Exhibit 10.1

PAETEC HOLDING CORP.

2011 OMNIBUS INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

 

Background     

PAETEC Holding Corp., a Delaware corporation (the “Company”), has granted you an
option to purchase shares of the common stock, par value $.01 per share, of the
Company (the “Stock”) pursuant to the PAETEC Holding Corp. 2011 Omnibus
Incentive Plan (the “Plan”). The information concerning the number of options
granted to you, the grant date, the option price and the vesting schedule are
set forth in the document entitled “Notification of Grant Award” (the
“Notification”) sent to you by the Company’s equity plan administrator, Merrill
Lynch. The terms of the award as set forth in the Notification are governed by
the Plan as well as the terms contained in this Incentive Stock Option Agreement
(the “Agreement”).

 

Carefully review all of the terms and conditions described in this Agreement and
in the Plan. You are deemed to have accepted the award as described in the
Notification and to agree to all of the terms and conditions described in the
Agreement and in the Plan. Should you wish to reject the award and thereby
forfeit any and all rights under the Plan you must email stockoptions@paetec.com
within 90 days after the Grant Date.

Incentive Stock Option      The option is intended to be an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”), and will be interpreted accordingly. If you cease to be an employee of
the Company, its parent or a Subsidiary or other Affiliate (“Employee”) but
continue to provide Service, the option will be deemed a non-qualified stock
option three (3) months after you cease to be an Employee. In addition, to the
extent that all or part of the option exceeds the $100,000 rule of Section
422(d) of the Code, the option or the lesser excess part will be deemed to be a
non-qualified stock option. Vesting     

The option is only exercisable before it expires and then only with respect to
the vested portion of the option. Subject to the preceding sentence, you may
exercise the option, in whole or in part, to purchase a whole number of vested
shares that is not less than 100 shares, unless the number of shares purchased
is the total number available for purchase under the option, by following the
procedures set forth in the Plan and below in this Agreement.

 

Your right to purchase shares of Stock under the option will vest according to
the vesting schedule set forth in the Notification beginning on the first year
anniversary of the Grant Date, provided you then continue in Service. The
resulting aggregate number of vested shares will be rounded to the nearest whole
number (with 0.5 of a share rounded down), and you may not vest in more than the
number of shares covered by the option. Please see Schedule 1 attached hereto
for vesting schedule examples.

 

No additional shares of Stock will vest after your Service has terminated for
any reason.

 

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Term      The option will expire in any event at the close of business at
Company headquarters on the day before the tenth (10th) anniversary of the Grant
Date; provided, however, that if you are a Ten Percent Stockholder, an option
granted to you that is intended to be an incentive stock option will expire at
the close of business at Company headquarters on the day before the fifth (5th)
anniversary of the Grant Date. The option will expire earlier if your Service
terminates, as described below. Regular Termination      If your Service
terminates for any reason, other than death, Disability or Cause, then the
option will expire at the close of business at Company headquarters on the
ninetieth (90th ) day after your termination date. Termination for Cause      If
your Service is terminated for Cause, then you will immediately forfeit all
rights to the option and the option will immediately expire. Termination for
Death     

If your Service terminates because of your death, then the option will expire at
the close of business at Company headquarters on the date that is twelve (12)
months after the date of death. During that twelve-month period, your estate or
heirs may exercise all or any portion of the option that was vested as of the
date of death.

 

In addition, if you die during the 90-day period described in connection with a
regular termination (i.e., a termination of your Service not on account of your
death, Disability or Cause), and a vested portion of the option has not yet been
exercised, then the option will instead expire on the date that is the day
before twelve (12) months after your termination date. In such a case, during
the period following your death up to the date that is the day before twelve
(12) months after your termination date, your estate or heirs may exercise all
or any portion of the option that was vested as of the date of your termination
of employment with the Company.

Termination for Disability      If your Service terminates because of your
Disability, then the option will expire at the close of business at Company
headquarters on the date that is twelve (12) months after your termination date.
During that twelve-month period, you may exercise all or any portion of the
option that was vested as of your termination date. Leaves of Absence     

For purposes of the option, your Service does not terminate when you go on a
bona fide employee leave of absence that was approved by the Company in writing,
if the terms of the leave provide for continued Service crediting, or when
continued Service crediting is required by applicable law. However, your Service
will be treated as terminating three (3) months after you go on employee leave,
unless your right to return to active work is guaranteed by law or by a
contract. Your Service terminates in any event when the approved leave ends
unless you immediately return to active employee work.

 

The Company will determine, in its sole discretion, which leaves count for this
purpose, and when your Service terminates, for all purposes under the Plan.

 

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Notice of Exercise     

When you wish to exercise the option, you must notify the Company by filing the
proper “Notice of Exercise” form at the address given on the form or by
providing another notice of exercise to the extent that the Company authorizes
such alternative provision of notice in writing. Your notice must specify the
number of whole shares you wish to purchase (in a parcel of at least 100 shares,
generally). Your notice must also specify how your shares of Stock should be
registered (in your name only or in your and your spouse’s names as joint
tenants with the right of survivorship). The notice will be effective when it is
received by the Company.

 

If someone else wants to exercise the option after your death, that person must
prove to the Company’s satisfaction that he or she is entitled to do so.

Form of Payment     

When you submit your notice of exercise, you must include payment of the option
price for the shares you are purchasing. Payment may be made in one (or a
combination) of the following forms:

 

•      Cash, your personal check, a cashier’s check, a money order or another
cash equivalent acceptable to the Company.

 

•      By delivery (on a form prescribed by the Company) of an irrevocable
direction to a licensed securities broker acceptable to the Company to sell
Stock and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate option price and any withholding taxes.

Withholding Taxes      You will not be allowed to exercise the option unless you
make acceptable arrangements to pay any withholding or other taxes that may be
due as a result of the option exercise or sale of Stock acquired under the
option. In the event that the Company determines that any federal, state, local
or foreign tax or withholding payment is required relating to the exercise or
sale of shares arising from this grant, the Company will have the right to
require such payments from you, or withhold such amounts from other payments due
to you from the Company or any Affiliate. Subject to the prior approval of the
Company, which may be withheld by the Company, in its sole discretion, you may
elect to satisfy this withholding obligation, in whole or in part, by causing
the Company to withhold Stock otherwise issuable to you or by delivering to the
Company Stock already owned by you. The Stock so delivered or withheld must have
an aggregate Fair Market Value equal to the withholding obligation and may not
be subject to any repurchase, forfeiture, unfulfilled vesting, or other similar
requirements.

 

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Transfer of Option     

During your lifetime, only you (or, in the event of your legal incapacity or
incompetency, your guardian or legal representative) may exercise the option.
You may not transfer or assign the option. For instance, you may not sell the
option or use it as security for a loan. If you attempt to do any of these
things, the option will immediately become invalid. You may, however, dispose of
the option in your will or it may be transferred upon your death by the laws of
descent and distribution.

 

Regardless of any marital property settlement agreement, the Company is not
obligated to honor a notice of exercise from your spouse, nor is the Company
obligated to recognize your spouse’s interest in the option in any other way.

Retention Rights      Neither the option nor this Agreement gives you the right
to be retained by the Company (or any parent, Subsidiary or other Affiliate) in
any capacity. The Company reserves (and any parent, Subsidiary or other
Affiliate reserves) the right to terminate your Service at any time and for any
reason. Stockholder Rights      You, or your estate or heirs, have no rights as
a stockholder of the Company until a certificate for the option’s shares has
been issued (or an appropriate book entry or direct registration entry has been
made). No adjustments are made for dividends or other rights if the applicable
record date occurs before your stock certificate is issued (or an appropriate
book entry or direct registration entry has been made), except as described in
the Plan. Adjustments      In the event of a stock split, a stock dividend,
reverse stock split or a similar change in the Stock, the number of shares of
Stock covered by the option and the option price per share will be adjusted (and
rounded down to the nearest whole number) if required pursuant to the Plan. The
option will be subject to the terms of the agreement of merger, liquidation or
reorganization in the event the Company is subject to such corporate activity,
to the extent specified in the Plan. Applicable Law      This Agreement will be
interpreted and enforced under the laws of the State of Delaware, other than any
conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Agreement to the substantive law of
another jurisdiction. Forum Selection      At all times each party hereto:
(1) irrevocably submits to the exclusive jurisdiction of any New York court or
Federal court sitting in New York; (2) agrees that any action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby will be heard and determined in such New York or Federal court; (3) to
the extent permitted by law, irrevocably waives (i) any objection such party may
have to the laying of venue of any such action or proceeding in any of such
courts, or (ii) any claim that such party may have that any such action or
proceeding has been brought in an inconvenient forum; and (4) to the extent
permitted by law, irrevocably agrees that a final nonappealable judgment in any
such action or proceeding will be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this section entitled “Forum Selection” will affect the right of any
party hereto to serve legal process in any manner permitted by law.

 

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The Plan     

The text of the Plan is incorporated in this Agreement by reference. Certain
capitalized terms used in this Agreement are defined in the Plan, and have the
meanings set forth in the Plan.

 

This Agreement, the Notification and the Plan constitute the entire
understanding between you and the Company regarding the option. Any prior
agreements, commitments or negotiations concerning the option are superseded. In
the event any provision of this Agreement or the Notification should appear to
be inconsistent with the Plan, the Plan will control.

Data Privacy     

In order to administer the Plan, the Company may process personal data about
you. Such data include, but are not limited to, the information provided in this
Agreement and any changes thereto, other appropriate personal and financial data
about you such as home address and business addresses and other contact
information, payroll information and any other information that might be deemed
appropriate by the Company to facilitate the administration of the Plan.

 

By receiving the option, you give explicit consent to the Company to process any
such personal data. You also give explicit consent to the Company to transfer
any such personal data outside the country in which you work or are employed
(including, with respect to non-U.S. resident Grantees, to the United States) to
transferees who will include the Company and other persons who are designated by
the Company to administer the Plan.

Consent to Electronic Delivery      The Company may choose to deliver certain
statutory materials relating to the Plan in electronic form. By receiving the
option grant you agree that the Company may deliver the Plan prospectus, the
Company’s annual proxy materials and its annual report to stockholders and other
documents to you in an electronic format. If at any time you would prefer to
receive paper copies of these documents, as you are entitled to, the Company
would be pleased to provide copies. Please contact Estacia Vosika, PAETEC
Holding Corp., 704-319-1922, or stockoptions@paetec.com to request paper copies
of these documents. Certain Dispositions      If you sell or otherwise dispose
of Stock acquired pursuant to the exercise of the option sooner than the
one-year anniversary of the date you acquired the Stock, then you agree to
notify the Company in writing of the date of sale or disposition, the number of
shares of Stock sold or disposed of and the sale price per share within ten (10)
days after such sale or disposition.

This is not a stock certificate or a negotiable instrument.

 

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