<PAGE>
As filed with the Securities and Exchange Commission on August 2, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
____________________
FOCAL COMMUNICATIONS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-4167094
State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
200 North LaSalle Street, Suite 1100
Chicago, Illinois 60601
(Address of Principal Executive Offices)
1998 Equity and Performance Incentive Plan
(Full Title of the Plan)
____________________
Joseph A. Beatty
Executive Vice President and Chief Financial Officer
Focal Communications Corporation
200 North LaSalle Street, Suite 1100
Chicago, Illinois 60601
(Name and Address of Agent For Service)
(312) 895-8400
(Telephone Number, including Area Code, of Agent For Service)
With a copy to:
Elizabeth C. Kitslaar
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601-1692
(312) 269-4114
____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
Proposed Proposed
Maximum Maximum
Amount To Be Offering Price Aggregate Amount of
Title of Securities To Be Registered Registered Per Share /(1)/ Offering Price /(1)/ Registration Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 1,768,000 $17.98 $31,788,640.00 $8,838.00
shares
================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to paragraphs (c) and (h) of Rule 457 under the
Securities Act, on the basis of the average of high and low sale prices of
the shares of Common Stock, par value $.01 per share, of the Company (the
"Common Stock"), on the Nasdaq Market on July 28, 1999.
================================================================================
<PAGE>
PART II
=======
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
The following documents filed by Focal Communications Corporation (the
"Company" or the "Registrant") with the Securities and Exchange Commission (the
"Commission") are incorporated by reference in this Registration Statement:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1998, filed with the Commission on March 31, 1999, as
amended on Form 10-K/A, filed with the Commission on April 7, 1999;
(b) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, filed with the Commission on May 7, 1999, as
amended on Form 10-Q/A, filed with the Commission on July 6, 1999; and
(c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, filed with the Commission
on July 26, 1999 (Reg. No. 000-26821) (the "Form 8-A").
All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Registration Statement and prior to the filing of a post-effective amendment
indicating that all securities offered under this Registration Statement have
been sold, or deregistering all securities then remaining unsold, are also
incorporated by reference and shall be a part hereof from the date of filing of
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superceded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supercedes such
statement. Any such statement so modified or superceded shall not be deemed,
except as so modified or superceded, to constitute a part of this Registration
Statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers
We have statutory authority to indemnify our officers and directors. The
applicable provisions of the Delaware General Corporation Law state that, to the
extent an officer or director is successful on the merits or otherwise, a
corporation may indemnify any person who
<PAGE>
was or is a party or who is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (each, a "Person"),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement, actually and reasonably incurred by such Person, if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In any
threatened, pending or completed action by or in the right of the corporation, a
corporation also may indemnify any such Person for costs actually and reasonably
incurred by him in connection with that action's defense or settlement, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to, the best interests of the corporation; however, no indemnification
shall be made with respect to any claim, issue or matter as to which such Person
shall have been adjudged to be liable to the corporation, unless and only to the
extent that a court shall determine that such indemnity is proper.
Under the applicable provisions of the Delaware General Corporation Law,
any indemnification shall be made by the corporation only as authorized in the
specific case upon a determination that the indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct. Such determination shall be made:
(1) By the Board of Directors by a majority vote of the directors who
are not parties to such action, suit or proceeding, even if less than a
quorum;
(2) By a committee of such directors designated by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
if less than a quorum;
(3) If there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion; or
(4) By the stockholders.
The Company's certificate of incorporation and bylaws provide for
indemnification to the full extent permitted by the laws of the State of
Delaware against and with respect to threatened, pending or completed actions,
suits or proceedings arising from or alleged to arise from, a party's actions or
omissions as a director, officer, employee or agent of the Company or of any
subsidiary of the Company or of any other corporation, partnership, joint
venture, trust or other entity which he has served in such capacity at the
request of the Company if such acts or omissions occurred or were or are alleged
to have occurred, while said party was a director, officer, employee or agent of
the Company.
In addition, the Company maintains liability insurance for its directors
and officers.
2
<PAGE>
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits
Exhibit Number Description
- -------------- -----------
4.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit No. 3.3 to the
Company's Registration Statement on Form S-1 originally
filed with the Commission on May 7, 1999 (Registration No.
333-77995) (the "S-1"))
4.2 Amended and Restated By-Laws (incorporated by reference to
Exhibit No. 3.5 of the S-1)
4.3 Indenture with Harris Trust and Savings Bank, dated February
18, 1998 (incorporated by reference to Exhibit No. 4.1 to
the Company's Registration Statement on Form S-4 originally
filed with the Commission on August 13, 1998 (Registration
No. 333-49397) (the "S-4"))
4.4 Initial Global 12.125% Senior Discount Note Due February 15,
2008, dated Februrary 18, 1998 (incorporated by reference to
Exhibit No. 4.2 of the S-4)
4.5 Stock Purchase Agreement with Madison Dearborn Capital
Partners, L.P., Frontenac VI, L.P., Battery Ventures III,
L.P., Brian F. Addy, John R. Barnicle, Joseph Beatty, and
Robert C. Taylor Jr., dated November 27,1996 (incorporated
by reference to Exhibit No. 4.5 of the S-4)
4.6 Amendment No. 1 to Stock Purchase Agreement with Madison
Dearborn Capital Partners, L.P., Frontenac VI, L.P., Battery
Ventures III, L.P., Brian F. Addy, John R. Barnicle, Joseph
Beatty, and Robert C. Taylor Jr., dated January 23, 1998
(incorporated by reference to Exhibit No. 4.6 of the S-4)
4.7 Amendment No. 2 to Stock Purchase Agreement with Madison
Dearborn Capital Partners, L.P., Frontenac VI, L.P.,
Battery Ventures III, L.P., Brian F. Addy, John R.
Barnicle, Joseph Beatty, and Robert C. Taylor Jr., dated
as of August 21, 1998 (incorporated by reference to Exhibit
No. 4.8 to the Company's Quarterly Report on Form 10-Q for
the period ending September 30, 1998, originally filed with
the Securities and Exchange Commission on November 16, 1998
(the "3rd Quarter 1998 10-Q"))
4.8 Vesting Agreement with Madison Dearborn Capital Partners,
L.P., Brian F. Addy, John R. Barnicle, Joseph Beatty and
Robert C. Taylor, Jr., dated as of November 27, 1996
(incorporated by reference to Exhibit No. 4.1 of the 3rd
Quarter 1998 10-Q)
3
<PAGE>
4.9 Vesting Agreement with Frontenac VI, L.P., Brian F. Addy,
John R. Barnicle, Joseph Beatty and Robert C. Taylor, Jr.,
dated as of November 27, 1996 (incorporated by reference to
Exhibit No. 4.2 of the 3rd Quarter 1998 10-Q)
4.10 Vesting Agreement with Battery Ventures III, L.P., Brian F.
Addy, John R. Barnicle, Joseph Beatty and Robert C. Taylor,
Jr., dated as of November 27, 1996 (incorporated by
reference to Exhibit No. 4.3 of the 3rd Quarter 1998 10-Q)
4.11 Amendment No. 1 to Vesting Agreement and Consent as of
August 21, 1998, between the Company and Madison Dearborn
Capital Partners, L.P., Frontenac VI, L.P., Battery Ventures
III, L.P., Brian F. Addy, John R. Barnicle, Joseph Beatty
and Robert C. Taylor, Jr., dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.4 of the 3rd
Quarter 1998 10-Q)
4.12 Amendment No. 1 to Vesting Agreement and Consent as of
August 21, 1998, between the Company and Madison Dearborn
Capital Partners, L.P., Frontenac VI, L.P., Battery Ventures
III, L.P., Brian F. Addy, John R. Barnicle, Joseph Beatty
and Robert C. Taylor, Jr., dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.5 of the 3rd
Quarter 1998 10-Q)
4.13 Amendment No. 1 to Vesting Agreement and Consent as of
August 21, 1998, between the Company and Madison Dearborn
Capital Partners, L.P., Frontenac VI, L.P., Battery Ventures
III, L.P., Brian F. Addy, John R. Barnicle, Joseph Beatty
and Robert C. Taylor, Jr., dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.6 of the 3rd
Quarter 1998 10-Q)
4.14 Form of Restricted Stock Agreement, dated September 30, 1998
between the Company and each of Brian F. Addy, John R.
Barnicle, Joseph Beatty, and Robert C. Taylor, Jr.
(incorporated by reference to Exhibit No. 4.7 of the 3rd
Quarter 1998 10-Q)
4.15 Stockholders Agreement with Madison Dearborn Capital
Partners, L.P., Frontenac VI, L.P., Battery Ventures III,
L.P., Brian F. Addy, John R. Barnicle, Joseph Beatty, and
Robert C. Taylor Jr., dated November 27, 1996 (incorporated
by reference to Exhibit No. 4.11 of the S-4)
4.16 Amendment No. 1 to Stockholders Agreement with Madison
Dearborn Capital Partners, L.P., Frontenac VI, L.P., Battery
Ventures III, L.P., Brian F. Addy, John R. Barnicle, Joseph
Beatty, and Robert C. Taylor Jr., dated as of July 7, 1998
(incorporated by reference to Exhibit No. 4.9 of the 3rd
Quarter 1998 10-Q)
4
<PAGE>
4.17 Amendment No. 2 to Stockholders Agreement with Madison
Dearborn Capital Partners, L.P., Frontenac VI, L.P., Battery
Ventures III, L.P., Brian F. Addy, John R. Barnicle, Joseph
Beatty, and Robert C. Taylor Jr., dated as of August 21,
1998 (incorporated by reference to Exhibit No. 4.10 of the
3rd Quarter 1998 10- Q)
4.18 Amendment No. 3 to Stockholders Agreement with Madison
Dearborn Capital Partners, L.P., Frontenac VI, L.P., Battery
Ventures III, L.P., Brian F. Addy, John R. Barnicle, Joseph
Beatty, and Robert C. Taylor Jr., dated as of February 16,
1999 (incorporated by reference to Exhibit No. 4.16 to the
Company's Annual Report on Form 10-K for year ended December
31, 1998 originally filed with the Commission on March 31,
1998 (the "1998 10-K"))
4.19 Executive Stock Agreement and Employment Agreement
with Brian F. Addy, dated November 27, 1996 (incorporated
by reference to Exhibit No. 4.12 of the S-4)
4.20 Executive Stock Agreement and Employment Agreement
with John R. Barnicle, dated November 27, 1996
(incorporated by reference to Exhibit No. 4.13 of the S-4)
4.21 Executive Stock Agreement and Employment Agreement with
Joseph A. Beatty, dated November 27, 1996 (incorporated by
reference to Exhibit No. 4.14 of the S-4)
4.22 Executive Stock Agreement and Employment Agreement with
Robert C. Taylor, Jr., dated November 27, 1996 (incorporated
by reference to Exhibit No. 4.15 of the S-4)
4.23 Amendment No. 1 to Executive Employment Agreement and
Consent with Brian F. Addy, dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.11 of the 3rd
Quarter 1998 10-Q)
4.24 Amendment No. 1 to Executive Employment Agreement and
Consent with John R. Barnicle, dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.12 of the 3rd
Quarter 1998 10-Q)
4.25 Amendment No. 1 to Executive Employment Agreement and
Consent with Joseph Beatty, dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.13 of the 3rd
Quarter 1998 10-Q)
4.26 Amendment No. 1 to Executive Employment Agreement and
Consent with Robert C. Taylor, dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.14 of the 3rd
Quarter 1998 10-Q)
4.27 Registration Agreement with Madison Dearborn Capital
Partners, L.P., Frontenac VI, L.P., Battery Ventures III,
L.P., Brian F. Addy, John R.
5
<PAGE>
Barnicle, Joseph Beatty, and Robert C. Taylor Jr., dated
November 27, 1996 (incorporated by reference to Exhibit No.
4.16 of the S-4)
4.28 Amendment No. 1 to Registration Agreement with Madison
Dearborn Capital Partners, L.P., Frontenac VI, L.P., Battery
Ventures III, L.P., Brian F. Addy, John R. Barnicle, Joseph
Beatty, and Robert C. Taylor Jr., dated as of August 21,
1998 (incorporated by reference to Exhibit No. 4.15 of the
3rd Quarter 1998 10-Q)
4.29 Amendment No. 4 to Stockholders Agreement with Madison
Dearborn Capital Partners, L.P., Frontenac VI, L.P., Battery
Ventures III, L.P., Brian F. Addy, John R. Barnicle, Joseph
Beatty and Robert C. Taylor, Jr., dated as of May 21, 1999
(incorporated by reference to Exhibit No. 4.27 of the S-1)
4.30 1998 Equity and Performance Incentive Plan, as amended and
restated effective July 23, 1999
4.31 Form of Non-Qualified Stock Option Agreement for use in
connection with the 1998 Equity and Performance Incentive
Plan
5.1 Opinion of Jones, Day, Reavis & Pogue
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1)
23.2 Consent of Independent Public Accountants
24.1 Power of Attorney
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 the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which is
registered) and any deviation from the low or high of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume
6
<PAGE>
and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the Registration Statement is on Form S-3, Form S-8 or Form F-
3, and 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 the 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.
(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 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 the Registration Statement 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.
(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 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 Act and
will be governed by the final adjudication of such issue.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Chicago, State of Illinois, on August 2, 1999.
FOCAL COMMUNICATIONS CORPORATION
By: /s/ Robert C. Taylor
------------------------
Robert C. Taylor
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert C. Taylor, Jr. Director, President and August 2, 1999
- ------------------------------------
Robert C. Taylor, Jr. Chief Executive Officer
/s/ John R. Barnicle Director, Executive Vice August 2, 1999
- ------------------------------------
John R. Barnicle President and Chief
Operating Officer
/s/ Joseph A. Beatty Executive Vice President and August 2, 1999
- ------------------------------------
Joseph A. Beatty Chief Financial Officer
/s/ Gregory J. Swanson Controller August 2, 1999
- ------------------------------------
Gregory J. Swanson
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C>
/s/ James E. Crawford, III Director August 2, 1999
- ------------------------------------
James E. Crawford, III
/s/ John A. Edwardson Director August 2, 1999
- ------------------------------------
John A. Edwardson
/s/ Paul J. Finnegan Director August 2, 1999
- ------------------------------------
Paul J. Finnegan
/s/ Richard D. Frisbie Director August 2, 1999
- ------------------------------------
Richard D. Frisbie
/s/ James N. Perry, Jr. Director August 2, 1999
- ------------------------------------
James N. Perry, Jr.
/s/ Paul A. Yovovich Director August 2, 1999
- ------------------------------------
Paul A. Yovovich
</TABLE>
* Joseph A. Beatty, the undersigned attorney-in-fact, by signing his name
hereto, does hereby sign and execute this Registration Statement on behalf of
the above indicated Registrant and officers and directors thereof (constituting
a majority of the directors) pursuant to a Power of Attorney filed with the
Securities and Exchange Commission.
August 2, 1999 By: /s/ Joseph A. Beatty
----------------------------------
Joseph A. Beatty
Executive Vice President and
Chief Financial Officer
9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description Numbered Page
- -------------- ----------- ---------------
<S> <C> <C>
4.1 Amended and Restated Certificate of Incorporation Incorporated by
(incorporated by reference to Exhibit No. 3.3 to the reference
Company's Registration Statement on Form S-1
originally filed with the Commission on May 7, 1999
(Registration No. 333-77995) (the "S-1"))
4.2 Amended and Restated By-Laws (incorporated by Incorporated by
reference to Exhibit No. 3.5 to the S-1) reference
4.3 Indenture with Harris Trust and Savings Bank, dated Incorporated by
February 18, 1998 (incorporated by reference to reference
Exhibit No. 4.1 to the Company's Registration
Statement on Form S-4 originally filed with the
Securities and Exchange Commission on August 13,
1998 (Registration No. 333-49397) (the "S-4"))
4.4 Initial Global 12.125% Senior Discount Note Due Incorporated by
February 15, 2008, dated February 18, 1998 reference
(incorporated by reference to Exhibit No. 4.2 of the
S-4)
4.5 Stock Purchase Agreement with Madison Dearborn Incorporated by
Capital Partners, L.P., Frontenac VI, L.P., Battery reference
Ventures III, L.P., Brian F. Addy, John R. Barnicle,
Joseph Beatty, and Robert C. Taylor Jr., dated
November 27, 1996 (incorporated by reference to
Exhibit No. 4.5 of the S-4)
4.6 Amendment No. 1 to Stock Purchase Agreement Incorporated by
with Madison Dearborn Capital Partners, L.P., reference
Frontenac VI, L.P., Battery Ventures III, L.P., Brian
F. Addy, John R. Barnicle, Joseph Beatty, and
Robert C. Taylor Jr., dated January 23, 1998
(incorporated by reference to Exhibit No. 4.6 of the
S-4)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description Numbered Page
- -------------- ----------- ---------------
<S> <C> <C>
4.7 Amendment No. 2 to Stock Purchase Agreement Incorporated by
with Madison Dearborn Capital Partners, L.P., reference
Frontenac VI, L.P., Battery Ventures III, L.P., Brian
F. Addy, John R. Barnicle, Joseph Beatty, and
Robert C. Taylor Jr., dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.8 to the
Company's Quarterly Report on Form 10-Q for the
period ending September 30, 1998, originally filed
with the Commission on November 16, 1998 (the
"3rd Quarter 1998 10-Q"))
4.8 Vesting Agreement with Madison Dearborn Capital Incorporated by
Partners, L.P., Brian F. Addy, John R. Barnicle, reference
Joseph Beatty and Robert C. Taylor, Jr., dated as of
November 27, 1996 (incorporated by reference to
Exhibit No. 4.1 of the 3rd Quarter 1998 10-Q)
4.9 Vesting Agreement with Frontenac VI, L.P., Incorporated by
Brian F. Addy, John R. Barnicle, Joseph Beatty and reference
Robert C. Taylor, Jr., dated as of November 27,
1996 (incorporated by reference to Exhibit No. 4.2
of the 3rd Quarter 1998 10-Q)
4.10 Vesting Agreement with Battery Ventures III, L.P., Incorporated by
Brian F. Addy, John R. Barnicle, Joseph Beatty and reference
Robert C. Taylor, Jr., dated as of November 27,
1996 (incorporated by reference to Exhibit No. 4.3
of the 3rd Quarter 1998 10-Q)
4.11 Amendment No. 1 to Vesting Agreement and Incorporated by
Consent as of August 21, 1998, between the reference
Company and Madison Dearborn Capital Partners,
L.P., Frontenac VI, L.P., Battery Ventures III, L.P.,
Brian F. Addy, John R. Barnicle, Joseph Beatty and
Robert C. Taylor, Jr., dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.4 of the
3rd Quarter 1998 10-Q)
4.12 Amendment No. 1 to Vesting Agreement and Incorporated by
Consent as of August 21, 1998, between the reference
Company and Madison Dearborn Capital Partners,
L.P., Frontenac VI, L.P., Battery Ventures III, L.P.,
Brian F. Addy, John R. Barnicle, Joseph Beatty and
Robert C. Taylor, Jr., dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.5 of the
3rd Quarter 1998 10-Q)
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description Numbered Page
- -------------- ----------- ---------------
<S> <C> <C>
4.13 Amendment No.1 to Vesting Agreement and Incorporated by
Consent as of August 21, 1998, between the reference
Company and Madison Dearborn Capital Partners,
L.P., Frontenac VI, L.P., Battery Ventures III, L.P.,
Brian F. Addy, John R. Barnicle, Joseph Beatty and
Robert C. Taylor, Jr., dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.6 of the
3rd Quarter 1998 10-Q)
4.14 Form of Restricted Stock Agreement, dated Incorporated by
September 30, 1998 between the Company and each reference
of Brian F. Addy, John R. Barnicle, Joseph Beatty,
and Robert C. Taylor, Jr. (incorporated by reference
to Exhibit No. 4.7 of the 3rd Quarter 1998 10-Q)
4.15 Stockholders Agreement with Madison Dearborn Incorporated by
Capital Partners, L.P., Frontenac VI, L.P., Battery reference
Ventures III, L.P., Brian F. Addy, John R. Barnicle,
Joseph Beatty, and Robert C. Taylor Jr., dated
November 27, 1996 (incorporated by reference to
Exhibit No. 4.11 of the S-4)
4.16 Amendment No. 1 to Stockholders Agreement with Incorporated by
Madison Dearborn Capital Partners, L.P., Frontenac reference
VI, L.P., Battery Ventures III, L.P., Brian F. Addy,
John R. Barnicle, Joseph Beatty, and Robert C.
Taylor Jr., dated as of July 7, 1998 (incorporated by
reference to Exhibit No. 4.9 of the 3rd Quarter 1998
10-Q)
4.17 Amendment No. 2 to Stockholders Agreement with Incorporated by
Madison Dearborn Capital Partners, L.P., Frontenac reference
VI, L.P., Battery Ventures III, L.P., Brian F. Addy,
John R. Barnicle, Joseph Beatty, and Robert C.
Taylor Jr., dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.10 of
the 3rd Quarter 1998 10-Q)
4.18 Amendment No. 3 to Stockholders Agreement with Incorporated by
Madison Dearborn Capital Partners, L.P., Frontenac reference
VI, L.P., Battery Ventures III, L.P., Brian F. Addy,
John R. Barnicle, Joseph Beatty, and Robert C.
Taylor Jr., dated as of February 16, 1999
(incorporated by reference to Exhibit No. 4.16 to
the Company's Annual Report on Form 10-K for
year ended December 31, 1998 originally filed with
the Commission on March 31, 1998 (the "1998 10-
K"))
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description Numbered Page
- -------------- ----------- ---------------
<S> <C> <C>
4.19 Executive Stock Agreement and Employment Incorporated by
Agreement with Brian F. Addy, dated November 27, reference
1996 (incorporated by reference to Exhibit No. 4.12
of the S-4)
4.20 Executive Stock Agreement and Employment Incorporated by
Agreement with John R. Barnicle, dated November reference
27, 1996 (incorporated by reference to Exhibit No.
4.13 of the S-4)
4.21 Executive Stock Agreement and Employment Incorporated by
Agreement with Joseph A. Beatty, dated November reference
27, 1996 (incorporated by reference to Exhibit No.
4.14 of the S-4)
4.22 Executive Stock Agreement and Employment Incorporated by
Agreement with Robert C. Taylor, Jr., dated reference
November 27, 1996 (incorporated by reference to
Exhibit No. 4.15 of the S-4)
4.23 Amendment No. 1 to Executive Employment Incorporated by
Agreement and Consent with Brian F. Addy, dated reference
as of August 21, 1998 (incorporated by reference to
Exhibit No. 4.11 of the 3rd Quarter 1998 10-Q)
4.24 Amendment No. 1 to Executive Employment Incorporated by
Agreement and Consent with John R. Barnicle, reference
dated as of August 21, 1998 (incorporated by
reference to Exhibit No. 4.12 of the 3rd Quarter
1998 10-Q)
4.25 Amendment No. 1 to Executive Employment Incorporated by
Agreement and Consent with Joseph Beatty, dated reference
as of August 21, 1998 (incorporated by reference to
Exhibit No. 4.13 of the 3rd Quarter 1998 10-Q)
4.26 Amendment No. 1 to Executive Employment Incorporated by
Agreement and Consent with Robert C. Taylor, reference
dated as of August 21, 1998 (incorporated by
reference to Exhibit No. 4.14 of the 3rd Quarter
1998 10-Q)
4.27 Registration Agreement with Madison Dearborn Incorporated by
Capital Partners, L.P., Frontenac VI, L.P., Battery reference
Ventures III, L.P., Brian F. Addy, John R. Barnicle,
Joseph Beatty, and Robert C. Taylor Jr., dated
November 27, 1996 (incorporated by reference to
Exhibit No. 4.16 of the S-4)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description Numbered Page
- -------------- ----------- ---------------
<S> <C> <C>
4.28 Amendment No. 1 to Registration Agreement with Incorporated by
Madison Dearborn Capital Partners, L.P., Frontenac reference
VI, L.P., Battery Ventures III, L.P., Brian F. Addy,
John R. Barnicle, Joseph Beatty, and Robert C.
Taylor Jr., dated as of August 21, 1998
(incorporated by reference to Exhibit No. 4.15 of
the 3rd Quarter 1998 10-Q)
4.29 Amendment No. 4 to Stockholders Agreement with Incorporated by
Madison Dearborn Capital Partners, L.P., reference
Frontenac VI, L.P., Battery Ventures III, L.P.,
Brian F. Addy, John R. Barnicle, Joseph Beatty and
Robert C. Taylor, Jr., dated as of May 21, 1999
(incorporated by reference to Exhibit No. 4.27 of
the S-1)
4.30 1998 Equity and Performance Incentive Plan, as
amended and restated effective August 1, 1999 15
4.31 Form of Non-Qualified Stock Option Agreement for
use in connection with the 1998 Equity and
Performance Incentive Plan 30
5.1 Opinion of Jones, Day, Reavis & Pogue 36
23.1 Consent of Jones, Day, Reavis & Pogue (included in
Exhibit 5.1) 36
23.2 Consent of Independent Public Accountants 37
24.1 Power of Attorney 38
</TABLE>
14
<PAGE>
Exhibit 4.30
FOCAL COMMUNICATIONS CORPORATION
1998 Equity and Performance Incentive Plan
1. Purpose. The purpose of the 1998 Equity and Performance Incentive
Plan is to attract and retain consultants, officers and other key employees of
Focal Communications Corporation, a Delaware corporation, and its Subsidiaries
and to provide to such persons incentives and rewards for superior performance.
2. Definitions. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Section 5 of
this Plan and includes both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"Base Price" means the price to be used as the basis for determining
the Spread upon the exercise of a Free-Standing Appreciation Right and a Tandem
Appreciation Right.
"Board" means the Board of Directors of the Company and, to the extent
of any delegation by the Board to a committee (or subcommittee thereof) pursuant
to Section 15 of this Plan, such committee (or subcommittee).
"Change in Control" shall have the meaning ascribed thereto in Section
11 of this Plan.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Common Shares" means the shares of Class A Common Stock, par value
$.01 per share, of the Company or any security into which such Common Shares may
be converted or exchanged by reason of any transaction or event of the type
referred to in Section 10 of this Plan.
"Company" means Focal Communications Corporation, a Delaware
corporation.
"Covered Employee" means a Participant who is, or is determined by the
Board to be likely to become, a "covered employee" within the meaning of Section
162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which a grant
of Option Rights, Appreciation Rights, Performance Shares or Performance Units
or a grant or sale of Restricted Shares or Deferred Shares shall become
effective (which shall not be earlier than the date on which the Board takes
action with respect thereto).
"Deferral Period" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 7 of this Plan.
<PAGE>
"Deferred Shares" means an award pursuant to Section 7 of this Plan of
the right to receive Common Shares at the end of a specified Deferral Period.
"Director" means a member of the Board of Directors of the Company.
"Eligible Transferee" means one or more (i) one or more members of the
Participant's immediate family (as the term "immediate family" is defined in
Rule 16a-1(e) promulgated under Section 16(a) of the Exchange Act (or any
successor rule to the same effect), as in effect from time to time), (ii) one or
more trusts established solely for the benefit of one or more members of the
Participant's immediate family, (iii) one or more corporations or limited
liability companies in which the only equity holders are members of the
Participant's immediate family or (iv) one or more partnerships in which the
only partners are members of the Participant's immediate family.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, as such statute, rules and regulations
may be amended from time to time.
"Free-Standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right.
"Incentive Stock Options" means Option Rights that are intended to
qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
"Initial Public Offering" means the initial underwritten offering of
equity securities of the Company to the general public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission pursuant to the Securities Act; provided that neither of the
following shall constitute an Initial Public Offering (i) any issuance of Common
Shares as consideration or financing for a merger or acquisition, or (ii) any
issuance of Common Shares or rights to acquire Common Shares to employees of the
Company as part of an incentive or compensation plan.
"Management Objectives" means the measurable performance objective or
objectives established pursuant to this Plan for Participants who have received
grants of Performance Shares or Performance Units (or, when so determined by the
Board, Option Rights, Appreciation Rights, Restricted Shares and dividend
credits) under this Plan. Management Objectives may be described in terms of
Company-wide objectives or objectives that are related to the performance of the
individual Participant or the Subsidiary, division, department, region or
function within the Company or Subsidiary in which the Participant is employed.
The Management Objectives may be made relative to the performance of other
corporations. The Management Objectives applicable to any award to a Covered
Employee shall be based on specified levels of or growth in one or more of the
following criteria:
(i) market value;
(ii) book value;
(iii) market share;
(iv) operating profit;
(v) net income;
(vi) cash flow;
2
<PAGE>
(vii) earnings, including earnings before interest, taxes,
depreciation and other non-cash items;
(viii) debt/capital ratio;
(ix) return on capital;
(x) return on equity;
(xi) costs or expenses;
(xii) net assets;
(xiii) return on assets;
(xiv) margins;
(xv) earnings per share growth;
(xvi) revenue growth;
(xvii) product volume growth, including growth in lines in service
or minutes of use; and
(xix) total return to shareholders.
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
the Company conducts its business, or other events or circumstances render the
Management Objectives unsuitable, the Committee may in its discretion modify
such Management Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems appropriate and
equitable; provided, however, the Committee shall not make any modification of
the Management Objectives or minimum acceptable level of achievement in the case
of a Covered Employee where such action would result in the loss of the
otherwise available exemption of the award under Section 162(m) of the Code.
"MDCP" means Madison Dearborn Capital Partners, L.P., a Delaware
limited partnership.
"Market Value per Share" means, as of any particular date, (i) the
closing sale price per Common Share as reported on the principal exchange on
which Common shares are then trading, if any, or, if applicable, the NASDAQ
National Market System, on the Date of Grant, or if there are no sales on such
day, on the next preceding trading day during which a sale occurred, or (ii) if
clause (i) does not apply, the fair market value of the Common Shares as
determined by the Board.
"Non-Employee Director" means a person who is a "non-employee
director" of the Company within the meaning of Rule 16b-3.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable upon exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares upon exercise
of an option granted pursuant to Section 4 of this Plan.
"Outside Director" means a person who is an "outside director" of the
Company within the meaning of Section 162(m) of the Code.
3
<PAGE>
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and who is at the time a consultant, an officer or
other key employee of the Company or any one or more of its Subsidiaries or who
has agreed to commence serving in any of such capacities.
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating to such Performance Share
or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 8 of this Plan.
"Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
"Plan" means this Focal Communications Corporation 1998 Equity and
Performance Incentive Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 4(g) of this Plan.
"Restricted Shares" means Common Shares granted or sold pursuant to
Section 6 of this Plan as to which neither the substantial risk of forfeiture
nor the restrictions on transfer referred to in Section 6 of this Plan have
expired.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act (or
any successor rule to the same effect), as in effect from time to time.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations promulgated thereunder, as amended from time to time.
"Spread" means the excess of the Market Value per Share on the date
when an Appreciation Right is exercised, or on the date when Option Rights are
surrendered in payment of the Option Price of other Option Rights, over the
Option Price or Base Price provided for in the related Option Right or Free-
Standing Appreciation Right, respectively.
"Subsidiary" means a corporation, company or other entity (i) more
than 50 percent of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) are, or
(ii) which does not have outstanding shares or securities (as may be the case in
a partnership, joint venture or unincorporated association) but more than 50
percent of whose ownership interest representing the right generally to make
decisions for such other entity is, now or hereafter, owned or controlled,
directly or indirectly, by the Company except that, for the purposes of
determining whether any person may be a Participant for the purposes of any
grant of Incentive Stock Options, "Subsidiary" means any corporation in which
the Company at the time of grant, owns or controls, directly or indirectly, more
than 50 percent of the total combined voting power represented by all classes of
stock issued by such corporation.
4
<PAGE>
"Tandem Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an Option
Right.
"Tax-Qualified Option" means an Option Right that is intended to
qualify under particular provisions of the Code, including but not limited to an
Incentive Stock Option.
"Termination Date" means the tenth anniversary of the date on which
this Plan is first approved by the stockholders of the Company.
"Voting Power" means at any time, the total votes relating to the
then-outstanding securities entitled to vote generally in the election of
Directors.
3. Shares Available Under the Plan. (a) Subject to adjustment as provided
in Section 3(b) and Section 10 of this Plan, the number of Common Shares that
may be issued or transferred (i) upon the exercise of Option Rights or
Appreciation Rights, (ii) as Restricted Shares and subsequently released from
substantial risks of forfeiture, (iii) as Deferred Shares, (iv) in payment of
Performance Shares or Performance Units that have been earned, or (v) in payment
of dividend equivalents paid with respect to awards made under this Plan, shall
not in the aggregate exceed a number of Common Shares equal to 3,536 Common
Shares, plus (z) any Common Shares described in Section 3(b). Such Common Shares
may be shares of original issuance or treasury shares or a combination thereof.
(b) The number of Common Shares available in Section 3(a) above shall
be adjusted to account for Common Shares relating to awards that expire, are
forfeited or are transferred, surrendered or relinquished upon the payment of
any Option Price by the transfer to the Company of Common Shares or upon
satisfaction of any withholding amount. Upon payment in cash of the benefit
provided by any award granted under this Plan, any Common Shares that were
covered by that award shall again be available for issuance or transfer
hereunder.
(c) Notwithstanding anything in this Section 3 or elsewhere in this
Plan to the contrary and subject to adjustment as provided in Section 10 of this
Plan, (i) the aggregate number of Common Shares actually issued or transferred
by the Company upon the exercise of Incentive Stock Options shall not exceed
5,000 Common Shares; (ii) no Participant shall be granted Option Rights and
Appreciation Rights for more than an aggregate of 1,000 Common Shares during any
calendar year; and (iii) the number of Common Shares issued as Restricted Shares
shall not in the aggregate exceed 2,500.
(d) Notwithstanding any other provision of this Plan to the contrary,
in no event shall any Participant in any calendar year receive an award of
Performance Shares or Performance Units having an aggregate maximum value as of
their respective Dates of Grant in excess of $5,000,000.
4. Option Rights. The Board may from time to time authorize grants to
Participants of options to purchase Common Shares. Each such grant may utilize
any or all of the authorizations, and shall be subject to all of the
requirements, contained in the following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains, subject to the limitations set forth in Section 3 of this Plan.
5
<PAGE>
(b) Each grant shall specify an Option Price per share, which may not
be less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent acceptable to the Company, (ii) by the tender to the
Company of Common Shares owned by the Participant and registered in the name of
the Participant having an aggregate fair market value on the date of exercise
equal to the total Option Price, such fair market value to be determined based
on the Market Value per Share on the date of exercise, (iii) by delivery of
irrevocable instructions to a financial institution or broker to deliver
promptly to the Company sale or loan proceeds with respect to the Common Shares
sufficient to pay the total Option Price, (iv) through the written election of
the Optionee to have Common Shares withheld by the Company from the Common
Shares otherwise to be received, with such withheld shares having an aggregate
fair market value on the date of exercise equal to the total Option Price of the
shares being purchased, and (v) any combination of the foregoing methods of
payment.
(d) The Board may determine, at or after the Date of Grant, that
payment of the Option Price of any Option Right (other than an Incentive Stock
Option) may also be made in whole or in part in the form of Restricted Shares or
other Common Shares that are forfeitable or subject to restrictions on transfer,
Deferred Shares, Performance Shares (based, in each case, on the Market Value
per Share on the date of exercise), other Option Rights (based on the Spread on
the date of exercise) or Performance Units. Unless otherwise determined by the
Board at or after the Date of Grant, whenever any Option Price is paid in whole
or in part by means of any of the forms of consideration specified in this
Section 4(d), the Common Shares received upon the exercise of the Option Rights
shall be subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that apply to the consideration surrendered, but only to the
extent determined with respect to the consideration surrendered, of (i) the
number of shares or Performance Shares, (ii) the Spread of any unexercisable
portion of Option Rights, or (iii) the stated value of Performance Units.
(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a broker on a date satisfactory to the Company
of some or all of the Common Shares to which such exercise relates.
(f) Any grant may provide for payment of the Option Price, at the
election of the Optionee, in installments (with or without interest) upon terms
determined by the Board.
(g) On or after the Date of Grant of any Option Rights, the Board may
provide for the automatic grant of Reload Option Rights to an Optionee upon the
exercise of Option Rights (including Reload Option Rights) using Common Shares
or other consideration specified in Section 4(d). Reload Option Rights shall
cover up to the number of Common Shares, Deferred Shares, Option Rights or
Performance Shares (or the number of Common Shares having a value equal to the
value of any Performance Units) surrendered to the Company upon any such
exercise in payment of the Option Price or to meet any withholding obligations.
Reload Options may have an Option Price that is less than the applicable Market
Value per Share at the time of exercise and shall be on such other terms as may
be specified by the Directors, which may be the same as or different from those
of the original Option Rights.
6
<PAGE>
(h) Successive grants may be made to the same Participant regardless
of whether any Option Rights previously granted to such Participant remain
unexercised.
(i) Each grant shall specify the period or periods of continuous
service by the Optionee with the Company or any Subsidiary or shall specify such
different or additional conditions as the Board may determine (including the
achievement of Management Objectives), that must be satisfied before the Option
Rights or installments thereof will become exercisable and may provide for the
earlier exercise of such Option Rights in the event of a Change in Control or
other events.
(j) Option Rights granted under this Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing.
(k) On or after the Date of Grant of any Option Rights (other than
Incentive Stock Options), the Board may provide for the payment of dividend
equivalents to the Optionee on a current, deferred or contingent basis or may
provide that any such equivalents shall be credited against the Option Price.
(l) The exercise of an Option Right shall result in the cancellation
on a share-for-share basis of any Tandem Appreciation Right authorized under
Section 5 of this Plan.
(m) No Option Right shall be exercisable more than 10 years from the
Date of Grant.
(n) Each grant of Option Rights shall be evidenced by an agreement
executed on behalf of the Company by an officer thereof and delivered to the
Optionee and containing such terms and provisions as the Board may approve
consistent with this Plan.
5. Appreciation Rights. (a) The Board may authorize the granting of (i)
Tandem Appreciation Rights to any Optionee in respect of Option Rights granted
under this Plan, and (ii) Free-Standing Appreciation Rights to any Participant.
A Tandem Appreciation Right shall be a right of the Optionee, exercisable by
surrender of the related Option Right, to receive from the Company an amount
determined by the Board, which shall be expressed as a percentage of the Spread
(not exceeding 100 percent) at the time of exercise. Tandem Appreciation Rights
may be granted at any time prior to the exercise or termination of the related
Option Rights; provided, however, that a Tandem Appreciation Right awarded in
respect of an Incentive Stock Option must be granted concurrently with the
Incentive Stock Option. A Free-Standing Appreciation Right shall be a right of
the Participant to receive from the Company an amount determined by the Board,
which shall be expressed as a percentage of the Spread (not exceeding 100
percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(i) Any grant may specify that the amount payable upon exercise
of an Appreciation Right may be paid by the Company in cash, in Common
Shares or in any combination thereof and may either grant to the
Participant or retain in the Board the right to elect among those
alternatives.
7
<PAGE>
(ii) Any grant may specify that the amount payable upon
exercise of an Appreciation Right may not exceed a maximum specified by the
Board at the Date of Grant.
(iii) Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.
(iv) Any grant may specify that the Appreciation Right may be
exercised only in the event of, or earlier in the event of, a Change in
Control.
(v) Any grant may provide for the payment to the Participant
of dividend equivalents thereon in cash or Common Shares on a current,
deferred or contingent basis.
(vi) Any grant may specify Management Objectives that must be
achieved as a condition of the exercise of the subject Appreciation Rights.
(vii) Each grant of Appreciation Rights shall be evidenced by an
agreement executed on behalf of the Company by an officer thereof and
delivered to the Participant, which agreement shall describe such
Appreciation Rights, identify any related Option Rights, state that such
Appreciation Rights are subject to all of the terms and conditions of this
Plan, and contain such other terms and provisions as the Board may approve
consistent with this Plan.
(c) Any grant of Tandem Appreciation Rights shall provide that the
Tandem Appreciation Rights may be exercised only at a time when the related
Option Rights are also exercisable and the Spread is positive and by surrender
of the related Option Rights for cancellation.
(d) Regarding Free-Standing Appreciation Rights only:
(i) Each grant shall specify in respect of each Free-Standing
Appreciation Right a Base Price, which shall be equal to or greater or
less than the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant
regardless of whether any Free-Standing Appreciation Rights previously
granted to the Participant remain unexercised; and
(iii) No Free-Standing Appreciation Right granted under this
Plan may be exercised more than 10 years from the Date of Grant.
6. Restricted Shares. The Board may authorize the granting or sale of
Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, subject in each case to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred to.
8
<PAGE>
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted Shares
covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period to be
determined by the Board at the Date of Grant and may provide for the earlier
lapse of such substantial risk of forfeiture in the event of a Change in Control
or other events.
(d) Each such grant or sale of Restricted Shares shall provide that
during the period for which such substantial risk of forfeiture is to continue,
the transferability of the Restricted Shares shall be prohibited or restricted
in the manner and to the extent prescribed by the Board at the Date of Grant
(which restrictions may include, but shall not be limited to, rights of
repurchase or first refusal in the Company or provisions subjecting the
Restricted Shares to a continuing substantial risk of forfeiture in the hands of
any transferee).
(e) Any grant of Restricted Shares may specify Management Objectives
that, if achieved, will result in termination or early termination of the risk
of forfeiture and restrictions on transfer applicable to the subject Restricted
Shares. Each grant may specify in respect of any such Management Objectives a
minimum acceptable level of achievement and may set forth a formula for
determining the number of Restricted Shares on which restrictions will terminate
if performance is at or above such minimum level but falls short of full
achievement of the specified Management Objectives.
(f) Any such grant or sale of Restricted Shares may require that any
or all dividends or other distributions paid on the Restricted Shares during the
period of a risk of forfeiture and restrictions on transfer be automatically
deferred and reinvested in additional Restricted Shares, which may be subject to
the same restrictions as the underlying award.
(g) Each grant or sale of Restricted Shares shall be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to the
Participant and shall contain such terms and provisions as the Board may approve
consistent with this Plan. Unless otherwise directed by the Board, all
certificates representing Restricted Shares shall be held in custody by the
Company, together with a stock power or powers endorsed in blank by the
Participant in whose name such certificates are registered, until all
restrictions thereon shall have lapsed.
7. Deferred Shares. The Board may authorize the granting or sale of
Deferred Shares to Participants. Each such grant or sale may utilize any or all
of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute the agreement by the
Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services and subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify.
9
<PAGE>
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by the Participant that is less
than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject to a Deferral Period as
determined by the Board at the Date of Grant, and may provide for the earlier
lapse or other modification of such Deferral Period in the event of a Change in
Control or other event.
(d) During the Deferral Period, a Participant shall not have any
rights of ownership in the Deferred Shares, shall not have any right to vote the
Deferred Shares and, except as provided in Section 9(c) of this Plan, shall not
have any right to transfer any rights under his or her award, but at or after
the Date of Grant, the Board may authorize the payment of dividend equivalents
on the Deferred Shares on a current, deferred or contingent basis, in either
cash or additional Common Shares.
(e) Each grant or sale of Deferred Shares shall be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to the
Participant and shall contain such terms and provisions as the Board may approve
consistent with this Plan.
8. Performance Shares and Performance Units. The Board may authorize the
granting of Performance Shares and Performance Units that will become payable to
a Participant upon achievement of specified Management Objectives. Each such
grant may utilize any or all of the authorizations, and shall be subject to all
of the requirements, contained in the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment to
reflect changes in compensation or other factors; provided, however, that no
such adjustment shall be made in the case of a Covered Employee where such
action would result in the loss of the otherwise available exemption of the
award under Section 162(m) of the Code.
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be such period of time commencing with the Date of Grant,
as shall be determined by the Board at the time of grant, which may be subject
to earlier lapse or other modification in the event of a Change in Control or
other events as set forth in the agreement specified in Section 8(g).
(c) Each grant shall specify Management Objectives that, if achieved,
will result in payment or early payment of the award, and each grant may specify
in respect of the specified Management Objectives a minimum acceptable level of
achievement and shall set forth a formula for determining the number of
Performance Shares or Performance Units that will be earned if performance is at
or above the minimum level but falls short of full achievement of the specified
Management Objectives. The grant shall specify that, before the Performance
Shares or Performance Units shall be earned and paid, the Board must certify
that the specified Management Objectives have been satisfied.
10
<PAGE>
(d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the Company
in cash or Common Shares or any combination thereof and may either grant to the
Participant or retain in the Board the right to elect among those alternatives.
(e) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the Board at
the Date of Grant. Any grant of Performance Units may specify that the amount
payable or the number of Common Shares issuable or transferable with respect
thereto may not exceed maximums specified by the Board at the Date of Grant.
(f) At or after the Date of Grant of Performance Shares, the Board may
provide for the payment of dividend equivalents to the holder thereof on a
current, deferred or contingent basis, in either cash or additional Common
Shares.
(g) Each grant of Performance Shares or Performance Units shall be
evidenced by an agreement executed on behalf of the Company by any officer and
delivered to the Participant, which agreement shall state that such Performance
Shares or Performance Units are subject to all the terms and conditions of this
Plan and shall contain such other terms and provisions as the Board may approve
consistent with this Plan.
9. Transferability. (a) Except as otherwise determined by the Board, but
subject to Section 9(c), no Option Right, Appreciation Right or other derivative
security granted under the Plan shall be transferable by a Participant other
than by will or the laws of descent and distribution. Except as otherwise
determined by the Board, Option Rights and Appreciation Rights shall be
exercisable during the Optionee's lifetime only by him or her or by his or her
guardian or legal representative.
(b) The Board may specify at the Date of Grant that part or all of the
Common Shares that are to be issued or transferred by the Company upon the
exercise of Option Rights or Appreciation Rights, upon the termination of the
Deferral Period applicable to Deferred Shares or upon payment under any grant of
Performance Shares or Performance Units or are no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions on transfer.
(c) Notwithstanding the provisions of Section 9(a), but subject to
prior authorization by the Board, Option Rights (other than Incentive Stock
Options), Appreciation Rights, Restricted Shares, Deferred Shares, Performance
Shares and Performance Units shall be transferable by a Participant to an
Eligible Transferee, without payment of consideration therefor; provided,
however, that (i) no such transfer shall be effective unless reasonable prior
notice thereof is delivered to the Company and such transfer is thereafter
effected in accordance with any terms and conditions that shall have been made
applicable thereto by the Company or the Board and (ii) any such transferee
shall be subject to the same terms and conditions hereunder as the Participant.
10. Adjustments. The Board shall make or provide for such adjustments in
the numbers of Common Shares covered by outstanding Option Rights, Appreciation
Rights, Deferred Shares, and Performance Shares granted hereunder, in the Option
Price and Base Price provided in
11
<PAGE>
outstanding Option Rights and Appreciation Rights, and in the kind of shares or
other securities covered thereby, as the Board, in its sole discretion,
exercised in good faith, may determine is equitably required to prevent dilution
or expansion of the rights of Participants or Optionees that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing.
In the event of any such transaction or event, the Board, in its discretion, may
provide in substitution for any or all outstanding awards under this Plan such
alternative consideration as it, in good faith, may determine to be equitable in
the circumstances and may require in connection therewith the surrender of all
awards so replaced. The Board shall also make or provide for such adjustments in
the numbers of shares specified in Section 3 of this Plan as the Board in its
sole discretion, exercised in good faith, may determine is appropriate to
reflect any transaction or event described in this Section 10; provided,
however, that any such adjustment to the number specified in Section 3(c)(i)
shall be made only if and to the extent that such adjustment would not cause any
Option Right intended to qualify as an Incentive Stock Option to fail so to
qualify.
11. Change in Control. For the purposes of this Plan, except as may be
otherwise prescribed by the Board in an agreement evidencing a grant or award
made under the Plan, a "Change in Control" shall mean if at any time any of the
following events shall have occurred:
(a) The Company is merged or consolidated or reorganized with or into
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of Directors immediately
prior to such transaction;
(b) The Company sells or otherwise transfers all or substantially all
of its assets to any other corporation or other legal person, and less than a
majority of the combined voting power of the then-outstanding securities of such
corporation or person immediately after such sale or transfer is held in the
aggregate by the holders of Common Stock immediately prior to such sale or
transfer;
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), as promulgated in each case pursuant to the
Exchange Act, disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined in Rule 13d-3
promulgated under the Exchange Act or any successor rule or regulation
promulgated thereunder) of securities representing 50% or more of the Voting
Power; or
(d) If during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Directors and any new Directors
whose election or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were Directors at the beginning of the period or whose election was
previously so approved cease for any reason to constitute a majority of the
Directors.
12
<PAGE>
Notwithstanding the provisions of subparagraph (c) above, a "Change in
Control" shall not be deemed to have occurred for the purposes of this Agreement
(i) solely because MDCP either files or becomes obligated to file a report on
Schedule 13D (or any successor schedule or report), as promulgated pursuant to
the Exchange Act, disclosing beneficial ownership by it of securities
representing 50% or more of the Voting Power, (ii) solely because the Company or
any Company-sponsored employee stock ownership plan or other employee benefit
plan of the Company either files or becomes obligated to file a report or proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein), as
promulgated in each case pursuant to the Exchange Act, disclosing beneficial
ownership by it of securities representing 50% or more of the Voting Power or
otherwise, or because the Company reports that a change in control of the
Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership or (iii) solely because of a change in control of any
subsidiary (as the term "subsidiary" is defined in Section 424(f) of the Code)
of the Company.
12. Fractional Shares. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.
13. Withholding Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements (in the discretion of the Board) may include relinquishment
of a portion of such benefit. The Company and a Participant or such other
person may also make similar arrangements with respect to the payment of any
taxes with respect to which withholding is not required.
14. Foreign Employees. In order to facilitate the making of any grant or
combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to
or amendments, restatements or alternative versions of this Plan as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as having
been approved and adopted in the same manner as this Plan. No such special
terms, supplements, amendments or restatements, however, shall include any
provisions that are inconsistent with the terms of this Plan as then in effect
unless this Plan could have been amended to eliminate such inconsistency without
further approval by the stockholders of the Company.
15. Administration of the Plan. (a) (i) Subject to subsection (ii) of
this Section 15(a), this Plan shall be administered by the Board, which may from
time to time delegate all or any part of its authority under this Plan to a
committee of the Board (or subcommittee thereof) consisting of not less than two
Non-Employee Directors appointed by the Board.
13
<PAGE>
(ii) Awards of Option Rights and Appreciation Rights are, and certain
awards of Restricted Shares, Performance Shares and Performance Units may be,
intended to qualify as performance-based compensation under Section 162(m) of
the Code. The grant of such awards, and the administration thereof and any
determinations to be made in connection therewith, shall be carried out only by
a committee of the Board (or subcommittee thereof) consisting of not less than
two Outside Directors appointed by the Board. Such committee shall grant such
awards in a manner consistent with the rules governing performance-based
compensation under Section 162(m) of the Code.
(b) To the extent of any such delegation, references in this Plan to
the Board shall be deemed to be references to any such committee (or
subcommittee). The interpretation and construction by the Board of any provision
of this Plan or of any agreement, notification or document evidencing the grant
of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares,
Performance Shares or Performance Units and any determination by the Board
pursuant to any provision of this Plan or of any such agreement, notification or
document shall be final and conclusive. No member of the Board shall be liable
for any such action or determination made in good faith.
16. Amendments, Etc. (a) The Board may at any time and from time to time
amend this Plan in whole or in part; provided, however, any amendment that must
be approved by the stockholders of the Corporation in order to comply with
applicable law or the rules of the principal exchange on which the Common Shares
are then trading (or, if applicable, the NASDAQ National Market System) shall
not be effective unless and until such approval shall have been obtained. The
submission of this Plan or any amendment hereto for stockholder approval shall
not be construed to limit the Company's authority to offer similar or dissimilar
benefits under other plans without stockholder approval.
(b) With the concurrence of the affected Optionee, the Board may
cancel any agreement evidencing Option Rights granted under this Plan. In the
event of any such cancellation, the Board may authorize the granting of new
Option Rights hereunder, which may or may not cover the same number of Common
Shares as had been covered by the canceled Option Rights, at such Option Price,
in such manner and subject to such other terms, conditions and discretion as
would have been permitted under this Plan had the canceled Option Rights not
been granted.
(c) The Board also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for the
purposes of this Plan. The Board may also provide that deferred issuances and
settlements include the payment or crediting of dividend equivalents or interest
on the deferral amounts.
(d) The Board may condition the grant of any award or combination of
awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Company or a Subsidiary to the Participant.
(e) In the event of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right not immediately and fully exercisable, or any
14
<PAGE>
Restricted Shares as to which the substantial risk of forfeiture or the
restrictions on transfer have not lapsed, or any Deferred Shares as to which the
Deferral Period has not been completed, or any Performance Shares or Performance
Units that have not been fully earned, or who holds Common Shares subject to any
transfer restriction imposed pursuant to Section 9(b) of this Plan, the Board
may in its sole discretion accelerate the time at which such Option Right or
Appreciation Right may be exercised or the time at which such substantial risk
of forfeiture or restrictions on transfer will lapse or the time when such
Deferral Period will end or the time at which such Performance Shares or
Performance Units will be deemed to have been fully earned or the time when such
transfer restriction will terminate or may waive any other limitation or
requirement under any such award.
(f) This Plan shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or any
Subsidiary and shall not interfere in any way with any right the Company or any
Subsidiary would otherwise have to terminate any Participant's employment or
other service at any time.
(g) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, such provision shall be null and void with respect to such
Option Right; provided, however, that such provision shall remain in effect for
other Option Rights, and there shall be no further effect on any provision of
this Plan.
17. Effective Date and Termination. (a) The effective date of this Plan
shall be the date immediately prior to the date on which the Company consummates
its Initial Public Offering.
(b) No grant shall be made under this Plan after the Termination Date,
but all grants made on or before the Termination Date shall continue in effect
thereafter subject to the terms thereof and the terms of this Plan.
15
<PAGE>
Exhibit 4.31
[Standard Form]
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
THIS AGREEMENT (the "Agreement") is made as of ____________ (the "Date of
Grant") by and between Focal Communications Corporation, a Delaware corporation
(the "Company"), and __________________ (the "Optionee").
1. Definitions. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Company's 1998 Equity and
Performance Incentive Plan (the "Plan").
2. Grant of Stock Option. Subject to and upon the terms, conditions
and restrictions set forth in this Agreement and in the Plan, the Company hereby
grants to the Optionee as of the Date of Grant a stock option (the "Option") to
purchase _____________ shares of Common Stock (the "Optioned Shares"). The
Option may be exercised from time to time in accordance with the terms of this
Agreement. The price at which the Optioned Shares may be purchased pursuant to
this Option shall be _____________ per share, subject to adjustment as
hereinafter provided (the "Option Price"). The Option is intended to be a non-
qualified stock option and shall not be treated as an "incentive stock option"
within the meaning of that term under Section 422 of the Code, or any successor
provision thereto.
3. Term of Option. The term of the Option shall commence on the
Date of Grant and, unless earlier terminated in accordance with Section 7
hereof, shall expire ten (10) years from the Date of Grant.
4. Vesting of Option. Subject to the expiration or earlier
termination of the Option, the Optioned Shares granted hereby shall become
exercisable as follows:
(i) after one (1) year from the Date of Grant, the Optionee may purchase
up to ____________ percent (__%) of the Optioned Shares;
(ii) after two (2) years from the Date of Grant, the Optionee may purchase
up to ____________ percent (__%) of the Optioned Shares;
(iii) after three (3) years from the Date of Grant, the Optionee may
purchase up to ____________ percent (__%) of the Optioned Shares; and
(iv) after four (4) years from the Date of Grant, the Optionee may purchase
up to ___________ percent (__%) of the Optioned Shares.
To the extent the Option is exercisable, it may be exercised in whole or in
part. In no event shall the Optionee be entitled to acquire a fraction of one
Optioned Share pursuant to this Option. The
<PAGE>
Optionee shall be entitled to the privileges of ownership with respect to
Optioned Shares purchased and delivered to him or her only upon the exercise of
all or part of this Option.
5. Transferability of Option. [(a) Except as provided in Section
5(b) below,] the Option granted hereby shall be neither transferable nor
assignable by the Optionee other than by will or by the laws of descent and
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee, or in the event of his or her legal incapacity, by his or her
guardian or legal representative acting on behalf of the Optionee. Any
purported transfer or encumbrance in violation of the provisions of this Section
5 shall be void, and the other party to any such purported transaction shall not
obtain any rights to or interest in the Option.
[(b) Notwithstanding Section 5(a) above, the Option may be transferred
by the Optionee, without payment of consideration therefor, to any Eligible
Transferee; provided, however, that (i) such transfer will not be effective
-------- -------
until ten (10) days following the delivery of notice of such transfer to the
Company and such transfer is thereafter effected in accordance with any terms
and conditions that shall have been made applicable thereto by the Company or
the Board; and (ii) any such Eligible Transferee shall be subject to the same
terms and conditions hereunder as the Optionee.]/1/
6. Notice of Exercise; Payment. To the extent then exercisable, the
Option may be exercised by written notice to the Company stating the number of
Optioned Shares for which the Option is being exercised and the intended manner
of payment. The date of such notice shall be the exercise date. Payment equal to
the aggregate Option Price of the Optioned Shares being exercised shall be
tendered in full with the notice of exercise to the Company either (i) in cash
or by check acceptable to the Company, (ii) by the tender to the Company of
shares of Common Stock owned by the Optionee for at least 6 months and
registered in the name of the Optionee having an aggregate fair market value on
the date of exercise equal to the total Option Price, such fair market value to
be determined based on the Market Value per Share on the date of exercise, (iii)
by delivery of irrevocable instructions to a financial institution or broker to
deliver promptly to the Company sale or loan proceeds with respect to the shares
sufficient to pay the total Option Price, (iv) through the written election of
the Optionee to have shares of Common Stock withheld by the Company from the
shares otherwise to be received, with such withheld shares having an aggregate
fair market value on the date of exercise equal to the total Option Price of the
shares being purchased, or (v) by any combination of the payment methods
specified in clauses (i) through [(iv)] hereof. Within ten (10) days thereafter,
the Company shall direct the due issuance of the Optioned Shares so purchased.
7. Conditions and Limitations on Right to Exercise Option.
Notwithstanding the provisions of Sections 3 and 4 hereof,
(a) Except as otherwise provided in Section 7(b) hereof, this Option may
not be exercised unless the Optionee is, at the time of exercise, an employee of
the Company or a Subsidiary (as defined in the Plan) and has been employed by
the Company or a Subsidiary continuously since the Date of Grant. If the
Optionee returns to active employment with the Company or a Subsidiary after
having been on an approved leave of absence from the Company or a Subsidiary,
the Optionee shall
________________________
/1/ Add for senior executive grants only.
2
<PAGE>
be treated as if continuously employed during the period of such leave of
absence. This Option may not, however, be exercised by the Optionee while on a
leave of absence from active employment with the Company or a Subsidiary, unless
such exercise is expressly approved in writing by the Board; and
(b) (i) If the Optionee ceases to be employed by the Company or a
Subsidiary (other than by reason of death, Disability (as defined below) or
retirement), the Option granted hereby, to the extent the Optionee was entitled
to exercise it at the date of termination of employment, may be exercised at any
time within three months after such termination but not after the date of
termination of the Option. Any part of the Option not so exercised shall
expire. Notwithstanding the foregoing, if Optionee's employment is terminated
for Cause (as defined below), then this Option shall thereupon terminate and
thereafter be unexercisable.
(ii) If the Optionee retires after reaching age 65, all or any part
of this Option which has not yet been exercised, whether otherwise eligible
for immediate exercise by the terms of this Agreement or not, may be
exercised at any time within three months after the Optionee's retirement
but not after the date of expiration of the Option.
(iii) If the Optionee retires after attaining age 55 but not age 65,
the Board, in its sole discretion, may permit all or any part of this
Option which has not yet been exercised, whether otherwise eligible for
immediate exercise by the terms of this Agreement or not, to be exercised
within three months after the Optionee's retirement but not after the date
of expiration of the Option.
(iv) If the Optionee's employment is terminated by reason of death
or Disability, all or any part of this Option which has not yet been
exercised, whether otherwise eligible for immediate exercise by the terms
of this Agreement or not, may be exercised at any time within one year
after such termination but not after the date of expiration of the option.
As used in this Agreement, "Cause" means (i) the Optionee's willful or
repeated failure substantially to perform the duties of his or her position with
the Company (other than any such failure resulting from his or her Disability
(as defined below)), which failure is not or cannot be cured within five
business days after the Company has given written notice thereof to the Optionee
specifying in detail the particulars of the acts or omissions deemed to
constitute such failure; (ii) the engaging by the Optionee in willful misconduct
which is materially injurious to the Company; (iii) the engaging by the Optionee
in any act of moral turpitude that is reasonably likely to materially and
adversely affect the Company or its business; or (iv) the Optionee's conviction
of, or entry of a plea of nolo contendere with respect to, any felony. For
---- ----------
purposes of this definition, no act, or failure to act, on the Optionee's part
shall be considered "willful" unless done, or omitted to be done, by the
Optionee in bad faith and without reasonable belief that the Optionee's action
or omission was in the best interests of the Company. The Optionee shall not be
deemed to have been terminated for Cause unless and until the Board finds that
the Optionee's termination for Cause is justified and has given the Optionee
written notice of termination, specifying in detail the particulars of the
Optionee's conduct found by the Board to justify such termination for Cause.
As used in this Agreement, "Disability" means the inability of the Optionee
to perform his or her position with the Company by reason of a medically
determined physical or mental impairment which has existed for a continuous
period of at least 26 weeks and which, in the
3
<PAGE>
judgment of a physician who certifies to such judgment, is expected to be of
indefinite duration or result in imminent death.
This Agreement shall not be exercisable for any number of Optioned Shares
in excess of the number of Optioned Shares for which this Agreement is then
exercisable, pursuant to Sections 4 and 8 hereof, on the date of termination of
employment.
8. Acceleration of Option. Notwithstanding the provisions of
Section 4, the Option granted hereby shall become immediately exercisable in
full in the event of (i) a Change of Control, (ii) the Optionee's Disability if
the Optionee becomes Disabled while an employee of the Company, (iii) the death
of the Optionee if such death occurs while the Optionee is employed by the
Company, (iv) the Optionee's retirement from the Company after attaining age 65,
or (v) in the Board's sole discretion, the Optionee's retirement after attaining
age 55 but not age 65.
9. No Employment Contract. Nothing contained in this Agreement
shall confer upon the Optionee any right with respect to continuance of
employment by the Company or a Subsidiary, nor limit or affect in any manner the
right of the Company or a Subsidiary to terminate the employment or adjust the
compensation of the Optionee.
10. Taxes and Withholding. If the Company or any Subsidiary shall be
required to withhold any federal, state, local or foreign tax in connection with
the exercise of the Option, and the amounts available to the Company or such
Subsidiary for such withholding are insufficient, the Optionee shall pay the tax
or make provisions that are satisfactory to the Company or such Subsidiary for
the payment thereof. The Optionee may elect to satisfy all or any part of any
such withholding obligation by surrendering to the Company a portion of the
Optioned Shares that are issued or transferred to the Optionee upon the exercise
of the Option, and the Optioned Shares so surrendered by the Optionee shall be
credited against any such withholding obligation at the Market Value per Share
of such shares on the date of such surrender. The Company will pay any and all
issue and other taxes in the nature thereof which may be payable by the Company
in respect of any issue or delivery upon a purchase pursuant to this Option.
11. Compliance with Law. The Company shall make reasonable efforts
to comply with all applicable federal and state securities laws; provided,
--------
however, that notwithstanding any other provision of this Agreement, the Option
- -------
shall not be exercisable if the exercise thereof would result in a violation of
any such law.
12. Adjustments. The Board shall make or provide for such
adjustments in the number of Optioned Shares covered by this Option, in the
Option Price applicable to such Option, and in the kind of shares covered
thereby, as the Board may determine is equitably required to prevent dilution or
enlargement of the Optionee's rights that otherwise would result from (a) any
stock dividend, stock split, combination of shares, recapitalization, or other
change in the capital structure of the Company, (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation, or other distribution of assets or issuance of rights or warrants
to purchase securities, or (c) any other corporate transaction or event having
an effect similar to any of the foregoing. In the event of any such transaction
or event, the Board may provide in substitution for this Option such alternative
consideration as it may determine to be equitable in the circumstances and may
require in connection therewith the surrender of this Option.
4
<PAGE>
13. Available Shares. The Company shall at all times until the
expiration of the Option reserve and keep available, either in its treasury or
out of its authorized but unissued shares of Common Stock, the full number of
Optioned Shares deliverable upon the exercise of this Option.
14. Relation to Other Benefits. Any economic or other benefit to the
Optionee under this Agreement shall not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company or a
Subsidiary and shall not affect the amount of any life insurance coverage
available to any beneficiary under any life insurance plan covering employees of
the Company or a Subsidiary.
15. Amendments. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
-------- -------
of the Optionee under this Agreement without the Optionee's consent.
16. Rights as a Stockholder. The Optionee shall have none of the
rights of a stockholder with respect to the shares of Common Stock subject to
this Option until such shares are issued to the Optionee upon exercise of the
Option.
17. Severability. In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
18. Relation to Plan. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistent provisions between
this Agreement and the Plan, the Plan shall govern. The Board acting pursuant
to the Plan, as constituted from time to time, shall, except as expressly
provided otherwise herein, have the right to determine any questions that arise
in connection with this Option or its exercise.
19. Successors and Assigns. Without limiting Section 5 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of the
Optionee, and the successors and assigns of the Company.
20. Notices. Any notice to the Company provided for herein shall be
in writing to the Company, marked Attention: Corporate Secretary at Focal
Communications Corporation, 200 North LaSalle Street, Chicago, Illinois 60601,
and any notice to the Optionee shall be addressed to said Optionee at his or her
address currently on file with the Company. Except as otherwise provided
herein, any written notice shall be deemed to be duly given if and when hand
delivered, or five (5) business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid, or
three (3) business days after having been sent by a nationally recognized
overnight courier service such as Federal Express, UPS or Purolator, addressed
as aforesaid. Any party may change the address to which notices are to be given
hereunder by written
5
<PAGE>
notice to the other party as herein specified, except that notices of changes of
address shall be effective only upon receipt.
21. Governing Law. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of Delaware,
without giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer as of the day and year first above
written.
FOCAL COMMUNICATIONS CORPORATION
By:_______________________________________________
Its:______________________________________________
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Agreement and accepts the Option granted hereunder, subject to
the terms and conditions of the Plan and the terms and conditions hereinabove
set forth.
_____________________________________________
Optionee
Date:_____________________________________________
6
<PAGE>
EXHIBIT 5.1
-----------
[LETTERHEAD OF JONES, DAY, REAVIS & POGUE]
August 2, 1999
Focal Communications Corporation
200 North LaSalle Street, Suite 1100
Chicago, Illinois 60601
Re: 1998 Equity and Performance Incentive Plan
------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Focal Communications Corporation, a Delaware
corporation (the "Company"), in connection with the Company's 1998 Equity and
Performance Incentive Plan, as amended (the "Plan"). We have examined such
documents, records and matters of law as we have deemed necessary for purposes
of this opinion, and based thereupon we are of the opinion that the shares of
the Company's Common Stock, par value $.01 per share ("Common Stock"), that may
be issued and sold pursuant to the Plan are duly authorized and, when issued and
sold in accordance with the Plan, will be validly issued, fully paid and
nonassessable so long as the consideration received by the Company is at least
equal to the stated par value of such shares of Common Stock.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement on Form S-8 filed by the Company to effect registration
of the shares of Common Stock to be issued and sold pursuant to the Plan under
the Securities Act of 1933.
Very truly yours,
/s/ JONES, DAY, REAVIS & POGUE
<PAGE>
EXHIBIT 23.2
------------
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated January 22,
1999 included in Focal Communications Corporation Annual Report on Form 10-K for
the year ended December 31, 1998 and to all references to our Firm included in
this registration statement.
ARTHUR ANDERSON LLP
Chicago, Illinois
August 2, 1999
<PAGE>
Exhibit 24.1
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OFFICERS AND DIRECTORS OF
FOCAL COMMUNICATIONS CORPORATION
POWER OF ATTORNEY
Know all men by these presents, that the undersigned officers and/or directors
of Focal Communications Corporation (the "Company") hereby constitute and
appoint Robert C. Taylor, Jr., John R. Barnicle, Joseph A. Beatty and Renee M.
Martin, or any of them, with full power of substitution and resubstitution, as
attorneys or attorney of the undersigned, to sign a Registration Statement or
Registration Statements on Form S-8 pursuant to the Securities Act of 1933, as
amended, concerning certain shares of the Common Stock, par value $.01 per
share, of the Company to be offered in connection with the Focal Communications
Corporation 1998 Equity and Performance Incentive Plan and any and all
amendments (including post-effective amendments) to such Registration
Statement(s) and to file the same with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission or any
state regulatory authority, 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, as fully to all intents and purposes
as he or she 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 or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof
.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original and all of which, when taken together,
shall constitute one and the same document.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as
of the 24 day of July, 1999.
/s/ Robert C. Taylor /s/ John R. Barnicle
- ------------------------------------- ----------------------------------
Robert C. Taylor, Jr., Director, John R. Barnicle, Director,
President and Chief Executive Officer Executive Vice President and Chief
Operating Officer
/s/ Joseph A. Beatty /s/ Gregory J. Swanson
- ------------------------------------- ----------------------------------
Joseph A. Beatty, Executive Vice Gregory J. Swanson, Controller
President and Chief Financial Officer
/s/ James E. Crawford, III /s/ John A. Edwardson
- ------------------------------------ ----------------------------------
James E. Crawford, III, Director John A. Edwardson, Director
/s/ Paul J. Finnegan /s/ Richard D. Frisbie
- ------------------------------------ ----------------------------------
Paul J. Finnegan, Director Richard D. Frisbie, Director
/s/ James N. Perry, Jr. /s/ Paul G. Yovovich
- ------------------------------------ ----------------------------------
James N. Perry, Jr., Director Paul G. Yovovich, Director
