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EXHIBIT 10.11
AMENDED AND RESTATED EXECUTIVE PURCHASE AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE PURCHASE AGREEMENT (this
"Agreement") is made as of December 13, 1999, by and between Allegiance Telecom,
Inc., a Delaware corporation (the "Company") and C. Xxxxxx Xxxx ("Executive").
This Agreement amends and restates the Executive Purchase Agreement dated as of
January 28, 1998 (the "Original Agreement") by and between the Executive and
Transcend Telecom, L.L.C., a Delaware limited liability company (the "LLC") and
the Company (then known as "Transcend Telecom, Inc."). Capitalized terms used
but not otherwise defined herein have the meanings ascribed to such terms in
paragraph 6 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. Executive purchased the Executive Securities as provided for in the
Original Agreement.
(b) Acknowledgment of At-Will Employment. The Executive
acknowledges and agrees that no agreement or arrangement between the Executive
and the Company (including, without limitation, the issuance of the Executive
Securities to the 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.
2. VESTING OF EXECUTIVE SECURITIES.
(a) Vesting Schedule. Except as otherwise provided herein, an
amount of Unvested Securities (as defined below) shall vest in accordance with
the following schedule:
Cumulative Percentage of Executive
Date Securities Vested on Such Date
---- ----------------------------------
January 28, 1998 20%
January 28, 1999 60%
January 28, 2000 80%
January 28, 2001 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 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 5, vesting
shall be tolled upon the date of the allegation of such breach; provided that
(i) if it is ultimately resolved under paragraph 5 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 5 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).
(c) Acceleration upon a Public Offering. The vesting schedule
set forth in (a) above gives effect to the fact that the Company consummated its
initial Public Offering on July 7, 1998 and Executive was employed by the
Company or any of its Subsidiaries on the closing date of such offering.
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(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 Company (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 Company and/or its assignees having made such election) shall
thereafter be deemed Vested Securities.
3. 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 Unvested Securities then in existence (whether
held by Executive or one or more of the Executive's transferees) will be subject
to repurchase by the Company at the Company's election pursuant to the terms and
conditions set forth in this paragraph 3 (the "Repurchase Option"). In the event
that 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") 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).
(c) Exercise of Repurchase Option. The Company 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 to be
acquired from each such holder. The Executive Securities to be repurchased by
the Company 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 Company has elected to purchase,
the Company 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 to be
repurchased hereunder shall be deemed to be allocated among Executive and the
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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 Company. The Company, 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.
(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) The Company 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 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.
(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) The Company 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
Company, 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
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appraise the fair market value of such non-publicly-traded Executive
Securities as follows: 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 all outstanding securities convertible into the Company's
Common Stock, assuming the conversion of such 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).
The three investment bankers/appraisers shall, within thirty days of
their retention, provide the written results of such appraisals to the
Company 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
Company (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 repurchased has been
determined, the Company 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 Company
(and/or any assignees of the Company's repurchase right), and the Company
(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 amount of the Repurchase Price for
such securities; provided that in the event the Board determines in its good
faith discretion that the Company is not in a position to pay in cash any
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or all of the Repurchase Price for Executive Securities to be repurchased by it.
The Company 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 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 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
Company shall be subject to applicable restrictions contained in the Delaware
General Corporation Law and in the Company's and its Subsidiaries' debt and
equity financing agreements. If any such restrictions prohibit the repurchase of
Executive Securities hereunder which the Company is otherwise entitled or
required to make, the time periods provided in this paragraph 3 shall be
suspended, and the Company 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. All rights under this
paragraph 3 of the Company and/or its assignees to repurchase Executive
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, or the Securityholders
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 Company an opinion of
counsel (reasonably acceptable in form and substance to the Company) 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
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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) No Executive Purchaser shall 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 Unvested 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").
(ii) The restrictions contained in this paragraph (c)
shall not apply with respect to transfers of Unvested 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 Unvested
Securities after any such Transfer, the transferees of such Unvested
Securities shall have agreed in writing to be bound by the provisions
of this Agreement with respect to the Unvested Securities so
transferred, and (prior to the death of Executive) each such transferee
of Unvested 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 Unvested 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.
5. CONFIDENTIALITY, NONCOMPETE, AND NONSOLICITATION.
(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
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related to and required by Executive's performance of duties assigned to
Executive or the Company, or to the extent such disclosure is permissible under
the confidentiality provisions set 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
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, (b) Executive learns from sources other than the Company or its
Subsidiaries, whether prior to or after such information is actually disclosed
by 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 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, that Executive's services to the Company are
unique in nature and of an extraordinary value to the Company, and that the
Company would be irreparably damaged if Executive were to provide similar
services to any person or entity competing directly with the Company. In
connection with the issuance to Executive of the Executive Securities hereunder,
in consideration of and as an inducement to the Company's entering into this
Agreement, Executive accordingly covenants and agrees with the Company 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, participate in any
business or enterprise conducting business in any Covered MSA which engages or
proposes to engage in the provision of competitive local exchange
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 proprietor, 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 company (public or private) wherein Executive has no
material involvement in the management (other than as an independent director
for which Executive receives no or only nominal cash compensation), (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. 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
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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 Company or any Subsidiary
to cease doing business with the Company or any Subsidiary, or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation of the Company and its Subsidiaries (including, without
limitation, making any negative statements or communications concerning the
Company or any Subsidiary).
(f) Noncompete Period. The "Noncompete Period" shall commence
on the date hereof and shall continue until the first anniversary of the
termination of Executive's employment with the Company and its Subsidiaries for
any reason; provided that the Noncompete Period shall terminate immediately upon
a Qualified Sale of the Company.
(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 5, or to the alleged breach hereof, shall be settled by
preliminary negotiation between the Company 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:
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(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, 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
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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 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. Section 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.
6. DEFINITIONS.
"Approved Business Plan" has the meaning ascribed to such term
in the Stock Purchase Agreement.
"Board" means the board of directors of the Company.
"Cause" means (A) Executive's theft or embezzlement, or
attempted theft or embezzlement, of money or property of the Company,
Executive's perpetration or attempted perpetration of fraud, or Executive's
participation in a fraud or attempted fraud, on the Company, or Executive's
unauthorized appropriation of, or attempt to misappropriate, any tangible or
intangible assets or property of the Company, (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 Executive's conviction of
a crime the commission of which results in injury to the Company 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.
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"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 Common Stock issued to
the Executive Purchasers under the Original Agreement, and (ii) 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, or (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).
"Investor Equity" means (i) the securities distributed in
respect of the securities purchased under the Investors Purchase Agreement and
(ii) 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. 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 Company or any Subsidiary thereof.
"LLC Agreement" means the limited liability company agreement
of even date herewith, 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 Common Stock issued upon conversion of Preferred Stock, the Original Cost of
such Preferred Stock, and (ii) with respect to any other securities, the
original price paid upon issuance of such securities.
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"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.
"Public Offering" means any underwritten sale of the Company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1 (or
a successor form adopted by the Securities and Exchange Commission); provided
that the following shall not be considered a Public Offering: (i) any issuance
of common stock as consideration or financing for a merger or acquisition, and
(ii) any issuance of common stock or rights to acquire common stock to employees
of the Company or its Subsidiaries as part of an incentive or compensation plan.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Securityholders Agreement" means the securityholders
agreement 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
of even date herewith, 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
5(d) or clause (ii) of paragraph 5(e) and (ii) any breach of any other provision
of paragraph 5 which is material or is intentionally and knowingly committed by
Executive.
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7. 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 Company, or any Subsidiary thereof
shall record such purported Transfer on its books 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, including without limitation the Original Agreement.
(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. 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.
(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 Company
assigns any of its repurchase rights 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.
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(h) Amendment, Modification, or Waiver. The provisions of this
Agreement may be amended, modified, or waived only with the prior written
consent of the Company 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
Company 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 reputable overnight courier service
(charges prepaid). Such notices, demands and other communications shall be sent
to the following Persons at the following addresses:
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To the Company:
0000 X. Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To an Executive Purchaser: at the address set forth 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.
(m) 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.
(n) Excise Tax. If either (a) it is determined by the Internal
Revenue Service or any other applicable governmental agency that any payment or
distribution of any type to or for the benefit of Executive pursuant to this
Agreement by the Company, any Person who acquires ownership or effective control
of the Company, or ownership of a substantial portion of the assets of the
Company (within the meaning of section 280G of the Code and the regulations
thereunder) or any affiliate of such Person (the "Total Payments") would be
subject to the excise tax imposed by section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are collectively referred to as the "Excise Tax"),
or (b) the Company or any such Person withholds any portion of such payment or
distribution or otherwise seeks to reduce the benefits to Executive under this
Agreement on account of the Excise Tax, then the Company and such Person shall
be jointly and severally obligated to pay to Executive an additional payment (a
"Gross-Up Payment") in an amount such that, after payment by Executive of all
federal, state and local taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Total Payments. The Company and such Person shall be
obligated to pay all costs of Executive (including attorney fees and expenses)
incurred in enforcing their obligations under this Section 5(n).
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
ALLEGIANCE TELECOM, INC.
By: /s/ XXXXX X. XXXXXXX
--------------------------------
Its: Chairman & CEO
--------------------------------
EXECUTIVE
/s/ C. XXXXXX XXXX
----------------------------------------
C. Xxxxxx Xxxx
