Document:

Exhibit
4.3

 

Grant No:

 

ESCHELON TELECOM, INC.

STOCK OPTION CERTIFICATE

 

THIS CERTIFIES THAT
                        
(the “Employee”)
has been awarded under the Eschelon Telecom, Inc. 2002 Stock Incentive Plan
(the “Plan”),
stock options (each, an “Option” or collectively, the “Options”) to purchase
               
shares of Common Stock, par value $0.01 per share (“Common Stock”) of Eschelon Telecom, Inc., a
Delaware corporation (the “Company”), at a price of
$            per share
(the “Exercise Price”).  This Certificate constitutes part of and is
subject to the terms and provisions of the attached Incentive Stock Option
Grant Agreement (the “Agreement”), which is incorporated by reference herein.

 

Grant Date:
                          

 

Expiration Date:  The Options expire at 5:00 p.m. Eastern Time
on the last business day prior to the tenth anniversary of the Grant Date (the
“Expiration Date”),
unless fully exercised or terminated earlier.

 

Vesting Schedule:  The Options vest and become exercisable in accordance
with the vesting schedule below, subject to the terms and conditions
described in the Agreement:

 

(a)                                  20%
of the Options vest and become exercisable on the Grant Date; and

 

(b)                                 20%
of the Options vest and become exercisable on each subsequent anniversary of
the Grant Date, through the fourth anniversary of the Grant Date.

 

The extent to
which the Options are vested and exercisable as of a particular vesting date is
rounded down to the nearest whole share. 
However, vesting is rounded up to the nearest whole share on the fourth
anniversary of the Grant Date.

 

Except to the
extent that the Options have earlier terminated, the unvested Options become
fully vested immediately before the occurrence of a Change in Control.

 

IN WITNESS
WHEREOF, the Company has caused this Certificate to be executed by its duly
authorized officer on this
            day of
                              
, 20    .

 

	
   

  	
   

  	
  ESCHELON
  TELECOM, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  

 

	
  Enclosures:

  	
   

  	
  Incentive Stock Option Grant
  Agreement

  
	
   

  	
   

  	
  Eschelon Telecom, Inc. 2002 Stock
  Incentive Plan

  
	
   

  	
   

  	
  Stockholders’ Agreement

  
	
   

  	
   

  	
  Stock Restriction Agreement

  
	
   

  	
   

  	
  Exercise Form

  

 

 

INCENTIVE STOCK OPTION GRANT
AGREEMENT

 

UNDER THE

 

ESCHELON TELECOM, INC. 2002 STOCK
INCENTIVE PLAN

 

1.                                       Terminology.  All capitalized words that are not defined
in this Agreement have the meanings ascribed to them in the Plan.  For purposes of this Agreement, the terms
below have the following meanings:

 

(a)                                  “Cause” has the
meaning ascribed to such term or words of similar import in the Employee’s
written employment or service contract with the Company and, in the absence of
such agreement or definition, means the Employee’s (i) conviction of, or
plea of nolo contendere to, a felony or crime involving moral turpitude;
(ii) fraud on or misappropriation of any funds or property of the Company,
any affiliate, customer or vendor; (iii) personal dishonesty,
incompetence, willful misconduct, willful violation of any law, rule or
regulation (other than minor traffic violations or similar offenses) or breach
of fiduciary duty which involves personal profit; (iv) willful misconduct
in connection with the Employee’s duties or willful failure to perform the
Employee’s responsibilities in the best interests of the Company;
(v) chronic use of alcohol, drugs or other similar substances which
affects the Employee’s work performance; (vi) violation of any material
Company rule, regulation, procedure or policy; or (vii) breach of any
provision of any employment, non-disclosure, non-competition, non-solicitation
or other similar agreement executed by the Employee for the benefit of the
Company, all as determined by the Administrator, which determination will be
conclusive.

 

(b)                                 “Change in Control”
means the sale of all or substantially all the assets of the Company and its
subsidiaries on a consolidated basis (measured either by book value in
accordance with generally accepted accounting principles consistently applied
or by fair market value (as determined in good faith by the Company’s Board of
Directors)) in any transaction or series of related transactions, or any
merger, consolidation or reorganization of the Company into or with another
corporation or other similar transaction or series of related transactions in
which the stockholders of the Company immediately prior to such merger,
consolidation or reorganization of the Company into or with another corporation
or other similar transaction or series of related transactions (i) hold less
than fifty percent (50%) of the outstanding voting securities of the surviving
corporation following the merger, consolidation or reorganization or (ii) hold
less than fifty percent (50%) of the outstanding voting securities of an
affiliated entity of the surviving corporation (if such securities of an
affiliated entity are issued to the stockholders of the Company in such
transaction).

 

(c)                                  “Company” includes
Eschelon Telecom, Inc. and its Affiliates, except where the context otherwise
requires.

 

(d)                                 “Option Shares” mean
the shares of Common Stock underlying the Options.

 

(e)                                  “Stockholders’ Agreement”
means the Fourth Amended Stockholders Agreement, dated as of June 27,
2002, as may be amended or replaced from time to time.

 

2.                                       Vesting.  The Options vest in accordance with the
vesting schedule identified in the Stock Option Certificate which is
attached hereto and constitutes a part of the Agreement (the ”Vesting Schedule”),
so long as the Employee is in the continuous employ of, or in a service
relationship with, the Company from the Grant Date through the applicable date
upon which

 

 

vesting is
scheduled to occur.  No vesting will
accrue to any Options after the Employee ceases to be in either an employment
or other service relationship with the Company.

 

3.                                             Exercise
of Options.

 

(a)                                  Right
to Exercise.  The Employee may
exercise the Options to the extent vested at any time on or before the
Expiration Date or the earlier termination of the Options, unless otherwise
provided in this Agreement. 
Section 4 below describes certain limitations on exercise of the
Options that apply in the event of the Employee’s death or termination of
employment or other service relationship with the Company.  The Options may be exercised only in
multiples of whole shares and may not be exercised at any one time as to fewer
than one hundred shares (or such lesser number of shares as to which the
Options are then exercisable).  No
fractional shares will be issued under the Options.

 

(b)                                 Exercise
Procedure.  In order to exercise the
Options, the following items must be delivered to the Secretary of the Company
before the expiration or termination of the Options: (i) an exercise
notice, in such form as the Administrator may require from time to time,
specifying the number of Option Shares to be purchased, (ii) full payment
of the Exercise Price for such Option Shares in accordance with
Section 3(c) of this Agreement, and (iii) an executed copy of any
other agreements requested by the Administrator pursuant to Section 3(d)
of this Agreement.  An exercise will not
be effective until all of the foregoing items are received by the Secretary of
the Company.

 

(c)                                  Method
of Payment.  Payment of the Exercise
Price may be made by (i) delivery of cash, certified or cashier’s check,
money order or other cash equivalent acceptable to the Administrator in its
discretion, (ii) a broker-assisted cashless exercise in accordance with
Regulation T of the Board of Governors of the Federal Reserve System
through a brokerage firm approved by the Administrator (after the closing of
the first public offering of securities of the Company that is effected
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Securities Act of 1933 (the “Securities Act”)),
(iii) by tender (via actual delivery or attestation) to the Company of
other shares of Common Stock of the Company which have a Fair Market Value on
the date of tender equal to the Exercise Price, provided  that
such shares have been owned by the Employee for a period of at least six months
free of any substantial risk of forfeiture or were purchased on the open market
without assistance, direct or indirect, from the Company, or (iv) a
combination of the foregoing.

 

(d)                                 Agreement
by Employee to Execute Other Agreements. 
The Employee hereby agrees to execute, as a condition precedent to the
exercise of the Options and at any time thereafter as may reasonably be
requested by the Administrator, a Stock Restriction Agreement, substantially in
the form, and containing the terms and provisions, of the Stock Restriction
Agreement attached hereto as Exhibit A, the Stockholders’ Agreement,
also attached hereto, with respect to any Option Shares acquired by the
Employee pursuant to this Agreement, and a “Non-Competition Agreement” in a
form as the Company may require.

 

(e)                                  Issuance
of Shares upon Exercise.  Upon
exercise of the Options in accordance with the terms of this Agreement, the
Company will issue to the Employee, the brokerage firm specified in the
Employee’s delivery instructions pursuant to a broker-assisted cashless exercise,
or such other person exercising the Options, as the case may be, the number of
shares of Common Stock so paid for, in the form of fully paid and nonassessable
stock.  The Company will deliver stock
certificates for the Option Shares as soon as practicable after exercise, which
certificates will, unless such Option Shares are registered or an exemption
from registration is available under applicable federal and state law, bear a
legend restricting transferability of such shares and referencing any applicable
Stock Restriction Agreement and/or Stockholders’ Agreement.

 

2

 

4.                                       Termination
of Employment or Service.

 

(a)                                  Exercise
Period Following Cessation of Employment or Other Service Relationship, In General.  If the Employee ceases to be employed by, or
in a service relationship with, the Company for any reason other than death or
discharge for Cause, (i) the unvested Options, after giving effect to the
provisions of Section 2 of this Agreement, terminate immediately upon such
cessation, and (ii) the vested Options remain exercisable during the
90-day period following such cessation, but in no event after the Expiration
Date.  Unless sooner terminated, the vested
Options terminate upon the expiration of such 90-day period.

 

(b)                                 Death
of Employee.  If the Employee dies
prior to the expiration or other termination of the Options, (i) the
unvested Options, after giving effect to the provisions of Section 2 of
this Agreement, terminate immediately upon the Employee’s death, and
(ii) the vested Options remain exercisable during the one-year period
following the Employee’s death, but in no event after the Expiration Date, by
the Employee’s executor, personal representative, or the person(s) to whom the
Options are transferred by will or the laws of descent and distribution.  Unless sooner terminated, the vested Options
terminate upon the expiration of such one-year period.

 

(c)                                  Termination
for Cause.  Notwithstanding anything
to the contrary in this Agreement, the Options terminate in their entirety,
regardless of whether the Options are vested, immediately upon the Employee’s
discharge of employment or other service relationship for Cause.

 

(d)                                 Change
in Status.  If the Employee’s
relationship with the Company ceases to be a “common law employee” relationship
but the Employee continues to provide bona fide services to the Company
following such cessation in a different capacity, including without limitation
as a director, consultant or independent contractor, then a termination of
employment or other service relationship shall not be deemed to have occurred
for purposes of this Section 4 upon such change in relationship.  Notwithstanding the foregoing, the Options
shall not be treated as incentive stock options within the meaning of Code
section 422 with respect to any exercise that occurs more than three
months after such cessation of the common law employee relationship (except as
otherwise permitted under Code section 421 or 422).

 

5.                                       Market
Stand-Off Agreement.  The Employee
agrees that following the effective date of a registration statement of the
Company filed under the Securities Act, the Employee, for the duration
specified by and to the extent requested by the Company and an underwriter of
Common Stock or other securities of the Company, shall not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, enter into a transaction which
would have the same effect, or enter into any swap, hedge or other arrangement
that transfers, in whole or in part, any of the economic consequences of
ownership of such securities, whether any such aforementioned transaction is to
be settled by delivery of such securities or other securities, in cash or
otherwise, or publicly disclose the intention to make any such offer, sale,
pledge or disposition, or to enter into any such transaction, swap, hedge or
other arrangement, in each case during the seven days prior to and the 180 days
after the effectiveness of any underwritten offering of the Company’s equity
securities (or such longer or shorter period as may be requested in writing by
the managing underwriter and agreed to in writing by the Company) (the “Market Stand-Off Period”),
except as part of such underwritten registration if otherwise permitted.  In addition, the Employee agrees to execute
any further letters, agreements and/or other documents requested by the Company
or its underwriters which are consistent with the terms of this
Section 5.  The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Stand-Off Period.

 

3

 

6.                                       Nontransferability
of Options.  These Options are
nontransferable otherwise than by will or the laws of descent and distribution
and during the lifetime of the Employee, the Options may be exercised only by
the Employee or, during the period the Employee is under a legal disability, by
the Employee’s guardian or legal representative.  Except as provided above, the Options may not be assigned,
transferred, pledged, hypothecated or disposed of in any way (whether by
operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.

 

7.                                       Qualified Nature of the Options. 
The Options are intended to qualify as incentive stock options within
the meaning of Code section 422 (“Incentive Stock Options”), to the
fullest extent permitted by Code section 422, and this Agreement shall be
so construed.  Pursuant to Code
section 422(d) the aggregate fair market value (determined as of the Grant
Date) of shares of Common Stock with respect to which all Incentive Stock
Options first become exercisable by the Employee in any calendar year under the
Plan or any other plan of the Company (and its parent and subsidiary
corporations, within the meaning of Code section 424(e) and (f), as may
exist from time to time) may not exceed $100,000 or such other amount as may be
permitted from time to time under Code section 422.  To the extent that such aggregate fair
market value exceeds $100,000 or other applicable amount in any calendar year,
such stock options will be treated as nonstatutory stock options with respect
to the amount of aggregate fair market value thereof that exceeds the Code
section 422(d) limit.  For this
purpose, the Incentive Stock Options will be taken into account in the order in
which they were granted.  In such case,
the Company may designate the shares of Common Stock that are to be treated as
stock acquired pursuant to the exercise of Incentive Stock Options and the
shares of Common Stock that are to be treated as stock acquired pursuant to
nonstatutory stock options by issuing separate certificates for such shares and
identifying the certificates as such in the stock transfer records of the
Company.

 

Notwithstanding anything herein to the contrary, if the Employee owns,
directly or indirectly through attribution, stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of
any of its subsidiaries (within the meaning of Code section 424(f)) on the
Grant Date, then the Exercise Price is the greater of (a) the Exercise
Price stated on the Stock Option Certificate which is attached hereto and
constitutes a part of this Agreement or (b) 110% of the Fair Market Value
of the Common Stock on the Grant Date, and the Expiration Date is the last business
day prior to the fifth anniversary of the Grant Date.

 

Code section 422 provides additional limitations respecting the
treatment of these Options as Incentive Stock Options.

 

8.                                       Notice
of Disqualifying Disposition.  If
the Employee makes a disposition (as that term is defined in  Code section 424(c)) of any Option
Shares acquired pursuant to these Options within two years of the Grant Date or
within one year after the Option Shares are transferred to the Employee, the
Employee agrees to notify the Administrator of such disposition in writing
within 30 days of the disposition.

 

9.                                       Withholding
of Taxes.  At the time the Options
are exercised, in whole or in part, or at any time thereafter as requested by
the Company, the Employee hereby authorizes withholding from payroll or any
other payment of any kind due the Employee and otherwise agrees to make
adequate provision for foreign, federal, state and local taxes required by law
to be withheld, if any, which arise in connection with the Options (including
upon a disqualifying disposition within the meaning of Code
section 421(b)).  The Company may
require the Employee to make a cash payment to cover any withholding tax
obligation as a condition of exercise of the Options or issuance of share
certificates representing Option Shares.

 

The Administrator may, in its sole discretion, permit the Employee to
satisfy, in whole or in part, any withholding tax obligation which may arise in
connection with the Options either by electing to have the Company withhold
from the shares to be issued upon exercise that number

 

4

 

of shares, or by
electing to deliver to the Company already-owned shares, in either case having
a Fair Market Value equal to the amount necessary to satisfy the statutory
minimum withholding amount due.

 

10.                                 Adjustments
for Corporate Transactions and Other Events.

 

(a)                                  Stock Dividend, Stock Split and Reverse
Stock Split.  Upon a stock dividend of, or
stock split or reverse stock split affecting, the Common Stock, the number of
shares covered by and the exercise price and other terms of the Options, shall,
without further action of the Board, be adjusted to reflect such event unless
the Board determines, at the time it approves such stock dividend, stock split
or reverse stock split, that no such adjustment shall be made.  The Administrator may make adjustments, in
its discretion, to address the treatment of fractional shares and fractional
cents that arise with respect to the Options as a result of the stock dividend,
stock split or reverse stock split.

 

(b)                                 Non-Change in Control Transactions.  Except
with respect to the transactions set forth in Section 10(a), in the event
of any change affecting the Common Stock, the Company or its capitalization, by
reason of a spin-off, split-up, dividend, recapitalization, merger,
consolidation or share exchange, other than any such change that is part of a
transaction resulting in a Change in Control, the Administrator, in its
discretion and without the consent of the Employee, shall make any adjustments
in the Options, including but not limited to modifying the number, kind and
price of securities subject to the Options.

 

(c)                                  Change in Control Transactions.  In
the event of any transaction resulting in a Change in Control, the Options will
terminate upon the effective time of any such Change in Control unless
provision is made in connection with the transaction in the sole discretion of
the parties thereto for the continuation or assumption of the Options, or the
substitution of the Options with new options of the surviving or successor
entity or a parent thereof.  In the
event of such termination, the Employee will be permitted, immediately before
the Change in Control, to exercise all portions of such Options that are then
exercisable or which become exercisable upon or prior to the effective time of
the Change in Control.

 

(d)                                 Adjustments for Unusual Events. 
The Administrator is authorized to make, in its discretion and without
the consent of the Employee, adjustments in the terms and conditions of, and
the criteria included in, the Options 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 Options or the Plan.

 

(e)                                  Binding Nature of Adjustments. 
Adjustments under this Section 10 will be made by the
Administrator, whose determination as to what adjustments, if any, will be made
and the extent thereof will be final, binding and conclusive.  No fractional shares will be issued pursuant
to the Options on account of any such adjustments.  The terms and conditions of this Agreement shall apply with equal
force to any additional and/or substitute securities received by the Employee
pursuant to this Section 10 in exchange for, or by virtue of the
Employee’s ownership of, the Options or the Option Shares, except as otherwise
determined by the Administrator.

 

11.                                 Confidential
Information.  In consideration of
the Options granted to the Employee pursuant to this Agreement, the Employee
agrees and covenants that, except as specifically authorized by the Company,
the Employee will keep confidential any trade secrets or confidential or
proprietary information of the Company which are now or which hereafter may
become known to the Employee as a result of the Employee’s employment by or
other service relationship with the Company, and shall not at any time,
directly or indirectly, disclose any such

 

5

 

information to any
person, firm, Company or other entity, or use the same in any way other than in
connection with the business of the Company, at all times during and after the
Employee’s employment or other service relationship.  The provisions of this Section 11 shall not narrow or
otherwise limit the obligations and responsibilities of the Employee set forth
in any agreement of similar import entered into between the Employee and the
Company.

 

12.                                 Continuation
of Existing Non-Compete Agreements. 
In consideration of the Options granted to the Employee pursuant to this
Agreement, any Employee who executed a Non-Competition Agreement in connection
with any earlier grant of options by the Company (regardless of whether such
options have been terminated or not) (each an “Existing Non-Competition
Agreement”) does hereby agree and covenant, that notwithstanding the
cancellation of such prior options, such Existing Non-Competition Agreement
(including all of the terms and conditions contained therein) shall remain in
full force and effect and valid and enforceable.

 

13.                                 Non-Guarantee
of Employment or Service Relationship. 
Nothing in the Plan or this Agreement shall alter the at-will or other
employment status or other service relationship of the Employee, nor be
construed as a contract of employment or service relationship between the
Company and the Employee, or as a contractual right of Employee to continue in
the employ of, or in a service relationship with, the Company for any period of
time, or as a limitation of the right of the Company to discharge the Employee
at any time with or without cause or notice and whether or not such discharge
results in the failure of any Options to vest or any other adverse effect on
the Employee’s interests under the Plan.

 

14.                                 No
Rights as a Stockholder.  The
Employee shall not have any of the rights of a stockholder with respect to the
Option Shares until such shares have been issued to him or her upon the due
exercise of the Options.  No adjustment
shall be made for dividends or distributions or other rights for which the
record date is prior to the date such shares are issued.

 

15.                                 The
Company’s Rights.  The existence of
the Options shall not affect in any way the right or power of the Company or
its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or other stocks with preference ahead
of or convertible into, or otherwise affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company’s assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.

 

16.                                 Employee.  Whenever the word “Employee” is used in any
provision of this Agreement under circumstances where the provision should
logically be construed, as determined by the Administrator, to apply to the
estate, personal representative, or beneficiary to whom the Options may be
transferred by will or by the laws of descent and distribution, the word
“Employee” shall be deemed to include such person.

 

17.                                 Notices.  All notices and other communications made or
given pursuant to this Agreement shall be in writing and shall be sufficiently
made or given if hand delivered or mailed by certified mail, addressed to the
Employee at the address contained in the records of the Company, or addressed
to the Administrator, care of the Company for the attention of its Corporate
Secretary at its principal office or, if the receiving party consents in
advance, transmitted and received via telecopy or via such other electronic
transmission mechanism as may be available to the parties.

 

18.                                 Entire
Agreement.  This Agreement contains
the entire agreement between the parties with respect to the Options granted
hereunder.  Any oral or written
agreements, representations, warranties, written inducements, or other
communications made prior to the

 

6

 

execution of this
Agreement with respect to the Options granted hereunder shall be void and
ineffective for all purposes.

 

19.                                 Amendment.  This Agreement may be amended from time to
time by the Administrator in its discretion; provided, however,
that  this Agreement may not be modified
in a manner that would have a materially adverse effect on the Options or
Option Shares as determined in the discretion of the Administrator, except as
provided in the Plan or in a written document signed by each of the parties
hereto.

 

20.                                 Conformity
with Plan.  This Agreement is
intended to conform in all respects with, and is subject to all applicable
provisions of, the Plan. 
Inconsistencies between this Agreement and the Plan shall be resolved in
accordance with the terms of the Plan. 
In the event of any ambiguity in this Agreement or any matters as to
which this Agreement is silent, the Plan shall govern.  A copy of the Plan is provided to you with
this Agreement.

 

21.                                 Governing
Law. The validity, construction and effect of this Agreement, and of any
determinations or decisions made by the Administrator relating to this
Agreement, and the rights of any and all persons having or claiming to have any
interest under this Agreement, shall be determined exclusively in accordance
with the laws of the State of Delaware, without regard to its provisions
concerning the applicability of laws of other jurisdictions.  Any suit with respect hereto will be brought
in the federal or state courts in the districts which include the city and
state in which the principal offices of the Company are located, and the
Employee hereby agrees and submits to the personal jurisdiction and venue
thereof.

 

22.                                 Headings.  The headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.

 

7

 

EXERCISE FORM

 

Administrator of
2002 Stock Incentive Plan

c/o Office of the
Corporate Secretary

Eschelon Telecom,
Inc.

 

Gentlemen:

 

I hereby exercise the Options granted to me on
                            ,
       , by Eschelon Telecom, Inc. (the
“Company”), subject to all the terms and provisions of the applicable grant
agreement and of the Eschelon Telecom, Inc. 2002 Stock Incentive Plan (the
“Plan”), and notify you of my desire to purchase
                         
shares of Common Stock of the Company at a price of
$                      
per share pursuant to the exercise of said Options.

 

This will confirm my understanding with respect to the shares to be
issued to me by reason of this exercise of the Options (the shares to be issued
pursuant hereto shall be collectively referred to hereinafter as the “Shares”)
as follows:

 

(a)                                  I
am purchasing the Shares for my own account for investment only, and not with a
view to, or for sale in connection with, any distribution of the Shares in
violation of the Securities Act of 1933 (the “Securities Act”), or any rule or regulation
under the Securities Act.

 

(b)                                 I
understand that the Shares are being issued without registration under the
Securities Act, in reliance upon one or more exemptions contained in the
Securities Act, and such reliance is based in part on the above
representation.  I also understand that
the Company is not obligated to comply with the registration requirements of
the Securities Act or with the requirements for an exemption under
Regulation A under the Securities Act for my benefit.

 

(c)                                  I
have had such opportunity as I deemed adequate to obtain from representatives
of the Company such information as is necessary to permit me to evaluate the
merits and risks of my investment in the Company.

 

(d)                                 I
have sufficient experience in business, financial and investment matters to be
able to evaluate the risks involved in the purchase of the Shares and to make
an informed investment decision with respect to such purchase.

 

(e)                                  I
can afford a complete loss of the value of the Shares and am able to bear the
economic risk of holding such Shares for an indefinite period.

 

(f)                                    I
understand that (i) the Shares have not been registered under the
Securities Act and are “restricted securities” within the meaning
of Rule 144 under the Securities Act; (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available
and, therefore, they may need to be held indefinitely;  and (iii) there is now no registration
statement on file with the Securities and Exchange Commission with respect to
any stock of the Company and the Company has no obligation or current intention
to register the Shares under the Securities Act.  As a condition to any transfer of the Shares, I understand that
the Company may require an opinion of counsel satisfactory to the Company to
the effect that such transfer does not require registration under the
Securities Act or any state securities law.

 

(g)                                 I
understand that the certificates for the Shares to be issued to me will bear a
legend substantially as follows:

 

The shares of stock represented by this certificate are subject to
restrictions on transfer, an option to purchase and a market stand-off
agreement set forth in a certain Stock

 

 

Restriction Agreement between the corporation and the registered owner
of this certificate (or his predecessor in interest), and no transfer of such
shares may be made without compliance with that Agreement.  A copy of that Agreement is available for
inspection at the office of the corporation upon appropriate request and
without charge.

 

The securities represented by this stock certificate have not been
registered under the Securities Act of 1933 (the “Act”) or applicable state
securities laws (the “State Acts”), and shall not be sold,
pledged, hypothecated, donated, or otherwise transferred (whether or not for
consideration) by the holder except upon the issuance to the corporation of a
favorable opinion of its counsel and/or submission to the corporation of such
other evidence as may be satisfactory to counsel for the corporation, to the
effect that any such transfer shall not be in violation of the Act and the
State Acts.”

 

Appropriate stop
transfer instructions will be issued by the Company to its transfer agent.

 

(h) I understand that this exercise of the Options is valid only if I
have also executed before or on the date of this exercise (1) the Stock
Restriction Agreement attached to the Option Grant Agreement as Exhibit A,
(2) the Stockholders’ Agreement attached to the Option Grant Agreement, and (3) a
non-competition agreement in a form as required by the Company.

 

Total Amount
Enclosed: 
$               

 

	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Employee)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Received by
  ESCHELON TELECOM, INC. on

  
	
   

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
										

 

2Exhibit
4.4

Grant No:
     

 

ESCHELON TELECOM, INC.

STOCK OPTION CERTIFICATE

 

THIS CERTIFIES THAT
                                
(the “Optionee”)
has been awarded under the Eschelon Telecom, Inc. 2002 Stock Incentive Plan
(the “Plan”),
nonstatutory stock options (each, an “Option” or collectively, the “Options”) to purchase
          shares of Common Stock,
par value $0.01 per share (“Common Stock”) of Eschelon Telecom, Inc., a Delaware
corporation (the “Company”),
at a price of $
            per share (the
“Exercise Price”).  This Certificate constitutes part of and is
subject to the terms and provisions of the attached Nonstatutory Stock Option
Grant Agreement (the “Agreement”), which is incorporated by reference herein.

 

Grant Date:
                                

 

Expiration Date:  The Options expire at 5:00 p.m. Eastern Time
on the last business day coincident with or prior to the tenth anniversary of
the Grant Date (the “Expiration Date”), unless fully exercised or terminated
earlier.

 

Vesting Schedule:  The Options vest and become exercisable in
accordance with the vesting schedule below, subject to the terms and
conditions described in the Agreement:

 

(a)                                  20%
of the Options vest and become exercisable on the Grant Date, and

 

(b)                                 20%
of the Options vest and become exercisable on each subsequent anniversary of
the Grant Date through the fourth anniversary of the Grant Date.

 

The extent to
which the Options are vested and exercisable as of a particular vesting date is
rounded down to the nearest whole share. 
However, vesting is rounded up to the nearest whole share on the fourth
anniversary of the Grant Date.

 

Except to the
extent that the Options have earlier terminated, the unvested Options become
fully vested immediately before the occurrence of a Change in Control.

 

IN WITNESS
WHEREOF, the Company has caused this Certificate to be executed by its duly
authorized officer on this
           day of
                                 
, 20     .

 

	
   

  	
   

  	
  ESCHELON
  TELECOM, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  

 

	
  Enclosures:

  	
   

  	
  Nonstatutory Stock Option Grant
  Agreement

  
	
   

  	
   

  	
  Eschelon Telecom, Inc. 2002 Stock
  Incentive Plan

  
	
   

  	
   

  	
  Stockholders’ Agreement

  
	
   

  	
   

  	
  Stock Restriction Agreement

  
	
   

  	
   

  	
  Exercise Form

  

 

 

NONSTATUTORY STOCK OPTION GRANT
AGREEMENT

 

UNDER THE

 

ESCHELON TELECOM, INC. 2002 STOCK INCENTIVE
PLAN

 

1.                                       Terminology.  All capitalized words that are not defined
in this Agreement have the meanings ascribed to them in the Plan.  For purposes of this Agreement, the terms
below have the following meanings:

 

(a)                                  “Cause” has the
meaning ascribed to such term or words of similar import in the Optionee’s
written employment or service contract with the Company and, in the absence of
such agreement or definition, means the Optionee’s (i) conviction of, or
plea of nolo contendere to, a felony or crime involving moral turpitude;
(ii) fraud on or misappropriation of any funds or property of the Company,
any affiliate, customer or vendor; (iii) personal dishonesty,
incompetence, willful misconduct, willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses), or breach of
fiduciary duty which involves personal profit; (iv) willful misconduct in
connection with the Optionee’s duties or willful failure to perform the
Optionee’s responsibilities in the best interests of the Company;
(v) chronic use of alcohol, drugs or other similar substances which
affects the Optionee’s work performance; (vi) violation of any material
Company rule, regulation, procedure or policy; or (vii) breach of any
provision of any employment, non-disclosure, non-competition, non-solicitation
or other similar agreement executed by the Optionee for the benefit of the
Company, all as determined by the Administrator, which determination will be
conclusive.

 

(b)                                 “Change in Control”
means the sale of all or substantially all the assets of the Company and its
subsidiaries on a consolidated basis (measured either by book value in
accordance with generally accepted accounting principles consistently applied
or by fair market value (as determined in good faith by the Company’s Board of
Directors)) in any transaction or series of related transactions, or any
merger, consolidation or reorganization of the Company into or with another
corporation or other similar transaction or series of related transactions in
which the stockholders of the Company immediately prior to such merger,
consolidation or reorganization of the Company into or with another corporation
or other similar transaction or series of related transactions (i) hold less
than fifty percent (50%) of the outstanding voting securities of the surviving
corporation following the merger, consolidation or reorganization or (ii) hold
less than fifty percent (50%) of the outstanding voting securities of an
affiliated entity of the surviving corporation (if such securities of an
affiliated entity are issued to the stockholders of the Company in such
transaction).

 

(c)                                  “Company” includes
Eschelon Telecom, Inc. and its Affiliates, except where the context otherwise
requires.

 

(d)                                 “Option Shares” mean
the shares of Common Stock underlying the Options.

 

(e)                                  “Stockholders’ Agreement”
means the Fourth Amended Stockholders Agreement, dated as of June 27,
2002, as may be amended or replaced from time to time.

 

2.                                       Vesting.  The Options vest in accordance with the
vesting schedule identified in the Stock Option Certificate which is
attached hereto and constitutes a part of the Agreement (the “Vesting Schedule”),
so long as the Optionee is in the continuous employ of, or in a service
relationship with, the Company from the Grant Date through the applicable date
upon which vesting is scheduled to occur. 
No vesting will accrue to any Options after the Optionee ceases to be in
either an employment or other service relationship with the Company.

 

 

3.                                             Exercise
of Options.

 

(a)                                  Right
to Exercise.  The Optionee may
exercise the Options to the extent vested at any time on or before the
Expiration Date or the earlier termination of the Options, unless otherwise
provided in this Agreement. 
Section 4 below describes certain limitations on exercise of the
Options that apply in the event of the Optionee’s death or termination of
employment or other service relationship with the Company.  The Options may be exercised only in
multiples of whole shares and may not be exercised at any one time as to fewer
than one hundred shares (or such lesser number of shares as to which the
Options are then exercisable).  No
fractional shares will be issued under the Options.

 

(b)                                 Exercise
Procedure.  In order to exercise the
Options, the following items must be delivered to the Secretary of the Company
before the expiration or termination of the Options: (i) an exercise
notice, in such form as the Administrator may require from time to time,
specifying the number of Option Shares to be purchased, (ii) full payment
of the Exercise Price for such Option Shares in accordance with
Section 3(c) of this Agreement, and (iii) an executed copy of any
other agreements requested by the Administrator pursuant to Section 3(d)
of this Agreement.  An exercise will not
be effective until all of the foregoing items are received by the Secretary of
the Company.

 

(c)                                  Method
of Payment.  Payment of the Exercise
Price may be made by (i) delivery of cash, certified or cashier’s check,
money order or other cash equivalent acceptable to the Administrator in its
discretion, (ii) a broker-assisted cashless exercise in accordance with
Regulation T of the Board of Governors of the Federal Reserve System
through a brokerage firm approved by the Administrator (after the closing of
the first public offering of securities of the Company that is effected
pursuant to a registration statement filed with, and declared effective by the
Securities and Exchange Commission under the Securities Act of 1933 (the “Securities Act”)),
(iii) tender (via actual delivery or attestation) to the Company of other
shares of Common Stock of the Company which have a Fair Market Value on the
date of tender equal to the Exercise Price, provided  that such
shares have been owned by the Optionee for a period of at least six months free
of any substantial risk of forfeiture or were purchased on the open market
without assistance, direct or indirect, from the Company, or (iv) a
combination of the foregoing.

 

(d)                                 Agreement
by Optionee to Execute Other Agreements. 
The Optionee hereby agrees to execute, as a condition precedent to the
exercise of the Options and at any time thereafter as may reasonably be
requested by the Administrator, a Stock Restriction Agreement, substantially in
the form, and containing the terms and provisions, of the Stock Restriction
Agreement attached hereto as Exhibit A, the Stockholders’ Agreement,
also attached hereto, with respect to any Option Shares acquired by the
Optionee pursuant to this Agreement, and a “Non-Competition Agreement” in the
form as the Company may require.

 

(e)                                  Issuance
of Shares upon Exercise.  Upon
exercise of the Options in accordance with the terms of this Agreement, the
Company will issue to the Optionee, the brokerage firm specified in the
Optionee’s delivery instructions pursuant to a broker-assisted cashless
exercise, or such other person exercising the Options, as the case may be, the
number of shares of Common Stock so paid for, in the form of fully paid and
nonassessable stock.  The Company will
deliver stock certificates for the Option Shares as soon as practicable after
exercise, which certificates will, unless such Option Shares are registered or
an exemption from registration is available under applicable federal and state
law, bear a legend restricting transferability of such shares and/or
Stockholders’ Agreement.

 

4.                                       Termination
of Employment or Service.

 

(a)                                  Exercise
Period Following Cessation of Employment or Other Service Relationship, In
General.  If the Optionee ceases to
be employed by, or in a service relationship with, the Company for any reason
other than death or discharge for Cause, (i) the unvested Options, after
giving effect to the provisions of Section 2 of this Agreement, terminate
immediately upon such cessation, and (ii) the vested Options remain
exercisable during the 90-day period following such cessation, but in no event
after the Expiration Date.  Unless
sooner terminated, the vested Options terminate upon the expiration of such
90-day period.

 

2

 

(b)                                 Death
of Optionee.  If the Optionee dies
prior to the expiration or other termination of the Options, (i) the
unvested Options, after giving effect to the provisions of Section 2 of
this Agreement, terminate immediately upon the Optionee’s death, and
(ii) the vested Options remain exercisable during the one-year period
following the Optionee’s death, but in no event after the Expiration Date, by
the Optionee’s executor, personal representative, or the person(s) to whom the
Options are transferred by will or the laws of descent and distribution.  Unless sooner terminated, the vested Options
terminate upon the expiration of such one-year period.

 

(c)                                  Termination
for Cause.  Notwithstanding anything
to the contrary in this Agreement, the Options terminate in their entirety,
regardless of whether the Options are vested, immediately upon the Optionee’s
discharge of employment or other service relationship for Cause.

 

5.                                       Market
Stand-Off Agreement.  The Optionee
agrees that following the effective date of a registration statement of the
Company filed under the Securities Act, the Optionee, for the duration
specified by and to the extent requested by the Company and an underwriter of
Common Stock or other securities of the Company, shall not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, enter into a transaction which
would have the same effect, or enter into any swap, hedge or other arrangement
that transfers, in whole or in part, any of the economic consequences of
ownership of such securities, whether any such aforementioned transaction is to
be settled by delivery of such securities or other securities, in cash or
otherwise, or publicly disclose the intention to make any such offer, sale,
pledge or disposition, or to enter into any such transaction, swap, hedge or
other arrangement, in each case during the seven days prior to and the 180 days
after the effectiveness of any underwritten offering of the Company’s equity
securities (or such longer or shorter period as may be requested in writing by
the managing underwriter and agreed to in writing by the Company) (the “Market Stand-Off Period”),
except as part of such underwritten registration if otherwise permitted.  In addition, the Optionee agrees to execute
any further letters, agreements and/or other documents requested by the Company
or its underwriters which are consistent with the terms of this
Section 5.  The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Stand-Off Period.

 

6.                                       Nontransferability
of Options.  These Options are
nontransferable otherwise than by will or the laws of descent and distribution
and during the lifetime of the Optionee, the Options may be exercised only by
the Optionee or, during the period the Optionee is under a legal disability, by
the Optionee’s guardian or legal representative.  Except as provided above, the Options may not be assigned,
transferred, pledged, hypothecated or disposed of in any way (whether by
operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.

 

7.                                       Nonstatutory
Nature of the Options.  The Options
are not intended to qualify as incentive stock options within the
meaning of Code section 422, and this Agreement shall be so
construed.  The Optionee acknowledges
that, upon exercise of the Options, the Optionee will recognize taxable income
in an amount equal to the excess of the then Fair Market Value of the Option
Shares over the Exercise Price and must comply with the provisions of
Section 8 of this Agreement with respect to any tax withholding obligations
that arise as a result of such exercise.

 

8.                                       Withholding
of Taxes.  At the time the Options
are exercised, in whole or in part, or at any time thereafter as requested by
the Company, the Optionee hereby authorizes withholding from payroll or any
other payment of any kind due the Optionee and otherwise agrees to make
adequate provision for foreign, federal, state and local taxes required by law
to be withheld, if any, which arise in connection with the Options.  The Company may require the Optionee to make
a cash payment to cover any withholding tax obligation as a condition of
exercise of the Options or issuance of share certificates representing Option
Shares.

 

3

 

The Administrator may, in its sole discretion, permit the Optionee to
satisfy, in whole or in part, any withholding tax obligation which may arise in
connection with the Options either by electing to have the Company withhold
from the shares to be issued upon exercise that number of shares, or by electing
to deliver to the Company already-owned shares, in either case having a Fair
Market Value equal to the amount necessary to satisfy the statutory minimum
withholding amount due.

 

9.                                       Adjustments
for Corporate Transactions and Other Events.

 

(a)                                  Stock Dividend, Stock Split and Reverse
Stock Split.  Upon a stock dividend of, or
stock split or reverse stock split affecting, the Common Stock, the number of
shares covered by and the exercise price and other terms of the Options, shall,
without further action of the Board, be adjusted to reflect such event unless
the Board determines, at the time it approves such stock dividend, stock split
or reverse stock split, that no such adjustment shall be made.  The Administrator may make adjustments, in
its discretion, to address the treatment of fractional shares and fractional
cents that arise with respect to the Options as a result of the stock dividend,
stock split or reverse stock split.

 

(b)                                 Non-Change in Control Transactions.  Except
with respect to the transactions set forth in Section 9(a), in the event
of any change affecting the Common Stock, the Company or its capitalization, by
reason of a spin-off, split-up, dividend, recapitalization, merger,
consolidation or share exchange, other than any such change that is part of a
transaction resulting in a Change in Control, the Administrator, in its
discretion and without the consent of the Optionee, shall make any adjustments
in the Options, including but not limited to modifying the number, kind and
price of securities subject to the Options.

 

(c)                                  Change in Control Transactions.  In
the event of any transaction resulting in a Change in Control, the Options will
terminate upon the effective time of any such Change in Control unless
provision is made in connection with the transaction in the sole discretion of
the parties thereto for the continuation or assumption of the Options, or the
substitution of the Options with new options of the surviving or successor
entity or a parent thereof.  In the
event of such termination, the Optionee will be permitted, immediately before
the Change in Control, to exercise all portions of such Options that are then
exercisable or which become exercisable upon or prior to the effective time of
the Change in Control.

 

(d)                                 Adjustments for Unusual Events. 
The Administrator is authorized to make, in its discretion and without
the consent of the Optionee, adjustments in the terms and conditions of, and
the criteria included in, the Options 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 Options or the Plan.

 

(e)                                  Binding Nature of Adjustments. 
Adjustments under this Section 9 will be made by the Administrator,
whose determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive. 
No fractional shares will be issued pursuant to the Options on account
of any such adjustments.  The terms and
conditions of this Agreement shall apply with equal force to any additional
and/or substitute securities received by the Optionee pursuant to this
Section 9 in exchange for, or by virtue of the Optionee’s ownership of,
the Options or the Option Shares, except as otherwise determined by the
Administrator.

 

10.                                 Confidential
Information.  In consideration of
the Options granted to the Optionee pursuant to this Agreement, the Optionee
agrees and covenants that, except as specifically authorized by the Company,
the Optionee will keep confidential any trade secrets or confidential or
proprietary information of the Company which are now or which hereafter may
become known to the Optionee as a result of the Optionee’s employment by or
other service relationship with the Company, and shall not at any time, directly
or indirectly, disclose any such information to any person, firm, Company or
other entity, or use the same in any way other than in connection with the
business of the Company, at all times during and after the Optionee’s
employment or other service relationship. 
The provisions of this

 

4

 

Section 10
shall not narrow or otherwise limit the obligations and responsibilities of the
Optionee set forth in any agreement of similar import entered into between the
Optionee and the Company.

 

11.                                 Continuation
of Existing Non-Compete Agreements. 
In consideration of the Options granted to the Optionee pursuant to this
Agreement, any Optionee who executed a Non-Competition Agreement in connection
with any earlier grant of options by the Company (regardless of whether such
options have been terminated or not) (each an “Existing Non-Competition
Agreement”) does hereby agree and covenant, that notwithstanding the
cancellation of such prior options, such Existing Non-Competition Agreement
(including all of the terms and conditions contained therein) shall remain in
full force and effect and valid and enforceable.

 

12.                                 Non-Guarantee
of Employment or Service Relationship. 
Nothing in the Plan or this Agreement shall alter the at-will or other
employment status or other service relationship of the Optionee, nor be
construed as a contract of employment or service relationship between the
Company and the Optionee, or as a contractual right of Optionee to continue in
the employ of, or in a service relationship with, the Company for any period of
time, or as a limitation of the right of the Company to discharge the Optionee
at any time with or without cause or notice and whether or not such discharge
results in the failure of any Options to vest or any other adverse effect on
the Optionee’s interests under the Plan.

 

13.                                 No
Rights as a Stockholder.  The
Optionee shall not have any of the rights of a stockholder with respect to the
Option Shares until such shares have been issued to him or her upon the due
exercise of the Options.  No adjustment
shall be made for dividends or distributions or other rights for which the
record date is prior to the date such shares are issued.

 

14.                                 The
Company’s Rights.  The existence of
the Options shall not affect in any way the right or power of the Company or
its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or other stocks with preference ahead
of or convertible into, or otherwise affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or transfer
of all or any part of the Company’s assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.

 

15.                                 Optionee.  Whenever the word “Optionee” is used in any
provision of this Agreement under circumstances where the provision should
logically be construed, as determined by the Administrator, to apply to the
estate, personal representative, or beneficiary to whom the Options may be
transferred by will or by the laws of descent and distribution, or another permitted
transferee, the word “Optionee” shall be deemed to include such person.

 

16.                                 Notices.  All notices and other communications made or
given pursuant to this Agreement shall be in writing and shall be sufficiently
made or given if hand delivered or mailed by certified mail, addressed to the
Optionee at the address contained in the records of the Company, or addressed
to the Administrator, care of the Company for the attention of its Corporate
Secretary at its principal office or, if the receiving party consents in
advance, transmitted and received via telecopy or via such other electronic
transmission mechanism as may be available to the parties.

 

17.                                 Entire
Agreement.  This Agreement contains
the entire agreement between the parties with respect to the Options granted
hereunder.  Any oral or written
agreements, representations, warranties, written inducements, or other
communications made prior to the execution of this Agreement with respect to
the Options granted hereunder shall be void and ineffective for all purposes.

 

18.                                 Amendment.  This Agreement may be amended from time to
time by the Administrator in its discretion; provided, however,
that this Agreement may not be modified in a manner that would have a
materially adverse effect on the Options or Option Shares as determined in the
discretion of the Administrator, except as provided in the Plan or in a written
document signed by each of the parties hereto.

 

5

 

19.                                 Conformity
with Plan.  This Agreement is
intended to conform in all respects with, and is subject to all applicable
provisions of, the Plan. 
Inconsistencies between this Agreement and the Plan shall be resolved in
accordance with the terms of the Plan. 
In the event of any ambiguity in this Agreement or any matters as to
which this Agreement is silent, the Plan shall govern.  A copy of the Plan is provided to you with
this Agreement.

 

20.                                 Governing
Law. The validity, construction and effect of this Agreement, and of any
determinations or decisions made by the Administrator relating to this
Agreement, and the rights of any and all persons having or claiming to have any
interest under this Agreement, shall be determined exclusively in accordance
with the laws of the State of Delaware, without regard to its provisions
concerning the applicability of laws of other jurisdictions.  Any suit with respect hereto will be brought
in the federal or state courts in the districts which include the city and
state in which the principal offices of the Company are located, and the
Optionee hereby agrees and submits to the personal jurisdiction and venue
thereof.

 

21.                                 Headings.  The headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.

 

6

 

EXERCISE FORM

 

Administrator of
2002 Stock Incentive Plan

c/o Office of the
Corporate Secretary

Eschelon Telecom,
Inc.

 

Gentlemen:

 

I hereby exercise the Options granted to me on
                             ,
        , by ESCHELON TELECOM, INC.
(the “Company”), subject to all the terms and provisions of the applicable
grant agreement and of the Eschelon Telecom, Inc. 2002 Stock Incentive Plan
(the “Plan”), and notify you of my desire to purchase
            shares of
Common Stock of the Company at a price of
$                        
per share pursuant to the exercise of said Options.

 

This will confirm my understanding with respect to the shares to be
issued to me by reason of this exercise of the Options (the shares to be issued
pursuant hereto shall be collectively referred to hereinafter as the “Shares”)
as follows:

 

(a)                                  I
am purchasing the Shares for my own account for investment only, and not with a
view to, or for sale in connection with, any distribution of the Shares in
violation of the Securities Act of 1933 (the “Securities Act”), or any rule or regulation
under the Securities Act.

 

(b)                                 I
understand that the Shares are being issued without registration under the
Securities Act, in reliance upon one or more exemptions contained in the
Securities Act, and such reliance is based in part on the above
representation.  I also understand that
the Company is not obligated to comply with the registration requirements of
the Securities Act or with the requirements for an exemption under
Regulation A under the Securities Act for my benefit.

 

(c)                                  I
have had such opportunity as I deemed adequate to obtain from representatives
of the Company such information as is necessary to permit me to evaluate the
merits and risks of my investment in the Company.

 

(d)                                 I
have sufficient experience in business, financial and investment matters to be
able to evaluate the risks involved in the purchase of the Shares and to make
an informed investment decision with respect to such purchase.

 

(e)                                  I
can afford a complete loss of the value of the Shares and am able to bear the
economic risk of holding such Shares for an indefinite period.

 

(f)                                    I
understand that (i) the Shares have not been registered under the
Securities Act and are “restricted securities” within the meaning
of Rule 144 under the Securities Act; (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available
and, therefore, they may need to be held indefinitely; and (iii) there is
now no registration statement on file with the Securities and Exchange
Commission with respect to any stock of the Company and the Company has no
obligation or current intention to register the Shares under the Securities
Act.  As a condition to any transfer of
the Shares, I understand that the Company may require an opinion of counsel
satisfactory to the Company to the effect that such transfer does not require
registration under the Securities Act or any state securities law.

 

 

(g)                                 I
understand that the certificates for the Shares to be issued to me will bear a
legend substantially as follows:

 

The shares of stock represented by this certificate are subject to
restrictions on transfer, an option to purchase and a market stand-off
agreement set forth in a certain Stock Restriction Agreement between the
corporation and the registered owner of this certificate (or his predecessor in
interest), and no transfer of such shares may be made without compliance with
that Agreement.  A copy of that
Agreement is available for inspection at the office of the corporation upon
appropriate request and without charge.

 

The securities represented by this stock certificate have not been
registered under the Securities Act of 1933 (the “Act”) or applicable state
securities laws (the “State Acts”), and shall not be sold,
pledged, hypothecated, donated, or otherwise transferred (whether or not for
consideration) by the holder except upon the issuance to the corporation of a
favorable opinion of its counsel and/or submission to the corporation of such
other evidence as may be satisfactory to counsel for the corporation, to the
effect that any such transfer shall not be in violation of the Act and the
State Acts.

 

Appropriate stop
transfer instructions will be issued by the Company to its transfer agent.

 

(h) I understand that this exercise of the Options is valid only if I
have also executed before or on the date of this exercise (1) the Stock Restriction
Agreement attached to the Option Grant Agreement as Exhibit A, (2) the
Stockholders’ Agreement attached to the Option Grant Agreement, and (3) a
non-competition agreement in a form as required by the Company.

 

I understand that this exercise of the Options is valid only if I have
also executed before or on the date of this exercise a non-competition
agreement in a form as required by the Company.

 

Total Amount
Enclosed: 
$                

 

	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Optionee)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Received by
  ESCHELON TELECOM, INC. on

  
	
   

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
										

 

2

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