TELSCAPE INTERNATIONAL, INC.
REGISTRATION RIGHTS AGREEMENT
Dated as of December 7, 2000
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
December 7, 2000, by and between TELSCAPE INTERNATIONAL, INC., a Texas
corporation (the "Company"), and the Purchasers as identified on Schedule 1
attached hereto (each, a "Purchaser" and collectively, the "Purchasers").
WITNESSETH:
WHEREAS, the Company has entered into that certain Securities Purchase
Agreement (the "Purchase Agreement") of even date herewith, with Purchasers
pursuant to which the Company has agreed to issue and sell to Purchasers shares
of the Company's Class G Senior Preferred Stock, par value $0.001 per share and
warrants to acquire shares of the Company's Common Stock (as defined herein)
(the "Warrants"); and
WHEREAS, the Company has agreed to grant certain registration rights with
respect to the shares of the Company's Common Stock, par value $0.001 per share
(the "Common Stock"), issuable upon exercise of the Warrants;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following respective
meanings:
1.1 "Commission" shall mean the Securities and Exchange Commission, or any
other successor federal agency at the time administering the Securities Act.
1.2 "Common Stock" shall mean the Company's common stock, par value $0.001
per share.
1.3 "Cutback Holders" shall mean the Participating Holders (as defined in
Section 2.2(b) hereof) and the Other Participating Holders.
1.4 "Cutback Securities" shall mean the Registrable Securities, as that
term is defined under this Agreement, together with the Registrable Securities,
as that term is defined under those certain Registration Rights Agreements by
and between the Company and the Other Participating Holders.
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1.5 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.6 "Holders" shall mean and include the Purchasers and other holders of
Warrants and any person or entity that shall, pursuant to Article 11 hereof,
become a party hereto, and any permitted transferee under Article 10 hereof
which holds Registrable Securities.
1.7 "Initiating Holders" shall mean any Holder or Holders who in the
aggregate own not less than twenty-five percent (25%) of the Registrable
Securities.
1.8 "Other Participating Holders" shall mean such holders of those warrants
issued and sold in conjunction with the Company's sale of its Class D Senior
Convertible Preferred Stock, Class E Senior Convertible Preferred Stock, Class F
Senior Convertible Preferred Stock and holders of other of the Company's
securities with registration rights that are not senior to the registration
rights provided hereunder, that are participating in a registration with the
Holders hereunder.
1.9 The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing with the Commission a registration
statement in compliance with the Securities Act, and the declaration or ordering
by the Commission of the effectiveness of such registration statement.
1.10 "Registrable Securities" means any and all shares of Common Stock: (1)
issued or issuable upon exercise of the Warrants; (2) issued or issuable with
respect to the Warrants by way of any stock split, stock dividend, combination,
recapitalization, reclassification, merger, consolidation or other similar
event; or (3) otherwise held or acquired by, or underlying any convertible,
exchangeable or exercisable securities of the Company held or acquired by,
Holders of Warrants, excluding in all cases, however, (i) Registrable Securities
that are the primary subject of a separate Registration Rights Agreement by and
between the Company and such Holder, (ii) Registrable Securities sold by a
Holder to the public or pursuant to Rule 144 promulgated under the Securities
Act (or any similar or analogous rule promulgated under the Securities Act) or
(iii) shares of Common Stock acquired by a Holder in an open market transaction.
For purposes of this Agreement, a person will be deemed to be a Holder of
Registrable Securities whenever such person has the right to acquire directly or
indirectly such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
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1.11 "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Articles 2, 3 and 4 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
messenger and delivery expenses, escrow fees, fees and disbursements of legal
counsel for the Company and all independent certified public accountants,
underwriters (excluding discounts and commissions) and persons retained by the
Company (but excluding the compensation of regular employees of the Company,
which shall be paid in any event by the Company), fees and disbursements of
legal counsel for the selling Holders (not to exceed $50,000 in the aggregate),
blue sky fees and expenses, and the expense of any special audits incident to or
required by any such registration.
1.12 "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.13 "Selling Expenses" shall mean all underwriting fees, discounts,
selling commissions and stock transfer taxes applicable to the Registrable
Securities registered by the Holders.
ARTICLE 2
REQUIRED REGISTRATION
2.1 Required Registration. Subject to the provisions set forth in Article
7, within 90 days after the Subsequent Closing (as defined in the Purchase
Agreement) occurs under the Purchase Agreement, or, if later, within 90 days
following the date on which the Company becomes eligible to use a Form S-3 (or
any successor form), the Company shall file with the Commission a registration
statement under the Securities Act on Form S-3 or any appropriate form (or any
successor form) pursuant to Rule 415 under the Securities Act covering the
Registrable Securities (the "Required Registration"). The Company shall use its
best efforts to cause the Required Registration to be declared effective under
the Securities Act as soon as practicable after filing, and once effective, the
Company shall cause such Required Registration to remain effective for a Period
ending on the earlier of: (i) the third anniversary of the Closing under the
Purchase Agreement; (ii) the date on which all Registrable Securities have been
sold pursuant to the Required Registration; and (iii) the date as of which there
are no longer any Registrable Securities in existence (the "Effective Period").
The registration statement for the Required Registration shall contain a
broad-form plan of distribution.
2.2 Underwriting.
(a) An underwriting may be selected as a method of distribution of the
Registrable Securities covered by the Required Registration by Holders holding
at least sixty-six and two-thirds percent (a "Supermajority") of the Registrable
Securities.
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(b) If a distribution of the Registrable Securities is to be effected by
means of an underwriting, the Company (together with all Holders proposing to
distribute their securities through such underwriting (the "Participating
Holders") shall use its best efforts to enter into an underwriting agreement in
customary form and reasonably acceptable to the Company with a managing
underwriter of nationally recognized standing selected for such underwriting by
the Company and approved by the Participating Holders holding a Supermajority of
the Registrable Securities proposed to be distributed through such underwriting,
which approval shall not be unreasonably withheld. In no event shall the Company
include any securities under the Required Registration which are not Registrable
Securities without the prior written consent of the Holders of a Supermajority
of Registrable Securities, and any such securities permitted to be sold under
the Required Registration shall only be sold in connection with a sale.
Notwithstanding any other provision of this Article 2, if the managing
underwriter advises the Participating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
underwriters may exclude some or all of the shares requested to be included in
such underwriting, and the number of shares of Cutback Securities that may be
included in the underwriting shall be allocated amongst all Cutback Holders in
proportion, as nearly as practicable, to the respective amounts of Cutback
Securities held by such Cutback Holders. No Cutback Securities excluded from the
underwriting by reason of the managing underwriter's marketing limitation shall
be included in such underwriting.
(c) If a distribution of the Registrable Securities is effected by means of
an underwriting and if any Participating Holder of Registrable Securities
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the managing underwriter and the
other Participating Holders. The Registrable Securities and/or other securities
so withdrawn shall also be withdrawn from such underwriting; provided, however,
that if by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by other Participating Holders may be included in
such underwriting (up to the maximum of any limitation imposed by the
underwriters), then the Company shall offer to all Participating Holders who
have included Registrable Securities in the registration the right to include
additional Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 2.2.
2.3 Eligibility. The Company represents, warrants and covenants that it
currently is, and shall use its best efforts to remain at all times during the
Effective Period, eligible to use Form S-3 under the Securities Act.
2.4 Opinion of Counsel. Upon the request of the Holders of a Supermajority
of the Registrable Securities, the Company shall furnish such Holders with an
opinion of counsel satisfactory to such Holders stating that the registration
statement filed in connection with the Required Registration is effective and
stating such other opinions as such Holders shall reasonably request.
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ARTICLE 3
REQUESTED REGISTRATION
3.1 Request for Registration. Beginning on the date which is immediately
after the third anniversary of the date of this Agreement, Initiating Holders
may request registration in accordance with this Article 3; provided, that such
registration covers Registrable Securities representing 25% of the then total
amount of the Registrable Securities. In the event the Company shall receive
from any one or more of the Initiating Holders a written request that the
Company effect any such registration, qualification or compliance with respect
to Registrable Securities, the Company will:
(a) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(b) use its best efforts to effect such registration, qualification or
compliance as soon as practicable (including, without limitation, undertaking to
file post-effective amendments, appropriate qualifications under applicable blue
sky or other state securities laws, and appropriate compliance with applicable
regulations issued under the Securities Act, and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 10 days
after the receipt of the written notice from the Company described in Section
3.1(a); provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Article 3:
(i) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act ;
(ii) within one hundred and eighty (180) days immediately following
the effective date of any registration statement pertaining to a firm
commitment underwritten offering of securities of the Company for its own
account;
(iii) after the Company has effected three (3) such requested
registrations pursuant to this Article 3, each such registration has been
declared or ordered effective, and the Registrable Securities offered
pursuant to each such registration have been sold, or if the Company has
effected any requested registration pursuant to this Agreement during the
previous six-month period;
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(iv) if the Company, within ten (10) days of the receipt of the
request of the Initiating Holder or Initiating Holders, gives notice of its
bona fide intention to effect the filing of a registration statement with
the Commission within forty-five (45) days of receipt of such request
(other than with respect to a registration statement relating to a Rule 145
transaction or with respect to a Registration Statement on Form S-8, or any
successor form).
(c) Subject to the foregoing clauses (i) through (iv), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request of the
Initiating Holders and provide notice to the other Holders as required by
Section 3.1(a); provided, however, if the Company shall furnish to such Holders
a certificate signed by the Chairman or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be detrimental to the Company and its stockholders for such
registration statement to be filed in the near future, then the Company shall
have the right to defer such filing for a period of not more than 180 days after
receipt of the request of the Initiating Holders; provided, further, that the
Company shall not be permitted to exercise such deferral right under this
Section 3.1(c) more than once in any 365-day period.
3.2 Underwriting.
(a) The distribution of the Registrable Securities covered by the request
of the Holders shall be effected by means of the method of distribution selected
by the Holders holding a majority of the Participating Holders. If such
distribution is effected by means of an underwriting, the right of any Holder to
registration pursuant to this Article 3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
(b) If such distribution is effected by means of an underwriting, the
Company (together with the Participating Holders in such Underwriting) shall use
its best efforts to enter into an underwriting agreement in customary form and
reasonably acceptable to the Company with a managing underwriter of nationally
recognized standing selected for such underwriting by the Company and approved
by a Supermajority in interest of the Participating Holders, which approval
shall not be unreasonably withheld. Notwithstanding any other provision of this
Article 3, if the managing underwriter advises the Cutback Holders in writing
that marketing factors require a limitation of the number of shares to be
underwritten, then the underwriters may exclude some or all of the shares
requested to be included in such registration, and the number of shares of
Cutback Securities to be included in the registration and underwriting shall be
allocated amongst the Cutback Holders in proportion, as nearly as practicable,
to the respective amounts of Cutback Securities held by such Cutback Holders at
the time of filing the registration statement. No Cutback Securities excluded
from the underwriting by reason of the managing underwriter's marketing
limitation shall be included in such registration.
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(c) If any Participating Holder disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. The Registrable Securities and/or
other securities so withdrawn shall also be withdrawn from registration;
provided, however, that if by the withdrawal of such Registrable Securities a
greater number of Registrable Securities held by other Participating Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Participating Holders who
have included Registrable Securities in the registration the right to include
additional Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 3.2.
3.3 Cancellation of Registration. A Supermajority in interest of the
Participating Holders shall have the right to cancel a proposed registration of
Registrable Securities pursuant to Article 3 when, in their discretion, market
conditions are so unfavorable as to be seriously detrimental to an offering
pursuant to such registration. Such cancellation of a registration shall not be
counted as one of the three (3) such requested registrations pursuant to Section
3.1(b)(iii); provided, however, that the Holders canceling such registration
shall pay all of the fees and expenses attributable to such registration and the
cancellation thereof.
ARTICLE 4
COMPANY REGISTRATION
4.1 Notice of Registration to Holders. If at any time or from time to time
the Company shall determine to register any of its securities, either for its
own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans on Form S-8 (or any
successor form) or (ii) a registration relating solely to a Commission Rule 145
transaction on Form S-4 (or any successor form), the Company will:
(a) promptly give to each Holder written notice thereof, and
(b) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made within
15 days after receipt of such written notice from the Company described in
Section 4.1(a), by any Holder or Holders.
4.2 Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
4.1(a). In such event, the right of any Holder to registration pursuant to this
Article 4 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company)
enter into an underwriting
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agreement in customary form with the managing underwriter selected for such
underwriting by the Company.
(a) Notwithstanding any other provision of this Article 4, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the underwriter may exclude some or all Cutback
Securities from such registration and underwriting. The Company shall so advise
all Holders of Cutback Securities, and the number of shares of Common Stock to
be included in such registration shall be allocated as follows: first, for the
account of the Company, all shares of Common Stock proposed to be sold by the
Company, and second, for the account of any other stockholders (including the
Cutback Holders) of the Company participating in such registration, the number
of shares of Common Stock requested to be included in the registration by such
other stockholders (including the Cutback Holders) in proportion, as nearly as
practicable, to the respective amounts of securities that are proposed to be
offered and sold by such other stockholders (including the Cutback Holders) of
such securities at the time of filing the registration statement. No Cutback
Securities excluded from the underwriting by reason of the underwriters',
marketing limitation shall be included in such registration.
(b) The Company shall so advise all Holders and the other holders
distributing their securities through such underwriting of any such limitation,
and the number of shares of Registrable Securities held by Holders that may be
included in the registration. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, but the Holder
shall continue to be bound by Article 8 hereof.
(c) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Article 4 prior to the pricing of such
offering, whether or not a Holder has elected to include Registrable Securities
in such registration.
ARTICLE 5
HOLDBACK AGREEMENT
If any Participating Holder notifies the Company that they intend to effect
the sale of Registrable Securities pursuant to Articles 2 or 3 above (each, a
"Sale"), the Company shall not effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for its equity securities, during the 90-day period beginning on the
date such notice of a Sale is received; provided that such notice shall not be
given by any Holder or Holders more than one time during any 180-day period.
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ARTICLE 6
EXPENSES OF REGISTRATION
Except as provided in Section 3.3 herein, all Registration Expenses shall
be borne by the Company. All Selling Expenses relating to Registrable Securities
registered by the Holders shall be borne by the Holders of such Registrable
Securities pro rata on the basis of the number of shares so registered.
ARTICLE 7
REGISTRATION PROCEDURES
(a) In the case of each registration effected by the Company pursuant to
this Agreement, the Company will notify each Holder in writing as to the
initiation of the registration effected by the Company pursuant to this
Agreement and as to the completion thereof. The Company agrees to use its best
efforts to effect or cause such registration to permit the sale of the
Registrable Securities covered thereby by the Holders thereof in accordance with
the intended method or methods of distribution thereof described in such
registration statement. In connection with any registration of any Registrable
Securities pursuant to Articles 2, 3 or 4 hereof, the Company shall, as soon as
reasonably practicable:
(i) prepare and file with the Commission a registration statement with
respect to such Registrable Securities within the time period prescribed in
Section 2.1(a) and use its best efforts to cause such registration
statement filed to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements
thereto, the Company shall comply with subparagraph (iii) of this paragraph
(a)) as soon as reasonably possible thereafter;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus included
therein as may be necessary to effect and maintain the effectiveness of
such registration statement as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to Form S-3
(or any successor form), and furnish to the holders of the Registrable
Securities covered thereby copies of any such supplement or amendment prior
to it being used and/or filed with the Commission; and comply with the
provisions of the Securities Act with respect to the disposition of all the
Registrable Securities to be included in such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(iii) provide the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with
the Commission, and each
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amendment or supplement thereto to each of: (A) the Holders of the
Registrable Securities to be included in such registration statement, (B)
the underwriters (which term, for purposes of this Agreement, shall include
a person deemed to be an underwriter within the meaning of Section 2(11) of
the Securities Act), if any, thereof, (C) the sales or placement agent, if
any, therefor, (D) one counsel for such underwriters or agent, and (E)
counsel for the Holders of such Registrable Securities participating in
such Registration Statement;
(iv) for a reasonable period prior to the filing of such registration
statement, and throughout the period specified above, make available for
inspection by the underwriters and one counsel for the Participating
Holders, such financial and other pertinent information and pertinent books
and records of the Company, and cause the officers, directors, employees,
counsel and independent certified public accountants of the Company to
respond to such inquiries, as shall be reasonably necessary, in the
judgment of the respective counsel referred to in such Section 6(a)(iii),
to conduct a reasonable investigation within the meaning of the Securities
Act; provided, however, that each such party shall be required to execute a
confidentiality and nondisclosure agreement which shall include provisions
among others, agreeing to maintain in confidence and not disclose to any
other Person or entity any of such information or records reasonably
designated by the Company in writing as being confidential, until such time
as (a) such information becomes a matter of public record (whether by
virtue of its inclusion in such registration statement or otherwise but not
as a result of the disclosure by such party), or (b) such party shall be
required so to disclose such information pursuant to the subpoena or order
of any court or other governmental agency or body having jurisdiction over
the matter (in which case such party will provide the Company notice of any
such requirement so that the Company may seek an appropriate protective
order and such parties shall cooperate with the Company to that end), or
(c) such information as is required to be set forth in such registration
statement or the prospectus included therein or in an amendment to such
registration statement or an amendment or supplement to such prospectus in
order that such registration statement, prospectus, amendment or
supplement, as the case may be, does not include an untrue statement of a
material fact or omit to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
and provided, further, that the Company need not make such information
available, nor need it cause any officer, director or employee to respond
to such inquiry, unless each such party, upon the Company's request,
execute and deliver to the Company an undertaking to substantially the same
effect contained in the second preceding proviso in form reasonably
satisfactory to the Company;
(v) promptly notify in writing the Holders of Registrable Securities,
the sales or placement agent, if any, therefor and the managing underwriter
of the securities being sold, (A) when such registration statement or the
prospectus included therein or any prospectus amendment or 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, (B) of any comments by the Commission and by the blue sky
or securities commissioner or regulator of any state with respect thereto
or any request by the Commission for amendments or
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supplements to such registration statement or the prospectus or for
additional information, (C) 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, (D) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose, or (E) if
it shall be the case, at any time when a prospectus is required to be
delivered under the Securities Act, that such registration statement,
prospectus, or any document incorporated by reference in any of the
foregoing contains 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;
(vi) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto or of any order suspending or preventing
the use of any related prospectus or suspending the qualification of any
Registrable Securities included in such registration statement for sale in
any jurisdiction at the earliest practicable date; provided that in the
Company's opinion, in consultation with its counsel, there is a good faith
argument for the removal of such order;
(vii) if requested by any managing underwriter or underwriter, any
placement or sales agent or any Holder of Registrable Securities, promptly
incorporate in a prospectus, prospectus supplement or post-effective
amendment such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent or such Holder may reasonably specify should be
included therein relating to the terms of the sale of the Registrable
Securities included thereunder, including, without limitation, information
with respect to the number of Registrable Securities being sold by such
Holder or agent or to such underwriters, the name and description of such
Holder, the offering price of such Registrable Securities and any discount,
commission or other compensation payable in respect thereof, the purchase
price being paid therefor by such underwriters and with respect to any
other terms of the offering of the Registrable Securities to be sold in
such offering; and make all required filings of such prospectus; prospectus
supplement or post-effective amendment promptly after notification of the
matters to be incorporated in such prospectus, prospectus supplement or
post-effective amendment;
(viii) furnish to each Holder of Registrable Securities, each
placement or sales agent, if any, therefor, each underwriter, if any,
thereof and the counsel referred to in Section 4(a)(iii) an executed copy
of such registration statement, each such amendment and supplement thereto
(in each case excluding all exhibits and documents incorporated by
reference) and such number of copies of the registration statement
(excluding exhibits thereto and documents incorporated by reference therein
unless specifically so requested by such holder, agent or underwriter, as
the case may be, of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus)), in
conformity with the requirements of the Securities Act, as such Holder,
agent, if any, and underwriter, if any, may
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reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Holder sold by such agent or
underwritten by such underwriter and to permit such Holder, agent and
underwriter to satisfy the prospectus delivery requirements of the
Securities Act; and the Company hereby consents to the use of such
prospectus and any amendment or supplement thereto by each such Holder and
by any such agent and underwriter, in each case in the form most recently
provided to such party by the Company, in connection with the offering and
sale of the Registrable Securities covered by the prospectus (including
such preliminary and summary prospectus) or any supplement or amendment
thereto;
(ix) use its best efforts to (A) register or qualify the Registrable
Securities under such other securities laws or blue sky laws of such
jurisdictions to be designated by the Holders of a majority of such
Registrable Securities and each placement or sales agent, if any, therefor
and underwriter, if any, thereof, as any Holder and each underwriter, if
any, of the securities being sold shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions for so long as may be necessary to enable such Holder, agent
or underwriter to complete its distribution of the Registrable Securities
pursuant to such registration statement and (C) take any and all such
actions as may be reasonably necessary or advisable to enable such Holder,
agent, if any, and underwriter to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that the
Company shall not be required for any such purpose to (1) take any action
to effect any such registration, qualification or compliance in any
particular jurisdiction in which it would not otherwise be required to
execute a general consent to service of process in effectuating such
registration, qualification or compliance, but for the requirements of this
Section 7(a)(ix), or (2) subject itself to taxation in any such
jurisdiction and further provided that (anything in this Agreement to the
contrary notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall required that
expenses incurred in connection with the qualification of the securities in
that jurisdiction be borne by selling shareholders, such expenses shall be
payable by the selling Holders pro rata, to the extent required by such
jurisdiction;
(x) cooperate with the Holders of the Registrable Securities and the
managing underwriters to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which
certificates shall be printed, lithographed or engraved, or produced by any
combination of such methods, on steel engraved borders and which shall not
bear any restrictive legends; and enable such Registrable Securities to be
in such denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale of
the Registrable Securities;
(xi) obtain a CUSIP number for all Registrable Securities, not later
than the effective date of the registration statement;
12
(xii) use its best efforts to enter into one or more underwriting
agreements, engagement letters, agency agreements, "best efforts"
underwriting agreements or similar agreements, as appropriate, and take
such other actions in connection therewith as the Holders of at least a
majority in interest of the Participating Holders shall reasonably request
in order to expedite or facilitate the disposition of such Registrable
Securities;
(xiii) whether or not an agreement of the type referred to in the
preceding subsection is entered into and whether or not any portion of the
offering contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent or any other entity,
(A) make such representations and warranties to the Holders of such
Registrable Securities and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof in form, substance and scope as are
customarily made in connection with any offering of equity securities
pursuant to any appropriate agreement and/or to a registration statement
filed on the form applicable to such registration statement; (B) obtain an
opinion of counsel to the Company in customary form and covering such
matters, of the type customarily covered by such an opinion, as the
managing underwriters, if any, and as the Holders of at least a majority of
such Registrable Securities may reasonably request, addressed to such
Holders and the placement or sales agent, if any, therefor and the
underwriters, if any, thereof and dated the effective date of such
registration statement (and if such registration statement contemplates an
underwritten offering of a party or of all of the Registrable Securities,
dated the date of the closing under the underwriting agreement relating
thereto) (it being agreed that the matters to be covered by such opinion
shall include, without limitation, the due organization of the Company, and
its subsidiaries, if any; the qualification of the Company, and its
subsidiaries, if any, to transact business as foreign companies; the due
authorization, execution and delivery of this Agreement and of any
agreement of the typed referred to in Section 7(a)(xii) hereof; the due
authorization, valid issuance, and the fully paid status of the capital
stock of the Company; the absence of (governmental approvals required to be
obtained in connection with the registration statement, the offering and
sale of the Registrable Securities, this Agreement or any agreement of the
type referred to in Section 7(a)(xii.) hereof; the compliance as to form of
such registration statement and any documents incorporated by reference
therein with the requirements of the Securities Act; the effectiveness of
such registration statement under the Securities Act; and, as of the date
of the opinion and of the registration statement or most recent
post-effective amendment thereto, as the case may be, the absence, to the
knowledge of such counsel, from such registration statement and the
prospectus included therein, as then amended or supplemented, and from the
documents incorporated by reference therein of an untrue statement of a
material fact or the omission to state therein a material fact necessary to
make the statements therein not misleading (in case of such documents, in
the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act)); (C) obtain a
"cold" comfort letter or letters from the independent certified public
accountants of the Company addressed to the Holders and the placement or
sales agent, if any, therefor and the underwriters, if any, thereof, dated
(I) the effective date of such registration statement and (II) the
effective date of any Prospectus supplement to the prospectus included in
such registration statement or post-effective amendment to such
registration statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the latest
such statements included in such prospectus (and, if such registration
statement contemplates an underwritten offering pursuant to any prospectus
supplement to the prospectus included in such Registration
13
statement or post-effective amendment to such registration statement which
includes unaudited or audited financial statements as of a date or for a
period subsequent to that of the latest such statements included in such
prospectus, dated the date of the closing under the underwriting agreement
relating thereto), such letter or letters to be in customary form and
covering such matters of the type customarily covered by letters of such
type; (D) deliver such documents and certificates, including officers'
certificates, as may be reasonably requested by Holders of at least a
majority of the Registrable Securities being sold and the placement or
sales agent, if any, therefor and the managing underwriters, if any,
thereof to evidence the accuracy of the representations and warranties made
pursuant to clause (A) above and the compliance with or satisfaction of any
agreements or conditions contained in the underwriting agreement or other
agreement entered into by the Company; and (E) undertake such obligations
relating to expense reimbursement, indemnification and contribution as are
provided in, Article 6 and 8 hereof;
(xiv) notify in writing each Holder of Registrable Securities of any
proposal by the Company to amend or waive any provision of this Agreement
and of any amendment or waiver effected pursuant thereto, each of which
notices shall contain the text of the amendment or waiver proposed or
effected, as the case may be;
(xv) engage to act on behalf of the Company with respect to the
Registrable Securities to be so registered a registrar and transfer agent
having such duties and responsibilities (including, without limitation,
registration of transfers and maintenance of stock registers) as are
customarily discharged by such an agent, and to enter into such agreements
and to offer such indemnities as are customary in respect thereof;
(xvi) cause all such Registrable Securities to be listed on each
securities exchange, over-the-counter market or on the Nasdaq National
Market ("Nasdaq Market") on which similar securities issued by the Company
are then listed and, if not so listed, to be listed and, if listed on the
Nasdaq Market, use its best efforts to secure designation of all such
Registrable Securities covered by such registration statement as a Nasdaq
"national market system security" within the meaning of Rule llAa2-1 of the
Commission or, failing that, to secure Nasdaq Market authorization for such
Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such
with respect to such Registrable Securities with the National Association
of Securities Dealers; and
(xvii) cause the management of the Company to participate in all
road-shows and other presentations in substance, scope and number as are
customarily made in connection with any public offering of equity
securities.
14
(b) In the event that the Company would be required, pursuant to Section
7(a)(v)(E) above, to notify the Holders of Registrable Securities included in a
registration statement hereunder, the sales or placement agent, if any, and the
managing underwriters, if any, of the securities being sold, the Company shall
prepare and furnish to each such Holder, to each such agent, if any, and to each
underwriter, if any, a reasonable number of copies of a prospectus supplement or
amendment so that, as thereafter delivered to the purchasers of Registrable
Securities, such prospectus shall not contain 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. Each Holder agrees that upon receipt of any notice from the Company
pursuant to Section 7(a)(v)(E) hereof, such Holder shall forthwith discontinue
the distribution of Registrable Securities until such Holder shall have received
copies of such amended or supplemented registration statement or prospectus, and
if so directed by the Company, such Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Holder's possession of the prospectus covering such Registrable Securities at
the time of receipt of such notice.
(c) The Company may require each Holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such Holder and such Holder's method of distribution of
such Registrable Securities as the Company may from time to time reasonably
request in writing but only to the extent that such information is required in
order to comply with the Securities Act. Each such Holder agrees to notify the
Company as promptly as practicable of any inaccuracy or change in information
previously furnished by such Holder to the Company or of the occurrence of any
event in either case as a result of which any prospectus relating to such
registration contains or would contain an untrue statement of a material fact
regarding such Holder or the distribution of such Registrable Securities or
omits to state any material fact regarding such Holder or the distribution of
such Registrable Securities required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing, and promptly to furnish to the Company any additional information
required to correct and update any previously furnished information or required
so that such Prospectus shall not contain, with respect to such Holder or the
distribution of such Registrable Securities, 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.
ARTICLE 8
INDEMNIFICATION
8.1 To the extent permitted by law, the Company will indemnify each Holder,
each of its officers and directors and partners, and each person controlling any
such persons within the meaning of Section 15 of the Securities Act, with
respect to which registration of any of the Registrable Securities under the
Securities Act has been effected pursuant to this Agreement, and
15
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereof, incident to any such registration of any of the Registrable Securities
under the Securities Act which has been effected pursuant to this Agreement, or
based on any omission (or alleged omission) to state therein, a material fact
required to be stated therein or necessary to make the statements therein, not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act or any state securities laws applicable to
the Company and relating to action or inaction by the Company in connection with
any such Registration, qualification or compliance, and will reimburse each such
Holder, each of its officers and directors and partners, and each person
controlling any such persons, each such Underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by such Holder or
underwriter and expressly intended for use in such registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereof; provided, further, that the indemnity agreement contained in this
Section 8.1 shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld or
delayed).
8.2 To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration is being effected, severally and not jointly, indemnify and hold
harmless the Company, each of its directors and officers, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers, directors, partners, and each person controlling such Holder within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), to which the
Company or such officer, director, underwriter or person who controls the
Company or such underwriter, within the meaning of Section 15 of the Securities
Act, including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the
16
Company, such Holders, such directors, officers, partners, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission), made in such registration statement, prospectus, offering circular,
other document or amendment or supplement is in reliance upon and in conformity
with written information furnished to the Company by such Holder and expressly
intended for use in such registration statement, prospectus, offering circular
or other document, or any amendment or supplement thereof; provided, however,
that the obligations of each Holder hereunder shall be limited to an amount
equal to the net proceeds to such Holder of Registrable Securities sold as
contemplated herein; provided, further, that the indemnity agreement contained
in this Section 8.2 shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if such settlement is effected without
the consent of the Holder (which consent shall not be unreasonably withheld or
delayed).
8.3 Each party entitled to indemnification under this Article 8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). The Indemnified Party may participate in such defense at such party's
expense; provided, however, that the Indemnifying Party shall bear the expense
of such defense of the Indemnified Party if representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest; provided, further, that the Company's obligation hereunder shall be
limited to the expense of one counsel for all Holders and the Company shall not
be required to pay the expense of counsel for multiple Holders. The failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is prejudicial to the ability of the Indemnifying Party to defend the action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party not to 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 If the indemnification provided for in Section 8.1 or 8.2 is
unavailable or insufficient to hold harmless an Indemnified Party, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of the expenses, claims, losses, damages or
liabilities (actions or proceedings in respect thereof) referred to in Section
8.1 or 8.2, in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and the sellers of Registrable Securities on the
other hand in connection with statements or
17
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) or expenses, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the sellers of Registrable
Securities and the parties, relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Holders agree that it would not be just and equitable if
contributions pursuant to this Section 8.4 were to be determined by pro rata
allocation (even if all Sellers of Registrable Securities were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the first sentence
of this Section 8.4. The amount paid by an Indemnified Party as a result of the
expenses, claims, losses, damages or liabilities (or actions or proceedings in
respect thereof) referred to in the first sentence of this Section 8.4 shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any claim,
action or proceeding which is the subject of this Section 8.4. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The obligations of sellers of
Registrable Securities to contribute pursuant to this Section 8.4 shall be
several in proportion to the respective amount of Registrable Securities sold by
them pursuant to a registration statement.
ARTICLE 9
RULE 144 REPORTING
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of
securities of the Company to the public without registration, the Company agrees
use its best efforts to:
9.1 Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act (or any similar or
analogous rule promulgated under the Securities Act); and
9.2 File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
and make available the benefits of Rule 144; and
9.3 So long as any Holder owns any Registrable Securities, furnish to such
Holder forthwith upon reasonable request a written statement by the Company as
to its compliance with the public information requirements of said Rule 144, the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other publicly available reports and
documents of the Company as such Holder may reasonably request in
18
availing itself of any rule or regulation of the Commission allowing it to sell
any such securities without registration.
ARTICLE 10
TRANSFER OF REGISTRATION RIGHTS
The rights to cause the Company to register Registrable Securities granted
Holders under Articles 2, 3 and 4 hereof may be assigned in connection with any
permitted transfer or assignment of the Holder's Registrable Securities. All
transferees and assignees of the rights to cause the Company to register
Registrable Securities granted Holders under Articles 2, 3 and 4 hereof, as a
condition to the transfer of such rights, shall agree in writing to be bound by
the agreements set forth herein.
ARTICLE 11
LIMITATIONS ON REGISTRATION RIGHTS
GRANTED TO OTHER SECURITIES
The parties hereto agree that additional holders may, with the consent of
the Company and the Holders of a Supermajority of the Registrable Securities
then outstanding, be added as parties to this Agreement with respect to any or
all securities of the Company held by them; provided, however, that from and
after the date of this Agreement, the Company shall not without the prior
written consent of the Holders of a Supermajority of the Registrable Securities
then outstanding, enter into any agreement with any holder or prospective holder
of any securities of the Company providing for the grant to such holder of
registration rights superior to, or pari passu with, those granted herein. Any
additional parties shall execute a counterpart of this Agreement, and upon
execution by such additional parties and by the Company, shall be considered
Holders for purposes of this Agreement, and shall be added to the Schedule of
Registration Rights Holders.
ARTICLE 12
MISCELLANEOUS
12.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN THE STATE WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
12.2 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO
19
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (I) ARISING UNDER
THIS AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY CLAIM, DEMAND,
ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
12.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
12.4 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof. Any provision of this Agreement may be amended, waived or
modified, and this Agreement may be terminated, if, but only if, such amendment,
waiver or modification or termination is in writing and is signed by the Company
and the holders of a Supermajority of the Registrable Securities; whenever any
provision of this Agreement requires action or approval by the holders of a
specified number of Registrable Securities, such action or approval may be
evidenced by a written consent executed by the requisite holders of Registrable
Securities, without any requirement of a meeting or prior notice to the other
holders of such shares.
12.5 Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed effectively given and received
upon delivery in person, or two business days after delivery by national
overnight courier service or by telecopier transmission with acknowledgment of
transmission receipt, or five business days after deposit via certified or
registered mail, return receipt requested, in each case addressed as follows:
if to the Company:
Telscape International, Inc.
0000 Xxxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx, General Counsel
Facsimile: (000) 000-0000
20
with a copy to (which shall not constitute notice):
Gardere Xxxxx Xxxxxx LLP
3000 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: W. Xxxxxx Xxxx, Jr.
Facsimile: (000) 000-0000
if to the Purchasers: at the addresses set forth on their respective signature
pages,
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
12.6 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
12.7 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
12.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute one instrument. Facsimile transmission of any signed original
document and/or retransmission of any signed facsimile transmission will be
deemed the same as delivery of an original. At the request of any party, the
parties will confirm the transmission by signing a duplicate original document.
[The next following pages are Signature Pages.]
21
Schedule 1
Purchasers
TSG Capital Fund III, X.X.
Xxxxxxx Capital Partners IV, X.X.
Xxxxxxx Capital Partners IV, FTE
EGL NatWest Ventures USA, L.P.
EGL Equity Partners III, L.P.
EGL Equity Offshore Partners III, L.P.
Gateway Opportunity Fund LLC
Oger Pensat Holdings Ltd.
Xxxxxx Xxxxxxx Strategic Partners Fund, L.P.
Xxxxx X. Xxxxxx III
