ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 59-3636526 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
320 Interstate North Parkway, Suite 500 Atlanta, GA | 30339 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | ý | |||
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Title of Class | Number of Shares Outstanding on November 1, 2012 | |
Common Stock, $0.01 par value | 29,819,968 |
Page | |||
As of | |||||||
September 30, 2012 | December 31, 2011 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 23,876 | $ | 8,521 | |||
Accounts receivable, gross | 25,877 | 27,479 | |||||
Less: Allowance for doubtful accounts | (2,346 | ) | (2,608 | ) | |||
Accounts receivable, net | 23,531 | 24,871 | |||||
Prepaid expenses | 11,042 | 7,447 | |||||
Inventory, net | 1,956 | 1,772 | |||||
Restricted cash | — | 1,295 | |||||
Deferred tax asset, net | 205 | 450 | |||||
Other assets | 1,457 | 562 | |||||
Total current assets | 62,067 | 44,918 | |||||
Property and equipment, gross | 527,289 | 486,273 | |||||
Less: Accumulated depreciation and amortization | (370,789 | ) | (325,803 | ) | |||
Property and equipment, net | 156,500 | 160,470 | |||||
Goodwill | 19,814 | 19,814 | |||||
Intangible assets, gross | 9,609 | 9,609 | |||||
Less: Accumulated amortization | (2,476 | ) | (1,507 | ) | |||
Intangible assets, net | 7,133 | 8,102 | |||||
Non-current deferred tax asset, net | 1,390 | 4,254 | |||||
Other non-current assets | 4,196 | 3,514 | |||||
Total assets | $ | 251,100 | $ | 241,072 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 16,462 | $ | 14,467 | |||
Accrued telecommunications costs | 15,557 | 16,548 | |||||
Deferred customer revenue | 11,372 | 11,360 | |||||
Other accrued liabilities | 24,216 | 20,925 | |||||
Current portion of fiber debt | 199 | — | |||||
Contingent consideration | — | 4,927 | |||||
Total current liabilities | 67,806 | 68,227 | |||||
Non-current fiber debt | 3,158 | — | |||||
Other non-current liabilities | 7,351 | 8,858 | |||||
Stockholders’ equity: | |||||||
Common stock, $0.01 par value; 50,000 shares authorized; 29,803 and 28,913 shares issued and outstanding, respectively | 298 | 289 | |||||
Preferred stock, $0.01 par value; 15,000 shares authorized; no shares issued and outstanding | — | — | |||||
Additional paid-in capital | 318,709 | 311,370 | |||||
Accumulated deficit | (146,222 | ) | (147,672 | ) | |||
Total stockholders’ equity | 172,785 | 163,987 | |||||
Total liabilities and stockholders’ equity | $ | 251,100 | $ | 241,072 |
For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenue | 121,491 | 122,529 | 369,096 | 362,101 | |||||||||||
Operating expenses: | |||||||||||||||
Cost of revenue (exclusive of depreciation and amortization of $10,304, $9,324, $30,882, and $28,252, respectively, shown separately below) | 38,675 | 40,457 | 119,323 | 120,261 | |||||||||||
Selling, general and administrative (exclusive of depreciation and amortization of $7,868, $7,518, $24,536 and $22,548, respectively, shown separately below) | 60,584 | 65,744 | 185,977 | 194,587 | |||||||||||
Depreciation and amortization | 18,172 | 16,842 | 55,418 | 50,800 | |||||||||||
Total operating expenses | 117,431 | 123,043 | 360,718 | 365,648 | |||||||||||
Operating income (loss) | 4,060 | (514 | ) | 8,378 | (3,547 | ) | |||||||||
Other (expense) income: | |||||||||||||||
Interest expense | (138 | ) | (136 | ) | (409 | ) | (363 | ) | |||||||
Other income, net | — | — | — | 1,210 | |||||||||||
Income (loss) before income taxes | 3,922 | (650 | ) | 7,969 | (2,700 | ) | |||||||||
Income tax expense | (1,969 | ) | (491 | ) | (4,516 | ) | (258 | ) | |||||||
Net income (loss) | $ | 1,953 | $ | (1,141 | ) | $ | 3,453 | $ | (2,958 | ) | |||||
Net income (loss) per common share: | |||||||||||||||
Basic | $ | 0.07 | $ | (0.04 | ) | $ | 0.12 | $ | (0.10 | ) | |||||
Diluted | $ | 0.06 | $ | (0.04 | ) | $ | 0.12 | $ | (0.10 | ) | |||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 29,533 | 29,442 | 29,348 | 29,606 | |||||||||||
Diluted | 30,267 | 29,442 | 29,971 | 29,606 |
Common Stock | Additional | Total | ||||||||||||||||
Shares | Par Value | Paid-in Capital | Accumulated Deficit | Stockholders’ Equity | ||||||||||||||
Balance at December 31, 2011 | 28,913 | $ | 289 | $ | 311,370 | $ | (147,672 | ) | $ | 163,987 | ||||||||
Exercise of stock options | 407 | 4 | 1,580 | — | 1,584 | |||||||||||||
Issuance of employee benefit plan stock | 313 | 3 | 131 | — | 134 | |||||||||||||
Issuance of employee bonus plan stock | 89 | 1 | 694 | — | 695 | |||||||||||||
Share-based compensation from options to employees | — | — | 1,137 | — | 1,137 | |||||||||||||
Share-based compensation from restricted shares to employees | — | — | 5,114 | — | 5,114 | |||||||||||||
Share-based compensation for non-employees | — | — | 75 | — | 75 | |||||||||||||
Vesting of restricted shares | 507 | 5 | (5 | ) | — | — | ||||||||||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares | (176 | ) | (2 | ) | (1,387 | ) | — | (1,389 | ) | |||||||||
Shares repurchased under our publicly announced share repurchase program | (250 | ) | (2 | ) | — | (2,003 | ) | (2,005 | ) | |||||||||
Net income | — | — | — | 3,453 | 3,453 | |||||||||||||
Balance at September 30, 2012 | 29,803 | $ | 298 | $ | 318,709 | $ | (146,222 | ) | $ | 172,785 |
For the nine months ended September 30, | |||||||
2012 | 2011 | ||||||
Operating Activities: | |||||||
Net income (loss) | $ | 3,453 | $ | (2,958 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 55,418 | 50,800 | |||||
Deferred taxes | 3,109 | (455 | ) | ||||
Provision for doubtful accounts | 4,685 | 4,723 | |||||
Other non-cash income, net | — | (1,210 | ) | ||||
Non-cash share-based compensation | 9,697 | 10,551 | |||||
Change in acquisition-related contingent consideration | 23 | (329 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (3,345 | ) | (5,909 | ) | |||
Inventory | (184 | ) | 156 | ||||
Prepaid expenses and other current assets | (4,490 | ) | (1,067 | ) | |||
Other assets | (497 | ) | 301 | ||||
Accounts payable | 1,995 | 3,656 | |||||
Other liabilities | (1,742 | ) | (3,187 | ) | |||
Net cash provided by operating activities | 68,122 | 55,072 | |||||
Investing Activities: | |||||||
Purchases of property and equipment | (47,117 | ) | (59,235 | ) | |||
Additional acquisition consideration | (4,950 | ) | (780 | ) | |||
Decrease in restricted cash | 1,295 | — | |||||
Net cash used in investing activities | (50,772 | ) | (60,015 | ) | |||
Financing Activities: | |||||||
Taxes paid on vested restricted shares | (1,389 | ) | (1,813 | ) | |||
Proceeds from short-term borrowings | 4,250 | — | |||||
Repayment of short-term borrowings | (4,250 | ) | — | ||||
Financing issuance costs | (185 | ) | (343 | ) | |||
Proceeds from exercise of stock options | 1,584 | 315 | |||||
Repurchase of common stock | (2,005 | ) | (11,094 | ) | |||
Net cash used in financing activities | (1,995 | ) | (12,935 | ) | |||
Net increase (decrease) in cash and cash equivalents | 15,355 | (17,878 | ) | ||||
Cash and cash equivalents at beginning of period | 8,521 | 26,373 | |||||
Cash and cash equivalents at end of period | $ | 23,876 | $ | 8,495 | |||
Supplemental disclosure: | |||||||
Interest paid | $ | 290 | $ | 219 | |||
Income taxes paid, net of refunds | $ | 1,180 | $ | 763 | |||
Non-cash purchases of property and equipment | $ | 3,357 | $ | 87 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net income (loss) | $ | 1,953 | $ | (1,141 | ) | $ | 3,453 | $ | (2,958 | ) | |||||
Basic weighted average common shares outstanding | 29,533 | 29,442 | 29,348 | 29,606 | |||||||||||
Effect of dilutive securities | 734 | — | 623 | — | |||||||||||
Diluted weighted average common shares outstanding | 30,267 | 29,442 | 29,971 | 29,606 | |||||||||||
Basic income (loss) per common share | $ | 0.07 | $ | (0.04 | ) | $ | 0.12 | $ | (0.10 | ) | |||||
Diluted income (loss) per common share | $ | 0.06 | $ | (0.04 | ) | $ | 0.12 | $ | (0.10 | ) |
Three months ended September 30, | Nine months ended September 30, | ||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||
Anti-dilutive shares | 3,512 | 5,122 | 3,693 | 5,141 |
Contingent consideration liability | |||
December 31, 2011 | $ | 4,927 | |
Fair value adjustments | 23 | ||
Contingent consideration paid | (4,950 | ) | |
September 30, 2012 | $ | — |
September 30, 2012 | December 31, 2011 | ||||||
Fiber capital leases | $ | 199 | $ | — | |||
Current portion of fiber debt | $ | 199 | $ | — | |||
Fiber Loan | $ | 2,000 | $ | — | |||
Fiber capital leases | 1,158 | — | |||||
Non-current fiber debt | $ | 3,158 | $ | — |
Year ending December 31, | Maximum Capital Expenditures | Minimum Adjusted EBITDA | |||||
2012 | $ | 85,000 | $ | 68,000 | |||
2013 | 90,000 | 75,000 | |||||
2014 | 87,000 | 75,000 | |||||
2015 through the maturity date | $ | 94,000 | $ | 75,000 |
Year ending December 31, | Fiber lease commitments | ||
2012 | $ | 30 | |
2013 | 490 | ||
2014 | 490 | ||
2015 | 490 | ||
2016 | 490 | ||
Thereafter | 460 | ||
Total | $ | 2,450 |
Employee costs (1) | Facility exit costs (2) | Other costs | Total | ||||||||||||
Expense | $ | 1,119 | $ | 696 | $ | 109 | $ | 1,924 | |||||||
Payments | (983 | ) | (222 | ) | (109 | ) | (1,314 | ) | |||||||
Accrued liability at September 30, 2012 | $ | 136 | $ | 474 | $ | — | $ | 610 |
(1) | The remaining employee-related liability will be paid within 12 months and approximates fair value due to the short discount period. |
(2) | Includes costs for consolidating certain leased offices. These charges were measured using fair value measurements with unobservable inputs (Level 3) and represent the present value of expected lease payments and direct costs to obtain a sublease, reduced by estimated sublease rental income. The timing and amount of estimated cash flows will continue to be evaluated each reporting period. |
Stock options | Restricted stock | ||||
Outstanding, December 31, 2011 | 3,616 | 1,186 | |||
Granted | 324 | 1,177 | |||
Stock options exercised (A) | (407 | ) | — | ||
Restricted stock vested (B) | — | (596 | ) | ||
Forfeited or canceled | (145 | ) | (116 | ) | |
Outstanding, September 30, 2012 | 3,388 | 1,651 | |||
Options exercisable, September 30, 2012 | 2,792 |
(A) | The total intrinsic value of options exercised during the nine months ended September 30, 2012 was $1,812 . |
(B) | The fair value of restricted shares that vested during the nine months ended September 30, 2012 was $4,412. |
Nine months ended September 30, | |||||||
2012 | 2011 | ||||||
Grant date fair value | $ | 3.15 | $ | 6.49 | |||
Expected dividend yield | — | % | — | % | |||
Expected volatility | 53.4 | % | 53.2 | % | |||
Risk-free interest rate | 1.4 | % | 2.9 | % | |||
Expected multiple of share price to exercise price upon exercise | 2.0 | 2.0 | |||||
Post vest cancellation rate | 2.9 | % | 1.1 | % |
Nine months ended September 30, | |||||||
2012 | 2011 | ||||||
Federal income tax expense (benefit) at statutory rate | $ | 2,789 | $ | (945 | ) | ||
State income tax expense, net of federal effect | 578 | 285 | |||||
Nondeductible expenses | 223 | 171 | |||||
Write-off deferred tax assets for non-deductible share-based compensation | 1,216 | 1,668 | |||||
Change in valuation allowance | (276 | ) | (900 | ) | |||
Other | (14 | ) | (21 | ) | |||
Total | $ | 4,516 | $ | 258 |
September 30, 2012 | December 31, 2011 | ||||||
Accrued bonus | $ | 8,943 | $ | 8,918 | |||
Accrued other compensation and benefits | 5,493 | 1,962 | |||||
Accrued other taxes | 4,370 | 4,404 | |||||
Accrued promotions | 660 | 1,155 | |||||
Deferred rent | 2,466 | 1,991 | |||||
Other accrued expenses | 2,284 | 2,495 | |||||
Other accrued liabilities | $ | 24,216 | $ | 20,925 | |||
Non-current portion of deferred rent | $ | 6,107 | $ | 7,348 | |||
Non-current other accrued expenses | 1,244 | 1,510 | |||||
Other non-current liabilities | $ | 7,351 | $ | 8,858 |
• | The bulk of their employees use personal computers on the job; |
• | They have knowledge workers who need to share data from a centralized source; |
• | They have remote workers who need to access data on the go; |
• | They need symmetric Metro Ethernet to run their business; |
• | They are often multi-location businesses; and |
• | They have a willingness to consider outsourcing their infrastructure as a way to preserve capital and increase both focus and productivity. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Calculation of ARPU | |||||||||||||||
Total revenue | $ | 121,491 | $ | 122,529 | $ | 369,096 | $ | 362,101 | |||||||
Cloud only revenue | (3,486 | ) | (3,326 | ) | (10,098 | ) | (9,607 | ) | |||||||
(A) Network access customer revenue (1) | 118,005 | 119,203 | 358,998 | 352,494 | |||||||||||
(B) Average Network access customers | 61,446 | 60,395 | 61,523 | 59,049 | |||||||||||
ARPU (A / B / months) | $ | 640 | $ | 658 | $ | 648 | $ | 663 |
(1) | During the third quarter of 2012 we began including revenue from certain cloud-based services provided to Network access customers within the ARPU calculation that were not previously included. We have recast all historical disclosures of ARPU for all periods presented in this Form 10-Q to conform to the current presentation. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Reconciliation of Free Cash Flow and Adjusted EBITDA to Net income (loss) (Dollar amounts in thousands) | |||||||||||||||
Free Cash Flow | $ | 7,691 | $ | (396 | ) | $ | 28,300 | $ | (1,631 | ) | |||||
Cash capital expenditures | 17,516 | 19,273 | 47,117 | 59,235 | |||||||||||
Adjusted EBITDA | $ | 25,207 | $ | 18,877 | $ | 75,417 | $ | 57,604 | |||||||
Depreciation and amortization | (18,172 | ) | (16,842 | ) | (55,418 | ) | (50,800 | ) | |||||||
Non-cash share-based compensation | (2,975 | ) | (2,920 | ) | (9,697 | ) | (10,551 | ) | |||||||
MaximumASP purchase accounting adjustments | — | 418 | — | 354 | |||||||||||
Transaction costs | — | (47 | ) | — | (154 | ) | |||||||||
Realignment costs (1) | — | — | (1,924 | ) | — | ||||||||||
Interest expense | (138 | ) | (136 | ) | (409 | ) | (363 | ) | |||||||
Other income, net | — | — | — | 1,210 | |||||||||||
Income (loss) before income taxes | 3,922 | (650 | ) | 7,969 | (2,700 | ) | |||||||||
Income tax expense | (1,969 | ) | (491 | ) | (4,516 | ) | (258 | ) | |||||||
Net income (loss) | $ | 1,953 | $ | (1,141 | ) | $ | 3,453 | $ | (2,958 | ) |
(1) | During the nine months ended September 30, 2012, $1,924 of realignment costs are included in Selling, general and administrative expense and $682 are included in Depreciation and amortization. |
For the three months ended September 30, | ||||||||||||||||||||
2012 | 2011 | Change from Previous Periods | ||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | Percent | |||||||||||||||
Revenue | ||||||||||||||||||||
Network, Voice and Data | $ | 115,164 | 94.8 | % | $ | 117,061 | 95.5 | % | $ | (1,897 | ) | (1.6 | )% | |||||||
Managed Hosting and Cloud | 6,327 | 5.2 | % | 5,468 | 4.5 | % | 859 | 15.7 | % | |||||||||||
Total revenue | 121,491 | 122,529 | (1,038 | ) | (0.8 | )% | ||||||||||||||
Cost of revenue | 38,675 | 31.8 | % | $ | 40,457 | 33.0 | % | $ | (1,782 | ) | (4.4 | )% | ||||||||
Gross margin (exclusive of depreciation and amortization): | $ | 82,816 | 68.2 | % | $ | 82,072 | 67.0 | % | $ | 744 | 0.9 | % | ||||||||
Network access customer data: | ||||||||||||||||||||
Customer locations at period end | 60,876 | 61,125 | (249 | ) | (0.4 | )% | ||||||||||||||
ARPU | $ | 640 | $ | 658 | $ | (18 | ) | (2.7 | )% | |||||||||||
Average monthly churn rate | 1.6 | % | 1.4 | % | 0.2 | % |
For the nine months ended September 30, | ||||||||||||||||||||
2012 | 2011 | Change from Previous Periods | ||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | Percent | |||||||||||||||
Revenue | ||||||||||||||||||||
Network, Voice and Data | $ | 350,925 | 95.1 | % | $ | 346,957 | 95.8 | % | $ | 3,968 | 1.1 | % | ||||||||
Managed Hosting and Cloud | 18,171 | 4.9 | % | 15,144 | 4.2 | % | 3,027 | 20.0 | % | |||||||||||
Total revenue | 369,096 | 362,101 | 6,995 | 1.9 | % | |||||||||||||||
Cost of revenue | 119,323 | 32.3 | % | 120,261 | 33.2 | % | (938 | ) | (0.8 | )% | ||||||||||
Gross margin (exclusive of depreciation and amortization): | $ | 249,773 | 67.7 | % | $ | 241,840 | 66.8 | % | $ | 7,933 | 3.3 | % | ||||||||
Network access customer data: | ||||||||||||||||||||
Customer locations at period end | 60,876 | 61,125 | (249 | ) | (0.4 | )% | ||||||||||||||
ARPU | $ | 648 | $ | 663 | $ | (15 | ) | (2.3 | )% | |||||||||||
Average monthly churn rate | 1.5 | % | 1.3 | % | 0.2 | % |
For the three months ended September 30, | ||||||||||||||||||||
2012 | 2011 | Change from Previous Periods | ||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | Percent | |||||||||||||||
Cost of revenue (exclusive of depreciation and amortization): | ||||||||||||||||||||
Circuit access fees | $ | 18,135 | 14.9 | % | $ | 18,420 | 15.0 | % | $ | (285 | ) | (1.5 | )% | |||||||
Other cost of revenue | 10,932 | 9.0 | % | 11,769 | 9.6 | % | (837 | ) | (7.1 | )% | ||||||||||
Transport cost | 6,440 | 5.3 | % | 6,172 | 5.0 | % | 268 | 4.3 | % | |||||||||||
Mobile cost | 4,345 | 3.6 | % | 5,620 | 4.6 | % | (1,275 | ) | (22.7 | )% | ||||||||||
Telecommunications cost recoveries | (1,177 | ) | (1.0 | )% | (1,524 | ) | (1.2 | )% | 347 | (22.8 | )% | |||||||||
Total cost of revenue | $ | 38,675 | 31.8 | % | $ | 40,457 | 33.0 | % | $ | (1,782 | ) | (4.4 | )% |
For the nine months ended September 30, | ||||||||||||||||||||
2012 | 2011 | Change from Previous Periods | ||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | Percent | |||||||||||||||
Cost of revenue (exclusive of depreciation and amortization): | ||||||||||||||||||||
Circuit access fees | $ | 54,410 | 14.7 | % | $ | 54,234 | 15.0 | % | $ | 176 | 0.3 | % | ||||||||
Other cost of revenue | 33,849 | 9.2 | % | 35,073 | 9.7 | % | (1,224 | ) | (3.5 | )% | ||||||||||
Transport cost | 19,322 | 5.2 | % | 17,803 | 4.9 | % | 1,519 | 8.5 | % | |||||||||||
Mobile cost | 13,999 | 3.8 | % | 16,615 | 4.6 | % | (2,616 | ) | (15.7 | )% | ||||||||||
Telecommunications cost recoveries | (2,257 | ) | (0.6 | )% | (3,464 | ) | (1.0 | )% | 1,207 | (34.8 | )% | |||||||||
Total cost of revenue | $ | 119,323 | 32.3 | % | $ | 120,261 | 33.2 | % | $ | (938 | ) | (0.8 | )% |
For the three months ended September 30, | ||||||||||||||||||||
2012 | 2011 | Change from Previous Periods | ||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | Percent | |||||||||||||||
Selling, general and administrative (exclusive of depreciation and amortization) | ||||||||||||||||||||
Salaries, wages and benefits (excluding share-based compensation) | $ | 37,252 | 30.7 | % | $ | 40,514 | 33.1 | % | $ | (3,262 | ) | (8.1 | )% | |||||||
Share-based compensation | 2,975 | 2.4 | % | 2,920 | 2.4 | % | 55 | 1.9 | % | |||||||||||
Marketing cost | 340 | 0.3 | % | 1,012 | 0.8 | % | (672 | ) | (66.4 | )% | ||||||||||
Transaction expense | — | — | (371 | ) | (0.3 | )% | 371 | nm | ||||||||||||
Other selling, general and administrative | 20,017 | 16.5 | % | 21,669 | 17.7 | % | (1,652 | ) | (7.6 | )% | ||||||||||
Total SG&A | $ | 60,584 | 49.9 | % | $ | 65,744 | 53.7 | % | $ | (5,160 | ) | (7.8 | )% | |||||||
Other operating expenses: | ||||||||||||||||||||
Depreciation and amortization | 18,172 | 15.0 | % | 16,842 | 13.7 | % | 1,330 | 7.9 | % | |||||||||||
Total other operating expenses | $ | 18,172 | 15.0 | % | $ | 16,842 | 13.7 | % | $ | 1,330 | 7.9 | % | ||||||||
Other data: | ||||||||||||||||||||
Monthly SG&A per average customer | $ | 283 | $ | 349 | $ | (66 | ) | (18.9 | )% | |||||||||||
Average employees | 1,617 | 2,010 | (393 | ) | (19.6 | )% |
For the nine months ended September 30, | ||||||||||||||||||||
2012 | 2011 | Change from Previous Periods | ||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | Percent | |||||||||||||||
Selling, general and administrative (exclusive of depreciation and amortization) | ||||||||||||||||||||
Salaries, wages and benefits (excluding share-based compensation) | $ | 112,588 | 30.5 | % | $ | 120,255 | 33.2 | % | $ | (7,667 | ) | (6.4 | )% | |||||||
Share-based compensation | 9,697 | 2.6 | % | 10,551 | 2.9 | % | (854 | ) | (8.1 | )% | ||||||||||
Marketing cost | 1,724 | 0.5 | % | 2,223 | 0.6 | % | (499 | ) | (22.4 | )% | ||||||||||
Transaction expense | — | 0 | (264 | ) | (0.1 | )% | 264 | nm | ||||||||||||
Realignment costs | 1,924 | 0.5 | % | — | 0 | 1,924 | nm | |||||||||||||
Other selling, general and administrative | 60,044 | 16.3 | % | 61,822 | 17.1 | % | (1,778 | ) | (2.9 | )% | ||||||||||
Total SG&A | $ | 185,977 | 50.4 | % | $ | 194,587 | 53.7 | % | $ | (8,610 | ) | (4.4 | )% | |||||||
Other operating expenses: | ||||||||||||||||||||
Depreciation and amortization | 55,418 | 15.0 | % | 50,800 | 14.0 | % | 4,618 | 9.1 | % | |||||||||||
Total other operating expenses | $ | 55,418 | 15.0 | % | $ | 50,800 | 14.0 | % | $ | 4,618 | 9.1 | % | ||||||||
Other data: | ||||||||||||||||||||
Monthly SG&A per average customer | $ | 321 | $ | 354 | $ | (33 | ) | (9.3 | )% | |||||||||||
Average employees | 1,675 | 1,949 | (274 | ) | (14.1 | )% |
For the three months ended September 30, | ||||||||||||||||||||
2012 | 2011 | Change from Previous Periods | ||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | Percent | |||||||||||||||
Interest expense | (138 | ) | (0.1 | )% | (136 | ) | (0.1 | )% | (2 | ) | 1.5 | % | ||||||||
Income tax expense | (1,969 | ) | (1.6 | )% | (491 | ) | (0.4 | )% | (1,478 | ) | 301.0 | % | ||||||||
Total | $ | (2,107 | ) | (1.7 | )% | $ | (627 | ) | (0.5 | )% | $ | (1,480 | ) | 236.0 | % |
For the nine months ended September 30, | ||||||||||||||||||||
2012 | 2011 | Change from Previous Periods | ||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | Percent | |||||||||||||||
Interest expense | $ | (409 | ) | (0.1 | )% | $ | (363 | ) | (0.1 | )% | $ | (46 | ) | 12.7 | % | |||||
Other income, net | — | — | % | 1,210 | 0.3 | % | (1,210 | ) | (100.0 | )% | ||||||||||
Income tax expense | (4,516 | ) | (1.2 | )% | (258 | ) | (0.1 | )% | (4,258 | ) | 1,650.4 | % | ||||||||
Total | $ | (4,925 | ) | (1.3 | )% | $ | 589 | 0.2 | % | $ | (5,514 | ) | nm |
For the nine months ended September 30, | Change from Previous Period | |||||||||||||
2012 | 2011 | Dollars | Percent | |||||||||||
Cash Flows: | ||||||||||||||
Net cash provided by operating activities | $ | 68,122 | $ | 55,072 | $ | 13,050 | 23.7 | % | ||||||
Net cash used in investing activities | (50,772 | ) | (60,015 | ) | 9,243 | (15.4 | )% | |||||||
Net cash used in financing activities | (1,995 | ) | (12,935 | ) | 10,940 | (84.6 | )% | |||||||
Net increase (decrease) in cash and cash equivalents | $ | 15,355 | $ | (17,878 | ) | $ | 33,233 | nm |
Exhibit No | Description of Exhibit | |
10.1* | At-Will Employment Agreement by and between Cbeyond and James Geiger. | |
10.2* | At-Will Employment Agreement by and between Cbeyond and J. Robert Fugate. | |
10.3* | Form of At-Will Employment Agreement by and between Cbeyond and Robert R. Morrice, Joseph A. Oesterling and N. Brent Cobb | |
31.1* | Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2* | Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1† | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2† | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101†† | The following financial information from the Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Unaudited Notes to Condensed Consolidated Financial Statements. |
* | Filed herewith. |
† | Furnished herewith. |
†† | Furnished electronically herewith. |
CBEYOND, INC. | |||
By: | /s/ James F. Geiger | ||
Name: | James F. Geiger | ||
Title: | Chairman, President and Chief Executive Officer | ||
By: | /s/ J. Robert Fugate | ||
Name: | J. Robert Fugate | ||
Title: | Executive Vice President and Chief Financial Officer |
Exhibit No | Description of Exhibit | |
10.1* | At-Will Employment Agreement by and between Cbeyond and James Geiger. | |
10.2* | At-Will Employment Agreement by and between Cbeyond and J. Robert Fugate. | |
10.3* | Form of At-Will Employment Agreement by and between Cbeyond and Robert R. Morrice, Joseph A. Oesterling and N. Brent Cobb. | |
31.1* | Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2* | Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1† | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2† | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101†† | The following financial information from the Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Unaudited Notes to Condensed Consolidated Financial Statements. |
* | Filed herewith. |
† | Furnished herewith. |
†† | Furnished electronically herewith. |
1. | At-Will Employment. Executive acknowledges and agrees that no agreement or arrangement between Executive and the Company (including the execution and delivery of this Agreement) shall entitle Executive to become or remain in the employment of the Company or affect the right of the Company to terminate Executive’s employment at any time and for any reason. |
2. | Termination. |
(i) | Non-Change in Control Severance. Subject to Section 2(d) below, in the event of a Specified Termination of Executive’s employment, the Company shall in accordance with its customary payroll practices, during the period beginning the day after the date of Executive’s Separation from Service with the Company and ending on the first anniversary of such date, pay Executive severance payments on the Company’s normal pay dates at a rate equal to 100% of the annual base salary rate in effect immediately prior to Executive’s termination of employment. If Executive’s Specified Termination occurs following a Change in Control, the severance provisions of paragraph 2(a)(ii) shall control rather than the provisions of this paragraph. |
(ii) | Post Change in Control Severance. Subject to Section 2(d) below, in the event of a Specified Termination of Executive’s employment following a Change in Control, in lieu of the severance described in paragraph 2(a)(i), above, the Company shall in accordance with its customary payroll practices, during the period beginning the day after the date of Executive’s Separation from Service and ending on the first anniversary of such date, pay Executive severance payments on the Company’s normal pay dates at a rate equal to 100% of the annual base salary rate in effect immediately prior to Executive’s termination of employment. In addition, Company shall, within three business days of the date six months following the date of Executive’s Separation from Service, pay Executive a lump sum equal to the average monetary value of the bonus paid to the Executive by the Company over the previous three years plus, at Executive’s election, either (A) an additional lump sum equal to one and one-half times the annual base salary of the Executive in effect on the date of his Specified Termination or (B) an |
(iii) | Effect of Voluntary Reductions in Bonus or Accepting Equity in Lieu of Cash for Bonus on Post Change in Control Severance. If Executive chooses in one or more years, for any reason whatsoever, to voluntarily accept a lower bonus payment than would otherwise have been due, the payment to Executive described in in Section 2(a)(ii), above, which is based on the payment of bonuses for previous years shall be calculated as if Executive had received the full bonus earned in each of the preceding three years. If, for any reason whatsoever, the Company provides the Executive all or a portion of Executive’s bonus in equity in one or more years, the payment to Executive described in in Section 2(a)(ii), above, which is based on the payment of bonuses for previous years shall be calculated by combining, for each of the years on which the calculation is based, the value of the cash bonus provided to Executive with the value of the equity provided in lieu of cash using the cash value of the equity at the time of issuance. |
(b) | Continuation of Medical Benefits via the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Subject to Section 2(d) below, in the event of a Specified Termination of Executive’s employment, the Company shall pay COBRA benefits for Executive and any dependants covered by Executive’s Company-provided health insurance on the date of his/her Specified Termination. In the event that Executive had no Company-provided health insurance upon the date of his/her Specified Termination, he/she shall not be eligible for any benefits otherwise available under this paragraph. |
(i) | In the event of a Specified Termination of Executive’s employment following the effective date of a Change in Control, the vesting and/or exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated on the date of termination. |
(ii) | In the event of a Specified Termination of Executive’s employment prior to the effective date of a Change in Control, (A) the vesting and/or exercisability of twenty percent (20%) of each of Executive’s outstanding non-performance-based Stock Awards shall be automatically accelerated on the date of termination (i.e., if forty percent (40%) of each Stock Award is vested as of the date of termination, then after such termination sixty percent (60%) of such Stock Award shall be vested and forty percent (40%) shall be unvested); and (B) if Executive has a performance-based Stock Award pending on the date of the Specified Termination, the performance period |
(iii) | In the event of a termination of Executive’s employment by reason of Executive’s death, the vesting and/or exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated on the date of death. |
(iv) | In the event of a termination of Executive’s employment by reason of Executive’s Disability, the vesting and/or exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated on the date of termination so that sixty percent (60%) of each such Stock Award shall be vested and/or exercisable (i.e., to the extent, but only to the extent, that less than sixty percent (60%) of an outstanding Stock Award has not already vested upon such termination of employment, such Stock Award will vest as of the date of such termination so that sixty percent (60%) of such Stock Award shall be vested. |
(v) | With respect to all Stock Awards granted to Executive on or after September 30, 2005, in the event of a Specified Termination of Executive’s employment, such Stock Awards shall remain exercisable for a period of two (2) years following the date of Executive’s termination. With respect to all Stock Awards granted to Executive prior to September 30, 2005, such Stock Awards shall remain exercisable following Executive’s termination of employment as set forth in the award agreements pursuant to which such Stock Awards were granted. |
(vi) | Except as specifically provided in Section 2(c)(v) above, this Section 2(c) shall supersede any other agreement with respect to the acceleration of Executive’s Stock Awards as a result of a termination of Executive’s employment, death, Disability and/or a Change in Control, including, without limitation, the applicable provisions of any award agreements pursuant to which such Stock Awards were granted. Such award agreements will continue to govern Executive’s Stock Awards to the extent not expressly superseded by this Agreement. |
(d) | Release; First Payment Date; Separate Payments. On or after the date of Executive’s Separation from Service and on or before the date that is 45 days after the date of Executive’s Separation from Service, Executive shall execute a release (the “Release”) in the form attached hereto and incorporated herein as Exhibit A or Exhibit B, as applicable. Such Release shall specifically relate to all of Executive’s rights and claims in existence at the time of such execution and shall confirm Executive’s obligations under Section 3 of this Agreement. It is understood that, if specified in the applicable Release, Executive has a certain number of calendar days to consider whether to execute such Release, and Executive may revoke such Release within seven (7) calendar days after execution. In the event Executive does not execute such Release within the period specified in the first sentence of this Section 2(d), or if Executive revokes such Release within the subsequent seven (7) day period, no benefits shall be payable under this Agreement. Notwithstanding anything to the contrary in this Agreement, any severance payments or benefits that would otherwise be payable or provided under this Agreement before the first normal payroll payment date falling on or after the sixtieth (60th) day after the date on which the Executive incurs a Separation from Service (the “First Payment Date”) shall be made on the First Payment Date. Each separate severance installment payment and each other payment that Executive may be eligible to receive under this Agreement shall be a separate payment under this Agreement for all purposes. |
(a) | Nondisclosure and Nonuse of Confidential Information. Executive shall not disclose or use at any time, either during Executive’s employment with the Company or thereafter, any Confidential Information (as defined below) of which Executive is or becomes aware, whether or not such information is developed by Executive, except to the extent that such disclosure or use is directly related to and required by Executive’s performance of duties assigned to Executive by the Company; provided that nothing herein shall restrict Executive from disseminating personal knowledge gained during the course of Executive’s employment with the Company after the second anniversary of the termination of Executive’s employment with the Company to the extent such personal knowledge is not the property of the Company. Executive shall take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. As used in this Agreement, the term “Confidential Information” is defined by O.C.G.A. §13-8-51(3) and means information that is not generally known to the public and that is used, developed or obtained by the Company in connection with its business, including but not limited to (i) products or services, (ii) fees, costs and pricing structures, (iii) designs, (iv) analysis, (v) drawings, photographs and reports, (vi) computer software, including operating systems, applications and program listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix) accounting and business methods, (x) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xi) customers and clients and customer or client lists, (xii) copyrightable works, (xiv) all technology and trade secrets, (xv) business plans and financial models, and (xvi) all similar and related information in whatever form. Confidential Information shall |
(i) | Acknowledgment of Company Ownership. In the event that Executive as part of Executive’s activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or constituting Confidential Information), any copyrightable work (whether or not constituting Confidential Information) or any other form of Confidential Information relating directly or indirectly to the Company’s business as now or hereafter conducted (collectively, “Intellectual Property”), Executive acknowledges that such Intellectual Property is the exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by Executive will be deemed “a work made for hire” under Section 201(b) of the 1976 Copyright Act, and the Company shall own all of the rights comprised by the copyright therein. Executive shall promptly and fully disclose all Intellectual Property to the Company and shall cooperate with the Company to protect the Company’s interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive’s employment with the Company). |
(ii) | Executive Invention. Executive understands that paragraph (b)(i) of Section 3 of this Agreement regarding the Company’s ownership of Intellectual Property does not apply to any invention for which no equipment, supplies, facilities or trade secret information of the Company were used and which was developed entirely on Executive’s own time, unless (i) the invention relates to the business of the Company or to the Company’s actual or demonstrably anticipated research or development or (ii) the invention results from any work performed by Executive for the Company. |
(c) | Delivery of Materials upon Termination of Employment. As requested by the Company from time to time and upon the termination of Executive’s employment with the Company for any reason, Executive shall promptly deliver to the Company |
(d) | Limited Noncompete. Executive agrees that for a period of twelve (12) months following his Separation from Service (the “Noncompete Period”): |
(i) | Executive will not, within a radius of twenty-five (25) miles of 320 Interstate North Parkway, SE, Atlanta, GA 30339, directly or indirectly, without the prior written consent of the Company, perform any duties the same or substantially similar to those Executive performed for the Company on behalf of an entity that competes with the Company or is planning to compete with the Company; AND |
(ii) | Executive will not, directly or indirectly, without the prior written consent of the Company, perform any duties the same or substantially similar to those Executive performed for the Company for the specifically identified competitive business entities or their parent companies, subsidiaries or affiliates listed in Exhibit C to this Agreement regardless of location, provided however, that this prohibition shall not apply to employment outside of the United States unless such employment is in a position which helps the listed company compete against the Company inside the United States. |
(e) | Nonsolicitation. During the Noncompete Period, Executive shall not (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any employee thereof, or (ii) call on, solicit or service any customer, supplier, licensee, licensor or other business relation of the Company in order to induce or attempt to induce any such Person to cease doing business with the Company, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company (including making any negative statements or communications concerning the Company), provided however that this Section 3(e) pertains only to customers, suppliers, licensees, licensors or other business relations of the Company with whom Executive had Material Contact. “Material Contact” is defined by O.C.G.A. § 13-8-51 and means the contact between Executive and another person or entity with whom or which Executive dealt on behalf of the Company, whose dealings with the Company were coordinated or supervised by Executive, or about whom or which Executive obtained Confidential Information in the course of his employment with the Company. |
(f) | Non-Disparagement. During the Noncompete Period and in perpetuity thereafter, Executive shall not directly or indirectly make any statement that will or may have |
(g) | Judicial Modification. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 3 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or geographic area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment or decision may be appealed. |
(a) | the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors (“voting securities”) of the Company that represent fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities, other than: |
(i) | an acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or |
(ii) | an acquisition of voting securities by the Company or a corporation owned, directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or |
(iii) | an acquisition of voting securities pursuant to a transaction described in subsection (c) below that would not be a Change in Control under subsection (c), or |
(iv) | an acquisition of voting securities pursuant to the Company’s initial public offering of its common stock; |
(b) | during any one-year period, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c) whose election by the Board 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 two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or |
(c) | the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: |
(i) | which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and |
(ii) | after which no person or group beneficially owns voting securities representing fifty percent (50%) or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this paragraph (ii) as beneficially owning fifty percent (50%) or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or |
(d) | the Company’s stockholders approve a liquidation or dissolution of the Company. |
(a) | Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. |
(b) | Complete Agreement. This Agreement and those documents expressly referred to in this Agreement embody the complete agreement and understanding among the Parties and supersede and preempt any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter of this Agreement in any way, including, without limitation, all written and oral agreements with respect to severance benefits and accelerated vesting and/or exercisability of Executive’s Stock Awards in the event of employment termination. |
(c) | Remedies. Each of the parties to this Agreement shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorney’s fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance (without posting a bond or other security) and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. |
(d) | Amendment, Modification, or Waiver. The provisions of this Agreement may be amended, modified, or waived only in a written agreement or amendment signed by both the Executive and the Company. |
(e) | Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or legal holiday in the States of Illinois or Georgia, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. |
(f) | Descriptive Headings; Interpretation; No Strict Construction. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns, pronouns, and verbs shall include the plural and vice versa. Reference to any agreement, document or instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. The use of the |
(g) | Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when (a) delivered personally to the recipient, (b) telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. Atlanta, Georgia time on a business day, and otherwise on the next business day, or (c) one business day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the following Persons at the following addresses: |
(h) | Successors and Assigns. This Agreement shall bind the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns whether so expressed or not. |
(i) | CHOICE OF LAW. THE QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS HERETO SHALL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF GEORGIA. |
(j) | Counterparts. This Agreement may be executed in separate counterparts, none of which need contain the signature of more than one party hereto but each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. |
(k) | Delivery by Facsimile. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall reexecute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation or enforceability of a contract and each such party forever waives any such defense. |
(l) | Code Section 409A. |
(i) | Six Month Delay. To the extent any benefits under this Agreement are treated as non-qualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then if Executive is deemed at the time of his Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the benefits to which Employee is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Employee’s termination benefits shall not be provided to Employee prior to the earlier of (i) the expiration of the six-month period measured from the date of the Executive’s Separation from Service or (ii) the date of Executive’s death. Upon the earlier of such dates, all payments deferred pursuant to this Section 3(f) shall be paid in a lump sum to Executive. Thereafter, payments will resume in accordance with this Agreement. The determination of whether the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation from Service shall made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treas. Reg. Section 1.409A-1(i) and any successor provision thereto). |
(ii) | In-kind Benefits and Reimbursements. Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of the Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of the Executive, except for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be |
(iii) | Miscellaneous. This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. In no event shall the Company be required to provide a tax gross-up payment to Executive or otherwise reimburse Executive with respect to Section 409A Penalties. Additionally, in the event that following the date hereof the Company or the Executive reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Internal Revenue Code, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance. |
(m) | Arbitration. Any dispute, claim or controversy based on, arising out of or relating to Executive’s employment or this Agreement shall be settled by final and binding arbitration in Atlanta, Georgia, before a single neutral arbitrator in accordance with the National Rules for the Resolution of Employment Disputes (the “Rules”) of the American Arbitration Association, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. If the parties are unable to agree upon an arbitrator, one shall be appointed by the AAA in accordance with its Rules. Each party shall pay the fees of its own attorneys, the expenses of its witnesses and all other expenses connected with presenting its case; however, Executive and the Company agree that, to the extent permitted by law, the arbitrator may, in his discretion, award reasonable attorneys’ fees to the prevailing party. Other costs of the arbitration, including the cost of any record or transcripts of the arbitration, AAA’s administrative fees, the fee of the arbitrator, and all other fees and costs, shall be borne by the Company. This Section 4(m) is intended to be the |
360networks, Inc. | Integra Telecom, Inc. |
Access One, Inc. | Internap Network Service Corporation |
Amazon.com, Inc. | ITC^DeltaCom, Inc. |
AT&T Inc. | Level 3 Communications, Inc. |
Bandwidth.com, Inc. | LOGIX Communications |
Birch Communications, Inc. | Microsoft Corp. |
Bright House Networks | Microtech-Tel, Inc. |
Broadview Networks Holdings, Inc. | Neustar, Inc. |
Broadvox LLC | Pac-West Telecomm, Inc. |
Cablevision Systems Corporation | PAETEC Holdings Corp. |
CenturyLink, Inc. | Rackspace Hosting, Inc. |
Charter Communications, Inc. | Sprint Nextel Corporation |
Comcast Corporation | Syniverse Technologies, Inc. |
Cox Communications | TCG Communications |
Cypress Communications | TDS Telecommunications Corporation |
Digital Agent, LLC | TelePacific Communications |
EarthLink, Inc. | Tel West Network Services Corporation |
First Communications, Inc. | Time Warner Cable, Inc. |
Global Crossing Limited | tw telecom inc. |
Globalcom, Inc. | Verizon Communications, Inc. |
GoGrid, LLC | Vonage Holdings Corp. |
Grande Communications Networks LLC | Windstream Corporation |
Hosting.com, Inc. | XO Holdings, Inc. |
Infotelecom, LLC |
1. | At-Will Employment. Executive acknowledges and agrees that no agreement or arrangement between Executive and the Company (including the execution and delivery of this Agreement) shall entitle Executive to become or remain in the employment of the Company or affect the right of the Company to terminate Executive’s employment at any time and for any reason. |
2. | Termination. |
(i) | Non-Change in Control Severance. Subject to Section 2(d) below, in the event of a Specified Termination of Executive’s employment, the Company shall in accordance with its customary payroll practices, during the period beginning the day after the date of Executive’s Separation from Service with the Company and ending on the first anniversary of such date, pay Executive severance payments on the Company’s normal pay dates at a rate equal to 100% of the annual base salary rate in effect immediately prior to Executive’s termination of employment. If Executive’s Specified Termination occurs following a Change in Control, the severance provisions of paragraph 2(a)(ii) shall control rather than the provisions of this paragraph. |
(ii) | Post Change in Control Severance. Subject to Section 2(d) below, in the event of a Specified Termination of Executive’s employment following a Change in Control, in lieu of the severance described in paragraph 2(a)(i), above, the Company shall in accordance with its customary payroll practices, during the period beginning the day after the date of Executive’s Separation from Service and ending on the first anniversary of such date, pay Executive severance payments on the Company’s normal pay dates at a rate equal to 100% of the annual base salary rate in effect immediately prior to Executive’s termination of employment. In addition, Company shall, within three business days of the date six months following the date of Executive’s Separation from Service, pay Executive a lump sum equal to the average monetary value of the bonus paid to the Executive by the Company over the previous three years plus, at Executive’s election, either (A) an additional lump sum equal to 50% of the annual base salary of the Executive in effect on the date of his Specified Termination or (B) no additional lump sum. If |
(iii) | Effect of Voluntary Reductions in Bonus on Post Change in Control Severance. If Executive chooses in one or more years, for any reason whatsoever, to voluntarily accept a lower bonus payment than would otherwise have been due, the payment to Executive described in in Section 2(a)(ii), above, which is based on the payment of bonuses for previous years shall be calculated as if Executive had received the full bonus earned in each of the preceding three years. If, for any reason whatsoever, the Company provides the Executive all or a portion of Executive’s bonus in equity in one or more years, the payment to Executive described in in Section 2(a)(ii), above, which is based on the payment of bonuses for previous years shall be calculated by combining, for each of the years on which the calculation is based, the value of the cash bonus provided to Executive with the value of the equity provided in lieu of cash using the cash value of the equity at the time of issuance. |
(b) | Continuation of Medical Benefits via the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Subject to Section 2(d) below, in the event of a Specified Termination of Executive’s employment, the Company shall pay COBRA benefits for Executive and any dependents covered by Executive’s Company-provided health insurance on the date of his/her Specified Termination. In the event that Executive had no Company-provided health insurance upon the date of his/her Specified Termination, he/she shall not be eligible for any benefits otherwise available under this paragraph. |
(i) | In the event of a Specified Termination of Executive’s employment following the effective date of a Change in Control, the vesting and/or exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated on the date of termination. |
(ii) | In the event of a Specified Termination of Executive’s employment prior to the effective date of a Change in Control, (A) the vesting and/or exercisability of twenty percent (20%) of each of Executive’s outstanding non-performance-based Stock Awards shall be automatically accelerated on the date of termination (i.e., if forty percent (40%) of each Stock Award is vested as of the date of termination, then after such termination sixty percent (60%) of such Stock Award shall be vested and forty percent (40%) shall be unvested); and (B) if Executive has a performance-based Stock Award pending on the date of the Specified Termination, the performance period ends in the one year following the Specified Termination and the performance goals of the Stock Award are met, Executive shall be provided, after the |
(iii) | In the event of a termination of Executive’s employment by reason of Executive’s death, the vesting and/or exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated on the date of death. |
(iv) | In the event of a termination of Executive’s employment by reason of Executive’s Disability, the vesting and/or exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated on the date of termination so that sixty percent (60%) of each such Stock Award shall be vested and/or exercisable (i.e., to the extent, but only to the extent, that less than sixty percent (60%) of an outstanding Stock Award has not already vested upon such termination of employment, such Stock Award will vest as of the date of such termination so that sixty percent (60%) of such Stock Award shall be vested. |
(v) | With respect to all Stock Awards granted to Executive on or after September 30, 2005, in the event of a Specified Termination of Executive’s employment, such Stock Awards shall remain exercisable for a period of one (1) year following the date of Executive’s termination. With respect to all Stock Awards granted to Executive prior to September 30, 2005, such Stock Awards shall remain exercisable following Executive’s termination of employment as set forth in the award agreements pursuant to which such Stock Awards were granted. |
(vi) | Except as specifically provided in Section 2(c)(v) above, this Section 2(c) shall supersede any other agreement with respect to the acceleration of Executive’s Stock Awards as a result of a termination of Executive’s employment, death, Disability and/or a Change in Control, including, without limitation, the applicable provisions of any award agreements pursuant to which such Stock Awards were granted. Such award agreements will continue to govern Executive’s Stock Awards to the extent not expressly superseded by this Agreement. |
(d) | Release; First Payment Date; Separate Payments. On or after the date of Executive’s Separation from Service and on or before the date that is 45 days after the date of Executive’s Separation from Service, Executive shall execute a release (the |
(a) | Nondisclosure and Nonuse of Confidential Information. Executive shall not disclose or use at any time, either during Executive’s employment with the Company or thereafter, any Confidential Information (as defined below) of which Executive is or becomes aware, whether or not such information is developed by Executive, except to the extent that such disclosure or use is directly related to and required by Executive’s performance of duties assigned to Executive by the Company; provided that nothing herein shall restrict Executive from disseminating personal knowledge gained during the course of Executive’s employment with the Company after the second anniversary of the termination of Executive’s employment with the Company to the extent such personal knowledge is not the property of the Company. Executive shall take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. As used in this Agreement, the term “Confidential Information” is defined by O.C.G.A. §13-8-51(3) and means information that is not generally known to the public and that is used, developed or obtained by the Company in connection with its business, including but not limited to (i) products or services, (ii) fees, costs and pricing structures, (iii) designs, (iv) analysis, (v) drawings, photographs and reports, (vi) computer software, including operating systems, applications and program listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix) accounting and business methods, (x) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xi) customers and clients and customer or client lists, (xii) copyrightable works, (xiv) all technology and trade secrets, (xv) business plans and financial models, and (xvi) all similar and related information in whatever form. Confidential Information shall not include any information that has been published in a form generally available to the public prior to the date Executive proposes to disclose or use such information. Information shall not be deemed to have been published merely because individual |
(i) | Acknowledgment of Company Ownership. In the event that Executive as part of Executive’s activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or constituting Confidential Information), any copyrightable work (whether or not constituting Confidential Information) or any other form of Confidential Information relating directly or indirectly to the Company’s business as now or hereafter conducted (collectively, “Intellectual Property”), Executive acknowledges that such Intellectual Property is the exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by Executive will be deemed “a work made for hire” under Section 201(b) of the 1976 Copyright Act, and the Company shall own all of the rights comprised by the copyright therein. Executive shall promptly and fully disclose all Intellectual Property to the Company and shall cooperate with the Company to protect the Company’s interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive’s employment with the Company). |
(ii) | Executive Invention. Executive understands that paragraph (b)(i) of Section 3 of this Agreement regarding the Company’s ownership of Intellectual Property does not apply to any invention for which no equipment, supplies, facilities or trade secret information of the Company were used and which was developed entirely on Executive’s own time, unless (i) the invention relates to the business of the Company or to the Company’s actual or demonstrably anticipated research or development or (ii) the invention results from any work performed by Executive for the Company. |
(c) | Delivery of Materials upon Termination of Employment. As requested by the Company from time to time and upon the termination of Executive’s employment with the Company for any reason, Executive shall promptly deliver to the Company all copies and embodiments, in whatever form, of all Confidential Information and Intellectual Property in Executive’s possession or within Executive’s control (including, but not limited to, written records, notes, photographs, manuals, |
(d) | Limited Noncompete. Executive agrees that for a period of twelve (12) months following his Separation from Service (the “Noncompete Period”): |
(i) | Executive will not, within a radius of twenty-five (25) miles of 320 Interstate North Parkway, SE, Atlanta, GA 30339, directly or indirectly, without the prior written consent of the Company, perform any duties the same or substantially similar to those Executive performed for the Company on behalf of an entity that competes with the Company or is planning to compete with the Company; AND |
(ii) | Executive will not, directly or indirectly, without the prior written consent of the Company, perform any duties the same or substantially similar to those Executive performed for the Company for the specifically identified competitive business entities or their parent companies, subsidiaries or affiliates listed in Exhibit C to this Agreement regardless of location, provided however, that this prohibition shall not apply to employment outside of the United States unless such employment is in a position which helps the listed company compete against the Company inside the United States. |
(e) | Nonsolicitation. During the Noncompete Period, Executive shall not (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any employee thereof, or (ii) call on, solicit or service any customer, supplier, licensee, licensor or other business relation of the Company in order to induce or attempt to induce any such Person to cease doing business with the Company, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company (including making any negative statements or communications concerning the Company), provided however that this Section 3(e) pertains only to customers, suppliers, licensees, licensors or other business relations of the Company with whom Executive had Material Contact. “Material Contact” is defined by O.C.G.A. § 13-8-51 and means the contact between Executive and another person or entity with whom or which Executive dealt on behalf of the Company, whose dealings with the Company were coordinated or supervised by Executive, or about whom or which Executive obtained Confidential Information in the course of his employment with the Company. |
(f) | Non-Disparagement. During the Noncompete Period and in perpetuity thereafter, Executive shall not directly or indirectly make any statement that will or may have the effect of disparaging the Company, or which is or may be derogatory of the Company. |
(g) | Judicial Modification. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 3 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or geographic area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment or decision may be appealed. |
(a) | the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors (“voting securities”) of the Company that represent fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities, other than: |
(i) | an acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or |
(ii) | an acquisition of voting securities by the Company or a corporation owned, directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or |
(iii) | an acquisition of voting securities pursuant to a transaction described in subsection (c) below that would not be a Change in Control under subsection (c), or |
(iv) | an acquisition of voting securities pursuant to the Company’s initial public offering of its common stock; |
(b) | during any one-year period, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c) whose election by the Board 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 two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or |
(c) | the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: |
(i) | which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and |
(ii) | after which no person or group beneficially owns voting securities representing fifty percent (50%) or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this paragraph (ii) as beneficially owning fifty percent (50%) or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or |
(d) | the Company’s stockholders approve a liquidation or dissolution of the Company. |
(a) | Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. |
(b) | Complete Agreement. This Agreement and those documents expressly referred to in this Agreement embody the complete agreement and understanding among the Parties and supersede and preempt any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter of this Agreement in any way, including, without limitation, all written and oral agreements with respect to severance benefits and accelerated vesting and/or exercisability of Executive’s Stock Awards in the event of employment termination. |
(c) | Remedies. Each of the parties to this Agreement shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorney’s fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance (without posting a bond or other security) and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. |
(d) | Amendment, Modification, or Waiver. The provisions of this Agreement may be amended, modified, or waived only in a written agreement or amendment signed by both the Executive and the Company. |
(e) | Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or legal holiday in the States of Illinois or Georgia, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. |
(f) | Descriptive Headings; Interpretation; No Strict Construction. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns, pronouns, and verbs shall include the plural and vice versa. Reference to any agreement, document or instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. The use of the |
(g) | Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when (a) delivered personally to the recipient, (b) telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. Atlanta, Georgia time on a business day, and otherwise on the next business day, or (c) one business day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the following Persons at the following addresses: |
(h) | Successors and Assigns. This Agreement shall bind the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns whether so expressed or not. |
(i) | CHOICE OF LAW. THE QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS HERETO SHALL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF GEORGIA. |
(j) | Counterparts. This Agreement may be executed in separate counterparts, none of which need contain the signature of more than one party hereto but each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. |
(k) | Delivery by Facsimile. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall reexecute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation or enforceability of a contract and each such party forever waives any such defense. |
(l) | Code Section 409A. |
(i) | Six Month Delay. To the extent any benefits under this Agreement are treated as non-qualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then if Executive is deemed at the time of his Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the benefits to which Employee is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Employee’s termination benefits shall not be provided to Employee prior to the earlier of (i) the expiration of the six-month period measured from the date of the Executive’s Separation from Service or (ii) the date of Executive’s death. Upon the earlier of such dates, all payments deferred pursuant to this Section 3(f) shall be paid in a lump sum to Executive. Thereafter, payments will resume in accordance with this Agreement. The determination of whether the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation from Service shall made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treas. Reg. Section 1.409A-1(i) and any successor provision thereto). |
(ii) | In-kind Benefits and Reimbursements. Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of the Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of the Executive, except for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be |
(iii) | Miscellaneous. This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. In no event shall the Company be required to provide a tax gross-up payment to Executive or otherwise reimburse Executive with respect to Section 409A Penalties. Additionally, in the event that following the date hereof the Company or the Executive reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Internal Revenue Code, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance. |
(m) | Arbitration. Any dispute, claim or controversy based on, arising out of or relating to Executive’s employment or this Agreement shall be settled by final and binding arbitration in Atlanta, Georgia, before a single neutral arbitrator in accordance with the National Rules for the Resolution of Employment Disputes (the “Rules”) of the American Arbitration Association, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. If the parties are unable to agree upon an arbitrator, one shall be appointed by the AAA in accordance with its Rules. Each party shall pay the fees of its own attorneys, the expenses of its witnesses and all other expenses connected with presenting its case; however, Executive and the Company agree that, to the extent permitted by law, the arbitrator may, in his discretion, award reasonable attorneys’ fees to the prevailing party. Other costs of the arbitration, including the cost of any record or transcripts of the arbitration, AAA’s administrative fees, the fee of the arbitrator, and all other fees and costs, shall be borne by the Company. This Section 4(m) is intended to be the |
360networks, Inc. | Integra Telecom, Inc. |
Access One, Inc. | Internap Network Service Corporation |
Amazon.com, Inc. | ITC^DeltaCom, Inc. |
AT&T Inc. | Level 3 Communications, Inc. |
Bandwidth.com, Inc. | LOGIX Communications |
Birch Communications, Inc. | Microsoft Corp. |
Bright House Networks | Microtech-Tel, Inc. |
Broadview Networks Holdings, Inc. | Neustar, Inc. |
Broadvox LLC | Pac-West Telecomm, Inc. |
Cablevision Systems Corporation | PAETEC Holdings Corp. |
CenturyLink, Inc. | Rackspace Hosting, Inc. |
Charter Communications, Inc. | Sprint Nextel Corporation |
Comcast Corporation | Syniverse Technologies, Inc. |
Cox Communications | TCG Communications |
Cypress Communications | TDS Telecommunications Corporation |
Digital Agent, LLC | TelePacific Communications |
EarthLink, Inc. | Tel West Network Services Corporation |
First Communications, Inc. | Time Warner Cable, Inc. |
Global Crossing Limited | tw telecom inc. |
Globalcom, Inc. | Verizon Communications, Inc. |
GoGrid, LLC | Vonage Holdings Corp. |
Grande Communications Networks LLC | Windstream Corporation |
Hosting.com, Inc. | XO Holdings, Inc. |
Infotelecom, LLC |
1. | At-Will Employment. Executive acknowledges and agrees that no agreement or arrangement between Executive and the Company (including the execution and delivery of this Agreement) shall entitle Executive to become or remain in the employment of the Company or affect the right of the Company to terminate Executive’s employment at any time and for any reason. |
2. | Termination. |
(i) | Non-Change in Control Severance. Subject to Section 2(d) below, in the event of a Specified Termination of Executive’s employment, the Company shall in accordance with its customary payroll practices, during the period beginning the day after the date of Executive’s Separation from Service with the Company and ending on the first anniversary of such date, pay Executive severance payments on the Company’s normal pay dates at a rate equal to 100% of the annual base salary rate in effect immediately prior to Executive’s termination of employment. If Executive’s Specified Termination occurs following a Change in Control, the severance provisions of paragraph 2(a)(ii) shall control rather than the provisions of this paragraph. |
(ii) | Post Change in Control Severance. Subject to Section 2(d) below, in the event of a Specified Termination of Executive’s employment following a Change in Control, in lieu of the severance described in paragraph 2(a)(i), above, the Company shall in accordance with its customary payroll practices, during the period beginning the day after the date of Executive’s Separation from Service and ending on the first anniversary of such date, pay Executive severance payments on the Company’s normal pay dates at a rate equal to 100% of the annual base salary rate in effect immediately prior to Executive’s termination of employment. In addition, Company shall, within three business days of the date six months following the date of Executive’s Separation from Service, pay Executive a lump sum equal to the average monetary value of the bonus paid to the Executive by the Company over the previous three years or—if Executive has not been employed by the Company long enough to have been paid a bonus in three previous years—by paying the Executive a sum equal to the amount that would have been paid to him/ |
(iii) | Effect of Voluntary Reductions in Bonus on Post Change in Control Severance. If Executive chooses in one or more years, for any reason whatsoever, to voluntarily accept a lower bonus payment than would otherwise have been due, the payment to Executive described in in Section 2(a)(ii), above, which is based on the payment of bonuses for previous years shall be calculated as if Executive had received the full bonus earned in each of the preceding three years. If, for any reason whatsoever, the Company provides the Executive all or a portion of Executive’s bonus in equity in one or more years, the payment to Executive described in in Section 2(a)(ii), above, which is based on the payment of bonuses for previous years shall be calculated by combining, for each of the years on which the calculation is based, the value of the cash bonus provided to Executive with the value of the equity provided in lieu of cash using the cash value of the equity at the time of issuance. |
(b) | Continuation of Medical Benefits via the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Subject to Section 2(d) below, in the event of a Specified Termination of Executive’s employment, the Company shall pay COBRA benefits for Executive and any dependants covered by Executive’s Company-provided health insurance on the date of his/her Specified Termination. In the event that Executive had no Company-provided health insurance upon the date of his/her Specified Termination, he/she shall not be eligible for any benefits otherwise available under this paragraph. |
(i) | In the event of a Specified Termination of Executive’s employment following the effective date of a Change in Control, the vesting and/or exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated on the date of termination. |
(ii) | In the event of a Specified Termination of Executive’s employment prior to the effective date of a Change in Control, (A) the vesting and/or exercisability of twenty percent (20%) of each of Executive’s outstanding non-performance-based Stock Awards shall be automatically accelerated on the date of termination (i.e., if forty percent (40%) of each Stock Award is vested as of the date of termination, then after such termination sixty percent (60%) of such Stock Award shall be vested and forty percent (40%) shall be unvested); and (B) if Executive has a performance-based Stock Award pending on the date of the Specified Termination, the performance period ends in the one year following the Specified Termination and the performance goals of the Stock Award are met, Executive shall be provided, after the performance goals are met, with 60% of the shares Executive would have |
(iii) | In the event of a termination of Executive’s employment by reason of Executive’s death, the vesting and/or exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated on the date of death. |
(iv) | In the event of a termination of Executive’s employment by reason of Executive’s Disability, the vesting and/or exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated on the date of termination so that sixty percent (60%) of each such Stock Award shall be vested and/or exercisable (i.e., to the extent, but only to the extent, that less than sixty percent (60%) of an outstanding Stock Award has not already vested upon such termination of employment, such Stock Award will vest as of the date of such termination so that sixty percent (60%) of such Stock Award shall be vested. |
(v) | With respect to all Stock Awards granted to Executive on or after September 30, 2005, in the event of a Specified Termination of Executive’s employment, such Stock Awards shall remain exercisable for a period of one (1) year following the date of Executive’s termination. With respect to all Stock Awards granted to Executive prior to September 30, 2005, such Stock Awards shall remain exercisable following Executive’s termination of employment as set forth in the award agreements pursuant to which such Stock Awards were granted. |
(vi) | Except as specifically provided in Section 2(c)(v) above, this Section 2(c) shall supersede any other agreement with respect to the acceleration of Executive’s Stock Awards as a result of a termination of Executive’s employment, death, Disability and/or a Change in Control, including, without limitation, the applicable provisions of any award agreements pursuant to which such Stock Awards were granted. Such award agreements will continue to govern Executive’s Stock Awards to the extent not expressly superseded by this Agreement. |
(d) | Release; First Payment Date; Separate Payments. On or after the date of Executive’s Separation from Service and on or before the date that is 45 days after the date of Executive’s Separation from Service, Executive shall execute a release (the “Release”) in the form attached hereto and incorporated herein as Exhibit A or |
(a) | Nondisclosure and Nonuse of Confidential Information. Executive shall not disclose or use at any time, either during Executive’s employment with the Company or thereafter, any Confidential Information (as defined below) of which Executive is or becomes aware, whether or not such information is developed by Executive, except to the extent that such disclosure or use is directly related to and required by Executive’s performance of duties assigned to Executive by the Company; provided that nothing herein shall restrict Executive from disseminating personal knowledge gained during the course of Executive’s employment with the Company after the second anniversary of the termination of Executive’s employment with the Company to the extent such personal knowledge is not the property of the Company. Executive shall take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. As used in this Agreement, the term “Confidential Information” is defined by O.C.G.A. §13-8-51(3) and means information that is not generally known to the public and that is used, developed or obtained by the Company in connection with its business, including but not limited to (i) products or services, (ii) fees, costs and pricing structures, (iii) designs, (iv) analysis, (v) drawings, photographs and reports, (vi) computer software, including operating systems, applications and program listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix) accounting and business methods, (x) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xi) customers and clients and customer or client lists, (xii) copyrightable works, (xiv) all technology and trade secrets, (xv) business plans and financial models, and (xvi) all similar and related information in whatever form. Confidential Information shall not include any information that has been published in a form generally available to the public prior to the date Executive proposes to disclose or use such information. Information shall not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material |
(i) | Acknowledgment of Company Ownership. In the event that Executive as part of Executive’s activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or constituting Confidential Information), any copyrightable work (whether or not constituting Confidential Information) or any other form of Confidential Information relating directly or indirectly to the Company’s business as now or hereafter conducted (collectively, “Intellectual Property”), Executive acknowledges that such Intellectual Property is the exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by Executive will be deemed “a work made for hire” under Section 201(b) of the 1976 Copyright Act, and the Company shall own all of the rights comprised by the copyright therein. Executive shall promptly and fully disclose all Intellectual Property to the Company and shall cooperate with the Company to protect the Company’s interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive’s employment with the Company). |
(ii) | Executive Invention. Executive understands that paragraph (b)(i) of Section 3 of this Agreement regarding the Company’s ownership of Intellectual Property does not apply to any invention for which no equipment, supplies, facilities or trade secret information of the Company were used and which was developed entirely on Executive’s own time, unless (i) the invention relates to the business of the Company or to the Company’s actual or demonstrably anticipated research or development or (ii) the invention results from any work performed by Executive for the Company. |
(c) | Delivery of Materials upon Termination of Employment. As requested by the Company from time to time and upon the termination of Executive’s employment with the Company for any reason, Executive shall promptly deliver to the Company all copies and embodiments, in whatever form, of all Confidential Information and Intellectual Property in Executive’s possession or within Executive’s control (including, but not limited to, written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, |
(d) | Limited Noncompete. Executive agrees that for a period of twelve (12) months following his Separation from Service (the “Noncompete Period”): |
(i) | Executive will not, within a radius of twenty-five (25) miles of 320 Interstate North Parkway, SE, Atlanta, GA 30339, directly or indirectly, without the prior written consent of the Company, perform any duties the same or substantially similar to those Executive performed for the Company on behalf of an entity that competes with the Company or is planning to compete with the Company; AND |
(ii) | Executive will not, directly or indirectly, without the prior written consent of the Company, perform any duties the same or substantially similar to those Executive performed for the Company for the specifically identified competitive business entities or their parent companies, subsidiaries or affiliates listed in Exhibit C to this Agreement regardless of location, provided however, that this prohibition shall not apply to employment outside of the United States unless such employment is in a position which helps the listed company compete against the Company inside the United States. |
(e) | Nonsolicitation. During the Noncompete Period, Executive shall not (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any employee thereof, or (ii) call on, solicit or service any customer, supplier, licensee, licensor or other business relation of the Company in order to induce or attempt to induce any such Person to cease doing business with the Company, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company (including making any negative statements or communications concerning the Company), provided however that this Section 3(e) pertains only to customers, suppliers, licensees, licensors or other business relations of the Company with whom Executive had Material Contact. “Material Contact” is defined by O.C.G.A. § 13-8-51 and means the contact between Executive and another person or entity with whom or which Executive dealt on behalf of the Company, whose dealings with the Company were coordinated or supervised by Executive, or about whom or which Executive obtained Confidential Information in the course of his employment with the Company. |
(f) | Non-Disparagement. During the Noncompete Period and in perpetuity thereafter, Executive shall not directly or indirectly make any statement that will or may have the effect of disparaging the Company, or which is or may be derogatory of the Company. |
(g) | Judicial Modification. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 3 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or geographic area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment or decision may be appealed. |
(a) | the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors (“voting securities”) of the Company that represent fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities, other than: |
(i) | an acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or |
(ii) | an acquisition of voting securities by the Company or a corporation owned, directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or |
(iii) | an acquisition of voting securities pursuant to a transaction described in subsection (c) below that would not be a Change in Control under subsection (c), or |
(iv) | an acquisition of voting securities pursuant to the Company’s initial public offering of its common stock; |
(b) | during any one-year period, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c) whose election by the Board 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 two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or |
(c) | the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: |
(i) | which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and |
(ii) | after which no person or group beneficially owns voting securities representing fifty percent (50%) or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this paragraph (ii) as beneficially owning fifty percent (50%) or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or |
(d) | the Company’s stockholders approve a liquidation or dissolution of the Company. |
(a) | Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. |
(b) | Complete Agreement. This Agreement and those documents expressly referred to in this Agreement embody the complete agreement and understanding among the Parties and supersede and preempt any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter of this Agreement in any way, including, without limitation, all written and oral agreements with respect to severance benefits and accelerated vesting and/or exercisability of Executive’s Stock Awards in the event of employment termination. |
(c) | Remedies. Each of the parties to this Agreement shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorney’s fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance (without posting a bond or other security) and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. |
(d) | Amendment, Modification, or Waiver. The provisions of this Agreement may be amended, modified, or waived only in a written agreement or amendment signed by both the Executive and the Company. |
(e) | Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or legal holiday in the States of Illinois or Georgia, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. |
(f) | Descriptive Headings; Interpretation; No Strict Construction. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns, pronouns, and verbs shall include the plural and vice versa. Reference to any agreement, document or instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. The use of the |
(g) | Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when (a) delivered personally to the recipient, (b) telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. Atlanta, Georgia time on a business day, and otherwise on the next business day, or (c) one business day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the following Persons at the following addresses: |
(h) | Successors and Assigns. This Agreement shall bind the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns whether so expressed or not. |
(i) | CHOICE OF LAW. THE QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS HERETO SHALL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF GEORGIA. |
(j) | Counterparts. This Agreement may be executed in separate counterparts, none of which need contain the signature of more than one party hereto but each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. |
(k) | Delivery by Facsimile. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall reexecute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation or enforceability of a contract and each such party forever waives any such defense. |
(l) | Code Section 409A. |
(i) | Six Month Delay. To the extent any benefits under this Agreement are treated as non-qualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then if Executive is deemed at the time of his Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the benefits to which Employee is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Employee’s termination benefits shall not be provided to Employee prior to the earlier of (i) the expiration of the six-month period measured from the date of the Executive’s Separation from Service or (ii) the date of Executive’s death. Upon the earlier of such dates, all payments deferred pursuant to this Section 3(f) shall be paid in a lump sum to Executive. Thereafter, payments will resume in accordance with this Agreement. The determination of whether the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation from Service shall made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treas. Reg. Section 1.409A-1(i) and any successor provision thereto). |
(ii) | In-kind Benefits and Reimbursements. Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of the Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of the Executive, except for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be |
(iii) | Miscellaneous. This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. In no event shall the Company be required to provide a tax gross-up payment to Executive or otherwise reimburse Executive with respect to Section 409A Penalties. Additionally, in the event that following the date hereof the Company or the Executive reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Internal Revenue Code, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance. |
(m) | Arbitration. Any dispute, claim or controversy based on, arising out of or relating to Executive’s employment or this Agreement shall be settled by final and binding arbitration in Atlanta, Georgia, before a single neutral arbitrator in accordance with the National Rules for the Resolution of Employment Disputes (the “Rules”) of the American Arbitration Association, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. If the parties are unable to agree upon an arbitrator, one shall be appointed by the AAA in accordance with its Rules. Each party shall pay the fees of its own attorneys, the expenses of its witnesses and all other expenses connected with presenting its case; however, Executive and the Company agree that, to the extent permitted by law, the arbitrator may, in his discretion, award reasonable attorneys’ fees to the prevailing party. Other costs of the arbitration, including the cost of any record or transcripts of the arbitration, AAA’s administrative fees, the fee of the arbitrator, and all other fees and costs, shall be borne by the Company. This Section 4(m) is intended to be the |
360networks, Inc. | Integra Telecom, Inc. |
Access One, Inc. | Internap Network Service Corporation |
Amazon.com, Inc. | ITC^DeltaCom, Inc. |
AT&T Inc. | Level 3 Communications, Inc. |
Bandwidth.com, Inc. | LOGIX Communications |
Birch Communications, Inc. | Microsoft Corp. |
Bright House Networks | Microtech-Tel, Inc. |
Broadview Networks Holdings, Inc. | Neustar, Inc. |
Broadvox LLC | Pac-West Telecomm, Inc. |
Cablevision Systems Corporation | PAETEC Holdings Corp. |
CenturyLink, Inc. | Rackspace Hosting, Inc. |
Charter Communications, Inc. | Sprint Nextel Corporation |
Comcast Corporation | Syniverse Technologies, Inc. |
Cox Communications | TCG Communications |
Cypress Communications | TDS Telecommunications Corporation |
Digital Agent, LLC | TelePacific Communications |
EarthLink, Inc. | Tel West Network Services Corporation |
First Communications, Inc. | Time Warner Cable, Inc. |
Global Crossing Limited | tw telecom inc. |
Globalcom, Inc. | Verizon Communications, Inc. |
GoGrid, LLC | Vonage Holdings Corp. |
Grande Communications Networks LLC | Windstream Corporation |
Hosting.com, Inc. | XO Holdings, Inc. |
Infotelecom, LLC |
1. | I have reviewed this quarterly report on Form 10-Q of Cbeyond, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ James F. Geiger | ||
Name: | James F. Geiger | |
Title: | Chairman, President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Cbeyond, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ J. Robert Fugate | ||
Name: | J. Robert Fugate | |
Title: | Executive Vice President and Chief Financial Officer |
(i) | the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | November 5, 2012 | /s/ James F. Geiger | |
James F. Geiger | |||
Chairman, President and Chief Executive Officer |
(i) | the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | November 5, 2012 | /s/ J. Robert Fugate | |
J. Robert Fugate | |||
Executive Vice President and Chief Financial Officer |
Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Significant components of income tax expense | ||||
Federal income tax expense (benefit) at statutory rate | $ 2,789 | $ (945) | ||
State income tax expense, net of federal effect | 578 | 285 | ||
Nondeductible expenses | 223 | 171 | ||
Write-off deferred tax assets for non-deductible share-based compensation | 1,216 | 1,668 | ||
Change in valuation allowance | (276) | (900) | ||
Other | (14) | (21) | ||
Income tax (expense) benefit | $ 1,969 | $ 491 | $ 4,516 | $ 258 |
Other Liabilities (Tables)
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Accrued Liabilities | The following table summarizes significant components of other liabilities as of September 30, 2012 and December 31, 2011:
|
Segment Information (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Operating Segments | ||||
Non-cash purchases of property and equipment | $ 3,357 | $ 87 | ||
Payments to Acquire Property, Plant, and Equipment, Total | 47,117 | 59,235 | ||
Total revenues | $ 121,491 | $ 122,529 | $ 369,096 | $ 362,101 |
Share-Based Compensation Plans (Details 1) (USD $)
|
9 Months Ended | |
---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Summarization the weighted average grant date fair values and the binomial option-pricing model | ||
Grant date fair value | $ 3.15 | $ 6.49 |
Expected dividend yield | 0.00% | 0.00% |
Expected volatility | 53.00% | 53.00% |
Risk-free interest rate | 1.00% | 3.00% |
Expected multiple of share price to exercise price upon exercise | $ 2.0 | $ 2.0 |
Post vest cancellation rate | 3.00% | 1.00% |
Performance Shares [Member]
|
||
Summarization the weighted average grant date fair values and the binomial option-pricing model | ||
Expected volatility | 50.00% | |
Risk-free interest rate | 0.00% | |
Fair Value Assumptions, Expected Term | 2 years |
Earnings per Share
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share Basic and Diluted Net Income (Loss) We calculate basic net income (loss) per share by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Our diluted net income (loss) per share is calculated in a similar manner, but includes the effect of dilutive common equivalent shares outstanding during the year. To the extent any common equivalent shares from stock options and other common stock equivalents are anti-dilutive, they are excluded from the computation of dilutive net loss per share. We were in a net loss position for the three and nine months ended September 30, 2011, resulting in no difference between basic net loss per share and diluted net loss per share. The following table summarizes our basic and diluted net income (loss) per share calculations (in thousands, except per share amounts):
Securities that were not included in the diluted net income (loss) per share calculations because they were anti-dilutive, inclusive of unexercised stock options and unvested restricted stock (see Note 6 to the Condensed Consolidated Financial Statements), are as follows (in thousands):
|