Exhibit 10.6
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made this 14nd day of April, 2001, by Xxxxxxx
X. Xxxx (the "Employee") in favor of Focal Communication Corporation, a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Employee has delivered to the Company a Promissory Note,
dated the date hereof (the "Note"), evidencing his obligation to repay a loan
made by the Company to the Employee (the "Loan"); and
WHEREAS, it is a condition to the Loan that the Employee pledge the
Pledged Stock as security for his obligations under the Note;
NOW, THEREFORE, in consideration of the premises contained herein the
parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, the following terms
shall have the following meanings:
"Code" means the Uniform Commercial Code from time to time in effect
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in the State of Illinois.
"Collateral" means the Pledged Stock, together with all stock
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certificates, securities or other property, options and rights of any
nature whatsoever that may be issued or granted in respect of the Pledged
Stock by the Company to the Employee while this Pledge Agreement is in
effect and all Proceeds.
"Obligations" means the unpaid principal of and interest on the Note
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and all other obligations and liabilities of the Employee to the Company
that may arise under, out of, or in connection with, the Note or this
Pledge Agreement.
"Pledge Agreement" means this Pledge Agreement, as amended,
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supplemented or otherwise modified from time to time.
"Pledged Stock" means (i) the shares of the Company's Common Stock,
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par value $.01 per share ("Common Stock"), listed on Schedule 1 hereto and
(ii) any shares of Common Stock hereafter acquired by the Employee, whether
by a purchase, the lapse of restrictions on shares of restricted stock, the
exercise of a stock option or otherwise.
"Proceeds" means all "proceeds" as such term is defined in Section 9-
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306(1) of the Uniform Commercial Code in effect in the State of Illinois on
the date hereof and shall in any event include, but shall not be limited
to, all dividends or other income from
the Pledged Stock or other Collateral, collections thereon or distributions
with respect thereto.
2. Pledge; Grant of Security Interest. Concurrently with his execution and
delivery of this Pledge Agreement, the Employee shall deliver the Pledged Stock
listed on Schedule 1 hereto to the Company. From time to time hereafter, as the
Employee acquires additional Pledged Stock, the Employee shall deliver such
Pledged Stock to the Company and, pending such delivery, shall hold such Pledged
Stock as agent for the Company, separate and apart from his other assets and
properties and in trust for the benefit of the Company. The Employee hereby
grants to the Company a security interest in the Collateral, as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration, upon required prepayment or otherwise)
of the Obligations.
3. Stock Powers. Concurrently with the delivery to the Company of each
certificate representing one or more shares of Pledged Stock, the Employee shall
deliver an undated stock power covering such certificate, duly executed in blank
by the Employee.
4. Representations and Warranties. The Employee represents and warrants
that:
(a) the Employee is the record and beneficial owner of, and has good
and marketable title to, the Pledged Stock listed on Schedule 1 hereto,
free of any and all liens or options in favor of, or claims of, any other
Person, except the liens created hereunder; and
(b) the Employee will be the record and beneficial owner of, and will
have good and marketable title to, any additional Pledged Stock acquired
after the date hereof, free of any and all liens or options in favor of, or
claims of, any other Person except the liens created hereunder; and
(c) the lien granted pursuant to this Pledge Agreement constitutes a
valid, perfected senior lien on the Collateral.
5. Covenants. The Employee covenants and agrees with the Company that,
from and after the Closing Date until the Obligations are paid in full:
(a) If the Employee shall, as a result of his ownership of the
Pledged Stock or any other Collateral, become entitled to receive or shall
receive any non-cash dividend or distribution (whether in additional shares
of Common Stock, other securities or other property and whether in
connection with any reclassification, increase or reduction of capital or
any reorganization or otherwise), or any option or right, whether in
addition to, in substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock or any of the other Collateral, or otherwise in
respect thereof, the Employee shall accept the same as the agent of the
Company, hold the same separate and apart from his other assets and
properties and in trust for the benefit of the Company, and deliver the
same forthwith to the Company in the exact form received, duly endorsed by
the Employee to the Company, if required, together with an undated stock
power duly executed in blank by the Employee covering any certificate
received by the Employee, to be held by the
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Company, subject to the terms hereof, as additional collateral security for
the Obligations.
(b) Without the prior written consent of the Company, the Employee
will not (i) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Collateral or (ii) create, incur or
permit to exist any lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein, except for
the lien created by this Pledge Agreement.
(c) At any time and from time to time upon the written request of the
Company, the Employee will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the
Company may reasonably request for the purposes of obtaining or preserving
the full benefits of this Pledge Agreement and the rights and powers herein
granted.
(d) The Employee agrees to pay and hold the Company harmless from any
and all liabilities with respect to, or resulting from any delay in paying,
any and all stamp, excise, sales or other taxes that may be payable or
determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Pledge
Agreement.
6. Voting Rights. Unless the Employee fails to pay or perform any of the
Obligations of the Employee under the Note or this Pledge Agreement, the
Employee shall be permitted to exercise all voting and corporate rights with
respect to the Pledged Stock; provided, however, that no vote shall be cast or
corporate rights exercised or other action taken that, in the Company's
reasonable judgment, would impair the Collateral or would be inconsistent with
or result in any violation of any provision of the Note or this Pledge
Agreement.
7. Rights of the Company. (a) If the Employee fails to pay or perform any
of the Obligations, all shares of the Pledged Stock shall be registered in the
name of the Company or its nominee and the Company or its nominee may thereafter
exercise (i) all voting, corporate and other rights pertaining to such shares of
the Pledged Stock at any meeting of stockholders of the Company or otherwise and
(ii) any and all rights of conversion, exchange, subscription and any other
rights, privileges or options pertaining to such shares of the Pledged Stock as
if it were the absolute owner thereof (including but not limited to the right to
exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of the Company or upon the exercise by the Employee or
the Company of any right, privilege or option pertaining to such shares of the
Pledged Stock and, in connection therewith, the right to deposit and deliver any
and all of the Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as it may
determine), all without liability except to account for property actually
received by it, but the Company shall have no duty to the Employee to exercise
any such right, privilege or option and shall not be responsible for any failure
to do so or delay in so doing.
(b) The rights of the Company hereunder shall not be conditioned or
contingent upon the pursuit by the Company of any right or remedy against the
Employee or against any other Person that may be or become liable in respect of
all or any part of the
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Obligations or against any collateral security therefor, guarantee therefor or
right of offset with respect thereto. The Company shall not be liable for any
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in so doing, and the Company shall not be under any obligation to
sell or otherwise dispose of any Collateral upon the request of the Employee or
any other person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
8. Remedies. If the Employee fails to perform any of his Obligations and
such failure is continuing, the Company may exercise, in addition to all other
rights and remedies granted in this Pledge Agreement and in any other instrument
or agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the Code. Without limiting the generality of
the foregoing, the Company, without demand of performance or other demand,
presentment, protest, notice or advertisement of any kind (except any notice
required by the Note or any notice required by law and hereinafter referred to)
to or upon the Employee or any other Person (any and all such demands, defenses,
notices and advertisements being hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and may forthwith sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any exchange, broker's
board or office of the Company or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The Company shall
have the right, upon any such public sale or sales and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in the
Employee, and any such right or equity is hereby waived or released. The Company
shall apply any Proceeds from time to time held by it and the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Company
hereunder, including but not limited to reasonable attorneys' fees and
disbursements of counsel to the Company, to the payment of the Obligations in
whole or in part and in such order as the Company may elect, and only after such
application and after the payment by the Company of any other amount required by
any provision of law, including but not limited to Section 9-504(1)(c) of the
Code, need the Company account for the surplus, if any, to the Employee. To the
extent permitted by applicable law, the Employee waives all claims, damages and
demands, other than any rights of notice and cure under the Note, he may acquire
against the Company arising out of the exercise by him of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. The Employee shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
Collateral are insufficient to pay the Obligations and the fees and disbursement
of any attorneys employed by the Company to collect such deficiency.
9. Private Sales. (a) The Employee recognizes that, in the absence of
registration under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws, the Company may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and
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applicable state securities laws or otherwise and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Employee acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The
Company shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to register such securities for public sale
under the Securities Act or under applicable state securities laws.
(b) The Employee further agrees to use his best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this paragraph 9
valid and binding and in compliance with any and all other applicable
requirements of law. The Employee further agrees that a breach of any of the
covenants contained in this paragraph 9 will cause irreparable injury to the
Company, that the Company has no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in this
paragraph 9 shall be specifically enforceable against the Employee, and the
Employee hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants.
10. Limitation on Duties Regarding Collateral. From and after the Closing
Date, the Company's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Company deals with similar securities and property for its own account. Neither
the Company nor any of its directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in so doing or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Employee or otherwise.
11. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
12. Severability. Any provision of this Pledge Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. Paragraph Headings. The paragraph headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
14. No Waiver; Cumulative Remedies. The Company shall not by any act
(except by a written instrument pursuant to paragraph 15 hereof) be deemed to
have waived any right or remedy hereunder or to have acquiesced in any breach of
any of the terms and conditions hereof. No failure on the part of the Company to
exercise, or delay on the part of the Company in exercising, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further
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exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Company of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Company would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
15. Waivers and Amendments; Successors and Assigns; Governing Law. None of
the terms or provisions of this Pledge Agreement may be amended, supplemented or
otherwise modified except by a written instrument executed by the Employee and
the Company, provided that any provision of this Pledge Agreement enforceable by
the Company may be waived by the Company in a letter or agreement executed by
the Company. This Pledge Agreement shall be binding upon the successors and
assigns of the Employee and shall inure to the benefit of the Company and its
successors and assigns. This Pledge Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
[Illinois] .
16. Notices. Notices may be given by the parties hereto and shall be
considered effective when personally delivered or one day after delivery by
reputable overnight courier, given or addressed to the parties or their
permitted assigns at the following addresses or such other address as shall be
given in writing by either party to the other.
To the Company:
Focal Communications Corporation
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
To the Employee:
Xxxxxxx X. Xxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
17. Counterparts. This Pledge Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and in making proof of
this Pledge Agreement, it shall not be necessary to produce or account for more
than one such counterpart.
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IN WITNESS WHEREOF, the undersigned have caused this Pledge Agreement
to be duly executed and delivered as of the date first above written.
/s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
FOCAL COMMUNICATIONS CORPORATION
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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Title: Chief Financial Officer
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SCHEDULE 1
to Pledge Agreement
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DESCRIPTION OF PLEDGED STOCK
Stock Certificate No. of
Issuer Class of Stock Number(s) Shares
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Focal Communications Common Stock FC0376 150,000
Corporation
