1
EXHIBIT 4.3
SERIES B PREFERRED STOCK
REGISTRATION RIGHTS AGREEMENT
THIS SERIES B PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT (the
"Agreement"), entered into this ___ day of _____________, 1999 is made by and
among (i) MGC Communications, Inc., a Nevada corporation (the "Company") and
(ii) each person listed on Exhibit A hereto (collectively, the "Investors").
WHEREAS, pursuant to the Securities Purchase Agreement, dated as of the
date hereof (the "Purchase Agreement"), among the Company and the Investors, the
Company shall issue on the date hereof to the Investors 5,277,779 shares of the
Company's Series B Convertible Preferred Stock, par value $.001 per share (the
"Series B Preferred Stock"); and
WHEREAS, as a condition to the Investors' consummation of the transactions
contemplated by the Purchase Agreement (the "Closing"), the Company has agreed
to provide the Investors with registration rights with respect to the shares of
Common Stock, par value $.001 per share (the "Common Stock");
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the receipt and sufficiency of which are
acknowledged, the parties hereto, each intending to be legally bound hereby,
agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 Definitions.
As used herein, the following terms shall have the respective meanings set
forth below:
"Common Stock" means the Company's Common Stock, par value $.001 per
share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders" means the Investors, for so long as the Investors own any Series
B Preferred Stock or any Registrable Securities, and their successors, assigns
and direct and indirect transferees who become registered owners of Series B
Preferred Stock or Registrable Securities.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Registrable Securities" means (i) any Common Stock issued or issuable to
the Investors, whether directly or by conversion of securities convertible into
Common Stock, and (ii) any
1
2
other securities issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) above by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
conversion, consolidation or other reorganization. As to any particular shares
constituting Registrable Securities, such shares will cease to be Registrable
Securities when they have been (x) effectively registered under the Securities
Act and disposed of in accordance with a registration statement covering them,
or (y) sold to the public pursuant to Rule 144 or a similar provision under the
Securities Act. For purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the right to acquire
directly or indirectly such Registrable Securities (upon conversion or exercise
in connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE II.
REGISTRATION RIGHTS
SECTION 2.1 Demand Registrations.
(a) Requests for Registration. Any Holder or number of Holders may
request, at any time after 90 days following the Closing, registration under the
Securities Act of all or part of their Registrable Securities on Form S-1, or
any similar long-form registration ("Long-Form Registration"), or, if available,
at the Company's option, on Form S-2 or S-3 or any similar short-form
registration ("Short-Form Registration"); provided that the aggregate offer
price of all such Registrable Securities being registered is at least
$1,000,000. Each request for a Demand Registration shall specify the number of
Registrable Securities requested to be registered, and the proposed underwriter.
Within ten days after receipt of any such request, the Company will give written
notice of such requested registration to all other holders (if any) of
Registrable Securities and, subject to Section 2.1(e) below, will include in
such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 15 days after the
receipt of the Company's notice. All registrations requested pursuant to this
Section 2.1 are referred to herein as "Demand Registrations."
2
3
(b) Long-Form Registrations. The Holders will be entitled to request two
(2) Long-Form Registrations in which the Company will pay all Registration
Expenses. A registration will not count as one of such two (2) Long-Form
Registrations until it has become effective or the demanding Holders withdraw
their request (unless such withdrawal is due to a material adverse change in the
business, operations, prospects or condition (financial or otherwise) of the
Company since the date of such demand). The Company will pay all Registration
Expenses in connection with any initiated registration whether or not it has
become effective unless the respective Investors withdraw their request (unless
such withdrawal is pursuant to the provisions of Section 2.1(e) hereunder or due
to a material adverse change in the business, operations, prospects or condition
(financial or otherwise) of the Company since the date of such demand).
(c) Short-Form Registrations. In addition to the Long-Form Registrations
provided pursuant to Section 2.1(b), the Holders will be entitled to request
unlimited Short-Form Registration, provided that the aggregate offering value of
the Registrable Securities requested to be registered in any Short-Form
Registration must equal at least $1,000,000 and that the Holders may only
request two (2) Short-Form Registrations in any 12-month period. After the
Company has become subject to the reporting requirements of the Exchange Act,
the Company will use its best efforts to make Short-Form Registrations available
for the sale of Registrable Securities. The Company will pay all Registration
Expenses with respect to Short-Form Registrations. The rights of a holder of
Registrable Securities under this Section 2.1(c) shall expire at such time as
the Registrable Securities of such holder are transferable without restriction
as to volume under Rule 144 under the Securities Act.
(d) Priority on Demand Registrations. If a Demand Registration is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold therein without adversely affecting the marketability of the
offering (the "Offering Quantity"), the Company will include in such
registration securities in the following priority:
(i) first, before including any securities which are not Registrable
Securities held by the Holders, the Company will include all of the
Registrable Securities requested to be included by such Holders, and if
the number of Registrable Securities requested to be included exceeds the
Offering Quantity, then the Company shall include only each such
requesting Holder's pro rata share of the Offering Quantity, based on the
amount of Registrable Securities held by such Holder (provided that any
Registrable Securities thereby allocated to any such Holder that exceed
such Holder's request shall be reallocated among the remaining requesting
Holders in like manner); and
(ii) second, to the extent (and only to the extent) that the
Offering Quantity exceeds the aggregate amount of Registrable Securities
which are
3
4
requested to be included in such registration, the Company shall include
in such registration any other securities requested to be included in the
offering.
Any Persons other than holders of Registrable Securities who participate in
Demand Registrations which are not at the Company's expense must pay their share
of the Registration Expenses as set forth in Section 2.5 hereof.
(e) Restrictions on Demand Registrations. The Company will not be
obligated to effect any Demand Registration within 90 days after the effective
date of a previous Demand Registration. The Company may postpone upon one
occasion in any 365 day period for up to 120 days the filing or the
effectiveness of a registration statement for a Demand Registration if the
Company determines in its good faith judgment that such Demand Registration
would reasonably be expected to have a material adverse effect on any proposal
or plan by the Company or any of its subsidiaries to engage in any acquisition
of assets or shares of unrelated companies (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction. In
such event, the holders of a majority of Registrable Securities requesting such
Demand Registration will be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration will not count as one of the
permitted, Demand Registrations hereunder and the Company will pay all
Registration Expenses in connection with such registration.
(f) Selection of Underwriters. The holders of a majority of the
Registrable Securities initiating any Demand Registration will have the right to
select the investment banker(s) and manager(s) to administer the offering,
subject to the Company's approval which will not be unreasonably withheld.
(g) Other Registration Rights. Except as provided in this Agreement, the
Company will not grant to any Person the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, which contains terms or
conditions more favorable than the terms or conditions contained in this
Agreement, without the prior written consent of the Holders of a majority of the
Registrable Securities.
(h) Limitation on Exercise of Demand Rights. Notwithstanding anything to
the contrary herein, prior to the first anniversary of the Closing Date, the
holders of the Registrable Securities shall not have the right to make a Demand
Registration unless the Market Threshold (as defined in the Certificate of
Designation for the Series B Preferred) has been reached.
4
5
SECTION 2.2 Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any of
its securities under the Securities Act (other than pursuant to a Demand
Registration or a registration on Form S-4 or S-8 or any successor or similar
forms) and the registration form to be used may be used for the registration of
Registrable Securities (a "Piggyback Registration"), whether or not for sale for
its own account, the Company will give prompt written notice to all holders of
Registrable Securities of its intention to effect such a registration and will
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 20 days
after the receipt of the Company's notice. The rights of a holder of Registrable
Securities under this Section 2.2 shall expire at such time as the Registrable
Securities of such holder are transferable without restriction as to volume
under Rule 144 under the Securities Act.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) Priority on Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company or an underwritten
offering undertaken by the Company pursuant to a demand registration exercised
by a Person other than the Investors (a "Demanding Party"), and the managing
underwriters advise the Company in writing (with a copy to each party hereto
requesting registration of Registrable Securities) that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of such offering (the "Company Offering Quantity"), the Company
will include in such registration securities in the following priority:
(i) first, the securities the Company proposes to sell and the
securities requested to be included by the Demanding Party in accordance
with any agreement between the Company and the Demanding Party; and
(ii) second, the Company will include all Registrable Securities
requested to be included by any holders thereof and all other holders of
registrable securities, and if the number of such holders' securities
requested to be included exceeds the Company Offering Quantity, then the
Company shall include only each such requesting holder's pro rata share of
the Company Offering Quantity, based on the amount of securities held by
such holder.
(d) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
Section 2.1 or pursuant to this Section 2.2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4 or S-8 or any successor form), whether on
its own behalf or at the request of any holder
5
6
or holders of such securities, until a period of at least 90 days has elapsed
from the effective date of such previous registration statement.
SECTION 2.3 Holdback Agreements.
(a) To the extent not inconsistent with applicable law, each Investor
agrees not to effect any public sale or distribution (including sales pursuant
to Rule 144) of equity securities of the Company, or any securities, options or
rights convertible into or exchangeable or exercisable for such securities that
such Investor owns prior to the effective date of any underwritten registration,
during the seven days prior to and the 120-day period beginning on the effective
date of any underwritten registration, unless the underwriters managing the
registered public offering otherwise agree; provided that such restrictions
shall not be more restrictive in duration or scope than restrictions imposed on
(i) any Person which has been granted registration rights by the Company, (ii)
any officer or director of the Company or (iii) any 5% holder of securities of
the Company.
(b) The Company agrees (i) not to effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
120-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-4 or S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree, and (ii) to cause each holder of its Common Stock, or any
securities convertible into or exchangeable or exercisable for Common Stock,
purchased from the Company at any time after the date of this Agreement (other
than in a registered public offering or pursuant to a stock option plan adopted
by the Company or upon the exercise of warrants outstanding as of the date of
this Agreement unless such holder is a party to this Agreement) to agree not to
effect any public sale or distribution (including sales pursuant to Rule 144) of
any such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
SECTION 2.4 Registration Procedures. Whenever Holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and within 60 days (or 45 days with respect to any Short-Form
Registration) after the end of the period within which requests for registration
may be given to the Company and file with the Securities and Exchange Commission
a registration statement with respect to such Registrable Securities and
thereafter use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company will furnish to the counsel
selected by the
6
7
holders of a majority of the Registrable Securities initiating such registration
statement copies of all such documents proposed to be filed, which documents
will be subject to review of such counsel);
(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 for a period of either (i) not less than 180 days (subject
to extension pursuant to Section 2.7(b)) or, if such registration statement
relates to an underwritten offering, such longer period as in the opinion of
counsel for the underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or dealer or
(ii) such shorter period as will terminate when all of the securities covered by
such registration statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (but in any event not before the expiration of any
longer period required under the Securities Act), and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, and the Managing
Underwriters, if any, promptly (1)(A) when a prospectus or any prospectus
supplement or post-effective amendment is proposed to be filed, and (B) with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (2) of any request by the SEC or any other Federal or
state governmental authority for amendments or supplements to a registration
statement or related prospectus or for additional information, (3) of the
issuance by the SEC, any state securities commission, any other governmental
agency or any court of any stop order, order or injunction suspending or
enjoining the use of a prospectus or the effectiveness of a registration
statement or the initiation of any proceedings for that purpose, (4) of the
receipt by the Company
7
8
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any proceeding for such
purpose, and (5) of the happening of any event (a "Changing Event") as a result
of which, the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and, at the request of any such seller, the Company will as soon
as possible prepare and furnish to such seller (a "Correction Event") a
reasonable number of copies of a supplement or amendment to such Prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such Prospectus will not contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(f) use its best efforts to cause all such Registrable Securities to be
listed on each securities exchange on which similar securities issued by the
Company are then listed and, if not so listed, to be listed on the NASD
automated quotation system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(i) make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement, any accountant or other agent retained by any such seller or
underwriter and one firm of attorneys representing the holders of Registrable
Securities, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable rules and
regulations of the Securities and Exchange Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale
8
9
in any jurisdiction, the Company will use its reasonable best efforts promptly
to obtain the withdrawal of such order;
(l) use its best efforts to obtain one or more comfort letters, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), signed by the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by comfort letters as the holders of a majority of the Registrable
Securities being sold reasonably request;
(m) use its best efforts to provide a legal opinion of the Company's
outside counsel, dated the effective date of such registration statement (or, if
such registration includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), with respect to the registration
statement, each amendment and supplement thereto, the prospectus included
therein (including the preliminary prospectus) and such other documents relating
thereto in customary form and covering such matters of the type customarily
covered by legal opinions of such nature.
(n) in connection with any sale or transfer of Registrable Securities that
will result in such securities no longer being Registrable Securities, cooperate
with the Holders thereof and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust Company
and to enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or such Holders
may request at least two business days prior to any sale of Registrable
Securities;
(o) make available for inspection by a representative of any underwriter
participating in any such disposition of Registrable Securities, and any
attorney, consultant or accountant retained by such selling Holders or
underwriter, at the offices where normally kept, during reasonable business
hours, all pertinent financial and other records, corporate documents and
properties of the Company and its subsidiaries (including with respect to
businesses and assets acquired or to be acquired to the extent that such
information is available to the Company), and cause the officers, directors,
agents and employees of the Company and its subsidiaries (including with respect
to businesses and assets acquired or to be acquired to the extent that such
information is available to the Company) to supply all information in each case
reasonably requested by any such representative, underwriter, attorney,
consultant or accountant in connection with such Registration Statement;
(p) cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD; and
9
10
(q) if requested by the selling Holders or the managing underwriters, if
any, (x) promptly incorporate in a prospectus supplement or post-effective
amendment such information as the selling Holders or the managing underwriters,
if any, reasonably believe is required to be included therein, and (y) make all
required filings of such prospectus supplement or such post-effective amendment
under the Act as soon as practicable after the Company has received notification
of the matters to be incorporated in such prospectus supplement or
post-effective amendment.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
SECTION 2.5 Registration Expenses.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for the Company and all independent certified public accountants, underwriters
(excluding discounts and commissions, which will be paid by the sellers of
Registrable Securities) and other Persons retained by the Company (all such
expenses being herein called "Registration Expenses"), will be borne as provided
in this Agreement, and the Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed or on
the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company will reimburse the Holders covered by such
registration for the reasonable fees and disbursements of one counsel chosen by
the holders of a majority of the Registrable Securities initiating such
registration.
SECTION 2.6 Indemnification.
(a) The Company agrees to indemnify and hold harmless, to the extent
permitted by law, each Holder and each Person who controls such Holder within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act and the respective officers, directors, partners, employees, representatives
and agents of any such party or any controlling Person to the fullest extent
lawful, from and against any and all losses, liabilities, claims, damages and
expenses whatsoever, joint or several, to which they or any of them may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based
10
11
upon (i) any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or, (ii) any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will reimburse such
Holder and each such director, officer and controlling person for any legal or
any other expenses incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made in such
registration statement, any such prospectus or preliminary prospectus or any
amendment or supplement thereto, or in any application, in reliance upon, and in
conformity with, written information prepared and furnished to the Company by
such Holder expressly for use therein or by such Holder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such Holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company will indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the Holders.
(b) In connection with any registration statement in which a Holder is
participating, each such Holder will furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and, to the extent
permitted by law each such Holder, severally, for itself only, will indemnify
and hold harmless the Company and each other Person who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and the respective officers, directors, partners, employees,
representatives and agents of any such party or any controlling Person to the
fullest extent lawful, from and against any and all losses, liabilities, claims,
damages and expenses whatsoever, joint or several, to which they or any of them
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) or expenses arise out of or are
based upon (i) the purchase or sale of Registrable Securities during any period
beginning upon a Changing Event (as defined in Section 2.4(e)) and ending on a
Correction Event (as defined in Section 2.4(e)), provided such Holder received
proper written notice of such Changing Event pursuant to Section 2.4(e), (ii)
any untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or in any application, or (iii) any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statement therein not misleading, but, with respect to clauses (ii)
and (iii) above, only to the extent that such untrue statement or omission is
made in such registration statement, any such prospectus or preliminary
prospectus or any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information prepared and
11
12
furnished to the Company by such Holder expressly for use therein, and such
Holder will reimburse the Company and each such director, officer and
controlling Person for any legal or any other expenses incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, however, that the obligation to indemnify will
be individual to each Holder and will be limited to the net amount of proceeds
received by such Holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give prompt notice shall not
impair any Person's right to indemnification hereunder to the extent such
failure has not materially prejudiced the indemnifying party) and (ii) unless in
such indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Such indemnifying party shall
not, however, enter into any settlement with a party without obtaining an
unconditional release of each indemnified party by such party with respect to
any and all claims against each indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or controlling Person of such indemnified party or any of
the respective officers, directors, partners, employees, representatives and
agents of any such party or any controlling Person, and will survive the
transfer of securities. The Company also agrees to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such party in
the event the Company's indemnification is unavailable for any reason.
12
13
SECTION 2.7 Participation in Underwritten Registrations.
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any overallotment or "green shoe" option
requested by the managing underwriter(s), provided that no Investor will be
required to sell more than the number of Registrable Securities that such holder
has requested the Company to include in any registration) and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
(b) Each Person that is participating in any registration hereunder agrees
that, upon receipt of any notice from the Company of a Changing Event (as
defined in Section 2.4(e)), such Person will forthwith discontinue the
disposition of its Registrable Securities pursuant to the registration statement
until such Person's receipt of the copies of a supplemented or amended
prospectus as contemplated by such Section 2.4(e). In the event the Company
shall give any such notice of a Changing Event, the applicable time period
mentioned in Section 2.4(b) during which a Registration Statement is to remain
effective shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to this paragraph to
and including the date when each seller of a Registrable Security covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 2.4(e).
SECTION 2.8 Current Public Information. At all times after the Company has
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company will file all reports required to be filed by it under
the Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will use
commercially reasonable best efforts to take such further action as any Holder
may reasonably request, all to the extent required to enable such Holders to
sell Registrable Securities pursuant to Rule 144 adopted by the Securities and
Exchange Commission under the Securities Act (as such rule may be amended from
time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission.
SECTION 2.9 Adjustment Affecting Registrable Securities. Except as
otherwise provided herein, the Company will not take any action, or permit any
change to occur, with respect to its securities which would materially and
adversely affect the ability of the Holders to include such Registrable
Securities in a registration undertaken pursuant to this Agreement or which
would adversely affect the marketability of such Registrable Securities in any
such registration.
13
14
ARTICLE III.
MISCELLANEOUS
SECTION 3.1 Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against any party hereto unless such modification, amendment or waiver
is approved in writing by Holders holding a majority of the Registrable
Securities.
SECTION 3.2 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 the effectiveness or validity of such provision in any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
SECTION 3.3 Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
SECTION 3.4 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, and to the extent applicable heirs,
executors, administrators and legal representatives and any subsequent holders
of Registrable Securities and the respective successors and assigns of each of
them, so long as they hold Registrable Securities.
SECTION 3.5 Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
SECTION 3.6 Remedies. 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 the parties hereto shall have the right to injunctive relief,
in addition to all of its rights and remedies at law or in equity, to enforce
the provisions of this Agreement. Nothing contained in this Agreement shall be
construed to confer upon any Person who is not a signatory hereto any rights or
benefits, as a third party beneficiary or otherwise.
SECTION 3.7 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 personally delivered
or received by certified mail, return receipt requested, confirmed telecopy or
sent by guaranteed overnight courier service. Such
14
15
notices, demands and other communications will be sent to the parties at the
addresses set forth in the Purchase Agreement, or to any party (including any
new party) at such address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
SECTION 3.8 Governing Law. The General Corporation Law of the State of
Nevada will govern all issues concerning the relative rights of the Company and
its stockholders. All other issues concerning this Agreement shall be governed
by and construed in accordance with the laws of the State of Rhode Island,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Rhode Island or any other jurisdiction) that would
cause the application of the law of any jurisdiction other than the State of
Rhode Island.
SECTION 3.9 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
[The rest of the page is left blank intentionally]
15
16
IN WITNESS WHEREOF, the parties, by their respective officers duly
authorized, have caused this Agreement to be duly executed and delivered as of
the date hereof.
MGC COMMUNICATIONS, INC.
By:
Name:
Title:
PROVIDENCE EQUITY PARTNERS III L.P.
By: Providence Equity Partners III
L.L.C., its general partner
By:
Name:
Title:
J K & B CAPITAL III L.P.
By:
Name:
Title:
WIND POINT PARTNERS III, L.P.
By:
Name:
Title:
16
17
EXHIBIT A
INVESTORS
Number of Shares of
Series B Preferred Stock
Name held by such Investor
---- ---------------------
Providence Equity Partners III L.P. 4,166,667
000 Xxxxx Xxxxxx
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
JK&B Capital III L.P. 555,556
000 X. Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Wind Point Partners III, L.P. 555,556
Xxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
17
