-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HSbEz6EajS8iSnZK3QcKqVyv86ZsifLEwgEdDKNoJfp6Twf7wEMY+8EPefNZpFAC pA3mfAwcZHDZ82BaqD4+aw== 0000950144-04-011958.txt : 20041210 0000950144-04-011958.hdr.sgml : 20041210 20041210151927 ACCESSION NUMBER: 0000950144-04-011958 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041206 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041210 DATE AS OF CHANGE: 20041210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERILINK CORP CENTRAL INDEX KEY: 0000774937 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 942857548 STATE OF INCORPORATION: DE FISCAL YEAR END: 0627 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-28562 FILM NUMBER: 041196130 BUSINESS ADDRESS: STREET 1: 127 JETPLEX CIR CITY: MADISON STATE: AL ZIP: 35758-8989 BUSINESS PHONE: 256-327-2001 MAIL ADDRESS: STREET 1: 127 JETPLEX CIR CITY: MADISON STATE: AL ZIP: 35758-8989 8-K 1 g92328e8vk.htm VERILINK CORPORATION VERILINK CORPORATION
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): December 10, 2004 (December 6, 2004)

VERILINK CORPORATION

(Exact name of registrant as specified in charter)
         
Delaware
(State of incorporation) 		  000-28562
(Commission File Number) 		  94-2857548
(IRS Employer
Identification No.)

127 JETPLEX CIRCLE
MADISON, AL 35758-8989
(Address of principal executive offices / Zip Code)

256.327.2001
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     o Written communications pursuant to Rule 425 under the Securities Act.

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act.

     o Pre-commencement communications pursuant to Rule 14d—2(b) under the Exchange Act.

     o Pre-commencement communications pursuant to Rule 13e—4(c) under the Exchange Act.

 

 

Item 1.01. Entry into a Material Definitive Agreement

     On December 6, 2004, the Board of Directors of Verilink Corporation (“Verilink”) adopted the Verilink Corporation 2004 New Hire Stock Incentive Plan (the “New Hire Plan”). The New Hire Plan has not been approved by Verilink’s stockholders as the New Hire Plan permits stock incentive awards that do not require stockholder approval under the Nasdaq Marketplace Rules.

     Verilink has reserved 500,000 shares of Verilink common stock for issuance under the New Hire Plan. The terms of the New Hire Plan are similar to Verilink’s 2004 Stock Incentive Plan (which is included as Annex E to the Joint Proxy Statement/Prospectus, dated June 24, 2004, forming a part of Verilink’s Registration Statement on Form S-4 (SEC Registration No. 333-116472)) in all material respects, except that: (i) awards under the New Hire Plan are limited to newly hired employees or as otherwise permitted without stockholder approval under the Nasdaq Marketplace Rules; and (ii) the New Hire Plan does not authorize the grant of incentive stock options. The description of the New Hire Plan contained in this Item 1.01 is qualified in its entirety by reference to the full text of the New Hire Plan, a copy of which is attached hereto as Exhibit 10.1.

     On December 6, 2004, Verilink’s Equity Incentive Sub-Committee of the Compensation Committee granted a non-qualified stock option under the New Hire Plan to Timothy R. Anderson, Verilink’s newly appointed Vice President and Chief Financial Officer, to purchase 200,000 shares of Verilink common stock. This option was granted without stockholder approval as permitted under Nasdaq Marketplace Rule 4350(i)(1)(A)(iv) and has the following terms: exercise price of $3.28 per share; duration of ten years; and vesting over a four-year period at the rate of 25% after one year from the date of hire and 1/48th of the total options granted per month each month thereafter. This option is fully exercisable from the date of grant; however, the shares issuable upon exercise are subject to repurchase until fully vested. A form of Option Award Agreement for grantees under the New Hire Plan is attached hereto as Exhibit 10.2.

     
Item 9.01   Exhibits
 
    
10.1
  Verilink Corporation 2004 New Hire Stock Incentive Plan
10.2
  Form of Option Award Agreement under the 2004 New Hire Stock Incentive Plan

2

 

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  VERILINK CORPORATION
(Registrant)
 		  
Dated: December 10, 2004  By:   (-s- C S Smith)    
    C. W. Smith   
    Vice President and Corporate Controller   
 

3

EX-10.1 2 g92328exv10w1.txt EX-10.1 VERILINK NEW HIRE STOCK INCENTIVE PLAN EXHIBIT 10.1 VERILINK CORPORATION 2004 NEW HIRE STOCK INCENTIVE PLAN . . . VERILINK CORPORATION 2004 NEW HIRE STOCK INCENTIVE PLAN TABLE OF CONTENTS
PAGE ---- SECTION 1 DEFINITIONS................................................................. 1 1.1 DEFINITIONS................................................................ 1 SECTION 2 THE STOCK INCENTIVE PLAN.................................................... 3 2.1 PURPOSE OF THE PLAN........................................................ 3 2.2 STOCK SUBJECT TO THE PLAN.................................................. 3 2.3 ADMINISTRATION OF THE PLAN................................................. 4 2.4 ELIGIBILITY AND LIMITS..................................................... 4 SECTION 3 TERMS OF STOCK INCENTIVES................................................... 4 3.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES............................... 4 3.2 TERMS AND CONDITIONS OF OPTIONS............................................ 5 (a) Option Price............................................................. 5 (b) Option Term.............................................................. 5 (c) Payment.................................................................. 5 (d) Conditions to the Exercise of an Option.................................. 6 3.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.......................... 6 (a) Settlement............................................................... 6 (b) Conditions to Exercise................................................... 6 3.4 TERMS AND CONDITIONS OF STOCK AWARDS....................................... 7 3.5 TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS......................... 7 (a) Payment.................................................................. 7 (b) Conditions to Payment.................................................... 7 3.6 TERMS AND CONDITIONS OF PERFORMANCE UNIT AWARDS............................ 7 (a) Payment.................................................................. 7 (b) Conditions to Payment.................................................... 8 3.7 TERMS AND CONDITIONS OF PHANTOM SHARES..................................... 8 (a) Payment.................................................................. 8 (b) Conditions to Payment.................................................... 8 3.8 TREATMENT OF AWARDS UPON TERMINATION OF EMPLOYMENT......................... 8 SECTION 4 RESTRICTIONS ON STOCK....................................................... 8 4.1 ESCROW OF SHARES........................................................... 8 4.2 RESTRICTIONS ON TRANSFER................................................... 9 SECTION 5 GENERAL PROVISIONS.......................................................... 9 5.1 WITHHOLDING................................................................ 9 5.2 CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION............................. 10 5.3 CASH AWARDS................................................................ 11 5.4 RIGHT TO TERMINATE EMPLOYMENT.............................................. 11 5.5 NON-ALIENATION OF BENEFITS................................................. 11 5.6 RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS....................... 11 5.7 LISTING AND LEGAL COMPLIANCE............................................... 11 5.8 TERMINATION AND AMENDMENT OF THE PLAN...................................... 12 5.9 CHOICE OF LAW.............................................................. 12 5.10 EFFECTIVE DATE OF PLAN..................................................... 12
i VERILINK CORPORATION 2004 NEW HIRE STOCK INCENTIVE PLAN SECTION 1 DEFINITIONS 1.1 Definitions. Whenever used herein, the masculine pronoun will be deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used herein with the meaning thereafter ascribed: (a) "Affiliate" means: (1) an entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with the Company, as determined by the Company, or (2) any entity in which the Company has such a significant interest that the Company determines it should be deemed an "Affiliate", as determined in the sole discretion of the Company. (b) "Board of Directors" means the board of directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended. (d) "Committee" means the committee appointed by the Board of Directors to administer the Plan. (e) "Company" means Verilink Corporation, a Delaware corporation. (f) "Disability" has the same meaning as provided in the long-term disability plan or policy maintained or, if applicable, most recently maintained, by the Company or, if applicable, any Affiliate of the Company for the Participant. If no long-term disability plan or policy was ever maintained on behalf of the Participant, Disability means that condition described in Code Section 22(e)(3), as amended from time to time. In the event of a dispute, the determination of Disability will be made by the Committee and will be supported by advice of a physician competent in the area to which such Disability relates. (g) "Dividend Equivalent Rights" means certain rights to receive cash payments as described in Section 3.5. (h) "Eligible Employee" means (1) a newly hired employee not previously an employee or director of the Company or an Affiliate; (2) an employee that, following a bona fide period of non-employment, is to be granted one or more Stock Incentives hereunder as an inducement material to the individual's entering into employment with the Company or an Affiliate; or (3) any other employee (as such term is defined in General Instruction A. to Form S-8 under the Securities Act of 1933) or service provider to whom Stock Incentives can be granted without shareholder approval under the rules of the principal trading market of the Company's stock, provided that, under any of the above circumstances, such grants are approved by the Committee. (i) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. (j) "Fair Market Value" with regard to a date means: (1) the price at which Stock shall have been sold on that date or the last trading date prior to that date as reported by the national securities exchange selected by the Committee on which the shares of Stock are then actively traded or, if applicable, as reported by the NASDAQ Stock Market; (2) if such market information is not published on a regular basis, the price of Stock in the over-the-counter market on that date or the last business day prior to that date as reported by the NASDAQ Stock Market or, if not so reported, by a generally accepted reporting service; or (3) if Stock is not publicly traded, as determined in good faith by the Committee with due consideration being given to (i) the most recent independent appraisal of the Company, if such appraisal is not more than twelve months old and (ii) the valuation methodology used in any such appraisal. For purposes of Paragraphs (1), (2), or (3) above, the Committee may use the closing price as of the applicable date, the average of the high and low prices as of the applicable date or for a period certain ending on such date, the price determined at the time the transaction is processed, the tender offer price for shares of Stock, or any other method which the Committee determines is reasonably indicative of the fair market value. (k) "Option" means a stock option other than an incentive stock option within the meaning of Section 422 of the Internal Revenue Code. (l) "Participant" means an Eligible Employee who receives a Stock Incentive hereunder. (m) "Performance Unit Award" refers to a performance unit award as described in Section 3.6. (n) "Phantom Shares" refers to the rights described in Section 3.7. (o) "Plan" means the Verilink Corporation 2004 New Hire Stock Incentive Plan. 2 (p) "Stock" means the Company's common stock, $.01 par value per share. (q) "Stock Appreciation Right" means a stock appreciation right described in Section 3.3. (r) "Stock Award" means a stock award described in Section 3.4. (s) "Stock Incentive Agreement" means an agreement between the Company and a Participant or other documentation evidencing an award of a Stock Incentive. (t) "Stock Incentive Program" means a written program established by the Committee, pursuant to which Stock Incentives are awarded under the Plan under uniform terms, conditions and restrictions set forth in such written program. (u) "Stock Incentives" means, collectively, Dividend Equivalent Rights Options, Phantom Shares, Stock Appreciation Rights, Stock Awards and Performance Unit Awards. (v) "Termination of Employment" means the termination of the employee-employer relationship between a Participant and the Company and its Affiliates, regardless of whether severance or similar payments are made to the Participant for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement. The Committee will, in its absolute discretion, determine the effect of all matters and questions relating to a Termination of Employment, including, but not by way of limitation, the question of whether a leave of absence constitutes a Termination of Employment. SECTION 2 THE STOCK INCENTIVE PLAN 2.1 Purpose of the Plan. The Plan is intended to provide a means of recruiting individuals to provide services to the Company or an Affiliate as an Eligible Employee. 2.2 Stock Subject to the Plan. Subject to adjustment in accordance with Section 5.2, five hundred thousand (500,000) shares of Stock (the "Maximum Plan Shares") are hereby reserved exclusively for issuance upon exercise or payment pursuant to Stock Incentives. The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Stock Incentive that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full will again be available for purposes of the Plan. The number of shares of Stock available for purposes of the Plan shall be reduced only by the actual number of shares of Stock issued in the settlement of each Stock Incentive, without regard to the number of shares of Stock associated with any award for the purpose of determining the extent of the Participant's rights in the Stock Incentive. 3 2.3 Administration of the Plan. The Plan is administered by the Committee. The Committee has full authority in its discretion to determine the employees of the Company or its Affiliates to whom Stock Incentives will be granted and the terms and provisions of Stock Incentives, subject to the Plan. Subject to the provisions of the Plan, the Committee has full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Stock Incentive Agreements; and to make all other determinations necessary or advisable for the proper administration of the Plan. The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated). The Committee's decisions are final and binding on all Participants. Each member of the Committee shall serve at the discretion of the Board of Directors and the Board of Directors may from time to time remove members from or add members to the Committee. Vacancies on the Committee shall be filled by the Board of Directors. 2.4 Eligibility and Limits. Stock Incentives may be granted only to Eligible Employees of the Company or an Affiliate. SECTION 3 TERMS OF STOCK INCENTIVES 3.1 Terms and Conditions of All Stock Incentives. (a) The number of shares of Stock as to which a Stock Incentive may be granted will be determined by the Committee in its sole discretion, subject to the provisions of Section 2.2 as to the total number of shares available for grants under the Plan. (b) Each Stock Incentive will either be evidenced by a Stock Incentive Agreement in such form and containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, performance goals that must be achieved as a condition to vesting or payment of the Stock Incentive, or be made subject to the terms of a Stock Incentive Program, containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, performance goals that must be achieved as a condition to vesting or payment of the Stock Incentive. Each Stock Incentive Agreement or Stock Incentive Program is subject to the terms of the Plan and any provisions contained in the Stock Incentive Agreement or Stock Incentive Program that are inconsistent with the Plan are null and void. (c) The date a Stock Incentive is granted will be the date on which the Committee has approved the terms and conditions of the Stock Incentive and has determined the recipient of the Stock Incentive and the number of shares covered by the Stock Incentive, and has taken all such other actions necessary to complete the grant of the Stock Incentive. 4 (d) Any Stock Incentive may be granted in connection with all or any portion of a previously or contemporaneously granted Stock Incentive. Exercise or vesting of a Stock Incentive granted in connection with another Stock Incentive may result in a pro rata surrender or cancellation of any related Stock Incentive, as specified in the applicable Stock Incentive Agreement or Stock Incentive Program. (e) Stock Incentives are not transferable or assignable except by will or by the laws of descent and distribution and are exercisable, during the Participant's lifetime, only by the Participant; or in the event of the Disability of the Participant, by the legal representative of the Participant; or in the event of death of the Participant, by the legal representative of the Participant's estate or if no legal representative has been appointed, by the successor in interest determined under the Participant's will; provided, however, that the Committee may waive any of the provisions of this Section or provide otherwise as to any Stock Incentives. (f) To the extent required by applicable law, promptly following an issuance of any Stock Incentive, the Company shall disclose in a press release the material terms of the grant, including the recipient of the grant and the number of shares of Stock involved. 3.2 Terms and Conditions of Options. Each Option granted under the Plan must be evidenced by a Stock Incentive Agreement. (a) Option Price. Subject to adjustment in accordance with Section 5.2 and the other provisions of this Section 3.2, the exercise price (the "Exercise Price") per share of Stock purchasable under any Option must be as set forth in the applicable Stock Incentive Agreement. (b) Option Term. The term of any Option must be as specified in the applicable Stock Incentive Agreement. (c) Payment. Payment for all shares of Stock purchased pursuant to exercise of an Option will be made in any form or manner authorized by the Committee in the Stock Incentive Agreement or by amendment thereto, including, but not limited to, cash or, if the Stock Incentive Agreement provides: (i) by delivery to the Company of a number of shares of Stock which have been owned by the holder for at least six (6) months prior to the date of exercise having an aggregate Fair Market Value of not less than the product of the Exercise Price multiplied by the number of shares the Participant intends to purchase upon exercise of the Option on the date of delivery; (ii) in a cashless exercise through a broker provided, however, that any such cashless exercise is consistent with the restrictions of Section 13(k) of the Exchange Act (Section 402 of the Sarbanes-Oxley Act of 2002); or 5 (iii) by having a number of shares of Stock withheld, the Fair Market Value of which as of the date of exercise is sufficient to satisfy the Exercise Price. In its discretion, the Committee also may authorize (at the time an Option is granted or thereafter) Company financing to assist the Participant as to payment of the Exercise Price on such terms as may be offered by the Committee in its discretion. Payment must be made at the time that the Option or any part thereof is exercised, and no shares may be issued or delivered upon exercise of an Option until full payment has been made by the Participant. The holder of an Option, as such, has none of the rights of a stockholder. (d) Conditions to the Exercise of an Option. Each Option granted under the Plan is exercisable by the Participant or any other designated person, at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the Stock Incentive Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may accelerate the time or times at which such Option may be exercised in whole or in part, including, without limitation, upon a change in control as defined in the Stock Incentive Agreement and may permit the Participant or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term, notwithstanding any provision of the Stock Incentive Agreement to the contrary. 3.3 Terms and Conditions of Stock Appreciation Rights. Each Stock Appreciation Right granted under the Plan must be evidenced by a Stock Incentive Agreement. A Stock Appreciation Right entitles the Participant to receive the excess of (1) the Fair Market Value of a specified or determinable number of shares of the Stock at the time of payment or exercise over (2) a specified or determinable price which, in the case of a Stock Appreciation Right granted in connection with an Option, may not be less than the Exercise Price for that number of shares subject to that Option. A Stock Appreciation Right granted in connection with a Stock Incentive may only be exercised to the extent that the related Stock Incentive has not been exercised, paid or otherwise settled. (a) Settlement. Upon settlement of a Stock Appreciation Right, the Company must pay to the Participant the appreciation in cash or shares of Stock (valued at the aggregate Fair Market Value on the date of payment or exercise) as provided in the Stock Incentive Agreement or, in the absence of such provision, as the Committee may determine. (b) Conditions to Exercise. Each Stock Appreciation Right granted under the Plan is exercisable or payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the Stock Incentive Agreement; provided, however, that subsequent to the grant of a Stock Appreciation Right, the Committee, at any time before complete termination of such Stock Appreciation Right, may accelerate the time or times at which such Stock Appreciation Right may be exercised or paid in whole or in part. 6 3.4 Terms and Conditions of Stock Awards. The number of shares of Stock subject to a Stock Award and restrictions or conditions on such shares, if any, will be as the Committee determines, and the certificate for such shares will bear evidence of any restrictions or conditions. Subsequent to the date of the grant of the Stock Award, the Committee has the power to permit, in its discretion, an acceleration of the expiration of an applicable restriction period with respect to any part or all of the shares awarded to a Participant. The Committee may require a cash payment from the Participant in an amount no greater than the aggregate Fair Market Value of the shares of Stock awarded determined at the date of grant in exchange for the grant of a Stock Award or may grant a Stock Award without the requirement of a cash payment. 3.5 Terms and Conditions of Dividend Equivalent Rights. A Dividend Equivalent Right entitles the Participant to receive payments from the Company in an amount determined by reference to any cash dividends paid on a specified number of shares of Stock to Company stockholders of record during the period such rights are effective. The Committee may impose such restrictions and conditions on any Dividend Equivalent Right as the Committee in its discretion shall determine, including the date any such right shall terminate and may reserve the right to terminate, amend or suspend any such right at any time. (a) Payment. Payment in respect of a Dividend Equivalent Right may be made by the Company in cash or shares of Stock (valued at Fair Market Value as of the date payment is owed) as provided in the Stock Incentive Agreement or Stock Incentive Program, or, in the absence of such provision, as the Committee may determine. (b) Conditions to Payment. Each Dividend Equivalent Right granted under the Plan is payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the applicable Stock Incentive Agreement or Stock Incentive Program; provided, however, that subsequent to the grant of a Dividend Equivalent Right, the Committee, at any time before complete termination of such Dividend Equivalent Right, may accelerate the time or times at which such Dividend Equivalent Right may be paid in whole or in part. 3.6 Terms and Conditions of Performance Unit Awards. A Performance Unit Award shall entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of the value of a specified or determinable number of units (stated in terms of a designated or determinable dollar amount per unit) granted by the Committee. At the time of the grant, the Committee must determine the base value of each unit, the number of units subject to a Performance Unit Award, and the Performance goals applicable to the determination of the ultimate payment value of the Performance Unit Award. The Committee may provide for an alternate base value for each unit under certain specified conditions. (a) Payment. Payment in respect of Performance Unit Awards may be made by the Company in cash or shares of Stock (valued at Fair Market Value as of the date payment is owed) as provided in the applicable Stock Incentive Agreement or Stock Incentive Program or, in the absence of such provision, as the Committee may determine. 7 (b) Conditions to Payment. Each Performance Unit Award granted under the Plan shall be payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee shall specify in the applicable Stock Incentive Agreement or Stock Incentive Program; provided, however, that subsequent to the grant of a Performance Unit Award, the Committee, at any time before complete termination of such Performance Unit Award, may accelerate the time or times at which such Performance Unit Award may be paid in whole or in part. 3.7 Terms and Conditions of Phantom Shares. Phantom Shares shall entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of the Fair Market Value of a specified number of shares of Stock at the end of a specified period. At the time of the grant, the Committee will determine the factors which will govern the portion of the phantom shares so payable, including, at the discretion of the Committee, any performance criteria that must be satisfied as a condition to payment. Phantom Share awards containing performance criteria may be designated as performance share awards. (a) Payment. Payment in respect of Phantom Shares may be made by the Company in cash or shares of Stock (valued at Fair Market Value as of the date payment is owed) as provided in the applicable Stock Incentive Agreement or Stock Incentive Program, or, in the absence of such provision, as the Committee may determine. (b) Conditions to Payment. Each Phantom Share granted under the Plan is payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specify in the applicable Stock Incentive Agreement or Stock Incentive Program; provided, however, that subsequent to the grant of a Phantom Share, the Committee, at any time before complete termination of such Phantom Share, may accelerate the time or times at which such Phantom Share may be paid in whole or in part. 3.8 Treatment of Awards Upon Termination of Employment. Any award under this Plan to a Participant who has experienced a Termination of Employment may be cancelled, accelerated, paid or continued, as provided in the applicable Stock Incentive Agreement or Stock Incentive Program, or, in the absence of such provision, as the Committee may determine. The portion of any award exercisable in the event of continuation or the amount of any payment due under a continued award may be adjusted by the Committee to reflect the Participant's period of service from the date of grant through the date of the Participant's Termination of Employment or such other factors as the Committee determines are relevant to its decision to continue the award. SECTION 4 RESTRICTIONS ON STOCK 4.1 Escrow of Shares. Any certificates representing the shares of Stock issued under the Plan will be issued in the Participant's name, but, if the applicable Stock Incentive Agreement or Stock Incentive Program so provides, the shares of Stock will be held by a custodian designated by the Committee (the "Custodian"). Each applicable Stock Incentive 8 Agreement or Stock Incentive Program providing for transfer of shares of Stock to the Custodian must appoint the Custodian as the attorney-in-fact for the Participant for the term specified in the applicable Stock Incentive Agreement or Stock Incentive Program, with full power and authority in the Participant's name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the shares under the terms of the applicable Stock Incentive Agreement or Stock Incentive Program. During the period that the Custodian holds the shares subject to this Section, the Participant is entitled to all rights, except as provided in the applicable Stock Incentive Agreement or Stock Incentive Program, applicable to shares of Stock not so held. Any dividends declared on shares of Stock held by the Custodian shall, as the Committee may provide in the applicable Stock Incentive Agreement or Stock Incentive Program, be paid directly to the Participant or, in the alternative, be retained by the Custodian or by the Company until the expiration of the term specified in the applicable Stock Incentive Agreement or Stock Incentive Program and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable. 4.2 Restrictions on Transfer. The Participant does not have the right to make or permit to exist any disposition of the shares of Stock issued pursuant to the Plan except as provided in the Plan or the applicable Stock Incentive Agreement or Stock Incentive Program. Any disposition of the shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the applicable Stock Incentive Agreement or Stock Incentive Program will be void. The Company will not recognize, or have the duty to recognize, any disposition not made in accordance with the Plan and the applicable Stock Incentive Agreement or Stock Incentive Program, and the shares so transferred will continue to be bound by the Plan and the applicable Stock Incentive Agreement or Stock Incentive Program. SECTION 5 GENERAL PROVISIONS 5.1 Withholding. The Company must deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state, or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan or upon the vesting of any Stock Award, the Company has the right to require the recipient to remit to the Company an amount sufficient to satisfy any federal, state, and local tax withholding requirements prior to the delivery of any certificate or certificates for such shares or the vesting of such Stock Award. A Participant may pay the withholding obligation in cash, or, if the applicable Stock Incentive Agreement or Stock Incentive Program provides, a Participant may elect to have the number of shares of Stock he is to receive reduced by, or with respect to a Stock Award, tender back to the Company, the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the shares of Stock determined as of the Tax Date (defined below), is sufficient to satisfy federal, state, and local, if any, withholding obligation arising from exercise or payment of a Stock Incentive (a "Withholding Election"). A Participant may make a Withholding Election only if both of the following conditions are met: (a) The Withholding Election must be made on or prior to the date on which the amount of tax required to be withheld is determined (the "Tax Date") by executing 9 and delivering to the Company a properly completed notice of Withholding Election as prescribed by the Committee; and (b) Any Withholding Election made will be irrevocable except on six months advance written notice delivered to the Company; however, the Committee may in its sole discretion disapprove and give no effect to the Withholding Election. 5.2 Changes in Capitalization; Merger; Liquidation. (a) The number of shares of Stock reserved for the grant of Options, Dividend Equivalent Rights, Performance Unit Awards, Phantom Shares, Stock Appreciation Rights and Stock Awards; the number of shares of Stock reserved for issuance upon the exercise or payment, as applicable, of each outstanding Option, Dividend Equivalent Right, Phantom Share and Stock Appreciation Right and upon vesting or grant, as applicable, of each Stock Award; the Exercise Price of each outstanding Option and the specified number of shares of Stock to which each outstanding Dividend Equivalent Right, Phantom Share and Stock Appreciation Right pertains must be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or combination of shares or the payment of a stock dividend in shares of Stock to holders of outstanding shares of Stock or any other increase or decrease in the number of shares of Stock outstanding effected without receipt of consideration by the Company. (b) In the event of a merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company's assets, other change in capital structure of the Company, tender offer for shares of Stock, or a change in control of the Company (as defined by the Committee in the applicable Stock Incentive Agreement) the Committee may make such adjustments with respect to awards and take such other action as it deems necessary or appropriate, including, without limitation, the assumption of other awards, the substitution of new awards, the adjustment of outstanding awards, the acceleration of awards, the removal of restrictions on outstanding awards, or the termination of outstanding awards in exchange for the cash value determined in good faith by the Committee of the vested and/or unvested portion of the award, all as may be provided in the applicable Stock Incentive Agreement or, if not expressly addressed therein, as the Committee subsequently may determine in its sole discretion. Any adjustment pursuant to this Section 5.2 may provide, in the Committee's discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Stock Incentive, but except as set forth in this Section may not otherwise diminish the then value of the Stock Incentive. (c) The existence of the Plan and the Stock Incentives granted pursuant to the Plan must not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the 10 dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding. 5.3 Cash Awards. The Committee may, at any time and in its discretion, grant to any holder of a Stock Incentive the right to receive, at such times and in such amounts as determined by the Committee in its discretion, a cash amount which is intended to reimburse such person for all or a portion of the federal, state, and local income taxes imposed upon such person as a consequence of the receipt of the Stock Incentive or the exercise of rights thereunder. 5.4 Right to Terminate Employment. Nothing in the Plan or in any Stock Incentive confers upon any Participant the right to continue as an employee of the Company or any of its Affiliates or affect the right of the Company or any of its Affiliates to terminate the Participant's employment at any time. 5.5 Non-Alienation of Benefits. Other than as provided herein, no benefit under the Plan may 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 may, prior to receipt by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the Participant. 5.6 Restrictions on Delivery and Sale of Shares; Legends. Each Stock Incentive is subject to the condition that if at any time the Committee, in its discretion, shall determine that the listing, registration or qualification of the shares covered by such Stock Incentive upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the granting of such Stock Incentive or the purchase or delivery of shares thereunder, the delivery of any or all shares pursuant to such Stock Incentive may be withheld unless and until such listing, registration or qualification shall have been effected. If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Stock Incentives then outstanding, the Committee may require, as a condition of exercise of any Option or as a condition to any other delivery of Stock pursuant to a Stock Incentive, that the Participant or other recipient of a Stock Incentive represent, in writing, that the shares received pursuant to the Stock Incentive are being acquired for investment and not with a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities laws. The Company may include on certificates representing shares delivered pursuant to a Stock Incentive such legends referring to the foregoing representations or restrictions or any other applicable restrictions on resale as the Company, in its discretion, shall deem appropriate. 5.7 Listing and Legal Compliance. The Committee may suspend the exercise or payment of any Stock Incentive so long as it determines that securities exchange listing or registration or qualification under any securities laws is required in connection therewith and has not been completed on terms acceptable to the Committee. 11 5.8 Termination and Amendment of the Plan. The Board of Directors at any time may amend or terminate the Plan without stockholder approval. No such termination or amendment without the consent of the holder of a Stock Incentive may adversely affect the rights of the Participant under such Stock Incentive. 5.9 Choice of Law. The laws of the State of Delaware shall govern the Plan, to the extent not preempted by federal law, without reference to the principles of conflict of laws. 5.10 Effective Date of Plan. This Plan was approved by the Board of Directors on December 6, 2004. VERILINK CORPORATION By:_______________________________________ Title: President and Chief Executive Officer 12 EX-10.2 3 g92328exv10w2.txt EX-10.2 FORM OF OPTION AWARD AGREEMENT EXHIBIT 10.2 FORM FOR EXECUTIVES NON-QUALIFIED STOCK OPTION AWARD PURSUANT TO THE VERILINK CORPORATION 2004 NEW HIRE STOCK INCENTIVE PLAN THIS AWARD is made as of the Grant Date by VERILINK CORPORATION (the "Company") to ____________________________________ (the "Optionee"). Upon and subject to the Terms and Conditions attached hereto and incorporated herein by reference, the Company hereby awards as of the Grant Date to Optionee an option (the "Option"), as described below, to purchase the Option Shares. A. Grant Date: _______________________. B. Type of Option: Non-Qualified Stock Option issued under the Verilink Corporation 2004 New Hire Stock Incentive Plan (the "Plan"). C. Plan under which granted: Verilink Corporation 2004 New Hire Stock Incentive Plan. D. Option Shares: All or any part of __________ shares of the Company's common stock, $.01 par value per share (the "Stock"), subject to adjustment as provided in the attached Terms and Conditions. E. Exercise Price: $_______ per share, subject to adjustment as provided in the attached Terms and Conditions. F. Option Period: The Option may be exercised only during the Option Period which commences on the Grant Date and ends on the earlier of (a) the tenth (10th) anniversary of the Grant Date; (b) the later of the date (i) three (3) months following the date the Optionee ceases to be an employee of the Company or any Subsidiary for any reason other than due to death or Disability; or (ii) twelve (12) months following the date the Optionee ceases to be an employee of the Company or any Subsidiary due to death or Disability. G. Vesting: The Option Shares shall be immediately vested and exercisable in their entirety as of the Grant Date, subject to the Company's Repurchase Rights (as defined in Section 9 below) in accordance with the attached Terms and Conditions and Repurchase Schedule. IN WITNESS WHEREOF, the Company and Optionee have executed and sealed this Award as of the Grant Date set forth above. OPTIONEE VERILINK CORPORATION _____________________________ By:__________________________________ [Name] Title:_______________________________ TERMS AND CONDITIONS TO THE NON-QUALIFIED STOCK OPTION AWARD PURSUANT TO THE VERILINK CORPORATION 2004 NEW HIRE STOCK INCENTIVE PLAN 1. Exercise of Option. Subject to the provisions of the Plan and the Award which is made pursuant to the Verilink Corporation 2004 New Hire Stock Incentive Plan and subject also to these Terms and Conditions, which are incorporated in and made a part of the attached Award: (a) the Option may be exercised with respect to all or any portion of the Option Shares at any time during the Option Period by the delivery to the Company, at its principal place of business, of a written notice of exercise in substantially the form attached hereto as Exhibit 1; (b) payment to the Company of the Exercise Price multiplied by the number of Option Shares being purchased (the "Purchase Price") as provided in Section 2; and (c) payment of any tax withholding liability pursuant to Section 3 below. Upon acceptance of such notice and receipt of payment in full of the Purchase Price and any tax withholding liability, the Company shall cause to be issued a certificate representing the Option Shares purchased. 2. Purchase Price. Payment of the Purchase Price for all Option Shares purchased pursuant to the exercise of an Option shall be made (a) in cash or certified check; (b) by delivery to the Company of a number of shares of Stock which have been owned by the Optionee for at least six (6) months prior to the date of the Option's exercise having a fair market value, as determined under the Plan, on the date of exercise either equal to the Purchase Price or in combination with cash or a certified check to equal the Purchase Price; (c) by receipt of the Purchase Price in cash from a broker, dealer or other "creditor" as defined by Regulation T issued by the Board of Governors of the Federal Reserve System following delivery by the Optionee to the Committee of instructions in a form acceptable to the Committee regarding delivery to such broker, dealer or other creditor of that number of Option Shares with respect to which the Option is exercised; provided, however, that any such cashless exercise must be effected in a manner consistent with the restrictions of Section 13(k) of the Securities Exchange Act of 1934 (Section 402 of the Sarbanes-Oxley Act of 2002); or (d) or any combination of the foregoing. 1 3. Condition to Delivery of Option Shares. (a) The Optionee must deliver to the Company, on the earlier of: (i) the later of the date on which Option Shares are purchased by the Optionee or the date on which the Repurchase Rights applicable to such Option Shares expire or (ii) the date of the Optionee's timely election pursuant to Code Section 83(b) as to all or any portion of the Option Shares purchased by the Optionee, either cash or a certified check payable to the Company in the amount of all tax withholding obligations (whether federal, state or local), imposed on the Company by reason of the exercise of the Option Shares or, if later in time, the lapse of the corresponding Repurchase Rights, or the making of an election pursuant to Code Section 83(b), as applicable, except as provided in Section 3(b). (b) If the Optionee does not make an election pursuant to Code Section 83(b), in lieu of paying the withholding tax obligation in cash or by certified check as described in Section 3(a), the Optionee may elect to have the actual number of shares of Stock issuable upon exercise reduced by the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the Stock as of the Tax Date (as defined below), is sufficient to satisfy the amount of the tax withholding obligations imposed on the Company by reason of the exercise of the Options Shares or, if later in time, the lapse of the corresponding Repurchase Rights (the "Withholding Election"). The Optionee may make a Withholding Election only if all of the following conditions are met: (i) the Withholding Election is made on or prior to the date on which the amount of tax required to be withheld is determined (the "Tax Date") by executing and delivering to the Company a properly completed Notice of Withholding Election, in substantially the form attached hereto as Exhibit 2; and (ii) any Withholding Election made will be irrevocable; however, the Committee may, in its sole discretion, disapprove and give no effect to any Withholding Election. 4. Rights as Shareholder. Until the stock certificates reflecting the Option Shares accruing to the Optionee upon exercise of the Option are issued, the Optionee shall have no rights as a shareholder with respect to such Option Shares. The Company shall make no adjustment for any dividends or distributions or other rights on or with respect to Option Shares for which the record date is prior to the issuance of that stock certificate, except as the Plan or the attached Award otherwise provides. 5. Restriction on Transfer of Option and of Option Shares. Except as otherwise expressly permitted by the Committee in writing, the Option evidenced hereby is nontransferable other than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Optionee only by the Optionee (or in the event of his/her disability, by his/her personal representative) and after his/her death, only by his/her legatee or the executor of his/her estate. 6. Changes in Capitalization. (a) Except as provided in Subsection (b) below, if the number of shares of Stock shall be increased or decreased by reason of a subdivision or combination of shares of Stock, the payment of an ordinary stock dividend in shares of Stock or any other increase or decrease in the number of shares of Stock outstanding effected without receipt of 2 consideration by the Company, an appropriate adjustment shall be made by the Committee, in a manner determined in its sole discretion, in the number and kind of Option Shares and in the Exercise Price. (b) In the event of a merger, consolidation, reorganization, extraordinary dividend or other change in the corporate structure of the Company, including a Change in Control (as defined in Section 19 below), or tender offer for shares of Stock, the Company shall provide for an appropriate, proportionate adjustment to the Option or provide for the substitution of a new option which adjustment or substitution shall be consistent with the event requiring the adjustment or substitution; provided, however, in the event the Company will not be the surviving entity as a result of the event and the surviving entity does not agree to the adjustment or substitution, the Committee may elect to terminate the Option Period as of the date of the Change in Control in consideration of the payment to the Optionee of the sum of the difference between the then Fair Market Value of the Stock and the Exercise Price for each Option Share as to which the Company's Repurchase Rights have lapsed and as to which the Option has not been exercised as of the date of the Change in Control. (c) The existence of the Plan and the Option granted pursuant to this Agreement shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding. Any adjustment pursuant to this Section may provide, in the Committee's discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Option. 7. Special Limitation on Exercise. No purported exercise of the Option shall be effective without the approval of the Committee, which may be withheld to the extent that the exercise, either individually or in the aggregate together with the exercise of other previously exercised stock options and/or offers and sales pursuant to any prior or contemplated offering of securities, would, in the sole and absolute judgment of the Committee, require the filing of a registration statement with the United States Securities and Exchange Commission or with the securities commission of any state. If a registration statement is not in effect under the Securities Act of 1933, or any applicable state securities law with respect to shares of Stock purchasable or otherwise deliverable under the Option, the Optionee (a) shall deliver to the Company, prior to the exercise of the Option or as a condition to the delivery of Stock pursuant to the exercise of an Option exercise, such information, representations and warranties as the Company may reasonably request in order for the Company to be able to satisfy itself that the Option Shares are being acquired in accordance with the terms of an applicable exemption from the securities registration requirements of applicable federal and state securities laws and (b) shall agree that the shares of Stock so acquired will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities law. 8. Legend on Stock Certificates. In addition to any legends required under applicable securities laws at the time the Option Shares are issued, the certificates evidencing Option Shares that are subject to Repurchase Rights at the time of issuance shall be endorsed with the following legend and the Optionee shall not make any transfer of the Option Shares without first complying with the restrictions on transfer described in such legend: 3 TRANSFER IS RESTRICTED THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND FORFEITURE PROVISIONS WHICH ALSO APPLY TO THE TRANSFEREE AS SET FORTH IN A NON-QUALIFIED STOCK OPTION AWARD, DATED ___________, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY. 9. Repurchase Rights. In the event the Optionee ceases to be an employee of the Company or any Affiliate for any reason, with or without cause, or if the Optionee or the Optionee's legal representative attempts to sell, exchange, transfer, pledge or otherwise dispose of any shares of Stock acquired upon exercise of the Option, the Company shall have the right to repurchase such shares ("Repurchase Rights") in the number provided in the Repurchase Schedule attached hereto and subject to the Terms and Conditions set forth in this Section 9. (a) Change in Control. In the event of a Change in Control, the Committee shall provide for the lapse of any and all of the Company's outstanding Repurchase Rights under the Option as of a date no later than immediately prior to the effective date of the Change in Control. (b) Option Shares Held by the Share Custodian. The Optionee hereby authorizes and directs the Company to deliver any certificate issued by the Company to evidence Option Shares acquired upon exercise of the Option to the Secretary of the Company or such other officer of the Company as may be designated by the Committee (the "Share Custodian") to be held by the Share Custodian until such Option Shares are no longer subject to the Company's Repurchase Rights in accordance with the Repurchase Schedule. When such Option Shares are no longer subject to the Company's Repurchase Rights in accordance with the Repurchase Schedule, the Share Custodian shall deliver such Option Shares to the Optionee. In the event that the number of such Option Shares that cease to be subject to the Company's Repurchase Rights include a fraction of a share, the Share Custodian shall not be required to deliver the fractional share, and the Company may pay the Optionee the amount determined by the Company to be the estimated fair market value therefor. The Optionee hereby irrevocably appoints the Share Custodian, and any successor thereto, as the true and lawful attorney-in-fact of Optionee with full power and authority to execute any stock transfer power or other instrument necessary to transfer such Option Shares to the Company in accordance with this Award, in the name, place, and stead of the Optionee. The term of such appointment shall commence on the Grant Date and shall continue until such Option Shares are delivered to the Optionee as provided above or are repurchased by the Company pursuant to Section 9(c) below. During the period that the Share Custodian holds the Option Shares subject to this Section 9, the Optionee shall be entitled to all rights applicable to shares of Stock not so held, except as provided in this Award. In the event the number of shares of Stock is increased or reduced by a change in the par value, split-up, stock split, reverse stock split, reclassification, merger, reorganization, consolidation, or otherwise, the Optionee agrees that any certificate representing shares of Stock or other securities of the Company issued as a result of any of the foregoing in respect of the Option Shares shall be delivered to the Share Custodian and shall be subject to all of the provisions of this Award as if initially granted thereunder. (c) Exercise of Repurchase Rights The Company may exercise the Repurchase Rights by written notice to the Share Custodian and to the Optionee or the Optionee's legal 4 representative within sixty (60) days after such termination of employment (or exercise of the Option, if later) or after the Company has received notice of the attempted disposition. The Repurchase Rights must be exercised, if at all, for all of the Option Shares purchased to date by the Optionee to the extent the same remain subject to the Repurchase Rights. If the Company fails to give notice within such sixty (60) day period, the Repurchase Rights shall terminate unless the Company and Optionee have extended the time for the exercise of the Repurchase Rights. In the event that the Company fails to exercise its Repurchase Rights, the Share Custodian shall deliver a certificate representing such Option Shares to the Optionee or the Optionee's legal representative. (d) Payment for Shares and Return of Shares. Payment by the Company to the Share Custodian on behalf of Optionee or Optionee's legal representative shall be made in cash within sixty (60) days after the date of the mailing of the written notice of exercise of the Repurchase Rights. For purposes of the foregoing, cancellation of any indebtedness of Optionee to the Company shall be treated as payment to Optionee in cash to the extent of the unpaid principal and any accrued interest canceled. The purchase price per share of Stock being purchased by the Company shall be an amount equal to Optionee's original cost per share, as adjusted, if applicable, pursuant to Section 6 herein. Within thirty (30) days after payment by the Company, the Share Custodian shall deliver the Option Shares which the Company has purchased to the Company and shall deliver the payment received from the Company to the Optionee. (e) Transfers Not Subject to the Repurchase Rights. The Repurchase Rights shall not apply to a transfer to Optionee's ancestors, descendants or spouse or to a trustee solely for the benefit of Optionee or Optionee's ancestors, descendants or spouse, provided that such transferee shall agree in writing (in a form satisfactory to the Committee) to take the shares of Stock subject to all the terms and conditions of this Section 9 providing for Repurchase Rights. 10. Governing Laws. This Award and the Terms and Conditions shall be construed, administered and enforced according to the laws of the State of Delaware; provided, however, the Option may not be exercised except in compliance with exemptions available under applicable state securities laws of the state in which the Optionee resides and/or any other applicable securities laws. 11. Successors. This Award and the Terms and Conditions shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the Optionee and the Company. 12. Notice. Except as otherwise specified herein, all notices and other communications under this Award shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein. 13. Severability. In the event that any one or more of the provisions or portion thereof contained in the Award and these Terms and Conditions shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of the Award and these Terms and Conditions, and the Award and these Terms and 5 Conditions shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein. 14. Entire Agreement. Subject to the terms and conditions of the Plan, the Award and the Terms and Conditions express the entire understanding of the parties with respect to the Option. 15. Violation. Any transfer, pledge, sale, assignment, or hypothecation of the Option or any portion thereof shall be a violation of the terms of the Award or these Terms and Conditions and shall be void and without effect. 16. Headings and Capitalized Terms. Section headings used herein are for convenience of reference only and shall not be considered in construing the Award or these Terms and Conditions. Capitalized terms used, but not defined, in either the Award or the Terms and Conditions shall be given the meaning ascribed to them in the Plan. 17. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of the Award and these Terms and Conditions, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. 18. No Right to Continued Employment. Neither the establishment of the Plan nor the award of Option Shares hereunder shall be construed as giving the Optionee the right to continued service as an employee of the Company or any affiliate. 19. Definition of Change in Control. As used in the Award and these Terms and Conditions, the term "Change in Control" means any one of the following events occurring after the Grant Date: (a) the acquisition by any individual, 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 voting securities of the Company where such acquisition causes such Person to own more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Employer Voting Securities"); (b) individuals who as of the Grant Date, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the Grant Date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; 6 (c) the approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Business Combination") or, if consummation of such Business Combination is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly by consummation); excluding, however, such a Business Combination pursuant to which all or substantially all of the Persons who were the beneficial owners of the Outstanding Employer Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Employer Voting Securities; or (d) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 7 EXHIBIT 1 NOTICE OF EXERCISE OF STOCK OPTION TO PURCHASE COMMON STOCK OF VERILINK CORPORATION Name_______________________ Address____________________ ___________________________ Date_______________________ Verilink Corporation 127 Jetplex Circle Madison, Alabama 35758-8989 Attn: Corporate Secretary Re: Exercise of Non-Qualified Stock Option Gentlemen: Subject to acceptance hereof by Verilink Corporation (the "Company") pursuant to the provisions of the Verilink Corporation 2004 New Hire Stock Incentive Plan (the "Plan") I hereby give notice of my election to exercise options granted to me to purchase ______________ shares of common stock $.01 par value ("Common Stock"), of the Company under the Non-Qualified Stock Option Award (the "Award") dated as of ____________. The purchase shall take place as of __________, 200__ (the "Exercise Date"). On or before the Exercise Date, I will pay the applicable purchase price as follows: [ ] by delivery of cash or a certified check for $___________ for the full purchase price payable to the order of Verilink Corporation. [ ] by delivery of cash or a certified check for $___________ representing a portion of the purchase price with the balance to consist of shares of Common Stock that I have owned for at least six months and that are represented by a stock certificate I will surrender to the Company with my endorsement. If the number of shares of Common Stock represented by such stock certificate exceeds the number to be applied against the purchase price, I understand that a new stock certificate will be issued to me reflecting the excess number of shares. [ ] by delivery of a stock certificate representing shares of Common Stock that I have owned for at least six months which I will surrender to the Company with my endorsement as payment of the purchase price. If the number of shares of Common Stock represented by such certificate exceeds the number to be applied against the purchase price, I understand that a new certificate will be issued to me reflecting the excess number of shares. Exhibit 1 - Page 1 [ ] by delivery of the purchase price by _________________________, a broker, dealer or other "creditor" as defined by Regulation T issued by the Board of Governors of the Federal Reserve System. I hereby authorize the Company to issue a stock certificate for the number of shares indicated above in the name of said broker, dealer or other creditor or its nominee pursuant to instructions received by the Company and to deliver said stock certificate directly to that broker, dealer or other creditor (or to such other party specified in the instructions received by the Company from the broker, dealer or other creditor) upon receipt of the purchase price. The required federal, state and local income tax withholding obligations, if any, on the exercise of the Award shall also be satisfied in accordance with Section 3 of the Terms and Conditions. As soon as the stock certificate is registered in my name, please deliver it to me at the above address or to the Share Custodian, if required by Section 9 of the Terms and Conditions. If the Common Stock being acquired is not registered for issuance to the Optionee pursuant to an effective registration statement on Form S-8 (or successor form) filed under the Securities Act of 1933, as amended (the "1933 Act"), I understand and agree that I may be required to make such additional representations, warranties, covenants, and agreements with the Company as the Company may reasonably request. I understand that the certificates representing the shares being purchased by me in accordance with this notice shall bear a legend referring to the foregoing covenants, representations and warranties and restrictions on transfer, and I agree that a legend to that effect may be placed on any certificate which may be issued to me as a substitute for the certificates being acquired by me in accordance with this notice. Very truly yours, ______________________________ AGREED TO AND ACCEPTED: VERILINK CORPORATION By:_______________________________ Title:____________________________ Number of Shares Exercised:________________________ Number of Shares Remaining:________________________ Date:________________________ Exhibit 1 - Page 2 EXHIBIT 2 NOTICE OF WITHHOLDING ELECTION VERILINK CORPORATION 2004 NEW HIRE STOCK INCENTIVE PLAN TO: Verilink Corporation Attn: Corporate Secretary FROM: ____________________________ RE: Withholding Election This election relates to the Option identified in Paragraph 3 below. I hereby certify that: (1) My correct name and social security number and my current address are set forth at the end of this document. (2) I am (check one, whichever is applicable). [ ] the original recipient of the Option. [ ] the legal representative of the estate of the original recipient of the Option. [ ] a legatee of the original recipient of the Option. [ ] the legal guardian of the original recipient of the Option. (3) The Option pursuant to which this election relates was issued under the Verilink Corporation 2004 New Hire Stock Incentive Plan in the name of _____________________ for the purchase of a total of __________ shares of Common Stock. This election relates to _____________ shares of Common Stock issuable upon exercise of the Option (the "Stock"), provided that the numbers set forth above shall be deemed changed as appropriate to reflect the applicable Plan provisions. (4) In connection with any exercise of the Option with respect to Stock, I hereby elect: [ ] to have certain of the shares otherwise issuable pursuant to the exercise withheld by the Company for the purpose of having the value of the shares applied to pay federal, state, and local, if any, taxes arising from the exercise. [ ] to tender shares held by me for a period of at least six (6) months prior to the exercise of the Option for the purpose of having the value of the shares applied to pay such taxes. The shares to be withheld or tendered, as the case may be, shall have, as of the Tax Date applicable to the exercise, a fair market value equal to the minimum statutory tax withholding requirement under federal, state and local law in connection with the exercise. Exhibit 2 - Page 1 (5) This Withholding Election is made no later than the Tax Date and is otherwise timely made pursuant to the Plan. (6) I understand that this Withholding Election may not be revised, amended or revoked by me. (7) The Plan has been made available to me by the Company, I have read and understand the Plan and I have no reason to believe that any of the conditions therein to the making of this Withholding Election have not been met. Capitalized terms used in this Notice of Withholding Election shall have the meanings given to them in the Plan. (8) Capitalized terms used in this Notice of Withholding Election without definition shall have the meanings given to them in the Plan. Dated: ____________________ ____________________________________ Signature ____________________________________ Name (printed) ____________________________________ Street Address ____________________________________ City, State, Zip Code Exhibit 2 - Page 2 [NAME OF OPTIONEE] SCHEDULE 1 VERILINK CORPORATION NON-QUALIFIED STOCK OPTION AWARD Repurchase Schedule A. Option Shares are subject to the Company's Repurchase Rights with respect to the shares of Stock that have been exercised as indicated in the schedule below.
Percentage of Option Shares Months of Service after Subject to the Repurchase Rights Vesting Commencement Date - -------------------------------- ------------------------- 100% Less than 12 75% 12 but less than 13
For every full Month of Service following the completion of twelve (12) months after the Vesting Commencement Date, the percentage of Option Shares subject to the Repurchase Rights shall be reduced by an additional 2.083% until the fourth anniversary of the Vesting Commencement Date at which point no Option Shares shall be subject to the Repurchase Rights. B. In determining which Option Shares are no longer subject to the Company's Repurchase Rights, the following order of priority shall be applied: (i) Option Shares purchased by the Optionee in the order of their date of purchase from the earliest purchase date to the most recent purchase date; and then (ii) Option Shares which have not been purchased by the Optionee. C. For purposes of the Repurchase Schedule, the Optionee shall be granted a Month of Service for each monthly period (i.e., from a date of one calendar month to the date immediately preceding the same date of the immediately succeeding calendar month) following the Vesting Commencement Date and during which Optionee continues, at all times, as an employee of the Company or Subsidiary. For purposes of this Repurchase Schedule, the Vesting Commencement Date is ___________. Schedule 1 - Page 1 GRAPHIC 4 g92328g9232800.gif GRAPHIC begin 644 g92328g9232800.gif M1TE&.#EAA0`K`*(``/___\S,S)F9F69F9C,S,P```````````"'Y!``````` M+`````"%`"L```/_"+K<_C#*2:N]..O-^PI>*([D-`QEJJX90;!P[`F$`$($ M*N\\-12$VR/7*QI;NJ-RZ3@QGT\G%".<;@8O2W4)K&VMOFQ8\`S\7-X;*,`& M"`0G+*$`Q5KFY#IZCY4#NWQU!5\/0(1';')S+G`#-F9HAT8_>1)G8`P"@T,N MDD>:E1%S29AN=)E`I&`U%)VE#%(`/ZJ8K!$!>*\,`9N4N@L%H9EG8ARX!06. MM!UVR;\+MA]8J<$>Q"Y`*8-$SP#<;G/)()H=QY6XPB%8FLM6O-C(T:;,\@#( M*;QFXC+G'VYO)[#Q(92-@[,&KDJP.D.(C9DWGB!HXK,'&2!'Z&Y5VY"0_T$. M3S8PV)&52P&<0D+M&R9"Y8.2& M@QEH%`O30)$G2'EL>B"JP*B&C1FP1&Q:3!^C5CVU0L#5T"8OLRXFP"$H-8+2 M!P&`-B4%BN<$-*EPY&RZ=Q?6!KS:F42V$JD%8@XF+OOF[=2QI0A'S2'85P%. M0C\.\9(PD3&TOY;N@2JZJ&313="*R3GD0H>AH),_/`8]V*SA#Z[2.L!%4\+C MP8"0K=%=M6!JOLM6FVQM0ZFFX,AZ=CPMU3,`WL?AGL'HL%&J4)`P^NT2?E\!-A#6YG41Q54 MF=(3',)Q58%+XL6`4PW2I6>$=>K%DUQOO_R@$A,:X'(XZUOA.CT#ZQF.01!9I)``)```[ ` end -----END PRIVACY-ENHANCED MESSAGE-----