, the fair market value per
Share as determined in good faith by the Board.
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(i) "GRANT" means a grant of a Non-Qualified Stock Option and/or an
Incentive Stock Option to a Participant pursuant to the Plan and described in
Section 5.
(j) "GRANT AGREEMENT" means a written agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
a Grant.
(k) "INCENTIVE STOCK OPTION" means a Grant which is an "incentive stock
option" within the meaning of Section 422 of the Code and which is designated as
an Incentive Stock Option by the Committee.
(l) "NON-QUALIFIED STOCK OPTION" means a Grant which is not an "incentive
stock option" within the meaning of Section 422 of the Code and shall include a
Stock Option which is designated as a Non-Qualified Stock Option by the
Committee.
(m) "PARTICIPANT" means an Employee or consultant of the Company or one of
its Subsidiaries, to whom one or more Grants have been made and such Grants have
not all been forfeited or terminated under the Plan. A member of the Board who
is not an Employee may not be a Participant.
(n) "PUBLIC OFFERING" means the sale of shares of Common Stock to the
public pursuant to a registration statement under the Securities Act which has
been declared effective by the SEC (other than a registration statement on Form
S-8 or any other similar form) which results in an active trading market in the
Common Stock.
(o) "SEC" means the United States Securities and Exchange Commission.
(p) "SECURITIES ACT" means the Securities Act of 1933, as amended and the
rules and regulations promulgated thereunder.
(q) "STOCK OPTION" means a Non-Qualified Stock Option or an Incentive Stock
Option.
(r) "SUBSIDIARY" means any corporation other than the Company in an
unbroken chain of corporations beginning with the Company if each of the
corporations, other than the last corporation in the unbroken chain, then owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
3. ADMINISTRATION OF PLAN
(a) The Plan shall be administered by the Committee. To the extent that the
Company and its Employees are subject to Section 16 of the Exchange Act or
Section 162(m) of the Code, the members of the Committee shall consist solely of
individuals who are both "non-employee directors" as defined by Rule 16b-3
promulgated under the Exchange Act and "outside directors" for purposes of
Section 162(m) of the Code. The Committee may adopt its own rules of procedure,
and the action of a majority of the Committee, taken at a meeting or taken
without a meeting by a writing signed by such majority, shall constitute action
by the Committee. The Committee shall have the power, authority and the
discretion to administer, construe and interpret the Plan and Grant Agreements,
to make rules for carrying out the Plan and to make
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changes in such rules. Any such interpretations, rules, and administration shall
be made and done in good faith and consistent with the basic purposes of the
Plan.
(b) The Committee may delegate to the Chief Executive Officer and to other
senior officers of the Company its duties and authority under the Plan
(including, without limitation, the authority to grant Stock Options) subject to
such conditions and limitations as the Committee shall prescribe except that
only the Committee may designate and make Grants to Participants who are subject
to Section 16 of the Exchange Act or Section 162(m) of the Code.
(c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company, and the
officers and directors of the Company shall be entitled to rely upon the advice,
opinions or valuations of any such persons. Subject to the terms and conditions
of this Plan and any applicable Grant Agreement, all actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Participants, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Grants, and all members of the Committee shall be fully protected by the
Company with respect to any such action, determination or interpretation.
4. ELIGIBILITY
The Committee may from time to time make Grants under the Plan to such
Employees, or Consultants and in such form and having such terms, conditions and
limitations as the Committee may determine. No Incentive Stock Option shall be
granted to any person who is not an Employee. No Grants may be made under this
Plan to non-employee directors of the Company or any of its Subsidiaries. Grants
may be granted singly, in combination or in tandem. The terms, conditions and
limitations of each Grant under the Plan shall be set forth in a Grant
Agreement, in a form approved by the Committee, consistent, however, with the
terms of the Plan; provided, however, that such Grant Agreement shall contain
provisions dealing with the treatment of Grants in the event of the termination,
death or disability of the Participant, and may also include provisions
concerning the treatment of Grants in the event of a change of control of the
Company. Grant Agreements evidencing Incentive Stock Options shall contain such
terms and conditions as may be necessary to qualify such Grants as "incentive
stock options" under Section 422 of the Code.
5. GRANTS
(a) From time to time, the Committee may, in its discretion, grant Stock
Options. At the time of grant, the Committee shall determine, and shall have
specified in the Grant Agreement or other Plan rules, the option exercise
period, the option exercise price, whether such Grants are to be Incentive Stock
Options or Non-Qualified Stock Options and such other conditions or restrictions
on the grant or exercise of the Stock Option as the Committee deems appropriate.
(b) In addition to other restrictions contained in the Plan and Grant
Agreement: (i) Stock Options granted hereunder may not be exercised more than 10
years after the date the
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Stock Option was granted (or in the case of an Incentive Stock Option granted to
an individual owning (within the meaning of Section 424(d) of the Code), at the
time the Incentive Stock Option was granted, more than 10% of the total combined
voting power of all classes of the stock of the Company or any Subsidiary
corporation, more than five years after the date the Incentive Stock Option was
granted) and (ii) unless otherwise permitted by applicable state law, the
exercise price per Share subject to any Stock Option granted hereunder shall not
be less than the par value per Share; provided, however, that (A) in the case of
an Incentive Stock Option, the exercise price per Share shall not be less than
100% of the Fair Market Value of Common Stock on the date the option is granted
and (B) in the case of an Incentive Stock Option granted to an individual then
owning (within the meaning of Section 424(d) of the Code) more than 10% of the
total combined voting power of all classes of stock of the Company, the exercise
price per Share shall not be less than 110% of the Fair Market Value of such
Shares on the date such Incentive Stock Option is granted.
(c) Payment of the option exercise price shall be made in cash; provided,
however, that the Committee, may in its discretion (i) allow payment, in whole
or in part, through the delivery of shares of Common Stock which have been owned
by the Participant for at least six months, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Stock Option or exercised portion thereof; (ii) allow
payment, in whole or in part, through the surrender of shares of Common Stock
then issuable upon exercise of the Stock Option having a Fair Market Value on
the date of Stock Option exercise equal to the aggregate exercise price of the
Stock Option or exercised portion thereof; (iii) allow payment, in whole or in
part, through the delivery of property of any kind which constitutes good and
valuable consideration; (iv) allow payment, in whole or in part, through the
delivery of a full recourse promissory note bearing interest (at no less than
such rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee or the Board; (v)
allow payment, in whole or in part, through the delivery of a notice that the
Participant has placed a market sell order with a broker with respect to shares
of Common Stock then issuable upon exercise of the Stock Option, and that the
broker has been directed to pay a sufficient portion of the net proceeds of the
sale to the Company in satisfaction of the Stock Option exercise price, provided
that payment of such proceeds is then made to the Company upon settlement of
such sale; or (vi) allow payment through any combination of the consideration
provided in the foregoing subparagraphs (ii), (iii), (iv) and (v). In the case
of a promissory note, the Committee may also prescribe the form of such note and
the security to be given for such note. The Stock Option may not be exercised,
however, by delivery of a promissory note or by a loan from the Company when or
where such loan or other extension of credit is prohibited by law.
(d) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by a Participant during any calendar year (under the Plan and all
other incentive stock option plans of the Company or any Subsidiary thereof)
exceeds $100,000, such options shall be treated and taxable as Non-Qualified
Stock Options. The rule set forth in the preceding sentence shall be applied by
taking options into account in the order in which they were granted, and the
stock issued upon exercise of options shall designate whether such stock was
acquired upon exercise of an Incentive Stock Option. For
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purposes of these rules, the Fair Market Value of stock shall be determined as
of the date of grant of the Stock Option granted with respect to such stock.
6. LIMITATIONS AND CONDITIONS
(a) The number of Shares available for Grants under this Plan shall be
80,000,000 shares of the authorized Common Stock as of the effective date of the
Plan. Unless restricted by applicable law, Shares related to Grants that are
forfeited, terminated, canceled or expire unexercised, shall immediately become
available for Grants.
(b) No Grants shall be made under the Plan beyond ten years after the
effective date of the Plan, but the terms of Grants made on or before the
expiration thereof may extend beyond such expiration. At the time a Grant is
made or amended or the terms or conditions of a Grant are changed, the Committee
may provide for limitations or conditions on such Grant.
(c) Nothing contained herein shall affect the right of the Company or any
Subsidiary to terminate any Participant's employment at any time or for any
reason.
(d) Other than as specifically provided by will or by the applicable laws
of descent and distribution or the terms of any applicable trust, no benefit
under the Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so
shall be void. No such benefit shall, prior to receipt thereof by the
Participant, be in any manner liable for or subject to the debts, contracts,
liabilities, engagements, or torts of the Participant.
(e) Participants shall not be, and shall not have any of the rights or
privileges of, stockholders of the Company in respect of any Shares purchasable
or otherwise acquired in connection with any Grant unless and until certificates
representing any such Shares have been issued by the Company to such
Participants; provided however that no delay in the issuance of certificates due
to be issued hereunder representing any such Shares shall operate to impair or
prejudice any Participant's rights to participate in a corporate transaction
providing for the disposition of such Shares.
(f) No election as to benefits or exercise of Stock Options or other rights
may be made during a Participant's lifetime by anyone other than the Participant
except by a legal representative appointed for or by the Participant.
(g) Absent express provisions to the contrary, no Grant under this Plan
shall be deemed "compensation" for purposes of computing benefits or
contributions under any retirement plan of the Company or its Subsidiaries and
shall not affect any benefits under any other benefit plan of any kind or
subsequently in effect under which the availability or amount of benefits is
related to level of compensation. This Plan is not a "Pension Plan" or "Welfare
Plan" under the Employee Retirement Income Security Act of 1974, as amended.
(h) Unless the Committee determines otherwise, no benefit or promise under
the Plan shall be secured by any specific assets of the Company or any of its
Subsidiaries, nor shall any assets of the Company or any of its Subsidiaries be
designated as attributable or allocated to the satisfaction of the Company's
obligations under the Plan.
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(i) To the extent designated by the Committee, no Grant shall be effective
unless and until it is approved by the stockholders of the Company holding more
than 75% of the voting power of all outstanding Common Stock of the Company in
accordance with the provisions of Section 280G(b)(5) of the Code.
(j) As a condition precedent to the award of any Stock Option or the
exercise or delivery of certificates for Shares issued pursuant thereto, the
Committee may require any Participant (or the Participant's successor, as
applicable) to enter into or become a party to a Stockholders Agreement or a
Voting Trust Agreement in such form(s) as the Committee may determine from time
to time.
7. TRANSFERS AND LEAVES OF ABSENCE
For purposes of the Plan, unless the Committee determines otherwise: (a) a
transfer of a Participant's employment without an intervening period of
separation among the Company and any Subsidiary shall not be deemed a
termination of employment, and (b) a Participant who is granted in writing a
leave of absence shall be deemed to have remained in the employ of the Company
or a Subsidiary during such leave of absence.
8. ADJUSTMENTS
In the event of any change in the outstanding Common Stock (including an
exchange for cash) by reason of a stock split, reverse stock split, spin-off,
stock dividend, stock combination or reclassification, recapitalization,
reorganization, consolidation, merger, change of control, or similar event, the
Committee shall adjust appropriately the number and kind of Shares subject to
the Plan and available for or covered by Grants and exercise prices related to
outstanding Grants, and make such other revisions to outstanding Grants as it
deems are equitably required.
9. MERGER, CONSOLIDATION, EXCHANGE, ACQUISITION, DISTRIBUTION, LIQUIDATION
OR DISSOLUTION
In its sole discretion, and on such terms and conditions as it deems
appropriate, coincident with or after the grant of any Stock Option, the
Committee may provide that such Stock Option cannot be exercised after the
consummation of the merger or consolidation of the Company into another
corporation, the exchange of all or substantially all of the assets of the
Company for the securities of another corporation, the acquisition by another
corporation of 80% or more of the Company's then outstanding shares of voting
stock or the recapitalization, reclassification, liquidation or dissolution of
the Company, or other adjustment or event which results in shares of Common
Stock being exchanged for or converted into cash, securities or other property,
and if the Committee so provides, it shall, on such terms and conditions as it
deems appropriate in its absolute discretion, also provide, either by the terms
of such Stock Option or by a resolution adopted prior to the consummation of
such merger, consolidation, exchange, acquisition, recapitalization,
reclassification, liquidation or dissolution, that, for some period of time
prior to the consummation of such transaction or event, such Stock Option shall
be exercisable as to all shares subject thereto, notwithstanding anything to the
contrary herein (but subject to the provisions of Section 6(b)) and that, upon
the consummation of such event, such Stock Option shall terminate and be of no
further force or effect; provided, however, that the Committee may also provide,
in its absolute discretion, that even if the Stock Option shall remain
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exercisable after any such event, from and after such event, any such Stock
Option shall be exercisable only for the kind and amount of cash, securities
and/or other property, or the cash equivalent thereof (net of any applicable
exercise price), receivable as a result of such event by the holder of a number
of shares of stock for which such Stock Option could have been exercised
immediately prior to such event.
10. AMENDMENT AND TERMINATION
The Committee shall have the authority to make such amendments to any terms
and conditions applicable to outstanding Grants as are consistent with this Plan
provided that, except for adjustments under Section 8 or 9 hereof, no such
action shall modify such Grant in a manner adverse to the Participant without
the Participant's consent except as such modification is provided for or
contemplated in the terms of the Grant. The Board may amend, suspend or
terminate the Plan.
11. WITHHOLDING TAXES
The Company shall have the right to deduct from any cash payment made under
the Plan any federal, state or local income or other taxes required by law to be
withheld with respect to such payment. It shall be a condition to the obligation
of the Company to deliver Shares upon the exercise of a Stock Option that the
Participant pay to the Company such amount as may be requested by the Company
for the purpose of satisfying any liability for such withholding taxes. Any
Grant Agreement may provide that the Participant may elect, in accordance with
any conditions set forth in such Grant Agreement, to pay a portion or all of
such withholding taxes in shares of Common Stock (including shares acquired by
contemporaneous exercise of other Stock Options); provided, however, that the
number of shares of Common Stock that may be withheld upon exercise of a Stock
Option in order to satisfy the Participants federal and state income and payroll
tax liabilities with respect to such exercise shall be limited to that number of
Shares which have a Fair Market Value on the date of withholding equal to the
aggregate amount of such liabilities based on the minimum statutory withholding
rates for federal and state income tax and payroll tax purposes that are
applicable to such supplemental taxable income.
12. REGISTRATION
If the Company shall have filed a registration statement pursuant to the
requirements of Section 12 of the Exchange Act, or engaged in a Public Offering
(a) the Company shall use reasonable efforts to register the Stock Options and
the Common Stock to be acquired on exercise of the Stock Options on a Form S-8
Registration Statement or any successor to Form S-8 to the extent that such
registration is then available with respect to such Stock Options and Common
Stock and (b) the Company will use reasonable efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder, to the extent required from
time to time to enable the Participant to sell shares of Common Stock without
registration under the Securities Act within the limitations of the exemptions
provided under any applicable rule or regulation of the SEC. Notwithstanding
anything contained in this Section 12, the Company may deregister under Section
12 of the Exchange Act if it is then permitted to do so pursuant to the Exchange
Act and the rules and
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regulations thereunder. Nothing in this Section 12 shall be deemed to limit in
any manner any otherwise applicable restrictions on sales of Common Stock.
13. EFFECTIVE DATE AND TERMINATION DATES
The Plan shall be effective as of the date of its adoption by the Board and
shall terminate on the tenth anniversary of such date, subject to earlier
termination by the Board pursuant to Section 10.
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I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of Birch Telecom, Inc. on May 4, 2001 and approved by the stockholders
of the Company on July 19, 2001.
Executed on this 19th day of July, 2001.
/s/ Gregory C. Lawhon
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Secretary
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