Exhibit 10.7
REGISTRATION RIGHTS AGREEMENT
between
TELEGROUP, INC.
and
THE HOLDERS NAMED HEREIN
Dated as of April 9, 1997
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 9, 1997, between
Telegroup, Inc., an Iowa corporation (the "Company"), and the holders of
certain shares of Common Stock and certain options to purchase Common Stock
(the "Stock Options") set forth in Exhibit A attached hereto (collectively,
the "Holders" and each a "Holder"). Capitalized terms used herein without
definition are defined in Section 8.
1. Registrations Upon Request.
1.1 Requests. From the S-3 Eligiblity Date until the date which is the
second anniversary of the S-3 Eligibility Date, the 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) in no event shall either such request cover less
than 20% of the aggregate number of shares of Registrable Securities, 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 (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 interfered 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order or requirement removed, withdrawn or resolved to the reasonable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 underwriting 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 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 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
Registrable Securities to be registered in accordance with the intended method
or methods of disposition of each seller of such Registrable Securities.
Notwithstanding the foregoing, (a) if the Board (or any executive
committee thereof) determines in its good faith judgment, 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 at all times the
Company is in good faith using all reasonable efforts to cause such other
registration statement to be filed as soon as possible 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 or other
authorized officer 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 75 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 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 Expenses in
connection with any registrations requested under Section 1.1. All other
expenses shall be paid by the selling securityholders.
2. Incidental Registrations. If the Company at any time 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 of its intention to do so. Upon the written request
of any such holder made within 15 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, 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) in accordance with the
terms hereof, 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 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 underwritten primary registration on
behalf of the Company, 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 being sold by
the Company, and second the Registrable Securities proposed to be
registered in 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
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 Persons and (B) in the case of an underwritten
secondary registration on behalf of the holders of the Company's
securities other than the holders of Registrable 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, all securities proposed to 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, second, the
Registrable 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 first above), 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 Persons.
The Company will pay the Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this
Section 2. All other expenses shall be paid by the selling securityholders.
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 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, 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;
(c) furnish to counsel selected by the holder of a majority of the
Registrable Securities included in such registration 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 registration 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
Holders of a majority of the Registrable Securities included in such
registration 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 delivered 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 supplement
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 its reasonable best efforts 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 (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
supplemented 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.
4.1 Underwriting Agreement. If the Registrable Securities 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 7. 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
representations 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 7.2.
4.2 Selection of Underwriters. If the Company at any time 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 to administer the offering.
5. Holdback Agreements. (a) If and whenever the Company 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
registration or pursuant to a registration on Form S-4 or S-8 or any successor
form) covering Registrable Securities.
6. Preparation; Reasonable Investigation. In connection 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 registration statement.
7. Indemnification.
7.1 Indemnification by the Company. In the event of any
registration of any Registrable Securities pursuant to this Agreement, to the
extent permitted by law. the Company will indemnify and hold harmless (a) the
seller of such Registrable Securities, (b) any directors, officers and general
partners of such seller, and (c) each person, if any, who controls (with the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
such seller 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 prospectus 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 prospectus, 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
7.1 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).
7.2 Indemnification by the Sellers. The Company may require, 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 7.1, 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 7.2 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 7.2 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.
7.3 Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 7,
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 7, 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 indemnified 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 subsequently 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. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim.
7.4 Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Section 7 (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.
7.5 Indemnification Payments. Any indemnification required to be
made by an indemnifying party pursuant to this Section 7 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.
7.6 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 offering 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 contribution from any person who was
not guilty of such fraudulent misrepresentation. No party shall be liable for
contribution under this Section 7.6 except to the extent and under such
circumstances as such party would have been liable to indemnify under this
Section 7 if such indemnification were enforceable under applicable law.
8. Definitions. For purposes of this Agreement, the following terms
shall have the following respective meanings:
"Board": The Board of Directors of the Company.
"Commission": The Securities and Exchange Commission.
"Common Stock": The Company's 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.
"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 Common Stock (i)
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
9.2, including Common Stock issued or issuable pursuant to the Stock Options
held by the Holders as of the date hereof, together with any securities issued
or distributed in respect of any such Common Stock by way of replacement,
stock dividend, stock split or conversion or in connection with a combination
of shares, recapitalization, reorganization, merger, consolidation, or
otherwise. As to any particular Registrable Securities, 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 (or any similar rule then in
force), (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. 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. Holders of Stock Options shall be entitled to
exercise the rights granted hereunder with respect to the registration of
Registrable Securities without having first to exercise the Stock Options. No
such exercise of Stock Options shall be required by the Company until the
registration of the Common Stock into which the Stock Options are exercisable
shall have been declared or ordered "effective" by the Commission and the
holder of the Stock Options shall have elected to sell such Common Stock
pursuant to such registration.
"Registration Expenses": Except for Selling Securityholder
Expenses, all expenses incident to the Company's performance of or compliance
with any registration pursuant to this Agreement, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants and other Persons retained by the
Company in connection with such registration .
"S-3 Eligibility Date": The date on which the Company becomes
eligible to register its securities by means of a registration statement on
Form S-3.
"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.
"Selling Securityholder Expenses ": The selling securityholders
will be responsible for payment of their own legal fees, underwriting fees and
brokerage discounts, commissions and other sales expenses incident to any
registration hereunder, with any such expenses which are common to the selling
securityholders divided among such securityholders (including the Company and
holders of the Company's securities other than Registrable Securities, to the
extent that securities are being registered on behalf of such Persons) pro
rata on the basis of the number of shares being registered on behalf of each
such securityholder, or as such securityholders may otherwise agree.
9. Miscellaneous.
9.1. 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 thereunder, 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.
9.2. 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.
9.3. 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.
9.4. Amendment and Modification. This Agreement may be amended,
modified or supplemented by the Company with the written consent of the
holders of a majority of the Registrable Securities, provided that all Holders
shall be notified of such amendment, modification or supplement.
9.5. 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
IOWA, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.
9.6. 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.
9.7. 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.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & Berlin, Chartered
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to any 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.
9.8. 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.
9.9. 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.
9.10. 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.
9.11. 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.
9.12. 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:
------------------------
THE HOLDERS WHOSE SIGNATURES ARE
ATTACHED HERETO
EXHIBIT A
HOLDERS
------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇
-------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇