Exhibit 10.24
EQUITY REGISTRATION RIGHTS AGREEMENT
Dated as of November 9, 2001
among
CHOICE ONE COMMUNICATIONS INC.,
XXXXXX XXXXXXX & CO. INCORPORATED.
FIRST UNION INVESTORS, INC.
and
CIBC INC.
EQUITY REGISTRATION RIGHTS AGREEMENT
This Equity Registration Rights Agreement (the "AGREEMENT") is made as
of November 9, 2001, among Choice One Communications Inc., a Delaware
corporation (the "CORPORATION"), Xxxxxx Xxxxxxx & Co. Incorporated ("MS&C"),
First Union Investors, Inc. ("FIRST UNION"), and CIBC Inc. ("CIBC") (MS&C, First
Union and CIBC each, a "WARRANTHOLDER").
WHEREAS, the Corporation and certain Affiliates of the Warrantholders
have entered into a Bridge Financing Agreement dated as of August 1, 2000 and
certain related agreements pursuant to which the Corporation has issued on the
date hereof warrants (the "WARRANTS") to the Warrantholders exercisable for
Common Stock; and
WHEREAS, this Agreement provides for certain rights and obligations of
the Corporation and the Warrantholders with respect to registration of the
Warrant Shares (as defined below) under the Securities Act;
NOW, THEREFORE, in consideration of the mutual promises made herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound agree as
follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The following terms used herein but not
otherwise defined will have the following meanings, applicable both to the
singular and the plural forms of the terms described:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "CONTROL" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, by contract or otherwise.
"BOARD" means the board of directors of the Corporation.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Corporation.
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"CORPORATION SECURITIES" has the meaning ascribed thereto in Section
2.02(b).
"DISADVANTAGEOUS CONDITION" has the meaning ascribed thereto in Section
2.01(a)(i).
"HOLDER" means each of the Warrantholders and, subject to Section 2.08,
any Transferee.
"MAJORITY HOLDERS" means, at any time, the Holders holding a majority
in aggregate of the Registrable Securities held by all Holders at such time,
assuming for purposes of this definition that all Warrants outstanding at such
time have been exercised in full.
"OTHER HOLDER DEMAND SECURITIES" has the meaning ascribed thereto in
Section 2.02(b).
"OTHER HOLDER" has the meaning ascribed thereto in Section 2.01(e).
"OTHER SECURITIES" has the meaning ascribed thereto in Section 2.02.
"PARI PASSU HOLDERS" means the Holders and any holder of Other
Securities who has been granted piggyback registration rights in compliance with
Section 2.10 that are pari passu with the piggyback registration rights of the
Holders.
"PARI PASSU SECURITIEs" means the Registrable Securities and the Other
Securities held by Pari Passu Holders.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"REGISTRABLE SECURITIES" means the Warrant Shares, and any securities
issued directly or indirectly with respect to such Warrants Shares by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Registrable Securities, such Registrable Securities shall cease to be
Registrable Securities when they (i) have been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (ii) have been repurchased by the Corporation or otherwise have
ceased to be outstanding or (iii) are eligible to be transferred in compliance
with Rule 144(k).
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"REGISTRATION EXPENSES" means any and all expenses incident to
performance of or compliance with any registration or marketing of securities
pursuant to Article 2, including, without limitation, (i) the fees,
disbursements and expenses of the Corporation's counsel and accountants in
connection with this Agreement and the performance of the Corporation's
obligations hereunder (including the expenses of any annual audit letters and
"cold comfort" letters required or incidental to the performance of such
obligations); (ii) all expenses, including filing fees, in connection with the
preparation, printing and filing of the registration statement, any preliminary
prospectus or final prospectus, any other offering document and amendments and
supplements thereto and the mailing and delivering of copies thereof to any
underwriters and dealers; (iii) the cost of printing or producing any agreements
among underwriters, underwriting agreements, and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of the securities to be disposed of; (iv) all
expenses in connection with the qualification of the securities to be disposed
of for offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters or the Holders of securities in
connection with such qualification and in connection with any blue sky and legal
investment surveys; (v) the filing fees incident to securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the sale
of the securities to be disposed of; (vi) transfer agents' and registrars' fees
and expenses and the fees and expenses of any other agent or trustee appointed
in connection with such offering; (vii) all security engraving and security
printing expenses; (viii) all fees and expenses payable in connection with the
listing of the securities on any securities exchange or automated interdealer
quotation system or the rating of such securities; (ix) any other fees and
disbursements of underwriters customarily paid by the issuers of securities, but
excluding underwriting discounts and commissions and transfer taxes, if any; (x)
the costs and expenses of the Corporation and its officers relating to rating
agency, analyst or investor presentations or any "road show" undertaken in
connection with the registration and/or marketing of any Registrable Securities,
provided that each Selling Holder participating in any such registration or
marketing of securities shall be severally obligated to reimburse the
Corporation for its pro rata share (calculated on the basis of the proceeds to
be received by such Selling Holder from the sale of Registrable Securities
pursuant to such registration or marketing) of one-half of any such reasonable
out-of-pocket costs and expenses; and (xi) other reasonable out-of-pocket costs,
fees and expenses of the Holders including the counsel to the Holders selected
pursuant to Section 2.01(d), provided that the Corporation will not be liable
for the fees and expenses of more than one legal counsel representing the
Holders in connection with any registration hereunder.
"RULE 144" means Rule 144 (or any successor rule to similar effect)
promulgated under the Securities Act.
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"RULE 415 OFFERING" means an offering on a delayed or continuous basis
pursuant to Rule 415 (or any successor rule to similar effect) promulgated under
the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
applicable rules and regulations thereunder.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or
agency succeeding to the functions thereof.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and applicable rules and regulations thereunder.
"SELLING HOLDER" means a Holder of Registrable Securities included in
the relevant registration statement.
"TRANSFEREE" has the meaning ascribed thereto in Section 2.08.
"WARRANT SHARES" means the shares of Common Stock deliverable upon
exercise of the Warrants, as adjusted from time to time.
ARTICLE 2
REGISTRATION RIGHTS
SECTION 2.1. Demand Registration--Registrable Securities. (a) At any
time, one or more Holders holding in the aggregate at least 40% of the
Registrable Securities (assuming, for purposes of calculating such percentage,
that all Warrants outstanding at such time have been exercised in full) may
request in writing that the Corporation effect the registration under the
Securities Act of any or all of the Registrable Securities held by such
requesting Holders. Upon receipt of such written notice specifying the intended
method or methods of disposition of such Registrable Securities, the Corporation
shall promptly give written notice of such requested registration to all other
Holders of Registrable Securities. The other Holders may by written notice to
the Corporation, within 15 days of the Corporation's notice, request the
inclusion in such registration of any or all of the Registrable Securities held
by each such other Holder. The Corporation shall promptly after the expiration
of such 15-day period notify each Holder of Registrable Securities to be
included in the registration of the other Holders requesting Registrable
Securities to be included therein and the number of Registrable Securities
requested to be included therein by each. The Corporation shall prepare and
(within 90 days after the original request has been given) file
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with the Securities and Exchange Commission a registration statement with
respect to all such Registrable Securities and thereafter use its best efforts
to effect the registration under the Securities Act and applicable state
securities laws of such Registrable Securities for disposition in accordance
with the intended method or methods of disposition stated in such request (which
requested method of disposition may be a Rule 415 Offering); provided that,
notwithstanding the foregoing:
(i) with respect to any registration statement filed, or to be
filed, pursuant to this Section 2.01, if the Corporation shall furnish
to the Holders of Registrable Securities that have made such request a
certified resolution of the Board stating that in the Board's good
faith judgment it would (because of the existence of, or in
anticipation of, any acquisition or other material event or transaction
the public disclosure of which at the time would be materially
prejudicial to the Corporation) be significantly disadvantageous (a
"DISADVANTAGEOUS CONDITION") to the Corporation for such a registration
statement to be maintained effective, or to be filed and become
effective, and setting forth in reasonable detail the general reasons
for such judgment, the Corporation shall be entitled to cause such
registration statement to be withdrawn and the effectiveness of such
registration statement terminated, or, in the event no registration
statement has yet been filed, shall be entitled not to file any such
registration statement, until such Disadvantageous Condition no longer
exists (written notice of which the Corporation shall promptly deliver
to such Holders). Upon receipt of any such certification of a
Disadvantageous Condition, such Holders shall forthwith discontinue use
of the prospectus contained in such registration statement and, if so
directed by the Corporation, each such Holder will deliver to the
Corporation all copies, other than permanent file copies then in such
Holder's possession, of the prospectus then covering such Registrable
Securities current at the time of receipt of such notice; provided
that, notwithstanding anything else contained in this Agreement, (1)
neither the filing nor the effectiveness of any such registration
statement may be delayed for a period in excess of 90 days due to the
occurrence of any particular Disadvantageous Condition and (2) the
Corporation may exercise its delay rights under this clause (i) on only
one occasion (and then for not more than 90 days) in connection with
any registration request under Section 2.01 or in any 1-year period. If
so requested by the requesting Holder(s), the Corporation shall, if any
registration statement shall have been withdrawn, at such time as it is
possible or, if earlier, at the end of the 90-day period following such
withdrawal, file a new registration statement covering the Registrable
Securities that were covered by such withdrawn registration and
maintain the effectiveness thereof for such time as is required under
this Agreement;
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(ii) the Holders may exercise their rights under this Section
2.01 (1) on an unlimited number of occasions with respect to
registration statements on Form S-3 and (2) on not more than three
occasions with respect to registration statements on Form S-1; provided
that so long as the Corporation is Form S-3 eligible at the time the
Holders propose to exercise their rights under this Section 2.01 with
respect to an offering of Registrable Securities, the Holders may
exercise their rights under this Section 2.01 only with respect to
registration statements on Form S-3, unless the estimated proceeds of
such offering exceed $10,000,000; and
(iii) the Holders of Registrable Securities shall not have the
right to require the filing of a registration statement pursuant to
this Section 2.01 (x) within six months following the registration and
sale of Registrable Securities effected pursuant to a prior exercise of
the registration rights provided for in this Section 2.01 or (y) for
Registrable Securities having an expected aggregate offering price of
less than $1,000,000.
(b) The requesting Holders may, at any time prior to the effective
date of the registration statement relating to any requested registration,
revoke such request (which request will then not count as the exercise of a
request for purposes of Section 2.01(a)(ii)), without liability to any other
Selling Holder requesting to have Registrable Securities included in such
registration pursuant to Section 2.01(a), by providing a written notice to the
Corporation revoking such request.
(c) Notwithstanding any other provision of this Agreement to the
contrary, a registration requested by a Holder of Registrable Securities
pursuant to this Section 2.01 shall not be deemed to have been effected (and,
therefore, not requested (and rights of a Holder shall be deemed not to have
been exercised) for purposes of paragraph (a) above), (i) unless it has become
effective, (ii) if after it has become effective such registration is interfered
with by any stop order, injunction or other order or requirement of the
Securities and Exchange Commission or other governmental agency or court for any
reason other than a misrepresentation or an omission by such Holder and, as a
result thereof, the Registrable Securities requested to be registered cannot be
completely distributed in accordance with the plan of distribution set forth in
the related registration statement or (iii) if the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied or waived other than solely
by reason of some act or omission by such Holder of Registrable Securities.
(d) In the event that any registration pursuant to this Section 2.01
shall involve, in whole or in part, an underwritten offering, so long as MS&C
and its Affiliates hold at least 40% of the Registrable Securities at such time,
MS&C will
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have the right to select the Corporation's lead underwriter (which may be an
Affiliate of MS&C) of such underwritten offering. Otherwise, if (i) any of the
Holders who hold Warrants or Warrant Shares on the date hereof hold any Warrants
or Warrant Shares at the time of any proposed registration pursuant to this
Section 2.01, such Holders will have the right to select such lead underwriter
and (ii) otherwise, the Holders of a majority of the Registrable Securities
participating in the underwritten offering will have the right to select such
lead underwriter. In connection with each registration pursuant to this Section
2.01, so long as MS&C participates in the offering, MS&C may select one counsel
to represent all of the Selling Holders. In the event that MS&C does not
participate in the offering, the Holders of a majority of the Registrable
Securities to be registered shall select the lead underwriter, as well as
counsel for the Selling Holders, with respect to such registration.
(e) Subject to Section 2.10, the Corporation shall have the right to
cause the registration of additional equity securities for sale for the account
of any Person that is not a Holder (including, without limitation, the
Corporation and any directors, officers or employees of the Corporation and any
other equity holders of the Corporation) (any such Person other than the
Corporation, an "OTHER HOLDER") in any registration of Registrable Securities
requested by the Holders pursuant to paragraph (a) above, so long as, with
respect to any Other Holder, such additional equity securities are being
registered by the Corporation pursuant to the exercise by such Other Holder of
contractual piggyback registration rights (i) provided that if such Holders are
advised in writing (with a copy to the Corporation) by a nationally recognized
investment banking firm selected in accordance with paragraph (d) above (which
shall be the lead underwriter in the case of an underwritten offering) that, in
such firm's good faith view, all or a part of such additional equity securities
cannot be sold and the inclusion of such additional equity securities or part
thereof in such registration would be likely to have an adverse effect on the
price, timing or distribution of the offering and sale of the Registrable
Securities then contemplated by any Holder, the registration of such additional
equity securities or part thereof shall not be permitted. The Holders of the
Registrable Securities to be offered pursuant to paragraph (a) above may require
that any such additional equity securities be included in the offering proposed
by such Holders on the same terms and conditions as the Registrable Securities
that are included therein. In the event that the number of Registrable
Securities requested to be included in a registration statement by the Holders
thereof exceeds the number which, in the good faith view of such investment
banking firm, can be sold without adversely affecting the price, timing,
distribution or sale of securities in the offering, the number shall be
allocated pro rata among all of the requesting Holders on the basis of the
relative number of Registrable Securities then held by each such Holder
(provided that any number in
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excess of a Holder's request may be reallocated among the remaining requesting
Holders in a like manner).
SECTION 2.2. Piggyback Registration. Subject to Section 2.10, in the
event that the Corporation proposes to register any of its Common Stock, any
other of its equity securities or securities convertible into or exchangeable
for its equity securities (collectively, including Common Stock, "OTHER
SECURITIES") under the Securities Act, whether or not for sale for its own
account, in a manner that would permit registration of Registrable Securities
for sale for cash to the public under the Securities Act, it shall give prompt
written notice to each Holder of Registrable Securities of its intention to do
so and of the rights of such Holder under this Section 2.02. Subject to the
terms and conditions hereof, such notice shall offer each such Holder the
opportunity to include in such registration statement such number of Registrable
Securities as such Holder may request. Upon the written request of any such
Holder made within 15 days after the receipt of the Corporation's notice (which
request shall specify the number of Registrable Securities intended to be
disposed of and the intended method of disposition thereof), the Corporation
shall use its best efforts to effect, in connection with the registration of the
Other Securities, the registration under the Securities Act of all Registrable
Securities which the Corporation has been so requested to register, to the
extent required to permit the disposition (in accordance with such intended
methods thereof) of the Registrable Securities so requested to be registered;
provided, that:
(a) if, at any time after giving such written notice of its intention
to register any Other Securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Corporation shall determine for any reason not to register the Other Securities,
the Corporation may, at its election, give written notice of such determination
to such Holders and thereupon the Corporation shall be relieved of its
obligation to register such Registrable Securities in connection with the
registration of such Other Securities, without prejudice, however, to the rights
of the Holders of Registrable Securities immediately to request that such
registration be effected as a registration under Section 2.01 to the extent
permitted thereunder;
(b) if the registration referred to in the first sentence of this
Section 2.02 is to be an underwritten registration on behalf of the Corporation
or any Other Holder, and a nationally recognized investment banking firm
selected by the Corporation or Other Holder to be the lead underwriter in such
offering advises the Corporation in writing that, in such firm's good faith
view, the inclusion of all or a part of such Registrable Securities in such
registration would be likely to have an adverse effect upon the price, timing or
distribution of the offering and sale of the Other Securities then contemplated,
the Corporation shall include in such registration: (i) first, if the
registration is to satisfy a demand registration right of
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any Other Holder (an "OTHER HOLDER DEMAND REGISTRATION"), up to the full number
of Other Securities ("OTHER HOLDER DEMAND SECURITIES") requested to be included
in such registration by the holder demanding such registration, (ii) second, all
Other Securities the Corporation proposes to sell for its own account
("CORPORATION SECURITIES") in excess of the number of Other Holder Demand
Securities to be sold in such offering which, in the good faith view of such
investment banking firm, can be so sold without so adversely affecting such
offering, (iii) third, up to the full number of Pari Passu Securities held by
Pari Passu Holders that are requested to be included in such registration in
excess of the aggregate number of Corporation Securities and/or Other Holder
Demand Securities, as applicable, to be sold in such offering and described in
clauses (i) and (ii) which, in the good faith view of such investment banking
firm, can be so sold without so adversely affecting such offering (and (x) if
such number is less than the full number of such Pari Passu Securities, such
number shall be allocated pro rata among such Pari Passu Holders on the basis of
the relative number of Pari Passu Securities then held and being sold by such
Pari Passu Holder and requested to be registered pursuant to such registration
(provided that any number in excess of a Pari Passu Holder's request may be
reallocated among the requesting Pari Passu Holders in a like manner) and (y) in
the event that such investment banking firm advises the Corporation in writing
pursuant to this subclause (b) that less than all of such Pari Passu Securities
should be included in such offering, Holders of Registrable Securities
constituting Pari Passu Securities requested to be included may withdraw their
request for registration of their Registrable Securities under this Section 2.02
and request that 90 days subsequent to the effective date of the registration
statement for the registration of the relevant Other Securities such
registration of Registrable Securities be effected as a registration under
Section 2.01 to the extent permitted thereunder), and (iv) fourth, up to the
full number of Other Securities (other than Other Holder Demand Securities,
Corporation Securities and Pari Passu Securities), if any, in excess of the
number of Other Holder Demand Securities, Corporation Securities and Pari Passu
Securities to be sold in such offering which, in the good faith view of such
investment banking firm, can be sold without so adversely affecting such
offering (and, if such number is less than the full number of Other Securities,
such number shall be allocated pro rata among the holders of such Other
Securities (other than Other Holder Demand Securities) on the basis of the
number of securities requested to be included therein by each such holder);
(c) the Corporation shall not be required to effect any registration
of Registrable Securities under this Section 2.02 incidental to the registration
of any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock option or
other executive or employee benefit or compensation plans; and
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(d) no registration of Registrable Securities effected under this
Section 2.02 shall relieve the Corporation of its obligation to effect a
registration of Registrable Securities pursuant to Section 2.01.
SECTION 2.3. Expenses. Except as provided herein, the Corporation shall
pay all Registration Expenses (exclusive of underwriting discounts and
commissions, if any) with respect to a particular offering (or proposed
offering). Each Selling Holder shall bear its own underwriting discounts and
commissions, transfer taxes and the fees and expenses of its own counsel, except
that fees and expenses of one counsel representing all Selling Holders (selected
pursuant to Section 2.01(d)) will constitute Registration Expenses.
SECTION 2.4. Registration and Qualification. If and whenever the
Corporation is required to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.01 or 2.02, the Corporation
shall as promptly as practicable:
(a) prepare, file and use its reasonable best efforts to cause to
become effective a registration statement under the Securities Act relating to
the Registrable Securities to be offered in accordance with the intended method
of disposition thereof;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities until such time as all
of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition set forth in such registration statement;
provided that the Corporation will, at least 5 business days prior to filing a
registration statement or prospectus or any amendment or supplement thereto,
furnish to each Selling Holder copies of such registration statement or
prospectus (or amendment or supplement) as proposed to be filed (including, upon
the request of such Selling Holder, documents to be incorporated by reference
therein) which documents will be subject to the reasonable review and comments
of such Selling Holder (and its attorneys) during such 5-business-day period and
the Corporation will not file any registration statement, any prospectus or any
amendment or supplement thereto (or any such documents incorporated by
reference) containing any statements with respect to such Selling Holder to
which such Selling Holder shall reasonably object in writing;
(c) furnish to the Selling Holders and to any underwriter of such
Registrable Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
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including all exhibits), such number of copies of the prospectus included in
such registration statement (including each preliminary prospectus and any
summary prospectus), in conformity with the requirements of the Securities Act,
such documents incorporated by reference in such registration statement or
prospectus, and such other documents, as the Selling Holders or such underwriter
may reasonably request, and a copy of any and all transmittal letters or other
correspondence to or received from, the Securities and Exchange Commission or
any other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating to
such offering;
(d) after the filing of the registration statement, promptly notify
each Selling Holder in writing of the effectiveness thereof and of any stop
order issued or threatened by the Securities and Exchange Commission and take
all reasonable actions required to prevent the entry of such stop order or to
promptly remove it if entered and promptly notify such Selling Holder of such
lifting or withdrawal of such order;
(e) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the Selling Holders to consummate the disposition of such Registrable
Securities;
(f) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the Selling Holders or any underwriter of such
Registrable Securities shall request, and use its best efforts to obtain all
appropriate registrations, permits and consents in connection therewith, and do
any and all other acts and things which may be necessary or advisable to enable
the Selling Holders or any such underwriter to consummate the disposition in
such jurisdictions of its Registrable Securities covered by such registration
statement; provided, that the Corporation shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
such jurisdiction wherein it is not so qualified or to consent to general
service of process in any such jurisdiction;
(g) (i) use its best efforts to furnish to each Selling Holder and to
any underwriter of such Registrable Securities an opinion of counsel for the
Corporation addressed to each Selling Holder and dated the date of the closing
under the underwriting agreement (if any) (or if such offering is not
underwritten, dated the effective date of the registration statement), and (ii)
use its best efforts to furnish to each Selling Holder a "cold comfort" letter
addressed to each Selling Holder and signed by the independent public
accountants who have audited the financial statements of the Corporation
included in such registration statement, in
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each such case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in connection with the consummation of underwritten public
offerings of securities and such other matters as the Selling Holders may
reasonably request and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements;
(h) as promptly as practicable, notify the Selling Holders in writing
(i) at any time when a prospectus relating to a registration pursuant to Section
2.01 or 2.02 is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) of any request by the Securities
and Exchange Commission or any other regulatory body or other body having
jurisdiction for any amendment of or supplement to any registration statement or
other document relating to such offering, and in either such case, at the
request of the Selling Holders prepare and furnish to the Selling Holders a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading;
(i) if requested by the lead or managing underwriters, use its best
efforts to list all such Registrable Securities covered by such registration on
each securities exchange and automated inter-dealer quotation system on which a
class of common equity securities of the Corporation is then listed;
(j) send appropriate officers of the Corporation to attend any "road
shows" and rating agency, analyst and investor presentations scheduled in
connection with any such registration and use its reasonable best efforts to
cooperate as reasonably requested by the Selling Holders in the marketing of the
Registrable Securities, and all reasonable out-of-pocket costs and expenses
incurred by the Corporation or such officers in connection with such attendance
or co-operation shall be paid one-half by the Corporation and one-half by the
Selling Holders participating in such registration, each of whom shall be
severally obligated to pay its for its pro rata share (calculated on the basis
of the proceeds to be received by such Selling Holder from the sale of its
Registrable Securities pursuant to such registration) of such one-half of such
costs and expenses; and
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(k) furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected pursuant
to Section 2.01 or 2.02 unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested by
the Selling Holders or the underwriters.
SECTION 2.5. Underwriting; Due Diligence. (a) If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant to
a registration requested under this Article 2, the Corporation shall enter into
an underwriting agreement with such underwriters for such offering, which
agreement will contain such representations and warranties and covenants by the
Corporation and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnification and contribution provisions substantially to
the effect and to the extent provided in Section 2.06, and agreements as to the
provision of opinions of counsel and accountants' letters to the effect and to
the extent provided in Section 2.04(g). The Selling Holders on whose behalf the
Registrable Securities are to be distributed by such underwriters shall be
parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Corporation to and
for the benefit of such underwriters, shall also be made to and for the benefit
of such Selling Holders. Such underwriting agreement shall also contain such
representations and warranties by such Selling Holders and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions on the part of selling shareholders, including,
without limitation, indemnification and contribution provisions substantially to
the effect and to the extent provided in Section 2.06.
(b) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the Securities Act pursuant
to this Article 2, the Corporation shall give the Selling Holders and the
underwriters, if any, and their respective counsel and accountants, such
reasonable and customary access to its books, records and properties and such
opportunities to discuss the business and affairs of the Corporation with its
officers and the independent public accountants who have certified the financial
statements of the Corporation as shall be necessary, in the opinion of such
Selling Holders and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act; provided,
that such Selling Holders and the underwriters and their respective counsel and
accountants shall use their reasonable best efforts to coordinate any such
investigation of the books, records and properties of the Corporation and any
such discussions with the Corporation's officers and accountants so that all
such investigations occur at the same time and all such discussions occur at the
same time.
14
SECTION 2.6. Indemnification and Contribution. (a) The Corporation
agrees to indemnify and hold harmless each Selling Holder and each person, if
any, who controls each Selling Holder within the meaning of either Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other costs, fees and expenses reasonably incurred in
connection with defending or investigating any such action or claim) insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or alleged untrue statement of a material fact contained in any registration
statement or any amendment thereof, any preliminary prospectus or prospectus (as
amended or supplemented if the Corporation shall have furnished any amendments
or supplements thereto) relating to the Registrable Securities, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission which
is based upon information relating to a Selling Holder, the plan of distribution
or the underwriter which is furnished to the Corporation in writing by a Selling
Holder or the underwriter expressly for use therein. The Corporation also agrees
to indemnify any underwriter of the Registrable Securities so offered and each
person, if any, who controls such underwriter on substantially the same basis as
that of the indemnification by the Corporation of each Selling Holder provided
in this Section 2.06(a).
(b) Each Selling Holder agrees to indemnify and hold harmless the
Corporation, its directors, the officers who sign the registration statement and
each person, if any who controls the Corporation within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act,
from and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other costs, fees and expenses reasonably
incurred in connection with defending or investigating any such action or claim)
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or any amendment thereof, any preliminary prospectus or
prospectus (as amended or supplemented if the Corporation shall have furnished
any amendments or supplements thereto) relating to the Registrable Securities,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only with reference to information relating to a Selling Holder
furnished in writing by or on behalf of a Selling Holder expressly for use in a
registration statement, any preliminary prospectus, prospectus or any amendments
or supplements thereto. Each Selling Holder also agrees to indemnify any
underwriter of the Registrable Securities so offered and each person, if any,
who controls such underwriter on substantially the same basis as that of the
15
indemnification by such Selling Holder of the Corporation provided in this
Section 2.06(b). Notwithstanding any other provision of this Section 2.06, no
Selling Holder's obligations to indemnify pursuant to this Section 2.06 shall
exceed the amount of net proceeds received by such Selling Holder in connection
with any offering of its Registrable Securities. Each Selling Holder's
obligations to indemnify pursuant to this Section are several in the proportion
that the net proceeds of the offering received by such Selling Holder bear to
the total net proceeds of the offering received by all Selling Holders and not
joint.
(c) Each party indemnified under paragraph (a) or (b) above shall,
promptly after receipt of notice of a claim or action against such indemnified
party in respect of which indemnity may be sought hereunder, notify the
indemnifying party in writing of the claim or action and the indemnifying party
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party, and shall assume the payment of all fees
and expenses; provided that the failure of any indemnified party so to notify
the indemnifying party shall not relieve the indemnifying party of its
obligations hereunder except to the extent that the indemnifying party is
materially prejudiced by such failure to notify. In any such action, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the sole expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) in the reasonable
judgment of such indemnified party representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, in which case the fees and expenses of such counsel shall be at
the sole expense of the indemnifying party. It is understood that the
indemnifying party shall not, in connection with any claim or action or related
proceeding in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such indemnified parties, and that all such fees
and expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Selling Holders as indemnified parties, such firm shall be
designated in writing by the indemnified party that had the largest number of
Registrable Securities included in such registration. The indemnifying party
shall not be liable for any settlement of any claim or action effected without
its written consent, which consent shall not be unreasonably withheld or
delayed, but if settled with such consent, or if there be a final judgment for
the plaintiff, the indemnifying party shall indemnify and hold harmless such
indemnified parties from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened claim or action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such
16
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability arising out of such proceeding.
(d) If the indemnification provided for in this Section 2.06 shall for
any reason be unavailable (other than in accordance with its terms) to an
indemnified party in respect of any loss, liability, cost, claim or damage
referred to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, cost, claim or damage (A)
as between the Corporation and the underwriters, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Corporation on the
one hand and the underwriters on the other hand from the offering of the
Registrable Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations, and (B) as between (x) the
Corporation and the Selling Holders, or (y) the Selling Holders and the
underwriters, in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Corporation on the one hand and the underwriters on the other hand in
connection with the offering of the Registrable Securities shall be deemed to be
in the same respective proportions as the net proceeds from the offering of the
Registrable Securities (before deducting expenses) (as if, for purposes of this
clause (d), the Corporation had received the proceeds of any secondary offering)
and the total underwriting discounts and commissions received by the
underwriters, in each case as set forth in the table on the cover of a
prospectus, bear to the aggregate public offering price of the Registrable
Securities. The relative fault of the Corporation, the Selling Holders and the
underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Corporation, by a Selling Holder or by the underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by an indemnified
party as a result of the loss, cost, claim, damage or liability, or action in
respect thereof, referred to above in this paragraph (d) shall be deemed to
include, for purposes of this paragraph (d), any legal or other costs, fees and
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. The Corporation and the
17
Selling Holders agree that it would not be just and equitable if contribution
pursuant to this Section 2.06 were determined by pro rata allocation (even if
the underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in this paragraph. Notwithstanding any other provision of this
Section 2.06, no Selling Holder shall be required to contribute any amount in
excess of the amount by which the net proceeds of the offering received by such
Selling Holder exceed the amount of any damages which such Selling Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. Each Selling Holder's obligations to
contribute pursuant to this Section are several in the proportion that the net
proceeds of the offering received by such Selling Holder bears to the total net
proceeds of the offering received by all the Selling Holders and not joint. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e Indemnification and contribution similar to that specified in the
preceding paragraphs of this Section 2.06 (with appropriate modifications) shall
be given by the Corporation, the Selling Holders and the underwriters with
respect to any required registration or other qualification of securities under
any state law or regulation or governmental authority.
(f The obligations of the parties under this Section 2.06 shall be in
addition to any liability which any party may otherwise have to any other party.
SECTION 2.7. Rule 144 and Form S-3. The Corporation shall use its best
efforts to ensure that the conditions to the availability of Rule 144 set forth
in paragraph (c) thereof shall continue to be satisfied. Upon the request of any
Holder of Registrable Securities, the Corporation will deliver to such Holder a
written statement as to whether it has complied with such requirements. The
Corporation further agrees to use its reasonable best efforts to cause all
conditions to the availability of Form S-3 (or any successor form) under the
Securities Act for the filing of registration statements under this Agreement to
be met as soon as practicable.
SECTION 2.8. Rights of Transferee of Registrable Securities. Any
transferee of Registrable Securities (a "TRANSFEREE") will be deemed a Holder
hereunder as soon as the Corporation receives (i) written notice stating the
name and address of the Transferee and identifying the number of Registrable
Securities Transferred and (ii) a written agreement, in form and substance
acceptable to the Majority Holders and the Corporation, from such Transferee
whereby such Transferee agrees to be bound by the terms of this Agreement.
18
SECTION 2.9. Holdback Agreement. If any registration pursuant to this
Article 2 shall be in connection with an underwritten public offering of
Registrable Securities, each Holder agrees not to effect any sale or
distribution, including any sale under Rule 144, of any equity security of the
Corporation (otherwise than through the registered public offering then being
made), within 7 days prior to or 90 days (or such lesser period as the lead or
managing underwriters may permit) after the effective date of the registration
statement (or the commencement of the offering to the public of such Registrable
Securities in the case of a Rule 415 Offering); provided that the foregoing
shall not apply to a Holder that (i) together with its Affiliates, beneficially
owns (within the meaning of Rule 13d-3 and Rule 13d-5 promulgated under the
Securities Exchange Act) in the aggregate less than 3% of the aggregate amount
of outstanding Common Stock or Warrants exercisable for less than 3% of the
aggregate amount of outstanding Common Stock and (ii) does not have a director
on the Board designated or nominated by it or its Affiliate. The Corporation
hereby also so agrees and agrees to use its reasonable best efforts to cause
each other holder of equity securities or securities convertible into or
exchangeable or exercisable for such securities (other than in the case of
equity securities issued under dividend reinvestment plans or employee stock
plans) purchased from the Corporation otherwise than in a public offering to so
agree.
SECTION 2.10. Restrictions on Other Registration Rights. (a)
Notwithstanding anything else contained in this Agreement, the Corporation shall
not, without the prior written consent of the Holders holding a majority in
aggregate of the Registrable Securities, grant or issue on or after the date
hereof to any Person any piggyback registration rights, or enter into any
agreement with any Person entitling such Person, to request or require that the
Corporation effect, the registration under the Securities Act of any security of
the Corporation for the account of any Person pursuant to the exercise of
piggyback registration rights unless such piggyback registration rights are pari
passu with, or subordinated to, the piggyback registration rights granted
pursuant to Section 2.02.
(b) The Corporation will not enter into any amendment, waiver or other
modification of Section 2.02(b) of the Registration Rights Agreement dated as of
July 8, 1998 among the Corporation and its shareholders (and related
definitions) (other than any such amendment of the second proviso of clause
(iii) thereof).
ARTICLE 3
MISCELLANEOUS
19
SECTION 3.1. No Inconsistent Agreements. The Corporation shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the Holders in this
Agreement.
SECTION 3.2. Remedies. Each Holder and each party hereto shall have all
rights and remedies set forth in this Agreement and all rights and remedies
which such parties have been granted at any time under any other agreement or
contract and all of the rights which such parties have under any law or at
equity. Any Person having rights under any provision of this Agreement shall be
entitled to enforce such rights specifically, to recover damages caused by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this Agreement.
SECTION 3.3. Consents to Amendments; Termination. (a The provisions of
this Agreement may be amended, modified or waived only upon the prior written
consent of the Majority Holders. Notwithstanding the foregoing, any such
amendment, modification or waiver of Section 2.01(a), 2.02 or 2.10 that would
adversely affect a Holder of Registrable Securities in a manner different from
the effect thereof on the Holders of Registrable Securities that have approved
such amendment or waiver shall also require the prior written consent of such
adversely affected Holder of Registrable Securities. No course of dealing
between the Corporation and any other Holder or any delay by such Holder in
exercising any rights hereunder shall operate as a waiver of any rights of such
Holder.
(b This Agreement shall terminate when (i) no Holder shall hold any
Registrable Securities and (ii) all the Warrants shall have been exercised in
full or shall have expired without being exercised.
SECTION 3.4. Successors and Assigns. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and permitted assigns
of the parties hereto whether so expressed or not.
SECTION 3.5. 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 prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
20
SECTION 3.6. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement. Any Person who becomes a Holder may
at any time after the date hereof become a party to this Agreement by executing
a counterpart to this Agreement agreeing to be bound by the provisions hereof as
if such Person were an original signatory hereto (which joinder shall not
constitute a modification, amendment, or waiver hereof).
SECTION 3.7. 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
form of nouns, pronouns and verbs shall include the plural and vice versa. The
use of the word "including" in this Agreement shall be by way of example rather
than by limitation. Reference to any agreement, document or instrument means
such agreement, document or instrument as amended or otherwise modified from
time to time in accordance with the terms thereof, and if applicable hereof. The
use of the words "or," "either" and "any" shall not be exclusive. The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, it is the intent of the parties that this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
SECTION 3.8. Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by, and construed under, the laws of the State of Delaware,
all rights and remedies being governed by said laws, without regard to conflict
of laws principles. Each of the parties hereto agrees (a) that this Agreement
involves at least $100,000 and (b) that this Agreement has been entered into by
the parties hereto in express reliance upon 6 Del.C. ss. 2708. Each party hereby
irrevocably and unconditionally agrees (x) to be subject to the jurisdiction of
the courts of the State of Delaware and the federal courts sitting in the State
of Delaware or in the County of New York in the State of New York and (y) to the
extent such party is not otherwise subject to service of process in the State of
Delaware, to appoint and maintain an agent in the State of Delaware as such
party's agent for acceptance of legal process, and that service made pursuant to
(y) above shall have the same legal force and effect as if served upon said
party personally within the State of Delaware. For purposes of implementing the
parties' agreement to appoint and maintain an agent for service of process in
the State of Delaware, each such party that has not as of the date hereof
already duly appointed such an agent does hereby appoint RL&F Service Corp., One
00
Xxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000, as
such agent.
SECTION 3.9. Addresses and Notices. All notices, requests or other
communications to any party hereunder shall be in writing (including facsimile
transmission) and shall be given,
if to MS&C, to:
Xxxxxx Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
if to First Union, to:
First Union Investors, Inc.
000 Xxxxx Xxxxxxx Xxxxxx
XX-0000
Xxxxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxx/Xxxxx Xxxxxxxxx
Facsimile: 704-383-1625
if to CIBC, to:
CIBC World Markets Corp.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
22
if to the Corporation, to:
Choice One Communications Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxx, Peabody LLP
Clinton Square
X.X. Xxx 00000
Xxxxxxxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxx, III
Facsimile: (000) 000-0000
and to:
Xxxxxxxx & Xxxxx
Citigroup Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
and if to any other Holder, to the address or facsimile set forth on the books
of the Corporation or any other address or facsimile number as a party may
hereafter specify for such purpose to the Corporation. Notwithstanding the
foregoing, no Holder or its counsel shall be entitled to notice if such Holder
holds less than 3% in the aggregate of the Registrable Securities.
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to 5
p.m. in the place of receipt and such day is a business day in the place of
receipt. Otherwise, any such notice, request or communication shall be deemed
not to have been received until the next succeeding business day in the place of
receipt.
23
SECTION 3.10. Business Days. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the state in which the Corporation's chief executive office is
located, the time period shall automatically be extended to the business day
immediately following such Saturday, Sunday or legal holiday.
* * *
24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CHOICE ONE COMMUNICATIONS INC.
By: /s/ Xxxx X. Xxxxxx
-----------------------------------------
Title: Vice President, Finance and Treasurer
XXXXXX XXXXXXX & CO. INCORPORATED
By: /s/ Xxxxxxxxx X. Xxxxxxxx
----------------------------------------
Title: Managing Director
FIRST UNION INVESTORS, INC.
By: /s/ Xxxx Xxxx
----------------------------------------------
Title: Vice President
CIBC INC.
By: /s/ Xxxxxxx Xxxxxxx
----------------------------------------------
Title: Managing Director
