Document:

United States Securities & Exchange Commission EDGAR Filing

EXHIBIT 4.1

FIRST AMENDMENT TO RIGHTS AGREEMENT

THIS FIRST AMENDMENT TO RIGHTS AGREEMENT (this “First Amendment”) is entered into as of the 28th day of February, 2006, by and between QUIPP, INC., a Florida corporation (the “Company”), and AMERICAN STOCK TRANSFER & TRUST COMPANY, a New York corporation (the “Rights Agent”).

RECITALS

WHEREAS, the Company and the Rights Agent are parties to a Rights Agreement dated as of March 3, 2003 (the “Rights Agreement”); and

WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company and the Rights Agent, at the direction of the Company, hereby agree to amend the Rights Agreement as set forth below.

NOW, THEREFORE, the Rights Agreement is hereby amended as follows:

1.

Section 7(a) of the Rights Agreement is hereby amended by replacing the reference to “March 2, 2006” in clause (i) of Section 7(a) with “September 4, 2007.”

2.

Exhibit A to the Rights Agreement is hereby amended by replacing all references to “March 2, 2006” with “September 4, 2007.”

3.

Exhibit B to the Rights Agreement is hereby amended by replacing the reference to “March 2, 2006” with “September 4, 2007.”

4.

Except as amended by this First Amendment, the Rights Agreement shall remain in full force and effect.

5.

This First Amendment shall be deemed to be a contract made under the laws of the State of Florida and for all purposes shall be governed by and construed in accordance with the laws of such jurisdiction applicable to contracts to be made and performed entirely within such jurisdiction.

6.

This First Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed as of the day and year first above written.

QUIPP, INC.

By:  /s/ Michael S. Kady

Name:

Michael S. Kady

Title:

President and Chief Executive Officer

AMERICAN STOCK TRANSFER & TRUST COMPANY

By:  /s/ Herbert J. Lemmer

Name:  Herbert J. Lemmer

Title:  Vice President

2Exhibit 10.19

    

      EMPLOYMENT/STOCK
        REPURCHASE AGREEMENT

      

      This
        Employment/Stock Repurchase Agreement (hereinafter “Agreement” is entered into
        on this 13th
        day of
        October, 1999 by ROLLA P. HUFF (hereinafter “Executive”) and MGC COMMUNICATIONS,
        INC., a Nevada corporation (hereinafter the “Company”). Executive and Company
        are collectively designated herein as the “Parties” and “Party” shall mean
        either one of the Parties.

      

      The
        Parties, for and in consideration of the promises, covenants, terms, conditions
        and obligations hereinafter set forth, agree as follows:

      

      1.
        Employment.
        Company
        hereby employs Executive and Executive hereby accepts employment by Company
        upon
        all terms and conditions as are hereinafter set forth.

      

      2.
        Scope
        of Service.

      

      A.
        Executive shall be employed by Company no later than November 1, 1999, as
        its
        President and Chief Executive Officer. Executive shall report directly and
        solely to Company’s Board of Directors. The duties and responsibilities of
        Executive as President and Chief Executive Officer shall be those of the
        chief
        executive officer of similar companies and as defined in the by-laws of Company,
        and shall be without consideration of other positions Executive may hold
        with
        Company. Executive’s services are mutually agreed to be unique personal
        services. Executive acknowledges that Company is relying upon Executive’s
        experience, expertise and other qualifications in entering into this Agreement.
        Executive shall not assign or delegate any right, obligation or duty hereunder
        to any other person or entity without the express written consent of the
        Company.

      

      B.
        During
        Executive’s period of service hereunder, Executive agrees to perform such
        services not inconsistent with his position as shall from time to time be
        assigned to him by Company’s Board of Directors. During the term of this
        Agreement, except for disability, illness and vacation periods, Executive
        shall
        devote his full productive time, attention and energies to the position of
        President and Chief Executive Officer of Company.

      

      C.
        Executive’s expenditure of reasonable amounts of time in connection with outside
        activities, not competitive with the business of Company, such as outside
        directorships or charitable activities, shall not be considered in contravention
        of this Agreement so long as such activities do not materially interfere
        with
        his performance of this Agreement. Further, it is understood and agreed by
        the
        Parties hereto that Executive is entitled to engage in passive and personal
        investment activities not materially interfering with his performance of
        this
        Agreement.

      

      D.
        Company shall cause Executive to be elected to Company’s Board of Directors and
        to be nominated for reelection to the Board so long as he continues to serve
        as
        President and Chief Executive Officer of Company.

      

      3.
        Term
        of Agreement.
        This
        Agreement shall be effective as of a date, not later than November 1, 1999,
        mutually agreeable to the Parties (the “Effective Date”) and Executive’s
        employment hereunder shall continue until October 31, 2002, unless sooner
        terminated by either Party as provided in Item 11 herein. Thereafter, this
        Agreement shall be automatically renewed on a year-to-year basis after the
        expiration of the initial or any subsequent term of this Agreement unless
        terminated by either Party as provided in Item 11 hereof.

      

      4.
        Compensation.
        During
        the term of this Agreement, Company agrees to pay to Executive, and Executive
        agrees to accept from Company, in full payment for services rendered by
        Executive and work to be performed by him under the terms of this Agreement,
        the
        following:

      

      A.
        An
        annual base salary (“Base Salary”) of Five Hundred Thousand Dollars
        ($500,000.00), payable in installments in accordance with Company’s payroll
        practices. The base salary may be increased annually in the discretion of
        the
        Board of Directors of Company based on Company’s performance and Executive’s
        personal accomplishments.

      

      B.
        Executive shall be entitled to a bonus of up to one hundred percent (100%)
        of
        his Base Salary each calendar year based on either (i) Company’s achievement of
        certain annual targets to be established by Company’s Board of Directors in
        conjunction with the establishment of Company’s operating budget each year, or
        (ii) in the event such targets are not met or an additional bonus is warranted,
        in the discretion of Company’s Board of Directors.

      

      C.
        Company shall pay Executive a cash signing bonus of One Million Dollars
        ($1,000,000) payable within fifteen (15) days of Executive’s commencement of
        employment hereunder. The cash signing bonus shall be repaid by Executive
        to
        Company in full in the event of Executive’s resignation from Company without
“Good Reason” (as defined in Item 11B) or termination for “Cause” (as defined in
        Item 11A) before completion of three (3) years of employment with Company.
        In
        such event, the repayment of the cash signing bonus shall be made within
        thirty
        (30) days of Executive’s termination of employment.

      

      D.
        In the
        event Executive’s employment with Company shall cease within one (1) year after
        a “Change of Control” (as defined in Item 10), shall be terminated by Company
        without Cause or shall be terminated by Executive with Good Reason, Company
        shall pay to Executive severance pay in an aggregate amount (not less than
        One
        Million Dollars ($1,000,000)) equal to two (2) times the total amount of
        Base
        Salary and incentive bonus paid by Company to Executive during the twelve
        (12)
        month period immediately preceding the date of his termination of employment.
        Such amount shall be paid by Company to Executive in twenty-four (24) equal
        monthly installments beginning on the date that is one (1) month after the
        date
        of his termination of employment.

      

      E.
        Company shall also reimburse Executive for all reasonable and necessary expenses
        actually incurred by Executive in performing services hereunder to the extent
        approved by Company. Executive shall prepare and submit to Company a periodic
        statement of charges in such detail and supported by such receipts, evidence
        and
        documentation as Company may reasonably require.

      

      5.
        Fringe
        Benefits.

      

      A.
        Company shall provide Employee such vacation time, sick leave and fringe
        benefits, including but not limited to participation in any pension, 401(k),
        health insurance and employee benefit plans that may be maintained by Company
        from time to time as are made generally available to other senior management
        employees of Company in accordance with Company policies. Company reserves
        the
        right to change the benefits available under its benefit plans at any time
        or
        times.

      

      B.
        Company shall pay on behalf of Executive his automobile expenses and the
        annual
        dues for Executive’s membership in a country club which shall be subject to
        Company’s approval if the aggregate of such automobile expenses and dues are in
        excess of $3,000 per month, which approval shall not be unreasonably
        withheld.

      

      C.
        Company shall pay Executive’s living expenses (including living quarters and
        local transportation costs) while Executive is in Las Vegas for business
        and
        shall pay Executive’s travel costs to and from Las Vegas on business. Any such
        amounts paid by Executive shall be reimbursed by Company upon presentation
        of
        receipts for such expenses.

      

      6.
        Deductions.
        Deductions shall be made from Executive’s salary for social security, Medicare,
        federal and state withholding taxes, and any other such taxes as may from
        time
        to time be required by governmental authority.

      

      7.
        Fiduciary
        Relationship.
        Both
        Parties acknowledge and agree that a fiduciary and confidential relationship
        has
        commenced and will continue to exist between them and that said relationship
        will continue during the term of this Agreement.

      

      8.
        Stock
        Options.

      

      A.
        Executive shall be eligible to participate in any stock option plans maintained
        by Company and any additional or successor plans created from time to
        time.

      

      B.
        As of
        the date hereof, Executive shall be granted a stock option for the purchase
        of
        400,000 shares of Company’s Common Stock. Such option shall: (i) have an
        exercise price equal to $20.00 per share; (ii) vest in four (4) equal annual
        installments at the rate of 25% on each of the first four anniversaries of
        the
        grant; (iii) accelerate and become fully vested in the event of a Change
        of
        Control (as defined in Item 10 hereof) or in the event Executive’s employment is
        terminated by him with Good Reason as provided in Item 11B; and (iv) be
        non-qualified options to the extent required by the Internal Revenue
        Code.

      

      C.
        As of
        the first anniversary of the Effective Date, Executive shall, if he is then
        employed by Company, be granted a stock option for the purchase of an additional
        200,000 shares of Company’s Common Stock. Such option shall: (i) have an
        exercise price equal to the greater of $30.00 per share or the closing price
        of
        Company’s Common Stock on the date of grant as reported in the Nasdaq National
        Market; (ii) vest in four (4) equal annual installments at the rate of 25%
        on
        each of the first four anniversaries of the grant; (iii) accelerate and become
        fully vested in the event of a Change of Control (as defined in Item 10 hereof)
        or in the event Executive’s employment is terminated by him with Good Reason as
        provided in Item 11B; and (iv) be non-qualified options to the extent required
        by the Internal Revenue Code.

      

      D.
        In
        addition to the stock options grants pursuant to Paragraphs B and C above,
        Executive shall be eligible for additional grants on an annual
        basis.

      

      9.
        Stock
        Sale and Company Option to Repurchase Executive’s Shares.

      

      A.
        Upon
        the Effective Date, Company shall sell to Executive 150,000 shares of its
        common
        stock (the “Note Shares”) for a purchase price equal to 150,000 multiplied by
        the closing price of Company’s Common Stock as of the date of this Agreement as
        reported in the Nasdaq National Market.

      

      B.
        The
        purchase price for the Note Shares shall be paid by Executive’s execution and
        delivery to Company of a non-recourse promissory note (the “Note”) in favor of
        Company. The Note will be secured by the Note Shares pursuant to a stock
        pledge
        agreement in a form reasonably agreeable to the Parties. The term of the
        Note
        will be three (3) years, and the Note will bear interest at the rate of 7.5%
        per
        annum on the unpaid balance, with no interest payment required prior to the
        maturity of the Note. The Note may be prepaid at any time without penalty,
        and
        prepayment will be required within 30 days after termination of employment
        by
        Company for Cause pursuant to Item 11A or by Executive’s resignation without
        Good Reason. Executive acknowledges that his holding period for Note Shares
        will
        not begin until he has paid for such shares for purposes of determining whether
        he has met the one-year holding period required before being able to sell
        such
        shares under Rule 144 under the Securities Act of 1933.

      

      C.
        Company shall forgive the Note in full (principal and interest) in the event:
        (i) Executive is in the continuous employment of Company during the three
        (3)
        year period beginning on the Effective Date, (ii) Executive’s employment with
        Company is terminated by Company without Cause prior to the date that is
        three
        (3) years after the Effective Date, (iii) Executive’s employment with Company is
        terminated by Executive with Good Reason, (iv) Executive’s employment is
        terminated as a result of disability, or (v) of a Change of Control (as defined
        in Item 10 hereof).

      

      D.
        If
        Executive is at any time prior to the date that is three (3) years after
        the
        Effective Date, not an employee of Company for any reason whatsoever other
        than
        as a result of termination of employment by Company without Cause, termination
        of employment by Executive with Good Reason, death, disability or a Change
        of
        Control (the date of such termination of employment being referred to herein
        as
        the “Termination Date”), then Company shall have the option to purchase,
        whereupon Executive shall be obligated to sell, any portion or all of the
        Note
        Shares in Company owned by Executive or any Affiliate of his on the Termination
        Date. In such event, such Note Shares shall be sold free and clear of any
        and
        all liens and encumbrances. The purchase price for the Note Shares shall
        be the
        amount per share paid by executive for such Note Shares (including any interest
        paid or accrued on the Note with respect to the Note Shares being
        repurchased).

      

      E.
        The
        option provided herein shall be exercised, if at all, by delivery of written
        notice by Company within ninety (90) days after the Termination
        Date.

      

      F.
        The
        closing of the purchase and sale hereunder shall occur within thirty (30)
        days
        following the exercise of said option and at a time and place as Company
        may
        designate by written notice to Executive at least five (5) days in advance
        of
        such closing. The parties hereto hereby agree to execute any and all instruments
        and documents to transfer full and complete title to such Note Shares to
        effectuate the foregoing. At the closing, the purchase price shall be paid
        by
        the cancellation of the Note up to but not in excess of the purchase price
        for
        the Note Shares being repurchased with the balance of such purchase price
        payable in cash.

      

      G.
        The
        repurchase price per share set forth in this Item shall be adjusted
        appropriately in the event of any stock split, stock dividend or other similar
        change in the capitalization of Company. The Board of Directors of Company
        shall
        make the determination of any such adjustments and shall provide Executive
        with
        written notice thereof.

      

      H.
        All
        certificates representing Note Shares shall bear the following restrictive
        legend (in addition to any other legends required to be placed
        thereon):

      

      The
        Shares represented by this certificate are subject to repurchase by Company
        pursuant to the terms of an Employment/Stock Repurchase Agreement dated October
        13, 1999, a copy of which is on file with Company.

      

      10.
        Change
        of Control.
        

      

      A.
        In the
        event of a Change of Control (as defined in Paragraph B below), Executive’s
        obligation to repay his cash signing bonus shall terminate, the stock options
        theretofore granted to Executive pursuant to Item 8B and 8C shall become
        immediately vested and Executive’s obligations to repay the Note referenced in
        Item 10B shall be forgiven as provided herein.

      

      B.
        For
        all purposes of this Agreement, a “Change in Control” shall be deemed to have
        occurred if: (i) by any method, transaction or series of related transactions
        more than 50% of the outstanding shares of Company or beneficial ownership
        thereof are acquired within a period of one year by persons other than the
        members of Company’s Board of Directors, those persons who were more than 5%
        stockholders of Company prior to the Effective Date, employees of Company
        and
        any of their immediate family members and affiliates and there is a change
        in
        the membership of Company’s Board within a one year period thereafter such that
        fewer than 50% of the members of the Board are persons who served in such
        position prior to the change in ownership; (ii) there is a merger or
        consolidation of Company in which Company is not the continuing or surviving
        entity or pursuant to which Company’s shares are converted into cash, securities
        or other property, or (iii) Company sells, leases or exchanges all or
        substantially all of its assets or Company’s stockholders approve the
        liquidation or dissolution of Company.

      

      C.
        In the
        event any payment or financial accommodation under this Agreement results
        in a
        liability of Executive for excise taxes based on the application of Sections
        4999 and 280G of the Internal Revenue Code, as amended, then Company shall
        pay
        to Executive such additional amount (the “Additional Payment”) as shall enable
        Executive to pay all excise taxes attributable to payments under this Paragraph
        D (including any Additional Payment) and all income taxes on the Additional
        Payment so that Executive will be in the same financial position after payment
        of the Section 4999 excise tax and income taxes on the Additional Payment
        that
        he would have been had the golden parachute rules not been applied.

      

      11.
        Duration
        of Services.

      

      A.
        Termination
        for Cause.
        Company
        may terminate this Agreement for “Cause”, effective immediately upon delivery of
        notice to Executive. For all purposes of this Agreement, “Cause shall exist only
        in the event Executive (i) shall be arrested for commission of a felony or
        other
        act involving moral turpitude, (ii) shall commit any act, specifically including
        but not limited to drug or alcohol abuse, which is materially and objectively
        harmful to Company or its business, (iii) shall commit any act of fraud,
        dishonesty or theft, whether or not related to his activities on behalf of
        Company, or (iv) shall fail to comply with any material provision of this
        Agreement and Executive has not cured such failure within twenty (20) days
        after
        written notice of such noncompliance has been given by Company to Executive,
        or
        if such failure is not capable of being cured in such time, a cure shall
        not
        have been diligently initiated by Executive within such twenty (20) day period
        and Executive shall not have cured such failure within forty (40) days
        thereafter; provided, however, that in no event shall Executive have the
        right
        to cure more than two (2) such failures under clause (iv) in any one calendar
        year.

      

      B.
        Termination
        by Executive for Good Reason.
        Executive may terminate this Agreement for “Good Reason” by giving to Company
        sixty (60) days written notice and such termination shall be effective on
        the
        sixtieth (60th)
        day
        following the date of such notice; provided, however, that Company may, in
        its
        sole and absolute discretion, accelerate the effective date of Executive’s
        termination to any date following the date such of notice. For all purposes
        of
        this Agreement, “Good Reason” shall mean (i) the failure of Company to comply
        with any material provision of this Agreement and Company has not cured such
        failure within twenty (20) days after written notice of such noncompliance
        has
        been given by Executive to Company, or if such failure is not capable of
        being
        cured in such time, a cure shall not have been diligently initiated by Company
        within such twenty (20) day period and Company shall not have cured such
        failure
        within forty (40) days thereafter; provided, however, that in no event shall
        Company have the right to cure more than two (2) such failures under this
        clause
        (i) in any one calendar year, or (ii) if any of the following shall occur
        without Executive’s consent and shall not be remedied within thirty (30) days
        after written notice of objection has been delivered by Executive to
        Company:

      

      (a)
        Executive is not elected or retained as President and Chief Executive Officer
        and a director of Company during the term of this Agreement;

      

      (b)
        any
        assignment to Executive of any duties other than those reasonably contemplated
        by Item 2 of this Agreement;

      

      (c)
        any
        removal of Executive from responsibilities substantially similar to those
        described or contemplated in Item 2 hereof; or

      

      (d)
        Company’s Board of Directors requires Executive to relocate or transfer Company
        headquarters or his principal place of residence away from the Rochester,
        New
        York area.

      

      C.
        Termination
        Without Cause.

      

      1.
        Executive may terminate this Agreement by giving to Company ninety (90) days
        written notice and such termination shall be effective on the ninetieth
        (90th)
        day
        following the date of such notice; provided, however, that Company may, in
        its
        sole and absolute discretion, accelerate the effective date of Executive’s
        voluntary termination to any date following the date of such
        notice.

      

      2.
        Company may, without cause, terminate this Agreement at any time by giving
        to
        Executive ninety (90) days written notice and such termination shall be
        effective on the ninetieth (90th)
        day
        following the date of such notice. At the option of Company, Executive shall
        immediately cease performing his duties hereunder upon receipt of the
        notice.

      

      D.
        Disability.
        If
        Executive shall fail or be unable to perform the services required hereunder
        because of any physical or mental infirmity, and such failure or inability
        shall
        continue for sixty (60) consecutive days, Company shall have the right to
        terminate Executive’s employment after delivering written notice thereof to
        Executive. Company shall in no way be obligated to compensate Executive after
        the expiration of the initial sixty (60) days of disability.

      

      E.
        Death.
        Executive’s employment shall terminate upon his death.

      

      F.
        Termination
        of Company’s Obligations.
        Company’s obligations under Item 4A and B of this Agreement shall terminate upon
        the expiration of the term of this Agreement without renewal or upon termination
        of Executive’s employment as provided in this Item.

      

      G.
        Termination
        of Executive’s Obligations.
        Executive’s obligations under Items 12, 13 and 15 of this Agreement shall
        survive the expiration of the term of this Agreement without renewal and
        termination of Executive’s employment as provided in such Items.

      

      12.
        Non-Competition.

      

      A.
        Executive and Company agree that Company’s activities are of a unique and
        special nature and that if Executive’s services were used in competition with
        Company, such use would cause serious and possibly irreparable harm to Company.
        Accordingly, Executive agrees to the commitments of non-competitive activities
        as described herein:

      

      1.
        Executive agrees that during the period of employment with Company and for
        a
        period of twelve (12) months after the last day of Executive’s employment with
        Company, that Executive shall not directly or indirectly: (a) call on, solicit,
        take away or attempt to take away for the benefit of Executive or of any
        other
        person or entity, any customer or supplier or prospective customer or supplier
        of Company, or (b) solicit, take away, or attempt to take away, for the benefit
        of Executive or of any other person or entity, any employee, officer or
        consultant of Company.

      

      2.
        Executive agrees that during the period of employment with Company and for
        a
        period of twelve (12) months after the last day of Executive’s employment with
        Company, that Executive shall not directly or indirectly engage, either as
        a
        consultant, independent contractor, proprietor, stockholder, partner, owner,
        officer, director, employee or otherwise in any business which (a) engages
        in
        any business which competes with the business of Company within the “Prohibited
        Geographic Area” (as defined below) as such business is conducted or planned to
        be conducted as of the date of termination of employment, or (b) calls on,
        solicits, takes away, sells to, or otherwise deals with any customers, suppliers
        or contacts of Company in a way that would adversely affect Company’s business,
        or (c) which otherwise competes with Company within the Prohibited Geographic
        Area. For purposes of this Agreement, the “Prohibited Geographic Area” shall
        mean the geographic area within the United States where Company shall then
        be
        doing business or shall then be actively planning to do business.

      

      B.
        The
        parties hereto agree that: (i) the covenants and agreements of Executive
        contained in Paragraph A of this Item are reasonably necessary to protect
        the
        interests of Company in whose favor said covenants and agreements are imposed
        in
        light of the nature of Company’s business and the professional involvement of
        Executive in such business; (ii) the restrictions imposed by Paragraph A
        of this
        Item are not greater than are necessary for the protection of Company in
        light
        of the substantial harm that Company will suffer should Executive breach
        any of
        the provisions of said covenants or agreements; (iii) the covenants and
        agreements of Executive contained in Paragraph A of this Item have been
        independently negotiated between the parties hereto and have served as a
        material inducement for Company to enter into this Agreement; (iv) the periods
        of restriction and restricted area referred to in Paragraph A of this Item
        are
        fair and reasonable in that they are reasonably required for the protection
        of
        Company; and (v) the nature, kind and character of the activities Executive
        is
        prohibited to engage in are reasonable and necessary to protect Company in
        that
        Company will rely on Executive for many important aspects of its
        business.

      

      C.
        Executive acknowledges that a material breach by him of any part of Paragraph
        A
        of this Item will result in irreparable and continuing damage to Company
        and any
        material breach or threatened breach of the covenants provided in Paragraph
        A of
        this Item shall be subject to specific performance by temporary as well as
        permanent injunction or any other equitable remedies of any court of competent
        jurisdiction.

      

      D.
        The
        covenants and agreements on the part of Executive contained in Paragraph
        A of
        this Item shall be construed as agreements independent of any other agreement
        between Executive and Company. The existence of any claim or cause of action
        of
        Executive against Company, whether predicated on this Agreement or otherwise,
        shall not constitute a defense to the enforcement by Company of each of such
        covenants and agreements or otherwise affect the remedies to which Company
        is
        entitled hereunder.

      

      E.
        If the
        provisions of this Item should ever be adjudicated to exceed the time,
        geographic or other limitations permitted by applicable law in any jurisdiction,
        then such provisions shall be deemed reformed in such jurisdiction to the
        maximum time, geographic or other limitation permitted by applicable
        law.

      

      F.
        Nothing contained in this Item shall restrict Executive from being a stockholder
        (but not an officer, director, employee, consultant or advisor) of any
        corporation that directly or indirectly competes with Company provided the
        stock
        of such competing corporation is publicly held and listed on a national stock
        exchange.

      

      13.
        Professional
        Responsibility.

      

      A.
        Executive agrees that he will provide in connection with the performance
        of all
        services under this Agreement the standards of care, skill and diligence
        normally provided by competent professionals in the performance of services
        similar to that contemplated by this Agreement.

      

      B.
        Executive represents that he has no conflicts of interest in rendering his
        professional services to Company.

      

      14.
        Confidential
        Information, Confidential Material.

      

      A.
        “Confidential Information” as used herein, whether or not reduced to writing and
        in any and all stages of development, shall include all relevant information
        concerning, in use or under consideration with respect to intended research
        or
        production areas of interest of Company, but shall not be limited to designs,
        procedures, experiments, protocols, test results, specifications, documentation,
        identity of and class of agreements with third parties, costs, profits,
        revenues, financial statements, and any and all other information, data,
        financial information, names or lists of names of suppliers and customers,
        interpretations, analyses, surveys, ideas, strategies, forecasts, discoveries,
        marketing plans, development plans, techniques, processes, specialized software
        and databases, know-how and trade secrets which are (a) directly or indirectly
        disclosed or revealed to Executive by Company or any of its officers, employees,
        agents, attorneys or representatives, or (b) created, developed, conceived
        or
        originated by Executive at any time during his employment hereunder.
        Notwithstanding the foregoing, any and all such information which Executive
        can
        show was previously known to him or which may constitute common and/or public
        knowledge shall be specifically excluded from this definition of “Confidential
        Information”.

      

      B.
        “Confidential Material” as used herein shall be any and all tangible materials
        and objects which embody Confidential Information or from which Confidential
        Information can be read, reproduced, developed or utilized.

      

      C.
        Anything which is legitimately and lawfully disclosed to Executive by a third
        party shall be released from the provisions and restrictions of this Agreement,
        but only to the extent necessary to permit such use and disclosure as are
        permitted by said third party.

      

      

      15.
        Confidentiality.

      

      A.
        Except
        in connection with Company’s business or as first authorized by Company,
        Executive shall not:

      

      1.
        directly or indirectly disclose, reveal, report, duplicate or transfer any
        Confidential Information or Confidential Material to any other person or
        entity;

      

      2.
        directly or indirectly aid, encourage, direct or allow any other person or
        entity to gain possession of or access to Confidential Information or
        Confidential Material;

      

      3.
        directly or indirectly copy or reproduce Confidential Material or create
        Confidential Material from Confidential Information; or

      

      4.
        directly or indirectly use, sell or exploit any Confidential Information
        or any
        Confidential Material or aid, encourage, direct or allow any other person
        or
        entity to use, sell or exploit any Confidential Information or Confidential
        Material.

      

      B.
        Executive hereby acknowledges and agrees that (i) Company has expended
        considerable and substantial time, effort and capital resources to develop
        the
        Confidential Information, (ii) the Confidential Information is innovative
        and
        must receive confidential treatment to protect Company’s competitive position in
        the market and Company’s proprietary interest therein from irreparable damage,
        (iii) Executive, by virtue of his relationship with Company, will have access
        to
        the Confidential Information, and (iv) the Confidential Information and all
        physical embodiments or other repositories of the same shall be and at all
        times
        remain the sole and exclusive property of Company.

      

      C.
        In the
        event of a breach or threatened breach by Executive of the provisions of
        this
        Item, Company shall be entitled to an injunction restraining Executive from
        disclosing, in whole or in part, any Confidential Information, or from rendering
        any services to any person, firm, corporation, association or other entity
        to
        whom such Confidential Information, in whole or in part, has been disclosed
        or
        is threatened to be disclosed.

      

      D.
        Upon
        receipt of a written request by Company, Executive agrees to surrender and
        return to Company all documents, records, memoranda, notebooks and any other
        repositories of Confidential Information of every character or
        description.

      

      16.
        Miscellaneous.

      

      A.
        This
        Agreement may only be amended in writing, signed by each Party hereto. The
        terms
        of this Agreement shall be interpreted under the laws of the State of
        Nevada.

      

      B.
        Executive agrees to execute such additional documents and do such further
        acts
        and deeds as may be necessary or desirable to effectuate the purposes hereof
        and
        for the perfection of the rights and interests of Company expressed
        herein.

      

      C.
        Each
        of the undersigned further agrees that any action or proceeding brought or
        initiated in respect of this Agreement may be brought or initiated in the
        State
        Court of Clark County, Nevada, or in federal district court in Nevada and
        each
        of the undersigned consents to the exercise of personal jurisdiction and
        the
        placement of venue in any of such courts, in any such action or proceeding
        and
        further consents that service of process may be effected in any such action
        or
        proceeding in such manner as may be permitted by law. Each of the undersigned
        further agrees that no such action shall be brought against any Party hereunder
        except in one of the courts above named.

      

      D.
        For
        all purposes of this Agreement, action or consent by Company shall require
        the
        action or consent of Company’s Board of Directors without participation by
        Executive.

      

      E.
        The
        waiver by either Party of any provision of this Agreement shall not operate
        as,
        or be construed to be, a waiver of any subsequent breach hereof.

      

      F.
        This
        Agreement shall inure to the benefit of and be binding upon the Parties hereto
        and their respective successors and assigns.

      

      G.
        This
        Agreement supersedes any and all other agreements, either oral or in writing,
        between the Parties hereto with respect to the subject matter hereof (including
        but not limited to that certain offer letter dated as of October 8, 1999)
        and
        this Agreement contains all the covenants and agreements among the Parties
        with
        respect to such subject matter.

      

      H.
        The
        headings contained in this Agreement are for reference purposes only and
        shall
        not affect in any way the meaning or interpretation of this
        Agreement.

      

      I.
        Any
        provision of this Agreement which is invalid, illegal or unenforceable in
        any
        jurisdiction shall, as to that jurisdiction, be ineffective to the extent
        of
        such invalidity, illegality or unenforceability, without affecting in any
        way
        the remaining provisions hereof in such jurisdiction or rendering that or
        any
        other provision of this Agreement invalid, illegal or unenforceable in any
        other
        jurisdiction.

      

      J.
        For
        purposes of this Agreement, notices and all other communications provided
        for in
        this Agreement shall be in writing and shall be deemed to have been duly
        given
        when personally delivered and acknowledged or delivered by United States
        registered mail, return receipt requested, addressed, in the case of Executive
        to Executive at his then current primary residence as Company may, from time
        to
        time be notified, and in the case of Company, to the attention to the Corporate
        Secretary of Company at the principal executive offices of Company, or to
        such
        other address as either Party may have furnished to the other in writing
        in
        accordance herewith, except that notice of a change of address shall be
        effective only upon receipt.

      

      K.
        As an
        inducement to Company to enter into this Agreement, Executive represents
        and
        warrants that other than his contractual obligations to keep confidential
        certain information of his former employer pursuant to a written agreement,
        a
        copy of which has been provided to Company: (i) he is not a party to any
        other
        agreement or obligation for personal services; (ii) there exist no impediments
        or restraints, contractual or otherwise, on Executive’s power, right or ability
        to enter into this Agreement and to perform his duties and obligations
        hereunder; (iii) the performance of his obligations under this Agreement
        do not
        and will not violate or conflict with any agreement relating to confidentiality,
        non-competition or exclusive employment to which Executive is or was subject;
        and (iv) Executive has not been involved in any legal proceedings that would
        be
        required to be disclosed in response to Item 401(f) of Regulation S-K
        promulgated under the Securities Act of 1933, as amended. As an inducement
        to
        Executive to enter into this Agreement, Company represents and warrants that
        there exist no impediments, or restraints, contractual or otherwise, on
        Company’s power, right or ability to enter into this Agreement and to perform
        its duties and obligations hereunder.

      

      L.
        Each
        Party has had the opportunity to be represented by counsel of its choice
        in
        negotiating this Agreement. This Agreement shall therefore be deemed to have
        been negotiated and prepared at the joint request and direction of the Parties,
        at arm’s length, with the advice and participation of counsel, and shall be
        interpreted in accordance with its terms and without favor to any
        Party.

      

      IN
        WITNESS WHEREOF, the Parties hereto have executed this Agreement on or as
        of the
        date first above written.

    

    
      	
               Company:

              MGC Communications, Inc.

               

            	 	 	 Executive:
	By:
              /s/ Maurice J. Gallagher	 	 	/s/ Rolla
              P.
              Huff
	
              

            	 	 	
              

            
	Maurice
              J.
              Gallagher, Jr.

              Its: Chairman
                of the Board

            	 	 	Rolla
              P.
              Huff

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