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EXHIBIT 10.7
EXECUTIVE PURCHASE AGREEMENT
THIS EXECUTIVE PURCHASE AGREEMENT (this "Agreement") is made
as of January 28, 1998, by and between Allegiance Telecom, L.L.C., a Delaware
limited liability company (the "LLC"), Allegiance Telecom, Inc., a Delaware
corporation (the "Company"), and C. Xxxxxx Xxxx ("Executive"). Capitalized terms
used but not otherwise defined herein have the meanings ascribed to such terms
in paragraph 7 hereof.
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, intending to be legally
bound, agree as follows:
1. PURCHASE AND SALE OF EXECUTIVE SECURITIES.
(a) Initial Capital Contribution and Issuance of Executive
Securities. Upon execution of this Agreement, Executive shall make a capital
contribution to the LLC in the amount of $300,000 (the "Initial Capital
Contribution") in exchange for, and the LLC shall issue to Executive, 600,000
Class B Units having the rights, obligations, and preferences set forth with
respect thereto in the LLC Agreement. Executive shall make the Initial Capital
Contribution to the LLC by delivery to the LLC of a cashier's or certified
check, or wire transfer of immediately available funds to an account designated
by the LLC, in the aggregate amount equal to the Initial Capital Contribution.
The aggregate amount of the Initial Capital Contribution made with respect to
each Class B Unit issued hereunder shall be considered Basic Contributions made
with respect to such Class B Unit.
(b) Representations and Warranties of Executive. In connection
with the Initial Capital Contribution and the issuance of the Executive
Securities hereunder, Executive represents and warrants to each of the LLC and
the Company that:
(i) The Executive Securities to be acquired by
Executive pursuant to this Agreement shall be acquired for Executive's
own account and not with a view to, or intention of, distribution
thereof in violation of the Securities Act or any applicable state
securities laws, and the Executive Securities shall not be disposed of
in contravention of the Securities Act or any applicable state
securities laws.
(ii) Executive will serve on the Management Committee
of the LLC, is a management employee of the Company, is sophisticated
in financial matters and is able to evaluate the risks and benefits of
the investment in the Executive Securities.
(iii) Executive is able to bear the economic risk of
his investment in the Executive Securities for an indefinite period of
time and is aware that transfer of the Executive Securities may not be
possible because (A) such transfer is subject to contractual
restrictions on transfer set forth herein and in the Securityholders
Agreement, and (B) the
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Executive Securities have not been registered under the Securities Act
or any applicable state securities laws and, therefore, cannot be sold
unless subsequently registered under the Securities Act and such
applicable state securities laws or an exemption from such registration
is available.
(iv) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of
the offering of the Executive Securities issued hereunder and has had
full access to such other information concerning the Company as he has
requested.
(v) This Agreement, the Joinder and Rights Agreement,
the LLC Agreement, the Securityholders Agreement, the Registration
Agreement, and the other agreements contemplated thereby of even date
therewith constitute the legal, valid and binding obligations of
Executive, enforceable in accordance with their terms, and the
execution, delivery and performance of such agreements by Executive and
Executive's employment with the Company do not and shall not conflict
with, violate or cause a breach of any agreement, contract or
instrument to which Executive is a party or by which he is bound or any
judgment, order or decree to which Executive is subject.
(c) Acknowledgment of At-Will Employment. As an inducement to
the LLC and the Company to enter into this Agreement, and as a condition
thereto, Executive acknowledges and agrees that no agreement or arrangement
between the Executive and the Company or the LLC (including, without limitation,
the issuance of the Executive Securities to Executive and the execution and
delivery of this Agreement) shall entitle Executive to remain in the employment
of the Company and its Subsidiaries or affect the right of the Company or its
Subsidiaries to terminate Executive's employment at any time and for any reason.
Executive's initial annual salary, which will remain subject to changes
implemented by the Board of Directors of the Company, shall be $200,000.
2. VESTING OF EXECUTIVE SECURITIES.
(a) Vesting Schedule. Except as otherwise provided herein, an
amount of Unvested Securities (as defined below) shall vest on each of the first
four anniversaries of the date hereof, such that the Executive Securities shall
be vested on each such date in accordance with the following schedule:
Cumulative Percentage of Executive
Date Securities Vested on Such Date
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The date hereof 20%
The first anniversary of the date hereof 40%
The second anniversary of the date hereof 60%
The third anniversary of the date hereof 80%
The fourth anniversary of the date hereof 100%
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Notwithstanding the foregoing sentence, and except as otherwise provided herein,
the above vesting schedule shall cease and no Unvested Securities (as defined
below) shall vest after the date on which Executive's employment with the
Company and its Subsidiaries terminates for any reason; provided that if
Executive's employment is terminated by the Company without Cause, the Executive
Securities shall thereafter continue to vest in accordance with the above
schedule so long as Executive has not committed a Vesting Termination Breach
(upon which breach the vesting schedule shall cease, and no Unvested Securities
(as defined below) shall vest on or after the date of the first such breach). In
the event the LLC or the Company has alleged that Executive has committed a
Vesting Termination Breach, Executive disputes such allegation, and the matter
is subject to the dispute resolution provisions set forth in paragraph 6,
vesting shall be tolled upon the date of the allegation of such breach; provided
that (i) if it is ultimately resolved under paragraph 6 that Executive has
committed a Vesting Termination Breach, the tolling shall become a permanent
cessation such that vesting shall have forever ceased upon the date of such
allegation, and (ii) if it is ultimately resolved under paragraph 6 that
Executive did not commit a Vesting Termination Breach, a number of Unvested
Securities shall vest giving retroactive effect to such vesting schedule such
that there shall exist a number of Vested Securities as if the vesting schedule
had not been tolled as a result of such allegations. Executive Securities which
have become vested pursuant to this Agreement are referred to herein as "Vested
Securities," and all other Executive Securities are referred to herein as
"Unvested Securities."
(b) Acceleration upon a Qualified Sale of the Company. All
Unvested Securities shall become Vested Securities upon the consummation of a
Qualified Sale of the Company (as defined below) so long as Executive is
employed by the Company or any of its Subsidiaries on the date of such sale (or,
if Executive's employment was terminated by the Company without Cause, so long
as Executive has not committed a Vesting Termination Breach). A "Qualified Sale
of the Company" means either (i) the sale, lease, transfer, conveyance or other
disposition, in one or a series of related transactions, of all or substantially
all of the assets of the Company and its Subsidiaries, taken as a whole, or (ii)
a transaction or series of transactions (including by way of merger,
consolidation, or sale of stock, but not including a Public Offering) the result
of which is that the holders of the Company's outstanding voting stock
immediately prior to such transaction are after giving effect to such
transaction no longer, in the aggregate, the "beneficial owners" (as such term
is defined in Rule 13d-3 and Rule 13d-5 promulgated under the Securities
Exchange Act), directly or indirectly through one or more intermediaries, of
more than 50% of the voting power of the outstanding voting stock of the
Company, in each case where the consideration for such assets or stock in such
sale or transfer consists of cash and/or publicly traded equity securities for
at least 50% of the outstanding stock of the Company (e.g., 100% of such
consideration would have to consist of cash and/or publicly traded equity
securities if only 50.01% of such stock were sold in such transaction).
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(c) Acceleration upon a Public Offering. Upon the consummation
of the Company's initial Public Offering, and so long as Executive is employed
by the Company or any of its Subsidiaries on the closing date of such offering
(or, if Executive's employment was terminated by the Company without Cause, so
long as Executive has not committed a Vesting Termination Breach), there will
vest the amount of Unvested Securities which were scheduled to vest within the
365 days following such closing date (and the remaining Unvested Securities, if
any, shall continue to vest 20% on each anniversary of the date hereof in
accordance with clause (a) above, such that the vesting schedule set forth in
paragraph (a) above shall have been effectively accelerated by one year).
(d) Acceleration upon Death or Disability. All Unvested Shares
shall become Vested Shares if Executive's employment with the Company or any of
its Subsidiaries terminates by reason of Executive's death or Disability.
(e) Other Acceleration. Subject to paragraph 3(h) hereof, any
Unvested Securities which the LLC (or its assignees) has not elected to
repurchase in the Repurchase Notice (as defined below) (including Unvested
Securities originally included in the Repurchase Notice, but for which the
election to repurchase was rescinded, pursuant to the terms of paragraph 3, by
all of the LLC and/or its assignees having made such election) shall thereafter
be deemed Vested Securities.
3. LLC'S REPURCHASE OPTION.
(a) The Repurchase Option. Upon (i) the termination of
Executive's employment with the Company and its Subsidiaries for any reason
other than a termination by the Company without Cause, or (ii) if Executive's
employment is terminated by the Company without Cause, upon Executive's
commission of a Vesting Termination Breach (the occurrence of either (i) or
(ii), a "Repurchase Event"), the Executive Securities then in existence (whether
held by Executive or one or more of Executive's transferees) will be subject to
repurchase by the LLC at the LLC's election pursuant to the terms and conditions
set forth in this paragraph 3 (the "Repurchase Option"). In the event that the
LLC or the Company has alleged that Executive has committed a Vesting
Termination Breach, Executive disputes such allegation, and the matter is
subject to the dispute resolution provisions set forth in paragraph 6, the
closing of the repurchase under this paragraph 3 shall not occur unless and
until it is ultimately determined that Executive committed a Vesting Termination
Breach; provided that during the pendency of such proceeding, the Executive
Securities specified in the Repurchase Notice (as defined below) shall not be
transferred by any holder thereof to any Person.
(b) Repurchase Price. The repurchase price (the "Repurchase
Price") for any Vested Securities to be repurchased shall be the Fair Market
Value of such securities. The Repurchase Price of any Unvested Securities to be
repurchased shall be the lesser of (x) the Fair Market Value of such Securities,
and (y) the Original Cost of such Securities (with securities having the lowest
Original Cost subject to repurchase prior to securities with a higher Original
Cost).
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(c) Exercise of Repurchase Option. The LLC (by action of the
Board) may elect to purchase all or any portion of the Executive Securities by
delivering written notice (the "Repurchase Notice") to the holder or holders of
the Executive Securities within 30 days after the Repurchase Event. The
Repurchase Notice shall set forth the amount, type, and class of Executive
Securities (including, if applicable, the amount of Unvested Securities and/or
Vested Securities) to be acquired from each such holder. The Executive
Securities to be repurchased by the LLC shall first be satisfied to the extent
possible from the Executive Securities held by Executive at the time of delivery
of the Repurchase Notice. If the amount of Executive Securities then held by
Executive is less than the total amount of Executive Securities that the LLC has
elected to purchase, the LLC shall purchase the remaining securities elected to
be purchased from the other holder(s) of Executive Securities, pro rata
according to the amount of Executive Securities held of record by each such
other holder at the time of delivery of the Repurchase Notice. The amount of
Unvested Securities and Vested Securities to be repurchased hereunder shall be
deemed to be allocated among Executive and the other holders of repurchased
Executive Securities (if any) pro rata according to the amount of Executive
Securities to be purchased from such persons.
(d) Assignment by the LLC. The LLC, by action of the Board,
will have the right to assign all or any portion of its repurchase rights
hereunder to any holder of Investor Equity and/or to any executive employee of
the Company or any of its Subsidiaries. Notwithstanding the foregoing, the LLC
may not assign to any Person its right to pay a portion of the Repurchase Price
for Executive Securities repurchased hereunder in the form of Class C Units (or,
after the dissolution and liquidation of the LLC, a promissory note).
(e) Fair Market Value of Repurchased Shares.
(i) The "Fair Market Value" of Executive Securities
subject to repurchase hereunder shall be determined in accordance with
this paragraph (e).
(ii) A majority interest of the LLC and/or any
assignees of the LLC's repurchase rights (based on the amount of
Executive Securities to be purchased by each) and the holders of a
majority of the Executive Securities to be repurchased shall attempt in
good faith to agree on the Fair Market Value of the Executive
Securities. Any agreement reached by such Persons shall be final and
binding on all parties hereto.
(iii) If such Persons are unable to reach such
agreement within 20 days after the giving of Repurchase Notice, the
Fair Market Value of any Executive Securities that are publicly traded
shall be the average, over a period of 21 days consisting of the date
of the Repurchase Event and the 20 consecutive business days prior to
that date, of the average of the closing prices of the sales of such
securities on all securities exchanges on which such securities 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
such securities are 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 such securities are not quoted in the
Nasdaq System, the average of
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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 organi zation.
(iv) If such Persons are unable to reach agreement
pursuant to subparagraph (ii) within 20 days after the giving of
Repurchase Notice, and to the extent any Executive Securities are not
publicly traded:
(A) A majority interest of the LLC and/or
its assignees (based on the amount of Executive Securities to be
repurchased by each) and the holders of a majority of the Executive
Securities shall each, within 10 days thereafter, choose one investment
banker or other appraiser with experience in analyzing and making
determinations concerning matters in the telecommunications industry
and in valuing entities like the LLC (including the distribution
arrangements of the type described in the LLC Agreement), and the two
investment bankers/appraisers so selected shall together select a third
investment banker/appraiser similarly qualified.
(B) The three investment bankers/appraisers
shall first appraise the fair market value of the Company (based on the
assumption of an orderly, arm's length sale to a willing unaffiliated
buyer). The three investment bankers/appraisers shall then appraise the
fair market value of such non-publicly-traded Executive Securities as
follows:
1) the fair market value of each
share of Common Stock shall be equal to the fair market value
of the Company divided by the total number of shares of Common
Stock outstanding on the date of the Repurchase Event
(determined on a fully diluted basis (x) with respect to the
Preferred Stock and all other outstanding securities
convertible into the Company's Common Stock, assuming the
conversion of such Preferred Stock and other convertible
securities (without regard to any conditions or other
restrictions on such conversion), and (y) with respect to all
outstanding options, warrants and other rights or securities
exercisable or exchangeable for shares of the Company's Common
Stock, in accordance with the Treasury Stock Method under
generally accepted accounting principles for determination of
fully diluted earnings per share);
2) the fair market value of each
share of Preferred Stock shall be equal to the greater of (x)
the Liquidation Value (as defined in the Company's certificate
of incorporation) of such share, together with all accrued but
unpaid dividends thereon (as determined under the Company's
certificate of incorporation), and (y) the fair market value
(determined in accordance with subparagraph 1) above) of the
share(s) of Common Stock (including fractional shares) into
which such share of Preferred Stock is convertible on the date
of the Repurchase Event;
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3) the fair market value of each
Class B Unit shall be equal to the fair market value of the
assets (as determined in accordance with subparagraphs 1), 2),
and 4) of this subparagraph (B)) that would be distributed
according to the terms of the LLC Agreement with respect to
such Class B Unit if the LLC were dissolved and liquidated on
the date of the Repurchase Event; and
4) the fair market value of any
other non-publicly-traded Executive Securities (or, for
purposes of subparagraph 3) above, any other assets) shall be
the fair value of such securities (or other assets),
determined on the basis of an orderly, arm's length sale to a
willing, unaffiliated buyer, taking into account all relevant
factors determinative of value.
The three investment bankers/appraisers shall, within thirty days of
their retention, provide the written results of such appraisals to the
LLC and/or its assignees and to each of the holders of Executive
Securities.
(C) The "Fair Market Value" of the
non-publicly-traded Executive Securities to be repurchased shall be the
average of the two appraisals closest to each other, and such amount
shall be final and binding on all parties hereto; provided that the LLC
(and/or any assignee) may at any time within five days after receiving
written notice of such determination rescind its prior exercise of the
Repurchase Option by giving written notice of such revocation to the
holder or holders of the Executive Securities to be repurchased, and
upon such revocation the revoking party will be treated as if it had
never exercised such Repurchase Option (it being understood that such
revoking parties shall thereafter have no right to re-exercise such
Repurchase Option).
(D) The costs of such appraisal shall be
allocated between the parties based on the percentage which the portion
of the contested amount not awarded to each party bears to the amount
actually contested by such party; provided that if any parties revoke
their exercise of the Repurchase Option pursuant to paragraph (C)
above, such revoking parties shall bear (pro rata among such revoking
parties based on the number of Executive Securities with respect to
which each such revoking party had initially exercised its Repurchase
Option) any appraisal costs that would be allocated to the holder(s) of
Executive Securities under this paragraph (D).
(f) Closing of the Repurchase. Within 10 business days after
the Repurchase Price for the Executive Securities to be purchased has been
determined, the LLC shall send a notice to each holder of Executive Securities
setting forth the consideration to be paid for such shares and the time and
place for the closing of the transaction, which date shall not be more than 30
days nor less than five days after the delivery of such notice. At such closing,
the holders of Executive Securities shall deliver all certificates (if any
exist) evidencing the Executive Securities to be repurchased to the LLC (and/or
any assignees of the LLC's repurchase right), and the LLC (and/or any assignees)
shall pay for the Executive Securities to be purchased pursuant to the
Repurchase Option by delivery of a check or wire transfer of immediately
available funds in the aggregate
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amount of the Repurchase Price for such securities; provided that in the event
the Board determines in its good faith discretion that the LLC is not in a
position to pay in cash any or all of the Repurchase Price for Executive
Securities to be repurchased by it:
(i) prior to the dissolution and liquidation of the
LLC, the LLC may pay a portion of the Repurchase Price for such
securities equal to (x) the aggregate Repurchase Price for the
Executive Securities to be repurchased by the LLC minus (y) the
Original Cost of such securities, by issuing in exchange for such
securities an equal number of the LLC's Class C Units (having the
rights and preferences set forth in the LLC Agreement), and for
purposes of the LLC Agreement each such Class C Unit shall as of its
issuance be deemed to have Basic Contributions made with respect to
such Class C Unit equal to (A) the aggregate portion of the Repurchase
Price paid by the issuance of Class C Units divided by (B) the number
of Class C Units so issued in such repurchase; or
(ii) after the dissolution and liquidation of the
LLC, the Company (as successor to the rights of the LLC under paragraph
8(e)(ii) below) may pay, in the form of a promissory note, a portion of
the Repurchase Price for such securities equal to (x) the aggregate
Repurchase Price for the Executive Securities to be repurchased by the
LLC minus (y) the Original Cost of such securities. Such a promissory
note shall be subordinated to all of the Company's senior debt
obligations either then or thereafter incurred, shall earn simple
annual interest at the Base Rate, shall have all principal and accrued
interest due and payable upon maturity, and shall mature upon the
earliest to occur of the Company's initial Public Offering (if such
initial Public Offering has not occurred prior to the issuance of such
promissory note), a Qualified Sale of the Company, or the fifth
anniversary of the issuance of such promissory note.
The purchasers of Executive Securities hereunder shall be entitled to receive
customary representations and warranties from the sellers regarding good title
to such shares, free and clear of any liens or encumbrances.
(g) Restrictions. Notwithstanding anything to the contrary
contained in this Agreement, all repurchases of Executive Securities by the LLC
shall be subject to applicable restrictions contained in the Delaware General
Corporation Law, the Delaware Limited Liability Company Act and in the LLC's and
its Subsidiaries' debt and equity financing agreements. If any such restrictions
prohibit the repurchase of Executive Securities hereunder which the LLC is
otherwise entitled or required to make, the time periods provided in this
paragraph 3 shall be suspended, and the LLC may make such repurchases as soon as
it is permitted to do so under such restrictions, unless by such time such
Repurchase Option has terminated pursuant to paragraph 3(h); provided that
notwithstanding the foregoing, in no event shall the time periods provided in
this paragraph 3 be suspended for more than 6 months.
(h) Termination of Repurchase Option. The rights under this
paragraph 3 of the LLC and/or its assignees to repurchase Vested Securities (but
not Unvested Securities) shall terminate upon the consummation of a Public
Offering. All rights under this paragraph 3 of the LLC
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and/or its assignees to repurchase Executive Securities (including both Vested
Securities and Unvested Securities) shall terminate upon a Qualified Sale of the
Company.
4. RESTRICTIONS ON TRANSFER.
(a) Opinion of Valid Transfer. In addition to any other
restrictions on transfer imposed by this Agreement, the Securityholders
Agreement, or the LLC Agreement, no holder of Executive Securities may sell,
transfer or dispose of any Executive Securities (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
LLC an opinion of counsel (reasonably acceptable in form and substance to the
LLC) that neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such transfer.
(b) Restrictive Legend. The certificates representing
Executive Securities shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON JANUARY 28, 1998, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE,
AND SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND REPURCHASE
OPTIONS SET FORTH IN AN EXECUTIVE PURCHASE AGREEMENT BETWEEN THE ISSUER
OF SUCH SECURITIES (THE "ISSUER") AND THE INITIAL HOLDER OF SUCH
SECURITIES (THE "INITIAL HOLDER"). A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
The legend set forth above shall be removed from the certificates evidencing any
shares which cease to be Executive Securities.
(c) Retention of Executive Stock.
(i) Executive shall not sell, transfer, assign,
pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily or by operation of law) any
interest in any Executive Securities (a "Transfer"), except pursuant to
(A) the repurchase provisions of paragraph 3 hereof or of the LLC
Agreement, (B) the "Participation Rights" or "Put" provisions set forth
in the Securityholders Agreement, or (C) a Sale of the Company (as
defined in the Securityholders Agreement) (each of (A), (B), and (C),
an "Exempt Transfer").
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(ii) The restrictions contained in this paragraph (c)
shall not apply with respect to transfers of Executive Securities (A)
pursuant to applicable laws of descent and distribution or (B) among
Executive's Family Group; provided that the restrictions contained in
this paragraph shall continue to be applicable to the Executive
Securities after any such Transfer, the transferees of such Executive
Securities shall have agreed in writing to be bound by the provisions
of this Agreement with respect to the Executive Securities so
transferred, and (prior to the death of Executive) each such transferee
of Executive Securities shall have entered into proxies and other
agreements satisfactory to the holders of a majority of the Investor
Equity pursuant to which Executive shall have the sole right to vote
such Executive Securities for all purposes. For purposes of this
Agreement, "Family Group" means Executive's spouse and descendants
(whether natural or adopted), any trust which at the time of such
Transfer and at all times thereafter is and remains solely for the
benefit of Executive and/or Executive's spouse and/or descendants and
any family partnership the partners of which consist solely of
Executive, such spouse, such descendants or such trusts.
(iii) The restrictions on the transfer of Executive
Securities set forth in this paragraph (c) shall continue with respect
to each Executive Security following any Transfer thereof (other than
an Exempt Transfer); provided that upon the consummation of a Public
Offering the restrictions set forth in this paragraph (c) shall
thereafter cease to apply to all Vested Securities (it being understood
that such restrictions shall continue to apply to all Unvested
Securities until such time as they become Vested Securities in
accordance with the terms hereof).
5. ISSUANCE OF TIER I AND TIER II OPTIONS.
(a) In the event of a dissolution and liquidation of the LLC
upon the consummation of a Public Offering (a "Public Offering Liquidation"), if
the Management Percentage for such Public Offering Liquidation is less than
33.3% the Company shall contemporaneously with such liquidation issue to each
holder of Class B Units:
(i) options (the "Tier I Options") entitling the
holder to acquire, at an exercise price per share equal to the IPO
Price, a number of shares of the Company's Common Stock equal to the
lesser of (x) the number of shares of Common Stock that such holder
would have received under the LLC Agreement in connection with such
Public Offering Liquidation if the Management Percentage had been 10%,
and (y) the difference of (A) the number of shares of Common Stock that
such holder would have received in connection with such Public Offering
Liquidation if the Management Percentage had been 33.3%, minus (B) the
number of shares of Common Stock that such holder actually received in
such liquidation; and
(ii) if the Management Percentage for such Public
Offering Liquidation is less than 23.3%, in addition to any Tier I
Options, options (the "Tier II Options") entitling the holder to
acquire, at an exercise price per share equal to the Tier II Price, a
number of shares of the Company's Common Stock equal to the lesser of
(x) the number of shares of
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Common Stock that such holder would have received in connection with
such Public Offering Liquidation if the Management Percentage had been
10%, and (y) the difference of (A) the number of shares of Common Stock
that such holder would have received in connection with such Public
Offering Liquidation if the Management Percentage had been 33.3%, minus
(B) the number of shares of Common Stock that such holder actually
received in such liquidation, minus (C) the number of shares of Common
Stock into which the Tier I Options issued to such holder are initially
exercisable.
(b) For purposes of performing the calculations in
subparagraphs (a)(i) and (ii) above, (i) a distribution of shares of the
Company's Preferred Stock in a Public Offering Liquidation shall be considered
to have been a distribution of the number of shares of Common Stock into which
such Preferred Stock is convertible on the date of such liquidation, and (ii) a
distribution of any other property in a Public Offering Liquidation shall be
considered to have been a distribution of a number of shares of Common Stock
equal to the quotient of (A) the aggregate fair market value of such distributed
property on the date of such liquidation, as determined in good faith by the
Board, divided by (B) the fair market value of one share of Common Stock on the
date of such liquidation, as determined in good faith by the Board.
(c) For purposes of this paragraph, the following terms shall
have the meanings set forth below:
"IPO Price" means the gross price per share at which shares of
the Company's Common Stock are initially offered and sold to the public in
connection with a Public Offering.
"Liquidation FMV" has the meaning ascribed to such term in the
LLC Agreement.
"Management Percentage" has the meaning ascribed to such term
in the LLC Agreement.
"Return Multiple" has the meaning ascribed to such term in the
LLC Agreement.
"Tier II Price" means, with respect to a particular Public
Offering Liquidation, the quotient of (x) the amount that would result in a
Return Multiple of 3.5 if the Liquidation FMV for such liquidation were equal to
such amount, divided by (y) the number of shares of Common Stock (determined on
an as-if-converted basis) held by the LLC immediately prior to such liquidation.
6. CONFIDENTIALITY.
(a) Nondisclosure and Nonuse of Confidential Information.
Executive shall not disclose or use at any time, either during his employment
with the Company or thereafter, any Confidential Information (as defined below)
of which Executive is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or use is directly
related to and required by Executive's performance of duties assigned to
Executive by the LLC or the Company, or to the extent such disclosure is
permissible under the confidentiality provisions set
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forth in the Stock Purchase Agreement. Executive shall take all appropriate
steps to safeguard Confidential Information and to protect it against
disclosure, misuse, espionage, loss and theft. As used in this Agreement, the
term "Confidential Information" means information that is not generally known to
the public and that is used, developed or obtained by the LLC, the Company, or
its Subsidiaries in connection with their business, including but not limited 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 bases, (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, (xiv) all technology and trade secrets, (xv) business plans
and financial models, and (xvi) all similar and related information in whatever
form. Confidential Information shall not include any information that has been
published in a form generally available to the public prior to the date
Executive proposes to disclose or use such information. Information shall not be
deemed to have been published merely because individual portions of the
information have been separately published, but only if all material features
constituting such information have been published in combination.
Notwithstanding the foregoing, "Confidential Information" shall not include any
information of which (a) Executive became aware prior to his affiliation with
the Company and the LLC, (b) Executive learns from sources other than the LLC,
the Company or its Subsidiaries, whether prior to or after such information is
actually disclosed by the LLC, the Company or its Subsidiaries or (c) is
disclosed in a prospectus or other documents for dissemination to the public.
(b) The Company's Ownership of Intellectual Property.
(i) Acknowledgment of Company Ownership. In the event
that Executive 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
hereafter conducted (collectively, "Intellectual Property"), Executive
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 Executive 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.
Executive 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 Executive's employment
with the Company).
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(ii) Executive Invention. Executive understands that
paragraph (b)(i) of this Agreement regarding the Company's ownership of
Intellectual Property does not apply to any invention for which no
equipment, supplies, facilities or trade secret information of the
Company were used and which was developed entirely on Executive's own
time, unless (i) the invention relates to the business of the Company
or to the Company's actual or demonstrably anticipated research or
development or (ii) the invention results from any work performed by
Executive for the Company.
(c) Delivery of Materials upon Termination of Employment. As
requested by the Company from time to time and upon the termination of
Executive's employment with the Company for any reason, Executive shall promptly
deliver to the Company all copies and embodiments, in whatever form, of all
Confidential Information and Intellectual Property in Executive'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.
(d) Noncompete. Executive acknowledges and agrees with the
Company and the LLC that in the course of his employment with the Company he
shall become familiar with the Company's trade secrets and with other
Confidential Information concerning the Company and the LLC, that Executive's
services to the Company and the LLC are unique in nature and of an extraordinary
value to the Company and the LLC, and that the Company and the LLC would be
irreparably damaged if Executive were to provide similar services to any person
or entity competing with the LLC or the Company or engaged in a similar
business. In connection with the issuance to Executive of the Executive
securities hereunder, in consideration of and as an inducement to the LLC's and
the Company's entering into this Agreement and the Company's agreeing to issue
the Tier I and Tier II Options and to assume the obligations of the LLC upon
dissolution and liquidation thereof, and in further consideration of the
Noncompete Compensation (as defined below), Executive accordingly covenants and
agrees with the Company and the LLC that during the Noncompete Period (as
defined below), Executive shall not, directly or indirectly, either for himself
or for or through any other individual, corporation, partnership, joint venture
or other entity, partici xxxx in any business or enterprise conducting business
in any Covered MSA which engages or proposes to engage in the provision of
telecommunications services. For purposes of this Agreement, (i) the term
"participate in" shall include, without limitation, having any direct or
indirect interest in any corporation, partnership, joint venture or other
entity, whether as a sole pro prietor, owner, stockholder, partner, joint
venturer, creditor or otherwise, or rendering any direct or indirect service or
assistance to any individual, corporation, partnership, joint venture and other
business entity (whether as a director, officer, manager, supervisor, employee,
agent, consultant or otherwise), other than ownership of up to 2% of the
outstanding stock of any class which is publicly traded, (ii) the term "MSA"
means metropolitan statistical area and (iii) the term "Covered MSA" means (1)
any MSA in which the Company is engaged in business or has at any time had an
Approved Business Plan (as defined in the Stock Purchase Agreement) to engage in
business, (2) the MSAs which include Dallas, New York, Atlanta, Chicago and Los
Angeles (the "Top Five MSAs"), (3) from and after the time
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at which there are Approved Business Plans for each of the Top Five MSAs, each
of the MSAs which include Boston, Cleveland, Denver, Detroit, Houston, Miami,
Northern New Jersey, Phoenix, Philadelphia, St. Louis, San Diego, San Francisco,
San Xxxx, Seattle and Washington, D.C. and (4) any other MSA for which a
business plan has been submitted to the Company pursuant to the Stock Purchase
Agreement on or prior to the termination of Executive's Employment or for which
Company personnel have taken substantial steps towards completing, provided,
that any such MSA under this clause (4) shall cease to be a Covered MSA if such
business plan does not become an Approved Business Plan within the earlier of
(x) 180 days after such submission and (y) 180 days after the termination of
Executive's Employment, and, in each case, the Company's management and the LLC
have attempted in good faith during such period to reach agreements that would
enable such plan to become an Approved Business Plan. Notwithstanding the
foregoing, the term Covered MSA shall not include any Top Five MSA which is not
subject to an Approved Business Plan if business plans for at least three of
such Top Five MSAs have not become Approved Business Plans prior to the later of
(x) the 180th day after the date on which the Company has employed a president
and chief operating officer approved by the Board's Executive Committee or (y)
the 180th day after business plans for each of the Top Five MSAs have been
submitted to the Company and the LLC for approval pursuant to the Stock Purchase
Agreement (which business plans are eligible to qualify as Approved Business
Plans because, among other things, they specify each of the items required under
Section 3A of the Stock Purchase Agreement to be specified in an Approved
Business Plan and do not require equity capital beyond the Maximum Commitment
(as defined in the Stock Purchase Agreement), and Executive has worked in good
faith to seek to have such plans become Approved Business Plans by such time.
Executive agrees that this covenant is reasonable with respect to its duration,
geographical area and scope.
(e) Nonsolicitation. During the Noncompete Period, Executive
shall not (i) induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or any Subsidiary, or in any way
interfere with the relationship between the Company or any Subsidiary and any
employee thereof, (ii) hire directly or through another entity any person who
was an employee of the Company or any Subsidiary at any time during the six
months prior to the date such person is to be so hired, or (iii) induce or
attempt to induce any customer, supplier, licensee or other business relation of
the LLC, the Company or any Subsidiary to cease doing business with the LLC, the
Company or any Subsidiary, or in any way interfere with the relationship between
any such customer, supplier, licensee or business relation and the LLC, the
Company and its Subsidiaries (including, without limitation, making any negative
statements or communications concerning the LLC, the Company or any Subsidiary).
(f) Noncompete Period. The "Noncompete Period" shall commence
on the date hereof and shall continue until (i) if Executive is terminated prior
to the third anniversary of the date hereof, the later of (A) the fourth
anniversary of the date hereof and (B) the second anniversary of the date of
termination, (ii) if Executive is terminated on or after the third anniversary,
but prior to the fourth anniversary, of the date hereof, the fifth anniversary
of the date hereof, and (iii) if Executive is terminated on or after the fourth
anniversary hereof, the first anniversary of the date of termination; provided
that the Noncompete Period shall terminate if at any time after the date of
termination the Company ceases to pay Executive his Noncompete Compensation
(unless Executive
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violates any covenant set forth in this paragraph 6, in which case the
Noncompete Period shall continue even absent payment of the Noncompete
Compensation). "Noncompete Compensation" shall consist of 100% of the base
salary that Executive received as compensation from the Company and its
Subsidiaries immediately prior to termination (Executive's "Previous Salary")
together with the continuation of the medical benefits that the Company provided
to Executive immediately prior to termination (Executive's "Previous Benefits");
provided that if at any time during the Noncompete Period Executive obtains
other employment, Executive's Noncompete Compensation shall during the period of
such employment (i) be reduced (but not below zero) by Executive's compensation
for such employment and (ii) shall not include the continued provision of
medical benefits if such employment provides medical benefits comparable to the
Previous Benefits.
(g) Judicial Modification. If the final judgment of a court of
competent jurisdiction, or any final non-appealable decision of an arbitrator in
connection with a mandatory arbitration, declares that any term or provision of
this paragraph is invalid or unenforceable, the parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or geographic area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment or decision may be
appealed.
(h) Dispute Resolution.
(i) Arbitration. All claims, disputes, controversies
and other matters in question arising out of or relating to this
paragraph 6, or to the alleged breach hereof, shall be settled by
preliminary negotiation between the LLC or other Person bringing such
allegation and the Executive (the "parties") or, if such preliminary
negotiation is unsuccessful for any reason (but in any event not later
than 10 days after commencement of such negotiation), by binding
arbitration in accordance with the procedures set forth in this
paragraph (h). Without limiting the mandatory arbitration provision set
forth in this paragraph (h), each of the parties hereto (A) waives the
right to bring an action in any court of competent jurisdiction with
respect to any such claims, controversies and disputes (other than any
such action to enforce the award or other remedy resulting from any
arbitration pursuant to this paragraph (h) or to prevent any arbitrator
from exceeding the authority granted to the arbitrators hereunder) and
(B) waives the right to trial by jury in any suit, action or other
proceeding brought on, with respect to or in connection with this
Agreement.
(ii) Binding Arbitration. Upon filing of a notice of
demand for binding arbitration by any party hereto, arbitration shall
be commenced and conducted as follows:
(A) Arbitrators. All claims, disputes,
controversies and other matters (collectively "matters") in
question shall be referred to and decided and settled by a
panel of three arbitrators with experience in analyzing,
understanding,
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and making determinations concerning matters in the
telecommunications industry, one selected by each of the
parties and the third by the two arbitrators so selected.
(B) Cost of Arbitration. The cost of each
arbitration proceeding, including without limitation the
arbitrators' compensation and expenses, hearing room charges,
court reporter transcript charges, etc., shall be allocated
among the parties based upon the percentage which the portion
of the contested amount not awarded to each party bears to the
amount actually contested by such party. The arbitrators shall
also award the party that prevails substantially in its
pre-hearing position its reasonable attorneys' fees and costs
incurred in connection with the arbitration. The arbitrators
are specifically instructed to award attorneys' fees for
instances of abuse of the discovery process.
(C) Situs of Proceedings. The situs of the
arbitration shall be in New York, New York, or such other
place as is mutually agreeable to the parties.
(iii) Pre-hearing Discovery. The parties shall have
the right to conduct and enforce pre-hearing discovery in accordance
with the then current Federal Rules of Civil Procedure, subject to the
following limitations: (A) each party may serve no more than one set of
interrogatories which set shall ask no more than twenty questions; (B)
each party may depose the other party's expert witnesses who will be
called to testify at the hearing, plus up to six fact witnesses without
regard to whether they will be called to testify (each party will be
entitled to a total of not more than 24 hours of depositions of the
other party's witnesses, and not more than 6 hours with respect to any
single witness); and (C) document discovery and other discovery shall
be under the control of and enforceable by the arbitrators, and all
disputes relating thereto shall be decided by the arbitrators.
Notwithstanding any contrary foregoing provisions, the arbitrators
shall have the power and authority to, and to the fullest extent
practicable shall, abbreviate arbitration discovery in a manner which
is fair to all parties in order to expedite the conclusion of each
alternative dispute resolution proceeding.
(iv) Pre-hearing Conference. Within thirty (30) days
after filing of notice of demand for binding arbitration, the
arbitrators shall hold a pre-hearing conference to establish schedules
for completion of discovery, for exchange of exhibit and witness lists,
for arbitration briefs, for the hearing, and to decide procedural
matters and all other questions that may be presented.
(v) Hearing Procedures. The hearing shall be
conducted to preserve its privacy and to allow reasonable procedural
due process. Rules of evidence need not be strictly followed, and the
hearing shall be streamlined as follows: (A) documents shall be
self-authenticating, subject to valid objection by the opposing party;
(B) expert reports, witness biographies, depositions and affidavits may
be utilized, subject to the opponent's right of a live
cross-examination of the witness in person; (C) charts, graphs and
summaries shall be utilized to present voluminous data, provided (1)
that the underlying data was made available to the opposing party
thirty (30) days prior to the hearing, and (2) that the preparer of
each chart, graph or summary is available for explanation and live
cross-examination in
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person; (D) the hearing should be held on consecutive business days
without interruption to the maximum extent practicable; and (E) the
arbitrators shall establish all other procedural rules for the conduct
of the arbitration in accordance with the rules of arbitration of the
American Arbitration Association.
(vi) Governing Law. This arbitration provision shall
be governed by, and all rights and obligations specifically enforceable
under and pursuant to, the Federal Arbitration Act (9 U.S.C. ss. 1, et
seq.).
(vii) Consolidation. No arbitration shall include, by
consolidation, joinder or in any other manner, any additional person
not a party to this Agreement (other than affiliates of any such party,
which affiliates may be included in the arbitration), except by written
consent of the parties hereto containing a specific reference to this
Agreement.
(viii) Award; Time Limit. The arbitrators are
empowered to render an award of general compensatory damages and
equitable relief (including, without limitation, injunctive relief),
but is not empowered to award punitive damages. The award rendered by
the arbitrators (A) shall be final; (B) shall not constitute a basis
for collateral estoppel as to any issue; and (C) shall not be subject
to vacation or modification. The arbitrators shall render any award or
otherwise conclude the arbitration no later than 120 days after the
date notice is given pursuant to this paragraph (h).
(ix) Confidentiality. The parties hereto will
maintain the substance of any proceedings hereunder in confidence and
the arbitrators, prior to any proceedings hereunder, will sign an
agreement whereby the arbitrator agrees to keep the substance of any
proceedings hereunder in confidence.
7. DEFINITIONS.
"Approved Business Plan" has the meaning ascribed to such term
in the Stock Purchase Agreement.
"Basic Contributions" has the meaning ascribed to such term in
the LLC Agreement.
"Board" means the board of managers of the LLC (or, after the
dissolution and liquidation of the LLC, the board of directors of the Company).
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"Cause" means (A) Executive's theft or embezzlement, or
attempted theft or embezzlement, of money or property of the Company or the LLC,
Executive's perpetration or attempted perpetration of fraud, or Executive's
participation in a fraud or attempted fraud, on the Company or the LLC, or
Executive's unauthorized appropriation of, or attempt to misappropriate, any
tangible or intangible assets or property of the Company or the LLC, (B) any act
or acts of disloyalty, misconduct or moral turpitude by Executive injurious to
the interest, property, operations, business or reputation of the Company or the
LLC, or Executive's conviction of a crime the commission of which results in
injury to the Company or the LLC or (C) Executive's repeated refusal or failure
(other than by reason of Disability) to carry out reasonable instructions by his
superiors or the Board or the Company's board of directors.
"Class A Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class B Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class C Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class D Units" has the meaning ascribed to such term in the
LLC Agreement.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Disability" means (i) any permanent physical or mental
incapacity or disability rendering the Executive unable or unfit to perform
effectively the duties and obligations of his employment or to participate
effectively and actively in the management of the Company, or (ii) any illness,
accident, injury, physical or mental incapacity or other disability, where such
condition has rendered the Executive unable or unfit to perform effectively the
duties and obligations of his employment or to participate effectively and
actively in the management of the Company for a period of at least 90 days (in
either case, as determined in the good faith judgment of the Company's board of
directors).
"Executive Securities" means (i) the Class B Units issued to
Executive hereunder, (ii) upon dissolution and liquidation of the LLC, any
securities of the Company distributed in respect of the securities referred to
in clause (i) above pursuant to such dissolution and liquidation, (iii) any Tier
I Options or Tier II Options issued to Executive hereunder, (iv) any other
securities of the LLC or the Company hereafter acquired by Executive, and (v)
any securities issued directly or indirectly with respect to the foregoing
securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization, or upon conversion or exercise
of any of the foregoing securities. As to any particular securities constituting
Executive Securities, such securities shall cease to be Executive Securities
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased by any holder of Class A Units, or by the LLC (including in
exchange for Class C Units or Class D Units), the Company or any Subsidiary
thereof
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"Investor Equity" means (i) the Class A Units issued pursuant
to the Investor Purchase Agreement, (ii) upon and after the dissolution or
liquidation of the LLC, the securities distributed in respect of the securities
referred to in clause (i) above pursuant to such dissolution or liquidation, and
(iii) any securities issued directly or indirectly with respect to the foregoing
securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization, or upon conversion or exercise
of the foregoing (but not including any Class D Units issued in exchange for
Class A Units). As to any particular securities constituting Investor Equity,
such securities shall cease to be Investor Equity when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased by
the LLC (including in exchange for Class D Units) or the Company or any
Subsidiary thereof.
"Joinder and Rights Agreement" means the joinder and rights
agreement of even date herewith, entered into by and among Executive, the LLC,
and the Company, as amended from time to time in accordance with its terms, by
which Executive became a party to the LLC Agreement, the Securityholders
Agreement, and the Registration Agreement.
"LLC Agreement" means the limited liability company agreement
dated as of August 13, 1997, entered into by and among the members of the LLC,
as amended from time to time in accordance with its terms.
"MSA" means a metropolitan statistical area.
"Original Cost" means, at any given time, (i) with respect to
any Class B Units, the total Basic Contributions made with respect to such Class
B Units pursuant to the LLC Agreement prior to such time, (ii) with respect to
any Preferred Stock, the aggregate Liquidation Value (as determined under the
Company's certificate of incorporation) of such Preferred Stock at such time,
(iii) with respect to any Common Stock issued upon conversion of Preferred
Stock, the Original Cost of such Preferred Stock, and (iv) with respect to any
other securities, the original price paid upon issuance of such securities.
"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.
"Preferred Stock" means the Company's 12% Cumulative
Convertible Preferred Stock, par value $.01 per share.
"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
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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.
"Registration Agreement" means the registration rights
agreement dated as of August 13, 1997, entered into by and among the Company and
the holders of interests in the LLC, as amended from time to time in accordance
with its terms.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Securityholders Agreement" means the securityholders
agreement dated as of August 13, 1997, entered into by and among the Company,
the LLC, and the holders of interests in the LLC, as amended from time to time
in accordance with its terms.
"Stock Purchase Agreement" means the stock purchase agreement
dated as of August 13, 1997, entered into by and between the Company and the
LLC, as amended from time to time in accordance with the terms thereof.
"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.
"Vesting Termination Breach" means (i) any breach of paragraph
6(d) or clause (ii) of paragraph 6(e) and (ii) any breach of any other provision
of paragraph 6 which is material or is intentionally and knowingly committed by
Executive.
8. MISCELLANEOUS PROVISIONS.
(a) Transfers in Violation of Agreement. Any Transfer or
attempted Transfer of any Executive Securities in violation of any provision of
this Agreement shall be void, and none of the LLC, the Company, or any
Subsidiary thereof shall record such purported Transfer on its books
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or treat any purported transferee of such Executive Securities as the owner of
such securities for any purpose.
(b) 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 invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) 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 or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(d) 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.
(e) Successors and Assigns.
(i) 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 whether so
expressed or not.
(ii) Each of the Company, the LLC, the Executive, and
each holder of Executive Securities hereby acknowledges that upon and
after the dissolution and liquidation of the LLC, (A) all contractual
obligations and duties of the LLC hereunder shall thereafter bind and
be enforceable against the Company, (B) all rights and powers granted
to the LLC hereunder (including, without limitation, the repurchase
rights set forth in paragraph 3) shall inure to the benefit of and be
enforceable by the Company, (C) all references to the LLC shall
thereafter be deemed to be references to the Company, and (D) this
Agreement shall thereafter operate and be construed as if the word
"Company" were substituted for the word "LLC" in each such instance.
(f) CHOICE OF LAW. ALL 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 DELAWARE.
(g) Remedies. Each of the parties to this Agreement (including
any holder of Investor Equity or employee of the Company to which the LLC
assigns any of its repurchase rights
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under paragraph 3 hereof) 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.
(h) Amendment, Modification, or Waiver. The provisions of this
Agreement may be amended, modified, or waived only with the prior written
consent of the LLC and the Executive.
(i) Third-Party Beneficiaries. The parties hereto acknowledge
and agree that certain provisions of this Agreement are intended for the benefit
of certain holders of Investor Equity or employees of the Company to which the
LLC assigns any of its repurchase rights under paragraph 3 hereof, that such
Persons are third-party beneficiaries of this Agreement and that provisions of
this Agreement shall be enforceable by such Persons as provided herein.
(j) Business Days. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the State of Illinois, the time period shall be automatically
extended to the business day immediately following such Saturday, Sunday or
holiday.
(k) Descriptive Headings; Interpretation; No Strict
Construction. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Reference to any agreement, document, or instrument means such agreement,
document, or instrument as amended or otherwise modified from time to time in
accordance with the terms thereof, and if applicable hereof. The use of the
words "include" or "including" in this Agreement shall be by way of example
rather than by limitation. The use of the words "or," "either" or "any" shall
not be exclusive. 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.
(l) 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 (a) delivered
personally to the recipient, (b) telecopied to the recipient (with hard copy
sent to the recipient by reputable overnight courier service (charges prepaid)
that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a
business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by
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reputable overnight courier service (charges prepaid). Such notices, demands and
other communications shall be sent to the following Persons at the following
addresses:
To the LLC:
c/o Madison Dearborn Capital Partners
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Xx.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To the Company:
0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To Executive: at the address set forth in the LLC's or the
Company's records.
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.
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(m) Certain Other Matters. In the event that Executive is
required to include for U.S. federal income tax purposes any amounts as ordinary
compensation income as a direct result of his purchase of the Executive
Securities hereunder, the Company shall take such actions (including, without
limitation, loaning and/or paying to Executive such amounts) as shall be
determined in good faith by the Board in order to place Executive in the same
after-tax economic position with respect to Executive's purchase and ultimate
disposition of the Executive Securities as if such amounts had not been included
in Executive's ordinary income and had not been added to Executive's tax basis
in the Executive Securities (taking into account the effect of any deductions
with respect to such ordinary compensation income that are allocated by the LLC
to Executive).
(n) Delivery by Facsimile. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Executive Purchase Agreement on the date first written above.
ALLEGIANCE TELECOM, L.L.C.
By: /s/ XXXXX X. XXXXXXX
------------------------------------------
Xxxxx X. Xxxxxxx, its authorized member
ALLEGIANCE TELECOM, INC.
By: /s/ XXXXX X. XXXXXXX
------------------------------------------
Xxxxx X. Xxxxxxx, its Chairman and CEO
EXECUTIVE
/s/ C. XXXXXX XXXX
---------------------------------------------
Name: C. Xxxxxx Xxxx
