EXHIBIT 10.33
FOCAL COMMUNICATIONS CORPORATION
000 XXXXX XXXXXXX XXXXXX
XXXXXXX, XXXXXXXX 00000
October 1, 0000
XxxxxXxxx XxxxXxxx
Xxxxxxx0
Xxxx, Xxxxx PostalCode
RE: FOCAL COMMUNICATIONS CORPORATION AMENDED AND
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RESTATED NONQUALIFIED STOCK OPTION AGREEMENT
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Dear FirstName:
The Company is pleased to advise you that its Board of Directors (the
"Board") has granted to you stock options ("Options") under the Focal
Communications Corporation 1997 Nonqualified Stock Option Plan, as amended from
time to time (the "Plan"), subject to the following terms and conditions:
1. DEFINITIONS. For the purposes of this Agreement, the following
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terms shall have the meanings set forth below:
"Change in Control" shall mean the occurrence of any of the following
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events:
(a) The Company is merged or consolidated or reorganized with or into
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders
of securities entitled to vote generally in the election of Directors
immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or substantially all
of its assets to any other corporation or other legal person, and less than
a majority of the combined voting power of the then-outstanding securities
of such corporation or person immediately after such sale or transfer is
held in the aggregate by the holders of Common Stock immediately prior to
such sale or transfer;
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(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), as promulgated in each case pursuant
to the Exchange Act, disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial owner" is defined in
Rule 13d-3 promulgated under the Exchange Act or any successor rule or
regulation promulgated thereunder) of securities representing 50% or more
of the Voting Power; or
(d) If during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Directors and any new
Directors whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
Directors then still in office who either were Directors at the beginning
of the period or whose election was previously so approved cease for any
reason to constitute a majority of the Directors.
Notwithstanding the provisions of subparagraph (c) above, a "Change in Control"
shall not be deemed to have occurred for the purposes of this Agreement (i)
solely because MDCP either files or becomes obligated to file a report on
Schedule 13D (or any successor schedule or report), as promulgated pursuant to
the Exchange Act, disclosing beneficial ownership by it of securities
representing 50% or more of the Voting Power, (ii) solely because the Company or
any Company-sponsored employee stock ownership plan or other employee benefit
plan of the Company either files or becomes obligated to file a report or proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein), as
promulgated in each case pursuant to the Exchange Act, disclosing beneficial
ownership by it of securities representing 50% or more of the Voting Power or
otherwise, or because the Company reports that a change in control of the
Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership or (iii) solely because of a change in control of any
subsidiary (as the term "subsidiary" is defined in Section 424(f) of the Code)
of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
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any successor statute.
"Common Stock" shall mean the Company's Class A Common Stock, par
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value $.01 per share, or in the event that the outstanding Common Stock is
hereafter changed into or exchanged for different stock or securities of the
Company, such other stock or securities.
"Company" shall mean Focal Communications Corporation, a Delaware
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corporation, and (except to the extent the context requires otherwise) any
subsidiary corporation of Focal Communications Corporation, as the term
"subsidiary" is defined in Section 424(f) of the Code.
"Director" shall mean a member of the Board.
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"Disability" shall mean your inability, due to illness, accident,
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injury, physical or mental incapacity or other disability, to carry out
effectively your duties and obligations to the Company or to participate
effectively and actively in the management of the Company for a period
anticipated to last at least 6 months, as determined by the Board in its good
faith discretion.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended, and any successor statute.
"Fair Market Value" of the Common Stock shall be the average, over a
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period of 21 days consisting of the day as of which Fair Market Value is being
determined and the 20 consecutive business days prior to such day, of the
average of the closing prices of the sales of the Common Stock on all securities
exchanges on which the Common Stock may at that time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day the Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day the Common Stock is not quoted in the NASDAQ System, the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated or any similar successor organization. If at any time the Common
Stock is not listed on any securities exchange or quoted in the NASDAQ System or
the over-the-counter market, the Fair Market Value shall be the fair value of
the Common Stock determined in good faith by the Board.
"Grant Date" shall mean the date of this Option grant letter first
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written above.
"Initial Public Offering" shall mean the initial underwritten offering
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of equity securities of the Company to the general public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission pursuant to the Securities Act, provided that neither of the
following shall constitute an Initial Public Offering: (i) any issuance of
Common Stock as consideration or financing for a merger or acquisition or (ii)
any issuance of Common Stock, or rights to acquire Common Stock, to employees of
the Company as part of an incentive or compensation plan.
"MDCP" shall mean Madison Dearborn Capital Partners, L.P., a Delaware
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limited partnership.
"Option Shares" shall mean the shares of Common Stock issuable upon
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the exercise of the Options and, until the consummation of the Initial Public
Offering shall occur, any and all shares of Common Stock that may be issued in
respect of such shares of Common Stock pursuant to a stock dividend, stock
split, reorganization, recapitalization, merger, consolidation, conversion or
other transaction or event effecting a change in the capital structure of the
Company or otherwise affecting the Common Stock. Until the consummation of the
Initial Public Offering shall occur, (i) all such shares of Common Stock shall
continue to be Option Shares in the hands of any holder thereof other than you
(except the Company and any purchaser of such shares of Common Stock pursuant to
the repurchase provisions of paragraph 12 below or the provisions of paragraphs
14(b),
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14(c) and 16 below), and (ii) each such holder shall automatically succeed to
your rights and obligations hereunder as a holder of Option Shares.
"Registration Agreement" shall mean that certain Registration
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Agreement dated as of November 27, 1996, by and among the Company and certain
investors, as amended from time to time.
"Sale of the Company" shall mean a Change in Control pursuant to
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subparagraph (a) or (b) of the definition of Change in Control above that occurs
prior to the consummation of the Initial Public Offering.
"Securities Act" shall mean the Securities Act of 1933, as amended,
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and any successor statute.
"Successor Entity" shall mean a successor to the Company by merger,
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consolidation or other business combination or a purchaser of all or
substantially all of the Company's assets or a majority of the Company's
outstanding voting securities, as the case may be.
"Voting Power" shall mean, at any time, the votes relating to the
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then-outstanding securities entitled to vote generally in the election of
Directors.
2. THE OPTIONS.
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(a) Exercise Price and Type of Options. The Company is granting to
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you Options. Each of your Options is for the purchase of 1/500th of a share of
Common Stock at a price per share of $1,500.00 (the "Exercise Price"), payable
upon exercise as set forth in paragraph 2(b) below. Your Options are not
intended to be "incentive stock options" within the meaning of Section 422 of
the Code.
(b) Payment of Option Price. Subject to the provisions of paragraphs
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3 and 4 below, your Options may be exercised in whole or in part upon payment of
an amount (the "Option Price") equal to the product of (i) the Exercise Price
multiplied by (ii) the number of Option Shares (including any fractional share)
to be acquired; provided, however, that following the consummation of the
Initial Public Offering, (i) the Exercise Price shall be multiplied by the
number of whole Option Shares to be acquired, and (ii) any fractional share
shall be settled in cash in accordance with the provisions of clause (b) of the
last sentence of paragraph 5 below. The Option Price shall be payable (i) in
cash (including check, bank draft, money order or, following the consummation of
the Initial Public Offering, from the proceeds of sale through a broker on a
date satisfactory to the Company of some or all of the Option Shares to which
the exercise relates), (ii) by transfer to the Company of shares of Common Stock
that, at the time of exercise, have been held by you for at least six months
and, by themselves or together with cash, have a Fair Market Value equal to the
Option Price, or (iii) in the discretion of the Board, by delivery of a
promissory note in accordance with policies approved by the Board.
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3. EXERCISABILITY/VESTING.
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(a) Vesting Schedule. Your Options may be exercised only to the
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extent that they shall have become vested. Except as otherwise provided in
paragraphs 3(b)(i) and 3(c) below, your options shall vest and become
exercisable with respect to the following percentages of your Option Shares
(rounded to the nearest whole share) on the following vesting dates, provided
that you are then employed by (or are then serving as a director of) the Company
and shall have been continuously employed by (or shall have continuously served
as a director of) the Company from the Grant Date through such vesting date:
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Cumulative Percentage of Options
Vesting Date Vested on such Vesting Date
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12-month anniversary of the Grant Date 25%
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18-month anniversary of the Grant Date 37.5%
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24-month anniversary of the Grant Date 50%
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30-month anniversary of the Grant Date 62.5%
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36-month anniversary of the Grant Date 75%
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42-month anniversary of the Grant Date 87.5%
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48-month anniversary of the Grant Date 100%
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(b) Treatment of Options upon a Change in Control. Upon the occurrence
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of a Change in Control:
(i) Partial Acceleration of Vesting. Your Options shall automatically
become immediately vested and exercisable to the extent that they would
have otherwise become vested and exercisable 12 months from and after the
date of the Change in Control pursuant to paragraph 3(a) above, had you
been continuously employed by (or continuously served as a director of) the
Company during such twelve-month period (and any Options then remaining
unvested and unexercisable shall continue to vest and become exercisable on
the anniversaries of the Grant Date set forth in paragraph 3(a), less 12
months in the case of each such anniversary, so that the vesting schedule
set forth in paragraph 3(a) shall have been effectively accelerated by 12
months, subject to your continuous employment by (or continuous service as
a director of) the Company as provided in paragraph 3(a)); and
(ii) Conversion of Options. Except as otherwise provided in paragraph
16(a) with respect to an Approved Sale (as defined in Section 16(a)), if
the outstanding shares of Common Stock are converted into or exchanged for
a different number or kind of shares or other securities or other
consideration, your Options shall be exchanged for or otherwise
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converted into economically and otherwise substantively equivalent (as
determined by the Board in its good faith discretion in accordance with the
Plan) options to purchase shares of stock or other equity securities of any
Successor Entity.
(c) Acceleration of Vesting upon Discharge in Anticipation of or
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Following a Change in Control. If your employment is terminated by the Company
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in connection with or anticipation of a Change in Control, or if your employment
is terminated by the Company or a Successor Entity at any time during the two-
year period commencing on the date of a Change in Control, your Options shall
automatically become fully vested and immediately exercisable upon such
termination of your employment. For the purposes of this paragraph 3(c), your
employment shall be deemed to have been terminated by the Company or a Successor
Entity, if your employment is actually terminated by the Company or a Successor
Entity or is terminated by you as a result of (i) a material reduction in your
total compensation without your consent (it being understood that a change in
the form or measure of compensation, including but not limited to a change from
salary-based compensation to commission-based compensation or a rearrangement of
your compensation package to include a different combination of salary, bonus,
commission, options or other equity incentives, etc., shall not in and of itself
constitute such a reduction) or (ii) a relocation of your place of employment to
a site that is at least 50 miles from your then-current place of employment
without your consent.
4. EXPIRATION OF OPTIONS.
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(a) Normal Expiration. In no event shall any portion of your Options
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be exercisable after the tenth anniversary of the Grant Date.
(b) Early Expiration upon Termination of Employment. Except as
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otherwise provided in paragraph 3(c) above, any portion of your Options that
shall not have become vested and exercisable in accordance with the provisions
of paragraph 3(a) or 3(b)(i) above shall automatically expire and be forfeited
immediately upon the termination of your employment with the Company for any
reason. Subject to the provisions of paragraph 4(a) above, any unexercised
portion of your Options that shall have become vested and exercisable in
accordance with the provisions of paragraph 3 above on or prior to the date of
termination of your employment shall remain exercisable for a period of 60 days
from and after the date of termination of your employment.
5. PROCEDURE FOR EXERCISE OF OPTIONS. To the extent that your
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Options shall have vested and become exercisable in accordance with the
provisions of paragraph 3 above, they may be exercised in whole or in part from
time to time, subject to the provisions of paragraph 4 above, by delivering to
the Company (to the attention of the Secretary of the Company) (a) written
notice of exercise, specifying (i) the number of Options being exercised and
(ii) the number of Option Shares (including any fractional share, if the
exercise shall occur prior to the consummation of the Initial Public Offering)
being acquired, (b) payment of the Option Price in accordance with the
provisions of paragraph 2(b) above, and (c) if the exercise shall occur prior to
the consummation of the Initial Public Offering, your written acknowledgment
that you have read and been afforded an opportunity to ask questions of the
Company's management regarding all financial and other
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information provided to you regarding the Company. As a condition to any
exercise of your options prior to the consummation of an Initial Public
Offering, (a) you shall permit the Company to deliver to you all financial and
other information regarding the Company that the Company shall believe necessary
to enable you to make an informed investment decision, and (b) you shall make
all customary investment representations that the Company shall require.
Following the consummation of the Initial Public Offering, (a) the Company shall
not be obligated to issue any fractional Option Share, and (b) any fractional
Option Share shall be settled in cash, based on the Fair Market Value of the
Common Stock on the date of exercise.
6. COMPLIANCE WITH SECURITIES LAWS. You represent that, when you
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exercise any of your Options, you shall be purchasing Option Shares for your own
account and not on behalf of others. You understand and acknowledge that federal
and state securities laws govern and restrict your right to offer, sell or
otherwise dispose of any Option Shares unless your offer, sale or other
disposition thereof is registered under the Securities Act and state securities
laws or, in the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration or qualification thereunder. You agree
that you shall not offer, sell or otherwise dispose of any Option Shares in any
manner that would (a) require the Company to file any registration statement
with the Securities and Exchange Commission (or any similar filing under state
law) or to amend or supplement any such filing or (b) violate or cause the
Company to violate the Securities Act, the rules and regulations promulgated
thereunder or any other state or federal law. You further understand that the
certificates for any Option Shares you purchase shall bear such legends as the
Company deems necessary or desirable in connection with the Securities Act or
other rules, regulations or laws, and you agree that, at the time of such
purchase, you shall execute such documents necessary for the Company to perfect
exemptions from registration under federal and state securities laws as the
Company may deem necessary or advisable.
7. NON-TRANSFERABILITY OF OPTIONS. Your Options are personal to you
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and are not transferable by you other than by will or the laws of descent and
distribution. During your lifetime only you (or your guardian or legal
representative) may exercise your Options. In the event of your death, your
Options may be exercised only (a) by the executor or administrator of your
estate or the person or persons to whom your rights under the Options shall pass
by will or the laws of descent and distribution and (b) to the extent that you
were entitled hereunder at the date of your death.
8. CONFORMITY WITH PLAN. Your Options are intended to conform in all
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respects with, and are subject to all applicable provisions of, the Plan (a copy
of which is attached hereto and incorporated herein by reference).
Inconsistencies between this Agreement and the Plan shall be resolved in
accordance with the terms of the Plan. By executing and returning the enclosed
copy of this Agreement, you acknowledge your receipt of this Agreement and the
Plan and agree to be bound by all of the terms of this Agreement and the Plan.
9. RIGHTS OF PARTICIPANTS. Nothing in this Agreement shall interfere
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with or limit in any way the right of the Company to terminate your employment
at any time and for any
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reason or confer upon you any right to continue in the employ of the Company for
any period of time or to continue your present (or any other) rate of
compensation, and in the event of your termination of employment at any time and
for any reason, any portion of your Options that are not then vested and
exercisable in accordance with the provisions of paragraph 3 above shall expire
and be forfeited in accordance with the provisions of paragraph 4(b) above.
Nothing in this Agreement shall confer upon you any right to be selected again
as a Plan participant, and nothing in the Plan or this Agreement shall provide
for any adjustment to the number of Option Shares subject to your Options upon
the occurrence of subsequent events except as provided in paragraph 11 below.
10. WITHHOLDING OF TAXES. If the Company shall be required to
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withhold any federal, state, local or foreign tax in connection with any
exercise of your Options, you shall pay the tax or make provisions that are
satisfactory to the Company for the payment thereof. Following the consummation
of the Initial Public Offering, you may elect to satisfy all or any part of any
such withholding obligation by surrendering to the Company a portion of the
Option Shares that are issued or transferred to you upon the exercise of your
Options, and the Option Shares so surrendered by you shall be credited against
any such withholding obligation at the Fair Market Value thereof on the date of
exercise.
11. ADJUSTMENTS. In the event of a reorganization, recapitalization,
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stock dividend or stock split, or combination or other change in the shares of
Common Stock, the Board may make such adjustments in the number and type of
shares authorized by the Plan, the number and type of shares covered by your
Options and the Exercise Price specified herein as the Board may determine to be
appropriate and equitable in order to prevent the dilution or enlargement of
rights under your Option. The issuance by the Company of shares of stock of any
class, or options or securities exercisable or convertible into shares of stock
of any class, for cash or property or labor or services, upon direct sale, or
upon the exercise of rights or warrants to subscribe therefor, or upon the
exercise or conversion of other securities, shall not affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock then subject to any Options.
12. RIGHT TO REPURCHASE OPTION SHARES UPON TERMINATION OF EMPLOYMENT
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PRIOR TO CONSUMMATION OF INITIAL PUBLIC OFFERING. Prior to the consummation of
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the Initial Public Offering:
(a) Repurchase of Option Shares. If your employment with the Company
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shall terminate for any reason (the date on which such termination shall
occur being referred to as the "Termination Date"), then the Company (or
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its assignee pursuant to paragraph 12(c)) shall have the option to
repurchase all or any portion of your Option Shares issued or issuable upon
exercise of your Options, whether held by you or by one or more of your
transferees, at the price determined in accordance with the provisions of
paragraph 13 (the "Repurchase Option").
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(b) Repurchase by Company. The Company may elect to purchase all or
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any portion of the Option Shares by delivery of written notice (the
"Repurchase Notice") to you or any other holder(s) of the Option Shares
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within the 20 days prior to and including, or within the 120 days
following, the Termination Date. The Repurchase Notice shall set forth the
number of Option Shares to be acquired from you and such other holder(s),
the aggregate consideration to be paid for such shares and the time and
place for the closing of the transaction. The number of Option Shares to be
repurchased by the Company shall first be satisfied to the extent possible
from the Option Shares held by you at the time of delivery of the
Repurchase Notice. If the number of Option Shares then held by you is less
than the total number of Option Shares the Company has elected to
repurchase, the Company shall repurchase the remaining Option Shares
elected to be repurchased from the other holder(s) thereof, pro rata
according to the number of Option Shares held by each such holder at the
time of delivery of the Repurchase Notice (determined as closely as
practicable to the nearest whole share).
(c) Assignment of Repurchase Option. By action of the Board, the
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Company may assign all or any portion of its repurchase rights under this
paragraph 12 to any holder of Common Stock (an "Other Stockholder") or any
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executive officer of the Company or any of its subsidiaries.
Notwithstanding the foregoing sentence, the Company may not assign its
right under paragraph 13(b) to pay a portion of the purchase price for any
Option Shares repurchased hereunder in the form of a promissory note or to
offset such purchase price against obligations or indebtedness owed by you
to the Company.
(d) Closing of Repurchase of Option Shares. The repurchase of Option
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Shares pursuant to this paragraph 12 shall be closed at the Company's
executive offices not less than 20 days after the giving of the Repurchase
Notice but not more than 20 days after the expiration of the 140-day period
referred to in paragraph 12(b). At the closing, the purchaser or
purchasers shall pay the purchase price in the manner specified in
paragraph 13(b), and you and any other holder(s) of Option Shares being
repurchased shall deliver the certificate or certificates representing such
shares to the purchaser or purchasers or their nominees, accompanied by
duly executed stock powers. (If any Option Shares issuable upon exercise
of your Options shall be repurchased hereunder, such Options shall be
deemed to have been exercised simultaneously with such repurchase.) Any
purchaser of Option Shares pursuant to this paragraph 12 shall be entitled
to receive customary representations and warranties from you and any other
selling holder(s) of Option Shares regarding the sale of such shares
(including representations and warranties regarding good title to such
shares, free and clear of any liens or encumbrances) and to require the
signatures of all sellers to be guaranteed by a national bank or reputable
securities broker.
Upon the consummation of the Initial Public Offering, the provisions of this
paragraph 12 shall automatically become null and void and of no further force or
effect.
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13. PURCHASE PRICE FOR OPTION SHARES.
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(a) Purchase Price. The purchase price to be paid for the Option
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Shares repurchased by the Company and Other Stockholders pursuant to paragraph
12 shall be equal to (i) in the case of Option Shares issued upon exercise of
your Options prior to such repurchase, the Fair Market Value of such Option
Shares as of the Termination Date, or (ii) in the case of Option Shares issuable
upon exercise of your Options (which shall be deemed to have been exercised
simultaneously with such repurchase), the Fair Market Value of such Option
Shares as of the Termination Date minus the Option Price for such Option Shares.
(b) Manner of Payment. If the Company elects to repurchase all or
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any portion of the Option Shares, including Option Shares held by one or more
transferees, the Company shall pay for such shares by delivery of a cashier's or
certified check or wire transfer of immediately available funds in an amount
equal to the purchase price of the Option Shares to be repurchased; provided,
however, in the event that the Board determines in its good faith discretion
that the Company is not in a position to pay in immediately available funds any
or all of such repurchase price, the Company may pay a portion of the repurchase
price for such Option Shares (which portion shall not exceed the Fair Market
Value of such Option Shares (as of the date on which such Option Shares were
originally issued to you) minus the Option Price for such Option Shares) in the
form of a subordinated promissory note of the Company. Such subordinated
promissory note shall bear interest at the rate paid on the Company's senior
debt obligations (or if the Company has no such senior debt, at the prime rate
announced or published by Citibank, N.A. from time to time), shall have all
principal and accrued interest due and payable on the fifth anniversary of the
date of issuance and shall be subordinated on terms and conditions satisfactory
to the holder(s) of the Company's indebtedness for borrowed money. In addition,
the Company may pay the purchase price for such Option Shares by offsetting
amounts outstanding under any indebtedness or obligations owed by you to the
Company. If the Company assigns any part of its Repurchase Option, each such
assignee shall pay for that portion of such Option Shares with a cashier's or
certified check or wire transfer of immediately available funds in an amount
equal to the purchase price for such Option Shares to be purchased by the
assignee.
(c) Termination of Purchase Price Provisions. Upon the consummation
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of the Initial Public Offering, the provisions of this paragraph 13 shall
automatically become null and void and of no further force or effect.
14. RESTRICTIONS ON TRANSFER OF OPTION SHARES PRIOR TO CONSUMMATION
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OF INITIAL PUBLIC OFFERING. Prior to the consummation of the Initial Public
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Offering:
(a) Transfer of Option Shares. You shall not sell, assign, transfer,
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pledge or otherwise dispose of or encumber any interest in any Option
Shares (a "Transfer") except pursuant to the provisions of paragraphs 12,
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14(b) or 16 ("Exempt Transfers").
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(b) Certain Permitted Transfers. The restrictions contained in this
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paragraph 14 shall not apply with respect to transfers of Option Shares (i)
pursuant to applicable laws of
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descent and distribution or (ii) among your family group; provided,
however, that the restrictions contained in this paragraph shall continue
to be applicable to the Option Shares after any such transfer, and the
transferees of such Option Shares shall agree in writing to be bound by the
provisions of this Agreement. For the purposes of this paragraph 14(b),
your "family group" means (i) persons related to you by blood, marriage or
adoption, (ii) any trust solely for the benefit of you and/or the persons
described in clause (i) of this sentence, and (iii) any limited
partnership, limited liability partnership, limited liability company or
similar entity, all of the equity interests of which are held by you and/or
the persons described in clause (i) and/or clause (ii) of this sentence.
(c) Termination of Restrictions. The restrictions on the transfer of
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Option Shares set forth in this paragraph 14 shall continue with respect to
each Option Share until the date on which such Option Share has been
transferred in an Exempt Transfer other than an Exempt Transfer
contemplated by paragraph 14(b).
Upon the consummation of the Initial Public Offering, the provisions of this
paragraph 14 shall automatically become null and void and of no further force or
effect.
15. ADDITIONAL RESTRICTIONS ON TRANSFER.
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(a) Restrictive Legend. Unless and until the Option Shares shall be
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sold pursuant to a transaction registered under the Securities Act or pursuant
to a transaction that complies with Rule 144 under the Securities Act,
certificates representing Option Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON ______, ____, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN AN OPTION AGREEMENT BETWEEN THE COMPANY AND
ONE OF ITS EMPLOYEES, DATED AS OF [____________________________,
________] A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) Opinion of Counsel. You may not sell, assign, transfer, pledge
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or otherwise dispose of or encumber any Option Shares (except pursuant to an
effective registration statement under the Securities Act or, 90 days after the
consummation of the Initial Public Offering, in compliance with Rule 701(c)(3)
under the Securities Act) without first delivering to the Company
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an opinion of counsel reasonably acceptable in form and substance to the Company
that registration under the Securities Act or any applicable state securities
law is not required in connection with such transfer.
(c) Holdback. You agree not to effect any public sale or
--------
distribution of any equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for any equity securities of the
Company, during the seven days preceding, and the 180 days following, the
effectiveness of any underwritten Demand Registration (as defined in the
Registration Agreement) or any underwritten Piggyback Registration (as defined
in the Registration Agreement), except as part of any such underwritten
registration if otherwise permitted.
16. SALE OF THE COMPANY PRIOR TO CONSUMMATION OF INITIAL PUBLIC
-----------------------------------------------------------
OFFERING. Prior to the consummation of the Initial Public Offering:
--------
(a) Consent to Sale of the Company. If a Sale of the Company is
------------------------------
approved by the Company and the holders of at least 67% of the
Institutional Investor Stock (as defined in the Stock Purchase Agreement
dated as of November 27, 1996, by and among the Company, MDCP, Frontenac
VI, L.P., Battery Ventures III, L.P., Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx,
Xxxxxx Xxxxxx and Xxxxxx X. Xxxxxx, Xx.) then outstanding (the "Approved
--------
Sale"), you shall consent to and raise no objections against the Approved
----
Sale of the Company, and if the Approved Sale of the Company is structured
as a sale of stock, you shall agree to sell all of your Option Shares then
outstanding, and all of your Options then remaining unexercised hereunder
(regardless of whether such Options are then vested and exercisable), on
such terms and conditions as shall be approved by the Board and the holders
of at least 67% of the Institutional Investor Stock then outstanding,
provided that such terms and conditions (including price) shall be no less
favorable than those on which shares of Institutional Investor Stock are
being sold in the Approved Sale. Any of your unexercised Options to be
purchased in the Approved Sale shall be purchased at a price equal to (i)
the price at which shares of Institutional Investor Stock are being
purchased in the Approved Sale minus (ii) the Option Price. You shall take
all necessary and desirable actions in connection with the consummation of
the Approved Sale of the Company.
(b) Purchaser Representative. If the Company or the holders of the
------------------------
Company's securities enter into any negotiation or transaction for which
Rule 506 (or any successor rule then in effect) under the Securities Act
may be available with respect to such negotiation or transaction (including
a merger, consolidation or other reorganization), you shall at the request
of the Company appoint a "purchaser representative" (as such term is
defined in Rule 501 under the Securities Act) reasonably acceptable to the
Company. If you appoint the purchaser representative designated by the
Company, the Company shall pay the fees of such purchaser representative.
If you decline to appoint the purchaser representative designated by the
Company, you shall appoint another purchaser representative reasonably
acceptable to the Company, and you shall be responsible for the fees of the
purchaser representative so appointed.
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The provisions of this paragraph 16 shall automatically become null and void and
of no further force or effect upon the earlier of (i) the consummation of a Sale
of the Company or (ii) the consummation of the Initial Public Offering.
17. REMEDIES. The parties hereto (and prior to the consummation of
--------
the Initial Public Offering, the Other Stockholders as third-party
beneficiaries) shall be entitled to enforce their rights under this Agreement
specifically, to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights existing in their favor. The
parties hereto acknowledge and agree that money damages would not be an adequate
remedy for any breach of the provisions of this Agreement and that any party
hereto (and prior to the consummation of the Initial Public Offering, any Other
Stockholder as a third-party beneficiary) may apply to any court of law or
equity of competent jurisdiction for specific performance or injunctive relief
(without posting bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement. All rights of the Other
Stockholders as third-party beneficiaries under this Agreement shall
automatically terminate upon the consummation of the Initial Public Offering.
18. AMENDMENT. Any amendment to the Plan shall be deemed an
---------
amendment to this Agreement to the extent that any such amendment is applicable
to this Agreement; provided, however, that (a) prior to the consummation of the
Initial Public Offering, no such amendment shall adversely affect your rights
under this Agreement without the prior written consent of a majority (based on
the total number of Option Shares subject to Options held) of the holders of
then outstanding Options granted under the Plan whose rights are similarly
adversely affected, and (b) following the consummation of the Initial Public
Offering, no such amendment shall adversely affect your rights under this
Agreement without your prior written consent. Prior to the consummation of the
Initial Public Offering, this Agreement may not otherwise be amended in any way
that would adversely affect your rights hereunder without the prior written
consent of a majority (based on the total number of Option Shares subject to
Options held) of the holders of then outstanding Options granted under the Plan
whose Option agreements are to be similarly amended, and following the
consummation of the Initial Public Offering, this Agreement may not otherwise be
amended in any way that would adversely affect your rights hereunder without
your prior written; provided, however, that prior to the consummation of the
Initial Public Offering, no provision of paragraph 12, 13, 14, 15, 16, 17 or 18
of this Agreement may be amended or waived without the prior written consent of
at least 67% of the Institutional Investor Stock then outstanding, if such
amendment or waiver would have a detrimental effect on the Other Stockholders.
19. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and permitted assigns of the parties hereto whether so
expressed or not.
20. SEVERABILITY. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall
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be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any other provision of this
Agreement.
21. COUNTERPARTS. This Agreement may be executed simultaneously in
------------
two or more counterparts (including by facsimile), each of which shall
constitute an original, and all of which taken together shall constitute one and
the same Agreement.
22. DESCRIPTIVE HEADINGS. The descriptive paragraph headings in this
--------------------
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
23. GOVERNING LAW. The corporate law of Delaware shall govern all
-------------
questions concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and interpretation of
this Agreement shall be governed by the internal law, and not the law of
conflicts, of Illinois.
24. NOTICES. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally,
one business day after being sent by reputable overnight courier (charges
prepaid) or four business days after being mailed by certified or registered
mail (postage prepaid and return receipt requested), to the recipient. Such
notices, demands and other communications shall be sent to the addresses
indicated below:
(a) If to you:
<> <>
<>
<>, <> <>
(b) If to the Company:
Focal Communications Corporation
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: President
(c) If to the Other Stockholders, to the address listed in the
Company's records; or to such other address (or to the attention of such other
person) as the receiving party may hereafter specify by prior written notice to
the sending party.
25. THIRD-PARTY BENEFICIARIES. You and the Company hereby
-------------------------
acknowledge that, until the consummation of the Initial Public Offering, the
Other Stockholders are third-party beneficiaries under this Agreement.
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26. ENTIRE AGREEMENT. This Agreement constitutes the entire
----------------
understanding between you and the Company and supersedes all prior oral and
written agreements with respect to the subject matter hereof.
* * * *
Please execute the enclosed copy of this Agreement in the space
provided below and return it to the Secretary of the Company at the executive
offices of the Company to confirm your receipt of copies of, and your
understanding and acceptance of the terms and conditions of, this Agreement and
the Plan.
Very truly yours,
FOCAL COMMUNICATIONS CORPORATION
By____________________________________________
Its President and Chief Executive Officer
Enclosures: 1. Extra copy of this Agreement
2. Copy of the Plan
The undersigned hereby acknowledges receipt of copies of, and his or
her understanding and acceptance of the terms and conditions of, this Agreement
and the Plan.
Dated as of: ______________, 1998
___________________________________________
(Signature)
___________________________________________
Name (printed or typed)
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