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EXHIBIT 10.8
AMENDED AND RESTATED
EXECUTIVE PURCHASE AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE PURCHASE AGREEMENT
(this "Agreement") is made as of January 20, 1998, by and between Allegiance
Telecom, L.L.C., a Delaware limited liability company (the "LLC"), Allegiance
Telecom, Inc., a Delaware corporation (the "Company"), and ______________
("Executive"). Capitalized terms used but not otherwise defined herein have the
meanings ascribed to such terms in paragraph 7 hereof.
The LLC, the Company, and Executive are parties to an
Executive Purchase Agreement dated as of August 13, 1997 (the "Prior
Agreement"), pursuant to which Executive made capital contributions to the LLC
in the amount of $7,705 (the "Initial Capital Contribution") in exchange for,
and the LLC issued to Executive, 150,000 Class B Units. The parties desire for
Executive to make capital contributions to the LLC in the amount of an
additional $6,563 (the "Second Initial Capital Contribution") in exchange for
the LLC's issuance to Executive of an additional 9,375 Class B Units. In
furtherance thereof, the parties hereby agree to amend and restate the Prior
Agreement as set forth herein.
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. Pursuant to the Prior Agreement, on August 13, 1997 (the "Prior
Date"), Executive made the Initial Capital Contribution to the LLC in exchange
for, and the LLC issued to Executive, 150,000 Class B Units having the rights,
obligations, and preferences set forth with respect thereto in the LLC
Agreement. The aggregate amount of the Initial Capital Contribution made with
respect to each such Class B Unit issued pursuant to the Prior Agreement is and
shall be considered Basic Contributions made with respect to such Class B Unit.
(b) Second Initial Capital Contribution and Issuance of
Executive Securities. Upon execution of this Agreement, Executive shall make the
Second Initial Capital Contribution to the LLC in exchange for, and the LLC
shall issue to Executive, an additional 9,375 Class B Units having the rights,
obligations, and preferences set forth with respect thereto in the LLC
Agreement. Executive shall make the Second Initial Capital Contribution to the
LLC by delivery to the LLC of a cashier's or certified check, or wire transfer
of immediately available funds to an account designated by the LLC, in the
aggregate amount equal to the Second Initial Capital Contribution. An aggregate
amount of the Second Initial Capital Contribution equal to $4,687.50 shall be
considered Basic Contributions made with respect to the 9,375 Class B Units
issued hereunder (which Basic Contributions shall be deemed to have been made
among such Class B Units on a pro rata basis).
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(c) Construction of Other Agreements. The parties hereto
acknowledge and agree that, pursuant to the express terms of the Stock Purchase
Agreement, the LLC Agreement, the Securityholders Agreement, and the
Registration Agreement, this Agreement (like the Prior Agreement) is and shall
be considered an "Executive Purchase Agreement" as such term is used in such
agreements.
(d) Representations and Warranties of Executive. In connection
with the Initial Capital Contribution and the Second Initial Capital
Contribution and the issuance of the Executive Securities under the Prior
Agreement and hereunder, Executive represents and warrants to each of the LLC
and the Company that:
(i) The Executive Securities acquired by Executive
under the Prior Agreement and to be acquired by Executive pursuant to
this Agreement shall be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of
the Securities Act or any applicable state securities laws, and the
Executive Securities shall not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(ii) Executive will serve on the Management
Committee of the LLC, is a management employee of the Company, is
sophisticated in financial matters and is able to evaluate the risks
and benefits of the investment in the Executive Securities.
(iii) Executive is able to bear the economic risk of
his investment in the Executive Securities for an indefinite period of
time and is aware that transfer of the Executive Securities may not be
possible because (A) such transfer is subject to contractual
restrictions on transfer set forth herein and in the Securityholders
Agreement, and (B) the Executive Securities have not been registered
under the Securities Act or any applicable state securities laws and,
therefore, cannot be sold unless subsequently registered under the
Securities Act and such applicable state securities laws or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of
the offering of the Executive Securities issued hereunder and has had
full access to such other information concerning the Company as he has
requested.
(v) This Agreement, the LLC Agreement, the
Securityholders Agreement, and the other agreements contemplated
thereby of even date therewith constitute the legal, valid and binding
obligations of Executive, enforceable in accordance with their terms,
and the execution, delivery and performance of such agreements by
Executive and Executive's employment with the Company do not and shall
not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Executive is a party or by which he is bound or
any judgment, order or decree to which Executive is subject.
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(e) Acknowledgment of At-Will Employment. As an inducement to
the LLC and the Company to enter into this Agreement, and as a condition
thereto, Executive acknowledges and agrees that no agreement or arrangement
between the Executive and the Company or the LLC (including, without limitation,
the issuance of the Executive Securities to Executive and the execution and
delivery of this Agreement) shall entitle Executive to remain in the employment
of the Company and its Subsidiaries or affect the right of the Company or its
Subsidiaries to terminate Executive's employment at any time and for any reason.
2. VESTING OF EXECUTIVE SECURITIES.
(a) Vesting Schedule. Except as otherwise provided herein, an
amount of Unvested Securities (as defined below) shall vest on each of the first
four anniversaries of the Prior Date, such that the Executive Securities shall
be vested on each such date in accordance with the following schedule:
Cumulative Percentage of Executive
Date Securities Vested on Such Date
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The first anniversary of the Prior Date 25%
The second anniversary of the Prior Date 50%
The third anniversary of the Prior Date 75%
The fourth anniversary of the Prior Date 100%
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. 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. 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
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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. Upon the consummation
of the Company's initial Public Offering, and so long as Executive is employed
by the Company or any of its Subsidiaries on the closing date of such offering,
there will vest the amount of Unvested Securities which were scheduled to vest
within the 365 days following such closing date (and the remaining Unvested
Securities, if any, shall continue to vest 25% on each anniversary of the Prior
Date in accordance with clause (a) above, such that the vesting schedule set
forth in paragraph (a) above shall have been effectively accelerated by one
year).
(d) Acceleration upon Death or Disability. All Unvested Shares
shall become Vested Shares if Executive's employment with the Company or any of
its Subsidiaries terminates by reason of Executive's death or Disability.
(e) Other Acceleration. Subject to paragraph 3(g) hereof, any
Unvested Securities which the LLC (or its assignees) has not elected to
repurchase in the Repurchase Notice (as defined below) (including Unvested
Securities originally included in the Repurchase Notice, but for which the
election to repurchase was rescinded, pursuant to the terms of paragraph 3, by
all of the LLC and/or its assignees having made such election) shall thereafter
be deemed Vested Securities.
3. LLC'S REPURCHASE OPTION.
(a) The Repurchase Option. Upon the termination of Executive's
employment with the Company and its Subsidiaries for any reason (a "Repurchase
Event"), the Executive Securities then in existence (whether held by Executive
or one or more of Executive's transferees) will be subject to repurchase by the
LLC at the LLC's election pursuant to the terms and conditions set forth in this
paragraph 3 (the "Repurchase Option").
(b) Repurchase Price. The repurchase price (the "Repurchase
Price") for any Vested Securities to be repurchased shall be the Fair Market
Value of such securities. The Repurchase Price of any Unvested Securities to be
repurchased shall be the lesser of (x) the Fair Market Value of such Securities,
and (y) the Original Cost of such Securities (with securities having the lowest
Original Cost subject to repurchase prior to securities with a higher Original
Cost).
(c) Exercise of Repurchase Option. The LLC (by action of the
Board) may elect to purchase all or any portion of the Executive Securities by
delivering written notice (the "Repurchase Notice") to the holder or holders of
the Executive Securities within 30 days after the Repurchase Event. The
Repurchase Notice shall set forth the amount, type, and class of Executive
Securities (including, if applicable, the amount of Unvested Securities and/or
Vested Securities) to be acquired from each such holder. The Executive
Securities to be repurchased by the LLC shall
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first be satisfied to the extent possible from the Executive Securities held by
Executive at the time of delivery of the Repurchase Notice. If the amount of
Executive Securities then held by Executive is less than the total amount of
Executive Securities that the LLC has elected to purchase, the LLC shall
purchase the remaining securities elected to be purchased from the other
holder(s) of Executive Securities, pro rata according to the amount of Executive
Securities held of record by each such other holder at the time of delivery of
the Repurchase Notice. The amount of Unvested Securities and Vested Securities
to be repurchased hereunder shall be deemed to be allocated among Executive and
the other holders of repurchased Executive Securities (if any) pro rata
according to the amount of Executive Securities to be purchased from such
persons.
(d) Assignment by the LLC. The LLC, by action of the Board,
will have the right to assign all or any portion of its repurchase rights
hereunder to any holder of Investor Equity and/or to any executive employee of
the Company or any of its Subsidiaries. Notwithstanding the foregoing, the LLC
may not assign to any Person its right to pay a portion of the Repurchase Price
for Executive Securities repurchased hereunder in the form of Class C Units (or,
after the dissolution and liquidation of the LLC, a promissory note).
(e) Fair Market Value of Repurchased Shares.
(i) The "Fair Market Value" of Executive Securities
subject to repurchase hereunder shall be determined in accordance with
this paragraph (e).
(ii) A majority interest of the LLC and/or any
assignees of the LLC's repurchase rights (based on the amount of
Executive Securities to be purchased by each) and the holders of a
majority of the Executive Securities to be repurchased shall attempt in
good faith to agree on the Fair Market Value of the Executive
Securities. Any agreement reached by such Persons shall be final and
binding on all parties hereto.
(iii) If such Persons are unable to reach such
agreement within 20 days after the giving of Repurchase Notice, the
Fair Market Value of any Executive Securities that are publicly traded
shall be the average, over a period of 21 days consisting of the date
of the Repurchase Event and the 20 consecutive business days prior to
that date, of the average of the closing prices of the sales of such
securities on all securities exchanges on which such securities may at
that time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day
such securities are not so listed, the average of the representative
bid and asked prices quoted in the Nasdaq System as of 4:00 P.M., New
York time, or, if on any day such securities are not quoted in the
Nasdaq System, the average of 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.
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(iv) If such Persons are unable to reach agreement
pursuant to subparagraph (ii) within 20 days after the giving of
Repurchase Notice, and to the extent any Executive Securities are not
publicly traded:
(A) A majority interest of the LLC
and/or its assignees (based on the amount of Executive Securities to
be repurchased by each) and the holders of a majority of the Executive
Securities shall each, within 10 days thereafter, choose one
investment banker or other appraiser with experience in analyzing and
making determinations concerning matters in the telecommunications
industry and in valuing entities like the LLC (including the
distribution arrangements of the type described in the LLC Agreement),
and the two investment bankers/appraisers so selected shall together
select a third investment banker/appraiser similarly qualified.
(B) The three investment bankers/appraisers
shall first appraise the fair market value of the Company (based on
the assumption of an orderly, arm's length sale to a willing
unaffiliated buyer). The three investment bankers/appraisers shall
then appraise the fair market value of such non-publicly-traded
Executive Securities as follows:
1) the fair market value of
each share of Common Stock shall be equal to the fair market
value of the Company divided by the total number of shares
of Common Stock outstanding on the date of the Repurchase
Event (determined on a fully diluted basis (x) with respect
to the Preferred Stock and all other outstanding securities
convertible into the Company's Common Stock, assuming the
conversion of such Preferred Stock and other convertible
securities (without regard to any conditions or other
restrictions on such conversion), and (y) with respect to
all outstanding options, warrants and other rights or
securities exercisable or exchangeable for shares of the
Company's Common Stock, in accordance with the Treasury
Stock Method under generally accepted accounting principles
for determination of fully diluted earnings per share);
2) the fair market value of
each share of Preferred Stock shall be equal to the greater
of (x) the Liquidation Value (as defined in the Company's
certificate of incorporation) of such share, together with
all accrued but unpaid dividends thereon (as determined
under the Company's certificate of incorporation), and (y)
the fair market value (determined in accordance with
subparagraph 1) above) of the share(s) of Common Stock
(including fractional shares) into which such share of
Preferred Stock is convertible on the date of the Repurchase
Event;
3) the fair market value of
each Class B Unit shall be equal to the fair market value of
the assets (as determined in accordance with subparagraphs
1), 2), and 4) of this subparagraph (B)) that would be
distributed
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according to the terms of the LLC Agreement with respect to
such Class B Unit if the LLC were dissolved and liquidated on
the date of the Repurchase Event; and
4) the fair market value of
any other non-publicly-traded Executive Securities (or, for
purposes of subparagraph 3) above, any other assets) shall
be the fair value of such securities (or other assets),
determined on the basis of an orderly, arm's length sale to
a willing, unaffiliated buyer, taking into account all
relevant factors determinative of value.
The three investment bankers/appraisers shall, within thirty days of
their retention, provide the written results of such appraisals to the
LLC and/or its assignees and to each of the holders of Executive
Securities.
(C) The "Fair Market Value" of the
non-publicly-traded Executive Securities to be repurchased shall be
the average of the two appraisals closest to each other, and such
amount shall be final and binding on all parties hereto; provided that
the LLC (and/or any assignee) may at any time within five days after
receiving written notice of such determination rescind its prior
exercise of the Repurchase Option by giving written notice of such
revocation to the holder or holders of the Executive Securities to be
repurchased, and upon such revocation the revoking party will be
treated as if it had never exercised such Repurchase Option (it being
understood that such revoking parties shall thereafter have no right
to re-exercise such Repurchase Option).
(D) The costs of such appraisal shall be
allocated between the parties based on the percentage which the portion
of the contested amount not awarded to each party bears to the amount
actually contested by such party; provided that if any parties revoke
their exercise of the Repurchase Option pursuant to paragraph (C)
above, such revoking parties shall bear (pro rata among such revoking
parties based on the number of Executive Securities with respect to
which each such revoking party had initially exercised its Repurchase
Option) any appraisal costs that would be allocated to the holder(s)
of Executive Securities under this paragraph (D).
(f) Closing of the Repurchase. Within 10 business days after
the Repurchase Price for the Executive Stock to be repurchased has been
determined, the LLC shall send a notice to each holder of Executive Stock
setting forth the consideration to be paid for such shares and the time and
place for the closing of the transaction, which date shall not be more than 30
days nor less than five days after the delivery of such notice. At such closing,
the holders of Executive Securities shall deliver all certificates (if any
exist) evidencing the Executive Securities to be repurchased to the LLC (and/or
any assignees of the LLC's repurchase right), and the LLC (and/or any assignees)
shall pay for the Executive Securities to be purchased pursuant to the
Repurchase Option by delivery of a check or wire transfer of immediately
available funds in the aggregate amount of the Repurchase Price for such
securities; provided that in the event the Board determines in its good faith
discretion
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that the LLC is not in a position to pay in cash any or all of the Repurchase
Price for Executive Securities to be repurchased by it:
(i) prior to the dissolution and liquidation of the
LLC, the LLC may pay a portion of the Repurchase Price for such
securities equal to (x) the aggregate Repurchase Price for the
Executive Securities to be repurchased by the LLC minus (y) the
Original Cost of such securities, by issuing in exchange for such
securities an equal number of the LLC's Class C Units (having the
rights and preferences set forth in the LLC Agreement), and for
purposes of the LLC Agreement each such Class C Unit shall as of its
issuance be deemed to have Basic Contributions made with respect to
such Class C Unit equal to (A) the aggregate portion of the Repurchase
Price paid by the issuance of Class C Units divided by (B) the number
of Class C Units so issued in such repurchase; or
(ii) after the dissolution and liquidation of the
LLC, the Company (as successor to the rights of the LLC under paragraph
8(e)(ii) below) may pay, in the form of a promissory note, a portion of
the Repurchase Price for such securities equal to (x) the aggregate
Repurchase Price for the Executive Securities to be repurchased by the
LLC minus (y) the Original Cost of such securities. Such a promissory
note shall be subordinated to all of the Company's senior debt
obligations either then or thereafter incurred, shall earn simple
annual interest at the Base Rate, shall have all principal and accrued
interest due and payable upon maturity, and shall mature upon the
earliest to occur of the Company's initial Public Offering (if such
initial Public Offering has not occurred prior to the issuance of such
promissory note), a Qualified Sale of the Company, or the fifth
anniversary of the issuance of such promissory note.
The purchasers of Executive Securities hereunder shall be entitled to receive
customary representations and warranties from the sellers regarding good title
to such shares, free and clear of any liens or encumbrances.
(g) Restrictions. Notwithstanding anything to the contrary
contained in this Agreement, all repurchases of Executive Securities by the LLC
shall be subject to applicable restrictions contained in the Delaware General
Corporation Law, the Delaware Limited Liability Company Act and in the LLC's and
its Subsidiaries' debt and equity financing agreements. If any such restrictions
prohibit the repurchase of Executive Securities hereunder which the LLC is
otherwise entitled or required to make, the time periods provided in this
paragraph 3 shall be suspended, and the LLC may make such repurchases as soon as
it is permitted to do so under such restrictions, unless by such time such
Repurchase Option has terminated pursuant to paragraph 3(h); provided that
notwithstanding the foregoing, in no event shall the time periods provided in
this paragraph 3 be suspended for more than 6 months.
(h) Termination of Repurchase Option. The rights under this
paragraph 3 of the LLC and/or its assignees to repurchase Vested Securities (but
not Unvested Securities) shall terminate upon the consummation of a Public
Offering. All rights under this paragraph 3 of the LLC
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and/or its assignees to repurchase Executive Securities (including both Vested
Securities and Unvested Securities) shall terminate upon a Qualified Sale of the
Company.
4. RESTRICTIONS ON TRANSFER.
(a) Opinion of Valid Transfer. In addition to any other
restrictions on transfer imposed by this Agreement, the Securityholders
Agreement, or the LLC Agreement, no holder of Executive Securities may sell,
transfer or dispose of any Executive Securities (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
LLC an opinion of counsel (reasonably acceptable in form and substance to the
LLC) that neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such transfer.
(b) Restrictive Legend. The certificates representing
Executive Securities shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND REPURCHASE OPTIONS SET FORTH IN
AN EXECUTIVE PURCHASE AGREEMENT BETWEEN THE ISSUER OF SUCH SECURITIES
(THE "ISSUER") AND THE INITIAL HOLDER OF SUCH SECURITIES (THE "INITIAL
HOLDER"), AS AMENDED FROM TIME TO TIME. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
The legend set forth above shall be removed from the certificates evidencing any
shares which cease to be Executive Securities.
(c) Retention of Executive Stock.
(i) Executive shall not sell, transfer, assign,
pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily or by operation of law) any
interest in any Executive Securities (a "Transfer"), except pursuant to
(A) the repurchase provisions of paragraph 3 hereof or of the LLC
Agreement, (B) the "Participation Rights" or "Put" provisions set forth
in the Securityholders Agreement, or (C) a Sale of the Company (as
defined in the Securityholders Agreement) (each of (A), (B), and (C),
an "Exempt Transfer").
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(ii) The restrictions contained in this paragraph (c)
shall not apply with respect to transfers of Executive Securities (A)
pursuant to applicable laws of descent and distribution or (B) among
Executive's Family Group; provided that the restrictions contained in
this paragraph shall continue to be applicable to the Executive
Securities after any such Transfer, the transferees of such Executive
Securities shall have agreed in writing to be bound by the provisions
of this Agreement with respect to the Executive Securities so
transferred, and (prior to the death of Executive) each such transferee
of Executive Securities shall have entered into proxies and other
agreements satisfactory to the holders of a majority of the Investor
Equity pursuant to which Executive shall have the sole right to vote
such Executive Securities for all purposes. For purposes of this
Agreement, "Family Group" means Executive's spouse and descendants
(whether natural or adopted), any trust which at the time of such
Transfer and at all times thereafter is and remains solely for the
benefit of Executive and/or Executive's spouse and/or descendants and
any family partnership the partners of which consist solely of
Executive, such spouse, such descendants or such trusts.
(iii) The restrictions on the transfer of Executive
Securities set forth in this paragraph (c) shall continue with respect
to each Executive Security following any Transfer thereof (other than
an Exempt Transfer); provided that upon the consummation of a Public
Offering the restrictions set forth in this paragraph (c) shall
thereafter cease to apply to all Vested Securities (it being understood
that such restrictions shall continue to apply to all Unvested
Securities until such time as they become Vested Securities in
accordance with the terms hereof).
5. ISSUANCE OF TIER I AND TIER II OPTIONS.
(a) In the event of a dissolution and liquidation of the LLC
upon the consummation of a Public Offering (a "Public Offering Liquidation"), if
the Management Percentage for such Public Offering Liquidation is less than
33.3% the Company shall contemporaneously with such liquidation issue to each
holder of Class B Units:
(i) options (the "Tier I Options") entitling the
holder to acquire, at an exercise price per share equal to the IPO
Price, a number of shares of the Company's Common Stock equal to the
lesser of (x) the number of shares of Common Stock that such holder
would have received under the LLC Agreement in connection with such
Public Offering Liquidation if the Management Percentage had been 10%,
and (y) the difference of (A) the number of shares of Common Stock that
such holder would have received in connection with such Public Offering
Liquidation if the Management Percentage had been 33.3%, minus (B) the
number of shares of Common Stock that such holder actually received in
such liquidation; and
(ii) if the Management Percentage for such Public
Offering Liquidation is less than 23.3%, in addition to any Tier I
Options, options (the "Tier II Options") entitling the holder to
acquire, at an exercise price per share equal to the Tier II Price, a
number of
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shares of the Company's Common Stock equal to the lesser of (x) the
number of shares of Common Stock that such holder would have received
in connection with such Public Offering Liquidation if the Management
Percentage had been 10%, and (y) the difference of (A) the number of
shares of Common Stock that such holder would have received in
connection with such Public Offering Liquidation if the Management
Percentage had been 33.3%, minus (B) the number of shares of Common
Stock that such holder actually received in such liquidation, minus (C)
the number of shares of Common Stock into which the Tier I Options
issued to such holder are initially exercisable.
(b) For purposes of performing the calculations in
subparagraphs (a)(i) and (ii) above, (i) a distribution of shares of the
Company's Preferred Stock in a Public Offering Liquidation shall be considered
to have been a distribution of the number of shares of Common Stock into which
such Preferred Stock is convertible on the date of such liquidation, and (ii) a
distribution of any other property in a Public Offering Liquidation shall be
considered to have been a distribution of a number of shares of Common Stock
equal to the quotient of (A) the aggregate fair market value of such distributed
property on the date of such liquidation, as determined in good faith by the
Board, divided by (B) the fair market value of one share of Common Stock on the
date of such liquidation, as determined in good faith by the Board.
(c) For purposes of this paragraph, the following terms shall
have the meanings set forth below:
"IPO Price" means the gross price per share at which shares of
the Company's Common Stock are initially offered and sold to the public in
connection with a Public Offering.
"Liquidation FMV" has the meaning ascribed to such term in the
LLC Agreement.
"Management Percentage" has the meaning ascribed to such term
in the LLC Agreement.
"Return Multiple" has the meaning ascribed to such term in the
LLC Agreement.
"Tier II Price" means, with respect to a particular Public
Offering Liquidation, the quotient of (x) the amount that would result in a
Return Multiple of 3.5 if the Liquidation FMV for such liquidation were equal to
such amount, divided by (y) the number of shares of Common Stock (determined on
an as-if-converted basis) held by the LLC immediately prior to such liquidation.
6. CONFIDENTIALITY.
(a) Nondisclosure and Nonuse of Confidential Information.
Executive shall not disclose or use at any time, either during his employment
with the Company or thereafter, any Confidential Information (as defined below)
of which Executive is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or use is directly
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related to and required by Executive's performance of duties assigned to
Executive by the LLC or the Company, or to the extent such disclosure is
permissible under the confidentiality provisions set forth in the Stock Purchase
Agreement. Executive shall take all appropriate steps to safeguard Confidential
Information and to protect it against disclosure, misuse, espionage, loss and
theft. As used in this Agreement, the term "Confidential Information" means
information that is not generally known to the public and that is used,
developed or obtained by the LLC, the Company, or its Subsidiaries in connection
with their business, including but not limited to (i) products or services, (ii)
fees, costs and pricing structures, (iii) designs, (iv) analysis, (v) drawings,
photographs and reports, (vi) computer software, including operating systems,
applications and program listings, (vii) flow charts, manuals and documentation,
(viii) data bases, (ix) accounting and business methods, (x) inventions,
devices, new developments, methods and processes, whether patentable or
unpatentable and whether or not reduced to practice, (xi) customers and clients
and customer or client lists, (xii) copyrightable works, (xiv) all technology
and trade secrets, (xv) business plans and financial models, and (xvi) all
similar and related information in whatever form. Confidential Information shall
not include any information that has been published in a form generally
available to the public prior to the date Executive proposes to disclose or use
such information. Information shall not be deemed to have been published merely
because individual portions of the information have been separately published,
but only if all material features constituting such information have been
published in combination. Notwithstanding the foregoing, "Confidential
Information" shall not include any information of which (a) Executive became
aware prior to his affiliation with the Company and the LLC, (b) Executive
learns from sources other than the LLC, the Company or its Subsidiaries, whether
prior to or after such information is actually disclosed by the LLC, the Company
or its Subsidiaries or (c) is disclosed in a prospectus or other documents for
dissemination to the public.
(b) The Company's Ownership of Intellectual Property.
(i) Acknowledgment of Company Ownership. In the event
that Executive as part of his activities on behalf of the Company
generates, authors or contributes to any invention, design, new
development, device, product, method or process (whether or not
patentable or reduced to practice or constituting Confidential
Information), any copyrightable work (whether or not constituting
Confidential Information) or any other form of Confidential Information
relating directly or indirectly to the Company's business as now or
hereafter conducted (collectively, "Intellectual Property"), Executive
acknowledges that such Intellectual Property is the exclusive property
of the Company and hereby assigns all right, title and interest in and
to such Intellectual Property to the Company. Any copyrightable work
prepared in whole or in part by Executive will be deemed "a work made
for hire" under Section 201(b) of the 1976 Copyright Act, and the
Company shall own all of the rights comprised by the copyright therein.
Executive shall promptly and fully disclose all Intellec tual 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
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13
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).
(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.
7. DEFINITIONS.
"Basic Contributions" has the meaning ascribed to such term in
the LLC Agreement.
"Board" means the board of managers of the LLC (or, after the
dissolution and liquidation of the LLC, the board of directors of the Company).
"Cause" means (A) Executive's theft or embezzlement, or
attempted theft or embezzlement, of money or property of the Company or the LLC,
Executive's perpetration or attempted perpetration of fraud, or Executive's
participation in a fraud or attempted fraud, on the Company or the LLC, or
Executive's unauthorized appropriation of, or attempt to misappropriate, any
tangible or intangible assets or property of the Company or the LLC, (B) any act
or acts of disloyalty, misconduct or moral turpitude by Executive injurious to
the interest, property, operations, business or reputation of the Company or the
LLC, or Executive's conviction of a crime the commission of which results in
injury to the Company or the LLC or (C) Executive's repeated refusal or failure
(other than by reason of Disability) to carry out reasonable instructions by his
superiors or the Board or the Company's board of directors.
"Class A Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class B Units" has the meaning ascribed to such term in the
LLC Agreement.
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14
"Class C Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class D Units" has the meaning ascribed to such term in the
LLC Agreement.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Disability" means (i) any permanent physical or mental
incapacity or disability rendering the Executive unable or unfit to perform
effectively the duties and obligations of his employment or to participate
effectively and actively in the management of the Company, or (ii) any illness,
accident, injury, physical or mental incapacity or other disability, where such
condition has rendered the Executive unable or unfit to perform effectively the
duties and obligations of his employment or to participate effectively and
actively in the management of the Company for a period of at least 90 days (in
either case, as determined in the good faith judgment of the Company's board of
directors).
"Executive Securities" means (i) the Class B Units issued to
Executive under the Prior Agreement and hereunder, (ii) upon dissolution and
liquidation of the LLC, any securities of the Company distributed in respect of
the securities referred to in clause (i) above pursuant to such dissolution and
liquidation, (iii) any Tier I Options or Tier II Options issued to Executive
hereunder, (iv) any other securities of the LLC or the Company acquired by
Executive at any time after the Prior Date, and (v) any securities issued
directly or indirectly with respect to the foregoing securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing
securities. As to any particular securities constituting Executive Securities,
such securities shall cease to be Executive Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased by
any holder of Class A Units, or by the LLC (including in exchange for Class C
Units or Class D Units), the Company or any Subsidiary thereof
"Investor Equity" means (i) the Class A Units issued pursuant
to the Investor Purchase Agreement, (ii) upon and after the dissolution or
liquidation of the LLC, the securities distributed in respect of the securities
referred to in clause (i) above pursuant to such dissolution or liquidation, and
(iii) any securities issued directly or indirectly with respect to the foregoing
securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization, or upon conversion or exercise
of the foregoing (but not including any Class D Units issued in exchange for
Class A Units). As to any particular securities constituting Investor Equity,
such securities shall cease to be Investor Equity when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar
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15
provision then in force) or (c) repurchased by the LLC (including in exchange
for Class D Units) or the Company or any Subsidiary thereof.
"LLC Agreement" means the limited liability company agreement
dated as of August 13, 1997, entered into by and among the members of the LLC,
as amended from time to time in accordance with its terms.
"Original Cost" means, at any given time, (i) with respect to
any Class B Units, the total Basic Contributions made with respect to such Class
B Units pursuant to the LLC Agreement prior to such time, (ii) with respect to
any Preferred Stock, the aggregate Liquidation Value (as determined under the
Company's certificate of incorporation) of such Preferred Stock at such time,
(iii) with respect to any Common Stock issued upon conversion of Preferred
Stock, the Original Cost of such Preferred Stock, and (iv) with respect to any
other securities, the original price paid upon issuance of such securities.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Stock" means the Company's 12% Cumulative
Convertible Preferred Stock, par value $.01 per share.
"Public Offering" means any underwritten sale of the Company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1 (or
a successor form adopted by the Securities and Exchange Commission); provided
that the following shall not be considered a Public Offering: (i) any issuance
of common stock as consideration or financing for a merger or acquisition, and
(ii) any issuance of common stock or rights to acquire common stock to employees
of the Company or its Subsidiaries as part of an incentive or compensation plan.
"Registration Agreement" means the registration agreement
dated as of August 13, 1997, entered into by and among the Company and the
holders of interests in the LLC, as amended from time to time in accordance with
its terms.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Securityholders Agreement" means the securityholders
agreement dated as of August 13, 1997, entered into by and among the Company,
the LLC, and the holders of interests in the LLC, as amended from time to time
in accordance with its terms.
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16
"Stock Purchase Agreement" means the stock purchase agreement
dated as of August 13, 1997, entered into by and between the Company and the
LLC, as amended from time to time in accordance with the terms thereof.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity.
8. MISCELLANEOUS PROVISIONS.
(a) Transfers in Violation of Agreement. Any Transfer or
attempted Transfer of any Executive Securities in violation of any provision of
this Agreement shall be void, and none of the LLC, the Company, or any
Subsidiary thereof shall record such purported Transfer on its books 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 or with
the Prior Agreement 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
Prior Agreement).
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17
(d) Counterparts. This Agreement may be executed in separate
counterparts, none of which need contain the signature of more than one party
hereto but each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(e) Successors and Assigns.
(i) Except as otherwise provided herein, this
Agreement shall bind the parties hereto and their respective successors
and assigns and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns whether so
expressed or not.
(ii) Each of the Company, the LLC, the Executive, and
each holder of Executive Securities hereby acknowledges that upon and
after the dissolution and liquidation of the LLC, (A) all contractual
obligations and duties of the LLC hereunder shall thereafter bind and
be enforceable against the Company, (B) all rights and powers granted
to the LLC hereunder (including, without limitation, the repurchase
rights set forth in paragraph 3) shall inure to the benefit of and be
enforceable by the Company, (C) all references to the LLC shall
thereafter be deemed to be references to the Company, and (D) this
Agreement shall thereafter operate and be construed as if the word
"Company" were substituted for the word "LLC" in each such instance.
(f) CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS
HERETO SHALL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF
THE STATE OF DELAWARE.
(g) Remedies. Each of the parties to this Agreement (including
any holder of Investor Equity or employee of the Company to which the LLC
assigns any of its repurchase rights under paragraph 3 hereof) shall be entitled
to enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorney's fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(h) Amendment, Modification, or Waiver. The provisions of this
Agreement may be amended, modified, or waived only with the prior written
consent of the LLC and the Executive.
(i) Third-Party Beneficiaries. The parties hereto acknowledge
and agree that certain provisions of this Agreement are intended for the benefit
of certain holders of Investor Equity or employees of the Company to which the
LLC assigns any of its repurchase rights under paragraph
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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:
To the LLC:
c/o Madison Dearborn Capital Partners
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Xx.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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with a copy (which shall not constitute notice) to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To the Company:
0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To Executive: at the address set forth in the LLC's or the
Company's records.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(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.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Amended and Restated Executive Purchase Agreement on the date first written
above.
ALLEGIANCE TELECOM, L.L.C.
By:
----------------------------------
Xxxxx X. Xxxxxxx,
its authorized member
ALLEGIANCE TELECOM, INC.
By:
----------------------------------
Xxxxx X. Xxxxxxx,
its Chairman and CEO
EXECUTIVE
--------------------------------------------
Name:
