Exhibit 4.5
STOCK PURCHASE AGREEMENT
BY AND AMONG
FOCAL COMMUNICATIONS CORPORATION
AND
MADISON DEARBORN CAPITAL PARTNERS, L.P.
FRONTENAC VI, L.P.
BATTERY VENTURES III, L.P.
XXXXX X. XXXX
XXXX X. XXXXXXXX
XXXXXX XXXXXX
XXXXXX X. XXXXXX, XX.
NOVEMBER 27, 1996
i
TABLE OF CONTENTS
Page
1. Authorization and Closings........................................... 2
1A. Authorization of the Class A Common........................... 2
1B. Purchase and Sale of the Class A Common....................... 2
1C. The Initial Closing........................................... 2
1D. The Subsequent Closings....................................... 3
2. Conditions to the Initial Closing.................................... 4
2A. Representations and Warranties; Covenants..................... 4
2B. Amendment of Certificate of Incorporation..................... 4
2C. Amendment of the Company's Bylaws............................. 4
2D. Stockholders Agreement........................................ 4
2E. Executive Stock Agreements.................................... 4
2F. Registration Agreement........................................ 4
2G. Vesting Agreements............................................ 4
2H. Interconnection Agreement and Achievement of Common Carrier
Status....................................................... 4
2I. Sale of Class A Common to Each Investor....................... 5
2J. Securities Law Compliance..................................... 5
2K. Opinion of the Company's Counsel.............................. 5
2L. Proceedings................................................... 5
2M. Expenses...................................................... 5
2N. Compliance with Applicable Laws............................... 5
2O. Initial Closing Documents..................................... 6
2P. Waiver........................................................ 6
3. Conditions to Each Subsequent Closing................................. 6
3A. Authorized by Initial and/or Subsequent Business Plan(s)...... 7
3B. Representations and Warranties................................ 7
3C. No Default.................................................... 7
3D. No Material Adverse Change.................................... 7
3E. Proceedings................................................... 8
3F. Opinion of the Company's Counsel.............................. 8
3G. Expenses...................................................... 8
3H. Subsequent Closing Documents.................................. 8
3I. Waiver........................................................ 8
4. Covenants............................................................. 9
4A. Financial Statements and Other Information.................... 9
4B. Inspection of Property........................................ 11
4C. Restrictions.................................................. 12
4D. Affirmative Covenants......................................... 15
4E. Compliance with Agreements.................................... 16
4F. Current Public Information.................................... 00
-x-
0X. Amendment of Vesting Agreements or Executive Stock
Agreements................................................... 16
4H. Intellectual Property Rights.................................. 16
4I. Public Disclosures............................................ 16
4J. First Refusal Rights.......................................... 17
5. Investors' Put Right................................................. 18
5A. Put Right..................................................... 18
5B. Company Obligation............................................ 18
5C. Repurchase Price.............................................. 18
5D. Repurchase Closing............................................ 19
6. Transfer of Restricted Securities.................................... 19
6A. General Provisions............................................ 19
6B. Opinion Delivery.............................................. 19
6C. Rule 144A..................................................... 19
6D. Legend Removal................................................ 20
7. Representations and Warranties of the Company........................ 20
7A. Organization, Corporate Power and Licenses.................... 20
7B. Capital Stock and Related Matters............................. 20
7C. Authorization; No Breach...................................... 21
7D. Conduct of Business; Absence of Liabilities................... 21
7E. Assets........................................................ 21
7F. No Subsidiaries............................................... 21
7G. Contracts and Commitments..................................... 21
7H. Intellectual Property Rights.................................. 22
7I. Litigation, etc............................................... 22
7J. Brokerage..................................................... 23
7K. Governmental Consent, etc..................................... 23
7L. Compliance with Laws.......................................... 23
7M. Affiliated Transactions....................................... 23
7N. Projections and Pro Forma Financial Statements................ 23
7O. Disclosure.................................................... 24
Section 8. Representations and Warranties of the Institutional
Investors.................................................... 24
8A. Assets........................................................ 24
8B. Initial Business Plan......................................... 24
8C. Authorization................................................. 24
9. Miscellaneous Provisions.............................................. 25
9A. Expenses...................................................... 25
9B. Remedies...................................................... 25
-ii-
9C. Investor's Investment Representations......................... 26
9D. Consent to Amendments......................................... 26
9E. Survival of Representations and Warranties.................... 26
9F. Successors and Assigns........................................ 26
9G. Capital and Surplus; Special Reserves......................... 27
9H. Severability.................................................. 27
9I. Counterparts.................................................. 27
9J. Descriptive Headings; Interpretation.......................... 27
9K. Governing Law................................................. 27
9L. Notices....................................................... 28
9M. Understanding among the Investors............................. 28
9N. No Strict Construction........................................ 28
Appendix A - Index of Definitions
Appendix B - Schedule of Investors
Appendix C - Original Offering Memorandum
Exhibits:
Exhibit 1 - The Initial Business Plan
Exhibit 2 - Restated Certificate of Incorporation
Exhibit 3 - Form of Executive Note
Exhibit 4 - Form of Executive Investor Stock Pledge Agreement
Exhibit 5 - Bylaws Amendment
Exhibit 6 - Stockholders Agreement
Exhibit 7 - Form of Executive Stock Agreement and Employment Agreement
Exhibit 8 - Registration Agreement
Exhibit 9 - Form of Vesting Agreement
Exhibit 10 - Interconnection Agreement
Exhibit 11 - Opinion of Xxxxxxxx, Xxxxxx & Xxxxxxx (Initial Closing)
Exhibit 12 - Opinion of Xxxxxxxx, Xxxxxx & Xxxxxxx (Subsequent Closings)
Exhibit 13 - Form of Nondisclosure and Noncompetition Agreement
-iii-
Disclosure Schedules
Licenses Schedule
Capitalization Schedule
Liabilities Schedule
Assets Schedule
Contracts Schedule
Intellectual Property Schedule
Litigation Schedule
Consents Schedule
Affiliated Transactions Schedule
-iv-
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of November
---------
27, 1996, by and among Focal Communications Corporation, a Delaware corporation
(the "Company"), Madison Dearborn Capital Partners, L.P., a Delaware limited
-------
partnership ("MDCP"), Frontenac VI, L.P., a Delaware limited partnership
----
("Frontenac"), Battery Ventures III, L.P., a Delaware limited partnership ("BV",
--------- --
and collectively with MDCP and Frontenac, the "Institutional Investors"), and
-----------------------
Xxxxxx X. Xxxxxx, Xx. ("Xxxxxx"), Xxxx X. Xxxxxxxx ("Xxxxxxxx"), Xxxxx X. Xxxx
------ --------
("Addy") and Xxxxxx Xxxxxx ("Xxxxxx", and, collectively with Xxxxxx, Xxxxxxxx
---- ------
and Addy, the "Executive Investors"). The Institutional Investors and the
-------------------
Executive Investors are referred to herein collectively as the "Investors" and
---------
individually as an "Investor." Capitalized terms used herein are defined in the
--------
Index of Definitions attached hereto as Appendix A, which is hereby made a part
----------
of this Agreement.
The Company has submitted a business plan in form and substance set
forth in Exhibit 1 attached hereto (the "Initial Business Plan"), which
--------- ---------------------
contains, among other information, a financial model, with underlying
assumptions, containing a plan to establish the Company's business in the
Chicago xxxxxxxxxxxx xxxxxxxxxxx xxxx ("XXX"). Pursuant to such Initial
---
Business Plan, the Company will require a certain level of capital to establish
itself in the Chicago MSA, such amount having been determined to be $8 million,
$4 million of which the Company will need at the time of the Initial Closing.
Thus, pursuant to the terms and subject to the conditions set forth
herein, this Agreement contemplates an initial transaction in which the
Investors will buy from the Company, and the Company will sell to the Investors,
79,384.62 shares of the Company's Class A Common Stock, par value $.01 per
share (the "Class A Common") for an aggregate purchase price of $4 million, and
--------------
subsequent transactions in which the Investors will make pro rata contributions
to the capital of the Company of up to an additional $21.8 million in the
aggregate (for a total investment, including the $4 million initial purchase, of
up to $25.8 million). Attached as Appendix C hereto is the original offering
----------
memorandum of the Company, which is included for reference purposes only and
shall in no way be construed as a Subsequent Business Plan (as defined below) or
a proposal therefor, nor considered to obligate any party hereto to approve any
Subsequent Business Plan.
1
Additionally, this Agreement contemplates that after the Initial
Closing hereunder (as defined below), Frontenac's designee(s) (or, if none,
Frontenac) may purchase up to 230.77 shares of Class A Common for a total
initial purchase price of up to $11,627.91, and MDCP's designee(s) (or, if
none, MDCP) may purchase up to 384.61 shares of Class A Common for a total
initial purchase price of $19,379.84 upon entering into a written counterpart to
this Agreement agreeing to be bound by the provisions of such purchases hereof.
All such additional purchasers shall be considered Investors and all such
purchased Class A Common shall be considered Investor Stock; provided that any
--------
such additional purchaser may prepay its capital contribution commitment to the
Company pursuant to this Agreement at the time of purchase (in the amount of
$325 per share, less the purchase price paid for such shares), upon which
prepayment such additional purchaser shall be under no further obligation to
make subsequent capital contributions hereunder.
NOW, THEREFORE, in consideration of the mutual promises made herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. AUTHORIZATION AND CLOSINGS.
--------------------------
1.1A. Authorization of the Class A Common. The Company shall
-----------------------------------
authorize the issuance and sale to the Investors of 80,000 shares of its Class A
Common, having the rights and preferences set forth in the Restated Certificate
of Incorporation attached hereto as Exhibit 2.
---------
1.1B. Purchase and Sale of the Class A Common. At the Initial
---------------------------------------
Closing (as defined below), subject to the terms and conditions set forth
herein, the Company shall sell to each Investor and each Investor shall purchase
from the Company the number of shares of Class A Common set forth opposite such
Investor's name on the "Schedule of Investors," which is attached hereto as
---------------------
Appendix B. The aggregate purchase price to be paid at the Initial Closing by
----------
each Investor, which is set forth opposite such Investor's name on the Schedule
of Investors, is referred to herein as that Investor's "Initial Contribution."
--------------------
The sale of the Class A Common to each Investor at the Initial Closing shall
constitute a separate sale hereunder.
1.1C. The Initial Closing. The closing of the separate initial
-------------------
purchases and sales of the Class A Common (the "Initial Closing") shall take
---------------
place at the offices of Xxxxxxxx & Xxxxx at 8:30 a.m. on November 27, 1996, or
at such other place or on such other date as may be mutually agreeable to the
Company and the Investors (the "Initial Closing Date"), but in no event shall
--------------------
the Initial Closing Date be later than November 30, 1996. At the Initial
Closing, the Company shall deliver to each Investor stock certificates
evidencing the Class A Common to be purchased by such Investor, registered in
such Investor's name, upon such Investor's delivery to the Company of either of
the following:
(i) in the case of an Institutional Investor, a cashier's or
certified check or wire transfer of immediately available funds to an
account designated by the Company (collectively, "Cash"), in the aggregate
----
amount of such Institutional Investor's Initial Contribution, or
-2-
(ii) in the case of an Executive Investor, canceled Company
notes (as well as documentation acceptable in good faith to the
Institutional Investors sufficient to demonstrate such amounts were loaned
to the Company) in the aggregate amount of $6,000, together with Cash, or
if so specified opposite such Executive Investor's name on the Schedule of
Investors, a combination of Cash and a ninety-day promissory note in the
form of Exhibit 3 attached hereto (such Executive Investor's "Note") in the
--------- ----
proportion specified opposite such Executive Investor's name on the
Schedule of Purchasers, in an aggregate amount equal to such Executive
Investor's Initial Contribution minus $6,000. Each Executive Investor's
-----
Note (including any such Notes issued at Subsequent Closings, as defined
below) shall be secured by a pledge of all Company securities owned by such
Executive Investor (including any such securities acquired hereafter at any
time that such Note is outstanding, but excluding shares of Class C Common
pledged to an Institutional Investor pursuant to a Vesting Agreement), and
in connection therewith, such Executive Investor will enter into a pledge
agreement in the form of Exhibit 4 attached hereto (the "Executive Investor
--------- ------------------
Stock Pledge Agreement").
----------------------
1.1D. The Subsequent Closings. Each of the subsequent closings
------------------------
hereunder (the "Subsequent Closings") shall, subject to the terms and conditions
-------------------
set forth below, occur (i) if the Specified Contribution of each Investor at
such Subsequent Closing, together with the Initial Contribution and the
aggregate Specified Contributions of each such Investor at all prior Subsequent
Closings, will not exceed 80/258 times the maximum commitment set forth opposite
-----
each such Investor's name on the Schedule of Investors (each such Investor's
"Maximum Commitment"), at a time and place determined by the Company's president
------------------
and set forth in a written notice given to each Investor at least 10 days (or,
if BV does not have immediately available funds sufficient to satisfy its
obligation at such Subsequent Closing, 15 days) prior to the applicable
Subsequent Closing, or (ii) otherwise, at a time and place determined by the
Company's board of directors (the "Board") and set forth in a written notice
-----
sent to each Investor at least 30 days prior to the applicable Subsequent
Closing. Such notice shall set forth the aggregate amount to be contributed by
the Investors at such Subsequent Closing and the pro rata portion thereof (based
on the Investors' respective Initial Contributions) to be contributed by each
Investor (each Investor's "Specified Contribution" for such Subsequent Closing);
----------------------
provided that the aggregate amount of each Investors' Specified Contribution at
--------
any Subsequent Closing shall not, together with the Initial Contribution and the
aggregate Specified Contributions of each such Investor at all prior Subsequent
Closings, exceed each such Investor's Maximum Commitment. At each Subsequent
Closing, each Investor shall deliver to the Company either of the following:
(i) in the case of an Institutional Investor, Cash in the
aggregate amount of such Institutional Investor's Specified Contribution
for such Subsequent Closing, or
(ii) in the case of an Executive Investor, Cash or, at the
election of such Executive Investor, Cash and a ninety-day Note, in an
aggregate amount equal to such Executive Investor's Specified Contribution
for such Subsequent Closing.
SECTION 2. CONDITIONS TO THE INITIAL CLOSING. The obligation of
---------------------------------
each Investor to purchase and pay for the Class A Common at the Initial Closing
is subject to the satisfaction as of the Initial Closing of the following
conditions:
-3-
2.1A. Representations and Warranties; Covenants. The representations
-----------------------------------------
and warranties contained in Section 7 and 8 hereof shall be true and correct in
all material respects at and as of the Initial Closing as though then made,
except to the extent of changes caused by the transactions expressly
contemplated herein, and the Company shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior to
the Initial Closing.
2.1B. Amendment of Certificate of Incorporation. The Company's
-----------------------------------------
Certificate of Incorporation shall have been amended to include the provisions
set forth in Exhibit 2 hereto (as so amended, the "Certificate of
--------- --------------
Incorporation"), shall be in full force and effect under the laws of Delaware as
-------------
of the Initial Closing as so amended, and shall not have been further amended or
modified.
2.1C. Amendment of the Company's Bylaws. The Company's bylaws shall
---------------------------------
have been duly amended to include the provisions set forth in Exhibit 5 hereto
---------
(as so amended, the "Bylaws"), shall be in full force and effect under the laws
of Delaware as of the Initial Closing as so amended, and shall not have been
further amended or modified.
2.1D. Stockholders Agreement. The Company and the Investors shall
----------------------
have entered into a stockholders agreement in form and substance set forth in
Exhibit 6 attached hereto (the "Stockholders Agreement"), and the Stockholders
--------- ----------------------
Agreement shall be in full force and effect as of the Initial Closing.
2.1E. Executive Stock Agreements. The Company shall have entered
--------------------------
into an executive stock agreement and employment agreement, in form and
substance substantially similar to Exhibit 7 attached hereto (the "Executive
--------- ---------
Stock Agreements"), with each Executive Investor, and each Executive Stock
----------------
Agreement shall not have been amended or modified and shall be in full force and
effect as of the Initial Closing.
2.1F. Registration Agreement. The Company and the Investors shall
----------------------
have entered into a registration agreement in form and substance as set forth in
Exhibit 8 attached hereto (the "Registration Agreement"), and the Registration
--------- ----------------------
Agreement shall be in full force and effect as of the Initial Closing.
2.1G. Vesting Agreements. The Company and the Executive Investors
------------------
shall have entered into a vesting agreement, in form and substance substantially
similar to Exhibit 9 attached hereto (the "Vesting Agreements"), with each
--------- ------------------
Institutional Investor, and each Vesting Agreement shall be in full force and
effect as of the Initial Closing.
2.1H. Interconnection Agreement and Achievement of Common Carrier
-----------------------------------------------------------
Status. The Company shall have entered into an Interconnection Agreement under
------
Sections 251 and 252 of the Telecommunications Act of 1996, with Ameritech
Information Industrial Services, a division of Ameritech Services, Inc., on
behalf of Ameritech Illinois, in form and substance as set forth in Exhibit 10
----------
attached hereto (the "Interconnection Agreement"), and such Interconnection
-------------------------
Agreement shall be in full force and effect as of the Initial Closing. In
addition, the Company shall have been certified by the Illinois Commerce
Commission to provide
-4-
facilities-based and resold, switched and dedicated, local exchange services in
the portions of MSA-1 served by Ameritech and Centel, and interexchange services
throughout Illinois ("Chicago Common Carrier Status"), and such certification
-----------------------------
shall not have been conditioned, restricted or withdrawn, and shall not be under
challenge, as of the Initial Closing.
2.1I. Sale of Class A Common to Each Investor. The Company shall
---------------------------------------
have simultaneously sold to each Investor the Class A Common to be purchased by
such Investor hereunder at the Initial Closing and shall have received payment
therefor in full as specified in paragraph 1C hereof.
2.1J. Securities Law Compliance. The Company shall have made all
-------------------------
filings under all applicable federal and state securities laws necessary to
consummate the issuance, in compliance with such laws, of the Class A Common to
be issued at the Initial Closing pursuant to this Agreement.
2.1K. Opinion of the Company's Counsel. Each Investor shall have
--------------------------------
received from Bischoff, Kenney, and Xxxxxxx, counsel for the Company, an opinion
with respect to the matters set forth in Exhibit 11 attached hereto, which shall
----------
be addressed to each Investor, dated the Initial Closing Date, and in form and
substance satisfactory to each Investor.
2.1L. Proceedings. All corporate and other proceedings taken or
-----------
required to be taken by the Company in connection with the transactions to occur
at the Initial Closing shall be consummated at or prior to the Initial Closing
and all documents incident thereto shall be satisfactory in form and substance
to each Institutional Investor and the Institutional Investors' special counsel.
2.1M. Expenses. At the Initial Closing, the Company shall have (i)
--------
reimbursed the Institutional Investors for their out-of-pocket expenses,
including the fees and expenses of their special counsel and special
telecommunications counsel as provided in paragraph 9A hereof, to the extent
then known, (ii) paid the fees and expenses of the counsel for the Company
related to the transactions contemplated hereby, to the extent then known, and
(iii) reimbursed Xxxxxx for his reasonable expenses incurred in relocating from
Charlotte, North Carolina to Chicago, Illinois, to the extent then known,
provided that such reimbursement to Xxxxxx shall not exceed $25,000.
--------
2.1N. Compliance with Applicable Laws. The purchase of Class A
-------------------------------
Common by each Investor hereunder at the Initial Closing shall not be prohibited
by any applicable law or governmental rule or regulation and shall not subject
such Investor to any penalty, liability or, in such Investor's reasonable
judgment, other onerous condition under or pursuant to any applicable law or
governmental rule or regulation, and the purchase of the Class A Common by each
Investor hereunder shall be permitted by the laws, rules and regulations of the
jurisdictions and governmental authorities and agencies to which such Investor
is subject.
2.1O. Initial Closing Documents. The Company shall have delivered to
-------------------------
each Investor all of the following documents:
-5-
(i) an Officer's Certificate, dated as of the Initial Closing
Date, stating that the conditions specified in paragraphs 1A, 2A-2C, 2E,
and 2H-2J, have been fully satisfied;
(ii) certified copies of (a) the resolutions duly adopted by
the Board authorizing the execution, delivery and performance of this
Agreement, the Stockholders Agreement, the Executive Stock Agreements, the
Registration Agreement and each of the other agreements contemplated
hereby, the filing of the amendment to the Company's certificate of
incorporation referred to in paragraph 2B, the amendment to the Company's
bylaws referred to in paragraph 2C, the issuance and sale of the Class A
Common, and the consummation of all other transactions to occur as of the
Initial Closing as contemplated by this Agreement, and (b) the resolutions
duly adopted by the Company's stockholders adopting the amendment to the
certificate of incorporation referred to in paragraph 2B;
(iii) certified copies of the Certificate of Incorporation and
the Bylaws, each as in effect at the Initial Closing;
(iv) certified copies of the Executive Stock Agreements and the
Interconnection Agreement, each as in effect at the Initial Closing;
(v) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions to occur as of the Initial Closing hereunder (including,
without limitation, all blue sky law filings, waivers of all preemptive
rights and rights of first refusal, and certified orders of the Illinois
Commerce Commission certifying the Company for Chicago Common Carrier
Status and approving the Interconnection Agreement);
(vi) such other documents relating to the transactions
contemplated by this Agreement as any Institutional Investor or the
Institutional Investors' special counsel, or any Executive Investor or the
counsel for the Company, may reasonably request.
2.1P. Waiver. Any condition specified in this Section 2 may be
------
waived if such waiver is consented to by each Investor; provided that no such
--------
waiver shall be effective against any Investor unless it is set forth in a
writing executed by such Investor.
SECTION 3. CONDITIONS TO EACH SUBSEQUENT CLOSING. The obligation of
-------------------------------------
each Investor to make such Investor's Specified Contribution to the capital of
the Company at each Subsequent Closing is subject to the satisfaction as of such
Subsequent Closing of
(i) if the Specified Contribution of each Investor at such
Subsequent Closing, together with the Initial Contribution and the
aggregate Specified Contributions of each such Investor at all prior
Subsequent Closings, will not exceed 80/258 times such Investor's Maximum
-----
Commitment, the following condition: As of the date of such Subsequent
Closing, there shall not have been any loss or invalidity of the
Interconnection Agreement or of any similar agreement entered into after
the date hereof, any change in
-6-
the laws or regulations to which the Company is subject that negatively
affects the ability of the Company to conduct its business, nor any
conditioning, restriction, or withdrawal of Chicago Common Carrier Status
or of any similar certification granted after the date hereof; or
(ii) otherwise, all of the following conditions:
3.1A. Authorized by Initial and/or Subsequent Business Plan(s). The
--------------------------------------------------------
Specified Contributions of all Investors at such Subsequent Closing shall be
contemplated and authorized under the terms of the Initial Business Plan and/or
any Subsequent Business Plan(s). "Subsequent Business Plan" means a business
------------------------
proposal submitted by Management to the Board setting forth proposed business
activities of the Company during a specified period of time, projections of
income from such business activities, the capital contributions Management deems
necessary to support such business activities during such time, and a budget of
expected expenditures of such capital, where such proposal has been approved by
a majority of the Board and the holders of at least 67% of the Institutional
Investor Stock then outstanding. "Management" means the Executive Investors (so
----------
long as such individuals are employed by the Company) together with such other
employees of the Company or its Subsidiaries as may be designated by the
Executive Investors and approved by the Board.
3.1B. Representations and Warranties. The representations and
------------------------------
warranties contained in paragraphs 7A, 7B(ii), 7C, 7J, 7K, 7L, and 7O hereof
shall be true and correct in all material respects at and as of such Subsequent
Closing as though then made, except to the extent of changes caused by the
transactions expressly contemplated herein.
3.1C. No Default. The Company shall not be in default of any of its
----------
obligations to the Investors pursuant to this Agreement, the Stockholders
Agreement, the Registration Agreement, or any Executive Stock Agreement or
Vesting Agreement, and neither the Company nor any of its Subsidiaries (if any)
shall be in material default under any other material agreement to which it is a
party.
3.1D. No Material Adverse Change. The Investors shall not be
--------------------------
obligated to make their Specified Contributions at a Subsequent Closing if, in
the good faith judgment of all of the Institutional Investors then holding at
least 3% of the Company's outstanding Common Stock, a material adverse change
(other than a change specifically and expressly contemplated in a Subsequent
Business Plan approved prior to the date of such Subsequent Closing) has
occurred after the date hereof and prior to such Subsequent Closing in the
business, financial condition, operations, assets, or business prospects of the
Company or any Subsidiary. Material adverse change shall for the purposes of
this paragraph include, without limitation, the loss or invalidity of any
material contract or agreement to which the Company is a party where such loss
or invalidity negatively affects the ability of the Company to conduct its
business (including, but not limited to, the Interconnection Agreement and any
similar agreement entered into after the date hereof), or the conditioning,
restriction, or withdrawal of Chicago Common Carrier Status or any similar
certification granted after the date hereof.
-7-
3.1E. Proceedings. All corporate and other proceedings taken or
-----------
required to be taken by the Company in connection with the transactions to occur
at the Subsequent Closing as contemplated by this Agreement shall be consummated
at or prior to the Subsequent Closing and all documents incident thereto shall
be reasonably satisfactory in form and substance to each Investor and the
Investors' special counsel.
3.1F. Opinion of the Company's Counsel. The Investors shall have
--------------------------------
received from Bischoff, Kenney, and Xxxxxxx, counsel for the Company, an opinion
with respect to the matters set forth in Exhibit 12 attached hereto, which shall
----------
be addressed to the Investors, dated the date of the Subsequent Closing, and in
form and substance satisfactory to the holders of at least 67% of the
Institutional Investor Stock then outstanding.
3.1G. Expenses. At such Subsequent Closing, the Company shall have
--------
reimbursed the Institutional Investors for their out-of-pocket expenses,
including the fees and expenses of their special counsel and their special
telecommunications counsel as provided in paragraph 9A hereof, to the extent
then known, and shall have reimbursed the Executive Investors for all of the
fees and expenses of the Executive Investors' special counsel incurred in
connection with such Subsequent Closing, to the extent then known.
3.1H. Subsequent Closing Documents. The Company shall have delivered
----------------------------
to the Investors all of the following documents:
(i) an Officer's Certificate, dated the date of the Subsequent
Closing, stating that the conditions specified in paragraphs 3A through 3C,
inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the
Board requesting the capital contributions being made at such Subsequent
Closing; and
(iii) such other documents relating to the transactions to occur
at such Subsequent Closing as any Institutional Investor or the
Institutional Investors' special counsel may reasonably request.
3.1I. Waiver. Any condition specified in this Section 3 may be
------
waived if consented to by holders of at least 67% of the Institutional Investor
Stock; provided that the condition in 3G respecting the Company's payment of the
--------
fees and expenses for the Executive Investors' special counsel may not be waived
without the express written consent of a majority of the Executive Investors.
SECTION 4. COVENANTS.
---------
4.1A. Financial Statements and Other Information. The Company shall
------------------------------------------
deliver (a) to each Executive Investor, so long as such Executive Investor holds
any Investor Stock, the information set forth in subparagraph 4A(iii) below,
and (b) to each Institutional Investor, so long as such Institutional Investor
holds any Investor Stock, and to any subsequent holder of at least
-8-
10% of the Investor Stock then outstanding (each such Institutional Investor and
each such subsequent 10% holder, a "Qualified Holder"), all the information
----------------
described in this paragraph 4A:
(i) as soon as available but in any event within 30 days after
the end of each monthly accounting period in each fiscal year: (a)
unaudited consolidating and consolidated statements of income and cash
flows of the Company and its Subsidiaries for such monthly period and for
the period from the beginning of the fiscal year to the end of such month,
and unaudited consolidating and consolidated balance sheets of the Company
and its Subsidiaries as of the end of such monthly period, setting forth in
each case comparisons to the Company's annual budget and to the
corresponding period in the preceding fiscal year, and all such statements
shall be prepared in accordance with generally accepted accounting
principles, consistently applied and shall be certified by the Company's
chief financial officer, and (b) a status report prepared by the Company's
chief financial officer, indicating whether the Company has met its
budgeted financial goals (including those specified in the Initial Business
Plan or in any Subsequent Business Plan), discussing the reasons for any
variation from such goals, and describing what actions the Company and its
Subsidiaries have taken and propose to take in order to meet budgeted
financial targets in the future;
(ii) within 45 days after the end of each quarterly accounting
period in each fiscal year, an Officer's Certificate stating that the
Company is not in default under this Agreement, the Stockholders Agreement,
the Registration Agreement, or any Executive Stock Agreement or Vesting
Agreement, and that neither the Company nor any of its Subsidiaries is in
default under any of its other material agreements or, if any such default
exists, specifying the nature and period of existence thereof and what
actions the Company and its Subsidiaries have taken and propose to take
with respect thereto;
(iii) within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year, setting forth in each case comparisons to the
Company's annual budget and to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles, consistently
applied, and accompanied by (a) with respect to the consolidated portions
of such statements, an opinion containing no exceptions or qualifications
(except for qualifications regarding specified contingent liabilities) of
an independent accounting firm of recognized national standing acceptable
to the holders of at least 67% of the Institutional Investor Stock then
outstanding, (b) a certificate from such accounting firm, addressed to the
Board, stating that in the course of its examination nothing came to its
attention that caused it to believe that there was any default specified in
paragraph 4A(ii) in existence or that there was any other default by the
Company or any Subsidiary in the fulfillment of or compliance with any of
the terms, covenants, provisions or conditions of any other material
agreement to which the Company or any Subsidiary is a party or, if such
accountants have reason to believe any such default by the Company or any
Subsidiary exists, a certificate specifying the nature and period of
existence thereof, and (c) a copy of such firm's annual management letter
to the Board;
-9-
(iv) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's operations or financial affairs given to the
Company by its independent accountants (and not otherwise contained in
other materials provided hereunder);
(v) at least 30 days but not more than 90 days prior to the
beginning of each fiscal year, an annual budget prepared on a monthly basis
for the Company and its Subsidiaries for such fiscal year (displaying
anticipated statements of income and cash flows and balance sheets), and
promptly upon preparation thereof any other significant budgets prepared by
the Company and any revisions of such annual or other budgets, and within
30 days after any monthly period in which there is a material adverse
deviation from the annual budget, an Officer's Certificate explaining the
deviation and what actions the Company has taken and proposes to take with
respect thereto;
(vi) promptly (but in any event within five business days)
after the discovery or receipt of notice of any default under any material
agreement to which the Company or any of its Subsidiaries is a party, any
condition or event which is reasonably likely to result in any material
liability under any federal, state or local statute or regulation relating
to public health and safety, worker health and safety or pollution or
protection of the environment or any other material adverse change, event
or circumstance affecting the Company or any Subsidiary (including, without
limitation, the filing of any material litigation against the Company or
any Subsidiary or the existence of any dispute with any Person which
involves a reasonable likelihood of such litigation being commenced), an
Officer's Certificate specifying the nature and period of existence thereof
and what actions the Company and its Subsidiaries have taken and propose to
take with respect thereto;
(vii) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Company sends to its stockholders and
copies of all registration statements and all regular, special or periodic
reports which it files, or (to its knowledge) any of its officers or
directors file with respect to the Company, with the Securities and
Exchange Commission or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public concerning
material developments in the Company's and its Subsidiaries' businesses;
and
(viii) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Qualified
Holder may reasonably request.
Each of the financial statements referred to in subparagraphs 4A(i) and (iii)
shall be true and correct in all material respects as of the dates and for the
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end adjustments for recurring
accruals (none of which would, alone or in the aggregate, be materially adverse
to
-10-
the financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole).
Notwithstanding the foregoing, the provisions of this paragraph 4A shall cease
to be effective so long as the Company (a) is subject to the periodic reporting
requirements of the Securities Exchange Act and continues to comply with such
requirements and (b) promptly provides to each Qualified Holder (and to each
Executive Investor then holding any Investor Stock) all reports and other
materials filed by the Company with the Securities and Exchange Commission
pursuant to the periodic reporting requirements of the Securities Exchange Act;
provided that so long as any Investor Stock remains outstanding, the Company
--------
shall continue to deliver to each Qualified Holder the information specified in
subparagraphs 4A(ii), 4A(iii)(b), 4A(vi), and 4A(viii).
Except as otherwise required by law or judicial order or decree or requested by
any governmental agency or authority, or as specified in the immediately
following proviso, each Person entitled to receive information regarding the
Company and its Subsidiaries under paragraph 4A or 4B shall not disclose any
such information to any third party (other than such Person's advisors or
representatives); provided that such a Person may disclose such information (i)
--------
in connection with the sale or transfer of any Investor Stock if such Person's
transferee agrees in writing to be bound by the provisions hereof, or (ii) if
such information is available to the public other than by reason of such
Person's breach of this provision.
All holdings of Investor Stock or Institutional Investor Stock by Persons who
are Affiliates of each other shall be aggregated for purposes of meeting any
threshold tests under this Agreement.
4.1B. Inspection of Property. To the extent not otherwise prohibited
----------------------
by law or regulation, the Company shall permit any representatives designated by
any Qualified Holder, upon reasonable notice and during normal business hours
and at such other times as any such Qualified Holder may reasonably request to
(i) visit and inspect any of the properties of the Company and its Subsidiaries,
(ii) examine the corporate and financial records of the Company and its
Subsidiaries and make copies thereof or extracts therefrom and (iii) discuss the
affairs, finances and accounts of any such corporations with the directors,
officers, key employees and independent accountants of the Company and its
Subsidiaries. The presentation of an executed copy of this Agreement by any
Qualified Holder to the Company's independent accountants shall constitute the
Company's permission to its independent accountants to participate in
discussions with such Persons.
4.1C. Restrictions. The Company shall not, without the prior written
------------
consent of the holders of at least 67% of the Institutional Investor Stock then
outstanding:
(i) directly or indirectly declare or pay any dividends or
make any distributions upon any of its capital stock;
(ii) directly or indirectly redeem, purchase or otherwise
acquire, or permit any Subsidiary to redeem, purchase or otherwise acquire,
any of the Company's or any Subsidiary's capital stock or other equity
securities (including, without limitation, warrants, options and other
rights to acquire such capital stock or other equity securities,
-11-
and the exercise of first refusal rights under the Stockholders Agreement),
except for: (a) cancellations of the Company's Common Stock pursuant to any
of the Vesting Agreements, (b) repurchases of Investor Stock pursuant to
Section 5 or paragraph 9B(ii) of this Agreement, (c) repurchases of the
Company's capital stock from employees of the Company or its Subsidiaries
(or such employees' transferees) pursuant to the terms of the Executive
Stock Agreements contemplated by this Agreement, or (d) repurchases of
options to acquire the Company's capital stock or of capital stock issued
upon the exercise of such options, pursuant to the terms of any Permitted
Stock Option Plan that may be approved by the Board, as contemplated under
subparagraph 4C(xix) of this Agreement;
(iii) except upon conversion of Class C Common into Class B
Common pursuant to the Certificate of Incorporation, or as expressly
contemplated by this Agreement or the Executive Stock Agreement, authorize,
issue or enter into any agreement providing for the issuance (contingent or
otherwise) of (a) any notes or debt securities containing equity features
(including, without limitation, any notes or debt securities convertible
into or exchangeable for capital stock or other equity securities, issued
in connection with the issuance of capital stock or other equity securities
or containing profit participation features), other than as may be
expressly specified in the Initial Business Plan or any Subsequent Business
Plan, or (b) any capital stock or other equity securities (or any
securities convertible into or exchangeable for any capital stock or other
equity securities);
(iv) make, or permit any Subsidiary to make, any loans or
advances to, guarantees for the benefit of, or Investments in, any Person
(other than a Wholly-Owned Subsidiary established under the laws of a
jurisdiction of the United States or any of its territorial possessions),
except for (a) reasonable advances to employees or customers in the
ordinary course of business and (b) Investments having a stated maturity no
greater than one year from the date the Company makes such Investment in
(1) obligations of the United States government or any agency thereof or
obligations guaranteed by the United States government, (2) certificates of
deposit of commercial banks having combined capital and surplus of at least
$500 million or (3) commercial paper with a rating of at least "Prime-1" by
-------
Xxxxx'x Investors Service, Inc.;
(v) merge or consolidate with any Person or permit any
Subsidiary to merge or consolidate with any Person (other than a merger
between Wholly-Owned Subsidiaries);
(vi) sell, lease or otherwise dispose of, or permit any
Subsidiary to sell, lease or otherwise dispose of, more than 10% of the
consolidated assets of the Company and its Subsidiaries (computed on the
basis of book value, determined in accordance with generally accepted
accounting principles consistently applied, or fair market value,
determined by the Board in its reasonable good faith judgment) in any
transaction or series of related transactions (other than sales in the
ordinary course of business), or sell or permanently dispose of any of its
or any Subsidiary's Intellectual Property Rights;
-12-
(vii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation,
any reorganization into a limited liability company, a partnership or any
other non-corporate entity which is treated as a partnership for federal
income tax purposes), except as provided in paragraph 5(d) of the
Stockholders Agreement;
(viii) acquire, or permit any Subsidiary to acquire, any
interest in any company or business (whether by a purchase of assets,
purchase of stock, merger or otherwise), or enter into any joint venture;
(ix) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than the
provision of local exchange telecommunications services or such other
business activities as may be identified in a Subsequent Business Plan;
(x) become subject to, or permit any of its Subsidiaries to
become subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument which by its terms would
(under any circumstances) restrict (a) the right of any Subsidiary to make
loans or advances or pay dividends to, transfer property to, or repay any
Indebtedness owed to, the Company or another Subsidiary or (b) the
Company's right to perform the provisions of this Agreement, the
Stockholders Agreement, the Registration Agreement, the Certificate of
Incorporation or the Bylaws (including, without limitation, the provisions
of Section 5 hereof);
(xi) except as expressly contemplated by this Agreement, make
any amendment to the Certificate of Incorporation or the Bylaws, or file
any resolution of the Board with the Delaware Secretary of State containing
any provisions which would adversely affect or otherwise impair the rights
or the relative preferences and priorities of the holders of the Class A
Common under the Certificate of Incorporation;
(xii) enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, employees or Affiliates or with any individual related
by blood, marriage or adoption to any such individual or with any entity in
which any such Person or individual owns a beneficial interest, except for
customary employment arrangements and benefit programs on reasonable terms
and except as otherwise expressly contemplated by this Agreement;
(xiii) establish or acquire (a) any Subsidiaries other than
Wholly-Owned Subsidiaries or (b) any Subsidiaries organized outside of the
United States and its territorial possessions;
(xiv) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, Indebtedness
exceeding an aggregate principal amount of $100,000 outstanding at any time
on a consolidated basis (other than
-13-
Indebtedness expressly specified in the Initial Business Plan or any
Subsequent Business Plan);
(xv) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Liens other
than Permitted Liens;
(xvi) make any capital expenditures or permit any Subsidiary to
make any capital expenditures (including, without limitation, payments with
respect to capitalized leases, as determined in accordance with generally
accepted accounting principles consistently applied) exceeding $100,000 in
the aggregate on a consolidated basis during any twelve-month period (other
than capital expenditures expressly specified in the Initial Business Plan
or any Subsequent Business Plan);
(xvii) enter into any leases or other rental agreements
(excluding capitalized leases, as determined in accordance with generally
accepted accounting principles consistently applied) under which the amount
of the aggregate lease payments for all such agreements exceeds $100,000 on
a consolidated basis for any twelve-month period, provided that the Company
--------
shall be allowed to enter into any leasing arrangements that are necessary
to the conduct of its business purpose and expressly specified in the
Initial Business Plan or any Subsequent Business Plan (including, but not
limited to, leasing telecommunications networks);
(xviii) change its fiscal year;
(xix) adopt any new stock option plan or employee stock
ownership plan or issue any shares of Common Stock to its or its
Subsidiaries' employees other than a plan, the terms of which shall be
approved by a majority of the Board and the holders of at least 67% of the
Institutional Investor Stock then outstanding, under which during the four-
year period after the date hereof specified employees of the Company or its
Subsidiaries are granted options to acquire, for fair market value, up to
5% (by value) of the Company's common stock (a "Permitted Stock Option
----------------------
Plan");
----
(xx) issue or sell any shares of the capital stock, or rights
to acquire shares of the capital stock, of any Subsidiary to any Person
other than the Company or a Wholly-Owned Subsidiary; or
(xxi) use the proceeds from the sale of the Class A Common and
the subsequent capital contributions at the Subsequent Closings other than
for working capital and budgeted general corporate purposes or as
contemplated by the Initial Business Plan and any Subsequent Business Plan,
as applicable.
The restrictions of this paragraph 4C shall terminate upon the consummation of a
Public Offering.
4.1D. Affirmative Covenants. So long as any Investor Stock remains
---------------------
outstanding, the Company shall, and shall cause each Subsidiary (if any) to:
-14-
(i) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and all material
licenses, authorizations and permits necessary to the conduct of its
businesses;
(ii) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or
profits therefrom (in each case before the same becomes delinquent and
before penalties accrue thereon) and all material claims for labor,
materials or supplies which if unpaid would by law become a Lien upon any
of its property unless and to the extent that the same are being contested
in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect
thereto;
(iii) comply with all other material obligations which it incurs
pursuant to any contract or agreement, whether oral or written, express or
implied, as such obligations become due, unless and to the extent that the
same are being contested in good faith and by appropriate proceedings and
adequate reserves (as determined in accordance with generally accepted
accounting principles, consistently applied) have been established on its
books with respect thereto;
(iv) comply in all material respects with all applicable laws,
rules and regulations of the FCC and all other governmental authorities
material to the business of the Company and its Subsidiaries (including,
without limitation, all requirements for maintaining Chicago Common Carrier
Status or any similar certification granted after the date hereof);
(v) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in
such amounts as are customary for well-insured corporations of similar size
engaged in similar lines of business;
(vi) maintain proper books of record and account which present
fairly in all material respects its financial condition and results of
operations and make provisions on its financial statements for all such
proper reserves as in each case are required in accordance with generally
accepted accounting principles, consistently applied; and
(vii) enter into and maintain nondisclosure and noncompete
agreements, in form and substance as set forth in Exhibit 13 hereto, with
----------
all Persons (other than the Executive Investors) who from time to time
become key employees of the Company or any of its Subsidiaries.
4.1E. Compliance with Agreements. The Company shall perform and
--------------------------
observe all of its obligations to the holders of Common Stock as set forth in
the Certificate of Incorporation and the Bylaws, the Stockholders Agreement, the
Vesting Agreements, the Executive Stock Agreements and the Registration
Agreement.
-15-
4.1F. Current Public Information. At all times after the Company has
--------------------------
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted Securities
may reasonably request, all to the extent required to enable such holders to
sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission or (ii) a registration statement on Form S-2
or S-3 or any similar registration form hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with
such requirements.
4.1G. Amendment of Vesting Agreements or Executive Stock Agreements.
-------------------------------------------------------------
The Company shall not amend, modify or fail to enforce any provision of any
Vesting Agreement or any Executive Stock Agreement without the prior written
consent of the holders of at least 67% of the Institutional Investor Stock then
outstanding.
4.1H. Intellectual Property Rights. The Company shall, and shall
----------------------------
cause each Subsidiary to, possess and maintain all material Intellectual
Property Rights necessary to the conduct of their respective businesses and own
all right, title and interest in and to, or have a valid license for, all such
Intellectual Property Rights. Neither the Company nor any Subsidiary shall take
any action, or fail to take any action, which would result in the invalidity,
abandonment, misuse or unenforceability of such Intellectual Property Rights or
which would infringe upon or misappropriate any rights of other Persons.
4.1I. Public Disclosures. The Company shall not, nor shall it permit
------------------
any Subsidiary to, disclose any Institutional Investor's name or identity as an
investor in the Company in any press release or other public announcement or in
any document or material filed with any governmental entity, without the prior
written consent of such Institutional Investor, unless such disclosure is
required by applicable law or governmental regulations or by order of a court of
competent jurisdiction, in which case prior to making such disclosure the
Company shall give written notice to such Institutional Investor describing in
reasonable detail the proposed content of such disclosure and shall permit the
Institutional Investor to review and comment upon the form and substance of such
disclosure.
4.1J. First Refusal Rights.
--------------------
(i) Except for issuances of (a) shares of Class A Common pursuant
to this Agreement, shares of Class B Common pursuant to any of the Executive
Stock Agreements contemplated hereby, or shares of Class B Common upon
conversion of Class C Common into such Class B Common pursuant to the
Certificate of Incorporation, (b) options to acquire Common Stock pursuant to
the Permitted Stock Option Plan, or shares of Common Stock upon the exercise of
such options, or (c) any securities pursuant to a Public Offering, if the
Company authorizes the issuance or sale of any shares of Common Stock or any
securities containing
-16-
options or rights to acquire any shares of Common Stock (other than as a pro
rata dividend on the outstanding Common Stock), the Company shall first offer to
sell to each holder of Investor Stock a portion of such stock or securities
equal to the quotient determined by dividing (1) the number of shares of
Investor Stock held by such holder by (2) the total number of shares of Investor
Stock then outstanding. Each holder of Investor Stock shall be entitled to
purchase such stock or securities at the most favorable price and on the most
favorable terms as such stock or securities are to be offered to any other
Persons; provided that if all Persons entitled to purchase or receive such stock
or securities are required to also purchase other securities of the Company, the
holders of Investor Stock exercising their rights pursuant to this paragraph
shall also be required to purchase the same strip of securities (on the same
terms and conditions) that such other Persons are required to purchase. The
purchase price for all stock and securities offered to the holders of the
Investor Stock shall be payable in cash.
(ii) In order to exercise its purchase rights hereunder, a holder of
Investor Stock must within 30 days after receipt of written notice from the
Company describing in reasonable detail the stock or securities being offered,
the purchase price thereof, the payment terms and such holder's percentage
allotment, deliver a written notice to the Company describing such holder's
election hereunder. If all of the securities offered to the holders of Investor
Stock are not fully subscribed by such holders, the remaining stock and
securities shall be reoffered by the Company to the holders purchasing their
full allotment upon the terms set forth in this paragraph, except that such
holders must exercise their purchase rights within five business days after
receipt of such reoffer.
(iii) Upon the expiration of the offering periods described above,
the Company shall be entitled to sell such stock or securities which the holders
of Investor Stock have not elected to purchase during the 180 days following
such expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to such holders. Any stock or securities offered or
sold by the Company after such 180-day period must be reoffered to the holders
of Investor Stock pursuant to the terms of this paragraph.
(iv) The rights of the holders of Investor Stock under this
paragraph shall terminate upon the consummation of a Public Offering.
SECTION 5. INVESTORS' PUT RIGHT.
--------------------
5.1A. Put Right. At any time and from time to time on or after the
---------
seventh anniversary of the Initial Closing Date, but not after the consummation
of a Public Offering, each Institutional Investor shall have the right to
require the Company to repurchase all, but not less than all, of the
outstanding Investor Stock held by such Institutional Investor and its
Affiliates at the Repurchase Price (as defined below) by giving written notice
to the Company of such Institutional Investor's exercise of this right (the
"Exercise Notice"). Within 10 days after receipt of an Exercise Notice, the
---------------
Company shall give written notice (the "Repurchase Notice") to each other holder
-----------------
of Investor Stock, setting forth the identity of the Institutional Investor
tendering such Exercise Notice, the number of shares of Investor Stock to be
repurchased from such Investor, and a reasonable approximation of the fair
market value of the Company's assets (net of any Company liabilities senior in
liquidation preference to the Investor Stock) and of each
-17-
share of Investor Stock at the time of such Repurchase Notice. Each Investor
shall be entitled to join in such repurchase and require the Company to purchase
all, but not less than all, of the Investor Stock held by such Investor and its
Affiliates at the same closing, at the same price, and on the same terms as the
Institutional Investor tendering the Exercise Notice by giving Exercise Notice
within 20 days after the date of the Repurchase Notice. Promptly (but in any
event within 3 business days after the end of this 20-day period), the Company
shall send each Investor written notice updating the information contained in
the Repurchase Notice (the "Revised Repurchase Notice"). The Revised Repurchase
-------------------------
Notice shall also set forth a time (which shall be not less than 5 nor more than
10 business days after the date of such notice) and place for a meeting between
the Company and the holders of a majority of the Investor Stock which the
Company has been requested to repurchase (the "Majority Holders").
----------------
5.1B. Company Obligation. The Company shall do everything within its
------------------
power under the law and the Certificate of Incorporation, including but not
limited to assuming or refinancing debt, recapitalizing the Company, or selling
the Company, to enable the Company to satisfy its repurchase obligations under
this Section 5.
5.1C. Repurchase Price. The repurchase price for each share of
----------------
Investor Stock repurchased by the Company under this Section 5 (the "Repurchase
----------
Price") shall be equal to the greater of (i) the initial purchase price of such
-----
share hereunder and all amounts subsequently contributed to the capital of the
Company with respect to such share pursuant to this Agreement (as adjusted for
stock splits, stock dividends, combinations, or other reorganizations) or (ii)
the fair market value of such share (without any discount for lack of liquidity
or minority status) as of the date of the first Repurchase Notice.
The Company, the Majority Holders, and the holders of a majority of
the Executive Stock then outstanding shall attempt in good faith to agree on the
fair market value of the Investor Stock. If they are unable to reach such
agreement within 20 days after the meeting date set forth in the Revised
Repurchase Notice, the Company and the Majority Holders will each, within 10
days thereafter, appoint one investment banker or other appraiser experienced in
valuing companies like the Company, and the two Persons so appointed shall
within 10 days after their appointment appoint a third investment banker or
appraiser similarly experienced. The three investment bankers/appraisers shall
each appraise the fair market value of the Investor Stock (based on the highest
price reasonably obtainable for the Company in an orderly, arm's length sale to
a willing unaffiliated buyer), and the fair market value for purposes hereof
shall be the average of the two appraisals closest to each other. Such
determination shall be final and binding on all parties hereto. The cost of the
appraisal shall be borne by the Company.
5.1D. Repurchase Closing. At the closing of a Company repurchase
------------------
of Investor Stock pursuant to this Section 0 (xxx "Xxxxxxxxxx Xxxxxxx"), each
------------------
Investor selling Investor Stock shall deliver to the Company all existing stock
certificates evidencing the Investor Stock held by such Investor, upon the
Company's delivery to each such selling Investor of Cash in an aggregate amount
equal to the Repurchase Price of such Investor Stock.
-18-
SECTION 6. TRANSFER OF RESTRICTED SECURITIES.
---------------------------------
6.1A. General Provisions. Restricted Securities are transferable
------------------
only pursuant to (i) public offerings registered under the Securities Act, (ii)
Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar
rule or rules then in force) if such rule is available, and (iii) subject to the
various conditions and prohibitions set forth in this Agreement, the
Stockholders Agreement, the Vesting Agreements, and the Executive Stock
Agreements, any other legally available means of transfer.
6.1B. Opinion Delivery. In connection with the transfer of any
----------------
Restricted Securities (other than a transfer described in paragraph 6A(i) or
(ii) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of Xxxxxxxx & Xxxxx or other counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of the Restricted Securities delivers to the Company an
opinion of Xxxxxxxx & Xxxxx or such other counsel that no subsequent transfer of
such Restricted Securities shall require registration under the Securities Act,
the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the Securities Act
legend set forth in paragraph 9C below. If the Company is not required to
deliver new certificates for such Restricted Securities not bearing such legend,
the holder thereof shall not transfer the same until the prospective transferee
has confirmed to the Company in writing its agreement to be bound by the
conditions contained in this Section 6 and paragraph 9C.
6.1C. Rule 144A. Upon the request of any Investor, the Company shall
---------
promptly supply to such Investor or its prospective transferees all information
regarding the Company required to be delivered in connection with a transfer
pursuant to Rule 144A of the Securities and Exchange Commission.
6.1D. Legend Removal. If any Restricted Securities become eligible
--------------
for sale pursuant to Rule 144(k), the Company shall, upon the request of the
holder of such Restricted Securities, remove the legend set forth in paragraph
9C from the certificates for such Restricted Securities.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a
---------------------------------------------
material inducement to the Investors to enter into this Agreement and purchase
the Class A Common hereunder, the Company hereby represents and warrants that:
7.1A. Organization, Corporate Power and Licenses. The Company is a
------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify. The
Company possesses all requisite corporate power and authority and, except as set
forth in the "Licenses Schedule" attached hereto, all material licenses, permits
-----------------
and authorizations necessary to own and operate its properties, to carry on its
businesses
-19-
as now conducted and presently proposed to be conducted and to carry out the
transactions contemplated by this Agreement. The copies of the Company's
charter documents and Bylaws which have been furnished to the Investors' special
counsel reflect all amendments made thereto at any time prior to the date of
this Agreement and are correct and complete.
7.1B. Capital Stock and Related Matters.
---------------------------------
(i) As of the Initial Closing and immediately thereafter, the
authorized capital stock of the Company (collectively, the "Common Stock") shall
------------
consist of (a) 80,000 shares of Class A Common, of which 79,384.62 shall be
issued and outstanding; (b) 35,000 shares of Class B Common Stock, par value
$.01 per share ("Class B Common"), 20,000 shares of which shall be issued and
--------------
outstanding, and 14,711.54 shares of which shall be reserved for issuance upon
conversion of the Class C Common Stock, par value $.01 per share ("Class C
-------
Common"); and 15,000 shares of Class C Common, of which 14,711.54 shall be
------
issued and outstanding. Except as set forth on the attached "Capitalization
--------------
Schedule," as of the Initial Closing, the Company shall not have outstanding any
--------
stock or securities, nor any options, warrants or other rights to acquire
capital stock or securities of the Company. As of the Initial Closing, all of
the outstanding shares of the Company's capital stock listed on the
Capitalization Schedule shall be validly issued, fully paid and nonassessable.
(ii) The Company has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any of its
capital stock, and the offer, sale and issuance of the Class A Common hereunder
or the Class B Common and Class C Common under the Executive Stock Agreements do
not require registration under the Securities Act or any applicable state
securities laws. To the best of the Company's knowledge, there are no
agreements between the Company's stockholders with respect to the voting or
transfer of the Company's capital stock or with respect to any other aspect of
the Company's affairs, except for the Stockholders Agreement, the Vesting
Agreement, and the Executive Stock Agreements.
7.1C. Authorization; No Breach. The execution, delivery and
------------------------
performance of this Agreement, the Stockholders Agreement, the Registration
Agreement, the Vesting Agreements, the Executive Stock Agreements, and all
other agreements contemplated hereby to which the Company is a party, the filing
of the amendment of the Company's Certificate of Incorporation referred to in
paragraph 2B above, and the amendment of the Company's Bylaws referred to in
paragraph 2C above have been duly authorized by the Company. This Agreement,
the Stockholders Agreement, the Executive Stock Agreements, the Vesting
Agreements, the Registration Agreement, the Certificate of Incorporation, and
all other agreements contemplated hereby to which the Company is a party each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution and delivery by the Company of this
Agreement, the Stockholders Agreement, the Executive Stock Agreements, the
Vesting Agreements, the Registration Agreement and all other agreements
contemplated hereby to which the Company is a party, the offering, sale and
issuance of the Class A Common hereunder and the Class B Common and Class C
Common under the Executive Stock Agreements, the filing of the amendments to
the Certificate of Incorporation referred to above and the fulfillment of and
compliance with the respective terms hereof and thereof by the Company, do not
and shall not (i) conflict with or result in a breach of the terms, conditions
or provisions of, (ii) constitute a
-20-
default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or any Subsidiary's capital stock or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency pursuant to the charter or Bylaws of the Company, or any law, statute,
rule or regulation to which the Company or any Subsidiary is subject, or any
agreement, instrument, order, judgment or decree to which the Company is
subject.
7.1D. Conduct of Business; Absence of Liabilities. Prior to the
-------------------------------------------
Initial Closing, except as set forth on the attached "Liabilities Schedule," the
--------------------
Company has not conducted any business nor incurred any expenses, obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to the Company and whether due or to become due and
regardless of when asserted).
7.1E. Assets. Except as set forth on the attached "Assets Schedule,"
------ ---------------
the Company does not own or lease any Assets, whether tangible or intangible
(excluding Intellectual Property Rights). The Company has good and marketable
title to, or a valid leasehold interest in, all assets listed on the Assets
Schedule, free and clear of all Liens.
7.1F. No Subsidiaries. The Company does not own or hold, and has
---------------
never owned or held, any rights to acquire any shares of stock or any other
security or interest in any other Person.
7.1G. Contracts and Commitments.
-------------------------
(i) Except as expressly contemplated by this Agreement or as set
forth on the attached "Contracts Schedule," neither the Company nor any
------------------
Subsidiary is a party to or bound by any written or oral contract of any kind,
including but not limited to any agreement, employee benefit plan, employment
contract, insurance contract, loan agreement, guarantee, lease, license,
warranty, or affirmative or restrictive covenant.
(ii) All of the contracts, agreements and instruments set forth on
the Contracts Schedule are valid, binding and enforceable in accordance with
their respective terms.
(iii) The Investors' special counsel has been supplied with a true
and correct copy of each of the written instruments, plans, contracts and
agreements and an accurate written description of each of the oral arrangements,
contracts and agreements which are referred to on the Contracts Schedule,
together with all amendments, waivers or other changes thereto.
7.1H. Intellectual Property Rights. The attached "Intellectual
---------------------------- ------------
Property Schedule" contains a complete and accurate list of all (a) patented or
-----------------
registered Intellectual Property Rights owned or used by the Company or any
Subsidiary, (b) pending patent applications and applications for registrations
of other Intellectual Property Rights filed by the Company or any Subsidiary,
(c) unregistered trade names and corporate names owned or used by the Company or
any Subsidiary and (d) unregistered trademarks and service marks. The
Intellectual Property
-21-
Schedule also contains a complete and accurate list of all licenses and other
rights granted by the Company or any Subsidiary to any third party with respect
to any Intellectual Property Rights and all licenses and other rights granted by
any third party to the Company or any Subsidiary with respect to any
Intellectual Property Rights, in each case identifying the subject Intellectual
Property Rights. Except as set forth on the Intellectual Property Schedule: (a)
the Company or one of its Subsidiaries owns all right, title and interest to, or
has the right to use pursuant to a valid license, all Intellectual Property
Rights necessary for the operation of the businesses of the Company and its
Subsidiaries as presently proposed to be conducted, free and clear of all Liens,
(b) the Company and its Subsidiaries own all right, title and interest in and to
all of the Intellectual Property Rights listed on such schedule, free and clear
of all Liens, (c) there have been no claims made against the Company or any
Subsidiary asserting the invalidity, misuse, or unenforceability of any of such
Intellectual Property Rights, and there are no valid grounds for the same, and
(d) neither the Company nor any Subsidiary has received any notices of, and is
not aware of any facts which indicate the likelihood of, any infringement or
misappropriation by, or conflict with, any third party with respect to such
Intellectual Property Rights (including, without limitation, any demand or
request that the Company or any Subsidiary license any rights from a third
party).
7.1I. Litigation, etc. Except as set forth on the attached
---------------
"Litigation Schedule," there are no actions, suits, proceedings, orders,
-------------------
investigations or claims pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any Subsidiary (or to the best of
the Company's knowledge, pending or threatened against or affecting any of the
officers, directors or employees of the Company and its Subsidiaries with
respect to their businesses or proposed business activities), or pending or
threatened by the Company or any Subsidiary against any third party, at law or
in equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, any actions,
suit, proceedings or investigations with respect to the transactions
contemplated by this Agreement); neither the Company nor any Subsidiary is
subject to, to the best of the Company's knowledge, any governmental
investigations or inquiries (including, without limitation, inquiries as to the
qualification to hold or receive any license or permit); and, to the best of the
Company's knowledge, there is no basis for any of the foregoing. Neither the
Company nor any Subsidiary is subject to any judgment, order or decree of any
court or other governmental agency, and neither the Company nor any Subsidiary
has received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business.
7.1J. Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company. The Company shall pay, and hold each Investor (excluding any
Executive Investor that had actual knowledge of such arrangement or agreement
prior to the date hereof) harmless against, any liability, loss or expense
(including, without limitation, reasonable attorneys' fees and out-of-pocket
expenses) arising in connection with any such claim.
7.1K. Governmental Consent, etc. Except as set forth on the attached
-------------------------
"Consents Schedule," no permit, consent, approval or authorization of, or
-----------------
declaration to or filing with, any
-22-
governmental authority is required in connection with the execution, delivery
and performance by the Company of this Agreement or the other agreements
contemplated hereby, or the consummation by the Company of any other
transactions contemplated hereby or thereby.
7.1L. Compliance with Laws. The Company has not violated any law or
--------------------
any governmental regulation or requirement in any material respect.
7.1M. Affiliated Transactions. Except as set forth on the attached
-----------------------
"Affiliated Transactions Schedule," no officer, director, employee or Affiliate
--------------------------------
of the Company or any Subsid iary or any individual related by blood, marriage
or adoption to any such individual or any entity in which any such Person or
individual owns any beneficial interest, is a party to any agreement, contract,
commitment or transaction with the Company or has any material interest in any
material property owned or used by the Company.
7.1N. Projections and Pro Forma Financial Statements.
----------------------------------------------
(i) Included as part of the Initial Business Plan attached hereto
as Exhibit 1 is a true and complete copy of the latest projections of the
consolidated income and cash flows of the Company and its Subsidiaries for the
five consecutive 12-month periods commencing with and following the date hereof.
Such projections have been prepared on the basis of the assumptions set forth
therein, which the Company reasonably believes are fair and reasonable in light
of current and reasonably foreseeable business conditions.
(ii) The pro forma consolidated balance sheets of the Company and
its Subsidiaries as of the end of each of the five consecutive 12-month periods
commencing with and following the date hereof, included as part of the Initial
Business Plan attached hereto as Exhibit 1, is complete and correct in all
material respects and presents fairly in all material respects the consolidated
financial condition of the Company and its Subsidiaries as of such date as if
the transactions contemplated by this Agreement had occurred immediately prior
to such date, and such balance sheet contains all pro forma adjustments
necessary in order to fairly reflect such assumption.
7.1O. Disclosure. Neither this Agreement nor any of the exhibits,
----------
schedules, attachments, written statements, documents, certificates or other
items supplied to any Investor by or on behalf of the Company with respect to
the transactions contemplated hereby contain any untrue statement of a material
fact or omit a material fact necessary to make each statement contained herein
or therein not misleading; provided that with respect to the financial
--------
projections furnished to the Investors by the Company, the Company represents
and warrants only that such projections were based upon assumptions reasonably
believed by the Company to be reasonable and fair as of the date the projections
were prepared in the context of the Company's history and current and reasonably
foreseeable business conditions. There is no fact which the Company has not
disclosed to the Investors in writing and of which any of its officers,
directors or executive employees is aware and which would reasonably be expected
to have a material adverse effect upon the expected financial condition or
business prospects of the Company and its Subsidiaries taken as a whole.
-23-
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE INSTITUTIONAL
---------------------------------------------------
INVESTORS. As a material inducement to the Company and the Executive Investors
---------
to enter into this Agreement and to engage in the transactions and enter into
the agreements contemplated hereby, each of the Institutional Investors
represents and warrants for itself, severally and not jointly, that:
8.1A. Assets. Such Institutional Investor has sufficient capital and
------
liquidity (including undrawn commitments) to fulfill its capital contribution
obligations under the Initial Business Plan and any Subsequent Business Plan,
pursuant to the terms and subject to the conditions set forth herein.
8.1B. Initial Business Plan. Such Institutional Investor is
---------------------
sophisticated in financial matters and sophisticated in the industry in which
the Company contemplates doing business and has had an opportunity to evaluate
the Initial Business Plan of the Company.
8.1C. Authorization. The execution, delivery and performance of this
-------------
Agreement and the other agreements contemplated hereby to which the such
Institutional Investor is a party by such Institutional Investor and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all requisite action on the part of such Institutional
Investor and the partners thereof, and no other proceedings on its or their part
(other than giving notice of drawdowns on commitments) is necessary to authorize
the execution, delivery or performance of this Agreement. This Agreement
constitutes, and each of the other agreements contemplated hereby to which such
Institutional Investor is a party will when executed constitute, a valid and
binding obligation of such Institutional Investor, enforceable in accordance
with their terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and limitations on the availability of equitable remedies.
SECTION 9. MISCELLANEOUS PROVISIONS.
------------------------
9.1A. Expenses. The Company shall pay, and hold each Institutional
--------
Investor harmless against liability for the payment of, the out-of-pocket
expenses of the Institutional Investors, including the reasonable fees and
expenses of MDCP's special counsel, Xxxxxxxx & Xxxxx, and their special
telecommunications counsel, Skadden, Arps, Slate, Xxxxxxx & Xxxx, arising in
connection with (i) the performance of due diligence investigations concerning
the Company, the negotiation and execution of this Agreement, and the
consummation of the transac tions to occur at the Initial Closing or any
Subsequent Closing as contemplated hereby, (ii) any amendments or waivers
(whether or not the same become effective) under or in respect of this
Agreement, the agreements contemplated hereby or the Certificate of
Incorporation, (iii) the enforcement of the rights granted under this Agreement,
the agreements contemplated hereby and the Certificate of Incorporation, (iv)
any filing with any governmental agency with respect to such Institutional
Investor's investment in the Company or in any other filing with any
governmental agency with respect to the Company which mentions such
Institutional Investor, and (v) stamp and other taxes which may be payable by
the Institutional Investors in respect of the execution and delivery of this
Agreement or the issuance, delivery or acquisition of any Investor Stock.
-24-
9.1B. Remedies.
--------
(i) Each holder of Investor Stock shall have all rights and
remedies set forth in this Agreement and the Certificate of Incorporation and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce (upon demonstration of irreparable harm)
such rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
(ii) If at any Subsequent Closing, after all conditions to such
Subsequent Closing set forth in Section 3 hereof have been either satisfied or
waived pursuant to paragraph 3I, any Investor refuses to tender such Investor's
Specified Contribution for such Subsequent Closing, the Company shall have the
right, in addition to the remedies available under subparagraph 9B(i) above, to
repurchase all shares of Investor Stock held by such refusing Investor or its
Affiliates for an aggregate price equal to such Investor's Initial Contribution
and all Specified Contributions made by such Investor at prior Subsequent
Closings, each with respect to such repurchased shares. The Company shall have
the option to pay such repurchase price in the form of a promissory note with
the following terms: (a) principal equal to such Investor's Initial Contribution
and all prior Specified Contributions made by such Investor, each with respect
to such repurchased shares; (b) liquidation preference junior to all senior debt
obligations of the Company then or thereafter incurred, and to the Distribution
Preference of the holders of Class A Common under the Certificate of
Incorporation; (c) simple annual interest equal to the prime rate issued by
Citibank from time to time; and (d) all principal and accrued interest due and
payable on the first to occur of (1) the closing of a Public Offering, (2) a
Sale of the Company (as defined in the Stockholders Agreement), and (3) the
fifth anniversary of the issuance of such note; provided that such note shall
--------
not be repaid until the Distribution Preference of the holders of Class A Common
under the Certificate of Incorporation has been fully satisfied. If an
Investor's holdings of Investor Stock are repurchased pursuant to this
paragraph, such Investor and its Affiliates shall thereafter retain no further
right to enforce or benefit from the provisions of this Agreement or any other
agreement contemplated hereby to which such Investor is a party other than the
promissory note described above, and such Investor and its Affiliates shall
retain no further obligation under this Agreement to make Specified
Contributions at any Subsequent Closing.
9.1C. Investor's Investment Representations. Each Investor hereby
-------------------------------------
represents that it is acquiring the Restricted Securities purchased hereunder or
acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no intention
of selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
--------
contained herein shall prevent any Investor and subsequent holders of Restricted
Securities from transferring such securities in compliance with the provisions
of Section 6 hereof. Each certificate or instrument representing Restricted
Securities shall be imprinted with a legend in substantially the following form:
-25-
"The securities represented by this certificate were originally
issued on November 27, 1996, and have not been registered under
the Securities Act of 1933, as amended. The transfer of the
securities represented by this certificate is subject to the
conditions specified in the Stock Purchase Agreement dated as of
November 27, 1996, as amended and modified from time to time,
between the issuer (the "Company") and certain investors. The
Company reserves the right to refuse the transfer of such
securities until such conditions have been fulfilled with respect
to such transfer. A copy of the Stock Purchase Agreement shall be
furnished by the Company to the holder hereof upon written
request and without charge."
9.1D. Consent to Amendments. Except as otherwise expressly provided
---------------------
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of at least 67% of the Institutional Investor Stock, and the holders of
a majority of the Executive Stock, outstanding at the time such amendment or
waiver becomes effective. No course of dealing between the Company and the
holder of any Investor Stock or any delay by such holder in exercising any
rights hereunder or under the Certificate of Incorporation shall operate as a
waiver of any rights of such holder.
9.1E. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
regardless of any investigation made by any Investor or on its behalf.
9.1F. 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 assigns of the parties hereto whether so expressed or
not; provided that a party's obligation to make Specified Contributions at
--------
Subsequent Closings shall be binding on such party's successors and assigns only
to the extent set forth in an express written assignment signed by such party.
In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Investor's benefit as an Investor
or holder of Investor Stock are also for the benefit of, and enforceable by, any
subsequent holder of such Investor Stock. Notwithstanding the foregoing, the
rights of the holders of the Investor Stock under this Agreement, the
Stockholders Agreement or the Registration Agreement shall not be exercisable by
or for the benefit of any subsequent holder of Investor Stock if, directly or
indirectly, the assignment of Investor Stock to such subsequent holder breached
any material provision of this Agreement or the Stockholders Agreement.
9.1G. Capital and Surplus; Special Reserves. The Company agrees that
-------------------------------------
the capital of the Company (as such term is used in Section 154 of the General
Corporation Law of Delaware) in respect of the shares of Class A Common issued
pursuant to this Agreement shall be equal to the aggregate par value of such
shares and that it shall not increase the capital of the Company with respect to
any shares of the Company's capital stock at any time on or after the date of
this Agreement. The Company also agrees that it shall not create any special
reserves
-26-
under Section 171 of the General Corporation Law of Delaware without the prior
written consent of the holders of at least 67% of the outstanding Institutional
Investor Stock.
9.1H. 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 be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
9.1I. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
9.1J. Descriptive Headings; Interpretation. The descriptive headings
------------------------------------
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
9.1K. Governing Law. The corporate law of the State of Delaware
-------------
shall govern all issues and questions concerning the relative rights and
obligations of the Company and its stockholders. All other issues and questions
concerning the construction, validity, enforcement and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of Illinois, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
9.1L. 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
to the recipient, one business day after they are sent to the recipient by
reputable overnight courier service (charges prepaid) or three business days
after they are mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Investor at the address indicated on the
Schedule of Investors with a copy to
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
and to the Company at the address indicated below:
-27-
Focal Communications Corporation
000 X. Xxxxxxxxxx Xxxx., Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
with a copy to Bischoff, Kenney, and Xxxxxxx
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxxxxx Xxxxxxx
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
9.1M. Understanding among the Investors. The determination of each
---------------------------------
Investor to purchase the Investor Stock pursuant to this Agreement has been made
by such Investor independently of any other Investor and independently of any
statements or opinions as to the advisability of such purchase or as to the
properties, business, prospects or condition (financial or otherwise) of the
Company which may have been made or given by any other Investor or by any agent
or employee of any other Investor. In addition, it is acknowledged by each of
the other Investors that MDCP has not acted as an agent of such Investor in
connection with making its investment hereunder and that MDCP shall not be
acting as an agent of such Investor in connection with monitoring its investment
hereunder.
9.1N. No Strict Construction. The parties hereto have participated
----------------------
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
* * * * *
-28-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
/s/ Xxxxx X. Xxxx MADISON DEARBORN CAPITAL PARTNERS, L.P.
----------------------------
Xxxxx X. Xxxx By Madison Dearborn Partners, L.P., its
General Partner
By Madison Dearborn Partners, Inc., its
General Partner
/s/ Xxxx X. Xxxxxxxx By /s/ Xxxxx X. Xxxxx, Xx.
---------------------------- ----------------------------------
Xxxx X. Xxxxxxxx Its Vice President
----------------------------------
/s/ Xxxxxx Xxxxxx
----------------------------
Xxxxxx Xxxxxx FRONTENAC VI, L.P.
By Frontenac Company, its General Partner
/s/ Xxxxxx X. Xxxxxx, Xx. By /s/ Xxxxx X. Xxxxxxxx III
---------------------------- ----------------------------------
Xxxxxx X. Xxxxxx, Xx. Its General Partner
----------------------------------
BATTERY VENTURES III, L.P.
By Battery Partners III, L.P., its General
Partner
By /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Its Managing Partner
-----------------------------------
FOCAL COMMUNICATIONS CORPORATION
By /s/ Xxxxxx X. Xxxxxx, Xx.
-----------------------------------
Its President
-----------------------------------
-29-
APPENDIX A
----------
INDEX OF DEFINITIONS
--------------------
For the purposes of this Agreement, the following terms have the
meanings set forth below:
"Addy" has the meaning set forth in the preamble.
----
"Affiliate" of any particular Person means any other Person
---------
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Agreement" has the meaning set forth in the preamble.
---------
"Xxxxxxxx" has the meaning set forth in the preamble.
--------
"Xxxxxx" has the meaning set forth in the preamble.
------
"Board" has the meaning set forth in paragraph 1D.
-----
"BV" has the meaning set forth in the preamble.
--
"Bylaws" has the meaning set forth in paragraph 2C.
------
"Cash" has the meaning set forth in paragraph 1C.
----
"Certificate of Incorporation" has the meaning set forth in paragraph
----------------------------
2B.
"Chicago Common Carrier Status" has the meaning set forth in paragraph
-----------------------------
2H.
"Class A Common" has the meaning set forth in paragraph 1A.
--------------
"Class B Common" has the meaning set forth in paragraph 7B(i).
--------------
"Class C Common" has the meaning set forth in paragraph 7B(i).
--------------
"Common Stock" has the meaning set forth in paragraph 7B(i).
------------
"Company" has the meaning set forth in the preamble.
-------
"Executive Investor" has the meaning set forth in the preamble.
------------------
"Executive Stock" has the meaning ascribed to such term in the
---------------
Executive Stock Agreements.
-S1-
"Executive Stock Agreements" has the meaning set forth in paragraph
--------------------------
2E.
"Exercise Notice" has the meaning set forth in paragraph 5A.
---------------
"Frontenac" has the meaning set forth in the preamble.
---------
"Indebtedness" means at a particular time, without duplication, (i)
------------
any indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (including, without
limitation, vendor Financing), (iv) any commitment by which a Person assures a
creditor against loss (including, without limitation, contingent reimbursement
obligations with respect to letters of credit), (v) any indebtedness guaranteed
in any manner by a Person (including, without limitation, guarantees in the form
of an agreement to repurchase or reimburse), (vi) any obligations under
capitalized leases with respect to which a Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations a Person assures a creditor against loss, (vii) any indebtedness
secured by a Lien on a Person's assets; and (viii) any unsatisfied obligation
for "withdrawal liability" to a "multiemployer plan" as such terms are defined
under ERISA.
"Initial Business Plan" has the meaning set forth in the preamble.
---------------------
"Initial Closing" has the meaning set forth in paragraph 1C.
---------------
"Initial Closing Date" has the meaning set forth in paragraph 1C.
--------------------
"Initial Contribution" has the meaning set forth in paragraph 1B.
--------------------
"Institutional Investor" has the meaning set forth in the preamble.
----------------------
"Institutional Investor Stock" means (i) the Class A Common issued to
----------------------------
the Institutional Investors hereunder, (ii) any securities repurchased by an
Institutional Investor pursuant to paragraph 3(e)(i) of any Executive Stock
Agreement, and (iii) any securities issued directly or indirectly with respect
to the foregoing securities by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular shares of Institutional Investor
Stock, such shares shall forever cease to be Institutional Investor Stock when
they have (a) been effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, (b) been sold
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) been forfeited pursuant to the provisions of any Vesting
Agreement.
"Intellectual Property Rights" means all (i) patents, patent
----------------------------
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documen-
-A2-
tation thereof, (vi) trade secrets and other confidential information
(including, without limitation, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (vii) other intellectual property rights
and (viii) copies and tangible embodiments thereof (in whatever form or medium).
"Interconnection Agreement" has the meaning set forth in paragraph 2H.
-------------------------
"Investment" as applied to any Person means (i) any direct or indirect
----------
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Investor" has the meaning set forth in the preamble.
--------
"Investor Stock" means (i) the Class A Common issued hereunder, (ii)
--------------
any securities repurchased by an Institutional Investor pursuant to paragraph
3(e)(i) of an Executive Stock Agreement, and (iii) any securities issued
directly or indirectly with respect to the foregoing securities by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares of Investor Stock, such shares shall forever cease to be
Investor Stock when they have (a) been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) been sold pursuant to Rule 144 (or any similar provision then
in force) under the Securities Act, or (c) been forfeited pursuant to the
provisions of any Vesting Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
---
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
---
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any Subsidiary or any Affiliate,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to the Company or any Subsidiaries under a
lease which is not in the nature of a conditional sale or title retention
agreement, or any subordination arrangement in favor of another Person (other
than any subordination arising in the ordinary course of business).
"Majority Holders" has the meaning set forth in paragraph 5A.
----------------
"Management" has the meaning set forth in paragraph 3A.
----------
"Maximum Commitment" has the meaning set forth in paragraph 1D.
------------------
-A3-
"MDCP" has the meaning set forth in the preamble.
----
"MSA"has the meaning set forth in the preamble.
---
"Note" has the meaning set forth in paragraph 1C(ii).
----
"Officer's Certificate" means a certificate signed by the Company's
---------------------
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
reasonably necessary in order to permit him to verify the accuracy of the
information set forth in such certificate and (ii) to the best of such officer's
knowledge, such certificate does not misstate any material fact and does not
omit to state any fact necessary to make the certificate not misleading.
"Permitted Lien" means:
--------------
(i) tax liens with respect to taxes not yet due and payable or
which are being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established in accordance with
generally accepted accounting principles, consistently applied;
(ii) deposits or pledges made in connection with, or to secure
payment of, utilities or similar services, workers' compensation,
unemployment insurance, old age pensions or other social security
obligations;
(iii) purchase money security interests in any property acquired
by the Company or any Subsidiary to the extent permitted by this Agreement;
(iv) interests or title of a lessor under any lease permitted
by this Agreement;
(v) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction for amounts not yet due and
payable;
(vi) easements, rights-of-way, restrictions and other similar
charges and encumbrances not interfering with the ordinary conduct of the
business of the Company and its Subsidiaries or detracting from the value
of the assets of the Company and its Subsidiaries; and
(vii) liens outstanding on the date hereof which secure
Indebtedness and which are described in the schedules to this Agreement.
"Permitted Stock Option Plan" has the meaning set forth in paragraph
---------------------------
4C(xix).
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
-A4-
"Public Offering" means any underwritten sale of the company's common
---------------
stock pursuant to an effective registration statement under the Securities Act
filed with the Securities and Exchange Commission on Form S-1 (or a successor
form adopted by the Securities and Exchange Commission); provided that the
--------
following shall not be considered a Public Offering: (i) any issuance of common
stock as consideration or financing for a merger or acquisition, and (ii) any
issuance of common stock or rights to acquire common stock to employees of the
Company or its Subsidiaries as part of an incentive or compensation plan.
"Qualified Holder" has the meaning set forth in paragraph 4A.
----------------
"Registration Agreement" has the meaning set forth in paragraph 2F.
----------------------
"Repurchase Closing" has the meaning set forth in paragraph 5D.
------------------
"Repurchase Notice" has the meaning set forth in paragraph 5A.
-----------------
"Repurchase Price" has the meaning set forth in paragraph 5C.
----------------
"Restricted Securities" means (i) the Class A Common issued hereunder,
---------------------
and (ii) any securities issued with respect to the securities referred to such
Class A Common by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 9C have been delivered by the
Company in accordance with paragraph 6B. Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 9C.
"Revised Repurchase Notice" has the meaning set forth in paragraph 5A.
-------------------------
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
----------------------------------
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended, or any similar federal law then in force.
"Specified Contribution" has the meaning set forth in paragraph 1D.
----------------------
"Stockholders Agreement" has the meaning set forth in paragraph 2D.
----------------------
"Subsequent Business Plan" has the meaning set forth in paragraph 3A.
------------------------
-A5-
"Subsequent Closings" has the meaning set forth in paragraph 1D.
-------------------
"Subsidiary" means, with respect to any Person, any corporation,
----------
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Xxxxxx" has the meaning set forth in the preamble.
------
"Vesting Agreement" has the meaning set forth in paragraph 2G.
-----------------
"Wholly-Owned Subsidiary" means, with respect to any Person, a
-----------------------
Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such
Person.
-A6-
APPENDIX B
----------
SCHEDULE OF INVESTORS
---------------------
Number of Initial Purchase Investor's
Names and Shares of Price for Maximum
Addresses Class A Common Class A Common Commitment
--------- -------------- ---------------- ------------
Madison Dearborn Capital Partners, L.P. 46, 153.85 $2,325,581.40 $15,000,000
Three First Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Tel. (000) 000-0000
Fax (000) 000-0000
Attention: Xxxxx X. Xxxxx, Xx.
and Xxxx Xxxxxxxx
Frontenac VI, L.P. 21,538.46 $1,085,271.32 $ 7,000,000
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx
Tel. (000) 000-0000
Fax (000) 000-0000
Attention: Xxxxx Xxxxxxxx
Battery Ventures III, L.P. 10, 769.23 $ 542, 635.66 $ 3,500,000
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Tel. (000) 000-0000
Fax (000) 000-0000
Attention: Xxxxxxx Xxxxxxx
Xxxxx X. Xxxx 230.77 $ 11, 627.91 $ 75,000
000 Xxxxxxxxxx Xxxx., Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Xxxx X. Xxxxxxxx 230.77 $ 11,627.91 $ 75,000
000 Xxxxxxxxxx Xxxx., Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Xxxxxx Xxxxxx 230.77 $ 11,627.91 $ 75,000
000 Xxxxxxxxxx Xxxx., Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Xxxxxx X. Xxxxxx, Xx. 230.77 $ 11,627.91 $ 75,000
000 Xxxxxxxxxx Xxxx., Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000
--------------- ---------------- ------------
TOTAL 79,384.62 $4,000,000.02 $25,800,000
-B1-
EXHIBITS TO STOCK PURCHASE AGREEMENT
Exhibit 1 - The Initial Business Plan
Exhibit 2 - Restated Certificate of Incorporation, dated November 26, 1996 -
Previously filed as Exhibit 3.1 to the Form S-4 Registration
Statement on April 3, 1998.
Exhibit 3 - Form of Promissory Note
Exhibit 4 - Form of Executive Investor Stock Pledge Agreement -Previously
filed as Exhibits 4.7- 4.10 to the Form S-4 Registration Statement
on April 3, 1998.
Exhibit 5 - Bylaws Amendment - Previously filed as Exhibit 3.2 to the Form S-4
Registration Statement on April 3, 1998.
Exhibit 6 - Stockholders Agreement by and among Focal, MDCP, Frontenac, BV,
Addy, Barnicle, Xxxxxx and Xxxxxx - Previously filed as Exhibit
4.11 to the Form S-4 Registration Statement on April 3, 1998.
Exhibit 7 - Form of Executive Stock Agreement and Employment Agreement -
Previously filed as Exhibits 4.12-4.15 to the Form S-4
Registration Statement on April 3, 1998.
Exhibit 8 - Registration Agreement by and among Focal, MDCP, Frontenac, BV,
Addy, Barnicle, Xxxxxx and Xxxxxx - Previously filed as Exhibit
4.16 to the Form S-4 Registration Statement on April 3, 1998.
Exhibit 9 - Form of Vesting Agreement
Exhibit 10 - Interconnection Agreement by and among Ameritech Statement on
April 3, 1998. Information Industry Services and Focal, dated
October 28, 1996- Previously filed as Exhibit 10.1 to the Form S-4
Registration
Exhibit 11 - Form of Opinion of Xxxxxxxx, Xxxxxx & Xxxxxxx (Initial Closing)
Exhibit 12 - Form of Opinion of Xxxxxxxx, Xxxxxx & Xxxxxxx (Subsequent
Closings)
Exhibit 13 - Form of Nondisclosure and Noncompetition Agreement
EXHIBIT 1 TO STOCK PURCHASE AGREEMENT
-------------------------------------
INITIAL BUSINESS PLAN
---------------------
The financial statements and projections attached hereto represent a
financial model for implementing the business of the Company in the Chicago
MSA-1 market. The Company shall use such funds contemplated hereunder
(specifically, initial capital of $4,000,000; $8,000,000 in the aggregate) to
obtain necessary assets (through purchase or lease), engage personnel, and take
all actions necessary to provide facilities-based and resold, switched and
dedicated, local exchange services in the identified market and interexchange
services throughout Illinois.
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96
Year 1 Year 2 Year 3 Year 4 Year5
Income Statement:
Corp/VAR acct revenue 208,701 2,524,442 6,231,920 17,352,528 29,902,725
ISP revenue 592,391 4,494,017 6,394,925 17,950,505 26,749,132
Total Revenue 801,093 7,018,459 16,626,846 35,303,032 56,651,857
Carrier settlements 431,926 2,178,197 4,595,682 8,609,522 14,047,349
Sales & customer service expense 2,707,161 4,149,763 6,829,377 10,932,858 14,072,091
General & administrative expense 286,700 376,457 475,305 592,647 689,639
Gross Profit (1,624,694) 316,022 4,726,480 15,168,006 27,842,777
Corporate Overhead 1,371,360 1,820,232 1,693,627 1,970,692 2,241,253
(Total Cash Expenses) 3,797,147 8,522,669 13,793,991 22,105,718 31,060,333
EBITDA (2,996,054) (1,504,210) 2,832,853 13,197,314 25,601,524
Depreciations & Amortization 344,617 687,304 1,079,449 1,666,301 2,231,059
Operating income (3,340,671) (2,191,514) 1,753,404 11,531,013 23,370,466
Other income (net) 0 0 0 0 0
Interest Expense 81,329 49,251 114,846 (53,333) (87,979)
Income Taxes 0 0 0 2,953,540 8,445,040
Net Income (3,442,000) (2,240,755) 1,638,758 8,630,806 15,013,405
Gross margin neg 5% 28% 43% 49%
EBITDA margin neg neg 17% 37% 45%
Operating margin neg neg 11% 33% 41%
Total customers
Total lines 2,426 7,087 13,240 22,730 33,926
Total MOUs (millions) 50.2 410.7 674.3 2159.4 3580.7
Total employees 27 43 55 74 89
Statement of Cash Flows:
Net income (3,422,000) (2,240,765) 1,638,758 8,630,806 15,013,405
Depreciation & amortization 344,617 687,304 1,079,449 1,666,301 2,231,059
Change in working capital 24,033 210,554 498,805 1,059,091 1,699,556
Other non-cash items 0 0 0 0 0
Cash from Operations (3,053,350) (1,342,907) 3,217,012 11,356,198 18,944,019
Capital expenditures (4,736,879) (2,253,685) (5,191,502) (7,615,744) (8,870,517)
Other investments 0 0 0 0 0
Cash for investing (4,736,879) (2,253,685) (5,191,502) (7,615,744) (8,870,517)
Secured financing 2,672,651 2,253,685 5,191,502 0 0
Debt repayment (355,331) (926,397) (1,826,444) (2,529,460) (2,174,128)
Other debt financing 0 0 0 0 0
Common A 6,000,000 2,000,000 0 0 0
Other equity 0 0 0 0 0
Other 0 0 0 0 0
Cash from Financing 8,317,319 3,327,288 3,365,059 (2,529,460) (2,174,128)
Beg. cash balance 0 527,090 257,785 1,648,354 2,659,349
Change in cash 527,090 (269,305) 1,390,569 1,210,995 7,899,373
Ending Cash Balance 527,090 257,785 1,648,354 2,859,349 10,758,722
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96
Year 1 Year 2 Year 3 Year 4 Year 8
Cash Summary:
Cash from Operations (3,053,350) (1,342,907) 3,217,012 11,356,198 16,944,019
Cash for Investing (4,736,879) (2,253,885) (5,191,502) (7,615,744) (8,870,517)
Net Cash Flow (7,790,229) (3,596,592) (1,974,490) 3,740,454 10,073,502
Cash from Financing 8,317,319 3,327,288 3,365,059 (2,529,460) (2,174,128)
Cumulative Net Cash 527,090 257,785 1,648,354 2,859,349 10,758,722
Balance Sheet:
Cash & mkt. securities 527,090 257,785 1,648,354 2,859,349 10,758,722
Accounts receivable 268,493 843,030 1,787,551 2,565,788 3,897,172
Other current assets 0 0 0 0 0
Current Assets 795,583 1,100,816 3,435,905 5,425,137 14,655,894
Gross PPE 4,684,369 6,592,675 10,840,120 16,167,068 20,484,404
Accum depreciation 344,617 1,031,921 2,111,370 3,777,671 6,008,730
Net PPE 4,339,752 5,560,754 8,728,750 12,389,397 14,475,674
Goodwill & other intangibles 0 0 0 0 0
Other non-current assets (1,510,236) (2,749,367) (5,343,769) (3,105,690) 1,910,691
Non-current Assets 2,829,518 2,811,387 3,384,981 9,283,707 16,386,365
Total Assets 3,625,099 3,912,203 6,820,888 14,708,844 31,042,260
Accounts Payable 605,635 1,018,110 1,586,689 2,521,808 3,492,442
Debt maturities 102,258 100,604 257,077 (209,354) (166,174)
Other accrued expenses 50,470 84,842 132,224 210,151 291,037
Current Liabilities 758,363 1,203,556 1,975,990 2,522,605 3,617,305
Secured debt 238,268 286,589 736,878 (630,711) (486,285)
Other long-term debt 0 0 0 0 0
Other non-current liab. 50,470 84,842 132,224 210,151 291,037
Non-Current Liabilities 288,736 371,412 868,902 (420,560) (195,248)
Common stock A 6,000,000 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0 0
Additional paid-in capital 0 0 0 0 0
Retained earnings (deficit) (3,422,000) (5,662,765) (4,024,007) 4,606,799 19,620,204
Shareowners Equity 2,578,000 2,337,235 3,975,993 12,606,799 27,620,204
Total Liabilities & Shareowners
Equity 3,625,099 3,912,203 6,820,886 14,708,844 31,042,260
Financial Ratios:
EBITDA/Cash Interest (36.8) (30.5) 24.7 NA NA
EBITDA-Capital Cash Interest (95.1) (76.3) (20.6) NA NA
EBITDA/Interest (36.8) (30.5) 24.7 (247.5) (291.0)
EBITDA-Capital Interest (95.1) (76.3) (20.6) (104.7) (190.2)
Debt/EBITDA (0.0) (0.0) 0.0 (0.0) (0.0)
Total Debt 340,524 387,173 993,755 (840,065) (652,460)
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96
Year 1
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8
Income Statement:
Corp/VAR acct revenue 0 0 0 0 0 0 4,575 13,988
ISP revenue 0 0 0 0 0 0 12,855 40,379
Total Revenue 0 0 0 0 0 0 17,430 54,367
Carrier settlements 0 0 0 0 0 0 33,422 49,232
Sales & customer service
expense 28,986 45,112 54,640 82,010 102,573 137,080 166,816 192,035
General & administrative
expenses 20,500 20,500 20,500 20,500 20,500 23,100 26,850 26,850
Gross Profit (49,486) (65,612) (75,140) (102,510) (123,073) (160,180) (209,658) (213,750)
Corporate Overhead 75,250 92,750 112,001 115,751 121,951 121,951 121,951 121,951
(Total Cash Expenses) 124,736 158,362 187,141 218,261 245,024 282,131 349,039 390,068
EBITDA (124,736) (158,362) (187,141) (218,261) (245,024) (282,132) (331,609) (335,701)
Depreciation & Amortization 4,281 6,561 8,842 11,123 31,404 33,684 35,965 38,246
Operating income (129,017) (164,923) (195,983) (229,384) (276,427) (315,815) (367,574) (373,947)
Other income (net) 0 0 0 0 0 0 0 0
Interest Expense 1,026 2,576 3,359 3,730 9,654 15,342 13,636 10,485
Income Taxes 0 0 0 0 0 0 0 0
Net Income (130,042) (167,500) (199,341) (233,114) (286,082) (331,157) (381,210) (384,431)
Gross margin NA NA NA NA NA NA neg neg
EBITDA margin NA NA NA NA NA NA neg neg
Operating margin NA NA NA NA NA NA neg neg
Total customers
Total lines 0 0 0 0 0 0 264 619
Total MOUs (millions) 00 00 00 00 00 00 1.0 3.2
Total employees 7 12 15 20 23 24 27 27
Statement of Cash Flows:
Net income (130,042) (167,500) (199,341) (233,114) (286,062) (331,157) (381,210) (384,431)
Depreciation & amortization 4,281 6,561 8,842 11,123 31,404 33,684 35,965 38,248
Change in working capital 0 0 0 0 0 0 523 1,631
Other non-cash items 0 0 0 0 0 0 0 0
Cash from Operations (125,762) (160,938) (190,499) (221,991) (254,678) (297,473) (344,722) (344,555)
Capital expenditures (428,073) (228,073) (228,073) (228,073) (2,028,073) (228,073) (228,073) (228,073)
Other investments 0 0 0 0 0 0 0 0
Cash for investing (428,073) (228,073) (228,073) (228,073) (2,028,073) (228,073) (228,073) (228,073)
Secured financing 214,037 114,037 114,037 114,037 1,318,248 114,037 114,037 114,037
Debt repayment 0 (4,459) (6,835) (9,211) (11,586) (39,050) (41,426) (43,801)
Other debt financing
Common A 4,000,000
Other equity
Other
Cash from Financing 4,214,037 109,578 107,202 104,826 1,306,661 74,987 72,611 70,235
Beg cash balance 0 3,660,202 3,380,768 3,069,397 2,724,159 1,748,069 1,297,510 797,326
Change in cash 3,660,202 (279,434) (311,371) (345,238) (976,090) (450,559) (500,184) (502,393)
Ending Cash Balance 3,660,202 3,380,768 3,069,397 2,724,159 1,748,069 1,297,510 797,326 294,933
Year 1
Month 9 Month 10 Month 11 Month 12
Income Statement:
Corp/VAR acct revenue 25,794 39,243 54,451 70,650
ISP revenue 75,694 114,669 150,952 197,842
Total Revenue 101,488 153,912 205,403 268,493
Carrier settlements 67,276 76,199 94,127 111,669
Sales & customer service
expense 208,257 219,786 225,642 244,226
General & administrative
expenses 26,850 26,850 26,850 26,850
Gross Profit (200,895) (168,924) (141,216) (114,252)
Corporate Overhead 121,951 121,951 121,951 121,951
(Total Cash Expenses) 424,334 444,787 468,570 504,696
EBITDA (322,848) (290,876) (263,167) (238,203)
Depreciation & Amortization 40,405 42,558 44,704 46,844
Operating income (363,251) (333,432) (307,870) (283,047)
Other income (net) 0 0 0 0
Interest Expense 7,737 5,755 4,437 3,592
Income Taxes 0 0 0 0
Net Income (370,988) (339,168) (312,308) (286,639)
Gross margin neg neg neg neg
EBITDA margin neg neg neg neg
Operating margin neg neg neg neg
Total customers
Total lines 1,065 1,469 1,929 2,426
Total MOUs (millions) 6.2 9.7 12.9 17.2
Total employees 27 27 27 27
Statement of Cash Flows:
Net income (370,988) (339,188) (312,308) (286,839)
Depreciation & amortization 40,405 42,558 44,704 46,844
Change in working capital 3,045 4,617 6,162 8,055
Other non-cash items 0 0 0 0
Cash from Operations (327,539) (292,013) (261,442) (231,740)
Capital expenditures (228,073) (228,073) (228,073) (228,073)
Other investments 0 0 0 0
Cash for investing (228,073) (228,073) (228,073) (228,073)
Secured financing 114,037 114,037 114,037 114,037
Debt repayment (46,177) (48,553) (50,929) (53,304)
Other debt financing
Common A 2,000,000
Other equity
Other
Cash from Financing 2,067,859 65,484 63,108 60,732
Beg cash balance 294,933 1,807,181 1,352,578 926,172
Change in cash 1,512,247 (454,602) (426,407) (399,081)
Ending Cash Balance 1,807,181 1,352,578 926,172 527,090
FOCEL COMMUNICATIONS CORP. INITIAL BUSINESS PLAN
CHICAGO FINANCIAL PLAN
9/23/96
YEAR 1
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
Cash Summary:
Cash from Operations (125,762) (160,938) (190,499) (221,991) (254,678) (297,473)
Cash for investing (428,073) (228,073) (228,073) (228,073) (2,028,073) (228,073)
Net Cash Flow (553,835) (389,011) (418,573) (450,064) (2,282,751) (525,546)
Cash from Financin 4,214,037 109,578 107,202 104,826 1,306,661 74,987
Cumulative Net Cash 3,660,202 3,380,768 3,069,397 2,724,159 1,748,069 1,297,510
Balance Sheet:
Cash & mid securites 3,660,202 3,380,768 3,069,397 2,724,159 1,748,069 1,297,510
Accounts Receivable 0 0 0 0 0 0
Other Current Assets 0 0 0 0 0 0
Current Assets 3,660,202 3,380,768 3,069,397 2,724,159 1,748,069 1,297,510
Gross PPE 428,073 656,147 884,220 1,112,293 3,140,366 3,368,440
Accum. Depreciation 4,281 10,842 19,684 30,807 62,211 95,895
Net PPE 423,793 645,304 864,535 1,081,486 3,078,155 3,272,544
Goodwill & other intangibles 0 0 0 0 0 0
Other non-current Assets 174,630 221,707 208,488 171,152 114,294 65,936
Non-current Assets 598,423 867,011 1,073,023 1,252,638 3,192,449 3,338,480
Total Assets 4,258,625 4,247,779 4,142,420 3,976,797 4,940,518 4,635,990
Accounts Payable 149,683 190,034 224,569 261,913 294,028 338,557
Debt maturities 0 53,509 80,904 94,327 100,307 403,391
Other accrued expenses 12,474 15,836 18,714 21,828 24,502 28,213
Current Liabilities 162,157 259,380 324,186 378,066 418,838 770,161
Secured Debt 214,037 270,105 296,403 306,903 1,513,256 1,184,852
Other long-term debt 0 0 0 0 0 0
Other non-current liab 12,474 15,836 18,714 21,826 24,502 28,213
Non-current Liabilities 226,510 285,941 315,117 328,729 1,537,759 1,213,065
Common stock A 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
Other common stock 0 0 0 0 0 0
Additional paid-in capital 0 0 0 0 0 0
Retained earnings (deficit) (130,042) (297,542) (496,883) (729,997) (1,016,079) (1,347,236)
Shareowners Equity 3,869,958 3,702,458 3,503,117 3,270,003 2,983,921 2,652,764
Total Liab & Shareowners Equity 4,258,625 4,247,779 4,142,420 3,976,797 4,940,518 4,635,990
Financial Ratios:
EBITDA/Cash Interest (121.6) (61.5) (55.7) (58.5) (25.4) (18.4)
EBITDA-Capex/Cash Interest (539.0) (150.0) (123.6) (119.6) (235.5) (33.3)
EBITDA/Interest (121.6) (61.5) (55.7) (58.5) (25.4) (18.4)
EBITOA-Capex/Cash Interest (539.0) (150.0) (123.6) (119.6) (235.5) (33.3)
Debt/EBITDA (0.1) (0.2) (0.2) (0.2) (0.5) (0.5)
Year 1
Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Summary:
Cash from Operations (344,722) (344,555) (327,539) (292,013) (261,442) (231,740)
Cash for investing (228,073) (228,073) (228,073) (228,073) (228,073) (228,073)
Net Cash Flow (572,795) (572,628) (555,612) (520,086) (489,515) (459,814)
Cash from Financin 72,611 70,235 2,067,859 65,484 63,108 60,732
Cumulative Net Cash 797,326 294,933 1,807,181 1,352,578 926,172 527,090
Balance Sheet:
Cash & mid securites 797,326 294,933 1,807,181 1,352,578 926,172 527,090
Accounts Receivable 17,430 54,367 101,488 153,912 205,403 268,493
Other Current Assets 0 0 0 0 0 0
Current Assets 814,756 349,300 1,908,669 1,506,490 1,131,575 795,583
Gross PPE 3,596,513 3,824,586 4,040,501 4,255,769 4,470,391 4,684,369
Accum. Depreciation 131,861 170,106 210,511 253,069 297,773 344,617
Net PPE 3,464,652 3,654,480 3,829,990 4,002,700 4,172,618 4,339,752
Goodwill & other intangibles 0 0 0 0 0 0
Other non-current Assets (261,736) (639,924) (944,325) (1,192,587) (1,374,525) (1,510,236)
Non-current Assets 3,202,916 3,014,555 2,885,665 2,810,113 2,798,093 2,829,516
Total Assets 4,017,672 3,363,855 4,794,334 4,316,603 3,929,668 3,625,099
Accounts Payable 418,846 468,081 509,201 533,744 562,284 605,635
Debt maturities 397,061 314,366 232,659 171,033 129,239 102,258
Other accrued expenses 34,904 39,007 42,433 44,479 46,857 50,470
Current Liabilities 850,811 821,454 784,294 749,255 738,380 758,363
Secured Debt 860,402 616,272 451,472 345,923 279,792 238,266
Other long-term debt 0 0 0 0 0 0
Other non-current liab 34,904 39,007 42,433 44,479 46,857 50,470
Non-current Liabilities 895,306 655,279 493,905 390,401 326,649 288,736
Common stock A 4,000,000 4,000,000 6,000,000 6,000,000 6,000,000 6,000,000
Other common stock 0 0 0 0 0 0
Additional paid-in capital 0 0 0 0 0 0
Retained earnings (deficit) (1,728,446) (2,112,877) (2,483,866) (2,823,053) (3,135,361) (3,422,000)
Shareowners Equity 2,271,554 1,887,123 3,516,134 3,176,947 2,864,639 2,578,000
Total Liab & Shareowners Equity 4,017,672 3,363,855 4,794,334 4,316,603 3,928,668 3,825,000
Financial Ratios:
EBITDA/Cash Interest (24.3) (32.0) (41.7) (50.5) (59.3) (65.8)
EBITDA-Capex/Cash Interest (41.0) (53.8) (71.2) (90.2) (110.7) (129.3)
EBITDA/Interest (24.3) (32.0) (41.7) (50.5) (59.3) (65.8)
EBITOA-Capex/Cash Interest (41.0) (53.8) (71.2) (90.2) (110.7) (129.3)
Debt/EBITDA (0.3) (0.2) (0.2) (0.1) (0.1) (0.1)
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96
Year 2
Month 13 Month 14 Month 15 Month 16 Month 17 Month 18 Month 19 Month 20
Income Statement:
Corp/VAR acct revenue 93,163 110,249 129,314 148,541 168,614 191,320 214,176 238,277
ISP revenue 247,728 281,793 314,541 329,810 343,781 359,312 389,796 407,397
Total Revenue 340,891 392,042 443,856 478,351 512,595 550,632 603,972 645,674
Carrier settlements 117,265 128,004 143,166 145,160 157,212 172,847 186,496 191,738
Sales & customer service expense 323,718 309,271 316,260 304,864 310,872 338,990 361,521 356,398
General & administrative expenses 28,075 29,075 29,075 29,075 29,075 33,012 33,012 33,012
Gross Profit (129,167) (74,307) (44,645) (748) 15,437 5,783 22,942 64,526
Corporate Overhead 151,686 151,686 151,686 151,686 151,686 151,686 151,686 151,686
(Total Cash Expenses) 621,744 618,035 640,187 630,785 648,844 696,535 732,715 732,834
EBITDA (280,683) (225,993) (196,331) (152,434) (136,249) (145,903) (128,744) (87,160)
Depreciation & Amortization 48,478 50,104 51,723 53,333 54,935 56,529 58,115 59,693
Operating income (329,331) (276,097) (248,054) (205,767) (191,183) (202,432) (186,659) (146,852)
Other income (net) 0 0 0 0 0 0 0 0
Interest Expense 3,406 3,756 4,114 4,348 4,454 4,465 4,411 4,317
Income Taxes 0 0 0 0 0 0 0 0
Net Income (332,738) (279,853) (252,168) (210,114) (195,638) (205,896) (191,270) (151,170)
Gross margin neg neg neg neg 3% 1% 4% 10%
EBITDA margin neg neg neg neg neg neg neg neg
Operating margin neg neg neg neg neg neg neg neg
Total customers
Total lines 2,896 3,322 3,750 4,032 4,328 4,640 5,113 5,464
Total MOUs (millions) 21.0 24.3 27.4 29.7 31.2 32.8 25.3 37.8
Total employees 39 39 39 39 39 43 43 43
Statement of Cash Flows:
Net income (332,738) (279,853) (252,168) (210,114) (195,638) (206,896) (191,270) (151,170)
Depreciation & amortization 48,478 50,104 51,723 53,333 54,935 56,529 58,115 59,693
Change in working capital 10,227 11,761 13,316 14,351 15,378 16,519 18,119 19,370
Other non-cash items 0 0 0 0 0 0 0 0
Cash from Operations (274,033) (217,988) (187,130) (142,431) (125,325) (133,849) (115,036) (72,107)
Capital expenditures (187,807) (187,807) (187,807) (187,807) (187,807) (187,807) (187,807) (187,807)
Other investments 0 0 0 0 0 0 0 0
Cash for investing (187,807) (187,807) (187,807) (187,807) (187,807) (187,807) (187,807) (187,807)
Secured financing 187,807 187,807 187,807 187,807 187,807 187,807 187,807 187,807
Debt repayment (55,680) (59,593) (63,506) (67,418) (71,331) (75,243) (79,156) (83,069)
Other debt financing
Common A 2,000,000
Other equity
Other
Cash from Financing 2,132,127 128,214 124,302 120,389 116,476 112,564 108,651 104,738
Beg cash balance 527,090 2,197,377 1,919,796 1,669,161 1,459,312 1,262,656 1,053,564 859,372
Change in cash 1,670,287 (277,580) (250,635) (209,849) (196,656) (209,092) (194,192) (155,176)
Ending Cash Balance 2,197,377 1,919,796 1,669,161 1,459,312 1,262,656 1,053,564 859,372 704,196
Year 2
Month 21 Month 22 Month 23 Month 24
Income Statement:
Corp/VAR acct revenue 264,823 291,944 321,672 352,148
ISP revenue 425,248 442,807 460,921 490,882
Total Revenue 690,071 734,751 782,593 843,030
Carrier settlements 208,956 224,383 241,956 259,013
Sales & customer service expense 365,907 373,321 383,948 404,713
General & administrative expenses 33,012 33,012 33,012 33,012
Gross Profit 82,197 104,035 123,677 146,292
Corporate Overhead 151,686 151,686 151,686 151,686
(Total Cash Expenses) 759,561 782,402 810,602 848,425
EBITDA (69,489) (47,651) (28,009) (5,394)
Depreciation & Amortization 61,263 62,825 64,380 65,927
Operating income (130,752) (110,477) (92,389) (71,321)
Other income (net) 0 0 0 0
Interest Expense 4,200 4,068 3,928 3,783
Income Taxes 0 0 0 0
Net Income (134,952) (114,545) (96,317) (75,104)
Gross margin 12% 14% 16% 17%
EBITDA margin neg neg neg neg
Operating margin neg neg neg neg
Total customers
Total lines 5,835 6,224 6,635 7,067
Total MOUs (millions) 39.7 41.7 43.8 46.0
Total employees 43 43 43 43
Statement of Cash Flows:
Net income (134,952) (114,545) (96,317) (75,104)
Depreciation & amortization 61,263 62,825 64,380 65,927
Change in working capital 20,702 22,043 23,478 25,291
Other non-cash items 0 0 0 0
Cash from Operations (52,987) (29,677) (8,459) 16,113
Capital expenditures (187,807) (187,807) (187,807) (187,807)
Other investments 0 0 0 0
Cash for investing (187,807) (187,807) (187,807) (187,807)
Secured financing 187,807 187,807 187,807 187,807
Debt repayment (86,981) (90,894) (94,807) (98,719)
Other debt financing
Common A
Other equity
Other
Cash from Financing 100,826 96,913 93,000 89,088
Beg cash balance 704,196 564,228 443,657 340,391
Change in cash (139,968) (120,571) (103,266) (82,606)
Ending Cash Balance 564,228 443,657 340,391 257,785
Focal Communication Corp. Initial Business Plan
Chicago Financial Plan
9/23/96
Year 2
Month 13 Month 14 Month 15 Month 16 Month 17 Month 18
Cash Summary:
Cash from Operations (274,033) (217,988) (187,130) (142,431) (125,325) (133,849)
Cash for Investing (187,807) (187,807) (187,807) (187,807) (187,807) (187,807)
Net Cash Flow (461,840) (405,795) (374,937) (330,238) (313,132) (321,656)
Cash from Financing 2,132,127 128,214 124,302 120,389 116,476 112,564
Cumulative Net Cash 2,197,377 1,919,796 1,669,161 1,459,312 1,262,656 1,053,564
Balance Sheet:
Cash & mkt securities 2,197,377 1,919,796 1,669,161 1,459,312 1,262,656 1,053,564
Accounts receivable 340,891 392,042 443,856 478,351 512,595 550,632
Other current assets 0 0 0 0 0 0
Current Assets 2,538,267 2,311,839 2,113,017 1,937,663 1,775,251 1,604,196
Gross PPE 4,847,815 5,010,444 5,172,260 5,333,266 5,493,468 5,652,869
Accum depreciation 393,095 443,199 494,922 548,255 603,189 659,718
Net PPE 4,454,720 4,567,245 4,677,338 4,785,012 4,890,279 4,993,151
Goodwill & other intangibles 0 0 0 0 0 0
Other non-current assets (1,506,890) (1,634,948) (1,735,672) (1,874,249) (1,982,279) (2,057,210)
Non-current Assets 2,947,830 2,932,296 2,941,665 2,910,763 2,908,000 2,935,941
Total Assets 5,486,097 6,244,135 5,054,682 4,848,426 4,683,252 4,540,137
Accounts Payable 746,093 741,642 768,224 756,942 778,613 835,842
Debt maturities 85,131 92,598 103,369 111,295 115,550 116,845
Other accured expense 62,174 61,804 64,019 63,079 64,884 69,654
Current Liabilities 893,398 896,044 935,612 931,316 959,047 1,022,341
Secured debt 285,262 320,878 341,811 350,905 351,831 347,549
Other long-term debt 0 0 0 0 0 0
Other non-current liab 62,174 61,804 64,019 63,079 64,884 69,654
Non-Current Liabilities 347,437 382,682 405,829 413,983 416,715 417,203
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0 0 0
Additional paid-in-capital 0 0 0 0 0 0
Retained earnings (deficit) (3,754,737) (4,034,591) (4,285,759) (4,496,873) (4,692,511 (4,899,407)
Shareowners Equity 4,245,263 3,965,409 3,713,241 3,503,127 3,307,489 3,100,593
Total Liabilities &
Shareowners Equity 5,486,097 5,244,135 6,054,682 4,848,426 4,683,252 4,540,137
Financial Ratios:
EBITDA/Cash Interest (82.4) (60.2) (47.7) (35.1) (30.6) (32.7)
EBITDA-Caper/Cash Interest (137.6) (110.2) (93.4) (78.3) (72.8) (74.7)
EBITDA/Interest (82.4) (60.2) (47.7) (35.1) (30.6) (32.7)
EBITDA-Capex/Interest (137.6) (110.2) (93.4) (78.3) (72.8) (74.7)
Debt/EBITDA (0.1) (0.2) (0.2) (0.3) (0.3) (0.3)
Year 2
Month 19 Month 20 Month 21 Month 22 Month 23 Month 24
Cash Summary:
Cash from Operations (115,036) ( 72,107) ( 52,987) ( 29,677) (8,459) 16,113
Cash for Investing (187,807) (187,807) (187,807) (187,807) (187,807) (187,807)
Net Cash Flow (302,843) (259,914) (240,794) (217,484) (196,266) (171,694)
Cash from Financing 108,651 104,738 100,826 96,913 93,000 89,088
Cumulative Net Cash 859,372 704,196 564,228 443,657 340,391 257,785
Balance Sheet:
Cash & mkt securities 859,372 704,196 564,228 443,657 340,391 257,785
Accounts receivable 603,972 645,674 690,071 734,751 782,593 843,030
Other current assets 0 0 0 0 0 0
Current Assets 1,463,343 1,349,871 1,254,299 1,178,408 1,122,984 1,100,816
Gross PPE 5,811,473 5,969,283 6,126,305 6,282,541 6,437,997 6,592,675
Accum depreciation 717,833 777,525 838,789 901,614 965,994 1,031,921
Net PPE 5,093,640 5,191,758 5,287,516 5,380,927 5,472,003 5,560,754
Goodwill & other intangibles 0 0 0 0 0 0
Other non-current assets (2,165,658) (2,312,668) (2,423,614) (2,537,997) (2,645,389) (2,749,367)
Non-current Assets 2,927,982 2,879,090 2,863,903 2,842,930 2,826,613 2,811,387
Total Assets 4,391,325 4,228,961 4,118,202 4,021,339 3,949,598 3,912,203
Accounts Payable 879,258 879,401 911,473 930,883 972,722 1,018,110
Debt maturities 116,099 114,050 111,210 107,904 104,330 100,604
Other accured expense 73,272 73,283 75,956 78,240 81,060 84,842
Current Liabilities 1,069,629 1,066,734 1,098,639 1,125,027 1,158,112 1,203,556
Secured debt 340,102 330,790 320,406 309,415 298,085 266,569
Other long-term debt 0 0 0 0 0 0
Other non-current liab 73,272 73,283 75,956 78,240 81,060 84,842
Non-Current Liabilities 413,373 404,073 396,362 387,655 379,146 371,412
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0 0 0
Additional paid-in-capital 0 0 0 0 0 0
Retained earnings (deficit) (5,090,677) (5,241,847) (5,376,799) (5,491,343) (5,587,660) (5,662,765)
Shareowners Equity 2,909,323 2,758,153 2,623,201 2,508,657 2,412,340 2,337,235
Total Liabilities &
Shareowners Equity 4,301,325 4,228,961 4,118,202 4,021,339 3,946,598 3,912,203
Financial Ratios:
EBITDA/Cash Interest (29.2) (20.2) (16.5) (11.7) (7.1) (1.4)
EBITDA-Caper/Cash Interest (71.8) (63.7) (61.3) (57.9) (54.9) (51.1)
EBITDA/Interest (29.2) (20.2) (16.5) (11.7) (7.1) (1.4)
EBITDA-Capex/Interest (71.8) (63.7) (61.3) (57.9) (54.9) (51.1)
Debt/EBITDA (0.3) (0.4) (0.5) (0.7) (1.2) (6.0)
s
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96 Year 3
Month 25 Month 26 Month 27 Month 28 Month 29 Month 30
Income Statement:
Corp/VAR acct revenue 475,218 508,798 543,624 580,873 618,646 657,821
ISP revenue 547,717 572,672 595,559 620,327 645,055 670,600
Total Revenue 1,022,935 1,081,470 1,139,184 1,201,200 1,263,701 1,328,421
Carrier settlements 284,021 292,895 309,464 329,449 347,570 366,250
Sales & customer service expense 618,718 505,566 513,294 526,278 535,573 547,581
General & administrative expenses 39,609 39,609 39,609 39,609 39,609 39,609
Gross Profit 80,588 243,400 276,817 306,864 340,949 374,982
Corporate Overhead 157,802 157,802 157,802 157,802 157,802 157,802
(Total Cash Expenses) 1,100,150 995,873 1,020,169 1,053,138 1,080,554 1,111,241
EBITDA (77,214) 86,597 119,015 148,062 183,147 217,180
Depreciation & Amortization 70,253 74,579 78,116 81,618 85,085 88,517
Operating income (147,467) 11,018 40,898 66,444 98,062 126,663
Other income (net) 0 0 0 0 0 0
Interest Expense 4,810 6,983 8,813 10,014 10,671 10,941
Income Taxes 0 0 0 0 0 0
Net Income (152,277) 4,035 32,085 56,430 87,391 117,722
Gross margin 8% 23% 24% 25% 27% 28%
EBITDA margin neg 8% 10% 12% 14% 16%
Operating margin neg 1% 4% 6% 8% 10%
Total customers
Total lines 7,602 8,014 8,442 8,888 9,352 9,834
Total MOUs (millions) 54.6 58.0 60.8 63.7 66.7 69.9
Total employees 55 55 55 55 55 55
Statement of Cash Flows:
Net income (152,277) 4,035 32,085 56,430 87,391 117,722
Depreciation & amortization 70,253 74,579 78,116 81,618 85,085 88,517
Change in working capital 30,688 32,444 34,176 36,036 37,911 39,853
Other non-cash items 0 0 0 0 0 0
Cash from Operations (51,336) 111,058 144,377 174,084 210,387 246,091
Capital expenditures (432,625) (432,625) (432,625) (432,625) (432,625) (432,625)
Other investments 0 0 0 0 0 0
Cash for investing (432,625) (432,625) (432,625) (432,625) (432,625) (432,625)
Secured financing 432,625 432,625 432,625 432,625 432,625 432,625
Debt repayment (102,632) (111,645) (120,658) (129,671) (138,684) 147,697
Other debt financing
Common A
Other equity
Other
Cash from Financing 329,993 320,980 311,967 302,954 293,941 284,928
Beg cash balance 257,785 103,817 103,231 126,950 171,362 243,065
Change in cash (153,968) (587) 23,719 44,413 71,703 98,394
Ending Cash Balance 103,817 103,231 126,950 171,362 243,055 341,460
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96 Year 3
Month 31 Month 32 Month 33 Month 34 Month 35 Month 36
Income Statement:
Corp/VAR acct revenue 699,581 742,033 786,063 829,148 872,615 917,499
ISP revenue 712,924 743,930 774,210 804,647 837,231 870,052
Total Revenue 1,412,505 1,485,963 1,560,273 1,833,795 1,709,846 1,787,551
Carrier settlements 397,111 410,279 432,727 452,880 475,510 497,526
Sales & customer service expense 577,379 577,197 588,727 598,849 612,912 627,304
General & administrative expenses 39,609 39,609 39,609 39,609 39,609 39,609
Gross Profit 398,406 458,879 499,211 542,457 581,815 623,112
Corporate Overhead 157,802 157,802 157,802 157,802 157,802 157,802
(Total Cash Expenses) 1,171,901 1,184,887 1,218,865 1,249,140 1,285,833 1,322,241
EBITDA 240,604) 301,076 341,408 384,655 424,013 465,310
Depreciation & Amortization 91,915 95,279 98,609 101,906 105,170 108,401
Operating income 148,689 205,797 242,799 282,749 318,843 356,909
Other income (net) 0 0 0 0 0 0
Interest Expense 10,961 10,827 10,601 10,323 10,014 9,689
Income Taxes 0 0 0 0 0 0
Net income 137,728 194,971 232,198 272,426 308,829 347,220
Gross margin 28% 31% 32% 33% 34% 35%
EBITDA margin 17% 20% 22% 24% 25% 26%
Operating margin 11% 14% 16% 17% 19% 20%
Total customers
Total lines 10,479 11,006 11,554 12,096 12,658 13,240
Total MOUs (millions) 73.8 78.0 81.6 85.3 89.0 92.9
Total employees 55 55 55 55 55 55
Statement of Cash Flows:
Net income 137,728 194,971 232,198 272,426 308,829 347,220
Depreciation & amortization 91,915 95,279 98,609 101,906 105,170 108,401
Change in working capital 42,375 44,579 46,808 49,014 51,295 53,627
Other non-cash items 0 0 0 0 0 0
Cash from Operations 272,018 334,829 377,616 423,346 465,294 509,248
Capital expenditures (432,625) (432,625) (432,625) (432,625) (432,625) (432,625)
Other investments 0 0 0 0 0 0
Cash for investing (432,625) (432,625) (432,625) (432,625) (432,625) (432,625)
Secured financing 432,625 432,625 432,625 432,625 432,625 432,625
Debt repayment (156,710) (165,723) (174,736) (183,749) (192,762) (201,775)
Other debt financing
Common A
Other equity
Other
Cash from Financing 275,915 266,902 257,889 248,876 239,863 230,850
Beg cash balance 341,460 456,768 625,873 828,753 1,068,350 1,340,882
Change in cash 115,308 169,106 202,879 239,597 272,532 307,472
Ending Cash Balance 456,768 625,873 828,753 1,068,350 1,340,882 1,648,354
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96 Year 3
Month 25 Month 26 Month 27 Month 28 Month 29 Month 30
Cash Summary:
Cash from Operations (51,336) 111,058 144,377 174,084 210,387 246,091
Cash for investing (432,625) (432,625) (432,625) (432,625) (432,625) (432,625)
Net Cash Flow (483,961) (321,567) (288,248) (258,541) (222,238) (186,534)
Cash from Financing 329,993 320,980 311,967 302,954 293,941 284,928
Cumulative Net Cash 103,817 103,231 126,950 171,362 243,065 341,460
Balance Sheet:
Cash & mkt securities 103,817 103,321 126,950 171,362 243,065 341,460
Accounts receivable 1,022,935 1,081,470 1,139,184 1,201,200 1,263,701 1,328,421
Other current assets 0 0 0 0 0 0
Current Assets 1,126,753 1,184,701 1,266,133 1,372,562 1,506,766 1,669,681
Gross PPE 7,025,300 7,457,925 7,811,645 8,161,827 8,508,508 8,851,722
Accum depreciation 1,102,174 1,176,753 1,254,869 1,336,488 1,421,573 1,510,090
Net PPE 5,923,126 6,281,172 6,556,776 6,825,340 7,086,935 7,341,632
Goodwill & other intangibles 0 0 0 0 0 0
Other non-current assets (2,708,149) (3,041,908) (3,175,018) (3,354,658) (3,580,387) (3,825,422)
Non-current Assets 3,214,978 3,239,264 3,381,757 3,470,681 8,506,548 3,516,210
Total Assets 4,341,731 4,423,965 4,647,891 4,843,244 5,013,314 5,186,091
Accounts Payable 1,320,180 1,195,047 1,224,203 1,263,765 1,296,665 1,333,490
Debt maturities 96,793 154,141 210,187 249,644 272,836 283,910
Other accrued expenses 110,015 99,587 102,017 105,314 108,055 111,124
Current Liabilities 1,526,988 1,448,775 1,536,407 1,618,723 1,677,556 1,728,524
Secured debt 519,769 686,609 788,389 841,699 862,804 863,822
Other long-term debt 0 0 0 0 0 0
Other non-current liab 110,015 99,587 102,017 105,314 108,055 111,124
Non-Current Liabilities 629,784 786,196 890,406 947,013 970,860 974,946
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0 0 0
Additional paid-in capital 0 0 0 0 0 0
Retained earnings (deficit) (5,815,042) (5,811,007) (5,778,922) (5,722,492) (5,635,101) (5,517,380)
Shareowners Equity 2,184,958 2,188,993 2,221,078 2,277,508 2,364,899 2,482,620
Total Liabilities & Shareowners Equity 4,341,731 4,423,965 4,647,891 4,843,244 5,013,314 5,186,091
EBITDA/Cash Interest Ratios: (16.1) 12.3 13.5 14.8 17.2 19.8
EBITDA-Capex/Cash Interest (106.0) (49.7) (35.6) (28.4) (23.4) (19.7)
EBITDA/Interest (16.1) 12.3 13.5 14.8 17.2 19.8
EBITDA-Capex/Internet (106.0) (49.7) (35.6) (28.4) (23.4) (19.7)
Debt/EBITDA (0.7) 0.8 0.7 0.6 0.5 0.4
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96 Year 3
Month 31 Month 32 Month 33 Month 34 Month 35 Month 36
Cash Summary:
Cash from Operations 272,018) 334,829 377,616 423,346 465,294 509,248
Cash for investing (432,625) (432,625) (432,625) (432,625) (432,625) (432,625)
Net Cash Flow (160,607) (97,797) (55,010) (9,279) 32,669 76,622
Cash from Financing 275,915 266,902 257,889 248,876 239,663 230,850
Cumulative Net Cash 456,768 625,873 828,753 1,068,350 1,340,882 1,648,354
Balance Sheet:
Cash & mkt securities 456,768 625,873 828,753 1,068,350 1,340,882 1,648,354
Accounts receivable 1,412,505 1,485,963 1,560,273 1,633,795 1,709,846 1,787,551
Other current assets 0 0 0 0 0 0
Current Assets 1,869,273 2,111,836 2,389,026 2,702,145 3,050,728 3,435,905
Gross PPE 9,191,504 9,527,888 9,860,906 10,190,596 10,516,990 10,840,120
Accum depreciation 1,602,005 1,697,284 1,795,893 1,897,799 2,002,969 2,111,370
Net PPE 7,589,499 7,830,604 6,065,015 8,292,799 8,514,022 8,728,750
Goodwill & other intangibles 0 0 0 0 0 0
Other non-current assets (4,058,024) (4,348,573) (4,607,451) (4,864,593) (5,107,502) (5,343,769)
Non-current Assets 3,531,475 3,482,031 3,457,564 3,428,206 3,406,520 3,365,981
Total Assets 5,400,748 5,593,867 5,846,590 6,130,351 6,457,248 6,820,886
Accounts Payable 1,406,282 1,421,864 1,462,638 1,498,968 1,543,000 1,586,689
Debt maturities 286,933 284,934 279,927 273,165 265,403 257,077
Other accrued expenses 117,190 118,489 121,886 124,914 128,583 132,224
Current Liabilities 1,810,405 1,825,287 1,864,451 1,897,047 1,936,986 1,975,990
Secured debt 852,804 834,772 812,734 788,445 762,906 736,678
Other long-term debt 0 0 0 0 0 0
Other non-current liab 117,190 118,489 121,886 124,914 128,583 132,224
Non-Current Liabilities 969,994 953,261 934,621 913,359 891,489 868,902
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0 0 0
Additional paid-in capital 0 0 0 0 0 0
Retained earnings (deficit) (5,379,651) (5,184,680) (4,952,482) (4,680,056) (4,371,227) (4,024,007)
Shareowners Equity 2,620,349 2,815,320 3,047,518 3,319,944 3,628,773 3,975,993
Total Liabilities & Shareowners Equity 5,400,748 5,593,867 5,846,590 6,130,351 6,457,248 6,820,886
EBITDA/Cash Interest Ratios: 22.0 27.8 32.2 37.3 42.3 48.0
EBITDA-Capex/Cash Interest (17.5) (12.2) (8.6) (4.6) (0.9) 3.4
EBITDA/Interest 22.0 27.8 32.2 37.3 42.3 46.0
EBITDA-Capex/Internet (17.5) (12.2) (8.6) (4.6) (0.9) 3.4
Debt/EBITDA (0.4) 0.3 0.3 0.2 0.2 0.2
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96 Year 4
Month 37 Month 38 Month 39 Month 40 Month 41 Month 42 Month 43
Income Statement:
Corp/VAR acct revenue 1,075,998 1,135,318 1,197,435 1,260,448 1,329,886 1,398,540 1,467,493
ISP revenue 1,193,032 1,245,673 1,295,504 1,346,238 1,399,894 1,455,720 1,526,037
Total Revenue 2,269,030 2,380,991 2,492,938 2,606,686 2,729,780 2,854,261 2,993,530
Carrier settlements 552,010 571,376 601,494 629,887 664,119 695,353 733,959
Sales & customer service expense 1,146,258 790,326 804,612 820,914 844,793 878,076 908,064
General & administrative expenses 46,855 46,855 46,855 46,855 46,855 51,196 51,196
Gross Profit 523,907 972,434 1,039,077 1,109,030 1,174,013 1,229,636 1,300,312
Corporate Overhead 164,224 164,224 164,224 164,224 164,224 164,224 164,224
(Total Cash Expenses) 1,909,348 1,572,781 1,617,185 1,661,880 1,719,991 1,788,849 1,857,443
EBITDA 359,682 808,210 875,763 944,806 1,009,789 1,065,412 1,136,088
Depreciation & Amortization 113,600 118,747 123,843 128,887 133,205 137,458 141,646
Operating income 246,082 689,462 751,910 815,918 876,584 927,953 994,440
Other income (net) 0 0 0 0 0 0 0
Interest Expense 7,282 2,839 (1,001) (3,731) (5,501) (6,588) (7,233)
Income Taxes 0 0 0 0 0 336,435 360,602
Net Income 238,801 689,623 752,912 819,649 882,084 598,106 641,071
Gross margin 23% 41% 42% 43% 43% 43% 43%
EBITDA margin 16% 34% 35% 36% 37% 37% 38%
Operating margin 11% 29% 30% 31% 32% 33% 33%
Total customers
Total lines 14,027 14,697 15,390 16,107 16,885 17,652 18,548
Total MOUs (millions) 139.8 147.1 153.6 160.3 167.4 174.7 182.9
Total employees 70 70 70 70 70 74 74
Statement of Cash Flows:
Net income 238,801 686,623 752,912 819,649 882,084 598,106 641,071
Depreciation & amortization 113,600 118,747 123,843 128,887 133,205 137,458 141,648
Change in working capital 68,071 71,430 74,788 78,201 81,893 85,628 89,806
Other non-cash items 0 0 0 0 0 0 0
Cash from Operations 420,472 876,800 951,542 1,026,737 1,097,183 821,193 872,524
Capital expenditures (634,645) (634,645) (634,645) (634,645) (634,645) (634,645) (634,645)
Other investments 0 0 0 0 0 0 0
Cash for investing (634,645) (634,645) (634,645) (634,645) (634,645) (634,645) (634,645)
Secured financing
Debt repayment (210,788) (210,788) (210,788) (210,788) (210,788) (210,788) (210,788)
Other debt financing
Common A
Other equity
Other
Cash from Financing (210,788) (210,788) (210,788) (210,788) (210,788) (210,788) (210,788)
Beg cash balance 1,648,354 1,223,392 1,254,758 1,360,867 1,542,171 1,793,920 1,769,679
Change in cash (424,962) 31,366 106,109 181,303 251,749 (24,241) 27,091
Ending Cash Balance 1,223,392 1,254,758 1,360,867 1,542,171 1,793,920 1,769,679 1,796,770
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96 Year 4
Month 44 Month 45 Month 46 Month 47 Month 48
Income Statement:
Corp/VAR acct revenue 1,544,164 1,622,928 1,697,557 1,772,477 1,850,283
ISP revenue 1,584,422 1,638,793 1,695,977 1,754,085 1,815,128
Total Revenue 3,128,587 3,261,720 3,383,534 3,526,563 3,665,412
Carrier settlements 763,777 798,667 831,107 865,080 902,693
Sales & customer service expense 918,509 931,388 945,003 961,521 983,393
General & administrative expenses 51,196 51,196 51,196 51,196 51,196
Gross Profit 1,395,104 1,480,470 1,566,228 1,648,766 1,728,129
Corporate Overhead 164,224 164,224 164,224 164,224 164,224
(Total Cash Expenses) 1,897,707 1,945,475 1,991,530 2,042,021 2,101,507
EBITDA 1,230,880 1,316,245 1,402,004 1,484,542 1,563,905
Depreciation & Amortization 145,774 149,839 153,843 157,786 161,671
Operating income 1,085,105 1,166,406 1,248,161 1,326,755 1,402,235
Other income (net) 0 0 0 0 0
Interest Expense (7,606) (7,818) (7,936) (8,002) (8,038)
Income Taxes 393,376 422,721 452,195 480,513 507,698
Net Income 699,335 751,503 803,902 854,245 902,574
Gross margin 45% 45% 46% 47% 47%
EBITDA margin 39% 40% 41% 42% 43%
Operating margin 35% 36% 37% 38% 38%
Total customers
Total lines 19,365 20,208 21,025 21,865 22,730
Total MOUs (millions) 191.3 198.9 206.6 214.4 222.5
Total employees 74 74 74 74 74
Statement of Cash Flows:
Net income 699,335 751,503 803,902 854,245 902,574
Depreciation & amortization 145,774 149,839 153,843 157,786 161,671
Change in working capital 93,858 97,852 101,806 105,797 109,962
Other non-cash items 0 0 0 0 0
Cash from Operations 938,967 999,194 1,059,551 1,117,828 1,174,207
Capital expenditures (634,645) (634,645) (634,645) (634,645) (634,645)
Other investments 0 0 0 0 0
Cash for investing (634,645) (634,645) (634,645) (634,645) (634,645)
Secured financing
Debt repayment (210,788) (210,788) (210,788) (210,788) (210,788)
Other debt financing
Common A
Other equity
Other
Cash from Financing (210,788) (210,788) (210,788) (210,788) (210,788)
Beg cash balance 1,796,679 1,890,303 2,044,064 2,258,181 2,530,575
Change in cash 93,534 153,760 214,117 272,394 328,774
Ending Cash Balance 1,890,303 2,044,064 2,258,181 2,530,575 2,859,349
Focal Communications Corp. Initial Business Plan
Chicago financial Plan
9/23/96 Year 4
Month 37 Month 38 Month 39 Month 40
Cash Summary:
Cash from Operations 420,472 876,800 951,542 1,026,737
Cash for investing (634,645) (634,645) (634,645) (634,645)
Net Cash Flow (214,174) 242,155 316,897 392,092
Cash from Financing (210,788) (210,788) (210,788) (210,788)
Cumulative Net Cash 1,223,392 1,254,758 1,360,867 1,542,171
Balance Sheet:
Cash & mid securities 1,223,392 1,254,758 1,360,867 1,542,171
Accounts receivable 2,269,030 1,904,793 1,994,351 2,085,349
Other current assets 0 0 0 0
Current Assets 3,492,422 3,159,551 3,355,218 3,627,519
Gross PPE 11,360,017 11,874,716 12,384,268 12,888,724
Accum depreciation 2,224,970 2,343,717 2,467,560 2,596,447
Net PPE 9,135,047 9,530,999 9,916,708 10,292,277
Goodwill & other intangibles 0 0 0 0
Other non-current assets (5,213,699) (5,520,576) (5,629,136) (5,622,238)
Non-current Assets 3,921,348 4,010,422 4,287,572 4,670,039
Total Assets 7,413,771 7,169,973 7,642,790 8,297,558
Accounts Payable 2,291,217 1,887,338 1,940,622 1,994,256
Debt maturities 248,439 131,473 16,666 (68,899)
Other accrued expenses 190,935 157,278 161,719 166,188
Current Liabilities 2,730,591 2,176,088 2,119,007 2,091,545
Secured debt 277,451 (64,810) (292,264) (434,152)
Other long-term debt 0 0 0 0
Other non-current liab. 190,935 157,278 161,719 166,188
Non-Current Liabilities 468,386 92,469 (130,545) (267,964)
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0
Additional paid-in capital 0 0 0 0
Retained earnings (deficit) (3,785,206) (3,098,583) (2,345,672) (1,526,022)
Shareowners Equity 4,214,794 4,901,417 5,654,328 6,473,978
Total Liabilities & Shareowners Equity 7,413,771 7,163,973 7,642,790 8,297,558
Financial Ratios:
EBITDA/Cash Interest 49.4 284.6 NA NA
EBITDA-Capex/Cash Interest (37.8) 61.1 NA NA
EBITDA/Interest 49.4 284.6 (874.8) (253.2)
EBITDA-Capex/Interest (37.8) 61.1 (240.8) (83.1)
Debt/EBITDA 0.1 0.0 (0.0) (0.0)
Focal Communications Corp. Initial Business Plan
Chicago financial Plan
9/23/96
Month 41 Month 42 Month 43 Month 44
Cash Summary:
Cash from Operations 1,097,183 821,193 872,524 938,967
Cash for investing (634,645) (634,645) (634,645) (634,645)
Net Cash Flow 462,538 186,547 237,879 304,322
Cash from Financing (210,788) (210,788) (210,788) (210,788)
Cumulative Net Cash 1,793,920 1,769,679 1,796,770 1,890,303
Balance Sheet:
Cash & mid securities 1,793,920 1,769,679 1,796,770 1,890,303
Accounts receivable 1,910,846 1,997,982 2,095,471 2,190,011
Other current assets 0 0 0 0
Current Assets 3,704,766 3,767,661 3,892,241 4,080,314
Gross PPE 13,320,519 13,745,837 14,164,775 14,577,429
Accum depreciation 2,729,652 2,887,111 3,008,759 3,154,533
Net PPE 10,590,866 10,878,726 11,156,016 11,422,896
Goodwill & other intangibles 0 0 0 0
Other non-current assets (5,176,523) (4,917,796) (4,632,117) (4,359,662)
Non-current Assets 5,414,343 5,960,930 6,523,899 7,063,234
Total Assets 9,119,109 9,728,591 10,416,140 11,143,548
Accounts Payable 2,063,989 2,146,619 2,228,932 2,277,249
Debt maturities (125,763) (161,235) (182,492) (194,880)
Other accrued expenses 171,999 178,885 185,744 189,771
Current Liabilities 2,110,226 2,164,269 2,232,184 2,272,140
Secured debt (519,178) (568,731) (597,028) (612,936)
Other long-term debt 0 0 0 0
Other non-current liab. 171,999 178,885 185,744 189,771
Non-Current Liabilities (347,179) (389,846) (411,283) (423,165)
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0
Additional paid-in capital 0 0 0 0
Retained earnings (deficit) (643,938) (45,832) 595,239 1,294,574
Shareowners Equity 7,356,062 7,954,186 8,595,239 9,294,574
Total Liabilities & Shareowners Equity 9,119,109 9,728,591 10,416,140 11,143,548
Financial Ratios:
EBITDA/Cash Interest NA NA NA NA
EBITDA-Capex/Cash Interest NA NA NA NA
EBITDA/Interest (183.6) (161.7) (157.1) (161.8)
EBITDA-Capex/Interest (68.2) (65.4) (69.3) (78.4)
Debt/EBITDA (0.1) (0.1) (0.1) (0.1)
Focal Communications Corp. Initial Business Plan
Chicago financial Plan
9/23/96 Year 4
Month 45 Month 46 Month 47 Month 48
Cash Summary:
Cash from Operations 999,194 1,059,551 1,117,828 1,174,207
Cash for investing (634,645) (634,645) (634,645) (634,645)
Net Cash Flow 364,549 424,906 483,183 539,562
Cash from Financing (210,788) (210,788) (210,788) (210,788)
Cumulative Net Cash 2,044,064 2,258,181 2,530,575 2,859,349
Balance Sheet:
Cash & mid securities 2,044,064 2,258,181 2,530,575 2,859,349
Accounts receivable 2,283,204 2,375,474 2,468,594 2,565,788
Other current assets 0 0 0 0
Current Assets 4,327,268 4,633,655 4,999,169 5,425,137
Gross PPE 14,983,893 15,384,260 15,778,622 16,167,068
Accum depreciation 3,304,372 3,458,214 3,616,001 3,777,671
Net PPE 11,679,521 11,926,046 12,162,621 12,389,397
Goodwill & other intangibles 0 0 0 0
Other non-current assets (4,060,771) (3,754,137) (3,436,152) (3,105,690)
Non-current Assets 7,618,750 8,171,909 8,726,469 9,283,707
Total Assets 11,946,018 12,805,564 13,726,838 14,708,844
Accounts Payable 2,334,570 2,389,837 2,450,425 2,521,808
Debt maturities (201,954) (205,931) (208,140) (209,354)
Other accrued expenses 194,548 199,153 204,202 210,151
Current Liabilities 2,327,164 2,383,058 2,446,488 2,522,605
Secured debt (621,770) (626,628) (629,276) (630,711)
Other long-term debt 0 0 0 0
Other non-current liab. 194,548 199,153 204,202 210,151
Non-Current Liabilities (427,223) (427,475) (425,074) (420,560)
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0
Additional paid-in capital 0 0 0 0
Retained earnings (deficit) 2,046,078 2,849,980 3,704,225 4,606,799
Shareowners Equity 10,046,078 10,849,980 11,704,225 12,606,799
Total Liabilities & Shareowners Equity 11,946,018 12,805,564 13,725,638 14,708,844
Financial Ratios:
EBITDA/Cash Interest NA NA NA NA
EBITDA-Capex/Cash Interest NA NA NA NA
EBITDA/Interest (168.4) (176.7) (185.5) (194.6)
EBITDA-Capex/Interest (87.2) (96.7) (106.2) (115.6)
Debt/EBITDA (0.1) (0.0) (0.0) (0.0)
Focal Communications Corp. Initial Business Plan
Chicago Financial Plan
9/23/96
Year 5
Month 49 Month 50 Month 51 Month 52 Month 53 Month 54
Income Statement:
Corp/VAR acct revenue 2,062,858 2,140,241 2,218,239 2,297,708 2,378,677 2,462,299
ISP revenue 1,827,145 1,895,007 1,960,737 2,028,783 2,098,091 2,170,683
Total Revenue 3,890,003 4,035,247 4,178,976 4,326,491 4,476,767 4,632,983
Carrier settlements 971,754 1,000,600 1,037,545 1,075,406 1,112,755 1,153,710
Sales & customer service expense 1,117,839 1,053,647 1,067,607 1,087,196 1,106,095 1,180,484
General & administrative expenses 54,811 54,811 54,811 54,811 54,811 59,369
Gross Profit 1,745,599 1,926,189 2,019,013 2,109,077 2,203,106 2,239,420
Corporate Overhead 186,771 186,771 185,771 186,771 186,771 186,771
(Total Cash Expenses) 2,331,175 2,295,830 2,346,734 2,404,185 2,460,432 2,580,334
EBITDA 1,558,828 1,739,418 1,832,242 1,922,308 2,016,335 2,052,649
Depreciation & Amortization 165,682 169,612 173,464 177,239 180,939 184,564
Operating income 1,393,147 1,569,805 1,658,776 1,745,067 1,835,397 1,868,084
Other income (net) 0 0 0 0 0 0
Interest Expense (8,057) (8,047) (7,998) (7,930) (7,851) (7,646)
Income Taxes 504,434 568,027 600,039 631,079 663,569 675,263
Net Income 896,771 1,009,825 1,066,737 1,121,918 1,179,678 1,200,467
Gross margin 45% 48% 48% 49% 49% 48%
EBITDA margin 40% 43% 44% 44% 45% 44%
Operating margin 36% 39% 40% 40% 41% 40%
Total customers
Total lines 23,703 24,559 25,438 26,341 27,268 28,220
Total MOUs (millions) 244.2 254.0 263.0 272.3 281.9 291.8
Total employees 82 82 82 82 82 89
Statement of Cash Flows:
Net income 896,771 1,009,825 1,066,737 1,121,918 1,179,678 1,200,467
Depreciation & amortization 165,682 169,612 173,464 177,239 180,939 184,564
Change in working capital 116,700 121,057 125,369 129,795 134,303 138,989
Other non-cash items 0 0 0 0 0 0
Cash from Operations 1,179,152 1,300,495 1,365,570 1,428,952 1,494,920 1,524,021
Capital expenditures (739,210) (739,210) (739,210) (739,210) (739,210) (739,210)
Other investments 0 0 0 0 0 0
Cash for investing (739,210) (739,210) (739,210) (739,210) (739,210) (739,210)
Secured financing
Debt repayment (210,788) (206,329) (203,953) (201,578) (199,202) (171,738)
Other debt financing
Common A
Other equity
Other
Cash from Financing (210,788) (208,329) (203,953) (201,578) (199,202) (171,738)
Beg cash balance 2,859,349 3,088,503 3,443,459 3,865,656 4,354,031 4,910,539
Change in cash 229,154 354,956 442,407 488,165 556,508 613,073
Ending Cash Balance 3,088,503 3,443,459 3,865,866 4,354,031 4,910,539 5,523,611
Year 5
Month 55 Month 56 Month 57 Month 58 Month 59 Month 60
Income Statement:
Corp/VAR acct revenue 2,535,601 2,609,906 2,684,248 2,759,642 2,837,229 2,915,075
ISP revenue 2,263,071 2,346,741 2,427,925 2,502,034 2,576,603 2,652,313
Total Revenue 4,799,672 4,956,647 5,112,174 5,261,678 5,413,832 5,567,389
Carrier settlements 1,195,463 1,225,631 1,263,634 1,297,091 1,337,470 1,376,091
Sales & customer service expense 1,208,503 1,216,803 1,233,445 1,245,573 1,266,762 1,280,137
General & administrative expenses 59,369 59,369 59,369 59,369 59,369 59,369
Gross Profit 2,336,337 2,454,844 2,555,526 2,659,843 2,750,231 2,843,791
Corporate Overhead 186,771 186,771 186,771 186,771 186,771 186,771
(Total Cash Expenses) 2,650,106 2,688,574 2,143,419 2,788,804 2,650,372 2,910,350
EBITDA 2,149,566 2,268,073 2,348,766 2,472,872 2,563,460 2,657,020
Depreciation & Amortization 188,117 191,599 195,011 198,355 201,632 204,844
Operating income 1,961,449 2,076,474 2,173,744 2,274,517 2,361,827 2,452,176
Other income (net) 0 0 0 0 0 0
Interest Expense (7,317) (7,018) (6,777) (6,589) (6,438) (6,311)
Income Taxes 708,756 750,057 764,988 821,198 852,574 885,056
Net Income 1,260,011 1,333,435 1,395,533 1,459,908 1,515,690 1,573,432
Gross margin 49% 50% 50% 51% 51% 51%
EBITDA margin 45% 46% 46% 47% 47% 48%
Operating margin 41% 42% 43% 43% 44% 44%
Total customers
Total lines 29,267 30,197 31,151 32,056 32,980 33,926
Total MOUs (millions) 302.8 313.9 313.9 334.3 344.1 354.2
Total employees 89 89 89 89 89 89
Statement of Cash Flows:
Net income 1,260,011 1,333,435 1,395,533 1,459,906 1,515,690 1,573,432
Depreciation & amortization 188,117 191,599 195,011 198,355 201,632 204,844
Change in working capital 143,990 148,699 153,365 157,850 157,415 167,022
Other non-cash items 0 0 0 0 0 0
Cash from Operations 1,592,118 1,673,733 1,743,910 1,816,113 1,879,737 1,945,298
Capital expenditures (739,210) (739,210) (739,210) (739,210) (739,210) (739,210)
Other investments 0 0 0 0 0 0
Cash for investing (739,210) (739,210) (739,210) (739,210) (739,210) (739,210)
Secured financing (169,363) (166,987) (164,611) (162,235) (159,860) (157,484)
Debt repayment
Other debt financing
Common A
Other equity
Other
Cash from Financing (169,363) (166,987) (164,611) (162,235) (159,860) (157,484)
Beg cash balance 5,523,611 6,207,157 6,974,693 7,814,782 8,729,450 9,710,118
Change in cash 683,545 767,537 840,089 914,668 980,668 1,048,604
Ending Cash Balance 6,207,157 6,974,693 7,814,782 8,729,450 9,710,118 10,758,722
Focal Communications Corp. Initial Business Plan
Chicago financial Plan
9/23/96 Year 5
Month 49 Month 50 Month 51 Month 52
Cash Summary:
Cash from Operations 1,179,152 1,300,495 1,365,570 1,428,952
Cash for investing (739,210) (739,210) (739,210) (739,210)
Net Cash Flow 439,943 561,285 626,360 689,742
Cash from Financing (210,788) (206,329) (203,953) (201,578)
Cumulative Net Cash 3,088,503 3,443,459 3,865,866 4,354,031
Balance Sheet:
Cash & mid securities 3,088,503 3,443,459 3,865,866 4,354,031
Accounts receivable 2,723,002 2,824,673 2,925,283 3,028,544
Other current assets 0 0 0 0
Current Assets 5,811,505 6,268,132 6,791,149 7,382,574
Gross PPE 16,568,152 16,961,215 17,346,416 17,723,914
Accum depreciation 3,943,353 4,112,965 4,286,429 4,463,568
Net PPE 12,624,800 12,848,250 13,059,987 13,260,245
Goodwill & other intangibles 0 0 0 0
Other non-current assets (2,510,590) (2,226,638) (1,816,967) (1,398,426)
Non-current Assets 10,114,210 10,621,612 11,243,020 11,661,819
Total Assets 15,925,715 16,889,745 18,034,169 19,244,383
Accounts Payable 2,797,410 2,754,995 2,816,081 2,885,022
Debt maturities (210,016) (210,375) (209,453) (207,848)
Other accrued expenses 233,117 229,583 234,673 240,418
Current Liabilities 2,820,511 2,774,204 2,841,301 2,917,592
Secured debt (631,483) (627,437) (621,938) (615,668)
Other long-term debt 0 0 0 0
Other non-current liab. 233,117 229,583 234,673 240,418
Non-Current Liabilities (398,365) (397,854) (387,264) (375,249)
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0
Additional paid-in capital 0 0 0 0
Retained earnings (deficit) 5,503,570 6,513,395 7,580,132 8,702,050
Shareowners Equity 13,503,570 14,513,395 15,580,132 16,702,050
Total Liabilities & Shareowners Equity 16,926,716 16,889,745 18,034,169 19,244,393
Financial Ratios:
EBITDA/Cash Interest NA NA NA NA
EBITDA-Capex/Cash Interest NA NA NA NA
EBITDA/Interest (193.5) (216.2) (229.1) (242.4)
EBITDA-Capex/Interest (101.7) (124.3) (136.7) (149.2)
Debt/EBITDA (0.0) (0.0) (0.0) (0.0)
Focal Communications Corp. Initial Business Plan
Chicago financial Plan
9/23/96
Month 53 Month 54 Month 55 Month 56
Cash Summary:
Cash from Operations 1,494,920 1,524,021 1,592,118 1,673,733
Cash for investing (739,210) (739,210) (739,210) (739,210)
Net Cash Flow 755,710 784,811 852,908 934,523
Cash from Financing (199,202) (171,738) (169,363) (166,987)
Cumulative Net Cash 4,910,539 5,523,611 6,207,157 6,974,693
Balance Sheet:
Cash & mid securities 4,910,539 5,523,611 6,207,157 6,974,693
Accounts receivable 3,133,737 3,243,088 3,359,771 3,469,653
Other current assets 0 0 0 0
Current Assets 8,044,278 8,766,699 9,566,927 10,444,346
Gross PPE 18,093,861 18,456,409 18,811,707 19,159,898
Accum depreciation 4,644,607 4,829,171 5,017,288 5,208,887
Net PPE 13,449,254 13,627,238 13,794,419 13,951,011
Goodwill & other intangibles 0 0 0 0
Other non-current assets (982,066) (480,004) (55,366) 326,108
Non-current Assets 12,467,188 13,147,235 13,739,053 14,277,119
Total Assets 20,511,463 21,913,934 23,305,980 24,721,465
Accounts Payable 2,952,518 3,096,401 3,180,127 3,226,289
Debt maturities (205,879) (203,717) (195,182) (186,594)
Other accrued expenses 246,043 258,033 265,011 268,857
Current Liabilities 2.992,683 3,150,717 3,249,956 3,308,552
Secured debt (608,991) (577,012) (551,192) (531,585)
Other long-term debt 0 0 0 0
Other non-current liab. 246,043 258,033 265,011 268,857
Non-Current Liabilities (362,948) (318,978) (286,182) (262,728)
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0
Additional paid-in capital 0 0 0 0
Retained earnings (deficit) 9,881,728) 11,082,195 12,342,206 13,675,641
Shareowners Equity 17,881,728 19,082,195 20,342,206 21,675,641
Total Liabilities & Shareowners Equity 20,511,463 21,913,934 23,305,880 24,721,465
Financial Ratios:
EBITDA/Cash Interest NA NA NA NA
EBITDA-Capex/Cash Interest NA NA NA NA
EBITDA/Interest (256.8) (268.5) (293.8) (323.2)
EBITDA-Capex/Interest (162.7) (171.8) (192.7) (217.9)
Debt/EBITDA (0.0) (0.0) (0.0) (0.0)
Focal Communications Corp. Initial Business Plan
Chicago financial Plan
9/23/96 Year 5
Month 57 Month 58 Month 59 Month 60
Cash Summary:
Cash from Operations 1,743,910 1,816,113 1,879,737 1,945,298
Cash for investing (739,210) (739,210) (739,210) (739,210)
Net Cash Flow 1,004,700 1,076,903 1,140,528 1,206,088
Cash from Financing (164,611) (162,235) (159,860) (157,484)
Cumulative Net Cash 7,814,782 8,729,450 9,710,118 10,758,722
Balance Sheet:
Cash & mid securities 7,814,782 8,729,450 9,710,118 10,758,722
Accounts receivable 3,578,522 3,683,173 3,789,683 3,897,172
Other current assets 0 0 0 0
Current Assets 11,393,304 12,412,623 13,499,801 14,655,894
Gross PPE 19,501,126 19,835,529 20,163,244 20,484,404
Accum depreciation 5,403,898 5,602,253 5,803,886 6,008,730
Net PPE 14,097,227 14,233,275 14,359,358 14,475,674
Goodwill & other intangibles 0 0 0 0
Other non-current assets 725,233 1,110,621 1,513,437 1,910,691
Non-current Assets 14,822,460 15,343,897 15,872,795 16,386,365
Total Assets 26,215,764 27,756,520 29,372,595 31,042,260
Accounts Payable 3,292,103 3,346,565 3,420,447 3,492,442
Debt maturities (179,545) (174,049) (169,722) (166,174)
Other accrued expenses 274,342 278,880 285,037 291,037
Current Liabilities 3,386,900 3,451,396 3,535,762 3.617,305
Secured debt (516,652) (504,838) (494,976) (486,285)
Other long-term debt 0 0 0 0
Other non-current liab. 274,342 278,880 285,037 291,037
Non-Current Liabilities (242,310) (225,958) (209,939) (195,248)
Common stock A 8,000,000 8,000,000 8,000,000 8,000,000
Other common stock 0 0 0 0
Additional paid-in capital 0 0 0 0
Retained earnings (deficit) 15,071,174 16,531,082 18,046,771 19,620,204
Shareowners Equity 23,071,174 24,531,082 26,046,771 27,620,204
Total Liabilities & Shareowners Equity 26,215,764 27,756,520 29,372,595 31,042,260
Financial Ratios:
EBITDA/Cash Interest NA NA NA NA
EBITDA-Capex/Cash Interest NA NA NA NA
EBITDA/Interest (349.5) (375.3) (398.2) (421.0)
EBITDA-Capex/Interest (240.4) (263.1) (283.4) (303.9)
Debt/EBITDA (0.0) (0.0) (0.0) (0.0)
EXHIBIT 2 TO STOCK PURCHASE AGREEMENT
-------------------------------------
Restated Certificate of Incorporation, dated November 26, 1996 - Previously
filed as Exhibit 3.1 to the Form S-4 Registration Statement on April 3, 1998.
EXHIBIT 3 TO STOCK PURCHASE AGREEMENT
Form of Promissory Note
PROMISSORY NOTE
---------------
$5,627.91 November 27, 1996
For value received, Xxxxx X. Xxxx (the "Executive Investor") hereby
------------------
promises to pay to the order of Focal Communications Corporation, a Delaware
corporation (the "Company"), the principal amount of $5,627.91, together with
-------
interest thereon calculated from the date hereof in accordance with the
provisions of this promissory note (this "Note"). This Note is issued pursuant
----
to the stock purchase agreement of even date herewith, by and between the
Company, the Executive Investor, and certain other investors listed on the
signature pages attached thereto (as amended from time to time pursuant to its
terms, the "Stock Purchase Agreement"). The amounts due under this Note are
------------------------
secured by a pledge of all Company common stock held by the Executive Investor
during the period of this Note, pursuant to the terms of a pledge agreement of
even date herewith, by and between the Company and the Executive Investor (the
"Executive Investor Stock Pledge Agreement").
-----------------------------------------
Interest shall accrue on a daily basis on the outstanding principal
amount of this Note at a rate per annum equal to the applicable federal rate
for obligations of similar duration, published monthly by the Internal Revenue
Service, and such interest shall be due and payable at such time as the
principal amount of this Note becomes due and payable, or, if earlier, at such
time as the principal amount of this Note is paid in full.
The Executive Investor shall repay the entire unpaid principal amount of
this Note and any accrued and unpaid interest thereon on the 90th day after the
date first written above (the "Maturity Date"). The Executive Investor may, at
-------------
any time and from time to time, without premium or penalty, prepay all or any
portion of the outstanding principal amount of this Note; provided that any
--------
prepayment shall first be applied to any accrued but unpaid interest.
In the event the Executive Investor fails to pay any amounts due
hereunder when due, the Executive Investor shall pay to the holder hereof, in
addition to such amounts due, all costs of collection, including reasonable
attorneys fees.
The Executive Investor, or his successors and assigns, hereby waives
diligence, presentment, protest and demand and notice of protest, demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from time to time and that the holder
hereof may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Executive Investor hereunder.
This Note shall be governed by the internal laws, and not the laws of
conflicts, of the State of Illinois.
/s/ Xxxxx X. Xxxx
----------------------------------------
Xxxxx X. Xxxx
PROMISSORY NOTE
---------------
$5,627.91 November 27, 1996
For value received, Xxxx X. Xxxxxxxx (the "Executive Investor") hereby
------------------
promises to pay to the order of Focal Communications Corporation, a Delaware
corporation (the "Company"), the principal amount of $5,627.91, together
-------
with interest thereon calculated from the date hereof in accordance with the
provisions of this promissory note (this "Note"). This Note is issued pursuant
----
to the stock purchase agreement of even date herewith, by and between the
Company, the Executive Investor, and certain other investors listed on the
signature pages attached thereto (as amended from time to time pursuant to its
terms, the "Stock Purchase Agreement"). The amounts due under this Note are
------------------------
secured by a pledge of all Company common stock held by the Executive Investor
during the period of this Note, pursuant to the terms of a pledge agreement of
even date herewith, by and between the Company and the Executive Investor (the
"Executive Investor Stock Pledge Agreement").
------------------------------------------
Interest shall accrue on a daily basis on the outstanding principal
amount of this Note at a rate per annum equal to the applicable federal rate for
obligations of similar duration, published monthly by the Internal Revenue
Service, and such interest shall be due and payable at such time as the
principal amount of this Note becomes due and payable, or, if earlier, at such
time as the principal amount of this Note is paid in full.
The Executive Investor shall repay the entire unpaid principal amount of
this Note and any accrued and unpaid interest thereon on the 90th day after the
date first written above (the "Maturity Date"). The Executive Investor may, at
-------------
any time and from time to time, without premium or penalty, prepay all or any
portion of the outstanding principal amount of this Note; provided that any
--------
prepayment shall first be applied to any accrued but unpaid interest.
In the event the Executive Investor fails to pay any amounts due
hereunder when due, the Executive Investor shall pay to the holder hereof, in
addition to such amounts due, all costs of collection, including reasonable
attorneys fees.
The Executive Investor, or his successors and assigns, hereby waives
diligence, presentment, protest and demand and notice of protest, demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from time to time and that the holder
hereof may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Executive Investor hereunder.
This Note shall be governed by the internal laws, and not the laws of
conflicts, of the State of Illinois.
/s/ Xxxx X. Xxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxx
PROMISSORY NOTE
---------------
$5,627.91 November 27, 1996
For value received, Xxxxxx X. Xxxxxx (the "Executive Investor") hereby
------------------
promises to pay to the order of Focal Communications Corporation, a Delaware
corporation (the "Company"), the principal amount of $5,627.91, together with
-------
interest thereon calculated from the date hereof in accordance with the
provisions of this promissory note (this "Note"). This Note is issued pursuant
----
to the stock purchase agreement of even date herewith, by and between the
Company, the Executive Investor, and certain other investors listed on the
signature pages attached thereto (as amended from time to time pursuant to its
terms, the "Stock Purchase Agreement"). The amounts due under this Note are
------------------------
secured by a pledge of all Company common stock held by the Executive Investor
during the period of this Note, pursuant to the terms of a pledge agreement of
even date herewith, by and between the Company and the Executive Investor (the
"Executive Investor Stock Pledge Agreement").
------------------------------------------
Interest shall accrue on a day basis on the outstanding principal amount
of this Note at a rate per annum equal to the applicable federal rate for
obligations of similar duration, published monthly by the Internal Revenue
Service, and such interest shall be due and payable at such time as the
principal amount of this Note becomes due and payable, or, if earlier, at such
time as the principal amount of this Note is paid in full.
The Executive Investor shall repay the entire unpaid principal amount of
this Note and any accrued and unpaid interest thereon on the 90th day after the
date first written above (the "Maturity Date"). The Executive Investor may, at
-------------
any time and from time to time, without premium or penalty, prepay all or any
portion of the outstanding principal amount of this Note; provided that any
--------
prepayment shall first be applied to any accrued but unpaid interest.
In the event the Executive Investor fails to pay any amounts due
hereunder when due, the Executive Investor shall pay to the holder hereof, in
addition to such amounts due, all costs of collection, including reasonable
attorneys fees.
The Executive Investor, or his successors and assigns, hereby waives
diligence, presentment, protest and demand and notice of protest, demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from time to time and that the holder
hereof may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Executive Investor hereunder.
This Note shall be governed by the internal laws, and not the laws of
conflicts, of the State of Illinois.
/s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
PROMISSORY NOTE
---------------
$5,627.91 November 27, 1996
For value received, Xxxxxx X. Xxxxxx, Xx. (the "Executive Investor")
------------------
hereby promises to pay to the order of Focal Communications Corporation, a
Delaware corporation (the "Company"), the principal amount of $5,627.91,
together with interest thereon calculated from the date hereof in accordance
with the provisions of this promissory note (this "Note"). This Note is issued
----
pursuant to the stock purchase agreement of even date herewith, by and between
the Company, the Executive Investor, and certain other investors listed on the
signature pages attached thereto (as amended from time to time pursuant to its
terms, the "Stock Purchase Agreement"). The amounts due under this Note are
------------------------
secured by a pledge of all Company common stock held by the Executive Investor
during the period of this Note, pursuant to the terms of a pledge agreement of
even date herewith, by and between the Company and the Executive Investor (the
"Executive Investor Stock Pledge Agreement").
------------------------------------------
Interest shall accrue on a daily basis on the outstanding principal
amount of this Note at a rate per annum equal to the applicable federal rate for
obligations of similar duration, published monthly by the Internal Revenue
Service, and such interest shall be due and payable at such time as the
principal amount of this Note becomes due and payable, or, if earlier, at such
time as the principal amount of this Note is paid in full.
The Executive Investor shall repay the entire unpaid principal amount of
this Note and any accrued and unpaid interest thereon on the 90th day after the
date first written above (the "Maturity Date"). The Executive Investor may, at
-------------
any time and from time to time, without premium or penalty, prepay all or any
portion of the outstanding principal amount of this Note; provided that any
--------
prepayment shall first be applied to any accrued but unpaid interest.
In the event the Executive Investor fails to pay any amounts due
hereunder when due, the Executive Investor shall pay to the holder hereof, in
addition to such amounts due, all costs of collection, including reasonable
attorneys fees.
The Executive Investor, or his successors and assigns, hereby waives
diligence, presentment, protest and demand and notice of protest, demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from time to time and that the holder
hereof may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Executive Investor hereunder.
This Note shall be governed by the internal laws, and not the laws of
conflicts, of the State of Illinois.
/s/ Xxxxxx X. Xxxxxx, Xx.
----------------------------------------
Xxxxxx X. Xxxxxx, Xx.
EXHIBIT 4 TO STOCK PURCHASE AGREEMENT
-------------------------------------
Form of Executive Investor Stock Pledge Agreement - Exhibits 4.7-4.10 to the
Form S-4 Registration Statement filed on April 3, 1998 are Executive Investor
Stock Pledge Agreements executed by Addy, Barnicle, Beatty, and Xxxxxx, Xx.,
respectively.
EXHIBIT 5 TO STOCK PURCHASE AGREEMENT
-------------------------------------
Bylaws Amendment - Previously filed as Exhibit 3.2 to the Form S-4 Registration
Statement on April 3, 1998.
EXHIBIT 6 TO STOCK PURCHASE AGREEMENT
-------------------------------------
Stockholders Agreement by and among Focal, MDCP, Frontenac, BV, Addy, Barnicle,
Xxxxxx and Xxxxxx - Previously filed as Exhibit 4.11 to the Form S-4
Registration Statement on April 3, 1998.
EXHIBIT 7 TO STOCK PURCHASE AGREEMENT
-------------------------------------
Form of Executive Stock Agreement and Employment Agreement - Exhibits 4.12-4.15
to the Form S-4 Registration Statement filed on April 3, 1998 are Executive
Stock Agreement and Employment Agreements executed by Addy, Barnicle, Xxxxxx and
Xxxxxx, Xx., respectively.
EXHIBIT 8 TO STOCK PURCHASE AGREEMENT
-------------------------------------
Registration Agreement by and among Focal, MDCP, Frontenac, BV, Addy, Barnicle,
Xxxxxx and Xxxxxx - Previously filed as Exhibit 4.16 to the Form S-4
Registration Statement on April 3, 1998.
EXHIBIT 9 TO STOCK PURCHASE AGREEMENT
Form of Vesting Agreement
VESTING AGREEMENT
-----------------
THIS VESTING AGREEMENT (this "Agreement") is made as of November 27, 1996,
---------
by and among Battery Ventures III, L.P. (the "New Capital Investor"), Focal
--------------------
Communications Corporation (the "Company"), and each of Xxxxxx X. Xxxxxx, Xx.,
-------
Xxxx X. Xxxxxxxx, Xxxxx X. Xxxx and Xxxxxx Xxxxxx (individually an "Executive
---------
Investor" and collectively the "Executive Investors").
-------- -------------------
The execution and delivery of this Agreement is a condition to the purchase
of the Company's Class A Common Stock, par value $.01 per share (the "Class A
-------
Common"), by the New Capital Investor, the Executive Investors and certain other
------
investors (collectively, the "Investors"), pursuant to a Stock Purchase
---------
Agreement of even date herewith by and among the Company and such Investors (the
"Stock Purchase Agreement"). Capitalized terms used but not otherwise defined
------------------------
herein are used herein with the meanings ascribed to such terms in Sections 2
and 3 below.
NOW, THEREFORE, in consideration of the mutual premises made herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
Section 1. Vesting and Forfeiture.
----------------------
1A. Vesting and Forfeiture upon a Sale. Contemporaneously with any sale
----------------------------------
or transfer by the New Capital Investor to any person of any shares of Qualified
Common (including by way of merger or consolidation, but excluding (i) any sale
or transfer of shares to a Successor Fund upon such Successor Fund's execution
of a counterpart to this Agreement agreeing to be bound by the provisions hereof
and to succeed to the rights and obligations of New Capital Investor hereunder
with respect to the shares of Qualified Common sold or transferred to such
Successor Fund, and (ii) any recapitalization or other reorganization in which
the New Capital Investor's holdings of the Company's equity immediately after
such transaction are equal to the New Capital Investor's holdings of the
Company's equity immediately prior to such transaction) (a "Sale"):
----
(a) a number (if any) of the shares of Unvested Class C
Common held by each holder of Unvested Class C Common shall vest equal to
the product obtained by multiplying (x) the number of shares of Qualified
Common being transferred in such Sale, times (y) such holder's Applicable
-----
Percentage for such Sale;
(b) a number (if any) of the New Capital Investor's shares
of Nonqualified Common equal to the product obtained by multiplying (i) the
number of shares of Qualified Common being transferred in such Sale, times
(ii) the sum of the Applicable Percentages for all holders of Unvested
Class C Common for such Sale, shall without further action by the Company
or the New Capital Investor automatically be deemed forfeited, and the New
Capital Investor shall thereafter no longer exercise nor have the right to
exercise any of its rights with respect to such forfeited shares; and
(c) a number of the shares of Unvested Class C Common held
by each holder of Unvested Class C Common equal to the difference (if any)
obtained by subtracting
(i) the number of such holder's shares of Unvested Class C Common that are
to vest as a result of such Sale, from (ii) the number of such holder's
shares of Unvested Class C Common that would vest as a result of such Sale
if the Return Multiple for such Sale were 35, shall without further action
by the Company or such holder automatically be deemed forfeited and such
holder shall thereafter no longer exercise nor have the right to exercise
any of its rights with respect to such forfeited shares.
1B. Vesting and Forfeiture upon Election Notice following a Rule 144
----------------------------------------------------------------
Quarter. If, within 10 business days after any calendar quarter (following the
-------
consummation of the Company's initial Public Offering) during which any shares
of Qualified Common then held by the New Capital Investor (excluding (i) shares
sold or transferred pursuant to a Sale during such calendar quarter, and (ii)
shares the transfer of which during such calendar quarter would have been
restricted under any hold-back agreement entered into with, or for the benefit
of, the Company or its underwriters) are eligible to be transferred pursuant to
Rule 144 promulgated by the Securities Exchange Commission under the Securities
Act of 1933, as amended, or any successor rule or rules then in effect ("Rule
----
144") as of the last business day of such calendar quarter (such a calendar
---
quarter, a "Rule 144 Quarter") (such eligible shares, the "Rule 144 Eligible
---------------- -----------------
Shares"), any holder of Unvested Class C Common gives written notice to the New
------
Capital Investor setting forth the number of Rule 144 Eligible Shares for such
Rule 144 Quarter, such holder's estimated calculation of the Fair Market Value
of such Rule 144 Eligible Shares (including all market information necessary to
enable the New Capital Investor to perform such calculation), and such holder's
estimated calculation of the number of such holder's shares of Unvested Class C
Common that will vest pursuant to paragraph I B(a) with respect to such Rule 144
Quarter ("Election Notice"), then on the 20th business day following such Rule
---------------
144 Quarter:
(a) a number (if any) of the shares of Unvested Class C Common
held by each such electing holder shall vest equal to the product obtained
by multiplying (x) the number of Rule 144 Eligible Shares for such Rule 144
Quarter, times (y) such holder's Applicable Percentage for such Rule 144
Quarter;
(b) a number (if any) of the New Capital Investor's shares of
Nonqualified Common equal to the product obtained by multiplying (x) the
number of Rule 144 Eligible Shares for such Rule 144 Quarter, times (y) the
-----
sum of the Applicable Percentages for such Rule 144 Quarter for all holders
of Unvested Class C Common giving Election Notice with respect to such Rule
144 Quarter, shall without further action by the Company or the New Capital
Investor automatically be deemed forfeited, and the New Capital Investor
shall thereafter no longer exercise nor have the right to exercise any of
its rights with respect to such forfeited shares;
(c) a number of the shares of Unvested Class C Common held by
each holder of Unvested Class C Common giving Election Notice with respect
to such Rule 144 Quarter equal to the difference (if any) obtained by
subtracting (i) the number of such holder's shares of Unvested Class C
Common that are to vest as a result of giving such
-2-
Election Notice, from (ii) the number of such holder's shares of Unvested
Class C Common that would vest as a result of giving such Election Notice
if the Return Multiple for such Rule 144 Quarter were 35, shall without
further action by the Company or such holder automatically be deemed
forfeited, and such holder shall thereafter no longer exercise nor have the
right to exercise any of its rights with respect to such forfeited shares.
1C. Vesting and Forfeiture upon Liquidation. Contemporaneously with
---------------------------------------
a complete liquidation of the Company (the "Liquidation"):
-----------
(a) a number (if any) of the shares of Unvested Class C Common
held by each holder of Unvested Class C Common shall vest equal to the
product obtained by multiplying (x) the number of shares of Qualified
Common held by New Capital Investor as of the date of the Liquidation,
times (y) such holder's Applicable Percentage for such Liquidation;
-----
(b) a number (if any) of the New Capital Investor's shares of
Nonqualified Common equal to the product obtained by multiplying (i) the
number of shares of Qualified Common held by the New Capital Investor as of
the date of the Liquidation, times (ii) the sum of the Applicable
-----
Percentages for all holders of Unvested Class C Common for such
Liquidation, shall without further action by the Company or the New Capital
Investor automatically be deemed forfeited, and the New Capital Investor
shall thereafter no longer exercise nor have the right to exercise any of
its rights with respect to such forfeited shares.
(c) a number of the shares of Unvested Class C Common held by
each holder of Unvested Class C Common equal to the difference (if any)
obtained by subtracting (i) the number of such holder's shares of Unvested
Class C Common that are to vest as a result of such Liquidation, from (ii)
the number of such holders shares of Unvested Class C Common that would
vest as a result of such Liquidation if the Return Multiple for such
Liquidation were 35, shall without further action by the Company or such
holder automatically be deemed forfeited, and such holder shall thereafter
no longer exercise nor have the right to exercise any of its rights with
respect to such forfeited shares.
1D. Forfeiture upon Termination of this Agreement. Upon the seventh
---------------------------------------------
anniversary of the date hereof, all Unvested Class C Common then outstanding
shall without further action by the Company or any holder of such Unvested Class
C Common automatically be deemed forfeited, and each such holder shall
thereafter no longer exercise nor have the right to exercise any of its rights
with respect to such forfeited shares.
1E. Forfeiture Procedure. Upon any forfeiture of any shares of
--------------------
Unvested Class C Common or Nonqualified Common pursuant to this Agreement, the
holder of such forfeited shares shall promptly submit the certificate or
certificates representing such forfeited shares to the Company for cancellation.
Upon such submission, the Company shall take all actions necessary to retire
such forfeited shares and to cause such shares to resume the status of
authorized and unissued shares. The
-3-
Company shall promptly cancel the submitted certificate(s) and issue to such
holder (i) a certificate, bearing the legend set forth in paragraph 5B below,
representing the number of shares (if any) of Unvested Class C Common or
Nonqualified Common, as applicable, which were evidenced by the submitted
certificate(s) but which were not forfeited, and (ii) a certificate, not bearing
the legend set forth in paragraph 4B below, representing the number of shares
represented by the submitted certificate(s) that were not forfeited and that in
connection with such forfeiture ceased to be Nonqualified Common or became
Vested Class C Common. as applicable.
Section 2. Calculation of Each Holder's Applicable Percentage.
2A. Applicable Percentage. For each Sale, Liquidation, or Rule 144
---------------------
Quarter, the "Applicable Percentage" for each holder of Unvested Class C Common
---------------------
shall be equal to the percentage obtained by multiplying:
(a) 25% (or if such holder is no longer employed by the Company
or any of its Subsidiaries ("Termination"), the product of (i) 25%, times
-----------
(ii) a fraction, the numerator of which is the number of shares of Unvested
Class C Common held by such holder immediately prior to Termination that
were not elected to be repurchased pursuant to an Executive Stock Agreement
as a result of such Termination, and the denominator of which is the number
of shares of Unvested Class C Common held by such holder immediately prior
to such Termination); times
(b) the quotient obtained by dividing (x) the Return Multiple
for such Sale, Liquidation, or Rule 144 Quarter minus 20 (provided that
----- --------
such difference shall not be less than zero nor greater than 15), by (y)
65.
2B. Calculation of the Return Multiple.
----------------------------------
(a) The "Return Multiple" for each Sale shall be equal to the
---------------
quotient obtained by dividing:
(i) the Fair Market Value of all consideration that the New
Capital Investor will receive in such Sale in exchange for the shares of
Qualified Common to be transferred or sold by the New Capital Investor in
such Sale, by
(ii) the Total Cost and Contributions for the shares of
Qualified Common to be transferred or sold by the New Capital Investor in
such Sale (as well as any shares of Nonqualified Common that will be
forfeited pursuant to this Agreement in connection with such Sale).
(b) The "Return Multiple" for each Liquidation shall be equal to the
---------------
quotient obtained by dividing:
-4-
(i) the Fair Market Value of all consideration to be
distributed in such Liquidation to the New Capital Investor with respect to
the shares of Qualified Common held by the New Capital Investor as of the
date of such Liquidation, by
(ii) the Total Cost and Contributions for the shares of
Qualified Common held by the New Capital Investor as of the date of such
Liquidation (as well as any shares of Nonqualified Common that will be
forfeited pursuant to this Agreement in connection with such Liquidation).
(c) The "Return Multiple" for each Rule 144 Quarter shall be equal to
---------------
the quotient obtained by dividing:
(i) the Fair Market Value of all of the New Capital Investor's
Rule 144 Eligible Shares for such Rule 144 Quarter, by
(ii) the Total Cost and Contributions for the New Capital
Investor's Rule 144 Eligible Shares for such Rule 144 Quarter (as well as
any shares of Nonqualified Common to be forfeited pursuant to this
Agreement by virtue of all Election Notices filed with respect to such Rule
144 Quarter).
Section 3. Definitions.
"Executive Stock Agreements" means the executive stock agreements of
-------------------------
even date herewith, each by and between the Company and one Executive Investor,
as amended from time to time pursuant to their terms.
"Fair Market Value" shall mean:
-----------------
(i) with respect to any Rule 144 Eligible Share, the weighted
average (based on the volume of trading in shares of the class of the
Company's common stock that includes the Rule 144 Eligible Shares (the
Company's "Common Stock") on each business day during the Rule 144 Quarter)
------------
over all of the business days during such Rule 144 Quarter, of the average
of the closing prices of the sales of such Common Stock on all securities
exchanges on which such 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; and
-5-
(ii) with respect to consideration received in a Sale or
Liquidation, the amount of all cash consideration received plus the fair
market value of all other consideration received (as shall be determined in
good faith by the New Capital Investor).
"Nonqualified Common" means 2,019.23 of the shares of Class A Common
-------------------
purchased by the New Capital Investor under the Stock Purchase Agreement
(together with any shares issued with respect to such shares of Nonqualified
Common, including any stock splits, stock dividends, or recapitalizations);
provided that
--------
(i) contemporaneously with a Sale, the number of shares of
Nonqualified Common that would be forfeited in connection with such Sale if
the Return Multiple for such Sale were 35 shall (whether or not actually
forfeited in connection with such Sale) forever cease to be Nonqualified
Common,
(ii) if any holder or holders of Unvested Class C Common give(s)
Election Notice with respect to a Rule 144 Quarter, the number of shares of
Nonqualified Common that would be forfeited in connection with such Rule
144 Quarter if the Return Multiple for such Rule 144 Quarter were 35 shall
(whether or not actually forfeited in connection with such Rule 144
Quarter) forever cease to be Nonqualified Common, and
(iii) contemporaneously with a Liquidation or termination of
this Agreement, any and all shares of Nonqualified Common then held by the
New Capital Investor shall forever cease to be Nonqualified Common,
(iv) if any shares of an Executive Investor's Unvested Class C
Common are repurchased pursuant to the provisions of an Executive Stock
Agreement, or if any Executive Investor waives (pursuant to paragraph 5G
below) his right to have any of his shares of Unvested Class C Common vest,
a number of New Capital Investor's shares of Nonqualified Common shall vest
equal to the number of shares of Unvested Class C Common so repurchased or
of which the rights to vest are so waived.
"Public Offering" means the initial underwritten sale of the company's
---------------
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S- I
(or a successor form adopted by the Securities and Exchange Commission);
provided that the following shall not be considered a Public Offering: (i) any
--------
issuance of common stock as consideration or financing for a merger or
acquisition, and (ii) any issuance of common stock or rights to acquire common
stock to employees of the Company or its Subsidiaries as part of an incentive or
compensation plan.
"Qualified Common" means 8,750 of the shares of Class A Common
----------------
purchased by the New Capital Investor under the Stock Purchase Agreement
(together with any shares issued with respect to such shares of Qualified
Common, including by any stock splits, stock dividends, or recapitalizations),
provided that any such share shall forever cease to be Qualified Common (i) upon
--------
-6-
a Liquidation, (ii) when such share has been sold or transferred in a Sale, or
(iii) upon termination of this Agreement; and further provided further that if
------------------------
any holder of Unvested Class C Common gives Election Notice with respect to a
Rule 144 Quarter, all Rule 144 Eligible Shares for such Rule 144 Quarter shall,
for all purposes as to such electing holder, thereafter forever cease to be
Qualified Common.
"Successor Fund" means, with respect to the New Capital Investor, any
--------------
private equity fund formed for the principal purpose of making equity
investments, where such fund is managed by the same principal parties having
management responsibility for the New Capital Investor.
"Total Cost and Contributions" means, with respect to each share of
----------------------------
Qualified Common or Nonqualified Common held by the New Capital Investor on any
specified date, the sum of (i) the New Capital Investors Initial Contribution
(as that term is defined in the Stock Purchase Agreement) divided by the
-------
aggregate number of shares of Class A Common purchased by the New Capital
Investor under the Stock Purchase Agreement (as adjusted for stock splits,
stock dividends, recapitalizations, and other reorganizations, the
"Original Class A Common"), and (ii) for all Subsequent Contributions (as that
-----------------------
term is defined in the Stock Purchase Agreement) made by the New Capital
Investor from the date hereof through such specified date, the quotient obtained
by dividing (x) the amount of each such Subsequent Contribution by the aggregate
number of shares of Original Class A Common held by the New Capital Investor as
of the date of each such Subsequent Contribution.
"Unvested Class C Common" means, as to each Executive Investor,
-----------------------
504.8075 of the shares of Class C Common issued as of the date hereof (together
with shares issued with respect to such shares of Unvested Class C Common as
part of any stock split, stock dividend. or recapitalization); provided that any
--------
such share shall forever cease to be Unvested Class C Common when it has been
(i) repurchased by the Company, an Investor, or an executive employee of the
Company or its Subsidiaries pursuant to paragraph 3 of an Executive Stock
Agreement, (ii) forfeited pursuant to -the terms of this Agreement or (iii)
vested pursuant to the terms of this Agreement (at which time, such share shall
become Vested Class C Common).
"Vested Class C Common" means all shares of Unvested Class C Common
---------------------
that have vested pursuant to the terms of this Agreement (and thereby ceased to
be Unvested Class C Common).
Section 4. Pledge of Unvested Class C Common
---------------------------------
4A. Pledge. Each Executive Investor hereby initially pledges to the
------
New Capital Investor, and grants to the New Capital Investor a security interest
in such Executive Investor's Unvested Class C Common (such Executive Investor's
"Pledged Shares") as security for its duties and obligations pursuant to this
--------------
Agreement.
-7-
4B. Delivery of Pledged Shares. Upon the execution of this Agreement,
--------------------------
each Executive Investor shall deliver to the New Capital Investor the
certificate(s) representing such Executive Investor's Pledged Shares, together
with duly executed forms of assignment sufficient to transfer title thereto to
the New Capital Investor.
4C. Status as Holder. For purposes of determinations and
----------------
calculations under this Agreement, each Executive Investor shall be deemed to be
the holder of such Executive Investor's Pledged Shares.
4D. Distributions, Other Certificates, etc. If any Executive
---------------------------------------
Investor becomes entitled to receive or receives any securities or other
property with respect to, in substitution of, or in exchange for any of such
Executive Investor's Pledged Shares (whether as a distribution in connection
with any recapitalization, reorganization or reclassification, a stock dividend
or otherwise), or any certificate(s) representing any of such Executive
Investor's Pledged Shares, such Executive Investor shall accept such securities,
property, or certificate(s) on behalf of and for the benefit of the New Capital
Investor as additional security for such Executive Investor's obligations
hereunder and shall promptly deliver such additional security to the New Capital
Investor together with duly executed forms of assignment, and such additional
security shall be deemed to be part of such Executive Investor's Pledged Shares.
4E. Delivery to and by the New Capital Investor. If the Company
-------------------------------------------
issues any certificate representing Pledged Shares, the Company shall in keeping
with the purpose of paragraph 4D deliver such certificate directly to the New
Capital Investor. If the holder of such Pledged Shares is required pursuant to
the terms of this Agreement to transfer any certificate representing Pledged
Shares to the Company for cancellation the New Capital Investor shall transfer
such certificate to the Company on behalf of such holder.
4F. Release of Pledged Shares upon Vesting. Upon any of Executive
--------------------------------------
Investor's Pledged Shares becoming Vested Class C Common pursuant to this
Agreement, the New Capital Investor shall deliver to such Executive Investor the
certificate or certificates representing such shares of Vested Class C Common
(or, if necessary, the New Capital Investor shall submit the certificate or
certificates representing such Vested Class C Common to the Company, and the
Company shall issue to such Executive Investor a certificate representing the
number of shares of Vested Class C Common represented by such submitted
certificate(s), and shall deliver to the New Capital Investor a certificate
(issued in such Executive Investor's name) representing the number of shares of
Class C Common which were represented by such submitted certificate(s) but which
were not Vested Class C Common and not forfeited), and such Vested Class C
Common shall no longer constitute part of such Executive Investor's Pledged
Shares.
4G. Voting Proxy. Each Executive Investor hereby appoints the New
------------
Capital Investor as his true and lawful proxy and attorney-in-fact, with full
power of substitution, to vote all of such Executive Investor's Pledged Shares
on all matters to be voted on by the Company's shareholders. These proxies and
powers granted by each Executive Investor pursuant to this
-8-
paragraph 4G are coupled with an interest, and are given to secure each
Executive Investor's obligations to the New Capital Investor under this
Agreement. Such proxies and powers shall be irrevocable with respect to each
such Pledged Share (and shall survive the death, disability, incompetency, or
bankruptcy of such Executive Investor) until such time as such Pledged Share
becomes Vested Class C Common pursuant to the provisions of this Agreement and
thereby ceases to be a Pledged Share, at which time such proxy shall be deemed
revoked with respect to such share (but not with respect to any shares of such
holder that remain Pledged Shares).
4H. Further Assurance. Each Executive Investor agrees that at any
-----------------
time and from time to time upon the request of the New Capital Investor, such
Executive Investor shall execute and deliver such further documents and take
such further actions as the New Capital Investor may reasonably request in order
to effect the purpose of this Agreement.
Section 5. Miscellaneous.
-------------
5A. New Capital Investor Determinations. All calculations and other
-----------------------------------
determinations under provisions of this Agreement (including the final
determination of the Fair Market Value of Rule 144 Eligible Shares) shall be
performed and made in good faith by the New Capital Investor, and such good
faith determinations shall be binding on all parties hereto. The Company and
the Executive Investors shall deliver to the New Capital Investor such
information as the New Capital Investor may reasonably request in connection
with performing such calculations or making such determinations.
5B. Restrictive Legend. Each certificate evidencing shares of
------------------
Nonqualified Common and Unvested Class C Common shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
FORFEITURE PROVISIONS SET FORTH IN A VESTING AGREEMENT DATED AS OF
NOVEMBER 27, 1996, BY AND AMONG THE ISSUER OF SUCH SECURITIES, AND
CERTAIN PERSONS LISTED ON THE SIGNATURE PAGES ATTACHED THERETO, AS
AMENDED FROM TIME TO TIME PURSUANT TO ITS TERMS, A COPY OF SUCH
VESTING AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO
THE HOLDER HEREOF UPON WRITTEN REQUEST."
The legend set forth above shall be removed from the certificates evidencing any
of the above shares when such shares cease to be Nonqualified Common or Unvested
Class C Common, as applicable.
5C. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements
-9-
or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
5D. Counterparts. This Agreement may be executed in separate
------------
counterparts, none of which need contain the signature of more than one party
hereto but each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
5E. Successors and Assigns. Except as otherwise provided herein,
----------------------
this Agreement shall bind the parties hereto and their respective successors and
assigns and shall inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns. Notwithstanding the
foregoing, the Executive Investors shall not transfer any Unvested Class C
Common to any person, except (i) pursuant to the pledge and forfeiture
provisions of this Agreement, or (ii) to the executor of such Executive
Investor's estate, at which time such executor shall sign a counterpart to this
Agreement agreeing to stand in the place of the Executive Investor and be bound
by the provisions hereof with respect to such shares of Unvested Class C Common.
5F. Choice of Law. The corporate law of the State of Delaware shall
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits hereto shall
be governed by the internal law, and not the law of conflicts, of the State of
Illinois.
5G. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended and waived only with the prior written consent of the Company, the New
Capital Investor and the holders of a majority of the shares of Unvested Class C
Common then outstanding, and such an amendment or waiver shall be binding on all
parties; provided that any holder of Unvested Class C Common may waive the
--------
rights under this Agreement to have the shares of Unvested Class C Common held
by such holder vest (upon such waiver, such shares the rights to vest of which
are waived shall be treated for purposes of this Agreement (including paragraph
2A(c) and Section 3) as if they had been repurchased pursuant to the repurchase
provisions of an Executive Stock Agreement.
5H. Notice. Any notice provided for in this Agreement shall be in
------
writing and shall be deemed to have been given when personally delivered to the
recipient, three business days after being mailed to the recipient by first
class mail (postage prepaid and return receipt requested), or one business day
after being sent to the recipient by reputable overnight courier service
(charges prepaid). Such notices shall be sent to each recipient at the address
specified for such recipient in the Stock Purchase Agreement, or to such other
address or to the attention of such other person as the recipient party shall
have specified by prior written notice to the sending party. Any notice given by
a holder of Unvested Class C Common pursuant to paragraph I B hereof shall, in
addition to the other requirements for such notice set forth in paragraph I B,
state in a conspicuous manner that, subject to the conditions and determinations
contemplated thereby, the events described therein are
-10-
scheduled to occur on the 20th day following the end of the Rule 144 Quarter
(and the notice shall conspicuously specify the actual date that is such 20th
day).
5I. Remedies. Each of the parties to this Agreement shall be
--------
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorney's fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement
5J. Termination. The provisions of this Agreement shall terminate
-----------
upon the earlier of (i) the first date upon which there remains either no
Unvested Class C Common outstanding, and (ii) the seventh anniversary of the
date hereof; provided that the obligations under this Agreement with respect to
any events resulting in the termination hereof shall survive such termination.
* * * *
-11-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
BATTERY VENTURES III, L.P.
By Battery Partners, III, L.P.
By:
--------------------------------------
Its:
-------------------------------------
/s/ Xxxxx X. Xxxx
-----------------------------------------
Xxxxx X. Xxxx
/s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Xxxx X. Xxxxxxxx
/s/ Xxxxxx Xxxxxx
-----------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxx X. Xxxxxx, Xx.
-----------------------------------------
Xxxxxx X. Xxxxxx, Xx.
FOCAL COMMUNICATIONS CORPORATION
By: /s/ Xxxxxx X. Xxxxxx, Xx.
--------------------------------------
Its: President
-------------------------------------
-12-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first Written above.
-----------------------------------------
New Capital Investor
By: /s/
--------------------------------------
Its: GP
-------------------------------------
-----------------------------------------
Xxxxx X. Xxxx
-----------------------------------------
Xxxx X. Xxxxxxxx
-----------------------------------------
Xxxxxx Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx, Xx.
FOCAL COMMUNICATIONS CORPORATION
By:
--------------------------------------
Its:
-------------------------------------
-13-
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Xxxxx X. Xxxx hereby sells, assigns and transfers unto
Battery Ventures III, L.P., Five Hundred Four and 8075/10,000 (504.8075) shares
of the Class C Common Stock, par value $.01 per share, of Focal Communications
Corporation, a Delaware corporation (the "Corporation") standing in his name on
the books of said Corporation represented by Certificate Number C-9, and does
hereby irrevocably constitute and appoint _____________________ attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: November 27, 1996
/s/ Xxxxx X. Xxxx
--------------------------------
Xxxxx X. Xxxx
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Xxxx X. Xxxxxxxx hereby sells, assigns and transfers
unto Battery Ventures III, L.P., Five Hundred Four and 8075/10,000 (504.8075)
shares of the Class C Common Stock, par value $.01 per share, of Focal
Communications Corporation, a Delaware corporation (the "Corporation") standing
in his name on the books of said Corporation represented by Certificate Number
C-10, and does hereby irrevocably constitute and appoint _____________________
attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.
Dated: November 27, 1996
/s/ Xxxx X. Xxxxxxxx
-----------------------------------
Xxxx X. Xxxxxxxx
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Xxxxxx Xxxxxx hereby sells, assigns and transfers unto
Battery Ventures III, L.P., Five Hundred Four and 8075/10,000 (504.8075) shares
of the Class C Common Stock, par value $.01 per share, of Focal Communications
Corporation, a Delaware corporation (the "Corporation") standing in his name on
the books of said Corporation represented by Certificate Number C-11, and does
hereby irrevocably constitute and appoint _____________________ attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: November 27, 1996
/s/ Xxxxxx Xxxxxx
---------------------------------
Xxxxxx Xxxxxx
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Xxxxxx X. Xxxxxx, Xx. hereby sells, assigns and
transfers unto Battery Ventures III, L.P., Five Hundred Four and 8075/10,000
(504.8075) shares of the Class C Common Stock, par value $.01 per share, of
Focal Communications Corporation, a Delaware corporation (the "Corporation")
standing in his name on the books of said Corporation represented by Certificate
Number C-12, and does hereby irrevocably constitute and appoint
_____________________ attorney to transfer the said stock on the books of the
Corporation with full power of substitution in the premises.
Dated: November 27, 1996
/s/ Xxxxxx X. Xxxxxx, Xx.
-----------------------------------
Xxxxxx X. Xxxxxx, Xx.
EXHIBIT 10 TO STOCK PURCHASE AGREEMENT
--------------------------------------
Interconnection Agreement by and among Ameritech Information Industry Services
and Focal, dated October 28, 1996 - Previously filed as Exhibit 10.1 to the Form
S-4 Registration Statement on April 3, 1998.
Exhibit 11 to Stock Purchase Agreement
Form of Opinion of Xxxxxxxx, Xxxxxx & Xxxxxxx (Initial Closing)
[Letterhead of Xxxxxxxx, Xxxxxx & Xxxxxxx]
November 27, 1996
Xxxxx X. Xxxxx, Xx.
Madison Dearborn Capital Partners, L.P.
Three First National Plaza, Suite 3800
Xxxxxxx, Xxxxxxxx 00000
Gentlemen:
We are counsel to Focal Communications Corporation (the "Company") in
connection with a transaction whereby the capital structure of the Company will
be recapitalized, the Restated Certificate of Incorporation will be amended and
new shareholders will be issued certain classes of Common Stock, all pursuant to
agreements dated herewith by and among all or some Focal Communications
Corporation, Madison Dearborn Capital Partners, L.P., Frontenac VI, L.P.,
Battery Ventures III, L.P., Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx,
and Xxxxxx X. Xxxxxx, Xx. and described as follows: Stock Purchase Agreement,
Executive Stock Agreement and Employment Agreement, Stockholders Agreement,
Registration Agreement, and Vesting Agreements (hereinafter all commonly
referred to as the "Agreements" and the transaction hereinafter commonly
referred to as the "Transaction"). This opinion is being delivered to you
pursuant to Paragraph 2K of the Stock Purchase Agreement.
For purposes of this opinion, we have examined the corporate records of the
Company, including but not limited to the Certificate of Incorporation, the
Restated Certificate of Incorporation, the Bylaws in effect prior to the date
hereof and the Bylaws adopted as of the date hereof, the Resolutions of
Shareholders and the Board of Directors, and such other documents as we have
deemed necessary under the circumstances. In making our examination, we have
assumed the genuineness of the signatures on all original documents, and the
conformity to original documents of all copies submitted to us as facsimile,
photostatic or conformed copies. We have assumed that the amended and Restated
Certificate of Incorporation, which shall be filed as of the date herewith,
shall be accepted and duly recorded by the Secretary of State of Delaware as of
the date hereof. As to various questions of fact material to our opinion, we
have relied upon statements or certificates of officers or representatives of
the Company and others. As to various questions of fact and law material to our
opinion, we have relied upon statements or certificates of public officials.
Based upon and subject to the foregoing, it is our opinion that:
Xxxxx X. Xxxxx, Xx.
Madison Dearborn Capital Partners, L.P.
November 27, 1996
Page 2
(i) The Company has been duly incorporated and organized, and is validly
existing and in good standing, under the laws of the State of Delaware, and the
Company has all necessary corporate power and authority and all material
licenses, permits and authorizations necessary to own its properties in the
locations presently owned and to conduct its business in the manner and in the
locations now conducted;
(ii) The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Agreements;
(iii) The Interconnection Agreement and the Agreements have been duly
authorized, executed and delivered by the Company, and each Agreement is a valid
and binding obligation of the Company, enforceable in accordance with its terms;
(iv) The execution and delivery by the Company of the Agreements, the
offering, sale and issuance of the Class A Common, and the fulfillment of and
the compliance with the respective terms thereof by the Company do not and shall
not (A) conflict with or result in a breach of the terms, conditions or
provisions of, (B) constitute a default under, (C) result in the creation of any
lien, mortgage, security interest, charge or other encumbrance upon the
Company's capital stock or assets pursuant to, (D) give any third party the
right to accelerate any obligation under, (E) result in a violation of, or (F)
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body pursuant to, the
Company's Restated Certificate of Incorporation, the Company's Bylaws, any law,
statute, rule or regulation to which the Company is subject, or any material
agreement, indenture, instrument, order, judgment or decree to which the Company
is subject;
(v) Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx, and Xxxxxx X.
Xxxxxx, Xx., have each executed and delivered an Executive Stock Agreement and
Employment Agreement and the Stockholders Agreement, and each such agreement is
a valid and binding obligation of each such person, enforceable in accordance
with its terms;
(vi) In November, 1996, the Illinois Commerce Commission certified the
Company to provide facilities-based and resold, switched and dedicated, local
exchange services in those portions of MSA-1 served by Ameritech and Centel, and
interexchange services throughout Illinois:
(1) such certification has not been conditioned, restricted,
withdrawn, and is not presently under challenge;
(2) the Company has filed all statements and reports, obtained all
consents, licenses, and approvals, and taken all other material actions
required by the ICC, FCC, or other laws or regulations, necessary to
maintain such certification and to provide such services in the Chicago
MSA;
Xxxxx X. Xxxxx, Xx.
Madison Dearborn Capital Partners, L.P.
November 27, 1996
Page 3
(3) neither the Company's entering into the Stock Purchase Agreement
or any of the other agreements of even date therewith to which the Company
is party, nor the transactions contemplated by such agreements, will result
in the conditioning, restriction, or withdrawal of such certification;
(vii) The restatement to the Company's Certificate of Incorporation
containing the provisions set forth in Exhibit 2 to the Stock Purchase Agreement
has been duly adopted by the Company, has been duly filed with the Secretary of
State of Delaware, has become effective under the laws of Delaware and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms;
(viii) The certificates representing the Class A Common purchased at the
Closing have been duly authorized, executed and delivered by the Company, such
Class A Common has been validly issued and is outstanding, fully paid and
nonassessable, and there are no statutory, or contractual, preemptive rights of
stockholders or rights of first refusal with respect to the issuance of such
Class A Common;
(ix) The offering, sale and issuance of the Class A Common under the
Stock Purchase Agreement and the other securities issued by the Company at the
Closing do not require registration under the Securities Act or registration or
qualification under any state securities laws;
(x) The Capitalization Schedule attached to the Stock Purchase Agreement
correctly sets forth the number of shares of each class of the Company's
authorized capital stock and the number of outstanding shares of each such class
as of the Closing;
This opinion has been furnished to you in accordance with Paragraph 2K of
the Stock Purchase Agreement and may not be relied upon by any other person or
for any other purpose. This opinion is based on existing Delaware and federal
laws, rules and regulations.
We express no opinion as to laws, rules or regulations other than these.
This opinion is limited to those matters expressly stated and no opinion shall
be inferred or applied beyond such matters.
XXXXXXXX, XXXXXX & XXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxx
[Letterhead of Xxxxxxxx, Xxxxxx & Xxxxxxx]
November 27, 1996
Frontenac VI, L.P.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Gentlemen:
We are counsel to Focal Communications Corporation (the "Company") in
connection with a transaction whereby the capital structure of the Company will
be recapitalized, the Restated Certificate of Incorporation will be amended and
new shareholders will be issued certain classes of Common Stock, all pursuant to
agreements dated herewith by and among all or some Focal Communications
Corporation, Madison Dearborn Capital Partners, L.P., Frontenac VI, L.P.,
Battery Ventures III, L.P., Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx,
and Xxxxxx X. Xxxxxx, Xx. and described as follows: Stock Purchase Agreement,
Executive Stock Agreement and Employment Agreement, Stockholders Agreement,
Registration Agreement, and Vesting Agreements (hereinafter all commonly
referred to as the "Agreements" and the transaction hereinafter commonly
referred to as the "Transaction"). This opinion is being delivered to you
pursuant to Paragraph 2K of the Stock Purchase Agreement.
For purposes of this opinion, we have examined the corporate records of the
Company, including but not limited to the Certificate of Incorporation, the
Restated Certificate of Incorporation, the Bylaws in effect prior to the date
hereof and the Bylaws adopted as of the date hereof, the Resolutions of
Shareholders and the Board of Directors, and such other documents as we have
deemed necessary under the circumstances. In making our examination, we have
assumed the genuineness of the signatures on all original documents, and the
conformity to original documents of all copies submitted to us as facsimile,
photostatic or conformed copies. We have assumed that the amended and Restated
Certificate of Incorporation, which shall be filed as of the date herewith,
shall be accepted and duly recorded by the Secretary of State of Delaware as of
the date hereof. As to various questions of fact material to our opinion, we
have relied upon statements or certificates of officers or representatives of
the Company and others. As to various questions of fact and law material to our
opinion, we have relied upon statements or certificates of public officials.
Based upon and subject to the foregoing, it is our opinion that:
(i) The Company has been duly incorporated and organized, and is
validly existing and in good standing, under the laws of the State of Delaware,
and the Company has all necessary corporate power and authority and all material
licenses, permits and authorizations necessary to own its properties in the
locations presently owned and to conduct its business in the manner and in the
locations now conducted;
Frontenac, VI L.P.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Page 2
(ii) The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Agreements;
(iii) The Interconnection Agreement and the Agreements have been duly
authorized, executed and delivered by the Company, and each Agreement is a valid
and binding obligation of the Company, enforceable in accordance with its terms;
(iv) The execution and delivery by the Company of the Agreements, the
offering, sale and issuance of the Class A Common, and the fulfillment of and
the compliance with the respective terms thereof by the Company do not and shall
not (A) conflict with or result in a breach of the terms, conditions or
provisions of, (B) constitute a default under, (C) result in the creation of any
lien, mortgage, security interest, charge or other encumbrance upon the
Company's capital stock or assets pursuant to, (D) give any third party the
right to accelerate any obligation under, (E) result in a violation of, or (F)
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body pursuant to, the
Company's Restated Certificate of Incorporation, the Company's Bylaws, any law,
statute, rule or regulation to which the Company is subject, or any material
agreement, indenture, instrument, order, judgment or decree to which the Company
is subject;
(v) Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx, and Xxxxxx X.
Xxxxxx, Xx., have each executed and delivered an Executive Stock Agreement and
Employment Agreement and the Stockholders Agreement, and each such agreement is
a valid and binding obligation of each such person, enforceable in accordance
with its terms;
(vi) In November, 1996, the Illinois Commerce Commission certified the
Company to provide facilities-based and resold, switched and dedicated, local
exchange services in those portions of MSA-1 served by Ameritech and Centel, and
interexchange services throughout Illinois:
(1) such certification has not been conditioned, restricted,
withdrawn, and is not presently under challenge;
(2) the Company has filed all statements and reports, obtained all
consents, licenses, and approvals, and taken all other material actions
required by the ICC, FCC, or other laws or regulations, necessary to
maintain such certification and to provide such services in the Chicago
MSA;
(3) neither the Company's entering into the Stock Purchase
Agreement or any of the other agreements of even date therewith to which
the Company is party, nor the
Frontenac VI L.P.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Page 3
transactions contemplated by such agreements, will result in the
conditioning, restriction, or withdrawal of such certification;
(vii) The restatement to the Company's Certificate of Incorporation
containing the provisions set forth in Exhibit 2 to the Stock Purchase Agreement
has been duly adopted by the Company, has been duly filed with the Secretary of
State of Delaware, has become effective under the laws of Delaware and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms;
(viii) The certificates representing the Class A Common purchased at the
Closing have been duly authorized, executed and delivered by the Company, such
Class A Common has been validly issued and is outstanding, fully paid and
nonassessable, and there are no statutory, or contractual, preemptive rights of
stockholders or rights of first refusal with respect to the issuance of such
Class A Common;
(ix) The offering, sale and issuance of the Class A Common under the
Stock Purchase Agreement and the other securities issued by the Company at the
Closing do not require registration under the Securities Act or registration or
qualification under any state securities laws;
(x) The Capitalization Schedule attached to the Stock Purchase
Agreement correctly sets forth the number of shares of each class of the
Company's authorized capital stock and the number of outstanding shares of each
such class as of the Closing;
This opinion has been furnished to you in accordance with Paragraph 2K of
the Stock Purchase Agreement and may not be relied upon by any other person or
for any other purpose. This opinion is based on existing Delaware and federal
laws, rules and regulations.
We express no opinion as to laws, rules or regulations other than these.
This opinion is limited to those matters expressly stated and no opinion shall
be inferred or applied beyond such matters.
XXXXXXXX, XXXXXX & XXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx
[Letterhead of Xxxxxxxx, Xxxxxx & Xxxxxxx]
November 27, 1996
Battery Ventures III, L.P.
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Gentlemen:
We are counsel to Focal Communications Corporation (the "Company") in
connection with a transaction whereby the capital structure of the Company will
be recapitalized, the Restated Certificate of Incorporation will be amended and
new shareholders will be issued certain classes of Common Stock, all pursuant to
agreements dated herewith by and among all or some Focal Communications
Corporation, Madison Dearborn Capital Partners, L.P., Frontenac VI, L.P.,
Battery Ventures III, L.P., Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx,
and Xxxxxx X. Xxxxxx, Xx. and described as follows: Stock Purchase Agreement,
Executive Stock Agreement and Employment Agreement, Stockholders Agreement,
Registration Agreement, and Vesting Agreements (hereinafter all commonly
referred to as the "Agreements" and the transaction hereinafter commonly
referred to as the "Transaction"). This opinion is being delivered to you
pursuant to Paragraph 2K of the Stock Purchase Agreement.
For purposes of this opinion, we have examined the corporate records of the
Company, including but not limited to the Certificate of Incorporation, the
Restated Certificate of Incorporation, the Bylaws in effect prior to the date
hereof and the Bylaws adopted as of the date hereof, the Resolutions of
Shareholders and the Board of Directors, and such other documents as we have
deemed necessary under the circumstances. In making our examination, we have
assumed the genuineness of the signatures on all original documents, and the
conformity to original documents of all copies submitted to us as facsimile,
photostatic or conformed copies. We have assumed that the amended and Restated
Certificate of Incorporation, which shall be filed as of the date herewith,
shall be accepted and duly recorded by the Secretary of State of Delaware as of
the date hereof. As to various questions of fact material to our opinion, we
have relied upon statements or certificates of officers or representatives of
the Company and others. As to various questions of fact and law material to our
opinion, we have relied upon statements or certificates of public officials.
Based upon and subject to the foregoing, it is our opinion that:
(i) The Company has been duly incorporated and organized, and is validly
existing and in good standing, under the laws of the State of Delaware, and the
Company has all necessary corporate power and authority and all material
licenses, permits and authorizations necessary to own its properties in the
locations presently owned and to conduct its business in the manner and in the
locations now conducted;
Battery Ventures III, L.P.
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Page 2
(ii) The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Agreements;
(iii) The Interconnection Agreement and the Agreements have been duly
authorized, executed and delivered by the Company, and each Agreement is a valid
and binding obligation of the Company, enforceable in accordance with its terms;
(iv) The execution and delivery by the Company of the Agreements, the
offering, sale and issuance of the Class A Common, and the fulfillment of and
the compliance with the respective terms thereof by the Company do not and shall
not (A) conflict with or result in a breach of the terms, conditions or
provisions of, (B) constitute a default under, (C) result in the creation of any
lien, mortgage, security interest, charge or other encumbrance upon the
Company's capital stock or assets pursuant to, (D) give any third party the
right to accelerate any obligation under, (E) result in a violation of, or (F)
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body pursuant to, the
Company's Restated Certificate of Incorporation, the Company's Bylaws, any law,
statute, rule or regulation to which the Company is subject, or any material
agreement, indenture, instrument, order, judgment or decree to which the Company
is subject;
(v) Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx, and Xxxxxx X.
Xxxxxx, Xx., have each executed and delivered an Executive Stock Agreement and
Employment Agreement and the Stockholders Agreement, and each such agreement is
a valid and binding obligation of each such person, enforceable in accordance
with its terms;
(vi) In November, 1996, the Illinois Commerce Commission certified the
Company to provide facilities-based and resold, switched and dedicated, local
exchange services in those portions of MSA-1 served by Ameritech and Centel, and
interexchange services throughout Illinois:
(1) such certification has not been conditioned, restricted,
withdrawn, and is not presently under challenge;
(2) the Company has filed all statements and reports, obtained all
consents, licenses, and approvals, and taken all other material actions
required by the ICC, FCC, or other laws or regulations, necessary to
maintain such certification and to provide such services in the Chicago
MSA;
(3) neither the Company's entering into the Stock Purchase Agreement
or any of the other agreements of even date therewith to which the Company
is party, nor the
Battery Ventures III, L.P.
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Page 3
transactions contemplated by such agreements, will result in the
conditioning, restriction, or withdrawal of such certification;
(vii) The restatement to the Company's Certificate of Incorporation
containing the provisions set forth in Exhibit 2 to the Stock Purchase Agreement
has been duly adopted by the Company, has been duly filed with the Secretary of
State of Delaware, has become effective under the laws of Delaware and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms;
(viii) The certificates representing the Class A Common purchased at the
Closing have been duly authorized, executed and delivered by the Company, such
Class A Common has been validly issued and is outstanding, fully paid and
nonassessable, and there are no statutory, or contractual, preemptive rights of
stockholders or rights of first refusal with respect to the issuance of such
Class A Common;
(ix) The offering, sale and issuance of the Class A Common under the
Stock Purchase Agreement and the other securities issued by the Company at the
Closing do not require registration under the Securities Act or registration or
qualification under any state securities laws;
(x) The Capitalization Schedule attached to the Stock Purchase Agreement
correctly sets forth the number of shares of each class of the Company's
authorized capital stock and the number of outstanding shares of each such class
as of the Closing;
This opinion has been furnished to you in accordance with Paragraph 2K of
the Stock Purchase Agreement and may not be relied upon by any other person or
for any other purpose. This opinion is based on existing Delaware and federal
laws, rules and regulations.
We express no opinion as to laws, rules or regulations other than these.
This opinion is limited to those matters expressly stated and no opinion shall
be inferred or applied beyond such matters.
XXXXXXXX, XXXXXX & XXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx
[Letterhead of Xxxxxxxx, Xxxxxx & Xxxxxxx]
November 27, 1996
Xxxxx X. Xxxx
Focal Communications Corporation
000 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Gentlemen:
We are counsel to Focal Communications Corporation (the "Company") in
connection with a transaction whereby the capital structure of the Company will
be recapitalized, the Restated Certificate of Incorporation will be amended and
new shareholders will be issued certain classes of Common Stock, all pursuant to
agreements dated herewith by and among all or some Focal Communications
Corporation, Madison Dearborn Capital Partners, L.P., Frontenac VI, L.P.,
Battery Ventures III, L.P., Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx,
and Xxxxxx X. Xxxxxx, Xx. and described as follows: Stock Purchase Agreement,
Executive Stock Agreement and Employment Agreement, Stockholders Agreement,
Registration Agreement, and Vesting Agreements (hereinafter all commonly
referred to as the "Agreements" and the transaction hereinafter commonly
referred to as the "Transaction"). This opinion is being delivered to you
pursuant to Paragraph 2K of the Stock Purchase Agreement.
For purposes of this opinion, we have examined the corporate records of the
Company, including but not limited to the Certificate of Incorporation, the
Restated Certificate of Incorporation, the Bylaws in effect prior to the date
hereof and the Bylaws adopted as of the date hereof, the Resolutions of
Shareholders and the Board of Directors, and such other documents as we have
deemed necessary under the circumstances. In making our examination, we have
assumed the genuineness of the signatures on all original documents, and the
conformity to original documents of all copies submitted to us as facsimile,
photostatic or conformed copies. We have assumed that the amended and Restated
Certificate of Incorporation, which shall be filed as of the date herewith,
shall be accepted and duly recorded by the Secretary of State of Delaware as of
the date hereof. As to various questions of fact material to our opinion, we
have relied upon statements or certificates of officers or representatives of
the Company and others. As to various questions of fact and law material to our
opinion, we have relied upon statements or certificates of public officials.
Based upon and subject to the foregoing, it is our opinion that:
(i) The Company has been duly incorporated and organized, and is
validly existing and in good standing, under the laws of the State of Delaware,
and the Company has all necessary corporate power and authority and all material
licenses, permits and authorizations necessary to own its properties in the
locations presently owned and to conduct its business in the manner and in the
locations now conducted;
Xxxxx X. Xxxx
Focal Communications Corporation
Page 2
(ii) The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Agreements;
(iii) The Interconnection Agreement and the Agreements have been duly
authorized, executed and delivered by the Company, and each Agreement is a valid
and binding obligation of the Company, enforceable in accordance with its terms;
(iv) The execution and delivery by the Company of the Agreements, the
offering, sale and issuance of the Class A Common, and the fulfillment of and
the compliance with the respective terms thereof by the Company do not and shall
not (A) conflict with or result in a breach of the terms, conditions or
provisions of, (B) constitute a default under, (C) result in the creation of any
lien, mortgage, security interest, charge or other encumbrance upon the
Company's capital stock or assets pursuant to, (D) give any third party the
right to accelerate any obligation under, (E) result in a violation of, or (F)
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body pursuant to, the
Company's Restated Certificate of Incorporation, the Company's Bylaws, any law,
statute, rule or regulation to which the Company is subject, or any material
agreement, indenture, instrument, order, judgment or decree to which the Company
is subject;
(v) Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx, and Xxxxxx X.
Xxxxxx, Xx., have each executed and delivered an Executive Stock Agreement and
Employment Agreement and the Stockholders Agreement, and each such agreement is
a valid and binding obligation of each such person, enforceable in accordance
with its terms;
(vi) In November, 1996, the Illinois Commerce Commission certified the
Company to provide facilities-based and resold, switched and dedicated, local
exchange services in those portions of MSA-1 served by Ameritech and Centel, and
interexchange services throughout Illinois:
(1) such certification has not been conditioned, restricted,
withdrawn, and is not presently under challenge;
(2) the Company has filed all statements and reports, obtained all
consents, licenses, and approvals, and taken all other material actions
required by the ICC, FCC, or other laws or regulations, necessary to
maintain such certification and to provide such services in the Chicago
MSA;
(3) neither the Company's entering into the Stock Purchase Agreement
or any of the other agreements of even date therewith to which the Company
is party, nor the transactions contemplated by such agreements, will result
in the conditioning, restriction, or withdrawal of such certification;
Xxxxx X. Xxxx
Focal Communications Corporation
Page 3
(vii) The restatement to the Company's Certificate of Incorporation
containing the provisions set forth in Exhibit 2 to the Stock Purchase Agreement
has been duly adopted by the Company, has been duly filed with the Secretary of
State of Delaware, has become effective under the laws of Delaware and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms;
(viii) The certificates representing the Class A Common purchased at the
Closing have been duly authorized, executed and delivered by the Company, such
Class A Common has been validly issued and is outstanding, fully paid and
nonassessable, and there are no statutory, or contractual, preemptive rights of
stockholders or rights of first refusal with respect to the issuance of such
Class A Common;
(ix) The offering, sale and issuance of the Class A Common under the Stock
Purchase Agreement and the other securities issued by the Company at the Closing
do not require registration under the Securities Act or registration or
qualification under any state securities laws;
(x) The Capitalization Schedule attached to the Stock Purchase Agreement
correctly sets forth the number of shares of each class of the Company's
authorized capital stock and the number of outstanding shares of each such class
as of the Closing;
This opinion has been furnished to you in accordance with Paragraph 2K of
the Stock Purchase Agreement and may not be relied upon by any other person or
for any other purpose. This opinion is based on existing Delaware and federal
laws, rules and regulations.
We express no opinion as to laws, rules or regulations other than these.
This opinion is limited to those matters expressly stated and no opinion shall
be inferred or applied beyond such matters.
XXXXXXXX, XXXXXX & XXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------------------
Xxxxxxx X. Xxxxxxx
[Letterhead of Xxxxxxxx, Xxxxxx & Xxxxxxx]
November 27, 1996
Xxxx Xxxxxxxx, Executive Vice President
Focal Communications Corporation
000 Xxxx Xxxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Gentlemen:
We are counsel to Focal Communications Corporation (the "Company") in
connection with a transaction whereby the capital structure of the Company will
be recapitalized, the Restated Certificate of Incorporation will be amended and
new shareholders will be issued certain classes of Common Stock, all pursuant to
agreements dated herewith by and among all or some Focal Communications
Corporation, Madison Dearborn Capital Partners, L.P., Frontenac VI, L.P.,
Battery Ventures III, L.P., Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx,
and Xxxxxx X. Xxxxxx, Xx. and described as follows: Stock Purchase Agreement,
Executive Stock Agreement and Employment Agreement, Stockholders Agreement,
Registration Agreement, and Vesting Agreements (hereinafter all commonly
referred to as the "Agreements" and the transaction hereinafter commonly
referred to as the "Transaction"). This opinion is being delivered to you
pursuant to Paragraph 2K of the Stock Purchase Agreement.
For purposes of this opinion, we have examined the corporate records of the
Company, including but not limited to the Certificate of Incorporation, the
Restated Certificate of Incorporation, the Bylaws in effect prior to the date
hereof and the Bylaws adopted as of the date hereof, the Resolutions of
Shareholders and the Board of Directors, and such other documents as we have
deemed necessary under the circumstances. In making our examination, we have
assumed the genuineness of the signatures on all original documents, and the
conformity to original documents of all copies submitted to us as facsimile,
photostatic or conformed copies. We have assumed that the amended and Restated
Certificate of Incorporation, which shall be filed as of the date herewith,
shall be accepted and duly recorded by the Secretary of State of Delaware as of
the date hereof. As to various questions of fact material to our opinion, we
have relied upon statements or certificates of officers or representatives of
the Company and others. As to various questions of fact and law material to our
opinion, we have relied upon statements or certificates of public officials.
Based upon and subject to the foregoing, it is our opinion that:
(i) The Company has been duly incorporated and organized, and is validly
existing and in good standing, under the laws of the State of Delaware, and the
Company has all necessary corporate power and authority and all material
licenses, permits and authorizations necessary to own its properties in the
locations presently owned and to conduct its business in the manner and in the
locations now conducted;
Xxxx Xxxxxxxx, Executive Vice President
Focal Communications Corporation
Page 2
(ii) The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Agreements;
(iii) The Interconnection Agreement and the Agreements have been duly
authorized, executed and delivered by the Company, and each Agreement is a valid
and binding obligation of the Company, enforceable in accordance with its terms;
(iv) The execution and delivery by the Company of the Agreements, the
offering, sale and issuance of the Class A Common, and the fulfillment of and
the compliance with the respective terms thereof by the Company do not and shall
not (A) conflict with or result in a breach of the terms, conditions or
provisions of, (B) constitute a default under, (C) result in the creation of any
lien, mortgage, security interest, charge or other encumbrance upon the
Company's capital stock or assets pursuant to, (D) give any third party the
right to accelerate any obligation under, (E) result in a violation of, or (F)
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body pursuant to, the
Company's Restated Certificate of Incorporation, the Company's Bylaws, any law,
statute, rule or regulation to which the Company is subject, or any material
agreement, indenture, instrument, order, judgment or decree to which the Company
is subject;
(v) Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx, and Xxxxxx X.
Xxxxxx, Xx., have each executed and delivered an Executive Stock Agreement and
Employment Agreement and the Stockholders Agreement, and each such agreement is
a valid and binding obligation of each such person, enforceable in accordance
with its terms;
(vi) In November, 1996, the Illinois Commerce Commission certified the
Company to provide facilities-based and resold, switched and dedicated, local
exchange services in those portions of MSA-1 served by Ameritech and Centel, and
interexchange services throughout Illinois:
(1) such certification has not been conditioned, restricted,
withdrawn, and is not presently under challenge;
(2) the Company has filed all statements and reports, obtained all
consents, licenses, and approvals, and taken all other material actions
required by the ICC, FCC, or other laws or regulations, necessary to
maintain such certification and to provide such services in the Chicago
MSA;
(3) neither the Company's entering into the Stock Purchase Agreement
or any of the other agreements of even date therewith to which the Company
is party, nor the transactions contemplated by such agreements, will result
in the conditioning, restriction, or withdrawal of such certification;
Xxxx Xxxxxxxx, Executive Vice President
Focal Communications Corporation
Page 3
(vii) The restatement to the Company's Certificate of Incorporation
containing the provisions set forth in Exhibit 2 to the Stock Purchase Agreement
has been duly adopted by the Company, has been duly filed with the Secretary of
State of Delaware, has become effective under the laws of Delaware and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms;
(viii) The certificates representing the Class A Common purchased at the
Closing have been duly authorized, executed and delivered by the Company, such
Class A Common has been validly issued and is outstanding, fully paid and
nonassessable, and there are no statutory, or contractual, preemptive rights of
stockholders or rights of first refusal with respect to the issuance of such
Class A Common;
(ix) The offering, sale and issuance of the Class A Common under the Stock
Purchase Agreement and the other securities issued by the Company at the Closing
do not require registration under the Securities Act or registration or
qualification under any state securities laws;
(x) The Capitalization Schedule attached to the Stock Purchase Agreement
correctly sets forth the number of shares of each class of the Company's
authorized capital stock and the number of outstanding shares of each such class
as of the Closing;
This opinion has been furnished to you in accordance with Paragraph 2K of
the Stock Purchase Agreement and may not be relied upon by any other person or
for any other purpose. This opinion is based on existing Delaware and federal
laws, rules and regulations.
We express no opinion as to laws, rules or regulations other than these.
This opinion is limited to those matters expressly stated and no opinion shall
be inferred or applied beyond such matters.
XXXXXXXX, XXXXXX & XXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------------------
Xxxxxxx X. Xxxxxxx
[Letterhead of Xxxxxxxx, Xxxxxx & Xxxxxxx]
November 27, 1996
Xxxxxx X. Xxxxxx, Xx., President
Focal Communications Corporation
000 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Gentlemen:
We are counsel to Focal Communications Corporation (the "Company") in
connection with a transaction whereby the capital structure of the Company will
be recapitalized, the Restated Certificate of Incorporation will be amended and
new shareholders will be issued certain classes of Common Stock, all pursuant to
agreements dated herewith by and among all or some Focal Communications
Corporation, Madison Dearborn Capital Partners, L.P., Frontenac VI, L.P.,
Battery Ventures III, L.P., Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx,
and Xxxxxx X. Xxxxxx, Xx. and described as follows: Stock Purchase Agreement,
Executive Stock Agreement and Employment Agreement, Stockholders Agreement,
Registration Agreement, and Vesting Agreements (hereinafter all commonly
referred to as the "Agreements" and the transaction hereinafter commonly
referred to as the "Transaction"). This opinion is being delivered to you
pursuant to Paragraph 2K of the Stock Purchase Agreement.
For purposes of this opinion, we have examined the corporate records of the
Company, including but not limited to the Certificate of Incorporation, the
Restated Certificate of Incorporation, the Bylaws in effect prior to the date
hereof and the Bylaws adopted as of the date hereof, the Resolutions of
Shareholders and the Board of Directors, and such other documents as we have
deemed necessary under the circumstances. In making our examination, we have
assumed the genuineness of the signatures on all original documents, and the
conformity to original documents of all copies submitted to us as facsimile,
photostatic or conformed copies. We have assumed that the amended and Restated
Certificate of Incorporation, which shall be filed as of the date herewith,
shall be accepted and duly recorded by the Secretary of State of Delaware as of
the date hereof. As to various questions of fact material to our opinion, we
have relied upon statements or certificates of officers or representatives of
the Company and others. As to various questions of fact and law material to our
opinion, we have relied upon statements or certificates of public officials.
Based upon and subject to the foregoing, it is our opinion that:
(i) The Company has been duly incorporated and organized, and is
validly existing and in good standing, under the laws of the State of Delaware,
and the Company has all necessary corporate power and authority and all material
licenses, permits and authorizations necessary to own its properties in the
locations presently owned and to conduct its business in the manner and in the
locations now conducted;
Xxxxxx X. Xxxxxx, Xx., President
Focal Communications Corporation
Page 2
(ii) The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Agreements;
(iii) The Interconnection Agreement and the Agreements have been duly
authorized, executed and delivered by the Company, and each Agreement is a valid
and binding obligation of the Company, enforceable in accordance with its terms;
(iv) The execution and delivery by the Company of the Agreements, the
offering, sale and issuance of the Class A Common, and the fulfillment of and
the compliance with the respective terms thereof by the Company do not and shall
not (A) conflict with or result in a breach of the terms, conditions or
provisions of, (B) constitute a default under, (C) result in the creation of any
lien, mortgage, security interest, charge or other encumbrance upon the
Company's capital stock or assets pursuant to, (D) give any third party the
right to accelerate any obligation under, (E) result in a violation of, or (F)
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body pursuant to, the
Company's Restated Certificate of Incorporation, the Company's Bylaws, any law,
statute, rule or regulation to which the Company is subject, or any material
agreement, indenture, instrument, order, judgment or decree to which the Company
is subject;
(v) Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx, and Xxxxxx X.
Xxxxxx, Xx., have each executed and delivered an Executive Stock Agreement and
Employment Agreement and the Stockholders Agreement, and each such agreement is
a valid and binding obligation of each such person, enforceable in accordance
with its terms;
(vi) In November, 1996, the Illinois Commerce Commission certified the
Company to provide facilities-based and resold, switched and dedicated, local
exchange services in those portions of MSA-1 served by Ameritech and Centel, and
interexchange services throughout Illinois:
(1) such certification has not been conditioned, restricted,
withdrawn, and is not presently under challenge;
(2) the Company has filed all statements and reports, obtained all
consents, licenses, and approvals, and taken all other material actions
required by the ICC, FCC, or other laws or regulations, necessary to
maintain such certification and to provide such services in the Chicago
MSA;
(3) neither the Company's entering into the Stock Purchase Agreement
or any of the other agreements of even date therewith to which the Company
is party, nor the transactions contemplated by such agreements, will result
in the conditioning, restriction, or withdrawal of such certification;
Xxxxxx X. Xxxxxx, Xx., President
Focal Communications Corporation
Page 3
(vii) The restatement to the Company's Certificate of Incorporation
containing the provisions set forth in Exhibit 2 to the Stock Purchase Agreement
has been duly adopted by the Company, has been duly filed with the Secretary of
State of Delaware, has become effective under the laws of Delaware and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms;
(viii) The certificates representing the Class A Common purchased at the
Closing have been duly authorized, executed and delivered by the Company, such
Class A Common has been validly issued and is outstanding, fully paid and
nonassessable, and there are no statutory, or contractual, preemptive rights of
stockholders or rights of first refusal with respect to the issuance of such
Class A Common;
(ix) The offering, sale and issuance of the Class A Common under the Stock
Purchase Agreement and the other securities issued by the Company at the Closing
do not require registration under the Securities Act or registration or
qualification under any state securities laws;
(x) The Capitalization Schedule attached to the Stock Purchase Agreement
correctly sets forth the number of shares of each class of the Company's
authorized capital stock and the number of outstanding shares of each such class
as of the Closing;
This opinion has been furnished to you in accordance with Paragraph 2K of
the Stock Purchase Agreement and may not be relied upon by any other person or
for any other purpose. This opinion is based on existing Delaware and federal
laws, rules and regulations.
We express no opinion as to laws, rules or regulations other than these.
This opinion is limited to those matters expressly stated and no opinion shall
be inferred or applied beyond such matters.
XXXXXXXX, XXXXXX & XXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------------------
Xxxxxxx X. Xxxxxxx
[Letterhead of Xxxxxxxx, Xxxxxx & Xxxxxxx]
November 27, 1996
Xxxxxx Xxxxxx
Focal Communications Corporation
000 Xxxx Xxxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Gentlemen:
We are counsel to Focal Communications Corporation (the "Company") in
connection with a transaction whereby the capital structure of the Company will
be recapitalized, the Restated Certificate of Incorporation will be amended and
new shareholders will be issued certain classes of Common Stock, all pursuant to
agreements dated herewith by and among all or some Focal Communications
Corporation, Madison Dearborn Capital Partners, L.P., Frontenac VI, L.P.,
Battery Ventures III, L.P., Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx,
and Xxxxxx X. Xxxxxx, Xx. and described as follows: Stock Purchase Agreement,
Executive Stock Agreement and Employment Agreement, Stockholders Agreement,
Registration Agreement, and Vesting Agreements (hereinafter all commonly
referred to as the "Agreements" and the transaction hereinafter commonly
referred to as the "Transaction"). This opinion is being delivered to you
pursuant to Paragraph 2K of the Stock Purchase Agreement.
For purposes of this opinion, we have examined the corporate records of the
Company, including but not limited to the Certificate of Incorporation, the
Restated Certificate of Incorporation, the Bylaws in effect prior to the date
hereof and the Bylaws adopted as of the date hereof, the Resolutions of
Shareholders and the Board of Directors, and such other documents as we have
deemed necessary under the circumstances. In making our examination, we have
assumed the genuineness of the signatures on all original documents, and the
conformity to original documents of all copies submitted to us as facsimile,
photostatic or conformed copies. We have assumed that the amended and Restated
Certificate of Incorporation, which shall be filed as of the date herewith,
shall be accepted and duly recorded by the Secretary of State of Delaware as of
the date hereof. As to various questions of fact material to our opinion, we
have relied upon statements or certificates of officers or representatives of
the Company and others. As to various questions of fact and law material to our
opinion, we have relied upon statements or certificates of public officials.
Based upon and subject to the foregoing, it is our opinion that:
(i) The Company has been duly incorporated and organized, and is validly
existing and in good standing, under the laws of the State of Delaware, and the
Company has all necessary corporate power and authority and all material
licenses, permits and authorizations necessary to own its properties in the
locations presently owned and to conduct its business in the manner and in the
locations now conducted;
Xxxxxx Xxxxxx
Focal Communications Corporation
Page 2
(ii) The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Agreements;
(iii) The Interconnection Agreement and the Agreements have been duly
authorized, executed and delivered by the Company, and each Agreement is a valid
and binding obligation of the Company, enforceable in accordance with its terms;
(iv) The execution and delivery by the Company of the Agreements, the
offering, sale and issuance of the Class A Common, and the fulfillment of and
the compliance with the respective terms thereof by the Company do not and shall
not (A) conflict with or result in a breach of the terms, conditions or
provisions of, (B) constitute a default under, (C) result in the creation of any
lien, mortgage, security interest, charge or other encumbrance upon the
Company's capital stock or assets pursuant to, (D) give any third party the
right to accelerate any obligation under, (E) result in a violation of, or (F)
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body pursuant to, the
Company's Restated Certificate of Incorporation, the Company's Bylaws, any law,
statute, rule or regulation to which the Company is subject, or any material
agreement, indenture, instrument, order, judgment or decree to which the Company
is subject;
(v) Xxxxx X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx, and Xxxxxx X.
Xxxxxx, Xx., have each executed and delivered an Executive Stock Agreement and
Employment Agreement and the Stockholders Agreement, and each such agreement is
a valid and binding obligation of each such person, enforceable in accordance
with its terms;
(vi) In November, 1996, the Illinois Commerce Commission certified the
Company to provide facilities-based and resold, switched and dedicated, local
exchange services in those portions of MSA-1 served by Ameritech and Centel, and
interexchange services throughout Illinois:
(1) such certification has not been conditioned, restricted,
withdrawn, and is not presently under challenge;
(2) the Company has filed all statements and reports, obtained all
consents, licenses, and approvals, and taken all other material actions
required by the ICC, FCC, or other laws or regulations, necessary to
maintain such certification and to provide such services in the Chicago
MSA;
(3) neither the Company's entering into the Stock Purchase Agreement
or any of the other agreements of even date therewith to which the Company
is party, nor the transactions contemplated by such agreements, will result
in the conditioning, restriction, or withdrawal of such certification;
Xxxxxx Xxxxxx
Focal Communications Corporation
Page 3
(vii) The restatement to the Company's Certificate of Incorporation
containing the provisions set forth in Exhibit 2 to the Stock Purchase Agreement
has been duly adopted by the Company, has been duly filed with the Secretary of
State of Delaware, has become effective under the laws of Delaware and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms;
(viii) The certificates representing the Class A Common purchased at the
Closing have been duly authorized, executed and delivered by the Company, such
Class A Common has been validly issued and is outstanding, fully paid and
nonassessable, and there are no statutory, or contractual, preemptive rights of
stockholders or rights of first refusal with respect to the issuance of such
Class A Common;
(ix) The offering, sale and issuance of the Class A Common under the Stock
Purchase Agreement and the other securities issued by the Company at the Closing
do not require registration under the Securities Act or registration or
qualification under any state securities laws;
(x) The Capitalization Schedule attached to the Stock Purchase Agreement
correctly sets forth the number of shares of each class of the Company's
authorized capital stock and the number of outstanding shares of each such class
as of the Closing;
This opinion has been furnished to you in accordance with Paragraph 2K of
the Stock Purchase Agreement and may not be relied upon by any other person or
for any other purpose. This opinion is based on existing Delaware and federal
laws, rules and regulations.
We express no opinion as to laws, rules or regulations other than these.
This opinion is limited to those matters expressly stated and no opinion shall
be inferred or applied beyond such matters.
XXXXXXXX, XXXXXX & XXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------------------
Xxxxxxx X. Xxxxxxx
EXHIBIT 12 TO STOCK PURCHASE AGREEMENT
FORM OF OPINION FOR SUBSEQUENT CLOSINGS
---------------------------------------
It is our opinion that:
(i) The Company has been duly incorporated and organized, and is
validly existing and in good standing, under the laws of the State of
Delaware, and the Company has all necessary corporate power and authority
and all material licenses, permits and authorizations necessary to own its
properties in the locations presently owned and to conduct its business in
the manner and in the locations now conducted;
(ii) Each of the Interconnection Agreement, [other material
Interconnection Agreements], the Stock Purchase Agreement, the Registration
Agreement, the Stockholders Agreement, and the other agreements
contemplated by the Stock Purchase Agreement to which the Company and Xxxxx
X. Xxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx, and Xxxxxx X. Xxxxxx, Xx. is a
party has been duly authorized by such person and remains a valid and
binding obligation of such person, enforceable in accordance with its
terms;
(iii) In _____________, the __________ Commerce Commission certified
the Company to provide facilities-based and resold, switched and dedicated,
local exchange services in those portions of ________ served by ________,
and interexchange services throughout ________;
(1) such certification has not been conditioned, restricted,
withdrawn, and is not presently under challenge;
(2) the Company has filed all statements and reports,
obtained all consents, licenses, and approvals, and taken all other
material actions required by the _CC, FCC, or other laws or
regulations, necessary to maintain such certification and to provide
such services in the _______ MSA;
(3) neither the Company's entering into the Stock Purchase
Agreement or any of the other agreements of even date therewith to
which the Company is party, nor the transactions contemplated by such
agreements, will result in the conditioning, restriction, or
withdrawal of such certification;
(iv) The Capitalization Schedule attached to _______ correctly sets
forth the number of shares of each class of the Company's authorized
capital stock and the number of outstanding shares of each such class as of
the Closing;
This opinion has been furnished to you in accordance with Paragraph 3F of
the Stock Purchase Agreement and may not be relied upon by any other person or
for any other purpose. This opinion is based on existing Delaware and federal
laws, rules and regulations. We express no opinion
as to laws, rules or regulations other than these. This opinion is limited to
those matters expressly stated and no opinion shall be inferred or applied
beyond such matters.
EXHIBIT 13 TO THE STOCK PURCHASE AGREEMENT
CONFIDENTIALITY
---------------
AND
---
NONCOMPETITION AGREEMENT
------------------------
This Agreement ("Agreement") made this ___ day of ___________, 19__, by and
between Focal Communications Corporation, a Delaware corporation (the "Company")
and ___________, an individual resident of the State of ___________ (the "Key
Employee").
WHEREAS, the Key Employee is desirous of being in the Company's employment
as an at-will employee based upon the conditions set forth in this Agreement;
and
WHEREAS, the Key Employee will have access to and be entrusted with
confidential and proprietary information of the Company; and
WHEREAS, the Company wishes to employ the Key Employee as an at-will
employee, but is willing to do so only if the Key Employee agrees to be bound by
the terms of this Agreement, and, in further consideration of the Key Employee's
execution hereof, the Company will pay to the Key Employee the sum of $1,000.00
upon the execution of this Agreement.
NOW, THEREFORE, in consideration of being in the Company's employment as an
at-will employee, in that the employment may be terminated by the Key Employee
or the Company at any time, for any reason or no reason, with or without notice,
and in further consideration of the material covenants and agreements contained
herein, including the Company's payment to the Key Employee of $_______________
upon execution of this Agreement, the parties hereto, each intending to be
legally bound, covenant and agree as follows:
Section 1. At-will Employment. In consideration of being employed as an
--------- ------------------
at-will employee, in that the Key Employee or the Company can terminate
employment at any time, for any reason or no reason, with or without notice, the
employee agrees to the at-will employment condition as set forth herein, as well
as all conditions as are or may be from time to time promulgated by the Company.
Section 2. Covenant not to Compete. Key Employee acknowledges and agrees
--------- -----------------------
that if, after the termination of his employment, he performs certain services
for any entity that is engaged in a similar business or entity competing with
the Company, that such any entity would obtain an unfair advantage over the
Company due to the knowledge and management information that the Key Employee
has gained by reason of his employment hereunder. Key Employee acknowledges and
agrees that the Company has a legitimate interest in being protected from the
Key Employee's employment by an entity that engages in a similar business or
competes with the Company. Key Employee hereby agrees to the following
restrictions (in addition to those contained in Sections 3, 4, 5 and 6): During
the term of his employment pursuant hereto and for a period of eighteen (18)
months after the termination of employment (the "Noncompetition Period"), the
Key Employee will not, directly or indirectly, (whether as sole proprietor,
partner or venturer, stockholder, director, officer, employee or consultant or
any other capacity as principal or agent or through any person, subsidiary or
employee acting as nominee or agent):
(a) Conduct or engage in or be interested or associated with any
person, firm, association, partnership, corporation, or other entity which
conducts or engages in a similar business or competes with the Company in any
geographic area where the Company is conducting business at the time of the
termination of the Key Employee's employment, or in any geographic area where
the Company has planned to conduct business and such Key Employee has knowledge
of such plan(s). (The Restricted Area);
(b) Take any action, directly or indirectly, to finance, guarantee,
or provide any other material assistance to any person, firm, association,
partnership, corporation, or other entity which conducts or engages in a similar
business or competes with the Company in the Restricted Area;
(c) Influence or attempt to influence any person, firm, association,
partnership, corporation, or other entity who is a contracting party with the
Company at any time during the Noncompetition Period to terminate any written or
oral agreement with the Company;
(d) Hire or attempt to hire for employment any person who is employed
by the Company or attempt to influence any such person to terminate employment
with the Company; or
(e) Call on, solicit, or take away as a client or customer or attempt
to call on, solicit or take away as a client or customer any person, firm,
association, partnership, corporation, or other entity that was a client or
customer of the Company, including actively sought prospective customers, with
whom the Key Employee had material contact during the term of his employment
that
was serviced by or under the supervision of the Key Employee during the term of
such employment; provided, however, that nothing herein shall prohibit the Key
Employee from general advertising and marketing efforts not specifically
targeting such clients or customers of the Company.
This covenant shall apply and inure to the benefit of any assignee of the
Company. The restrictive provisions of this Agreement shall not prohibit Key
Employee from having an equity interest in the securities of any corporation
engaged in a similar business to that of the Company, which are listed on a
recognized securities exchange or traded in the over-the-counter market to the
extent that such interest does not exceed one percent (1%) of such corporation
or does not constitute control of such corporation.
Section 3. Confidential Information. Key Employee acknowledges and agrees
--------- ------------------------
that all nonpublic information concerning the Company's business relating,
without limitation, to (i) products or services, (ii) fees, costs and pricing
structures, (iii) designs, (iv) analysis, (v) drawings, photographs and reports,
(vi) computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data basis, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customers and clients and customer or client lists,
(xii) copyrightable works, (xiii) all technology and trade secrets (xiv)
business plans and financial models, and (xv) all similar and related
information in whatever form (collectively, the "Confidential Information") is
and shall remain the property of the Company. The Key Employee recognizes and
agrees that all of the Confidential Information, whether developed by Key
Employee or made available to Key Employee, other than information that is
generally known to the public, is a unique asset of the Company, the disclosure
of which would be damaging to the Company. Key Employee agrees that he will
not at any time during the term of his employment or for a period of eighteen
(18) months after the termination of employment, directly or indirectly,
disclose to any person any Confidential Information of the Company, other than
information that is already know to the public, except as may be required in the
ordinary course of business of the Company or as may be required by law.
Section 4. Property of the Company. Key Employee acknowledges that from
--------- -----------------------
time to time in the course of providing services pursuant to this Agreement, he
shall have the opportunity to inspect and use certain property, both tangible
and intangible, of the Company, including Confidential Information, and Key
Employee hereby agrees that such property shall remain the exclusive property of
the Company.
Section 5. Intangible Assets. Key Employee shall never at any time have or
--------- ----------------
claim any right, title, or interest in any trade name, trademark, copyright,
patent, whether registered or unregistered, or other similar rights belonging to
or used by the Company and shall never have or claim rights, title, or interest
in any material matter of any sort prepared for or used in connection with the
business or promotion of the Company, whether produced, prepared, or published
in whole or in part by the Company.
Section 6. The Company Ownership of Intellectual Property.
--------- ----------------------------------------------
(a) Acknowledgment of Company Ownership. In the event that Key Employee,
-----------------------------------
as part of his activities on behalf of the Company, generates, authors or
contributes to any invention, design, new development, device, product, method
or process (whether or not patentable or reduced to practice or constituting
Confidential Information), any copyrightable work (whether or not constituting
Confidential Information) or any other form of Confidential Information relating
directly or indirectly to the Company's business as now or hereinafter conducted
(collectively, "Intellectual Property"), Key Employee acknowledges that such
Intellectual Property is the exclusive property of the Company and hereby
assigns all right, title and interest in and to such Intellectual Property to
the Company. Any copyrightable work prepared in whole or in part by Key
Employee will be deemed "a work made for hire" under Section 201(b) of the 1976
Copyright Act, and the Company shall own all of the rights comprised by the
copyright therein. Key Employee shall promptly and fully disclose all
Intellectual Property to the Company and shall cooperate with the Company to
protect the Company's interests in and rights to such Intellectual Property
(including, without limitation, providing reasonable assistance in securing
patent protection and copyright registrations and executing all documents as
reasonably requested by the Company, whether such requests occur prior to or
after termination of Key Employee's employment with the Company).
(b) Delivery of Materials Upon Termination of Employment. As requested
----------------------------------------------------
by the Company from time to time and upon the termination of Key Employee's
employment with the Company, Key Employee shall promptly deliver to the Company
all copies and embodiments, in whatever form, of all Confidential Information
and Intellectual Property in Key Employee's possession or within his control
(including, but not limited to, written records, notes, photographs, manuals,
notebooks, documentation, program listings, flow charts, magnetic media, disks,
diskettes, tapes and all other materials containing any Confidential Information
or Intellectual Property) irrespective of the
location or form of such material and, if requested by the Company, shall
provide the Company with written confirmation that all such materials have been
delivered to the Company.
Section 7. Remedies. The parties hereby acknowledge and agree that the
--------- --------
services to be rendered by the Key Employee and the various rights granted to
the Key Employee hereunder are special, unique and of extraordinary character
which gives a peculiar value to the Company which is impossible of replacement
and for the loss of which the Company cannot reasonably or adequately be
compensated in damages, and Key Employee acknowledges and agrees that a breach
by him/her of this Agreement will cause the Company irreparable injury and
damage. Therefore, Key Employee expressly agrees that in the event of a breach
by the Key Employee of the provisions of Sections 2, 3, 4, 5 or 6 hereunder, the
Company shall be entitled to injunctive and other equitable relief to remedy
such breach of this Agreement, or any part thereof, and to secure its
enforcement, in addition to any other remedy to which the Company might be
entitled.
Section 8. Waiver. No delay or failure on the part of any party hereto in
--------- ------
exercising any right, power, or privilege under this Agreement or any other
documents furnished in connection with or pursuant to this Agreement shall
impair any such right, power, or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power, or privilege shall preclude the further exercise of such right,
power, or privilege, or the exercise of any other right, power, or privilege.
No waiver shall be valid against any party hereto unless made in writing and
signed by the party against whom enforcement of such waiver is sought and then
only to the extent expressly specified therein.
Section 9. Governing Law. This Agreement, the rights and obligations of
--------- -------------
the parties hereto, and any claims or any disputes related hereto, shall be
governed by and construed in accordance with the laws of the State of _________.
Section 10. Binding Effects. Subject to any provisions hereof restricting
---------- ---------------
assignment, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
Section 11. Acknowledgment. The Key Employee has been provided a
---------- --------------
reasonable amount of time to have this document reviewed by legal counsel, has
been fully made aware of his rights, duties and obligations hereunder, or has
elected not to have such reviewed by counsel but fully understands the terms and
conditions of this Agreement and the ramifications of breaching this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf as of the day
and year first above written.
WITNESSES: FOCAL COMMUNICATIONS CORPORATION
By:
---------------------------------- ---------------------------------
Print Name:
---------------------------------- -------------------------
Print Title:
------------------------
KEY EMPLOYEE
By:
---------------------------------- ---------------------------------
----------------------------------
DISCLOSURE SCHEDULES TO STOCK PURCHASE AGREEMENT
Licenses Schedule
Capitalization Schedule
Liabilities Schedule
Assets Schedule
Contracts Schedule
Intellectual Property Schedule
Litigation Schedule
Consents Schedule
Affiliated Transcations Schedule
7A. LICENSES SCHEDULE
---------------------
1. Permit to conduct business in the city of Chicago.
7B(i). CAPITALIZATION SCHEDULE
------------------------------
As of November 25, 1996, the Capital Stock of the Company is as follows:
Common Stock, no par
Authorized Shares 1,500
Outstanding Shares 1,500
As of the initial Closing and immediately thereafter, the capital stock of the
Company shall be as follows:
Class A Common, $.01 par value
Authorized Shares 80,000
Outstanding Shares 79,384.62
Class B Common, $.01 par value
Authorized Shares 20,000
Outstanding Shares 20,000
Class C Common, $.01 par value
Authorized Shares 15,000
Outstanding Shares 14,711.54
7D. LIABILITIES
---------------
Prior to the Initial Closing, the Company has incurred the following expenses,
obligations or liabilities:
Liabilities:
Reed, Smith, Xxxx & XxXxxx $12,656.74
Xxxxxxx & Berlin $ 598.84
Xxxxxxxx & Xxxxx Unknown as of Closing
Skadden, Arps, Slate, Xxxxxxx & Xxxx Unknown as of Closing
Xxxxxx Xxxxxxxx X.X. Unknown as of Closing
Xxxxxxxx, Xxxxxx & Xxxxxxx Unknown as of Closing
7E. ASSETS SCHEDULE
-------------------
General office materials and equipment, the value of which does not exceed
$1,000.00.
7G. CONTRACTS SCHEDULE
----------------------
Prior to Initial Closing, the Company and/or any subsidiary is a party to or
bound by the following written and/or oral agreements:
1. Letter of Intent with Data Center Design and Development for design
and construction of central office space, November 18, 1996.
2. Letter of Intent with Northern Telecom, Inc. for procurement of one
DMS-500 central office switching system, October 9, 1996.
3. Letter of firm commitment with Northern Telecom, Inc. to purchase
minimum of six DMS-500 central office switching systems, October 9, 1996.
4. Interconnection Agreement with Ameritech Information Industry
Services, October 28, 1996.
5. Letter of Intent with Xxxxxx-Xxxxxxx Management Corporation to lease
000 X. XxXxxxx for central office and general corporate office space, October
24, 1996.
6. Employee health insurance agreement with Brockford & Company,
August 1, 1996.
7. Enhanced 9-1-1 Service Agreement with Ameritech Infomation Industry
Services, October 28, 1996.
8. Directory Assistance Agreement with Ameritech Information Services,
October 28, 1996.
9. Switched Access Meet Point Billing Agreement with Ameritech
Information Industry Services, October 28, 1996.
7H. INTELLECTUAL PROPERTY SCHEDULE
----------------------------------
(a) Patented or registered Intellectual Property Rights owned or used by the
Company or any Subsidiary:
NONE
(b) Pending patent applications for registration of other Intellectual
Property Rights filed by the Company or any Subsidiary:
(1) Federal application for service xxxx:
FOCAL COMMUNICATIONS CORPORATION
(2) Federal application for service xxxx:
FOCAL
(3) Federal application for service xxxx:
FOCAL AND DESIGN (Logo)
(c) Unregistered trade names and corporate names owned or used by the Company
or any Subsidiary:
NONE
(d) Unregistered trademarks and service marks:
(1) Slogan:
FOCUSED ON LOCAL COMMUNICATIONS
(2) Slogan:
FUNCTIONALLY EQUIVALENT, TECHNICALLY
SUPERIOR, LOW COST TELECOMMUNICATIONS
SERVICES
7I. LITIGATION SCHEDULE
-----------------------
NO EXCEPTION
7K. CONSENTS SCHEDULE
---------------------
SEE ALSO LICENSES SCHEDULE
-----------------
1. Permit to conduct business in the City of Chicago.
2. Building Permits as necessary from the City of Chicago.
3. Permits, if any, required from other jurisdictions upon implementation of
such Subsequent Business Plan(s) contemplated hereunder.
7M. AFFILIATED TRANSACTIONS SCHEDULE
------------------------------------
NO EXCEPTION
