EXHIBIT 4.4
AMENDMENT NO. 1 TO
VESTING AGREEMENT AND CONSENT
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This Amendment No. 1 to Vesting Agreement and Consent (this "Amendment") is
entered into as of this 21/st/ day of August, 1998, between Focal Communications
Corporation, a Delaware corporation (the "Company"), Xxxxx X. Xxxx, Xxxx X.
Xxxxxxxx, Xxxxxx Xxxxxx, Xxxxxx X. Xxxxxx, Xx. (collectively, the "Executive
Investors"), Madison Dearborn Capital Partners, L.P., Frontenac VI, L.P., and
Battery Ventures III, L.P. (the "New Capital Investor" and collectively, the
"Institutional Investors"). Capitalized terms not otherwise defined in this
Agreement are used herein with the meanings assigned to such terms in the New
Capital Vesting Agreement (as hereinafter defined).
WHEREAS, the Company, the Executive Investors and the New Capital Investor
are parties to that certain Vesting Agreement dated as of November 27, 1996 (the
"New Capital Vesting Agreement");
WHEREAS, each Institutional Investor other than the New Capital Investor is
a party to Vesting Agreements dated as of November 27, 1996 (the "Other Vesting
Agreements");
WHEREAS, the New Capital Vesting Agreement and the Other Vesting Agreements
(collectively, the "Vesting Agreements") provide for the (a) issuance of
14,711.54 shares of the Company's Class C Common Stock, par value $.01 per share
("Class C Common"), to the Executive Investors, which shares would be subject to
certain vesting requirements, and (b) the characterization of 14,711.54 shares
of the Company's Class A Common Stock, par value $.01 ("Class A Common"),
purchased by the Institutional Investors as "Nonqualified Common," which shares
would be subject to certain risks of forfeiture associated with the vesting of
shares of Class C Common;
WHEREAS, the Company, the Executive Investors and the Institutional
Investors have determined that it is in their respective best interests to amend
the New Capital Vesting Agreement to, among other things, clarify the terms and
conditions under which the Executive Investors' rights to the Class C Common
would become vested;
WHEREAS, the Company, the Executive Investors and the New Capital Investor
wish to amend the provisions of the New Capital Vesting Agreement as provided in
paragraph 1 of this Amendment;
WHEREAS, the Institutional Investors collectively own all of the shares of
Institutional Investor Stock (as such term is defined in that certain Stock
Purchase Agreement, dated as of November 26, 1996, by and among the Company and
the other parties thereto (the "Stock Purchase Agreement")) presently
outstanding and the Executive Investors collectively own all of the shares of
Unvested Class C Common presently outstanding and at least a majority of the
shares of
Executive Stock (as such term is defined in the Stock Purchase Agreement)
presently outstanding; and
WHEREAS, the Institutional Investors and the Executive Investors wish to
consent to the amendment (as provided in paragraph 1 of this Amendment) for
purposes of the Stock Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties to this Amendment
hereby agree as follows:
1. Amendments to New Capital Vesting Agreement. Pursuant to Section 5G of
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the New Capital Vesting Agreement:
(a) Section 3 of the New Capital Vesting Agreement is hereby amended
by adding the following definition to such section:
"Qualified Sale of the Company" means a sale or transfer of all or
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substantially all of the outstanding stock or assets of the Company
and its subsidiaries, including by way of merger or consolidation,
where more than 50% of the consideration for such stock or assets in
such sale or transfer consists of cash and/or publicly traded
securities."
(b) Section 5J of the New Capital Vesting Agreement is hereby amended
by replacing such section in its entirety with the following:
"5J. Termination. The provisions of this Agreement shall terminate
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upon the earlier of (i) the date upon which there remains no
Unvested Class C Common outstanding, (ii) the seventh anniversary
of the date hereof or (iii) the Effective Time (as hereinafter
defined); provided, however, that the obligations under this
Agreement with respect to any events resulting in the termination
hereof and the provisions of Section 6 hereof shall survive such
termination."
(c) The New Capital Vesting Agreement is hereby amended by adding the
following Section at the end of such Agreement:
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"Section 6. Obligations of the Parties Upon the Effective Time.
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6A. Disposition of Unvested Class C Common. Upon the earlier to occur
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of (i) the date immediately prior to the consummation of a Public
Offering, (ii) September 30, 1998 or (iii) the date upon which a
Qualified Sale of the Company is consummated, whichever is
earlier (such earlier date, the "Effective Time"), (i) 68.63
shares of the Unvested Class C Common held by each Executive
Investor (an aggregate of 274.51 shares of Unvested Class C
Common) shall be designated "Restricted Stock" (the "Restricted
Stock") and shall thereafter be subject to the terms and
conditions of certain Restricted Stock Agreements between the
Company and each of the Executive Investors in the form attached
hereto as Exhibit A (the "Restricted Stock Agreements") and (ii)
all remaining shares of Unvested Class C Common (an aggregate of
1,744.72 shares of Unvested Class C Common or 436.18 shares of
Unvested Class C Common per Executive Investor) (the "Forfeited
Class C Common") shall be automatically forfeited and the
applicable Executive Investor shall thereafter no longer exercise
nor have the right to exercise any of his rights with respect to
such forfeited shares.
6B. Disposition of Nonqualified Common. Upon the Effective Time, (i)
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686.5 shares of Nonqualified Common held by the New Capital
Investor (the "Forfeited Nonqualified Common" and together with
the Forfeited Class C Common, the "Forfeited Shares") shall be
automatically 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 (ii) the
1,332.73 remaining shares of Nonqualified Common held by the New
Capital Investor (the "Unrestricted Class A Common") shall no
longer be subject to any risk of forfeiture in connection with
this Agreement.
6C. Procedures. No later than five (5) business days after the
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execution and delivery of this Amendment by the Institutional
Investors, the holders of the Forfeited Shares shall promptly
deliver to the Company the certificate or certificates
representing such Forfeited Shares, duly endorsed (or accompanied
by stock powers duly endorsed) in blank by the registered holders
thereof to be held by the Company for transfer and cancellation
by the Company in accordance with Sections 6A and 6B. Upon the
Effective Time, the Company shall take all actions necessary to
(a) execute and deliver to the Executive Investor the Restricted
Stock Agreement, with all blanks appropriately completed, (b)
retire the Forfeited Shares and cause such shares to resume the
status of authorized but unissued shares, (c) promptly cancel the
certificate(s) representing the Forfeited Shares and (d) issue to
(i) the Executive Investors a certificate representing the number
of shares of Restricted Stock pursuant to 6A(i) and in accordance
with the Restricted Stock Agreement and (ii) the New Capital
Investor a certificate, bearing the
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appropriate legends, representing the number of shares of
Unrestricted Class A Common pursuant to Section 6B(ii)."
2. Shares Available for Issuance Under the Company's Equity Incentive
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Plans. The Institutional Investors each hereby acknowledge that the agreement
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by the Company to adopt the Company's 1998 Equity and Performance Incentive Plan
(the "Equity Plan") and 1998 Equity Plan for Non-Employee Directors (the
"Director Plan") in substantially the forms attached hereto as Exhibit B and
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Exhibit C, respectively, and concurrently therewith to adopt certain amendments
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to the Company's 1997 Nonqualified Stock Option Plan (the "1997 Plan Amendment")
in substantially the form attached hereto as Exhibit D, constitutes a material
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portion of the consideration for the execution of this Amendment by the
Executive Investors. The Institutional Investors each hereby further
acknowledge that by executing this Amendment, the Institutional Investors each
agree to do all things necessary or appropriate to cause such Plans and the 1997
Plan Amendment to be adopted in accordance with this Section 2.
3. Consent. For all purposes of the Stock Purchase Agreement (including,
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without limitation, Sections 4C(ii), (iii) and (xii), 4E and 4G thereof), each
of the Institutional Investors and Executive Investors consents to this
Amendment.
4. Counterparts. This Amendment may be executed in multiple
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counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
5. Descriptive Headings. The descriptive headings of this Amendment are
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inserted for convenience only and do not constitute a part of this Amendment.
6. Survival. Notwithstanding anything in the Vesting Agreements to the
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contrary, the terms of this Amendment shall survive termination of the Vesting
Agreements.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
MADISON DEARBORN CAPITAL
_________________________
Xxxxx X. Xxxx PARTNERS, L.P.
By: Madison Dearborn Partners, L.P., its General
Partner
By: Madison Dearborn Partners, Inc., its General
Partner
By:___________________________________________
_________________________
Xxxx X. Xxxxxxxx Its:______________________________________
FRONTENAC VI, L.P.
_________________________
Xxxxxx Xxxxxx By: Frontenac Company, its General Partner
By:_____________________________________________
Its:_______________________________________
BATTERY VENTURES III, L.P.
_________________________
Xxxxxx X. Xxxxxx, Xx. By: Battery Partners III, L.P., its General
Partner
By:_____________________________________________
Its:_______________________________________
FOCAL COMMUNICATIONS CORPORATION
By:_____________________________________________
Its:_______________________________________
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EXHIBIT A
[Form of Restricted Stock Agreement]
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EXHIBIT B
[1998 Plan]
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EXHIBIT C
[Director Plan]
8
EXHIBIT D
[Amendment to 1997 Plan]
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