EXHIBIT 99.5
FIRST AMENDED AND RESTATED
REGISTRATION AGREEMENT
THIS FIRST AMENDED AND RESTATED REGISTRATION AGREEMENT (this
"AGREEMENT") is made as of October 26, 2001, by and among Focal Communications
Corporation, a Delaware corporation (the "COMPANY"), the Persons listed on the
SCHEDULE OF ORIGINAL INSTITUTIONAL INVESTORS attached hereto (the "ORIGINAL
INSTITUTIONAL INVESTORS"), the Persons listed on the SCHEDULE OF NEW
INSTITUTIONAL INVESTORS attached hereto (the "NEW INSTITUTIONAL INVESTORS"), the
Persons listed on the SCHEDULE OF EXCHANGING BONDHOLDERS attached hereto (the
"EXCHANGING BONDHOLDERS"), and the Persons listed on the SCHEDULE OF EXECUTIVE
INVESTORS attached hereto (the "EXECUTIVE INVESTORS"). Capitalized terms used
but not otherwise defined herein have the meanings given to such terms in
Section 9.
WHEREAS, the Company, the Original Institutional Investors,
and the Executive Investors are parties to a Registration Agreement dated as of
November 27, 1996, and amended as of August 21, 1998 and August 2, 2000 (the
"ORIGINAL REGISTRATION AGREEMENT").
WHEREAS, the Company and the New Institutional Investors have
entered into a Preferred Stock Purchase and Loan Commitment Agreement, dated as
of August 9, 2001 (as amended by that certain Joinder Agreement and Amendment
No. 1 to Preferred Stock Purchase and Loan Commitment Agreement, dated as of
September 21, 2001, that certain Amendment No. 2 to Preferred Stock Purchase and
Loan Commitment Agreement, dated as of October 11, 2001, and that certain
Joinder Agreement, dated as of October 23, 2001, the "PURCHASE AGREEMENT"),
pursuant to which the New Institutional Investors have agreed, on the terms and
subject to the conditions set forth therein, to purchase shares of the Company's
Series A Redeemable Voting Convertible Preferred Stock, par value $0.01 per
share (the "PREFERRED STOCK") and to make certain senior secured loans (the
"LOANS") to the Company.
WHEREAS, the Company has entered into an Exchange Agreement
with each of the Exchanging Bondholders (collectively, the "EXCHANGE
AGREEMENTS"), pursuant to which the Exchanging Bondholders have agreed, on the
terms and subject to the conditions set forth therein, to exchange certain of
the Company's debt securities held by such Exchanging Bondholders for shares of
the Company's Common Stock, par value $0.01 per share (the "COMMON STOCK").
WHEREAS, the execution and delivery of this Agreement is a
condition to the obligations of the New Institutional Investors and the
Exchanging Bondholders at the closing of the transactions contemplated by the
Purchase Agreement and the Exchange Agreements, respectively.
WHEREAS, the parties hereto desire to amend and restate the
Original Registration Agreement in its entirety as set forth herein.
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 agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time after the date
hereof: (i) the holders of a majority of the Original MDCP Registrable
Securities then outstanding may request two registrations under the Securities
Act of all or any portion of their Registrable Securities on Form S-1 or any
similar long-form registration (each, a "LONG-FORM REGISTRATION"), (ii) the
holders of a majority of the Original Frontenac Registrable Securities then
outstanding and the holders of a majority of the Original BV Registrable
Securities then outstanding may each request one Long- Form Registration, (iii)
the holders of at least 8% of the Original Registrable Securities then
outstanding may request unlimited registrations under the Securities Act of all
or any portion of their Registrable Securities on Form S-2 or S-3 or any similar
short-form registration (each, a "SHORT-FORM REGISTRATION") if available, (iv)
the holders of a majority of the New Institutional Investor Registrable
Securities may request two Long-Form Registrations (or Short-Form Registrations
if available), and (v) the holders of a majority of the New Institutional
Investor Registrable Securities may request unlimited Short-Form Registrations
which are filed with the Securities and Exchange Commission in accordance with
and pursuant to Rule 415 promulgated under the Securities Act (or any successor
rule then in effect) (each, a "SHELF REGISTRATION") if available; PROVIDED that
the aggregate offering value of the Registrable Securities requested to be
registered in any registration under this paragraph 1(a) (each, a "DEMAND
REGISTRATION") must equal at least $10 million in any Long-Form Registration,
and at least $2 million in any Short-Form Registration (including any Shelf
Registration).
All requests for registration hereunder shall be made by
giving written notice to the Company (the "DEMAND NOTICE"). Each Demand Notice
shall specify the approximate number of Registrable Securities requested to be
registered and the anticipated per share price range for such offering. Within
ten days after receipt of any Demand Notice, the Company shall give written
notice of such requested registration to all other holders of Registrable
Securities and, subject to the provisions of paragraph 1(e) below, shall 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.
(b) DEMAND EXPENSES. The Company shall pay all Registration
Expenses of all holders of Registrable Securities in all Demand Registrations.
(c) LONG-FORM REGISTRATIONS. A registration shall not count as
one of the permitted Long-Form Registrations (including any Short-Form
Registration pursuant to paragraph 1(a)(iv) above) until it has become effective
(unless such Long-Form Registration has not become effective due solely to the
fault of the holders requesting such registration) or if the holders of
Registrable Securities initially requesting such registration are not able to
register and sell at least 90% of the Registrable Securities
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requested to be included in such registration; PROVIDED that the Company shall
in any event pay all Registration Expenses in connection with any registration
initiated as a Demand Registration whether or not it has become effective and
whether or not such registration has counted as one of the permitted Long-Form
Registrations. All Long-Form Registrations shall be underwritten registrations.
(d) SHORT-FORM REGISTRATIONS. Demand Registrations shall be
Short-Form Registrations whenever the Company is permitted to use any applicable
short form. After the Company has become subject to the reporting requirements
of the Securities Exchange Act, the Company shall use its best efforts to make
Short-Form Registrations on Form S-3 (or any successor form) available for the
sale of Registrable Securities.
(e) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not
include in any Demand Registration any securities which are not Registrable
Securities without the prior written consent of the holders of a majority of the
Registrable Securities included in such registration. 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 in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities initially
requesting registration, the Company shall include in such registration the
number which can be so sold in the following order of priorities: (i) first, the
Registrable Securities (other than Executive Registrable Securities or
Exchanging Bondholder Registrable Securities) requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, (ii) second, the
Exchanging Bondholder Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, (iii) third, the
Executive Registrable Securities requested to be included in such registration,
pro rata among the holders of such Registrable Securities on the basis of the
number of shares owned by each such holder, and (iv) fourth, other securities
requested to be included in such registration.
(f) RESTRICTIONS ON LONG-FORM REGISTRATIONS. The Company shall
not be obligated to effect any Demand Registration which is a Long-Form
Registration within 180 days after the effective date of a previous Demand
Registration which was a Long-Form Registration or a previous registration in
which the holders of Registrable Securities were given piggyback rights pursuant
to paragraph 3 and in which there was no reduction in the number of Registrable
Securities requested to be included. The Company may postpone for up to 180 days
the filing or the effectiveness of a registration statement for a Demand
Registration if the Company's board of directors determines in its reasonable
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 (other than in the
ordinary course of business) or any merger, consolidation, tender offer,
reorganization or similar transaction; provided that in such event, the holders
of Registrable Securities initially requesting such Demand Registration shall be
entitled to withdraw such request and, if such request is withdrawn, such
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Demand Registration shall not count as one of the permitted Demand Registrations
hereunder and the Company shall pay all Registration Expenses in connection with
such withdrawn registration. The Company may delay a Demand Registration
hereunder only once in any twelve-month period.
(g) SELECTION OF UNDERWRITERS. The holders of a majority of
the Registrable Securities initially requesting registration hereunder shall
have the right to select the investment banker(s) and manager(s) to administer
the offering, subject to the Company's approval which shall not be unreasonably
withheld.
(h) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, the Company shall not grant to any Persons 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, without the
prior written consent of both (i) the holders of at least 67% of the Original
Institutional Investor Registrable Securities then outstanding and (ii) the
holders of a majority of the New Institutional Investor Registrable Securities
then outstanding; PROVIDED that the Company may grant rights to other Persons to
(i) participate in Piggyback Registrations so long as such rights are
subordinate to the rights of the holders of Registrable Securities with respect
to such Piggyback Registrations and (ii) request registrations so long as the
holders of Registrable Securities are entitled to participate in any such
registrations with such Persons pro rata on the basis of the number of shares
owned by each such holder.
2. PREFERRED REGISTRATION.
(a) REQUEST FOR REGISTRATION. At any time after the first
anniversary of the closing under the Purchase Agreement, the holders of a
majority of the Preferred Securities then outstanding may request one
registration of all or any portion of their Preferred Securities (the "PREFERRED
REGISTRATION"), which registration may be a Long-Form Registration, a Short-Form
Registration if available, or a Shelf-Registration if available (as determined
by the holders of a majority of the Preferred Securities included in such
registration).
All requests for registration under this paragraph 2(a) will
be made by giving written notice to the Company, which notice will specify the
approximate number of Preferred Securities requested to be registered and the
anticipated per share price range for such offering. Within ten days after
receipt of any such notice, the Company shall give written notice of such
requested registration to all other holders of Preferred Securities and will
include in such registration all Preferred 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.
(b) PREFERRED EXPENSES. The Company shall pay all Registration
Expenses of all holders of Preferred Securities in the Preferred Registration.
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(c) PERMITTED REGISTRATION. A registration shall not count as
the permitted Preferred Registration until it has become effective (unless such
Preferred Registration has not become effective due solely to the fault of the
holders requesting such registration) or if the holders of Preferred Securities
initially requesting such registration are not able to register and, in the case
of an underwritten registration, sell at least 90% of the Preferred Securities
requested to be included in such registration; PROVIDED that the Company shall
in any event pay all Registration Expenses in connection with any registration
initiated as a Preferred Registration whether or not it has become effective and
whether or not such registration has counted as the permitted Preferred
Registration. The Preferred Registration shall be an underwritten registration,
unless otherwise determined by the holders of a majority of the Preferred
Securities to be included in such registration.
(d) SHORT-FORM REGISTRATIONS. The Preferred Registration will
be a Short-Form Registration whenever the Company is permitted to use any
applicable short form.
(e) PRIORITY ON PREFERRED REGISTRATION. The Company shall not
include in the Preferred Registration any securities which are not Preferred
Securities without the prior written consent of the holders of a majority of the
Preferred Securities included in such registration. If the Preferred
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Preferred Securities
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Preferred Securities and other securities, if
any, which can be sold in an orderly manner in such offering within a price
range acceptable to the holders of a majority of the Preferred Securities
initially requesting registration, the Company shall include in such
registration the number which can be so sold in the following order of
priorities: (i) first, the Preferred Securities requested to be included in such
registration, pro rata among the holders of such Preferred Securities on the
basis of the number of shares owned by each such holder, and (ii) second, other
securities requested to be included in such registration.
(f) RESTRICTIONS ON PREFERRED REGISTRATION. The Company may
postpone for up to 180 days the filing or the effectiveness of a registration
statement for a Preferred Registration if the Company's board of directors
determines in its reasonable good faith judgment that such Preferred
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 (other than in the ordinary course of business) or any
merger, consolidation, tender offer, reorganization or similar transaction;
provided that in such event, the holders of Preferred Securities initially
requesting such Preferred Registration shall be entitled to withdraw such
request and, if such request is withdrawn, such Preferred Registration shall not
count as the permitted Preferred Registration hereunder and the Company shall
pay all Registration Expenses in connection with such withdrawn registration.
The Company may delay a Preferred Registration hereunder only once in any
twelve-month period.
(g) SELECTION OF UNDERWRITERS. The holders of a majority of
the Preferred Securities initially requesting registration hereunder shall have
the right to select the investment banker(s) and man-
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ager(s) to administer the offering, subject to the Company's approval which
shall not be unreasonably withheld.
(h) EXCHANGE OF SECURITIES. If the Preferred Registration is
an underwritten public offering, and the managing underwriters advise the the
holders of Preferred Securities and the Company that the following type of
exchange would positively affect the marketability of such offering, then the
Company will or will agree to exchange the Preferred Securities requested to be
included in such registration for substantially identical securities (with such
modifications to the form and terms thereof as are suggested by the managing
underwriters and reasonably acceptable to the Company and the holders of a
majority of the Preferred Securities included in such registration), which newly
issued securities will be included in such Preferred Registration.
3. 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 Preferred Registration) and the registration form to
be used may be used for the registration of Registrable Securities (a "PIGGYBACK
REGISTRATION"), the Company shall give prompt written notice (in any event
within three business days after its receipt of notice of any exercise of demand
registration rights other than under this Agreement) to all holders of
Registrable Securities of its intention to effect such a registration and shall
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.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, the Company shall include in
such registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities (other than Executive Registrable Securities
or Exchanging Bondholder Registrable Securities) requested to be included in
such registration, pro rata among the holders of such Registrable Securities on
the basis of the number of shares owned by each such holder, (iii) third, the
Exchanging Bondholder Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, (iv) fourth, the
Executive Registrable Securities requested to be included in such registration,
pro rata among the holders of such Registrable Securities on the basis of the
number of shares owned by each such holder, and (v) fifth, other securities
requested to be included in such registration.
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(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the holders initially
requesting such registration, the Company shall include in such registration (i)
first, the securities requested to be included therein by the holders requesting
such registration and the Registrable Securities requested to be included in
such registration, pro rata among the holders of such securities on the basis of
the number of securities so requested to be included therein owned by each such
holder, and (ii) second, other securities requested to be included in such
registration.
(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 3, and if such previous registration
has not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convert ible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least 180 days has elapsed from the effective date of such
previous registration.
4. HOLDBACK AGREEMENTS.
(a) HOLDERS OF REGISTRABLE SECURITIES.
(i) Each holder of Registrable Securities shall not
effect any public sale or distribution (including sales pursuant to
Rule 144) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities,
during (A) the 30-day period prior to and (B) the 90-day period
beginning on the effective date of any underwritten Demand Registration
or any underwritten Piggyback Registration in which Registrable
Securities are included (or the commencement date of any underwritten
distribution from a Shelf Registration), except as part of such
underwritten registration (or underwritten distribution) or unless the
underwriters managing the registered public offering otherwise agree.
(ii) The Company shall determine, and notify the
holders of Registrable Securities of, the commencement date of the
30-day period referred to in clause (i)(A) of this Section 4(a). The
Company's determination of the commencement date shall be made in good
faith after consultation with the underwriters managing the registered
public offering.
(iii) The 90-day period referred to in clause (i)(B)
of this Section 4(a) shall terminate and be of no further force and
effect if the closing bid price of the Company's common stock at any
time exceeds 120% of the offering price of the common stock in the
registered public offering referred to therein for five consecutive
trading days. In addition, if such 90-day period terminates as a result
of the application of the previous sentence, the Company will use
reasonable
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efforts to persuade the underwriters managing the registered public
offering thereafter to allow holders of Registrable Securities to sell
their shares in the public market (including under Rule 144) without
regard to any lock-up or similar arrangement entered into between the
underwriters managing the public offering and the holders of
Registrable Securities.
(b) THE COMPANY. The Company (i) shall not 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 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration (or
the commencement date of any underwritten distribution from a Shelf
Registration), except as part of such underwritten registration (or such
underwritten distribution) or pursuant to registrations on Form S-8 or any
successor form, or unless the underwriters managing the registered public
offering otherwise agree, and (ii) shall cause each holder of at least 3% (on a
fully-diluted basis) 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 Rule 144) 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 or
distribution, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
5. REGISTRATION PROCEDURES. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall 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 shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and 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 shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents shall be subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and 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 not less than 180 days (or, in the case of a Shelf Registration, a period
ending on the earlier of (i) the date on which all Registrable Securities
included in such Shelf Registration have been sold pursuant thereto or have
otherwise ceased to be Registrable Securities, and (ii) the second anniversary
of the effective date of such Shelf Registration) and comply with the provisions
of the Securities Act with respect to the disposition of all
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securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the 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 shall 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, at any
time when a prospectus relating thereto 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 contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) 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 and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(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 (including effecting a stock split or
a combination of shares);
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(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, 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) permit any holder of Registrable Securities which holder,
in its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) 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 common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order; and
(m) obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the holders of a
majority of the Registrable Securities being sold reasonably request (provided
that such Registrable Securities constitute at least 10% of the securities
covered by such registration statement).
6. REGISTRATION EXPENSES.
(a) EXPENSES. 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,
fees and disbursements of custodians, and fees and disbursements of counsel for
the Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "REGISTRATION EXPENSES"), shall be borne
as provided in this Agreement, except that the Company shall, 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
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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) REIMBURSEMENT OF COUNSEL. In connection with each Demand
Registration, the Preferred Registration, and each Piggyback Registration, the
Company shall reimburse the holders of Registrable Securities included in such
registration for the reasonable fees and disbursements of one counsel chosen by
the holders of a majority of the Registrable Securities included in such
registration and for the reasonable fees and disbursements of each additional
counsel retained by any holder of Registrable Securities for the purpose of
rendering a legal opinion on behalf of such holder in connection with any
underwritten Demand Registration, Preferred Registration, or Piggyback
Registration.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, each holder of Registrable Securities, its officers and directors and
each Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by 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 any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing 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 shall 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 of
Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
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, shall indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from 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 any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation to indemnify
shall be individual, not joint and several, for each holder and shall be limited
to the net amount of proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement.
- 11 -
(c) Any Person entitled to indemnification hereunder shall (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 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. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall 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) No indemnifying party shall, without the written consent
of each indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise, or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim without any payment or consideration
provided or obligation incurred by any indemnified party and (ii) does not
include a statement as to or an admission of fault, culpability, or a failure to
act, by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 7 is
unavailable to or is insufficient to hold harmless an indemnified party under
the provisions above in respect to any losses, claims, damages, or liabilities
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, or liabilities (i) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the sellers of Registrable
Securities and any other sellers participating in the registration statement on
the other hand 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 fault referred to in clause (i) above, but also the relative
benefit of the Company on the one hand and of the sellers of Registrable
Securities and any other sellers participating in the registration statement on
the other hand in connection with the registration statement or omissions which
resulted in such losses, claims, damages, or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the sellers of Registrable Securities and any other sellers
participating in the registration statement on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) to the Company bear to the total net proceeds from the
offering (before deducting expenses) to the sellers of Registrable Securities
and any other sellers participating in the registration statement. The relative
fault of the Company on the one hand and of the sellers of Registrable
Securities and any other sellers participating in the registration statement on
the other shall be determined by reference to, among
- 12 -
other things, whether the untrue or alleged omission to state a material fact
relates to information supplied by the Company or by the sellers of Registrable
Securities or other sellers participating in the registration statement and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement or omission.
The Company and the sellers of Registrable Securities agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the sellers of Registrable
Securities 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 the immediately preceding Section. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, and liabilities
referred to in the immediately preceding subsection shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, no seller of Registrable Securities shall be required to contribute
pursuant to this Section 7(e), together with amounts paid under Section 7(b),
any amounts in excess of the net proceeds received by such seller from the sale
of Registrable Securities covered by the registration statement filed pursuant
hereto. 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.
(f) The indemnification and contribution by any such party
provided for under this Agreement shall be in addition to any other rights to
indemnification or contribution which any indemnified party may have pursuant to
law or contract and will remain in full force and effect regardless of any
investigation made or omitted by or on behalf of the indemnified party or any
officer, director, or controlling Person of such indemnified party and will
survive the transfer of securities.
(g) The indemnification and contribution required by this
Section 7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage, or liability is incurred.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. 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 and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; PROVIDED that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in paragraph 7 hereof.
- 13 -
9. DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings set forth below:
"EXCHANGING BONDHOLDER REGISTRABLE SECURITIES" means
Registrable Securities consisting of, or derived from, any Common Stock issued
to the Exchanging Bondholders pursuant to the Exchange Agreements.
"EXECUTIVE REGISTRABLE SECURITIES" means Registrable
Securities consisting of, or derived from, Common Stock issued by the Company to
the Executive Investors prior to the date hereof.
"ORIGINAL BV REGISTRABLE SECURITIES" means Registrable
Securities consisting of, or derived from, the Common Stock issued by the
Company to Battery Ventures III, L.P. prior to the date hereof.
"ORIGINAL FRONTENAC REGISTRABLE SECURITIES" means Registrable
Securities consisting of, or derived from, the Common Stock issued by the
Company to Frontenac VI, L.P. prior to the date hereof.
"ORIGINAL INSTITUTIONAL INVESTOR REGISTRABLE SECURITIES" means
Registrable Securities consisting of, or derived from, Common Stock issued by
the Company to the Original Institutional Investors prior to the date hereof.
"ORIGINAL MDCP REGISTRABLE SECURITIES" means Registrable
Securities consisting of, or derived from, the Common Stock issued by the
Company to Madison Dearborn Capital Partners, L.P. prior to the date hereof.
"ORIGINAL REGISTRABLE SECURITIES" means, collectively,
Original Institutional Investor Registrable Securities and Executive Registrable
Securities.
"NEW INSTITUTIONAL INVESTOR REGISTRABLE SECURITIES" means
Registrable Securities consisting of, or derived from, (x) Preferred Stock
issued to the New Institutional Investors under the Purchase Agreement or (y)
(without duplication with the securities described in clause (x)) Common Stock
issued or issuable upon conversion of the Preferred Stock and the Loans.
"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.
"PREFERRED SECURITIES" means shares of Preferred Stock issued
to the New Institutional Investors under the Purchase Agreement, so long as such
shares continue to be Registrable Securities.
"REGISTRABLE SECURITIES" means (i) any Common Stock issued by
the Company to the Original Institutional Investors prior to the date hereof,
(ii) any Common Stock issued by the Company to
- 14 -
the Executive Investors prior to the date hereof, (iii) with respect to a
Preferred Registration, any Preferred Stock issued to the New Institutional
Investors under the Purchase Agreement, (iv) without duplication of the
securities described in clause (iii), any Common Stock issued or issuable upon
conversion of the Preferred Stock or the Loans, (v) any Common Stock issued to
the Exchanging Bondholders pursuant to the Exchange Agreements, and (vi) any
securities issued with respect to any of the foregoing securities by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, or upon
conversion or exercise of any such securities; PROVIDED that with respect to any
Registrable Securities, such securities shall cease to be Registrable Securities
when they have been (A) distributed to the public pursuant to an offering
registered under the Securities Act, (B) sold to the public through a broker,
dealer or market maker in compliance with Rule 144 under the Securities Act (or
any similar rule promulgated by the Securities Exchange Commission then in
force), or (C) transferred to the public in a transaction exempt from
registration under Section 4(1) of the Securities Act; AND PROVIDED FURTHER,
that such securities shall cease to be Registrable Securities if the aggregate
number of securities that would otherwise be considered Registrable Securities
held by a holder (together with his or its affiliates) constitutes fewer that
0.5% of the shares of Common Stock of the Company then outstanding and the
holder thereof may sell such securities under Rule 144(k), or any successor
provision thereto, under the Securities Act. For purposes of this Agreement, a
Person shall be deemed to be the holder of Registrable Securities, and the
Registrable Securities shall be deemed to be outstanding and in existence,
whenever such Person has the right to acquire such Registrable Securities upon
conversion of Preferred Stock or Loans, or similar securities held by such
Person, whether or not such acquisition has actually been effected, and such
Person shall be entitled to exercise the rights of a holder of such Registrable
Securities hereunder.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any successor federal statute then in force.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
shall 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 of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) REMEDIES. 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
- 15 -
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.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company, the holders of at least 67% of the
Original Institutional Investor Registrable Securities outstanding at the time
such amendment or waiver becomes effective, and the holders of at least a
majority of the New Institutional Investor Registrable Securities outstanding at
the time such amendment or waiver becomes effective; PROVIDED, that an amendment
which adversely affects the Executive Registrable Securities in a manner adverse
relative to other Registrable Securities also requires the prior written consent
of holders of a majority of the Executive Registrable Securities then
outstanding; AND PROVIDED FURTHER, that an amendment which adversely affects the
Exchanging Bondholder Registrable Securities in a manner adverse relative to
other Registrable Securities also requires the prior written consent of holders
of a majority of the Exchanging Bondholder Registrable Securities then
outstanding.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements 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 assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) 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.
(g) 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.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State
- 16 -
of Illinois, without giving effect to any choice of law or conflict of law rules
or provisions (whether of the State of Illinois or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of Illinois.
(j) 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 delivered
personally to the recipient, one business day after being sent to the recipient
by reputable overnight courier service (charges prepaid), or three business days
after being sent to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Original Institutional Investor, each New
Institutional Investor, each Exchanging Bondholder, and each Executive Investor
at the last known record address for such Person and to the Company at the
address indicated below:
Focal Communications Corporation
000 X. XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: General Counsel
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
- 17 -
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
agreement as of the date first written above.
FOCAL COMMUNICATIONS CORPORATION
By: /s/ Xxxxx Xxxxxxx
Its:
------------------------------------------
GREAT HILL EQUITY PARTNERS LIMITED PARTNERSHIP
By: Great Hill Partners GP, LLC
Its: General Partner
By: /s/ Xxxx X. Xxxxx
A Manager
GREAT HILL INVESTORS, LLC
By: /s/ Xxxx X. Xxxxx
A Manager
GREAT HILL EQUITY PARTNERS II
LIMITED PARTNERSHIP
By: Great Hill Partners XX XX, LLC
Its: General Partner
By: /s/ Xxxx X. Xxxxx
A Manager
- 18 -
GREAT HILL AFFILIATE PARTNERS II
LIMITED PARTNERSHIP
By: Great Hill Partners XX XX, LLC
Its: General Partner
By: Xxxx X. Xxxxx
A Manager
MADISON DEARBORN CAPITAL PARTNERS IV, L.P.
By: Madison Dearborn Partners IV, L.P.
Its: General Partner
By: Madison Dearborn Partners, L.L.C.
Its: General Partner
By: /s/ Xxxxx Xxxxx
Its:
------------------------------------------
FRONTENAC VIII LIMITED PARTNERSHIP
By: Frontenac VIII Partners, L.P.
Its: General Partner
By: Frontenac Company VIII, L.L.C.
Its: General Partner
By: /s/ Xxxxx X. Xxxxxxxx
Its:
------------------------------------------
- 19 -
FRONTENAC MASTERS VIII LIMITED PARTNERSHIP
By: Frontenac VIII Partners, L.P.
Its: General Partner
By: Frontenac Company VIII, L.L.C.
Its: General Partner
By: /s/ Xxxxx X. Xxxxxxxx
Its:
------------------------------------------
BATTERY VENTURES III, L.P.
By: Battery Partners III, L.P.
Its: General Partner
By: /s/ Xxxx Xxxxxxx
Its:
------------------------------------------
BATTERY VENTURES VI, L.P.
By: Battery Partners VI, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxxx
Its:
------------------------------------------
BATTERY INVESTMENT PARTNERS VI, LLC
By: /s/ Xxxx Xxxxxxx
Its:
------------------------------------------
XXXXXXXX STREET PARTNERS III
By: /s/ WSK
Its:
------------------------------------------
SPECIAL CO-INVEST PARTNERS I
By: /s/ WSK
Its:
------------------------------------------
/s/ Xxxx Xxxxxxxx
-----------------
Xxxx Xxxxxxxx
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Xx.
- 21 -
SCHEDULE OF ORIGINAL INSTITUTIONAL INVESTORS
Madison Dearborn Capital Partners, L.P.
Frontenac VI Limited Partnership
Battery Ventures III, L.P.
SCHEDULE OF NEW INSTITUTIONAL INVESTORS
Madison Dearborn Capital Partners IV, X.X.
Xxxxxxxx Street Partners III
Special Co-Invest Partners I
Frontenac VIII Limited Partnership
Frontenac Masters VIII Limited Partnership
Battery Ventures III, L.P.
Battery Ventures VI, L.P.
Battery Investment Partners VI, LLC
Great Hill Equity Partners Limited Partnership
Great Hill Investors, LLC
Great Hill Equity Partners II Limited Partnership
Great Hill Affiliate Partners II Limited Partnership
SCHEDULE OF EXCHANGING BONDHOLDERS
Redacted
SCHEDULE OF EXECUTIVE INVESTORS
Xxxxx Xxxx
Xxxx Xxxxxxxx
Xxxxxx Xxxxxx
Xxxxxx X. Xxxxxx, Xx.
