STOCK OPTION GRANT AGREEMENT
The stock option represented by this STOCK OPTION GRANT AGREEMENT is
granted as of the 6th day of March 2000, by The Network Connection, Inc., a
Georgia corporation (the "Company"), to Robert Pringle ("Grantee").
BACKGROUND
A. Grantee is President and Chief Operating Officer of Company.
B. Pursuant to the terms of an employment agreement entered into between
the Company and Grantee of even date herewith (the "Employment Agreement"), and
in order to induce Grantee to enter into the Employment Agreement, incentivize
Grantee with respect to the future success of the Company and to encourage him
to perform at increasing levels of effectiveness and use his best efforts to
promote the growth and profitability of the Company, and in consideration of
services to be performed, Company desires to afford Grantee an opportunity to
purchase shares of its common stock, par value $0.001 per share ("Common
Stock"), as hereinafter provided.
C. Any capitalized terms used but not defined herein shall have the
meanings attributed thereto in the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the receipt and adequacy of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. Grant of Option. In order to incentivize Grantee with respect to the
future success of the Company and to encourage him to perform at increasing
levels of effectiveness and use his best efforts to promote the growth and
profitability of the Company, the Company hereby irrevocably grants to Grantee
the right and option to purchase (the "Option") all or any part of an aggregate
of Eight Hundred Thousand (800,000) shares of Common Stock (the "Option Shares")
at a price per share equal to $9.00, which is the last sale price for shares of
Common Stock on the day prior to the day hereof as reported by Nasdaq (the
"Option Price"), during the Option Period (as defined below) and subject to the
conditions hereinafter set forth.
2. Option Period. The Option may be exercised in accordance with the
provisions of Paragraphs 4 and 5 hereof during the Option Period, which shall
begin on the date hereof and shall end on the Option Expiration Date defined in
Paragraph 3 hereof. All rights to exercise the Option shall terminate on the
Option Expiration Date.
3. Option Expiration Date. The Option Expiration Date shall be March 6,
2010.
4. Exercise of Option.
(a) The Option shall vest, and shall be exercisable as set forth in
the following table, provided that any portion of this Option which becomes
exercisable in any year, but is not exercised in such year, may be carried
forward and exercised in any future year until the Option Expiration Date,
subject to earlier termination as provided in Paragraph 6 hereof:
From and after: Number of Shares Exercisable
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June 6, 2000 160,000
March 6, 2001 160,000
March 6, 2002 160,000
March 6, 2003 160,000
March 6, 2004 160,000
(b) Notwithstanding anything to the contrary contained herein, Grantee
may purchase all or any portion of the unexercised balance of this Option
immediately prior to, or upon, the effective date of a Change of Control (as
defined in the following sentence). A "Change of Control" of the Company shall
mean any transaction or series of related transactions that results in a change
in the control of the Company, including, without limitation:
(i) a merger or consolidation of the Company into or with any
other entity when the Company is not the surviving entity of such merger or
consolidation;
(ii) the acquisition, directly or indirectly, by any individual,
entity or "group" (as defined in Section 13(d) of the Securities and Exchange
Act of 1934, as amended) (other than the Company, any subsidiary thereof, any
employee benefit plan of the Company, or any entity holding shares or other
securities of the Company for or pursuant to the terms of such a plan) (an
"Acquirer"), of stock or options, or any combination thereof, entitling the
Acquirer to cast 50% or more of all votes (without consideration of the rights
of any class of stock to elect directors by a separate class vote) entitled to
be cast by all stockholders of the Company in an election of the Board of
Directors of the Company;
(iii) the acquisition, directly or indirectly, by an Acquirer of
a majority of the total equity interest of the Company;
(iv) the sale or other disposition of assets of the Company equal
to 33.33% or more of the value of the Company's assets at the time of such sale
or disposition, unless the stockholders of the Company, immediately prior to
such sale or disposition, hold at least a majority of the voting power of each
surviving, resulting or acquiring corporation which, immediately following the
transaction, holds any of such sold or disposed assets;
(v) the election to the Board of Directors of the Company of
individuals who would constitute a majority of the members of the Board elected
at any meeting of stockholders or by written consent (without consideration of
the rights of any class of stock to elect directors by a separate class vote),
where the election or the nomination for election by the Company's stockholders
of such directors was not approved by a vote of at least a majority of the
directors in office immediately prior to such election or nomination; or
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(vi) the formation of a joint venture or partnership with the
Company for the purpose of effecting a transfer of control of, or a material
interest in, the Company (such merger, consolidation, sale or other transaction
listed in subparagraphs (i) through (vi) being hereinafter referred to as a
"Transaction").
There shall be excluded from the foregoing any Transaction as a result of
which (A) the holders of Common Stock prior to the Transaction retain or acquire
securities constituting a majority of the outstanding voting common stock of the
acquiring or surviving corporation or other entity in substantially the same
proportions that they owned Common Stock in the Company prior to the
Transaction, and (B) no single person or entity owns more than half of the
outstanding voting common stock of the acquiring or surviving corporation or
other entity. For purposes of this Paragraph 4, voting common stock of the
acquiring or surviving corporation or other entity that is issuable upon
conversion of convertible securities or upon exercise of warrants or options
shall be considered outstanding, and all securities that vote in the election of
directors (other than solely as the result of a default in the making of any
dividend or other payment) shall be deemed to constitute that number of shares
of voting common stock which is equivalent to the number of such votes that may
be cast by the holders of such securities.
5. Manner of Exercise. Exercise of the Option, or any portion thereof,
shall be by written notice to the Company pursuant to Paragraph 12 hereof. The
notice shall be accompanied by payment in full in cash, stock of the Company, or
other property (including notes or other contractual obligations of Grantee to
make payment on a deferred basis, and/or through "cashless exercise
arrangements," to the extent permitted by applicable law), or a combination
thereof, in an amount equal to the product obtained by multiplying the number of
Option Shares with respect to which the Option is then being exercised by the
Option Price. Upon receipt of such notice and payment, the Company shall, as
soon as practicable thereafter, deliver a certificate or certificates
representing the Option Shares purchased. The certificate or certificates shall
be delivered to or upon the written order of the Grantee. Upon such exercise and
regardless of the fact that a certificate or certificates representing the
Option Shares purchased shall not yet have been issued, Grantee or his legal
representative, legatees or distributees, as the case may be, shall be deemed to
be a holder of any shares subject to this Option, provided that the written
notice and payment required by this Paragraph 5 have been delivered to Company.
The Option Shares that shall be purchased upon the exercise of the Option as
provided herein shall be fully paid and non-assessable.
6. Rights in Event of Death, Disability or Termination of Employment.
(a) DEATH. If Grantee's employment is terminated because of death
while employed by the Company, then the installment of Options that would have
been the next to vest at the time of such termination shall automatically vest
as of the date immediately prior to such termination (without any action on the
part of the Company or the Grantee). After such a termination, Grantee's estate
or legal representatives shall have through the Option Expiration Date to
exercise any vested but unexercised Options. Subject to the first sentence of
this paragraph (a), any Options that remain unvested at the time of termination
shall automatically terminate and be cancelled (without any action on the part
of the Company).
(b) DISABILITY. If Grantee is terminated from his employment with the
Company by reason of disability in accordance with the Employment Agreement,
then the installment of Options that would have been the next to vest at the
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time of such termination shall automatically vest as of the date immediately
prior to such termination (without any action on the part of the Company or the
Grantee). After such a termination, Grantee shall have through the Option
Expiration Date to exercise any vested but unexercised Options. Subject to the
first sentence of this paragraph (b), any Options that remain unvested at the
time of termination shall automatically terminate and be cancelled (without any
action on the part of the Company).
(c) CAUSE OR RESIGNATION. If Grantee is terminated from his employment
with the Company for Cause (as defined in the Employment Agreement) in
accordance with the Employment Agreement or voluntarily leaves the employ of the
Company other than for Good Reason (as defined in the Employment Agreement)
prior to expiration of the Employment Agreement, then all unvested Options shall
automatically terminate and be cancelled (without any action on the part of the
Company) on the effective date of termination. In addition, Grantee shall have
the opportunity on the date of such termination for Cause or Grantee's
voluntarily leaving the employ of the Company to exercise all vested but
unexercised Options. All vested Options not exercised on such date shall
thereafter automatically expire (without any action on the part of the Company).
(d) WITHOUT CAUSE. If Grantee is terminated from his employment
without Cause or terminates his employment with Company for Good Reason (as
defined in the Employment Agreement) in accordance with the Employment
Agreement, then the installment of Options that would have been the next to vest
at the time of such termination shall automatically vest as of the date
immediately prior to such termination (without any action on the part of the
Company or the Grantee). After such a termination, Grantee shall have through
the Option Expiration Date to exercise any vested but unexercised Options.
Subject to the first sentence of this subparagraph (d), any Options that remain
unvested at the time of termination shall automatically terminate and be
cancelled (without any action on the part of the Company).
7. Option Shares to be Purchased for Investment. Unless Company has
notified Grantee pursuant to Paragraph 12 hereof that a registration statement
covering the Option Shares has become effective under the Securities Act of
1933, as amended (the "Act"), it shall be a condition to the exercise of the
Option that the Option Shares acquired upon such exercise be acquired for
investment and not with a view to distribution. If requested by the Company upon
advice of its counsel that the same is necessary or desirable, the Grantee
shall, at the time of purchase of the Option Shares, deliver to the Company
Grantee's written representation that Grantee (a) is purchasing the Option
Shares for his own account for investment, and not with a view to public
distribution or with any present intention of reselling any of the Option Shares
(other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act); (b) has been advised and understands that (i) the Option
Shares have not been registered under the Act and are subject to restrictions on
transfer and (ii) the Company is under no obligation to register the Option
Shares under the Act or to take any action which would make available to the
Grantee any exemption from such registration except as may be provided in the
Registration Rights Agreement of even date herewith between the Company and
certain shareholders, including the Grantee; and (c) has been advised and
understands that such Option Shares may not be transferred without compliance
with all applicable federal and state securities laws.
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8. Changes in Capital Structure. The number of Option Shares covered by this
Option and the Option Price shall automatically (without any action on the part
of the Company) be equitably adjusted in the event (the "Event") of (i) the
payment of any dividend payable in, or the making of any distribution of, Common
Stock to holders of record of Common Stock, which increases the outstanding
Common Stock; (ii) any stock split, combination of shares, recapitalization or
other similar change; (iii) the merger or consolidation of the Company into or
with any other entity; or (iv) the reorganization, dissolution, liquidation or
winding up of the Company. Grantee shall be entitled, upon the exercise of the
Option, to receive such new, additional or other shares of stock of any class,
or other property (including, without limitation, cash and/or securities of any
successor entity), as Grantee would have been entitled to receive as a matter of
law in connection with such Event had Grantee held the Option Shares on the
record date set for such Event. The Company shall have the authority to
reasonably determine the adjustments to be made under this Paragraph 8 and any
such reasonable determination shall be final, binding and conclusive.
9. Legal Requirements. If the listing, registration or qualification of the
Option Shares upon any securities exchange or under any federal or state law, or
the consent or approval of any governmental regulatory body is necessary as a
condition of or in connection with the purchase of the Option Shares, the
Company shall not be obligated to issue or deliver the certificates representing
the Option Shares as to which the Option has been exercised unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained. This Option does not hereby impose on the Company a duty
to so list, register, qualify, or effect or obtain consent or approval. If
registration is considered unnecessary by the Company or its counsel, the
Company may cause a legend to be placed on the certificates for the Option
Shares being issued calling attention to the fact that they have been acquired
for investment and have not been registered, such legend to read as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED UNLESS THERE IS A REGISTRATION
STATEMENT IN EFFECT COVERING SUCH SECURITIES OR THERE IS
AVAILABLE AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS."
10. No Obligation to Exercise Option. The Grantee shall be under no
obligation to exercise the Option.
11. Transfer. The Option is not transferable by Grantee other than by will
or by the laws of descent and distribution in the event of the Grantee's death,
in which event the Option may be exercised by the heirs or legal representatives
of the Grantee as provided herein. The Option may be exercised during the
lifetime of the Grantee only by the Grantee. Any attempt at assignment,
transfer, pledge or disposition of the Option contrary to the provisions hereof
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or the levy of any execution, attachment or similar process upon the Option
shall be null and void and without effect. Any exercise of the Option by a
person other than the Grantee shall be accompanied by appropriate proofs of the
right of such person to exercise the Option.
12. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or when sent by certified or registered
mail, postage prepaid, properly addressed to the party entitled to receive such
notice at the address stated below; or when sent via facsimile transmission with
confirmation of transmission or via electronic mail, provided that in both of
the foregoing situations a copy of the notice so transmitted is sent to the
party entitled to receive such notice via first-class mail, postage prepaid at
the address stated below:
If to Company: The Network Connection, Inc.
1811 Chestnut Street, Suite 120
Philadelphia, PA 19103
Attention: Chairman and Chief Executive Officer
Facsimile: (215) 972-8183
E-mail: oceancastle@erols.com
If to Grantee: Robert Pringle
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Either party hereto may change such party's address, facsimile number or
e-mail address by sending notice thereof to the other party by any of the
methods set out above, provided that such change shall not be deemed effective
as against the party to whom it is sent until the notice containing such change
is actually received by such party.
13. Administration. This Option has been granted pursuant to the Employment
Agreement and is subject to the terms and provisions thereof. All questions of
interpretation and application of this Option shall be determined by the
Company, and such determination shall be final, binding and conclusive.
14. Not an Employment or Service Contract. Nothing in this Option shall be
construed as an agreement by the Company, express or implied, to employ Grantee
or contract for Grantee's services, to restrict the right of the Company to
discharge Grantee or cease contracting for Grantee's services or to modify,
extend or otherwise affect in any manner whatsoever, the terms of any employment
agreement or contract for services which may exist between the Grantee and the
Company.
15. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
16. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware without regard to conflicts of laws
principles.
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17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18. Amendment. This Agreement may not be amended except by an instrument in
writing signed by the parties.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
date first above written.
THE NETWORK CONNECTION, INC.
By: /s/ Irwin L. Gross
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Irwin L. Gross
Chairman and Chief Executive Officer
/s/ Robert Pringle
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Robert Pringle
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