<PAGE> 1
As filed with the Securities and Exchange Commission on March 5, 1999
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ALLEGIANCE TELECOM, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of 75-2721491
incorporation or organization) (I.R.S. Employer
Identification No.)
1950 Stemmons Freeway
Suite 3026
Dallas, Texas 75207
(Address of Principal Executive Offices) (Zip Code)
ALLEGIANCE TELECOM, INC. EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
(Full Title of the Plan)
Royce J. Holland
Chairman of the Board and Chief Executive Officer
Allegiance Telecom, Inc.
1950 Stemmons Freeway
Suite 3026
Dallas, Texas 75207
(214) 261-7100
(Name, address including zip code, and telephone number,
including area code, of Agent for Service)
Copy to:
Mark B. Tresnowski, Esq.
Senior Vice President and General Counsel
Allegiance Telecom, Inc.
4 Westbrook Corporate Center
Suite 400
Westchester, Illinois 60154
(708) 836-5200
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED(1) SHARE(2) PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share........... 2,305,718 shares (3) $22.9375 $ 52,887,407 $ 14,703
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416 of the Securities Act of 1933, this Registration
Statement also covers such additional shares of Common Stock as may become
issuable pursuant to anti-dilution provisions of the employee benefit plan
described herein.
(2) Estimated pursuant to Rule 457(c) and (h), solely for purposes of
calculating the amount of the registration fee, based upon the average of
the high and low prices reported for the Common Stock on the Nasdaq
National Market on March 3, 1999, of $22.9375.
(3) Shares reserved for issuance under the Allegiance Telecom, Inc. Employee
Stock Discount Purchase Plan.
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PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION.
The documents containing the information specified in Part I, Items 1
and 2, will be delivered in accordance with Rule 428(b)(1) of the
Securities Act of 1933, as amended ("Securities Act"). Such documents
are not required to be, and are not, filed with the Securities and
Exchange Commission, either as part of this Form S-8 Registration
Statement or as prospectuses or prospectus supplements pursuant to Rule
424. These documents, and the documents incorporated by reference in
this Registration Statement pursuant to Item 3 of Part II of this
Registration Statement, taken together, constitute a prospectus that
meets the requirements of Section 10(a) of the Securities Act.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
Upon written or oral request, any of the documents incorporated by
reference in Item 3 of Part II of this Registration Statement (which
documents are incorporated by reference in the Section 10(a)
Prospectus), other documents required to be delivered to eligible
employees pursuant to Rule 428(b) or additional information about the
Allegiance Telecom, Inc. Employee Stock Discount Purchase Plan are
available without charge by contacting:
Patricia E. Koide
Senior Vice President of Human Resources, Real Estate,
Facilities and Administration
Allegiance Telecom, Inc.
4 Westbrook Corporate Center
Suite 400
Westchester, Illinois 60154
(708) 836-5200
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. The following
documents, which have been filed by Allegiance Telecom, Inc. (the "Company")
with the Securities and Exchange Commission, are incorporated in this
Registration Statement by reference:
(a) The Company's Prospectus, dated June 30, 1998, filed
pursuant to Rule 424(b) of the Securities Act, which relates to the
Company's Registration Statement on Form S-1 (Registration File No.
333-53475).
(b) The description of the Company's Common Stock, par value
$.01 per share (the "Common Stock") contained in the Company's
Registration Statement on Form 8-A, filed with the Commission on June
23, 1998, which incorporated by reference the section titled
"Description of Capital Stock" contained in the Prospectus as part of
the Company's Registration Statement on Form S-1 (Registration File No.
333-53475).
(c) The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998, filed with the Commission on August 12,
1998.
(d) The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1998, filed with the Commission on November
5, 1998.
(e) All reports and other documents subsequently filed by the
Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior
to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of
such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES. Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. The validity of the Common Stock
to be issued under the Plan will be passed upon for the Company by Mark B.
Tresnowski, its Senior Vice President and General Counsel. Mr. Tresnowski (a)
owns 3,000 shares of Common Stock and (b) has stock options to purchase 330,000
shares of Common Stock at an exercise price of $1.00 per share.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 102(b)(7) of the
Delaware General Corporation Law (the "DGCL") permits a corporation to provide
in its certificate of incorporation that a director of the corporation shall not
be personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
transaction from which the director derives an improper personal benefit, (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) for improper payment of dividends or
redemptions of shares or (iv) for any breach of a director's duty of loyalty to
the company or its stockholders. Article X, Part A, of the Company's Amended and
Restated Certificate of Incorporation (the "Restated Certificate") includes such
a provision.
The Company's Restated Certificate provides that each person who was or is made
a party or is threatened to be made a party to or is otherwise involved
(including involvement as a witness) in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding"), by reason of
the fact that he or she is or was a Director or officer of the Company or, while
a Director or
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officer of the Company, is or was serving at the request of the Company as a
Director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a Director or officer or in any other
capacity while serving as a Director or officer, will be indemnified and held
harmless by the Company to the fullest extent authorized by the DGCL, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Company to provide broader
indemnification rights then permitted prior thereto), against all expense,
liability and loss (including attorneys' fees, judgment, fines, excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith and such indemnification will continue
as to an indemnitee who has ceased to be a Director, officer, employee or agent
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators under the Restated Certificate. This right of indemnification is
a contractual right and includes the obligation of the Company to pay the
expenses incurred in defending any such proceeding in advance of its final
disposition (an "advance of expenses"); provided, however, that, if and to the
extent that the DGCL requires, an advance of expenses incurred by indemnitee in
his or her capacity as a Director or officer (and not in any other capacity in
which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) will be made only upon delivery
to the Company of an undertaking, by or on behalf of such indemnitee, to repay
all amounts so advanced if it will ultimately be determined by final judicial
decision from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses. The Company may, by action of
its Board of Directors, provide indemnification to employees and agents of the
Company with the same or lesser scope and effect as the foregoing
indemnification of Directors and officers.
The Company plans to enter into indemnification agreements with its current
Directors and executives officers substantially in the form previously filed
with the Commission by the Company and anticipates entering into such agreements
in the future with any new Director or executive officer.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable.
ITEM 8. EXHIBITS. An Exhibit index is located on page 8.
Number Description
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3.1 Amended and Restated Certificate of Incorporation of the
Company, incorporated by reference to Exhibit 3.1 of the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1998, filed with the Commission on August 12,
1998.
3.2 Amended and Restated Bylaws of the Company, incorporated by
reference to Exhibit 3.2 of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1998, filed
with the Commission on August 12, 1998.
4.1 Form of certificate representing shares of Common Stock, $.01
par value per share, incorporated by reference to Exhibit 4.5
of the Company's Registration Statement on Form S-1
(Registration File No. 333-53475).
*4.2 Allegiance Telecom, Inc. Employee Stock Discount Purchase
Plan.
*5.1 Opinion of Mark B. Tresnowski, Senior Vice President and
General Counsel of Allegiance Telecom, Inc., with respect to
the legality of the shares of the Common Stock being
registered hereby.
*23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Mark B. Tresnowski (included in Exhibit 5.1).
24.1 Powers of Attorney (included in Part II of this Registration
Statement).
- --------------
* Filed herewith
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ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement (i) to include any prospectus
required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration
Statement (or most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in this Registration Statement; and (iii) to
include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in
this Registration Statement;
(2) that, for the purpose of determining any liability
under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof; and
(3) to remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on March 5, 1999.
ALLEGIANCE TELECOM, INC.
By /s/ ROYCE J. HOLLAND
---------------------------------
Royce J. Holland, Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Royce J. Holland, Thomas M. Lord, Dennis
M. Maunder and Mark B. Tresnowski and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
****
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on March 5, 1999.
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/s/ ROYCE J. HOLLAND Chairman of the Board and Chief Executive Officer (Principal
- ----------------------------------- Executive Officer)
Royce J. Holland
/s/ C. DANIEL YOST President, Chief Operating Officer and Director
- -----------------------------------
C. Daniel Yost
/s/ THOMAS M. LORD Executive Vice President, Chief Financial Officer, and
- ----------------------------------- Director (Principal Financial Officer)
Thomas M. Lord
/s/ DENNIS M. MAUNDER Vice President and Controller (Principal Accounting Officer)
- -----------------------------------
Dennis M. Maunder
/s/ JOHN J. CALLAHAN Senior Vice President of Sales and Marketing and Director
- -----------------------------------
John J. Callahan
/s/ PAUL D. CARBERY Director
- -----------------------------------
Paul D. Carbery
/s/ JAMES E. CRAWFORD, III Director
- -----------------------------------
James E. Crawford, III
</TABLE>
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<TABLE>
<S> <C>
/s/ JOHN B. EHRENKRANZ Director
- -----------------------------------
John B. Ehrenkranz
/s/ PAUL J. FINNEGAN Director
- -----------------------------------
Paul J. Finnegan
/s/ RICHARD D. FRISBIE Director
- -----------------------------------
Richard D. Frisbie
/s/ REED E. HUNDT Director
- -----------------------------------
Reed E. Hundt
/s/ JAMES N. PERRY, JR. Director
- -----------------------------------
James N. Perry, Jr.
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the
Company, incorporated by reference to Exhibit 3.1 of the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1998, filed with the Commission on August 12,
1998.
3.2 Amended and Restated Bylaws of the Company, incorporated by
reference to Exhibit 3.2 of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1998, filed
with the Commission on August 12, 1998.
4.1 Form of certificate representing shares of Common Stock, $.01
par value per share, incorporated by reference to Exhibit 4.5
of the Company's Registration Statement on Form S-1
(Registration File No. 333-53475).
*4.2 Allegiance Telecom, Inc. Employee Stock Discount Purchase
Plan.
*5.1 Opinion of Mark B. Tresnowski, Senior Vice President and
General Counsel of Allegiance Telecom, Inc., with respect to
the legality of the shares of the Common Stock being
registered hereby.
*23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Mark B. Tresnowski (included in Exhibit 5.1).
24.1 Powers of Attorney (included in Part II of this Registration
Statement).
</TABLE>
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* Filed herewith
<PAGE> 1
Exhibit 4.2
ALLEGIANCE TELECOM, INC.
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
The following constitutes the provisions of the Allegiance Telecom,
Inc. Employee Stock Discount Purchase Plan (the "Plan").
1. Purpose. The purpose of the Plan is to maintain competitive equity
compensation programs and to provide employees of Allegiance Telecom, Inc. (the
"Company") with an opportunity and incentive to acquire a proprietary interest
in the Company through the purchase of the Company's Common Stock, thereby more
closely aligning the interests of the Company's employees and shareholders. It
is the intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended ("Section 423"). Accordingly, the provisions of the Plan shall be
construed to extend and limit participation consistent with the requirements of
Section 423.
2. Definitions. Capitalized terms used in this Plan and not otherwise
defined have the meanings set forth below.
"Administrator" means the Compensation Committee, or the Board if the
Board asserts administrative authority over the Plan pursuant to Section 13.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the Common Stock of the Company.
"Compensation" means with respect to each participant for each pay
period, the full base salary or hourly compensation and any commissions and cash
bonus paid to such participant. Except as otherwise determined by the
Compensation Committee for all participants, "Compensation" does not include (i)
overtime pay or shift premiums, (ii) any amount contributed on behalf of a
participant to any pension plan or plan of deferred compensation, (iii) any
automobile or relocation allowances (or reimbursement for any such expenses),
(iv) any amounts realized as compensation from the exercise of qualified or
nonqualified stock options, (v) any amounts paid as a starting bonus or finder's
fee, (vi) any amounts paid to a participant in the form of fringe benefits, such
as health and welfare, hospitalization, and group life insurance benefits, or
perquisites, or paid in lieu of such benefits, such as cash-out credits
generated under a plan qualified under Code Section 125 or (vii) other similar
forms of extraordinary compensation.
"Compensation Committee" means a committee of members of the Board
meeting the qualifications described in Section 12 and appointed by the Board to
administer the Plan.
"Eligible Employee" means an Employee who has been an Employee for at
least three continuous months.
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"Employee" means any individual who is customarily employed for more
than twenty (20) hours per week and more than five (5) months in a calendar year
by the Company or a Subsidiary that is permitted to participate in the Plan
under Section 15(b). For purposes of the Plan, the employment relationship shall
be treated as continuing while the individual is on sick leave or other leave of
absence approved by the Company, except that when the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship will be deemed to have
terminated on the 91st day of such leave.
"Enrollment Date" means the first day of each Offering Period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Date" means the last day of each Offering Period.
"Fair Market Value" of the Common Stock on any date means the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including, without limitation, the Nasdaq
National Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported), as quoted on such
exchange or system (or the exchange or system with the greatest volume of
trading in the Common Stock) on the date of such determination (or, if such date
is not a Trading Day, then on the next preceding Trading Day), as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable; or
(ii) If the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotation System (but not on the
Nasdaq National Market) or is regularly quoted by a recognized securities dealer
but selling prices are not reported, its Fair Market Value shall be the mean
between the high and low asked prices for the Common Stock on the date of such
determination (or, if such date is not a Trading Day, then on the next preceding
Trading Day), as reported in the Wall Street Journal or such other source as the
Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value of the Common Stock shall be determined in good
faith by the Administrator.
"Offering Period" means each period of three (3) months ending on each
March 31, June 30, September 30 and December 31, provided that the initial
Offering Period shall commence as soon as practicable following consummation of
the Company's initial public offering. The Administrator shall have the power to
change the duration of Offering Periods without shareholder approval as set
forth in Section 11 or if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
"Option" means the option granted to each participant pursuant to
Section 4 upon enrollment in an Offering Period.
"Periodic Exercise Limit" has the meaning set forth in Section 4(a).
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"Plan Account" means an account maintained by the Company for each
participant in the Plan, to which are credited the payroll deductions made for
such participant pursuant to Section 5 and from which are debited amounts paid
for the purchase of shares upon exercise of such participant's Option pursuant
to Section 6.
"Purchase Price" as of any Exercise Date means an amount equal to 85%
of the Fair Market Value of a share of Common Stock on the Exercise Date or on
the Enrollment Date for the Offering Period in which such Exercise Date occurs,
whichever is lower.
"Reserves" means the number of shares of Common Stock covered by each
Option that have not yet been exercised and the number of shares of Common Stock
that have been authorized for issuance under the Plan, but not yet placed under
Option.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act and any successor
provision.
"Subsidiary" has the meaning as set forth under Section 424(f) of the
Code.
"Trading Day" means a day on which national stock exchanges and the
National Association of Securities Dealers Automated Quotation System are open
for trading.
3. Offering Periods and Participation. The Plan shall be implemented
through a series of consecutive Offering Periods. An Eligible Employee may
enroll in an Offering Period by delivering an executed enrollment form
prescribed by the Company to the Company. The enrollment form shall be delivered
to the Company a number of business days prior to the Enrollment Date for that
Offering Period, as specified by the Company. An enrollment form in effect for a
Plan participant for a particular Offering Period shall continue in effect for
subsequent Offering Periods if the participant remains an Eligible Employee and
has not withdrawn pursuant to Section 7.
4. Options.
(a) Grants. On the Enrollment Date for each Offering Period, each
Eligible Employee participating in such Offering Period shall be granted an
Option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to that number of shares of Common Stock
determined by dividing $12,500 by the Fair Market Value of a share of Common
Stock on the Enrollment Date (such number of shares being the "Periodic Exercise
Limit"). The Option shall expire immediately after the Exercise Date of the
Offering Period.
(b) Grant Limitations. Any provisions of the Plan to the contrary
notwithstanding, no participant shall be granted an Option under the Plan:
(i) if, immediately after the grant, such participant (taking into
account stock held by other persons that is attributed to such Employee pursuant
to Section 424(d) of the Code) would own stock and/or hold outstanding options
to purchase stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any
Subsidiary (as determined under Treasury Regulations Section 1.423-2(d)); or
(ii) which permits such participant's rights to purchase stock
under all employee stock purchase plans of the Company and its Subsidiaries to
accrue at a rate that exceeds Twenty-Five
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<PAGE> 4
Thousand Dollars ($25,000) worth of stock (determined at the Fair Market Value
of the shares at the time such Option is granted) in any calendar year.
(c) No Rights in Respect of Underlying Stock. The participant will have
no interest or voting right in shares covered by an Option until such Option has
been exercised.
5. Payroll Deductions.
(a) Participant Designations. The enrollment form applicable to an
Offering Period shall designate payroll deductions to be made on each payday
during the Offering Period as a whole number percentage not exceeding ten
percent (10%) of such Eligible Employee's Compensation for the pay period
preceding such payday, provided that the aggregate of such payroll deductions
during the Offering Period shall not exceed ten percent (10%) of the
participant's Compensation during said Offering Period.
(b) Plan Account Balances. The Company shall make payroll deductions as
specified in each participant's enrollment form on each payday during the
Offering Period and credit such payroll deductions to such participant's Plan
Account. A participant may not make any additional payments into such Plan
Account. No interest will accrue on any payroll deductions. All payroll
deductions received or held by the Company under the Plan may be used by the
Company for any corporate purpose, and the Company shall not be obligated to
segregate such payroll deductions.
(c) Participant Changes. A participant may discontinue his or her
participation in the Plan as provided in Section 7, or may increase or decrease
(subject to such limits as the Administrator may impose) the rate of his or her
payroll deductions during any Offering Period by filing with the Company a form
prescribed by the Company authorizing such a change in the payroll deduction
rate. The change in rate shall be effective as promptly as practicable after
such form has been received by the Company.
(d) Decreases. Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 4(b) herein, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period. Payroll deductions shall recommence at the rate provided in
such participant's enrollment form at the beginning of the first Offering Period
that is scheduled to end in the following calendar year, unless terminated by
the participant as provided in Section 7.
(e) Tax Obligations. At the time of each exercise of a participant's
Option, and at the time any Common Stock issued under the Plan to a participant
is disposed of, the participant must adequately provide for the Company's
federal, state, or other tax withholding obligations, if any, that arise upon
the exercise of the Option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefit attributable to sale or early disposition of
Common Stock by the Employee.
(f) Statements of Account. The Company shall maintain each
participant's Plan Account and shall give each Plan participant a statement of
account at least annually. Such statements will
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<PAGE> 5
set forth the amounts of payroll deductions, the Purchase Price, the number of
shares purchased and the remaining cash balance, if any, for the period covered.
6. Exercise of Options.
(a) Automatic Exercise on Exercise Dates. Unless a participant
withdraws as provided in Section 7, his or her Option for the purchase of shares
will be exercised automatically on the Exercise Date of the Offering Period in
which such participant is enrolled for the maximum number of shares of Common
Stock, including fractional shares, as can then be purchased at the applicable
Purchase Price with the payroll deductions accumulated in such participant's
Plan Account and not yet applied to the purchase of shares under the Plan,
subject to the Periodic Exercise Limit. During a participant's lifetime, a
participant's Options to purchase shares hereunder are exercisable only by the
participant.
(b) Delivery of Shares. As promptly as practicable after each Exercise
Date on which a purchase of shares occurs, the Company shall arrange the
delivery to each participant, as appropriate, of a certificate upon request or
book entry transfer representing the shares purchased upon exercise of his or
her Option, provided that the Company may in its discretion hold fractional
shares for the accounts of the participants pending aggregation to whole shares.
(c) Compliance with Law. Shares shall not be issued with respect to an
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant thereto comply with all applicable provisions of law, domestic
or foreign, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. As a condition to the exercise of an Option, the
Company may require the participant for whom an Option is exercised to represent
and warrant at the time of any such exercise that the shares are being purchased
only for investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned applicable provisions of law. Shares
issued upon purchase under the Plan may be subject to such transfer restrictions
and stop-transfer instructions as the Administrator deems appropriate.
(d) Excess Plan Account Balances. If, due to application of the
Periodic Exercise Limit, there remains in a participant's Plan Account
immediately following exercise of such participant's Option on an Exercise Date
any cash accumulated during the Purchase Period immediately preceding such
Exercise Date and not applied to the purchase of shares under the Plan, such
cash shall promptly be returned to the participant.
7. Withdrawal; Termination of Employment.
(a) Voluntary Withdrawal. Subject to Section 15(f), a participant may
withdraw from an Offering Period by giving written notice to the Company on a
form prescribed by the Company for that purpose. Such withdrawal must be elected
at least five (5) business days prior to the Exercise Date for which such
withdrawal is to be effective or by any other date specified by the Company for
any future Offering Period. Such withdrawal shall be effective as soon as
reasonably practicable after such notice has been received by the Company. On or
promptly following the effective date of any
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<PAGE> 6
withdrawal, all (but not less than all) of the withdrawing participant's payroll
deductions credited to his or her Plan Account and not yet applied to the
purchase of shares under the Plan will be paid to such participant. On the
effective date of such withdrawal, such participant's Option for the Offering
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made during the Offering Period. If a participant
withdraws from an Offering Period, payroll deductions will not resume at the
beginning of any succeeding Offering Period unless the participant delivers to
the Company a new enrollment form with respect thereto.
(b) Termination of Employment. Promptly after a participant's ceasing
to be an Employee for any reason the payroll deductions credited to such
participant's Plan Account and not yet applied to the purchase of shares under
the Plan will be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 9, and such
participant's Option will be automatically terminated; provided that, if the
Company does not learn of such death more than five (5) business days prior to
an Exercise Date, payroll deductions credited to such participant's Plan account
may be applied to the purchase of shares under the Plan on such Exercise Date.
8. Transferability. Neither payroll deductions credited to a
participant's Plan Account nor any rights with regard to the exercise of an
Option or to receive shares under the Plan may be assigned, transferred, pledged
or otherwise disposed of by the participant in any way other than by will, the
laws of descent and distribution or as provided in Section 9 hereof. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Administrator may treat such act as an election to
withdraw from an Offering Period in accordance with Section 7. The Administrator
may, in its discretion and consistent with applicable law, restrict the transfer
of shares purchased under the Plan by imposing a holding period not to exceed
one year from the date of issuance.
9. Designation of Beneficiary. A participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
Plan Account in the event of such participant's death and any shares purchased
for the participant upon exercise of his or her Option but not yet issued. If a
participant is married and the designated beneficiary is not the spouse, spousal
consent may be required for such designation to be effective. A designation of
beneficiary may be changed by a participant at any time by written notice to the
Company.
10. Stock. The maximum number of shares of the Company's Common Stock
that shall be made available for sale under the Plan shall be 2,305,718 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 11. If on a given Enrollment Date or Exercise Date the number of
shares with respect to which Options are to be granted or exercised exceeds the
number of shares then available under the Plan, the Administrator shall make a
pro rata allocation of the shares remaining available for purchase in as uniform
a manner as shall be practicable and as it shall determine to be equitable.
Shares of Common Stock subject to unexercised Options that expire, terminate or
are cancelled will again become available for the grant of further Options under
the Plan.
11. Adjustments upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the Purchase Price,
Periodic Exercise Limit, and other characteristics of the Options, shall be
appropriately and proportionately adjusted for any increase
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<PAGE> 7
or decrease or exchange in the issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, exchange or any other increase or decrease
in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
The Administrator may, if it so determines in the exercise of its sole
discretion, provide for adjusting the Reserves, as well as the Purchase Price,
Periodic Exercise Limit, and other characteristics of the Options, in the event
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the pending Offering Period will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Administrator, and all Plan Account balances will be
paid to participants as appropriate consistent with applicable law.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger or other
combination (the "Transaction") of the Company with or into another entity, each
Option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor entity or a parent or subsidiary of such successor
entity, unless the Administrator determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Exercise Date (the "New
Exercise Date"). If the Administrator shortens the Offering Period then in
progress in lieu of assumption or substitution, the Administrator shall notify
each participant in writing, at least ten (l0) days prior to the New Exercise
Date, that the Exercise Date for such participant's Option has been changed to
the New Exercise Date and that such participant's Option will be exercised
automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 7
(provided that, in such case, the participant's withdrawal shall be effective if
notice thereof is delivered to the Company at least five (5) business days prior
to the New Exercise Date). For purposes of this Section, an Option granted under
the Plan shall be deemed to be assumed if, following the Transaction, the Option
confers the right to purchase at the Purchase Price (provided that for such
purposes the Fair Market Value of the Common Stock on the New Exercise Date
shall be the value per share of the consideration paid in the Transaction), for
each share of stock subject to the Option immediately prior to the Transaction,
the consideration (whether stock, cash or other securities or property) received
in the Transaction by holders of Common Stock for each share of Common Stock
held on the effective date of the transaction (and if such holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the Transaction was not solely common equity of
the successor entity or its parent (as defined in Section 424(e) of the Code),
the Administrator may, with the consent of the successor entity and the
participant, provide for the consideration to be received upon exercise of the
Option to be solely common equity of the successor entity or its parent equal in
fair market value to the per share consideration received by holders of Common
Stock in the Transaction.
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<PAGE> 8
12. Administration. The Plan shall be administered by the Compensation
Committee, which shall have the authority to construe, interpret and apply the
terms of the Plan and any agreements defining the rights and obligations of the
Company and participants under the Plan, to prescribe, amend, and rescind rules
and regulations relating to the Plan, to determine eligibility and to adjudicate
all disputed claims filed under the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. The Administrator
may, in its discretion, delegate ministerial responsibilities under the Plan to
the Company. Every finding, decision and determination made by the Compensation
Committee shall, to the full extent permitted by law, be final and binding upon
all parties. Any action of the Compensation Committee shall be taken pursuant to
a majority vote or by the unanimous written consent of its members. The
Compensation Committee shall consist of three or more members of the Board, each
of whom shall be disinterested within the meaning of Rule 16b-3, provided,
however, that the number of members of the Compensation Committee may be reduced
or increased from time to time by the Board to the number required or allowed by
Rule 16b-3. The Board may from time to time in its discretion exercise any
responsibilities or authority allocated to the Compensation Committee under the
Plan. No member of the Compensation Committee or any designee thereof will be
liable for any action or determination made in good faith with respect to the
Plan or any transaction arising under the Plan.
13. Amendment or Termination.
(a) Administrator's Discretion. The Administrator may, at any time and
for any reason, terminate or amend the Plan. Except as provided in Section 11,
no such termination can affect Options previously granted, provided that an
Offering Period may be terminated by the Administrator on any Exercise Date if
the Administrator determines that such termination is in the best interests of
the Company and its shareholders. Except as provided herein, no amendment may
make any change in any Option theretofore granted that adversely affects the
rights of any participant. To the extent necessary to comply with and qualify
under Rule 16b-3 or under Section 423 (or any successor rule or provision or any
other applicable law or regulation), the Administrator shall obtain shareholder
approval of amendments to the Plan in such a manner and to such a degree as
required.
(b) Administrative Modifications. Without shareholder consent (except
as specifically required by applicable law or regulation) and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Administrator shall be entitled to amend the Plan to the extent
necessary to comply with and qualify under Rule 16b-3 and Section 423, change
the duration of the Offering Period, limit the frequency and/or number of
changes in payroll deductions during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a participant
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant's Compensation, and
establish such other limitations or procedures as the Administrator determines
in its sole discretion to be advisable and which are consistent with the Plan.
14. Term of Plan. The Plan shall become effective upon the first
Enrollment Date after its approval by the shareholders of the Company and shall
continue in effect for a term of ten (10) years unless sooner terminated
pursuant to Section 13.
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<PAGE> 9
15. Miscellaneous.
(a) Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
(b) Subsidiaries. The Administrator may from time to time in its
discretion permit Employees of any Subsidiary to participate in the Plan on the
same terms as Eligible Employees hereunder.
(c) Expenses. All costs and expenses incurred in administering the Plan
shall be paid by the Company, except that any stamp duties or transfer taxes
applicable to participation in the Plan may be charged to the account of such
participant by the Company. Any brokerage fees for the purchase of shares by a
participant shall be paid by the Company, but any brokerage fees for the sale of
shares by a participant shall be borne by the participant.
(d) Equal Rights and Privileges. All Employees of the Company (or of
any Subsidiary that is permitted to participate in the Plan under Section 15(b))
shall have equal rights and privileges under the Plan so that the Plan qualifies
as an "employee stock purchase" within the meaning of Section 423 (or any
successor provision of the Code) and the Treasury regulations thereunder. Any
provision of the Plan which is inconsistent with Section 423 (or any successor
provision of the Code) or applicable Treasury regulations shall, without further
act or amendment by the Company or the Board, be reformed to comply with the
requirements of Section 423 (or any successor provision of the Code) or
applicable Treasury regulations. This Section 15(d) shall take precedence over
all other provisions of the Plan.
(e) Exclusion From Retirement and Fringe Benefit Computation. To the
extent not prohibited by statutory law, no portion of the award of Options under
this Plan shall be taken into account as "wages," "salary," or other
"compensation" for any purpose, whether in determining eligibility, benefits, or
otherwise, under (i) any pension, retirement, profit sharing or other qualified
or nonqualified plan of deferred compensation, (ii) any employee welfare or
fringe benefit plan including, but not limited to, group insurance,
hospitalization, medical, and disability, or (iii) any form of extraordinary pay
including but not limited to, bonuses, sick pay, and vacation pay.
(f) Additional Restrictions of Rule 16b-3. The terms and conditions of
Options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such Options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions. Without limitation of the foregoing, the election
by a person subject to Section 16 of the Exchange Act to enroll in an Offering
Period may be made irrevocable for specific periods within the Offering Period.
(g) No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of an employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the
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<PAGE> 10
Company, and it shall not be deemed to interfere in any way with the Company's
right to terminate, or otherwise modify, an employee's employment at any time.
(h) Applicable Law. The laws of the State of Delaware shall govern all
matters relating to the Plan, except to the extent (if any) superseded by the
laws of the United States.
(i) Headings. Headings used herein are for convenience of reference
only and do not affect the meaning or interpretation of the Plan.
* * * *
<PAGE> 1
Exhibit 5.1
[Allegiance Telecom, Inc. Law Department Letterhead]
March 5, 1999
Allegiance Telecom, Inc.
1950 Stemmons Freeway, Suite 3026
Dallas, Texas 75207
Re: Allegiance Telecom, Inc.
Registration Statement on Form S-8
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of Allegiance
Telecom, Inc., a Delaware corporation (the "Company"). I am issuing this opinion
in connection with the proposed registration by the Company of 2,305,718 shares
(the "Shares") of its Common Stock, par value $.01 per share, pursuant to a
Registration Statement on Form S-8, filed with the Securities and Exchange
Commission on the date hereof under the Securities Act of 1933, as amended (the
"Act") (such Registration Statement, as amended or supplemented, is hereinafter
referred to as the "Registration Statement"). The Shares are to be issued by the
Company to its employees pursuant to the Allegiance Telecom, Inc. Employee Stock
Discount Purchase Plan (the "Plan").
In that connection, I have examined such corporate proceedings,
documents, records and matters of law as I have deemed necessary to enable me to
render this opinion.
For purposes of this opinion, I have assumed the authenticity of all
documents submitted to me as originals, the conformity to the originals of all
documents submitted to me as copies and the authenticity of the originals of all
documents submitted to me as copies. I have also assumed the legal capacity of
all natural persons, the genuineness of the signatures of persons signing all
documents in connection with which this opinion is rendered, the authority of
such persons signing on behalf of the parties thereto other than the Company and
the due authorization, execution and delivery of all documents by the parties
thereto other than the Company. As to any facts material to the opinions
expressed herein, I have relied upon the statements and representations of the
Company's officers and other representations of the Company and others.
My opinion expressed below is subject to the qualifications that I
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), or (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, I hereby advise you
that in my opinion:
(1) The Plan has been duly adopted by the Board of Directors of the
Company.
(2) The Shares are duly authorized and validly reserved for issuance
pursuant to the Plan and when: (a) the Registration Statement becomes effective
under the Act; (b) the Shares are issued in accordance with the terms of the
Plan; (c) the recipient provides the full consideration for such Shares as
required by the terms of the Plan (assuming in each case the consideration
received by the Company is at least equal to $0.01 per share); and (d)
certificates representing the Shares have been duly executed and delivered on
behalf of the Company and duly countersigned by the Company's transfer
agent/registrar, the Shares will be validly issued, fully paid and
nonassessable.
<PAGE> 2
Allegiance Telecom, Inc.
March 5, 1999
Page 2 of 2
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5.1 to the Registration Statement. In giving this
consent, I do not hereby admit that I am in the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Securities and Exchange Commission.
I express no opinion as to any laws other than the General Corporation
Law of the State of Delaware and the federal law of the United States of
America. I do not find it necessary for the purposes of this opinion, and
accordingly I do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states or securities laws of foreign
jurisdictions to the issuance and sale of the Shares.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. I assume
no obligation to revise or supplement this opinion should the applicable law be
changed by legislative action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
/s/ Mark B. Tresnowski
MARK B. TRESNOWSKI
Senior Vice President and General Counsel
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated April 24, 1998
(except for Note 10 which date is June 5, 1998), included in Allegiance Telecom,
Inc.'s Prospectus, dated June 30, 1998, which relates to Allegiance Telecom,
Inc.'s Registration Statement on Form S-1 (Registration File No. 333-53475), and
to all references to our Firm included in this Registration Statement on Form
S-8.
ARTHUR ANDERSEN LLP
Dallas, Texas
March 5, 1999
