Exhibit 10.6
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REGISTRATION RIGHTS AGREEMENT
among
TELEGROUP, INC.
GREENWICH STREET CAPITAL PARTNERS, L.P.
GREENWICH STREET CAPITAL OFFSHORE FUND, LTD.
TRV EMPLOYEES FUND, L.P.
THE TRAVELERS INSURANCE COMPANY
and
THE TRAVELERS LIFE AND ANNUITY COMPANY
Dated as of November 27, 1996
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TABLE OF CONTENTS
Page
1. Registrations Upon Request..................................1
1.1. Requests.............................................1
1.2. Registration Statement Form...........................3
1.3. Expenses..............................................3
1.4. No Company Initiated Registration.....................3
2. Incidental Registrations....................................4
3. Registration Procedures.....................................6
4. Underwritten Offerings.....................................12
4.1. Underwriting Agreement...............................12
4.2. Selection of Underwriters............................13
5. Holdback Agreements........................................13
6. Preparation; Reasonable Investigation......................14
7. [Intentionally Omitted]....................................15
8. Indemnification............................................15
8.1. Indemnification by the Company.......................15
8.2. Indemnification by the Sellers.......................16
8.3. Notices of Claims, etc...............................17
8.4. Other Indemnification................................18
8.5. Indemnification Payments.............................18
8.6. Other Remedies.......................................19
9. Definitions................................................19
10. Miscellaneous..............................................22
10.1. Rule 144 etc........................................22
10.2. Successors, Assigns and Transferees.................23
10.3. Stock Splits, etc...................................23
10.4. Amendment and Modification..........................23
10.5. GOVERNING LAW.......................................23
10.6. Invalidity of Provision.............................24
10.7. Notices.............................................24
10.8. Headings; Execution in Counterparts.................25
10.9. Injunctive Relief...................................26
10.10. Further Assurances.................................26
10.11. Entire Agreement...................................26
10.12. Term...............................................26
REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT, dated as of November 27, 1996,
among Telegroup, Inc., an Iowa corporation (the "Company"),
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Greenwich Street Capital Partners, L.P., a Delaware limited partnership,
Greenwich Street Capital Offshore Fund, Ltd., a British Virgin Islands
corporation, TRV Employees Fund, L.P., a Delaware limited partnership, The
Travelers Insurance Company, a Connecticut corporation, and The Travelers Life
and Annuity Company, a Connecticut corporation
(collectively, the "Holders" and each a "Holder"). Capitalized terms
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used herein without definition are defined in Section 9.
1. Registrations Upon Request.
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1.1 Requests. At any time during each one of the two years
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following an initial public offering of the Company's securities, the Majority
Holders shall have the right to make one request per year that the Company
effect the registration under the Securities Act of any of the Registrable
Securities of the Holders, each such request to specify the intended method or
methods of disposition thereof, provided that (a)
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in no event shall either such request cover less than 20% of the aggregate
number of shares of Common Stock purchasable on the Issue Date upon the
exercise of all Warrants, as adjusted from time to time pursuant to the terms
thereof, and (b) the Company shall not be required to effect a registration
pursuant to this Section 1.1 until a period of 90 days shall have elapsed from
the effective date of the most recent registration previously effected by the
Company, provided, further, that
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(i) if the registration statement relating to any such request is not declared
effective within 90 days of the date such registration statement is first
filed with the Commission or (ii) if, within 180 days after the registration
relating to any such request has become effective, such registration is inter-
fered with by any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and the Company fails to have such
stop order, injunction or other order or requirement removed, withdrawn or
resolved to the reasonable satisfaction of the Holders within 45 days or (iii)
the conditions to closing specified in the indemnity agreement entered into in
connection with the registration relating to any such request are not
satisfied (other than as a result of a default or breach thereunder by the
Holders), then such request
shall not be counted for purposes of the request limitations of the Holders
set forth above. Upon any such request, the Company will promptly, but in any
event within 15 days, give written notice of such request to all holders of
Registrable Securities and Warrants and thereupon the Company will, subject to
the last paragraph of this Section 1.1, use its reasonable best efforts to
effect the prompt registration under the Securities Act of:
(A) the Registrable Securities which the Company has
been so requested to register by the Majority Holders, and
(B) all other Registrable Securities which the Company
has been requested to register by the holders thereof by
written request given to the Company within 20 days after the
giving of such written notice by the Company,
all to the extent reasonably required to permit the disposition of the Reg-
istrable Securities so to be registered in accordance with the intended method
or methods of disposition of each seller of such Registrable Securities.
Notwithstanding the foregoing, but subject to the rights of holders
of Registrable Securities under Section 2, (a) if the Board determines in its
good faith judgment, after consultation with a firm of nationally recognized
underwriters, that there will be an adverse effect on a then
contemplated public offering of the Company's equity securities, the Company
may defer the filing (but not the preparation) of the registration statement
which is required to effect any registration pursuant to this Section 1.1,
during the period starting with the 30th day immediately preceding the date of
anticipated filing by the Company of, and ending on a date 60 days following
the effective date of, the registration statement relating to such public
offering, provided that
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at all times the Company is in good faith using all reasonable efforts to
cause such registration statement to be filed as soon as possible and
provided, further, that such period shall end on such earlier date as
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may be permitted by the underwriters of such underwritten public offering and
(b) if the Company shall at any time furnish to each seller of the Registrable
Securities to be registered a certificate signed by the President of the
Company stating that the Company has pending or in process a material
transaction, the disclosure of which would, in the good faith judgment of the
Board, materially and adversely affect the Company, the Company may defer the
filing (but not the preparation) of a registration statement for up to 60 days
(but the Company shall use its best efforts to resolve the transaction and
file the registration statement as soon as possible).
1.2 Registration Statement Form. The registration
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requested pursuant to Section 1.1 shall be effected by the filing of a
registration statement on any form selected by the Company for which the
Company then qualifies.
1.3 Expenses. The Company will pay all Registration
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Expenses in connection with any registrations requested under Section 1.1.
1.4 No Company Initiated Registration. After receipt of
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notice of a requested registration pursuant to Section 1.1, the Company shall
not initiate, without the consent of the Majority Holders, a registration of
any of its securities for its own account until such registration has been
effected or such registration has been terminated.
2. Incidental Registrations. If the Company at any time
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proposes to register any of its Common Stock under the Securities Act (other
than pursuant to Section 1 or a registration on Form S-4 or S-8 or any
successor form), and the registration form to be used may be used for the
registration of Registrable Securities, it will give prompt written notice to
all holders of Registrable Securities and Warrants of its intention to do so.
Upon the written request of any such holder made within 30 days after the
receipt of any such notice (which request shall specify the number of
Registrable Securities intended to be disposed of by such holder and the
intended method or methods of disposition thereof), the Company will use its
reasonable best efforts to effect the registration under the Securities Act of
all such Registrable Securities in accordance with such intended method or
methods of disposition, provided that:
(a) if, at any time after giving written notice of its
intention to register any such securities and prior to the
effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason
not to register such securities, the Company may, at its election,
give written notice of such determination to each holder of
Registrable Securities and Warrants and, thereupon, shall not be
obligated to register any Registrable Securities in connection with
such registration (but shall nevertheless pay the Registration
Expenses in connection therewith), without prejudice, however, to
the rights of the Holders to request that a registration be
effected under Section 1; and
(b) if a registration pursuant to this Section 2 involves an
underwritten offering, and the managing underwriter (or, in the
case of an offering that is not underwritten, a nationally
recognized investment banking firm) shall advise the Company in
writing (with a copy to each holder of Registrable Securities
requesting registration thereof) that, in its opinion,
the number of securities requested and otherwise proposed to be
included in such registration exceeds the number which can be sold
in such offering without materially and adversely affecting the
offering price, the Company, (A) in the case of any initial public
offering of the Company's securities, will include in such
registration to the extent of the number which the Company is so
advised can be sold in such offering without such material adverse
effect, first, the securities, if any, being sold by the Company,
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second, the Registrable Securities proposed to be registered in
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such offering by all holders of Registrable Securities, up to a cap
of 50% of all Registrable Securities then held by such holders,
third, all such other securities proposed to be registered in such
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offering by the Company for the accounts of each other Person, up
to a cap of the number of shares of Common Stock equal to the then
Applicable Percentage of all of the Common Stock issued and
outstanding on the date hereof on a fully diluted basis, and
fourth, the remaining Registrable Securities proposed to be
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registered in such offering by all holders of Registrable
Securities and the remaining securities proposed to be registered
in such offering by the Company for the accounts of all other
Persons, pro rata among such holders of such Registrable Securities
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and such other Persons on the basis of the Inclusion Ratio, (B) in
the case of all other underwritten offerings, will include in such
registration to the extent of the number which the Company is so
advised can be sold in such offering without such material adverse
effect, first, the securities, if any, being sold by the Company,
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and second the Registrable Securities proposed to be registered in
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such offering by all holders of Registrable Securities and all such
other securities proposed to be registered in such offering by the
Company for the accounts of all other Persons, pro rata among such
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holders of such Registrable Securities and such other Persons on
the basis of the number of securities requested to be included by
such holders and
such other Person and (C) in the case of all other
offerings, will include in such registration to the extent of the
number which the Company is so advised can be sold in such offering
without such material adverse effect, first, the securities, if
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any, being sold by the Company, second, all securities proposed to
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be registered in such offering by the Company for the accounts of
Persons other than the holders of Registrable Securities pursuant
to the exercise of demand registration rights if such securities
must be included prior to the Registrable Securities to prevent a
breach of any applicable registration rights agreement between the
Company and such other Persons, but only in such amount and to the
extent required by such agreement, and third, the Registrable
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Securities proposed to be registered in such offering by all
holders of such Registrable Securities and all such other
securities proposed to be registered in such offering by the
Company for the accounts of each other Person (not included in
those securities to be registered pursuant to clause second above),
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pro rata among such holders of such Registrable Securities and all
such other Persons on the basis of the number of securities
requested to be included by such holders and such other Person.
The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this Sec-
tion 2. No registration effected under this Section 2 shall relieve the
Company from its obligation to effect a registration under Section 1.
3. Registration Procedures. Subject to the restrictions set
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forth in this Agreement, if and whenever the Company is required to use its
reasonable best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 1 and 2, the
Company will promptly:
(a) prepare, and as soon as practicable, but in any event
within 60 days thereafter file with the Commission, a registration
statement with respect to such Registrable Securities, make all
required filings with the NASD and use its reasonable best efforts
to cause such registration statement to become effective;
(b) prepare and promptly file with the Commission such
amendments and post-effective 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 so long as is required to comply with the provisions
of the Securities Act and to complete the disposition of all
securities covered by such registration statement in accordance
with the intended method or methods of disposition thereof, but in
no event for a period of more than four months after such
registration statement becomes effective;
(c) furnish to counsel selected by the Majority Holders
copies of all documents proposed to be filed with the Commission in
connection with such registration;
(d) furnish to each seller of Registrable Securities, without
charge, such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in
each case including all exhibits and documents filed therewith) and
such number of copies of the prospectus included in such registra
ion statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of
the Securities Act, and such other documents, as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller in accordance with the
intended method or methods of disposition thereof;
(e) use its reasonable best efforts to register or qualify
such Registrable Securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as each
seller shall reasonably request, and do any and all other acts and
things which may be necessary or advisable to enable such seller to
consummate the disposition of such Registrable Securities in such
jurisdictions in accordance with the intended method or methods of
disposition thereof, provided that the Company shall not for any
such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so
qualified, subject itself to taxation in any jurisdiction wherein
it is not so subject, or take any action which would subject it to
general service of process in any jurisdiction wherein it is not so
subject;
(f) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies, authorities
or self-regulatory bodies as may be necessary by virtue of the
business and operations of the Company to enable the seller or
sellers thereof to consummate the disposition of such Registrable
Securities in accordance with the intended method or methods of
disposition thereof;
(g) furnish to each seller of Registrable Securities a signed
counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the
registration statement (and, if such registration includes an
underwritten public offering, the date of the closing under
the underwriting agreement), and
(ii) a "comfort" letter (unless the registration is
pursuant to Section 2 and such a letter is not otherwise being
furnished to the Company), dated the effective date of such
registration statement (and if such registration includes an
underwritten public offering, dated the date of the closing
under the underwriting agreement), signed by the independent
public accountants who have issued an audit report on the
Company's financial statements included in the registration
statement,
covering such matters as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and
such other matters as the Majority Holders may reasonably request;
(h) notify each seller of any Registrable Securities covered
by such registration statement at any time when the Company has
knowledge that a prospectus relating thereto is required to be de
ivered under the Securities Act of the happening of any event or
existence of any fact as a result of which the prospectus included
in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances
then existing, and, as promptly as is practicable, prepare and
furnish to such seller a reasonable number of copies of a sup
lement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light
of the circumstances then existing;
(i) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement of the Company (in form
complying with the provisions of Rule 158 under the Securities Act)
covering the period of at least 12 months, but not more than 18
months, beginning with the first month after the effective date of
the registration statement;
(j) notify each seller of any Registrable Securities covered
by such registration statement (i) when the prospectus or any
prospectus supplement or post-effective amendment has been filed,
and, with respect to such registration statement or any
post-effective amendment, when the same has become effective,
(ii) of any request by the Commission for amendments or supplements
to such registration statement or to amend or to supplement such
prospectus or for additional information, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of
such registration statement or the initiation of any proceedings
for that purpose of which the Company has knowledge and (iv) of the
suspension of the qualification of such securities for offering or
sale in any jurisdiction, or of the institution of any proceedings
for any of such purposes of which the Company has knowledge;
(k) use every reasonable effort to obtain the lifting of any
stop order that might be issued suspending the effectiveness of
such registration statement at the earliest possible moment;
(l) use its reasonable best efforts (i) (A) to list such
Registrable Securities on any securities exchange on which the
equity securities of the Company are then listed or, if no such
equity securities are then listed, on an exchange selected by the
Company, if such listing is then permitted under the rules of such
exchange, or (B) if such listing is not practicable, to secure
designation of such securities as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 under the Exchange Act
or, failing that, to secure NASDAQ authorization for such
Registrable Securities, and, without limiting the foregoing, to
arrange for at least two market makers to register as such with re
pect to such Registrable Securities with the NASD, and (ii) to
provide a transfer agent and registrar for such Registrable
Securities not later than the effective date of such registration
statement;
(m) enter into such agreements and take such other actions as
the sellers of Registrable Securities or the underwriters
reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities, including, without
limitation, to the extent that the offering in question is an
underwritten offering, preparing for, and participating in, such
number of "road shows" and all such other customary selling efforts
as the underwriters reasonably request in order to expedite or
facilitate such disposition; and
(n) use its reasonable best efforts to take all other steps
necessary to effect the registration of such Registrable Securities
contemplated hereby.
The Company may require each seller of any Registrable Securities as
to which any registration is being effected to furnish to the Company such
information regarding such seller, including, without limitation, its
ownership of Registrable Securities and the disposition of such Registrable
Securities, as the Company may from time to time reasonably request in writing
and as shall be required by law in connection therewith. Each such holder
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such holder not materially misleading.
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith,
which refers to any seller of any Registrable Securities covered thereby by
name, or otherwise identifies such seller as the holder of any Registrable
Securities, without the consent of such seller, such consent not to be
unreasonably withheld, unless such disclosure is required by law.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(h), such holder will promptly discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such holder's receipt of the copies of the sup-
plemented or amended prospectus contemplated by Section 3(h). If so directed
by the Company, each holder of Registrable Securities will deliver to the
Company (at the Company's expense) all copies, other than permanent file
copies, in such holder's possession of the prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event
that the Company shall give any such notice, the period mentioned in Section
3(b) shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
each seller of any Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by Section 3(h).
4. Underwritten Offerings.
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4.1 Underwriting Agreement. If the Registrable Securities
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which are being sold pursuant to a registration requested under Section 1 are
being sold in an underwritten offering, the Company shall enter into an
underwriting agreement with the underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the
underwriters and to contain such representations and warranties by the Company
and such other terms and provisions as are customarily contained in agreements
of this type, including, without limitation, indemnities to the effect and to
the extent provided in Section 8. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the repre-
sentations and warranties by, and the agreements on the part of, the Company
to and for the benefit of such underwriters be made to and for the benefit of
such holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement shall also be conditions precedent to the obligations of such
holders of Registrable Securities. No underwriting agreement (or other
agreement in connection with such offering) shall require any holder of
Registrable Securities to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, the ownership of such holder's
Registrable Securities and such holder's intended method or methods of
disposition and any other representation required by law or to furnish any
indemnity to any Person which is broader than the indemnity furnished by such
holder in Section 8.2.
4.2 Selection of Underwriters. If the Company at any time
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proposes to register any of its securities under the Securities Act for sale
for its own account pursuant to an underwritten offering, the Company will
have the right to select the managing underwriter (which shall be of nation-
ally recognized standing) to administer the offering.
5. Holdback Agreements. If and whenever the Company
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proposes to register any of its Common Stock under the Securities Act for its
own account (other than on Form S-4 or S-8 or any successor form) or is
required to use its reasonable best efforts to effect the registration of any
Registrable Securities under the Securities Act pursuant to
Section 1, each holder of Registrable Securities agrees by acquisition of such
Registrable Securities not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act, of any
Registrable Securities within seven days prior to and 90 days (unless advised
in writing by the managing underwriter that a longer period, not to exceed 180
days, is required, or such shorter period as the managing underwriter for any
underwritten offering may agree) after the effective date of the registration
statement relating to such registration, except as part of such registration.
(b) The Company agrees not to effect any public sale or
distribution of its Common Stock or securities convertible into or
exchangeable or exercisable for any of such securities within seven days prior
to and 90 days (unless advised in writing by the managing underwriter that a
longer period, not to exceed 180 days, is required, or such shorter period as
the managing underwriter for any underwritten offering may agree) after the
effective date of any registration statement (except as part of such registra-
tion or pursuant to a registration on Form S-4 or S-8 or any successor form)
covering Registrable Securities. In addition, the Company shall use its best
efforts to cause each holder of its equity securities or any securities
convertible into or exchangeable or exercisable for any of such securities,
whether outstanding on the date of this Agreement or issued at any time after
the date of this Agreement (other than any such securities acquired in a
public offering), to agree not to effect any such public sale or distribution
of such securities during such period, except as part of any such registration
if permitted, and to cause each such holder to enter into a similar agreement
to such effect with the Company.
6. Preparation; Reasonable Investigation. In connection
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with the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Company will give the
holders of such Registrable Securities so to be registered and their
underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such
access to the financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries and such opportunities to
discuss the business of the Company with its officers and the independent
public accountants who have issued audit reports on its financial statements
as shall be reasonably requested by such holders in connection with such reg-
istration statement.
7. [Intentionally Omitted]
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8. Indemnification.
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8.1 Indemnification by the Company. In the event of any
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registration of any Registrable Securities pursuant to this Agreement, the
Company will indemnify and hold harmless (a) the seller of such Registrable
Securities, (b) the directors, officers, partners, employees, agents and
Affiliates of such seller, (c) each Person who participates as an underwriter
in the offering or sale of such securities and (d) each person, if any, who
controls (with the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) any of the foregoing against any and all losses, claims,
damages or liabilities (or actions or proceedings in respect thereof), joint
or several, directly or indirectly based upon or arising out of (i) any untrue
statement or alleged untrue statement of a fact contained in any registration
statement under which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary pro-
spectus contained therein or used in connection with the offering of
securities covered thereby, or any amendment or supplement thereto, or
(ii) any omission or alleged omission to state a fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse each such indemnified party for any
legal or any other expenses reasonably incurred by them in connection with
enforcing its rights hereunder or under the underwriting agreement entered
into in connection with such offering or investigating, preparing, pursuing or
defending any such loss, claim, damage, liability, action or proceeding,
except insofar as any such loss, claim, damage, liability, action, proceeding
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary prospec-
tus, amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such seller expressly for use in the
preparation thereof. Such indemnity shall remain in full force and effect,
regardless of any investigation made by such indemnified party and shall
survive the transfer of such Registrable Securities by such seller. The
indemnity agreement contained in this Section 8.1 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, action or
proceeding if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld).
8.2 Indemnification by the Sellers. The Company may require,
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as a condition to including any Registrable Securities in any registration
statement filed pursuant to Section 1 or 2, that the Company shall have
received an undertaking satisfactory to it from each of the prospective
sellers of such Registrable Securities to indemnify and hold harmless,
severally, not jointly, in the same manner and to the same extent as set forth
in Section 8.1, the Company, its directors, officers, each person, if any, who
controls (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) the Company, each underwriter and any of the other
sellers of securities in such offering with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement
or
alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company by such
seller expressly for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such other
indemnified Person, officer or controlling Person and shall survive the
transfer of such Registrable Securities by such seller. The indemnity
agreement contained in this Section 8.2 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, action or proceeding if
such settlement is effected without the consent of such seller (which consent
shall not be unreasonably withheld). The indemnity provided by each seller of
Registrable Securities under this Section 8.2 shall be limited in amount to
the net amount of proceeds actually received by such seller from the sale of
Registrable Securities pursuant to such registration statement.
8.3 Notices of Claims, etc. Promptly after receipt by an
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indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 8,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding, provided
--------
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the
preceding paragraphs of this Section 8, except to the extent that the
indemnifying party is materially prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate therein and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such indem-
nified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party for any legal or other expenses subse-
quently incurred by the latter in connection with the defense thereof except
for the reasonable fees and expenses of any counsel retained by such
indemnified party to monitor such action or proceeding. Notwithstanding the
foregoing, if such indemnified party and the indemnifying party reasonably
determine, based upon advice of their respective independent counsel, that a
conflict of interest may exist between the indemnified party and the
indemnifying party with respect to such action and that it is advisable for
such indemnified party to be represented by separate counsel, such indemnified
party may retain other counsel, reasonably satisfactory to the indemnifying
party, to represent such indemnified party, and the indemnifying party shall
pay all reasonable fees and expenses of such counsel. No indemnifying party,
in the defense of any such claim or litigation, shall, except with the consent
of such indemnified party, which consent shall not be unreasonably withheld,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation.
8.4. Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding paragraphs of this Section 8 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration (other than under the
Securities Act) or other qualification of such Registrable Securities under
any federal or state law or regulation of any governmental authority.
8.5. Indemnification Payments. Any indemnification required
------------------------
to be made by an indemnifying party pursuant to this Section 8 shall be made
by periodic payments to the indemnified party during the course of the action
or proceeding, as and when bills are received by such indemnifying party with
respect to an indemnifiable loss,
claim, damage, liability or expense incurred by such indemnified party.
8.6. Other Remedies. If for any reason the foregoing
--------------
indemnity is unavailable, or is insufficient to hold harmless an indemnified
party, other than by reason of the exceptions provided therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities,
actions, proceedings or expenses in such proportion as is appropriate to
reflect the relative benefits to and faults of the indemnifying party on the
one hand and the indemnified party on the other in connection with the offer-
ing of Registrable Securities (taking into account the portion of the proceeds
of the offering realized by each such party) and the statements or omissions
or alleged statements or omissions which resulted in such loss, claim, damage,
liability, action, proceeding or expense, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statements or
omissions. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to con-
tribution from any person who was not guilty of such fraudulent misrepresen-
tation. No party shall be liable for contribution under this Section 8.6
except to the extent and under such circumstances as such party would have
been liable to indemnify under this Section 8 if such indemnification were en-
forceable under applicable law.
9. Definitions. For purposes of this Agreement, the
-----------
following terms shall have the following respective meanings:
"Affiliate": A Person that directly, or indirectly through
---------
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
"Applicable Percentage" means (i) in the event that the
Company's initial Public Offering (as defined in the Warrants) occurs prior to
July 1, 1997, 4%, (ii) in the event the Company's initial Public Offering
occurs on or subsequent to July 1, 1997 but prior to January 1, 1998, 4.5% and
(iii) in the event the Company's initial Public Offering occurs at any time on
or subsequent to January 1, 1998, 5%.
"Board": The Board of Directors of the Company
"Commission": The Securities and Exchange Commission.
----------
"Class A Common Stock": The Company's Class A Common Stock,
--------------------
no par value per share.
"Exchange Act": The Securities Exchange Act of 1934, as
------------
amended, or any successor federal statute, and the rules and regulations
thereunder which shall be in effect from time to time.
"Inclusion Ratio" means, with respect to any shares to be
---------------
included by the holders of Registrable Securities and all other Persons
pursuant to the "cut-back" provisions of Section 2 of this Agreement, 33.3%,
in the case of the holders of Registrable Securities, and 66.6%, in the case
of all such other Persons.
"Issue Date" means the date upon which the Warrants are
----------
originally issued.
"Majority Holders": The Holders of Warrants exercisable for
----------------
more than 50% of the aggregate number of
shares of Class A Common Stock then purchasable upon exercise of all such
Warrants.
"NASD": National Association of Securities Dealers, Inc.
----
"NASDAQ": The Nasdaq National Market.
------
"Person": An individual, corporation, partnership, joint
------
venture, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Registrable Securities": The shares of Class A or Class B
----------------------
Common Stock beneficially owned (within the meaning of Section 13d-3 of the
Exchange Act) by the Holders or any other Person made a party hereto pursuant
to Section 10.2, including all the shares of Class A Common Stock into which
the Warrants are exercisable pursuant to the terms of the Warrants, together,
in all cases, with any securities issued or distributed in respect of any such
Class A Common Stock by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, reorganization,
merger, consolidation, or otherwise. As to any particular Registrable Securi-
ties, such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (ii) they shall
have been sold to the public pursuant to Rule 144 under the Securities Act,
(iii) such securities shall have been otherwise transferred and subsequent
disposition of them shall not require registration or qualification of them
under the Securities Act or any similar state law then in force or (iv) they
shall have ceased to be outstanding, provided, that a transfer of a Warrant or
Warrants pursuant
--------
to the terms thereof shall not cause the shares of Class A Common Stock into
which such Warrant or Warrants are exercisable to cease to be Registrable
Securities.
"Registration Expenses": All expenses incident to the
---------------------
Company's performance of or compliance with any registration pursuant to this
Agreement, including, without limitation, (i) registration, filing and NASD
fees, (ii) fees and expenses of complying with securities or blue sky laws,
(iii) fees and expenses associated with listing securities on an exchange or
NASDAQ, (iv) word processing, duplicating and printing expenses, (v) messenger
and delivery expenses, (vi) transfer agents', trustees', depositories',
registrars' and fiscal agents' fees, (vii) fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters, (viii) reasonable
fees and disbursements of any one counsel retained by the sellers of
Registrable Securities, which counsel shall be designated by the Majority
Holders, and (ix) any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any.
"Securities Act": The Securities Act of 1933, as amended, or
--------------
any successor federal statute, and the rules and regulations thereunder which
shall be in effect from time to time.
"Warrant" or "Warrants": The Company's warrants (Nos. 1-5) to
------- --------
purchase Class A Common Stock issued to the Holders and all warrants issued
upon transfer, division or combination of, or in substitution for, thereof.
10. Miscellaneous.
-------------
10.1. Rule 144 etc. If the Company shall have filed a
------------
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act relating to any class of equity securities, the Company will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission there-
under, and will take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (b) any
successor rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
10.2. Successors, Assigns and Transferees. This Agreement
-----------------------------------
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. In addition, and provided
that an express assignment shall have been made, a copy of which shall have
been delivered to the Company, the provisions of this Agreement that are for
the benefit of a holder of Registrable Securities shall be for the benefit of
and enforceable by any subsequent holder of any Registrable Securities or
Warrants.
10.3.Stock Splits, etc. Each holder of Registrable Securities
-----------------
agrees that it will vote to effect a stock split or combination with respect
to any Registrable Securities in connection with any registration of such
Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering that
is not underwritten, if an investment banker shall advise the Company in
writing) that in its opinion such a stock split or combination would
facilitate or increase the likelihood of success of the offering. The Company
shall cooperate in all reasonable respects in effecting any such stock split
or combination.
10.4. Amendment and Modification. This Agreement may be
--------------------------
amended, modified or supplemented by the Company with the written consent of
the Majority Holders, provided that
--------
all Holders shall be notified of such amendment, modification or supplement.
10.5. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES HEREUNDER AND THE PERSONS SUBJECT HERETO SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES
THEREOF.
10.6. Invalidity of Provision. The invalidity or
-----------------------
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of this Agreement,
including that provision, in any other jurisdiction.
10.7. Notices. All notices, requests, demands, letters,
-------
waivers and other communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
(a) delivered personally, (b) mailed, certified or registered mail with
postage prepaid, (c) sent by next-day or overnight mail or delivery or
(d) sent by telecopy or telegram, as follows:
(i) If to the Company, to it at:
Telegroup, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx & Berlin
0000 X Xxxxxx
Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx Xxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(ii) If to Greenwich Street Capital Partners, L.P., to it at:
Greenwich Street Capital Partners, L.P.
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
with a copy to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
(iii) If to any other Holder, to the address of such Holder as
set forth in the books and records of the Company
or to such other person or address as any party shall specify by notice in
writing to the Company. All such notices, requests, demands, letters, waivers
and other communications shall be deemed to have been received (w) if by
personal delivery on the day after such delivery, (x) if by certified or
registered mail, on the fifth business day after the mailing thereof, (y) if
by next-day or overnight mail or delivery, on the day delivered or (z) if by
telecopy or telegram, on the next day following the day on which such
telecopy or telegram was sent, provided that a copy is also sent by certified
or registered mail.
10.8.Headings; Execution in Counterparts. The headings and
-----------------------------------
captions contained herein are for convenience and shall not control or affect
the meaning or construction of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and which together shall constitute one and the same instrument.
10.9. Injunctive Relief. Each of the parties recognizes and
-----------------
agrees that money damages may be insufficient and, therefore, in the event of
a breach of any provision of this Agreement the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of this
Agreement. Such remedies shall, however, be cumulative and not exclusive, and
shall be in addition to any other remedy which such party may have.
10.10 Further Assurances. Subject to the specific terms of
------------------
this Agreement, each of the Company and the Holders shall make, execute,
acknowledge and deliver such other instruments and documents, and take all
such other actions, as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
10.11. Entire Agreement. This Agreement is intended by the
----------------
parties hereto as a final expression of their agreement and intended to be a
complete and exclusive statement of their agreement and understanding in
respect of the subject matter contained herein. This Agreement supersedes all
prior or contemporaneous agreements and understandings between the parties
with respect to such subject matter.
10.12. Term. This Agreement shall be effective as of the date
----
hereof and shall continue in effect
thereafter until the earlier of (a) its termination by the consent of the
parties hereto or their respective successors in interest and (b) the date on
which no Registrable Securities remain outstanding.
[Rest of Page Intentionally Left Blank]
IN WITNESS WHEREOF, this Agreement has been signed by each of the
parties hereto, effective as of the date first written above.
TELEGROUP, INC.
By:
------------------------------
Name:
Title:
GREENWICH STREET CAPITAL
PARTNERS, L.P.
By:Greenwich Street Investments, L.P. Inc, its
general partner
By:Greenwich Street Investments, Inc., General
Partner
By:
--------------------------------
Name:
Title:
GREENWICH STREET CAPITAL OFFSHORE
FUND, LTD.
By:Greenwich Street Capital Partners, Inc., as
Manager
By:
----------------------------------------
Name:
Title:
TRV EMPLOYEES FUND, L.P.
By:TRV Employees Investments, Inc., its general
partner
By:
---------------------------------------
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By:
---------------------------------------
Name:
Title:
THE TRAVELERS LIFE AND ANNUITY
COMPANY
By:
----------------------------------------
Name:
Title:
