Document:

ex10-6_3

      Second Amendment to Loan Agreement and Promissory Note             Exhibit: 10.6.3

      This Second Amendment to the Loan Agreement and Promissory Note is dated
May 8, 2001 and entered into by and between Clayton A. Thomas, Jr. (“Borrower”)
and Net2000 Communications Group, Inc. (“Company”).

      WHEREAS, Borrower and Company entered into a letter agreement (“Loan
Agreement”) dated December 5, 2000 and amended on February 1, 2001 in which the
Company agreed to lend Borrower an aggregate principal amount of up to
$1,500,000 (collectively, the “Loan”); and

      WHEREAS, the obligation of the Borrower to repay the Loan was evidenced by
a Promissory Note (“Note”) dated December 5, 2000 and amended as of February 1,
2001 and signed by Borrower;

      WHEREAS, under the current terms of the Note, the Borrower is obligated to
pay to the Company monthly interest on the outstanding principal balance of the
Loan at the Applicable Federal Rate (“Interest Rate”) and repay the outstanding
balance of the Loan in full on the Maturity Date (as defined in the amended
Loan Agreement);

      WHEREAS, the parties wish to further amend the Loan Agreement and the
Note;

      NOW, THEREFORE, the parties agree as follows:

1.    The first sentence of Paragraph 1 of the Loan Agreement is amended by
deleting “June 6, 2001” and replacing it with “May 31, 2002”.

2.    Paragraph 2 of the Loan Agreement is deleted in its entirety and replaced
with the following sentence:

	 	 	 	“Subject to the terms and conditions of this letter (herein referred to
as this “Agreement”), the Borrower may prepay this Loan and/or any
accrued but unpaid interest in whole or in part at any time without
penalty or premium.”

3.    Paragraph 5(a) of the Loan Agreement is deleted in its entirety and
Paragraph 5(b) is hereby renumbered as Paragraph 5(a).

4.    The following new Paragraph 5(b) is hereby included in the Loan Agreement:

	 	 	 	"(b) The Company hereby waives repayment of the first one hundred
thousand dollars ($100,000.00) of the outstanding balance of the Loan
(“Loan Waiver”) and such Loan Waiver shall be subject to a tax true up
whereby the Loan Waiver amount will be grossed up based on Borrower’s
income tax bracket so that it is a net waiver amount and the Company will
pay Borrower such additional compensation as is

 

	 	 	 	necessary to place Borrower in the same after tax position he would have
been in had no income tax been incurred on the Loan Waiver.”

5.    Paragraph 2 of the Note, which was deleted in its entirety and replaced with
a new Paragraph 2 pursuant to the First Amendment as of February 1, 2001, is
further amended by deleting the phrase “and shall be paid currently in cash on
a monthly basis on each Payment Date (as defined below)” from the first
sentence of Paragraph 2. The further amended version of Paragraph 2 shall be as
follows:

	 	 	 	“Interest Rate Provisions. Except as provided in Section 2.2 hereof, from
the date hereof and thereafter until the outstanding amount hereof is
paid in full, interest shall accrue on the principal balance of this Note
outstanding from time to time at the Applicable Federal Rate (“AFR”) in
effect at the end of each month as published by the United States
Internal Revenue Service (“Interest Rate”). Each change in any interest
rate provided for herein based upon the AFR resulting from a change in
the AFR shall take effect without notice to the Borrower at the time of
such change in the AFR.”

6.    Paragraph 2.2 of the Note is amended by deleting the phrase “on each Payment
Date (as defined below)”.

7.    Paragraph 3.1 of the Note is deleted in its entirety and replaced with the
following new Paragraph 3.1:

	 	 	 	“3.1(a) Accrued Interest: Commencing on the last day of the calendar
month following the date the initial advance of the Loan is made and
continuing on the last day of each succeeding calendar month thereafter,
the Borrower shall accrue interest at the applicable Interest Rate on the
then outstanding principal balance under this Note.”

8.    Paragraph 3.3 of the Note is amended by inserting the phrase “and/or any
accrued interest” between the words “Note” and “in”.

9.    All other terms, conditions, and obligations of the Loan Agreement and
Promissory Note shall remain in full force and effect unless amended in writing
and signed by both parties.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

      IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to the Loan Agreement and Promissory Note to be duly executed and effective as
of May 8, 2001.

	 	 	 
	NET2000 COMMUNICATIONS GROUP, INC		
        /s/ Clayton A. Thomas Jr.
			
CLAYTON A. THOMAS, JR.,

     AS BORROWER
	 
	BY:/s/ Donald Clarke  
	       Donald Clarke

      Chief Financial Officer

	 	 
	COMMONWEALTH OF VIRGINIA 	)
	
	
	
	

		) ss:
	
	
	
	

	COUNTY OF FAIRFAX 	)

      On this 17 day of July, 2001 before me personally appeared CLAYTON A.
THOMAS, JR., to be known to be the person who executed the foregoing instrument
and who being by me duly sworn, did depose and say that he signed his name to
the foregoing instrument.

	 	 
	 	 /s/ Catherine Riehn             

NOTARY PUBLIC

My commission expires on:ex10-9_1

Exhibit 10.9.1

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE

BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933

	 	 	 
	PROSPECTUS		
June 11, 2001

NET2000 COMMUNICATIONS, INC.

9,375,000 shares of Common Stock ($0.01 Par Value)

Amended and Restated 1999 Stock Incentive Plan

      This Prospectus covers shares of Common Stock, par value $0.01 per share
(referred to in this Prospectus as “Common Stock” or “Shares”) of Net2000
Communications, Inc. (referred to in this Prospectus as the “Company”) that may
be issued under the Net2000 Communications, Inc. Amended and Restated 1999
Stock Incentive Plan (the “Plan”).

      This Prospectus describes the principal features of the Plan in general
terms. You may request a copy of the complete text of the Plan and additional
information about the Plan and its administrators by contacting the Corporate
Secretary of the Company at 2180 Fox Mill Road, Herndon, Virginia 20171
(Telephone: 703-654-2000). You also may request from the Corporate Secretary
of the Company copies of the other documents that make up a part of this
Prospectus (described more fully at the end of this document), as well as all
reports, proxy statements and other communications distributed to the Company’s
security holders generally.

      You should rely only on the information contained in this Prospectus and
in the other formal documents mentioned above when making decisions regarding
the securities offered to you under the Plan pursuant to this Prospectus. The
Company has not authorized any person to give any information or to make any
representations other than those contained in this Prospectus and those formal
documents. You should be aware also that the affairs of the Company may have
changed since the date of this Prospectus. This Prospectus does not constitute
an offer or solicitation in any state or other jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such state or
jurisdiction.

      This Prospectus covers securities that have been registered under the
Securities Act of 1933. These securities have not been approved or disapproved
by the Securities and Exchange Commission or any state securities commission
nor has the Securities and Exchange Commission or any state securities
commission passed upon the accuracy or adequacy of the Prospectus.

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	PURPOSE OF THE PLAN			2	
	
	
	
	

	ADMINISTRATION			2	
	
	
	
	

	ELIGIBILITY			2	
	
	
	
	

	TYPES OF AWARDS			3	
	
	
	
	

		STOCK OPTIONS			3	
	
	
	
	

			Recipients of Options			3	
	
	
	
	

			Purchase Price			3	
	
	
	
	

			Vesting and Exercise Rules			3	
	
	
	
	

			Medium and Time of Payment			4	
	
	
	
	

			Rules Applicable to ISOs			4	
	
	
	
	

		STOCK APPRECIATION RIGHTS			4	
	
	
	
	

		STOCK AWARDS			4	
	
	
	
	

		PHANTOM STOCK UNITS			5	
	
	
	
	

		PERFORMANCE AWARDS			5	
	
	
	
	

		OTHER STOCK-BASED AWARDS			5	
	
	
	
	

		SUBSTITUTE AWARDS			5	
	
	
	
	

	TAX ASPECTS OF AWARDS			5	
	
	
	
	

			Nonqualified Options			5	
	
	
	
	

			Incentive Stock Options			6	
	
	
	
	

			Stock and Other Share-Based Awards			7	
	
	
	
	

			Performance Awards			8	
	
	
	
	

			Tender of Company Common Stock in Connection with Awards			8	
	
	
	
	

			Cashless Exercise of Options			9	
	
	
	
	

			Net Capital Gain			9	
	
	
	
	

			Alternative Minimum Tax			9	
	
	
	
	

			Transferability of Certain Awards			9	
	
	
	
	

			Tax Withholding			10	
	
	
	
	

			Loans			10	
	
	
	
	

			Other Laws			10	
	
	
	
	

	OTHER INFORMATION CONCERNING THE PLAN AND AWARDS			11	
	
	
	
	

			Shares Subject to the Plan			11	
	
	
	
	

			Limit On Number of Shares Available to Any Individual under the Plan			11	
	
	
	
	

			Forfeitures; Adjustments to Awards			11	
	
	
	
	

			Duration of the Plan			12	
	
	
	
	

			Amendment, Modification, and Termination of the Plan			12	
	
	
	
	

			Transferability of Awards			12	
	
	
	
	

			Employment Rights			12	
	
	
	
	

	RESTRICTIONS ON RESALE			13	
	
	
	
	

	MATTERS INCORPORATED BY REFERENCE			13	
	
	
	
	

	ADDITIONAL INFORMATION			14	

-i-

PURPOSE OF THE PLAN

      The Plan allows employees to participate in the financial success of the
Company through the ownership of Common Stock and the receipt of other
equity-based incentive awards. Under the Plan, Common Stock may be issued to
eligible individuals as a result of grants of nonqualified stock options,
incentive stock options, stock appreciation rights, restricted or unrestricted
stock awards, phantom stock units, and performance awards (all such grants are
referred to in this Prospectus individually as an “Award” or collectively as
“Awards”).

ADMINISTRATION

      The Plan is administered by the Board of Directors of the Company or by
such committee or committees as may be appointed by the Board of Directors from
time to time (referred to in this Prospectus as the “Administrator”).

      The Administrator has authority to grant Awards under the Plan, prescribe
Grant Agreements evidencing the Awards and establish programs for granting
Awards. In exercising this authority, the Administrator has full and sole
power to:

	 	•	 	select eligible persons who can participate in the Plan;
	 
	 	•	 	determine the sizes and types of Awards;
	 
	 	•	 	determine the terms and conditions of Awards;
	 
	 	•	 	except as otherwise provided in this Prospectus under the
heading “Adjustments to Awards,” amend the terms and conditions
of any outstanding Award without the consent of the holder in
any manner that does not materially adversely affect the Award;
	 
	 	•	 	construe and interpret the Plan and any agreement or instrument
entered into under the Plan;
	 
	 	•	 	establish, amend, or waive rules and regulations for the Plan’s
administration; and
	 
	 	•	 	make all other determinations that may be necessary or
advisable for the administration of the Plan.

      The Administrator’s determinations under the Plan need not be uniform.
All determinations and decisions that the Administrator makes pursuant to the
provisions of the Plan are final, conclusive and binding on all parties.

ELIGIBILITY

      All employees, officers, directors and consultants of the Company or of
any corporation, partnership, joint venture or other entity that controls, is
controlled by, or is under common control with the Company (the Company and
these related entities are collectively referred to in this Prospectus as the
“Company”) are eligible to participate in the Plan. The Administrator selects
the eligible individuals who will receive Awards.

-2-

TYPES OF AWARDS

      The Plan permits the grant of various types of Awards, either separately
or in tandem with other Awards. The terms of each Award are specified in a
written agreement (referred to in this Prospectus as the “Award Agreement”).
The terms of Awards may vary from award to award and from person to person. A
brief description of the types of Awards that may be granted under the Plan
follows.

STOCK OPTIONS

      The Administrator may award stock options (referred to in this Prospectus
as “Options”) to eligible individuals. In general, an Option is a contractual
right granted to an individual to purchase up to a specified number of Shares
at a specified purchase price within a specified period of time, subject to
certain conditions. The Administrator may award Options which qualify as
incentive stock options (sometimes referred to in this Prospectus as “ISOs”) as
defined by section 422 of the Internal Revenue Code of 1986, as amended
(referred to in this Prospectus as the “Code”), nonqualified stock options
(sometimes referred to in this Prospectus as “NQSOs”) which do not qualify as
ISOs, or a combination of the two. The primary difference between ISOs and
NQSOs is their tax treatment, which is described in this Prospectus under the
heading “Tax Aspects of Awards.”

      The Award Agreement for an Option provides the type of Option (ISO or
NQSO) awarded, the number of Shares subject to the Option, the purchase price
of those Shares, the term of the Option, and such other terms and conditions as
the Administrator may determine.

      

	 	 	 	
In general, the following rules apply to Options granted under the Plan:

	 
	 	 	 	Recipients of Options: ISOs may be granted only to employees of the
Company or a parent or subsidiary corporation of the Company. NQSOs may
be granted to any eligible individual.
	 
	 	 	 	Purchase Price: ISOs must have a purchase price at least equal to fair
market value of the underlying Shares on the grant date (or 110% of the
fair market value if granted to an individual who owns more than 10% of
the total combined voting power of all classes of shares of the Company,
or its parent or subsidiary corporations). NQSOs may have a purchase
price less than fair market value. The Plan generally defines “fair
market value” to mean the last reported sale price per Share on the
relevant date or, if no sale takes place on that date, the average of the
closing bid and asked prices on that date, as reported on the Nasdaq
National Market.
	 
	 	 	 	Vesting and Exercise Rules: The Shares subject to an Option may be
purchased (referred to generally as the “exercise” of the Option) as
allowed by the vesting and exercisability rules set forth in the Award
Agreement. Unless the Award Agreement states otherwise, Options are
exercisable at any time during the Option’s term. However, the Award
Agreement might provide that Options are only exercisable in accordance
with a vesting schedule. In addition, the right to exercise might
terminate when certain events occur, such as termination of employment,
as specified in the Award Agreement. An Option holder is not required to
exercise an Option when it first becomes exercisable. The Option holder
may exercise the Option (or the exercisable portion of the Option, as the
case may be) at any time within the remaining term of the Option, subject
to the rules in the Award Agreement. Partial exercise will be permitted
from time to time in accordance with administrative rules of exercise
established by the Administrator.

-3-

	 	 	 	Medium and Time of Payment: To exercise an Option, the Option holder
must give written notice to the Corporate Secretary of the Company or
such other person designated by the Administrator specifying the
intention to purchase Shares, the number of Shares to be purchased and
the date that the purchase is to occur. Shares purchased upon exercise
of an Option must be paid in full at the time of purchase in accordance
with the terms of the Award Agreement evidencing the Option. An Award
Agreement might provide that the purchase price is to be paid (i) in
cash or cash-equivalents, (ii) by tendering or having Shares withheld
that have an aggregate fair market value equal to the purchase price,
(iii) by a broker-assisted cashless exercise procedure, (iv) by a
combination of the foregoing methods, or (v) by any other means that
the Administrator approves. In addition, the Administrator may authorize
the Company to make or guarantee loans to Option holders upon such terms
and conditions as the Administrator considers appropriate. No Shares
will be issued pursuant to any Option until full payment of the purchase
price has been made to the Company. An Option holder will have none of
the rights of a shareholder of the Company until such Shares are issued.
	 
	 	 	 	Rules Applicable to ISOs: In order for an Option to be an ISO, the
Administrator must designate it as such at the time of grant or in the
Award Agreement evidencing the Option. In addition, grants of ISOs are
limited by the following general restrictions: (i) ISOs must be
granted within 10 years of the Plan’s adoption by the Board; (ii) the
term of an ISO cannot exceed 10 years (5 years if granted to an
individual who owns more than 10% of the total combined voting power of
all classes of shares of the Company, or its parent or subsidiary
corporations); (iii) the aggregate fair market value (determined as
of the grant date) of Shares with respect to which all ISOs first become
exercisable by any individual in any calendar year under this Plan or any
other plan of the Company and its parent and subsidiary corporations may
not exceed $100,000 or such other amount as may be permitted from time to
time under Section 422 of the Code; and (iv) an ISO cannot be granted
in tandem with an NQSO in such a manner that the exercise of one affects
an individual’s right to exercise the other.

STOCK APPRECIATION RIGHTS

      The Administrator may award stock appreciation rights (referred to in this
Prospectus as an “SAR”) to eligible individuals. In general, an SAR entitles
the holder to receive a payment having an aggregate value equal to the product
of (i) the excess of (A) the fair market value on the exercise date of one
Share over (B) the base price per Share specified in the Award Agreement,
times (ii) the number of Shares for which the SAR is being exercised. The
Administrator will determine whether to pay the amount receivable upon the
SAR’s exercise via cash or by delivery of Shares or by a combination of the
two. If any portion of the payment is to be made in Shares, the number of
Shares will be determined by dividing such portion of the payment amount by the
fair market value of a Share on the exercise date. No fractional shares will
be used for such payment, and the Administrator will determine whether cash
will be given in lieu of any fractional shares or whether the fractional shares
will be canceled without payment.

STOCK AWARDS

      The Administrator may award restricted or unrestricted stock to eligible
individuals. The Administrator will determine whether to pay the stock Award
in cash or by delivery of Shares or by a combination of the two. If the Award
is for restricted stock, an Award Agreement will specify the restrictions,
their duration and events that would cause the individual to forfeit the
Shares.

-4-

PHANTOM STOCK UNITS

      The Administrator may grant Awards denominated in stock-equivalent units
(referred to in this Prospectus as “phantom stock units”) to eligible
individuals. Phantom stock units granted to an individual will be credited to
a bookkeeping reserve account solely for accounting purposes. The Company is
not required to segregate any of the Company’s assets on account of granting
phantom stock units. The Administrator will determine whether to pay the
amount due upon settlement of the phantom stock unit via cash or by delivery of
Shares or by a combination of the two. Except as otherwise provided in the
applicable Award Agreement, the recipient of phantom stock units will have none
of the rights of a shareholder with respect to any Shares represented by the
phantom stock unit solely as a result of being granted the phantom stock unit.

PERFORMANCE AWARDS

      The Administrator may grant performance awards which become payable on
account of attainment of one or more performance goals established by the
Administrator. Performance goals may be based on the Company’s operating
income or one or more other business criteria that apply to an individual or
group of individuals, a business unit, or the Company as a whole, over a
performance period designated by the Administrator. The Administrator will
determine whether to pay performance awards in cash or by delivery of Shares or
by a combination of the two.

OTHER STOCK-BASED AWARDS

      The Administrator may grant other stock-based awards to eligible
employees. Such Awards may be denominated in cash, in Common Stock or other
securities, in stock -equivalent units, in stock appreciation units, in
securities or debentures convertible into Common Stock, or in any combination
of the foregoing and may be paid in Common Stock or other securities, in cash,
or in a combination of Common Stock or other securities and cash, all as
determined in the sole discretion of the Administrator.

SUBSTITUTE AWARDS

      Awards may be granted under the Plan from time to time in substitution for
awards held by employees, officers, consultants or directors of entities who
become or are about to become employees, officers, consultants or directors of
the Company as the result of a merger or consolidation of the employing entity
with the Company, or the acquisition by the Company of the assets or stock of
the employing entity. The terms and conditions of any substitute Awards so
granted may vary from the terms and conditions set forth in the Plan to the
extent that the Administrator deems appropriate at the time of grant to conform
the substitute Awards to the provisions of the awards for which they are
substituted.

TAX ASPECTS OF AWARDS

      The following is a brief summary of the principal United States federal
income tax consequences to participants and the Company of participation in the
Plan. The summary is based on the provisions of the Code as in effect on the
date of this Prospectus and on existing and proposed regulations and rulings
thereunder, all of which are subject to change. Each participant is urged to
consult his or her tax advisor regarding the tax consequences of participation
in the Plan.

      Nonqualified Options. To the extent that any Option does not satisfy
the requirements for an incentive stock option, it will be treated as a
nonqualified stock option. An Option holder generally will not recognize
income for federal income tax purposes at the time a nonqualified stock option
is granted.

-5-

An Option holder who is not an officer or director of the Company subject
to Section 16(b) of the Securities Exchange Act of 1934, as amended (referred
to in this Prospectus as the “Exchange Act”) will recognize ordinary income
upon exercise of a nonqualified stock option in an amount equal to the
difference between the fair market value of the Common Stock on the exercise
date and the purchase price.

      It is presently unclear what income tax consequences result with respect
to the exercise of a nonqualified option by an officer or director who could be
subject to liability under Section 16(b) of the Exchange Act if such exercise
occurs less than six months after the officer or director makes a non-exempt
purchase (or is deemed to have made a non-exempt purchase) of other shares of
Common Stock of the Company. Officers and directors should consult with their
tax advisors if this circumstance arises.

      When shares acquired upon exercise of a nonqualified stock option are sold
or otherwise disposed of, the Option holder generally will recognize gain (or
loss) equal to the difference between the amount realized and the Option
holder’s tax basis in the shares. An Option holder’s tax basis in shares of
Common Stock received upon exercise of a nonqualified stock option generally is
the sum of the purchase price paid and the ordinary income recognized as a
result of exercising the nonqualified stock option. But see, “Tax Aspects of
Awards —Tender of Company Common Stock in Connection with Awards,” below.
Ordinarily, the gain (or loss) recognized on a sale or other disposition will
be a long-term capital gain (or loss) if more than one year has elapsed between
the date on which ordinary income was recognized and the date of the sale, or
short-term capital gain (or loss) if a lesser period has elapsed.

      The Company generally will be entitled to a deduction for federal income
tax purposes with respect to the exercise of a nonqualified stock option at the
same time and in the same amount as ordinary income is recognized by the Option
holder.

      Incentive Stock Options. An Option holder will not recognize
ordinary taxable income upon the grant or exercise of an incentive stock
option. However, the Option holder may be subject to the alternative minimum
tax upon exercise of an Award which qualifies as an incentive stock option.
See “Tax Aspects of Awards — Alternative Minimum Tax.” Under the Code, the
aggregate fair market value (determined at the time of grant) of stock with
respect to which incentive stock options are exercisable for the first time by
any individual during any calendar year under the Plan and all other plans of
the Company and related corporations may not exceed $100,000.

      In order to qualify for the tax treatment accorded incentive stock
options, the Option holder generally must be an employee of the Company or its
parent or subsidiary corporation from the date the Option is granted until
three months before the Option is exercised. However, if an Option holder is
disabled within the meaning of Code section 22(e)(3), the three-month
period is extended to twelve months. Finally, in the case of an Option holder
who dies, solely for purposes of determining whether the Option is an incentive
stock option, the three-month period is waived with respect to the exercise of
the Option by the Option holder’s estate or by a person who acquires the right
to exercise the Option by reason of the Option holder’s death. Although an
Award Agreement may provide that an incentive stock option may be exercised
more than three months after an Option holder retires, if it is not exercised
within three months, it will not be treated as an incentive stock option, but
will be taxed as a nonqualified stock option. See “Tax Aspects of Awards —
Nonqualified Options.”

      Upon sale of the shares acquired upon exercise of an incentive stock
option, any gain recognized generally will be taxed as capital gain if such
shares have been held for at least two years from the date the incentive stock
option was granted and more than one year from the date the shares were
transferred to

-6-

the Option holder. Any sale or other disposition of the shares acquired
upon exercise of an incentive stock option prior to the expiration of the
holding period described in this paragraph is deemed a “disqualifying
disposition” unless the Option is exercised after the Option holder’s death by
the Option holder’s estate or by the person who acquired the right to exercise
the Option by reason of the Option holder’s death.

      Upon a disqualifying disposition, an Option holder generally will
recognize ordinary income in an amount equal to the lesser of (a) the excess of
the fair market value of the shares on the date the Option was exercised over
the purchase price, or (b) the excess of the amount realized upon such
disposition over the adjusted tax basis of the shares. If the amount realized
exceeds the fair market value of the shares on the date of the exercise, the
excess will be treated as long-term capital gain provided that the shares have
been held for more than one year or short-term capital gain if the shares have
been held for one year or less.

      An Option holder’s tax basis in shares of Common Stock received upon
exercise of an incentive stock option generally is equal to the purchase price
paid. But see, “Tax Aspects of Awards — Tender of Company Common Stock in
Connection with Awards,” below.

      The Company will not be entitled to a deduction for federal income tax
purposes at the time an incentive stock option is granted or exercised or,
unless a disqualifying disposition has occurred, at the time the shares
acquired upon exercise of an incentive stock option are sold. If an Option
holder makes a disqualifying disposition, the Company generally will be
entitled to take a deduction at the same time and in the same amount as the
ordinary income recognized by the Option holder.

      Stock and Other Share-Based Awards. Upon the settlement of a
share-based award (including SARs) in cash, the recipient recognizes ordinary
income equal to such cash amount. The tax consequences of receiving Common
Stock pursuant to a share-based award (other than Options) under the Plan is
similar to receiving cash compensation from the Company, unless the Common
Stock awarded is restricted stock. If the Common Stock is unrestricted, the
recipient must recognize ordinary income equal to the fair market value of the
Common Stock on the date of receipt less any amount paid for that stock. If
Common Stock is restricted when it is received, no income is recognized upon
receipt unless, within thirty days of receipt, the recipient makes a
Section 83(b) election in accordance with Treasury Regulations to recognize
income upon receipt of the Common Stock. Common Stock is considered to be
restricted for income tax purposes if it is nontransferable and subject to a
substantial risk of forfeiture. Also, Common Stock received by an officer or
director subject to Section 16(b) of the Exchange Act is considered to be
restricted so long as sale of that Common Stock could subject him or her to
suit under Section 16(b). If no Section 83(b) election was made, then
on the date the restrictions lapse, the recipient recognizes ordinary income
equal to the fair market value of the Common Stock on that date less any
amounts paid for that Common Stock.

      The recipient of a share-based award will acquire a tax basis in shares of
Common Stock received pursuant to such award equal to the sum of the amount
paid for such shares and the ordinary income recognized as a result of the
award. But see, “Tax Aspects of Awards — Tender of Company Common Stock in
Connection with Awards,” below. The holding period for shares of Common Stock
received pursuant to a share-based award begins immediately after the date on
which ordinary income is recognized.

-7-

      Generally, the Company will be entitled to a deduction for federal income
tax purposes with respect to a share-based award at the same time and in the
same amount as ordinary income is recognized by the recipient.

      Performance Awards. The recipient of a performance award generally
does not recognize income upon the grant of the award. Upon payment of the
performance award, amounts received, whether in cash or in shares, are taxable
to the recipient of the award as ordinary income in the year of receipt. The
Company generally will be entitled to a deduction for federal income tax
purposes with respect to a performance award at the same time and in the same
amount as ordinary income is recognized by the recipient.

      Tender of Company Common Stock in Connection with Awards.
In the Administrator’s discretion, incentive stock options and
nonqualified stock options may be exercised by tendering shares of the Common
Stock of the Company with a fair market value equal to part or all of the
Option purchase price as payment. As a general rule, an exchange of common
shares for common shares of the same corporation is a nontaxable exchange. For
purposes of determining capital gain or loss treatment upon subsequent
dispositions of the shares, the shares of stock received upon exercise of the
stock option that are equal in number to the shares tendered (the shares
tendered are referred to in this prospectus as “Payment Shares”) will have a
carryover holding period, and the holding period of any additional shares of
stock received will begin on the date that the stock option is exercised.

      Upon exercise of a nonqualified stock option via tender of shares,
regardless of whether the Payment Shares may have been acquired under an
incentive stock option for which the minimum holding period requirements have
not been satisfied (see “Tax Aspects — Incentive Stock Options,” above), the
Option holder will (i) recognize as ordinary income the fair market value
of the shares received that exceed the number of Payment Shares tendered, less
cash, if any, paid on the exercise; (ii) not recognize income with respect
to the shares received equal in number to the Payment Shares tendered; and
(iii) have a carryover basis with respect to those shares of stock received
that are equal in number to the Payment Shares tendered, and a basis in any
additional shares equal to the difference between the fair market value of the
shares received pursuant to the nonqualified stock option and the exercise
price of the nonqualified stock option, plus any cash actually paid.

      Upon exercise of an incentive stock option via tender of shares, where the
Payment Shares were acquired from a source other than an incentive stock option
or, if acquired under an incentive stock option, the minimum holding period
requirements have been satisfied, the Option holder will (i) not recognize
income upon the exercise of the incentive stock option; (ii) not recognize
capital gain or loss on the tender of Payment Shares; (iii) have a
carryover basis with respect to those shares of stock received that are equal
in number to the Payment Shares tendered, and a basis in any additional shares
equal to the cash, if any, paid on the exercise; and (iv) for purposes of
determining whether the minimum holding period requirements are satisfied upon
subsequent dispositions, the holding period of all shares received will begin
on the date the incentive stock option is exercised via tender of shares.

      Upon exercise of an incentive stock option via tender of shares, where the
Payment Shares were acquired under an incentive stock option for which the
minimum holding period requirements have not been satisfied, the Option holder
will (i) have a “disqualifying disposition” with respect to the Payment
Shares that will result in the recognition of ordinary income as described
above under “Tax Aspects — Incentive Stock Options;” (ii) not recognize
capital gain to the extent that the amount realized in the disqualifying
disposition exceeds the fair market value of the Payment Shares on the date
acquired; (iii) have a basis with respect to those shares of stock received
that are equal in number to the Payment

-8-

Shares tendered equal to the basis in the Payment Shares increased by the
amount of ordinary income recognized as a result of the disqualifying
disposition, and a basis in any additional shares equal to the amount of cash,
if any, paid on the exercise; and (iv) for purposes of determining whether
the minimum holding period requirements are satisfied upon subsequent
dispositions, the holding period of all shares received will begin on the date
the incentive stock option is exercised via tender of shares.

      Cashless Exercise of Options. If an Option holder enters into an
arrangement with a brokerage firm whereby the brokerage firm lends the Option
holder the funds to exercise the Option and then sells a sufficient number of
the shares received upon the exercise to pay the purchase price, withholding
taxes, and brokerage fees and charges, the Option holder may recognize a
short-term capital loss for federal income tax purposes because the brokerage
fees will reduce the amount realized on that sale. In addition, any margin or
other loan charges resulting from that transaction may be deductible to the
Option holder as an investment interest expense.

      Net Capital Gain. The maximum income tax rate for net capital
gain for shares held for more than one year (i.e., the amount by which a net
long-term capital gain exceeds any net short-term capital loss in the same
taxable year) is 20% (10% for taxpayers in the 15% tax bracket). Effective for
taxable years beginning after December 31, 2000, the 20% rate is reduced to 18%
(8% for taxpayers in the 15% tax bracket).

      Alternative Minimum Tax. A taxpayer may be subject to an
alternative minimum tax which is payable to the extent the alternative minimum
tax exceeds the taxpayer’s regular income tax for the year. “Alternative
minimum taxable income” consists of an individual’s taxable income determined
with certain adjustments and increased by “items of tax preference.” In
computing a taxpayer’s alternative minimum taxable income, the exercise of an
incentive stock option generally is treated as the exercise of a nonqualified
stock option. Consequently, the difference between the fair market value of
the Common Stock on the exercise date and the exercise price is included in the
taxpayer’s alternative minimum taxable income. As a result, under certain
circumstances, an Option holder may incur alternative minimum tax liability for
a taxable year in which he or she exercises an incentive stock option.

      Transferability of Certain Awards. For gift tax purposes, a transfer
of a nonqualified option for no consideration may have tax consequences only if
such transfer is a completed gift. The Internal Revenue Service takes the
position that such transfer is a completed gift only to the extent the option
is vested and exercisable.

      A completed gift of a nonqualified option (or a portion thereof) is a
taxable gift to the extent that the amount of the gift, together with other
completed gifts by that donor to the same donee in the same year, exceeds an
annual exclusion. The amount of such annual exclusion is $10,000 for 2001, and
may be adjusted annually thereafter for cost-of-living increases. For an
option, the amount of the gift is the fair market value of the option on the
date the gift is completed, as determined based one or more generally
recognized option pricing models, which take into account such factors as the
exercise price and expected life of the option, the current trading price,
expected volatility and expected dividends of the underlying stock, and the
risk-free interest rate over the remaining option term.

      If a transfer of a nonqualified option is a taxable gift, such transfer
results in gift tax liability for the donor to the extent that such gift,
together with all prior taxable gifts by the donor, exceeds a lifetime
exemption, which exempts all taxable gifts from gift tax, and all transfers
upon death from estate tax, up to a dollar amount. The amount of the lifetime
exemption is $675,000 for 2001. The lifetime exemption is a cumulative
exemption with respect to taxable gifts and transfers upon death so that
taxable gifts made

-9-

during an individual’s lifetime will reduce the amount of the lifetime
exemption available, for estate tax purposes, with respect to transfers upon
death. If an individual dies with an estate in excess of the lifetime
exemption (less lifetime taxable gifts), the excess amount which do not pass to
a spouse (amounts passed to a spouse are not subject to the gift and estate
taxes) or to charity are subject to the estate tax. The rates for the gift and
estate taxes, prescribed under a single schedule, are graduated, beginning with
37 percent and increasing to a maximum (for taxable transfers in excess of
$3 million) of 55 percent in 2001.

      Federal tax legislation passed in 2001 provides that the lifetime
exemption amount will increase in 2002 through 2010 and the maximum tax rate
for estate and gift taxes will decline in 2002 through 2010. Specifically, the
lifetime exemption in 2002 is increased to $1 million and the top tax rate in
2002 is decreased to 50%.

      A nonqualified option transferred by gift to a donee may be exercised by
that donee, who will have the obligation to pay the exercise price. Upon
exercise of the option, the Plan participant to whom the option was originally
granted will have the same federal income tax consequences as if the option had
not been transferred. Thus, if such participant is not subject to Section
16(b) of the Exchange Act, he or she will recognize ordinary income, upon
exercise of the option by the donee, in an amount equal to the difference
between the fair market value of the Common Stock on the exercise date and the
purchase price.

      When Shares acquired upon exercise of the transferred option are sold or
otherwise disposed of by the gift donee, that donee generally will recognize
gain (or loss) equal to the difference between the amount realized and the
donee’s tax basis in the shares. The donee’s tax basis those shares is the sum
of the purchase price paid by the donee and the ordinary income recognized by
the original option holder pursuant to exercise the option. Ordinarily, the
gain (or loss) recognized on a sale or other disposition will be a long-term
capital gain (or loss) if more than one year has elapsed between the date on
which ordinary income was recognized and the date of the sale, or short-term
capital gain (or loss) if a lesser period has elapsed.

      Tax Withholding. Holders of Awards must pay to the Company, or make
provision satisfactory to the Administrator for payment of, any taxes required
to be withheld with respect to any Award under the Plan no later than the date
of the event creating tax liability. The Administrator may permit any
participant to have the Company retain shares of Common Stock to satisfy the
withholding tax liability for any transaction contemplated by the Plan. To the
extent that shares are retained by the Company upon the exercise of an
incentive stock option, a disqualifying disposition will occur with respect to
the retained shares. See “Tax Aspects of Awards —Incentive Stock Options,”
above.

      Loans. To the extent that the Company makes or guarantees any loan in
connection with an Award, the borrower may recognize ordinary income to the
extent that the interest rate on such loan is less than the interest rate
prescribed by the Code or to the extent that the principal or interest on the
loan is forgiven by the Company.

      Other Laws. The Plan is not subject to any portion of the Employee
Retirement Income Security Act of 1974, nor is the taxation of benefits under
the Plan governed by Code section 401(a).

      The foregoing discussion does not cover all income or other tax effects
involved in an individual’s participation in the Plan. Accordingly, each
individual should consult his or her own tax advisor concerning any matters
relating to the particular tax consequences of participation in

-10-

 the Plan. If theindividual is subject to a state or local income tax or
to the income tax of a country other than the United States, he or she should
seek advice as to the tax laws in those jurisdictions.

OTHER INFORMATION CONCERNING THE PLAN AND AWARDS

      Shares Subject to the Plan: Except as provided below, no more than
9,375,000 shares of Common Stock, in the aggregate, may be issued under the
Plan. If any Award, or portion of an Award, under the Plan expires or
terminates unexercised, becomes unexercisable or is forfeited or otherwise
terminated, surrendered or canceled as to any shares, or if any shares of
Common Stock are surrendered to the Company in connection with any Award
(whether or not such surrendered shares were acquired pursuant to any Award),
the shares subject to such Award and the surrendered shares will thereafter be
available for further Awards under the Plan; provided, however, that any such
shares that are surrendered to the Company in connection with any Award or that
are otherwise forfeited after issuance, or any shares forfeited, surrendered,
canceled or withheld in connection with an Award to an individual other than an
officer or director from the 1,000,000 shares specifically reserved for Awards
of non-qualified options, will not be available for purchase pursuant to
incentive stock options.

      In the event of changes in the Common Stock of the Company by reason of
any stock dividend of or stock split or reverse stock split affecting, the
Common Stock, the maximum number of shares reserved for issuance or with
respect to which Awards may be granted under the Plan, shall, without further
action of the Board, be adjusted to reflect such event. The Administrator may
make adjustments in its discretion to address the treatment of fractional
shares and fractional cents that arise as a result of the stock dividend, stock
split or reverse stock split.

      In the event of any other changes affecting the Company, the
capitalization of the Company or the Common Stock of the Company by reason of
any spin-off, split-up, recapitalization, dividend, merger, consolidation,
business combination or exchange of shares and the like, the Administrator may,
in its discretion and without the consent of holders of Awards, adjust the
maximum number and kind of shares reserved for issuance or with respect to
which Awards may be granted under the Plan.

      Shares issued pursuant to the Plan may be from authorized and unissued
shares of Common Stock or may be shares purchased on the open market. No fees,
commissions or charges will be payable with respect to the issuance of any such
Shares.

      Limit On Number of Shares Available to Any Individual under the Plan. The
maximum number of shares of Common Stock for which Awards may be granted under
the Plan to any individual during the Company’s fiscal year shall be 600,000
shares, provided, however, that individuals in their first year of employment
with the Company may receive Awards covering up to 750,000 shares.

      Forfeitures; Adjustments to Awards: In the event of changes in the Common
Stock of the Company by reason of any stock dividend of or stock split or
reverse stock split affecting, Common Stock, the number of shares covered by
and the exercise price and other terms of an Award, shall without further
action of the Board, be adjusted equitably to reflect such event. The
Administrator may make adjustments in its discretion to address the treatment
of fractional shares and fractional cents that arise as a result of the stock
dividend, stock split or reverse stock split.

      In the event of other changes affecting the Common Stock, the Company or
its capitalization, by reason of any spin-off, split-up, dividend or
recapitalization, or any merger, consolidation or share

-11-

exchange, that does not result in a Change in Control, the Administrator,
in its discretion and without the consent of the holder of the Award, may make
any adjustments to the Award it deems appropriate, including but not limited to
changes to the number and type of securities subject to the Award. However, no
Award may be changed in connection with any merger, consolidation or share
exchange that results in a Change in Control without the consent of the holder
of that Award.

      Notwithstanding anything in the Plan to the contrary and without the
consent of holders of Awards, the Administrator, in its sole discretion, may
make any modifications to any Awards, including but not limited to
cancellation, forfeiture, surrender or other termination of the Awards in whole
or in part regardless of the vested status of the Award, but only to the extent
necessary to facilitate any business combination that is authorized by the
Board to comply with requirements for treatment as a pooling of interests
transaction for accounting purposes under generally accepted accounting
principles.

      The Administrator is authorized to make, in its discretion and without the
consent of holders of Awards, adjustments in the terms and conditions of, and
the criteria included in, Awards in recognition of unusual or nonrecurring
events affecting the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Administrator determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.

      Duration of the Plan: The Plan became effective on November 16, 1999.
Unless sooner terminated by the Board, the Plan will remain in effect until all
Shares subject to it have been purchased or acquired according to the Plan’s
provisions.

      No Award shall be granted under the Plan after the close of business on
November 16, 2009. Subject to other applicable provisions of the Plan, all
Awards made under the Plan prior to such termination of the Plan shall remain
in effect until such Awards have been satisfied or terminated in accordance
with the Plan and the terms of such Awards.

      Amendment, Modification, and Termination of the Plan: The Board, without
further approval of the shareholders, may terminate, amend or modify the Plan
or any portion thereof at any time.

      Transferability of Awards: Except as otherwise determined by the
Administrator, and in any event in the case of an incentive stock option or a
stock appreciation right granted with respect to an incentive stock option, no
Award granted under the Plan is transferable by a grantee otherwise than by
will or the laws of descent and distribution. Unless otherwise determined by
the Administrator in accord with the provisions of the immediately preceding
sentence, an Award may be exercised during the lifetime of the grantee, only by
the grantee or, during the period the grantee is under a legal disability, by
the grantee’s guardian or legal representative.

      Employment Rights: Nothing in the Plan or in any Award or any Award
Agreement will interfere with or limit in any way the right of the Company to
terminate any participant’s employment or service at any time with or without
cause or notice. In addition, nothing in the Plan confers upon any participant
any right to continued employment or service with the Company.

-12-

RESTRICTIONS ON RESALE

      This Prospectus may not be used for the resale of Shares acquired pursuant
to this Prospectus by persons who may be deemed to be “affiliates” within the
meaning of Rule 405 of the Securities Act of 1933. Rule 405, in
effect, defines “affiliates” as persons who “directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with” the Company. Ordinarily, this concept only extends to persons
who are executive officers, directors, or substantial shareholders (5% or more)
of the Company.

      Non-affiliates may freely re-sell to the public any Shares acquired
pursuant to this Prospectus. Affiliates, however, may only re-sell under a
separate registration statement and prospectus (which the Company has no
present intention of filing) or, assuming the availability thereof, under
Rule 144 of the Securities Act of 1933 or another applicable exemption from
registration. Rule 144 contains a number of conditions to its
availability, including a requirement that the Company has filed all reports
required by the Exchange Act, a limitation on the number of shares that may be
sold in any given period of time and the manner of such sale, and a requirement
that a form (Form 144) be filed at the time an order to sell is placed.
However, the one-year holding period imposed by Rule 144 with respect to
“restricted securities” does not apply to any sale of Common Stock acquired
pursuant to the Plan.

      Award holders who are officers or directors of the Company are subject to
the reporting and short-swing profits liability provisions of Section 16 of
the Exchange Act. Consequently, these Award holders should be aware that
reporting obligations may arise as a result of the grant or settlement of
Awards and that any purchase and sale (or deemed purchase and sale) at a profit
within six months may present a risk of liability under Section 16(b). In
order to ensure compliance with these rules, Award holders should consult with
counsel prior to effecting any transactions involving the purchase and sale (or
the deemed purchase or sale) of Common Stock.

MATTERS INCORPORATED BY REFERENCE

      The Company is subject to the informational reporting requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the Securities and Exchange Commission. The following documents filed by
the Company with the Securities and Exchange Commission are incorporated by
reference into, and made a part of, this Prospectus:

	 	(a)      The Company’s Annual Report on Form 10-K filed pursuant to Sections
13 or 15(d) of the Exchange Act, filed April 13, 2001 (File No.
000-29515);
	 
	 	(b)      All other reports filed by the Company pursuant to Sections 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered by the
document referred to in (a) above; and
	 
	 	(c)      The description of the Common Stock contained in the Registration
Statement filed with the Securities and Exchange Commission to register
the Common Stock under Section 12 of the Exchange Act, including any
amendment or report filed for the purpose of updating such description.

      In addition to the foregoing, all documents subsequently filed by the
Company under Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act
(before the filing of a post-effective amendment to the registration statement
of which this Prospectus forms a part that indicates that all securities
offered

-13-

pursuant to this Prospectus have been issued or that deregisters all
securities then remaining under this Prospectus) shall be deemed to be
incorporated by reference into, and to be a part of, this Prospectus from the
date of filing of such documents.

      A copy of all materials incorporated by reference into this Prospectus
(not including exhibits to such materials, unless such exhibits are
specifically incorporated by reference in this Prospectus) will be furnished
without charge to any participant requesting them. Requests should be made to
the Corporate Secretary of the Company, 2180 Fox Mill Road, Herndon, Virginia
20171 (Telephone: 703-654-2000). Upon request the Company will also furnish
without charge a copy of its latest Annual Report to shareholders.

ADDITIONAL INFORMATION

      The Company files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. These SEC
filings are available to the public over the Internet at the SEC’s web site at
http://www.sec.gov. You may also read and copy any document the Company files
at the SEC’s public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.

-14-

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