Exhibit (d)(23)
INTERLIANT, INC.
Nonqualified Stock Option Agreement
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THIS NONQUALIFIED STOCK OPTION AWARD AGREEMENT (this "Award
Agreement") is made and entered into as of May 22, 2001 (the "Date of Grant") by
and between Interliant, Inc., a Delaware corporation (the "Company"), and The
Xxxx Group, Inc.(the "Optionee"), a consultant of the Company.
Section 1. Stock Option Award. The Company grants to the Optionee, on
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the terms and conditions hereinafter set forth, an option to purchase (the
"Option") all or any part of an aggregate of 2,000,000 shares of common stock
(the "Common Stock") of the Company, par value $.01 per share (the "Option
Shares"). The Option is not intended to qualify as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Section 2. Exercise Price. The exercise price per share of the Option
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Shares shall be $1.00 per share.
Section 3. Terms and Conditions. The Option is subject to the
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following terms and conditions:
(a) Vesting of Stock Option. Subject to Section 3(c) hereof, the
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Option Shares shall become vested and exercisable in forty-eight (48) equal
monthly installments based on the passage of time, on each monthly anniversary
date of the Date of Grant beginning June 22, 2001 and continuing through and
including, May 22, 2005. Notwithstanding the foregoing, but subject to Section
3(c) hereof, upon a "change in control" of the Company, the Option with respect
to such number of the Option Shares equal to the difference between 1,000,000
minus the then vested portion of the first 1,000,000 of the total share grant,
shall become fully and immediately vested and exercisable. In addition and
further notwithstanding the foregoing, but subject to Section 3 (c) hereof, the
Option with respect to the balance of the 2,000,000 share grant not otherwise
vested pursuant to the immediately preceding sentence, shall become fully and
immediately vested and exercisable upon the occurrence of both of the following
events (collectively, the "Acceleration Event"): (1) a "change in control" of
the Company, and (2) after such change in control, (x) Optionee's engagement by
the Company or the successor entity resulting therefrom, is terminated by the
Company or such successor, or (y) Optionee terminates its engagement with the
Company due to a significant adverse change in Optionee's or Xxxxx Xxxxxx'x
level of responsibility, in Optionee's compensation or in the Company's staffing
requirements under its consulting agreement with Optionee, as directed by the
Board of Directors of the Company or such successor, which is not remedied
within 30 days of written notice from the Optionee to such Board advising them
with reasonable specificity of Optionee's intention to terminate this agreement.
For purposes of this Award Agreement, "change in control" shall mean:
(i) an acquisition subsequent to the date hereof by any person,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person"), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
30% or more of either (A) the then outstanding shares of Common Stock or
(B) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however, the
following: (1) any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Company,
(2) any acquisition by the Company and (3) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company;
(ii) a change in the composition of the Board of Directors of the
Company (the "Board") such that during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction
described in subsections (i), (iii) or (iv) of this paragraph) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the
members thereof;
(iii) the approval by the stockholders of the Company of a merger,
consolidation, reorganization or similar corporate transaction, whether or
not the Company is the surviving corporation in such transaction, in which
outstanding shares of Common Stock are converted into (A) shares of stock
of another company, other than a conversion into shares of voting common
stock of the successor corporation (or a holding company thereof)
representing 80% of the voting power of all capital stock thereof
outstanding immediately after the merger or consolidation or (B) other
securities (of either the Company or another company) or cash or other
property;
(iv) the approval by the stockholders of the Company of (A) the sale
or other disposition of all or substantially all of the assets of the
Company or (B) a complete liquidation or dissolution of the Company; or
(v) the adoption by the Board of a resolution to the effect that any
person has acquired effective control of the business and affairs of the
Company.
(b) Option Term. Option Shares that become exercisable pursuant to
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Section 3 hereof may be purchased at any time during the Option Term. For
purposes hereof, the "Option Term" shall commence on the Date of Grant and shall
expire on the tenth anniversary thereof, unless earlier terminated upon the
termination of Optionee's consulting engagement with the Company as provided in
Section 3(c) hereof. Upon the expiration of the Option Term, any unexercised
Option Shares shall be cancelled and shall be of no further force or effect.
(c) Termination of Service. If Optionee's consulting engagement
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with the Company is terminated for any reason prior to the occurrence of any
otherwise applicable vesting
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date or event provided in Section 3(a) hereof, the Optionee shall (i) forfeit
its interest in any Option Shares that have not yet become vested, which shall
be cancelled and be of no further force or effect, and (ii) retain the right to
exercise any Option Shares that have previously become vested until the
expiration of three months after the effective date of such termination of
service. Notwithstanding the foregoing, if Optionee's consulting engagement with
the Company (or successor entity in the event of a change in control) is
terminated due to or in connection with a change in control, then the provisions
of Section 3 (a) concerning acceleration of unvested Option Shares shall remain
in effect and Optionee shall retain the right to exercise any Option Shares that
have previously become vested or which vest immediately upon a change in control
or an Acceleration Event as provided in Section 3 above, until the expiration of
twelve months after the effective date of such termination of engagement.
(d) Procedure for Exercise. The Option may be exercised, in whole
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or part (for the purchase of whole shares only), by delivery of a written notice
(the "Notice") from the Optionee to the Secretary of the Company at the
Company's principal office located at Two Xxxxxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx
Xxxx 00000, which Notice shall: (i) state the number of Option Shares being
exercised and the Tranche to which they relate; (ii) state the method of payment
for the Option Shares and tax withholding pursuant to Section 3(e) hereof; (iii)
include any representation of the Optionee required pursuant to Section 4
hereof; (iv) in the event that the Option shall be exercised by any person other
than the Optionee pursuant to Section 7 hereof, include appropriate proof of the
right of such person to exercise the Option; and (v) comply with such further
requirements as the Board may from time to time prescribe.
(e) Payment of Exercise Price and Tax Withholding. Payment of the
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exercise price for the Option Shares shall be made (i) in cash or cash
equivalent acceptable to the Company, (ii) by delivery of stock certificates (in
negotiable form) representing shares of Common Stock held by the Optionee for at
least six months on the date of exercise (or such other period as the Board may
deem appropriate for purposes of applicable accounting rules) having a fair
market value equal to the aggregate exercise price of the Option Shares, (iii)
by delivery of a notice that the Optionee has placed a market sell order (or
similar instruction) with a broker with respect to shares of Common Stock then
issuable upon exercise of the 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 Option Price (conditioned upon the payment of such net
proceeds), or (iv) a combination of the methods described above. For purposes of
this Award Agreement, "fair market value" as of any day means the sales price of
the Common Stock as reported on the Nasdaq National Market as of 4:00 P.M. New
York Time on such day or, if the Common Stock is not reported on the Nasdaq
National Market, the fair market value per share of the Common Stock as
determined by the Board in good faith. In addition and at the time of exercise,
as a condition of delivery of the Option Shares, the Optionee shall remit to the
Company all required federal, state and local withholding tax amounts in any
manner permitted for the payment of the exercise price as provided above.
Section 4. Investment Representation. Upon the exercise of the Option
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at a time when there is not in effect a registration statement under the
Securities Act of 1933 relating to the Option Shares, the Optionee hereby
represents and warrants, and by virtue of such exercise shall be deemed to
represent and warrant, to the Company that the Option Shares shall be acquired
for
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investment and not with a view to the distribution thereof, and not with any
present intention of distributing the same, and the Optionee shall provide the
Company with such further representations and warranties as the Company may
require in order to ensure compliance with applicable federal and state
securities, blue sky and other laws. No Option Shares shall be purchased upon
the exercise of the Option unless and until the Company and/or the Optionee
shall have complied with all applicable federal or state registration, listing
and/or qualification requirements and all other requirements of law or of any
regulatory agencies having jurisdiction, unless the Board has received evidence
satisfactory to it that a prospective Optionee may acquire such shares pursuant
to an exemption from registration under the applicable securities laws. Any
determination in this connection by the Board shall be final, binding, and
conclusive. The Company reserves the right to legend any certificate for shares
of Common Stock, conditioning sales of such shares upon compliance with
applicable federal and state securities laws and regulations.
Section 5. No Rights as Stockholder or Employee or Consultant.
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(a) The Optionee shall not have any privileges of a stockholder of
the Company with respect to any Option Shares subject to (but not acquired upon
valid exercise of) the Option, nor shall the Company have any obligation to
issue any dividends or otherwise afford any rights to which shares of Common
Stock are entitled with respect to any such Option Shares, until the date of the
issuance to the Optionee of a stock certificate evidencing such shares.
(b) Nothing in this Award Agreement or the Option shall confer upon
the Optionee any right to continue as an employee or consultant of the Company
or to interfere in any way with the right of the Company to terminate the
Optionee's consulting engagement at any time.
Section 6. Adjustments. In the event of a reorganization,
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recapitalization, stock split, stock dividend, combination of shares, merger or
consolidation, or the sale, conveyance, or other transfer by the Company of all
or substantially all of its property, or any other change in the corporate
structure or shares of the Company, pursuant to any of which events the then
outstanding shares of Common Stock are split up or combined, or are changed
into, become exchangeable at the holder's election for other shares of stock or
any other consideration, or in the case of any other transaction described in
section 424(a) of the Code, the Board may change the number and kind of shares
(including by substitution of shares of another corporation) subject to the
Option, and/or the exercise price of such shares in the manner that it shall
deem to be equitable and appropriate. In the event of any merger, consolidation,
reorganization or similar corporate event in which shares of the Common Stock
are to be exchanged for payment of cash (the "Cash Consideration"), the Board
may, in its discretion, (ii) make equitable adjustments as provided above, or
(ii) cancel the Option in exchange for payment in cash, if any, equal to the
excess of the Cash Consideration for the shares underlying the Option over the
exercise price for such shares.
Section 7. Restriction on Transfer of Option. The Option may not be
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transferred, pledged, assigned, hypothecated or otherwise disposed of in any way
by the Optionee. The Option shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of the Option contrary to the provisions hereof, and the levy
of any execution, attachment or similar process upon the Option, shall be null
and void and without effect.
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Section 8. Notices. Any notice hereunder by the Optionee shall be
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given to the Company in writing and such notice shall be deemed duly given only
upon receipt thereof at the Company's corporate offices at Two Xxxxxxxxxxxxxx
Xxxx, Xxxxxxxx, Xxx Xxxx 00000, Attention: General Counsel, or at such other
address as the Company may designate by notice to the Optionee. Any notice
hereunder by the Company shall be given to the Optionee in writing and such
notice shall be deemed duly given only upon receipt thereof at such address as
the Optionee may have on file with the Company.
Section 9. Other Compensation and Benefit Plans. The amount of any
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compensation deemed to be received by the Optionee as a result of the exercise
of the Option or the sale of shares received upon such exercise shall not
constitute compensation with respect to which any other benefits of such
Optionee are determined, including, without limitation, benefits under any
bonus, pension, profit sharing, life insurance or compensation continuation
plan, except as otherwise specifically determined by the Board.
Section 10. Construction. The construction of this Award Agreement is
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vested in the Board, and the Board's construction shall be final and conclusive.
Section 11. Governing Law. This Award Agreement shall be construed
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and enforced in accordance with the laws of the State of New York, without
giving effect to the choice of law principles thereof.
Section 12. Material Inducement. The parties hereto acknowledge that
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the grant of the Option as described herein was a material inducement for
Optionee to accept or continue its consulting engagement with the Company and
but for said Option, Optionee would not have accepted or continued such
engagement.
INTERLIANT, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Chief Financial Officer
OPTIONEE:
THE XXXX GROUP, INC.
By: /s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx, Chief Operating Officer
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