Exhibit 10.15
Form of Stock Option Agreement
FOCAL COMMUNICATIONS CORPORATION
000 XXXXX XXXXXXX XXXXXX
XXXXXXX, XXXXXXXX 00000
_______________, 1998
[PARTICIPANT]
_________________________
_________________________
Re: Focal Communications Corporation (the "Company")
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Grant of Nonqualified Stock Option
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Dear [PARTICIPANT]:
The Company is pleased to advise you that its Board of Directors has
granted to you stock options (the "Options"), as provided below, under the Focal
Communications Corporation 1997 Stock Option Plan (as amended or modified from
time to time as provided therein, the "Plan"), a copy of which is attached
hereto and incorporated herein by reference.
1. Definitions. For the purposes of this Agreement, the following
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terms shall have the meanings set forth below:
"Board" shall mean the Board of Directors of the Company.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, and
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any successor statute.
"Common Stock" shall mean the Company's Class A Common Stock, par
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value $.01 per share, or in the event that the outstanding Common Stock is
hereafter changed into or exchanged for different stock or securities of the
Company, such other stock or securities.
"Company" shall mean Focal Communications Corporation, a Delaware
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corporation, and (except to the extent the context requires otherwise) any
subsidiary corporation of Focal Communications Corporation as such term is
defined in Section 424(f) of the Code.
"Disability" shall mean your inability, due to illness, accident,
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injury, physical or mental incapacity or other disability, to carry out
effectively your duties and obligations to the Company or to participate
effectively and actively in the management of the Company for a period
anticipated to last at least 6 months, as determined by the Board in its good
faith discretion.
"Fair Market Value" of the Common Stock shall be the average, over a
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period of 21 days consisting of the day as of which Fair Market Value is being
determined and the 20 consecutive business days prior to such day, of the
average of the closing prices of the sales of 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. If at any time the
Common Stock is not listed on any securities exchange or quoted in the NASDAQ
System or the over-the-counter market, the Fair Market Value shall be the fair
value of the Common Stock determined in good faith by the Board.
"Grant Date" shall mean the date of this Option grant letter first
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written above.
"Option Shares" shall mean (i) all shares of Common Stock issued or
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issuable upon the exercise of the Options and (ii) all shares of Common Stock
issued with respect to the Common Stock referred to in clause (i) above by way
of stock dividend or stock split or in connection with any conversion, merger,
consolidation or recapitalization or other reorganization affecting the Common
Stock. Option Shares shall continue to be Option Shares in the hands of any
holder other than you (except for the Company and any purchaser of Option Shares
pursuant to the repurchase provisions in paragraph 12 hereof or pursuant to the
provisions in paragraphs 14(b)-(c) and 16 hereof), and each such transferee
thereof shall succeed to the rights and obligations of a holder of Option Shares
hereunder.
"Public Offering" means any underwritten sale of the Company's Common
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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
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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 as part of an incentive or compensation plan.
"Registration Agreement" shall mean that certain Registration
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Agreement, dated as of November 27, 1997, by and among the Company and certain
investors as amended from time to time.
"Sale of the Company" shall mean a merger or consolidation effecting a
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change in control of the Company, a sale of all or substantially all of the
Company's assets or a sale of a majority of the Company's outstanding voting
securities.
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"Securities Act" shall mean the Securities Act of 1933, as amended,
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and any successor statute.
2. The Options.
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(a) Terms. The Company is granting to you ___________ Options. Each
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of your Options is for the purchase of 1/500th of a share of Common Stock at a
price per share of $________ (the "Exercise Price"), payable upon exercise as
set forth in paragraph 2(b) below. Your Options shall expire at the close of
business on the tenth anniversary of the Grant Date (the "Expiration Date"),
subject to earlier expiration as provided in paragraph 4 below. Your Options are
not intended to be "incentive stock options" within the meaning of Section 422
of the Code.
(b) Payment of Option Price. Subject to paragraph 3 below, your
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Options may be exercised in whole or in part upon payment of an amount (the
"Option Price") equal to the product of (i) the Exercise Price multiplied by
(ii) the number of Option Shares (including fractional shares) to be acquired.
Payment shall be made in cash (including check, bank draft or money order) or,
in the discretion of the Board, by delivery of a promissory note (if in
accordance with policies approved by the Board).
3. Exercisability/Vesting.
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(a) Vesting Schedule. Your Options may be exercised only to the
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extent they have become vested. Your options shall vest and become exercisable
with respect to the following percentages of your Option Shares (rounded to the
nearest whole share) on the following vesting dates, in each case if and only if
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you are, and have been continuously employed by the Company or served as a
director from the date of this Agreement through such vesting date:
Cumulative Percentage of Options
Vesting Date Vested on such Vesting Date
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12-month anniversary of the Grant Date 25%
18-month anniversary of the Grant Date 37.5%
24-month anniversary of the Grant Date 50%
30-month anniversary of the Grant Date 62.5%
36-month anniversary of the Grant Date 75%
42-month anniversary of the Grant Date 87.5%
48-month anniversary of the Grant Date 100%
(b) Treatment of Options upon a Sale of the Company. In the event of
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a Sale of the Company, the Board or the board of directors of the surviving or
acquiring entity shall, in connection with the Sale of the Company, either (i)
provide for the continuation of your Options under this Agreement after the Sale
of the Company by substituting an equivalent amount (as determined by the Board
in its good faith discretion) of shares of stock in the surviving or
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acquiring entity, or of the consideration payable for the Common Stock in
connection with the Sale of the Company, or of such other securities as the
Board deems appropriate, in place of the Common Stock issuable upon the exercise
of your Options as specified in Section 2(a) above (which substitution shall be
binding on you and shall not constitute an amendment or waiver of any provision
hereof under Section 18 below), or (ii) upon written notice to you, elect for
your Options to expire in accordance with Section 4(c) below.
(c) Acceleration of Vesting upon a Sale of the Company. In the event
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of a Sale of the Company, if you have been continuously employed by the Company
or served as a director from the date of this Agreement until the date of such
Sale of the Company, there shall vest immediately prior to such Sale of the
Company (or immediately prior to any repurchase of your Option Shares in
connection with such Sale of the Company) the number of your Options that were
expected to vest within the 12-month period following such Sale of the Company.
(d) Acceleration of Vesting upon Discharge after a Sale of the
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Company. In the event of a Sale of the Company, if your employment is
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terminated by the Company (or by the surviving or acquiring company, as the case
may be) in connection with such Sale of the Company or at any time during the 2-
year period commencing on the date of consummation thereof, all of your unvested
Options shall become vested on the date of such termination. For purposes of
this paragraph (d) only, "terminated by the Company (or by the surviving or
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acquiring company, as the case may be" shall mean actual termination by the
Company or such other company, as well as your voluntary termination as a result
of either of the following: (i) a material reduction in your total compensation
without your consent, it being understood that a change in the form or measure
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of compensation (including, but not limited to, a change from salary-based
compensation to commission-based compensation, or a rearrangement of your
compensation package to include a different combination of salary, bonus,
commission, options, incentive equity, etc.) shall not in and of itself
constitute such a material reduction, or (ii) a relocation of your place of
employment to a site at least 50 miles away without your consent.
4. Expiration of Option.
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(a) Normal Expiration. In no event shall any part of your Options be
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exercisable after the Expiration Date set forth in paragraph 2(a) above.
(b) Early Expiration upon Termination of Employment. In the event your
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employment with the Company is terminated at any time prior to the Expiration
Date for any reason, any portion of your Options that were not vested and
exercisable on the date your employment with the Company terminated shall expire
and be forfeited on such date, and any portion of your Options that were vested
and exercisable on the date your employment with the Company terminated shall
expire and be forfeited 60 days from the date of termination, but in no event
after the Expiration Date.
(c) Early Expiration upon a Sale of the Company. Upon a Sale of the
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Company, the Board or the board of directors of the surviving or acquiring
entity may elect, upon
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written notice to you, that any portion of your Options that were not vested and
exercisable prior to or in connection with such Sale of the Company shall expire
and be forfeited as of the date of such Sale of the Company, and that any of
your Options that were vested and exercisable prior to or in connection with
such Sale of the Company shall expire and be forfeited if not repurchased or
exercised prior to or contemporaneously with such Sale of the Company.
5. Procedure for Exercise. You may exercise all or any portion of
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your Options, to the extent they have vested and are outstanding, at any time
and from time to time prior to their expiration, by delivering written notice to
the Company (to the attention of the Company's Secretary) and your written
acknowledgment that you have read and have been afforded an opportunity to ask
questions of management of the Company regarding all financial and other
information provided to you regarding the Company, together with payment of the
Option Price in accordance with the provisions of paragraph 2(b) above. As a
condition to any exercise of your Options, you shall permit the Company to
deliver to you all financial and other information regarding the Company it
believes necessary to enable you to make an informed investment decision, and
you shall make all customary investment representations which the Company
requires.
6. Securities Laws Restrictions and Other Restrictions on Transfer
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of Option Shares. You represent that when you exercise any of your Options you
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shall be purchasing Option Shares for your own account and not on behalf of
others. You understand and acknowledge that federal and state securities laws
govern and restrict your right to offer, sell or otherwise dispose of any Option
Shares unless your offer, sale or other disposition thereof is registered under
the Securities Act and state securities laws, or in the opinion of the Company's
counsel, such offer, sale or other disposition is exempt from registration or
qualification thereunder. You agree that you shall not offer, sell or otherwise
dispose of any Option Shares in any manner which would: (i) require the Company
to file any registration statement with the Securities and Exchange Commission
(or any similar filing under state law) or to amend or supplement any such
filing or (ii) violate or cause the Company to violate the Securities Act, the
rules and regulations promulgated thereunder or any other state or federal law.
You further understand that the certificates for any Option Shares you purchase
shall bear such legends as the Company deems necessary or desirable in
connection with the Securities Act or other rules, regulations or laws, and you
agree that at the time of such purchase you shall execute such documents
necessary for the Company to perfect exemptions from registration under federal
and state securities laws as the Company may reasonably request.
7. Non-Transferability of Options. Your Options are personal to you
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and are not transferable by you other than by will or the laws of descent and
distribution. During your lifetime only you (or your guardian or legal
representative) may exercise your Options. In the event of your death, your
Options may be exercised only (i) by the executor or administrator of your
estate or the person or persons to whom your rights under the Options shall pass
by will or the laws of descent and distribution and (ii) to the extent that you
were entitled hereunder at the date of your death.
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8. Conformity with Plan. Your Options are intended to conform in all
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respects with, and are subject to all applicable provisions of, the Plan (which
is incorporated herein by reference). Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, you acknowledge
your receipt of this Agreement and the Plan and agree to be bound by all of the
terms of this Agreement and the Plan.
9. Rights of Participants. Nothing in this Agreement shall
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interfere with or limit in any way the right of the Company to terminate your
employment at any time and for any reason, nor confer upon you any right to
continue in the employ of the Company for any period of time or to continue your
present (or any other) rate of compensation, and in the event of your
termination of employment at any time and for any reason, any portion of your
Options that were not previously vested and exercisable shall be forfeited.
Nothing in this Agreement shall confer upon you any right to be selected again
as a Plan participant, and nothing in the Plan or this Agreement shall provide
for any adjustment to the number of Option Shares subject to your Options upon
the occurrence of subsequent events except as provided in paragraph 11 below.
10. Withholding of Taxes. The Company shall be entitled, if
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necessary or desirable, to withhold from you from any amounts due and payable by
the Company to you (or secure payment from you in lieu of withholding) the
amount of any withholding or other tax due from the Company with respect to any
Option Shares issuable under this Agreement, and the Company may defer such
issuance unless indemnified by you to its satisfaction.
11. Adjustments. In the event of a reorganization, recapitalization,
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stock dividend or stock split, or combination or other change in the shares of
Common Stock, the Board may, in order to prevent the dilution or enlargement of
rights under your Option, make such adjustments in the number and type of shares
authorized by the Plan, the number and type of shares covered by your Options
and the Exercise Price specified herein as may be determined to be appropriate
and equitable. The issuance by the Company of shares of stock of any class, or
options or securities exercisable or convertible into shares of stock of any
class, for cash or property, or for labor or services either upon direct sale,
or upon the exercise of rights or warrants to subscribe therefor, or upon
exercise or conversion of other securities, shall not affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock then subject to any Options.
12. Right to Purchase Option Shares upon Termination or a Sale of the
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Company.
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(a) Repurchase of Option Shares. If your employment with the Company
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shall terminate at any time for any reason (the date on which such termination
occurs being referred to as the "Termination Date"), or in the event of a Sale
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of the Company (the date of the consummation of such Sale of the Company being
referred to as the "Sale Date") then the Company (or its assignee pursuant to
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paragraph 12(c) below) shall have the option to repurchase all or any portion of
your Option Shares issued or issuable upon exercise of your Options,
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whether held by you or by one or more of your transferees, at the price
determined in accordance with the provisions of paragraph 13 hereof (the
"Repurchase Option").
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(b) Repurchase by Company. The Company may elect to purchase all or
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any portion of the Option Shares by delivery of written notice (the "Repurchase
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Notice") to you or any other holders of the Option Shares within the 20 days
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ending on, or within the 120 days after, the Termination Date or the Sale Date
(as applicable). The Repurchase Notice shall set forth the number of Option
Shares to be acquired from you and such other holder(s), the aggregate
consideration to be paid for such shares and the time and place for the closing
of the transaction. The number of Option Shares to be repurchased by the
Company shall first be satisfied to the extent possible from the Option Shares
held by you at the time of delivery of the Repurchase Notice. If the number of
Option Shares then held by you is less than the total number of Option Shares
the Company has elected to purchase, then the Company shall purchase the
remaining shares elected to be purchased from the other holders thereof, pro
rata according to the number of shares held by each such holder at the time of
delivery of such Repurchase Notice (determined as close as practical to the
nearest whole shares).
(c) Assignment of Company's Repurchase Option. The Company, by action
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of the Board, will have the right to assign all or any portion of its repurchase
rights hereunder to any holder of Class A Common (any "Other Stockholder") or
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any executive employee of the Company or any of its subsidiaries.
Notwithstanding the foregoing sentence, the Company may not assign its right
under paragraph 13(b) to pay a portion of the repurchase price for your Option
Shares repurchased hereunder in the form of a promissory note or to offset such
repurchase price against obligations or indebtedness owed by you to the Company.
(d) Closing of Repurchase of Option Shares. The purchase of Option
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Shares pursuant to this paragraph 12 shall be closed at the Company's executive
offices at least 20 days after the giving of the Repurchase Notice, but in no
event more than 20 days after the expiration of the 140-day period referred to
in paragraph 12(b). At the closing, the purchaser or purchasers shall pay the
purchase price in the manner specified in paragraph 13(b) and you and any other
holders of Option Shares being purchased shall deliver the certificate or
certificates representing such shares to the purchaser or purchasers or their
nominees, accompanied by duly executed stock powers. (If any Option Shares
issuable upon exercise of your Options are repurchased hereunder, such Options
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shall be deemed to be exercised simultaneously with such repurchase.) Any
purchaser of Option Shares under this paragraph 12 shall be entitled to receive
customary representations and warranties from you and any other selling holders
of Option Shares regarding the sale of such shares (including representations
and warranties regarding good title to such shares, free and clear of any liens
or encumbrances) and to require all sellers' signatures to be guaranteed by a
national bank or reputable securities broker.
13. Purchase Price for Option Shares.
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(a) Purchase Price. The purchase price per share to be paid for the
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Option Shares purchased by the Company and the Other Stockholders pursuant to
paragraph 12 shall be
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equal to (i) in the case of Option Shares issued upon exercise of your Options
prior to such repurchase, the Fair Market Value of such Option Shares as of the
Termination Date, or (ii) in the case of Option Shares issuable upon exercise of
your Options (which Options shall be deemed exercised simultaneously with such
repurchase), the Fair Market Value of such Option Shares minus the Option Price
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for such Option Shares.
(b) Manner of Payment. If the Company elects to purchase all or any
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part of the Option Shares, including Option Shares held by one or more
transferees, the Company shall pay for such shares by delivery of a cashier's or
certified check or wire transfer of immediately available funds in an amount
equal to the purchase price of the Option Shares to be repurchased; provided
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that in the event the Board determines in its good faith discretion that the
Company is not in a position to pay in immediately available funds any or all of
such repurchase price, the Company may pay for a portion of the repurchase price
for such Option Shares (which portion shall in no event exceed the Fair Market
Value of such Option Shares minus the Option Price (at the time such Option
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Shares were issued upon exercise of Options) for such Option Shares) in the form
of a subordinated promissory note of the Company. Such subordinated promissory
note shall bear interest at the rate paid on the Company's senior debt
obligations (or if the Company has no such senior debt, at the prime rate
announced or published by Citibank, N.A. from time to time), shall have all
principal and accrued interest due and payable on the fifth anniversary of the
date of issuance and shall be subordinated on terms and conditions satisfactory
to the holders of the Company's indebtedness for borrowed money. In addition,
the Company may pay the purchase price for such shares by offsetting amounts
outstanding under any indebtedness or obligations owed by you to the Company.
If the Company assigns any part of its Repurchase Option, each such assignee
shall pay for that portion of such Option Shares with a cashier's or certified
check or wire transfer of immediately available funds in an amount equal to the
repurchase price for such Option Shares to be repurchased by such assignee.
14. Restrictions on Transfer.
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(a) Transfer of Option Shares. You shall not sell, pledge or
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otherwise transfer any interest in any Option Shares (a "Transfer") except
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pursuant to the provisions of paragraphs 14(d), 12 or 16 hereof ("Exempt
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Transfers"), or (but only after the consummation of a Public Offering) except
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pursuant to the provisions of this paragraph 14. At least 60 days prior to
making any Transfer other than an Exempt Transfer, you shall deliver a written
notice (the "Sale Notice") to the Company and the Other Stockholders, specifying
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in reasonable detail the identity of the prospective transferee(s), the number
of shares to be transferred and the terms and conditions of the Transfer.
(b) First Refusal.
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(i) The Company shall notify you and the Other Stockholders in
writing, within 20 days after its receipt of the Sale Notice, whether it
desires to purchase any of the shares offered for sale in the Sale Notice
(the "Offered Shares") and, if so, how many Offered Shares it desires to
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purchase (the "Company Notice"). Subject to
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subparagraph 14(b)(vii) below, the Company shall have the right to purchase
all the Offered Shares which it elects to purchase in the Company Notice,
at the price and on the other terms (subject to subparagraph 14(b)(iii)
below) set forth in the Sale Notice. If the Company elects to purchase all
of the Offered Shares, the Company Notice shall also set forth the time and
place of the closing of such purchase (the "Closing"), which shall occur
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not more than 90 days after the Company's receipt of the Sale Notice.
(ii) Each Other Stockholder shall have the right to purchase its
pro rata portion (based upon the number of shares of Class A Common held by
each Other Stockholder electing to purchase any of the Offered Shares) of
the Offered Shares not purchased by the Company under subparagraph 14(b)(i)
above or by Other Stockholders under this subparagraph 14(b)(ii), at the
price and on the other terms (subject to subparagraph 14(b)(iii) below) set
forth in the Sale Notice, by so notifying the Company in writing 10 days
after receipt of the Company Notice (each, a "Stockholder Notice"). Each
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Stockholder Notice shall specify the maximum number of shares which the
Other Stockholder sending such Stockholder Notice desires to purchase.
(iii) Notwithstanding any other provision hereof, in the event
that the sale price, or any portion thereof, for the Offered Shares
described in the Sale Notice is not payable in the form of cash or simple
promissory notes issued by the prospective purchaser described therein, the
Company and any Other Stockholders electing to purchase Offered Shares
pursuant to subparagraphs 14(b)(i) or (ii) above shall be required to pay
only such portion, if any, of the sale price described in the Sale Notice
as consists of cash and simple promissory notes (the latter to be issued by
the Company or the Other Stockholder purchasing such shares, as
applicable), and delivery of such consideration to you shall be payment in
full for the Offered Shares.
(iv) If the Company does not elect to purchase all of the
Offered Shares, it shall notify all Other Stockholders in writing within 35
days after the Company's receipt of the Sale Notice whether the Company and
the Other Stockholders have elected, in the aggregate, to purchase all of
the Offered Shares (the "Second Company Notice").
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(v) If the Company and the other Stockholders have elected
pursuant to subparagraph 14(b)(i) or (ii) above, in the aggregate, to
purchase all Offered Shares, the Second Company Notice shall set forth the
number of Offered Shares to be purchased by the Company and by each Other
Stockholder that elected to purchase Offered Shares and the time and place
of the Closing, which shall occur not less than 60 nor more than 90 days
after the Company's receipt of the Sale Notice.
(vi) At the Closing, the Company (if it elected to purchase any
Offered Shares) and each Other Stockholder electing to purchase Offered
Shares (if the Company did not elect to purchase all Offered Shares) shall
deliver to you the cash and, if applicable, the promissory notes
constituting the purchase price for the Offered Shares to be purchased by
such purchaser, and the you will deliver to the Company and/or each
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purchasing Other Stockholder the certificate(s) representing the Offered
Shares being purchased by such purchaser.
(vii) If the Company and all Other Stockholders do not elect, in
the aggregate, to purchase all Offered Shares pursuant to subparagraphs
14(b)(i) and (ii) above, all elections pursuant to subparagraphs 14(b)(i)
or (ii) to purchase Offered Shares shall be null and void (which fact shall
be stated in the Second Company Notice), and you shall have the right,
subject to paragraph 14(c) below, to Transfer the Offered Shares to the
transferee described in the Sale Notice at the price and on the other terms
described therein, within 90 days after the date of the Sale Notice. If
after such 90-day period, the Offered Shares which you are entitled to
transfer pursuant to this subparagraph (vii) have not been so transferred,
they shall thereafter again be subject to this paragraph 14(b).
(c) Participation Rights.
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(i) Any Other Stockholder not electing to purchase any Offered
Shares pursuant to subparagraph 14(b)(ii) above may elect to participate in
any sale of Offered Shares pursuant to subparagraph 14(b)(vii) above (and
only in a sale pursuant to such subparagraph) by so stating in the
Stockholder Notice.
(ii) If any Other Stockholders have elected to participate in
such Transfer, you and such electing Other Stockholders shall each be
entitled to sell in the contemplated Transfer, at the same price and on the
same terms, a number of shares of Class A Common equal to the product of
(x) the quotient determined by dividing the number of shares of Class A
Common owned by such Person by the number of shares of Class A Common owned
by all Stockholders participating in such Transfer (including you) and (y)
the number of Offered Shares specified in the Sale Notice.
(iii) You will use best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the participating Other
Stockholder(s) in any contemplated Transfer, and you will not transfer any
of the Offered Shares to any prospective transferee unless (x) such
prospective transferee agrees to the participation of the participating
Other Stockholder(s) in such Transfer, or (y) you purchase from each
participating Other Stockholder the same number of shares (at the same
price and on the same terms) that such participating Other Stockholder
would have been entitled to sell had the prospective transferee so agreed.
(iv) Each Other Stockholder transferring shares pursuant to this
paragraph 14(c) shall pay its pro rata share (based on the number of shares
of Class A Common to be transferred by such Stockholder) of the expenses
incurred by you and the Other Stockholders in connection with such transfer
and shall be obligated to join on a pro rata basis (based on the number of
shares of Class A Common Stock to be sold) in any indemnification or other
obligations that you agree to provide in connection with such transfer
(other than any such obligations that relate specifically to a particular
stockholder
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such as indemnification with respect to representations and warranties
given by a stockholder regarding such stockholder's title to and ownership
of shares); provided that no holder shall be obligated in connection with
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such Transfer to agree to indemnify or hold harmless the transferee(s) with
respect to an amount in excess of the net cash proceeds paid to such holder
in connection with such Transfer.
(d) Certain Permitted Transfers. The restrictions contained in this
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paragraph 14 shall not apply with respect to transfers of Option Shares (i)
pursuant to applicable laws of descent and distribution or (ii) among your
family group; provided that the restrictions contained in this paragraph shall
continue to be applicable to the Option Shares after any such transfer and the
transferees of such Option Shares shall agree in writing to be bound by the
provisions of this Agreement. Your "family group" means your spouse and
descendants, or any trust solely for the benefit of you, your spouse, or your
descendants.
(e) Termination of Restrictions. The restrictions on the transfer of
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Option Shares set forth in this paragraph 14 shall continue with respect to each
Option Share until the date on which such Option Share has been transferred in a
transaction permitted by this paragraph (including Exempt Transactions but
excluding a transaction contemplated by paragraph 14(d)).
15. Additional Restrictions on Transfer.
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(a) Restrictive Legend. The certificates representing the Option
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Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
________ __, ____, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN
OPTION AGREEMENT BETWEEN THE COMPANY AND ONE OF ITS EMPLOYEES, DATED AS OF
[_______________, ______], A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) Opinion of Counsel. You may not sell, transfer or dispose of any
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Option Shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company that registration
under the Securities Act or any applicable state securities law is not required
in connection with such transfer.
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(c) Holdback. You agree not to effect any public sale or distribution
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of any equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 180 days after the effectiveness of any underwritten Demand Registration
or any underwritten Piggyback Registration (as such terms are defined in the
Registration Agreement), except as part of such underwritten registration if
otherwise permitted.
16. Sale of the Company.
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(a) Consent to Sale of Company. If a Sale of the Company is approved
--------------------------
by the Company and the holders of at least 67% of the Institutional Investor
Stock (as that term is defined in the stock purchase agreement dated as of
November 27, 1996, by and among the Company and certain investors (as amended
from time to time according to its terms, the "Stock Purchase Agreement")) then
------------------------
outstanding (the "Approved Sale"), you shall consent to and raise no objections
-------------
against the Approved Sale of the Company, and if the Approved Sale of the
Company is structured as a sale of stock, you shall agree to sell all of your
Option Shares and rights to acquire Option Shares on the terms and conditions
approved by the Board and the holders of at least 67% of the Institutional
Investor Stock then outstanding. You shall take all necessary and desirable
actions in connection with the consummation of the Approved Sale of the Company.
(b) Purchaser Representative. If the Company or the holders of the
------------------------
Company's securities enter into any negotiation or transaction for which Rule
506 (or any similar rule then in effect) promulgated by the Securities Exchange
Commission may be available with respect to such negotiation or transaction
(including a merger, consolidation or other reorganization), you shall, at the
request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If you appoint the
purchaser representative designated by the Company, the Company shall pay the
fees of such purchaser representative, but if you decline to appoint the
purchaser representative designated by the Company you shall appoint another
purchaser representative (reasonably acceptable to the Company), and you shall
be responsible for the fees of the purchaser representative so appointed.
(c) Termination of Restrictions. The provisions of this paragraph 16
---------------------------
shall terminate upon the consummation of a Sale of the Company.
17. Remedies. The parties hereto (and the Other Stockholders as
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third-party beneficiaries) shall be entitled to enforce their rights under this
Agreement specifically, to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in their
favor. The parties hereto acknowledge and agree that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party hereto (and any Other Stockholders as a third-party beneficiary) may,
in its sole discretion, apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
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18. Amendment. Except as otherwise provided herein, any provision of
---------
this Agreement may be amended or waived only with the prior written consent of
the Company and a majority (based on the number of Option Shares held) of the
Participants (as defined in the Plan) negatively affected by a similar amendment
made to their Option Agreement; provided that no provision of paragraph 12, 13,
14, 15, 16, 17, or 18 may be amended or waived, if such amendment or waiver
would have a detrimental effect on the Other Stockholders, without the prior
written consent of the holders of at least 67% of the Institutional Investor
Stock then outstanding.
19. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and permitted assigns of the parties hereto whether so
expressed or not.
20. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
21. Counterparts. This Agreement may be executed simultaneously in
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two or more counterparts (including by facsimile), each of which shall
constitute an original, but all of which taken together shall constitute one and
the same Agreement.
22. Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
23. Governing Law. The corporate law of Delaware shall govern all
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questions concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and interpretation of
this Agreement shall be governed by the internal law, and not the law of
conflicts, of Illinois.
24. Notices. All notices, demands or other communications to be
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given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally,
one business day after being sent by reputable overnight courier (charges
prepaid) or four business days after being mailed by certified or registered
mail (postage prepaid and return receipt requested), to the recipient. Such
notices, demands and other communications shall be sent to you and to the
Company and to the Original Stockholders at the addresses indicated below:
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(a) If to the Optionee:
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
(b) If to the Company:
Focal Communications Corporation
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: President
(c) If to the Other Stockholders, at the address listed in 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.
25. Third-Party Beneficiary. The Company and you acknowledge that
-----------------------
the Other Stockholders are third-party beneficiaries under this Agreement.
26. Entire Agreement. This Agreement constitutes the entire
----------------
understanding between you and the Company, and supersedes all other agreements,
whether written or oral, with respect to the acquisition by you of Common Stock
of the Company.
* * * *
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Please execute the extra copy of this Agreement in the space below
and return it to the Company's Secretary at its executive offices to confirm
your understanding and acceptance of the agreements contained in this Agreement.
Very truly yours,
FOCAL COMMUNICATIONS CORPORATION
By _____________________________________
Its President and Chief Executive Officer
Enclosures: 1. Extra copy of this Agreement
2. Copy of the Plan
The undersigned hereby acknowledges having read this Agreement and
the Plan and hereby agrees to be bound by all provisions set forth herein and in
the Plan.
Dated as of: _____________, ________
OPTIONEE
_______________________________
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