SECURITIES PURCHASE AGREEMENT
AMONG
MDNH PARTNERS, L.P.,
KENDU PARTNERS
AND
TELSCAPE INTERNATIONAL, INC.
This SECURITIES PURCHASE AGREEMENT is entered into as of December 18, 1998
(the "AGREEMENT"), by and among MDNH Partners, L.P., a California limited
partnership ("MDNH"), Kendu Partners, a California general partnership ("Kendu,"
and together with MDNH, the "INVESTORS"), and Telscape International, Inc., a
Texas corporation (the "COMPANY").
RECITALS
A. The parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue to the Investors, and the Investors
shall purchase from the Company, up to 950,000 shares of the Company's common
stock, par value $.001 per share (the "COMMON STOCK").
B. Except as otherwise provided in this Agreement, such investments will
be made in reliance upon the provisions of Section 4(2) promulgated by the
Securities and Exchange Commission under the United States Securities Act of
1933, as amended (the
"Securities Act"),
and/or upon such other exemption from the registration requirements of the
Securities Act as
may be available.
NOW, THEREFORE, in consideration of the foregoing Recitals which are
hereby incorporated by this reference and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 INITIAL PURCHASE.
(a) Upon the terms and conditions set forth herein, the Company shall
issue and sell to the Investors, and the Investors shall purchase from the
Company, 250,000 shares of Common Stock (the "INITIAL SHARES") at $6.00/share
(for a total purchase price of $1,500,000) (the "PURCHASE PRICE"). MDNH shall
purchase 125,000 of the Initial Shares for a total purchase price of $750,000
and Kendu shall purchase 125,00 of the Initial Shares for a total purchase price
of $750,000.
(b) The closing of the purchase and sale of the Initial Shares (the
"INITIAL CLOSING") shall be held at the offices of Xxxxxxxx, Patch Xxxxx & Bass,
LLP, located at 000 Xxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, on the first
business day following execution of this Agreement
and satisfaction of all conditions set forth in Section 2.1 (the "INITIAL
CLOSING DATE") or at such other time or place as the parties may agree. With
respect to the sale of the Initial Shares, on or before the Initial Closing
Date, (i) the Company shall deliver to the Investors certificates for the
Initial Shares and (ii) the Investors shall deliver or cause to be delivered to
the Company the Purchase Price (less the PCM Commission set forth in Section 1.6
hereof) by wire transfer of immediately available funds to one or more accounts
designated by the Company.
SECTION 1.2.OPTIONAL PURCHASES.
(a) In addition to the purchase of the Initial Shares pursuant to Section
1.1 above, the Investors agree to purchase during the Commitment Period (as such
term is defined below), at the Company's option and subject to the conditions
set forth in Section 2.2, up to $2,000,000 of shares of Common Stock (the "FIRST
OPTION SHARES") at a price equal to 80% of the Market Price (as such term is
defined below) of such shares. Beginning thirty (30) days after the closing of
the purchase and sale of all or any portion of the First Option Shares, the
Investors agree to purchase during the Commitment Period, at the Company's
option and subject to the conditions set forth in Section 2.2, up to an
additional $1,500,000 of shares of Common Stock (the "SECOND OPTION SHARES") at
a price equal to 80% of the Market Price of such shares. The First Option Shares
and the Second Option Shares are referred to herein collectively as the "OPTION
SHARES." Notwithstanding anything herein to the contrary, up to $500,000 of the
Option Shares may be purchased from certain shareholders of the Company who
shall be selected by the President or any Vice President of the Company (the
"Selling Shareholders"), rather than directly from the Company. The Company
acknowledges and agrees that the shares purchased from Selling Shareholders
shall be deemed to be part of the Option Shares. The term "COMMITMENT PERIOD"
means the period commencing five (5) Trading Days after public disclosure and
release of the Company's 1998 earnings pursuant to the rules and requirements
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and
expiring six months after the Initial Closing Date. The term "TRADING DAY" means
any day during which the Principal Market (as such term is defined below) shall
be open for business. The term "PRINCIPAL MARKET" means the NASDAQ National
Market, the NASDAQ Small-Cap Market, the American Stock Exchange or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Company's Common Stock. The term "MARKET PRICE" means the average
closing price per share of the Company's Common Stock on the five (5) Trading
Days prior to the applicable Optional Closing Date (as such tem is defined
below). The Investors may allocate the purchase of Option Shares between
themselves as they agree; PROVIDED, HOWEVER, that the obligation of the
Investors to purchase Option Shares and to pay the purchase price therefor shall
be joint and several obligations of the Investors.
(b) The closing of the purchase and sale of Option Shares (each, an
"OPTIONAL CLOSING") shall be held at the offices of Xxxxxxxx, Patch Xxxxx &
Bass, LLP, located at 000 Xxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, on a
Trading Day during the Commitment Period which is five (5) Trading Days after
the date on which the Company elects by delivery of an Optional Purchase Notice
pursuant to Section 1.3 to sell Option Shares to the Investors, in conformity
with the provisions of this Agreement (each, an "OPTIONAL CLOSING DATE" and,
together with the Initial Closing Date, the "CLOSING DATES") or at such other
time or place as the
parties may agree. With respect to each Optional Closing relating to Option
Shares, on the applicable Optional Closing Date, (i) the Company shall deliver
certificates for the Option Shares to be purchased by the Investors pursuant to
this Section 1.2, and (ii) the Investors shall deliver the purchase price of
such Option Shares (less the PCM Commission, if any, set forth in Section 1.6
hereof) by wire transfer to the account designated by the Company. In addition,
on or prior to each Optional Closing, the Company and the Investors shall
deliver all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in order to
implement and effect the transactions contemplated herein.
SECTION 1.3 MECHANICS OF EXERCISE RELATING TO OPTION SHARES.
(a) DELIVERY OF THE OPTIONAL PURCHASE NOTICE. The Company may deliver only
one written notice to purchase First Option Shares and one written notice to
purchase Second Option Shares (each notice hereinafter referred to as an
"OPTIONAL PURCHASE Notice"). Each Optional Purchase Notice shall set forth the
number of Option Shares to be sold in an amount not less than $500,000, in
increments of $500,000, subject to the limitations imposed by Sections 1.2 and
2.2 herein. The Company may not deliver an Optional Purchase Notice to the
Investors on a day that any event described in Section 1.4 is then occurring or
if the applicable conditions set forth in Article II are not satisfied. If any
of the events described in Section 1.4 occur on or after the date on which an
Optional Purchase Notice is given, but prior to the Optional Closing Date
associated with such Optional Purchase Notice, or if the applicable conditions
set forth in Section 1.2 or Article II are not satisfied as of the applicable
Optional Closing Date (subject to any extension as mutually agreed by the
Company and the Investors), such Optional Purchase Notice shall be null, void
and of no further force or effect; provided, however, that the nullification and
voidance of an Optional Purchase Notice shall not reduce the number of Optional
Purchase Notices that the Company may deliver to the Investors. The following
example illustrates how the immediately preceding sentence should be
interpreted: if an event described in Section 1.4 occurs on or after the date
that an Optional Purchase Notice is given by the Company with respect to the
First Option Shares and that Optional Purchase Notice is deemed null, void and
of no force or effect, the Optional Closing shall be canceled; however, the
Company shall have the right to deliver an additional Optional Purchase Notice
with respect to the First Option Shares (subject to the conditions set forth in
this paragraph) and shall retain its right to deliver an Optional Purchase
Notice with respect to the Second Option Shares (subject to the conditions set
forth in this paragraph).
(b) DATE OF DELIVERY OF OPTIONAL PURCHASE NOTICE. An Optional Purchase
Notice shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investors if such notice is received prior to 5:00
P.M. Chicago time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 5:00 P.M. Chicago time. The Optional
Purchase Notice may not be delivered or deemed delivered, on a day which is not
a Trading Day.
SECTION 1.4 SUSPENSION OF OPTIONAL PURCHASE OBLIGATION. The Investors
shall not be required to purchase Option Shares from the Company on any Optional
Closing Date nor may an Optional Purchase Notice be delivered on a day that one
or more of the following has occurred or
is occurring: (i) the average closing price of the Common Stock on any of the
five (5) Trading Days prior to the applicable Optional Closing Date is less than
$6.25 per share or more than $15.00 per share, (ii) the Company fails to satisfy
in all material respects the requirements in Sections 1.2 and 2.2(a) or (b) as
applicable, (iii) any failure or interruption in the compliance in all material
respects with the Company's covenants set forth in Article V or (iv) the Company
is in possession of material nonpublic information that it has not disclosed and
does not disclose to the Investors prior to the relevant Optional Closing Date
or material nonpublic information regarding the Company has been disclosed
(regardless of by whom) less than five (5) Trading Days before such Optional
Closing Date.
SECTION 1.5 ISSUANCE OF ADDITIONAL SHARES. In the event the Company makes
any election to sell Option Shares to the Investors at any time in which the
Company is in possession of material nonpublic information that it has not
disclosed and does not disclose to the Investors prior to the relevant Optional
Closing Date, and the market price of the Common Stock falls within the five (5)
Trading Days following disclosure of such information (whether of not such
disclosure is made by or on behalf of the Company and regardless of when such
disclosure is made), in addition to any other remedies that the Investors may
have for such action, the Company shall issue to the Investors, for no
additional cost, additional shares of Common Stock. Such shares shall be issued
promptly following delivery of a request by Investors to the Company and shall
be issued in an amount necessary to reduce the average purchase price of such
Option Shares to 80% of the average closing price of the Common Stock on the
five (5) Trading Days following release of the nonpublic information.
SECTION 1.6 PCM COMMISSION. The Company shall pay PCM a commission in
connection with the sale of Common Stock hereby in an amount equal to 5.75% of
the sales price of such shares (the "PCM COMMISSION"); provided, however, that
PCM shall receive no commission with respect to any Option Shares that are sold
by Selling Shareholders to the Investors. PCM may, in its sole discretion, elect
to receive the PCM Commission in either (i) cash, (ii) warrants to purchase
common stock of the Company, on commercially reasonable terms on which the
parties will mutually agree in good faith, or (iii) part in cash and part in
warrants. The PCM Commission shall be due and payable, and warrants shall be
issued, as the case may be, on each Closing Date hereunder with respect to the
shares sold on such date. The Company hereby authorizes the Investors to pay any
portion of the PCM Commission that is to be paid in cash directly to PCM at each
such closing as directed by PCM. In addition, the Company agrees to enter into
an amendment to the Investment Banking Agreement by and between the Company and
PCM originally dated November 23, 1998 in order to increase the compensation
payable to PCM in connection with the services to be provided thereunder to
seven (7) percent. Such amendment shall be in the form attached hereto as
EXHIBIT A. The Company shall be under no obligation to issue warrants to PCM
pursuant to this Section 1.6 until such time as PCM shall make written
representations to the Company (which shall be reasonably satisfactory to the
Company's counsel) in form and substance similar to those made by the Investors
in Article III hereof.
SECTION 1.7 REGISTRATION OF SHARES. The resale by the Investors of the
Initial Shares and the Option Shares shall be subject to a registration rights
agreement (the "REGISTRATION
RIGHTS AGREEMENT") to be entered into between the Company and the Investor on
the Initial Closing Date. The Registration Rights Agreement shall be in form and
substance similar to that agreement which is attached hereto as EXHIBIT B.
ARTICLE II
CONDITIONS TO CLOSING
SECTION 2.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS TO ISSUE AND SELL
COMMON STOCK BY THE COMPANY AND TO PURCHASE COMMON STOCK BY THE INVESTOR.
(a) CONDITIONS PRECEDENT TO COMPANY'S OBLIGATION. The obligation hereunder
of the Company to issue and sell the Initial Shares and the Option Shares is
subject to the satisfaction, at or before each such Closing, of each of the
conditions set forth below:
(i) ACCURACY OF EACH INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each Investor shall be true and correct
in all material respects as of the date of this Agreement and as of the
date of each Closing as though made at each such time.
(ii) PERFORMANCE BY EACH INVESTOR. Each Investor shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Investor at or prior to such
Closing.
(iii) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction which, in the reasonable opinion of the Company and its legal
counsel, prohibits or materially adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been
commenced which may have the effect of prohibiting or materially adversely
affecting any of the transactions contemplated by this Agreement.
(iv) OTHER. The Company shall have received and been reasonably
satisfied with such other certificates and documents as shall have been
reasonably requested by the Company in order for the Company to confirm
the Investors' satisfaction of the conditions set forth in this Agreement.
(b) CONDITIONS PRECEDENT TO EACH INVESTOR'S OBLIGATIONS. The obligation
hereunder of each Investor to purchase the Initial Shares and the Option Shares
is subject to the satisfaction, at or before each Closing Date, of each of the
conditions set forth below:
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in
all material respects as of each Closing Date as though made at such time.
(ii) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to the each Closing Date.
(iii) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction which prohibits or materially adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have
been commenced which may have the effect of prohibiting or materially
adversely affecting any of the transactions contemplated by this
Agreement.
(iv) ADVERSE CHANGES. Except as described in the Company's press
release dated November 30, 1998 (and for each Optional Closing Date, as
described in press releases filed after the date of this Agreement) or
otherwise disclosed to the Investors, since the date of the Company's last
quarterly report pursuant to the Exchange Act, no event which had or is
reasonably likely to have a material adverse effect on the business,
operations, properties, prospects, or financial condition of the Company
(a "MATERIAL ADVERSE EFFECT") has occurred.
(v) LEGAL OPINIONS. The Company shall have caused to be delivered to
the Investors an opinion of the Company's independent counsel in the form
of EXHIBIT C
attached hereto.
(vi) OFFICER'S CERTIFICATE. The Company shall have delivered to the
Investors a certificate dated as of each Closing Date executed by an
executive officer of the Company and to the effect that all the conditions
to such Closing have been satisfied as at the date of each such
certificate.
(vii) REGISTRATION RIGHTS AGREEMENT. The Company shall have entered
into the Registration Rights Agreement.
(viii) OTHER. The Investors shall have received and been reasonably
satisfied with such other certificates and documents as shall have been
reasonably requested by the Investors in order for the Investors to
confirm the Company's satisfaction of the conditions set forth in this
Agreement.
SECTION 2.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER AN
OPTIONAL PURCHASE NOTICE AND THE OBLIGATION OF THE INVESTORS TO PURCHASE OPTION
Shares.
(a) CONDITIONS PRECEDENT OF SECTION 2.1(B). The conditions precedent
listed in Section 2.1(b) shall have been satisfied.
(b) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading
of the Common Stock shall not have been suspended by Principal Market, the
Securities and Exchange Commission (the "SEC") or the National Association of
Securities Dealers, Inc. (the "NASD") and
the Common Stock shall have been approved for listing or quotation on and shall
not have been delisted from the Principal Market. The issuance of such Option
Shares shall not violate the shareholder approval requirements of the Principal
Market.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Each Investor represents and warrants to the Company that:
SECTION 3.1 INTENT. The Investor (which for purposes of this Article III
shall include each beneficial owner of the Common Stock issued hereby, as
determined pursuant to Rule 13d-3 under the Exchange Act) is entering into this
Agreement for investment for its own account and the Investor has no present
arrangement (whether or not legally binding) at any time to sell, grant any
participation in or otherwise distribute such Common Stock to or through any
person or entity. Subject to Section 6.3 hereof, the Investor reserves the right
to dispose of the Common Stock at any time in accordance with federal and state
securities laws applicable to such disposition.
SECTION 3.2 SOPHISTICATED AND ACCREDITED INVESTOR. (a) The Investor is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and the
Investor has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in Common Stock
issued hereby. The Investor acknowledges that an investment in such Common Stock
is speculative and involves a high degree of risk. The Investor acknowledges
that the Common Stock to be issued pursuant to this Agreement are "RESTRICTED
SECURITIES" within the meaning of the Securities Act and the rules and
regulations promulgated thereunder and may not be resold in the absence of an
effective registration statement under the Securities Act or an available
exemption from the Securities Act registration requirements.
(b) The Investor understands that (i) the offering and sale of the Common
Stock is intended to be exempt from registration under the Securities Act
pursuant to Section 4(2) of the Securities Act, (ii) neither the Common Stock
nor the sale thereof to the Investor has been registered under the Securities
Act, or under any state securities law, and (iii) no registration statement with
respect to the Common Stock has been filed with the SEC, nor with any other
regulatory authority and that, as a result, any benefit which might normally
accrue to an investor such as the Investor by an impartial review of such a
registration statement by the SEC or other regulatory commission will not be
forthcoming.
SECTION 3.3 AUTHORIZATION; ENFORCEMENT. (i) The Investor has the requisite
partnership power and authority to enter into and perform this Agreement and to
purchase the Initial Shares and Option Shares, (ii) the execution, issuance and
delivery of this Agreement by the Investor and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
partnership action and no further consent or authorization of the Investor or
its partners is required, and (iii) this Agreement has been duly executed and
delivered by the Investor and constitutes valid and binding obligations of the
Investor enforceable against the Investor in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
SECTION 3.4 NOT AN AFFILIATE. The Investor is not an officer, director or
"AFFILIATE" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
SECTION 3.5 ORGANIZATION AND STANDING. MDNH represents and warrants to the
Company that it is a limited partnership duly organized, validly existing, and
in good standing under the laws of California. Kendu represents and warrants to
the Company that it is a general partnership duly organized, validly existing,
and in good standing under the laws of California.
SECTION 3.6 ABSENCE OF CONFLICTS. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on the Investor, or
the provision of any indenture, instrument or agreement to which the Investor is
a party or is subject, or by which the Investor or any of its assets is bound,
or conflict with or constitute a material default thereunder, or result in the
creation or imposition of any lien pursuant to the terms of any such indenture,
instrument or agreement, or constitute a breach of any fiduciary duty owed by
the Investor to any third party, or require the approval of any third-party
(which has not been obtained) pursuant to any material contract, agreement,
instrument, relationship or legal obligation to which the Investor is subject or
to which any of its assets, operations or management may be subject.
SECTION 3.7 DISCLOSURE; ACCESS TO INFORMATION. The Investor acknowledges
that (i) it has received all information it considers necessary or appropriate
for deciding whether to purchase the Common Stock; (ii) as a result of its
experience in financial matters, it is properly able to evaluate the capital
structure of the Company, the business of the Company and the risks inherent
therein and is capable of bearing the economic risks of its investment in the
Common Stock; and (iii) it has been given the opportunity to obtain any
additional information or documents from, and to ask questions and receive
answers of, the officers and representatives of the Company to the extent
necessary to evaluate the merits and risks related to its investment in the
Common Stock, and all such questions have been answered to the Investor's full
satisfaction. The Investor has received all documents, records, books and other
information pertaining to Investor's investment in the Company that have been
requested by the Investor. The Investor further acknowledges that it understands
that the Company is subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the
Investor has reviewed or received copies of any such reports that have been
requested by it.
SECTION 3.8 MANNER OF SALE. At no time was the Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
SECTION 3.9 NO OTHER ACTION; NON-CONTRAVENTION. (a) No action, consent or
approval by or in respect of, or filing with, any governmental authority, agency
or official or any other Person
is required for the execution, delivery and performance by the Investor of this
Agreement.
(b) The execution, delivery and performance by the Investor of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (i) violate its charter or bylaws or other constituent documents
(including, without limitation, any limited liability company agreement or
partnership agreement) or (ii) violate any applicable law, rule, regulation,
judgment, injunction, order or decree, which violation would (a) affect the
validity of this Agreement or (b) individually or in the aggregate impair the
ability of the Investor to perform in any material respect the obligations which
it has under this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Investor that:
SECTION 4.1 COMPANY STATUS. The Company has registered its Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the NASDAQ National
Market System.
SECTION 4.2 CURRENT PUBLIC INFORMATION. The Company has delivered or made
available to the Investor true and correct copies of all registration
statements, reports and documents, including proxy statements (other than
preliminary proxy statements), filed with the SEC by or with respect to the
Company since December 31, 1997, pursuant to the Securities Act or Exchange Act.
All such registration statements, reports and documents, together with those
registration statements, reports and documents filed pursuant to the Securities
Act or Exchange Act subsequent to the date of this Agreement are collectively
referred to herein as the "SEC DOCUMENTS".
SECTION 4.3 NO GENERAL SOLICITATION IN REGARD TO THIS TRANSACTION. Neither
the Company nor any of its affiliates nor any distributor or any person acting
on its or their behalf has conducted any general solicitation (as that term is
used in Rule 502(c) of Regulation D) with respect to any of the Common Stock,
nor have they made any offers or sales of any security or solicited any offers
to buy any security under any circumstances that would require registration of
the Common Stock under the Securities Act.
SECTION 4.4 VALID ISSUANCE OF COMMON STOCK.
(a) All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and nonassessable. As
of the date of this Agreement, the Company has authorized capitalization
consisting of 25,000,000 shares of Common Stock, par value $.001 per share,
5,000,000 shares of Preferred Stock, par value $.001 per share, and 1,000,000
shares of Series A Preferred Stock, par value $.001 per share. Stock options
granted or reserved for
issuance to employees and directors of the Company are as described in SCHEDULE
4.4. As of
December 15, 1998, there were issued and outstanding 5,782,749 shares of Common
Stock. As of the date of this Agreement, the Company has no other capital stock
issued and outstanding and no other outstanding securities convertible into
Common Stock other than as set forth in SCHEDULE 4.4.
(b) The Initial Shares and Option Shares have been duly authorized and,
when issued in accordance with this Agreement, will be validly issued, fully
paid and nonassessable and free of any liens or encumbrances. Additionally, the
holders of outstanding Common Stock of the Company are not and shall not be
entitled to preemptive or other rights afforded by the Company to subscribe for
the capital stock or other securities of the Company as a result of the issuance
of the Initial Shares and Option Shares to the Investor hereunder.
SECTION 4.5 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Texas and has the requisite corporate power to own its properties and to carry
on its business as now being conducted. Except as disclosed in SCHEDULE 4.5, the
Company does not have any subsidiaries. The Company and each subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
SECTION 4.6 AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue the Initial Shares and Option Shares, (ii) the execution, issuance and
delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or shareholders is required, and (iii) this Agreement has
been duly executed and delivered by the Company and constitutes valid and
binding obligations of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
SECTION 4.7 CORPORATE DOCUMENTS. The Company has furnished or made
available or will furnish and make available prior to the Initial Closing Date
to the Investor true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof (the "ARTICLES"), and
the Company's bylaws, as amended and in effect on the date hereof (the
"BYLAWS").
SECTION 4.8 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Initial
Shares and Option Shares do not and will not (i) result in a violation of the
Company's Articles of Incorporation or bylaws or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or (iii)
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect); nor is the Company otherwise in violation of, in conflict with
or in default under any of the foregoing (except for such violations, conflicts
or defaults as would not, individually or in the aggregate, have a Material
Adverse Effect); provided that, for purposes of the Company's representations
and warranties as to violations of foreign law, rule or regulation referenced in
clause (iii), such representations and warranties are made only to the best of
the Company's knowledge insofar as the execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby are or may be affected by the status of the
Investor under or pursuant to any such foreign law, rule or regulation). The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations which either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Initial Shares and Option Shares in accordance
with the terms hereof (other than any SEC, NASD or state securities filings
which may be required to be made by the Company subsequent to any Closing, and
any registration statement which may be filed pursuant hereto; provided that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investor herein.)
SECTION 4.9 SEC DOCUMENTS. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
SECTION 4.10 NO MATERIAL ADVERSE EFFECT. Since the date of the Company's
last quarterly report under the Exchange Act, no Material Adverse Effect has
occurred or exists with respect to the Company or its subsidiaries except as
described in the Company's press release dated November 30, 1998.
SECTION 4.11 NO UNDISCLOSED LIABILITIES. The Company and its subsidiaries
have no liabilities or obligations which are material, individually or in the
aggregate, and are not disclosed in the SEC Documents or otherwise publicly
announced, other than those incurred in the ordinary course of the Company's or
its subsidiaries' respective businesses since the filing of the Company's most
recent SEC Document, and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company and upon any and its
subsidiaries.
SECTION 4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since the filing of
the Company's most recent SEC Document, no event or circumstance has occurred or
exists with respect to the Company or its subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
SECTION 4.13 LITIGATION AND OTHER PROCEEDINGS. Except as may be set forth
on SCHEDULE 4.13 and in the SEC Documents, there are no lawsuits or proceedings
pending or to the best knowledge of the Company threatened, against the Company,
nor has the Company received any written or oral notice of any such action,
suit, proceeding or investigation, which could reasonably be expected to have a
Material Adverse Effect on the Company or which could reasonably be expected to
materially adversely affect the transactions contemplated by this Agreement.
Except as set forth in the SEC Documents no judgment, order, writ, injunction or
decree or award has been issued by or, so far as is known by the Company,
requested of any court, arbitrator or governmental agency which could reasonably
be expected to result in a Material Adverse Effect on the Company or which could
reasonably be expected to materially adversely affect the transactions
contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1 REGISTRATION RIGHTS. The Company shall comply in all respects
with the terms the Registration Rights Agreement for the term provided for
therein.
SECTION 5.2 LISTING OF COMMON STOCK. The Company hereby agrees to maintain
the listing of the Common Stock on a Principal Market, and as soon as
practicable but in any event prior to the commencement of the Commitment Period
to list the additional shares of Common Stock issuable under this Agreement. The
Company further agrees, if the Company applies to have the Common Stock traded
on any other Principal Market, it will include in such application the Common
Stock issuable under this Agreement, and will take such other action as is
necessary or desirable to cause the Common Stock to be listed on such other
Principal Market as promptly as possible.
SECTION 5.3 EXCHANGE ACT REGISTRATION. The Company will cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by the Exchange Act or the rules thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under the Exchange Act.
SECTION 5.4 CORPORATE EXISTENCE. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
SECTION 5.5 ADDITIONAL SEC DOCUMENTS. The Company will furnish to the
Investors upon request copies of all SEC Documents furnished or submitted to the
SEC.
SECTION 5.6 PENALTIES FOR FAILURE TO OBTAIN OR MAINTAIN EFFECTIVENESS OF A
REGISTRATION STATEMENT. In the event (i) the Company fails to file a
Registration Statement and obtain the effectiveness of a Registration Statement
within nine (9) months from the Initial Closing Date (or for any Option Shares
sold to the Investors pursuant to this Agreement, from the relevant Optional
Closing Date), (ii) the effectiveness of the Registration Statement is suspended
(other than as required by the filing of post-effective amendments as required
by law), or (iii) an Investor desires to resell, transfer or otherwise dispose
of Registrable Securities and a current prospectus meeting the requirements of
Section 10 of the Securities Act is not available for delivery by such Investor
(such suspension in (ii) or failure of delivery in (iii) is referred to herein
as a "SUSPENSION"), and such occurrence is not the result of any information
provided or failed to be provided by such Investor or some unforeseeable
catastrophe affecting the operation of the SEC, the Company shall pay to such
Investor within five (5) days following the end of the first 30-day period
following the date by which such Registration Statement was required to have
been declared effective, or following the date of suspension, in cash, an
aggregate amount equal to one half of one percent (0.5%) of the aggregate
purchase price of the Common Stock purchased by such Investor hereunder, and for
each 30-day period thereafter, an aggregate amount equal to one percent (1%) of
the aggregate purchase price of the Common Stock purchased by such Investor
hereunder. All amounts payable hereunder shall be paid to the Investor by
cashier's check or wire transfer in immediately available funds to such account
or accounts as shall be designated in writing by the Investor.
SECTION 5.9 LEGAL FEES AND EXPENSES. The Company shall pay all reasonable
legal fees and expenses incurred by the Investors in connection with the
transactions contemplated by this Agreement and the Registration Rights
Agreement, including without limitation those incurred in connection with the
negotiation, drafting, documentation and closing thereof to a maximum of $2,500.
ARTICLE VI
LEGENDS; INVESTOR COVENANTS
SECTION 6.1 LEGENDS. The Initial Shares and Option Shares will bear the
following legend
(the "LEGEND"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
THESE SECURITIES ARE SUBJECT TO A LOCK-UP AGREEMENT BETWEEN THE
HOLDER AND THE COMPANY AS SET FORTH IN THE SECURITIES PURCHASE
AGREEMENT DATED AS OF DECEMBER 18, 1998.
The Initial Shares and Option Shares shall also bear a legend referencing
the Lock-Up set forth in Section 6.3.
SECTION 6.2 INVESTORS' COMPLIANCE. Nothing in this Article VI shall affect
in any way each Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
SECTION 6.3 LOCK-UP PERIOD. (a) Each Investor agrees that it will not sell
or transfer, or contract to sell or transfer, any shares of Common Stock
acquired hereby until the expiration of nine (9) months after such shares of
Common Stock have been acquired.
(b) In the event of an underwritten public offering of the Company's
Common Stock, if the managing underwriter deems it necessary or appropriate that
the Investors agree to extend the lock-up period set forth in Section 6.3(a),
the parties agree to negotiate in good faith the terms of any such additional
lock-up period, including, without limitation, compensation for the Investors.
If the parties agree on the terms of any such additional lock-up period (during
a period deemed by the underwriter to be necessary or appropriate), the
Investors will enter into a written agreement with the underwriter and the
Company to that effect (including an agreement not to sell or otherwise transfer
or dispose of any shares of Common Stock acquired hereby in a market transaction
(including sales pursuant to Rule 144)). The parties acknowledge and agree that
if they are unable to agree in good faith on the terms of any such additional
lock-up period, the Investors shall have no obligation and the Company shall
have no right to extend the lock-up period set forth in Section 6.3(a) above or
modify the terms thereof in any manner, regardless of whether of not any
underwriter deems any such additional lock-up necessary or appropriate.
(c) In order to enforce the covenant in Section 6.3(a) and if the parties
agree to an extension of the lock-up period pursuant to Section 6.3(b), in order
to enforce such agreement the Company may impose stop-transfer instructions with
respect to the Registrable Securities of the Investor until the end of such
period.
ARTICLE VII
CHOICE OF LAW AND VENUE
SECTION 7.1 CHOICE OF LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The parties hereby agree that
all actions or proceedings arising directly or indirectly from or in connection
with this Agreement shall, at the option of either party, be litigated only in a
state or federal court located in Houston, Texas. The parties consent to the
jurisdiction and venue of the foregoing court and consent that any process or
notice of motion or other application to said court or a judge thereof may be
served inside or outside the State of Texas by registered mail, return receipt
requested, directed to the party for which it is intended at its address set
forth in this Agreement (and service so made shall be deemed complete five (5)
days after the same has been posted as aforesaid) or by personal service or in
such other manner as may be permissible under the rules of said court.
ARTICLE VIII
ASSIGNMENT; ENTIRE AGREEMENT, AMENDMENT; PUBLICITY
SECTION 8.1 ASSIGNMENT. Neither this Agreement nor any rights of the
Investors or the Company hereunder may be assigned by any party to any other
person, except that the Company may assign up to $500,000 of the First Option
Shares or Second Option Shares to a Selling Shareholder. Notwithstanding the
foregoing, (a) the provisions of this Agreement shall inure to the benefit of,
and be enforceable by, any transferee of any of the Common Stock purchased or
acquired by the Investors hereunder with respect to the Common Stock held by
such person, and (b) each Investor's interest in this Agreement may be assigned
at any time, in whole or in part, to any other person or entity (including any
affiliate of the Investor) upon the prior written consent of the Company, which
consent shall not to be unreasonably withheld.
SECTION 8.2 ENTIRE AGREEMENT, AMENDMENT. This Agreement, the Registration
Rights Agreement, and the other documents delivered or to be delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subject hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth in this Agreement
or therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
SECTION 8.3 PUBLICITY. The Company agrees that it will not disclose, and
will not include in any public announcement (except for a press release
announcing the execution of this Agreement and the transactions contemplated
hereby), the name of the Investors without its consent, unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
ARTICLE IX
NOTICES; COST AND EXPENSES; INDEMNIFICATION
SECTION 9.1 NOTICES. All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder or which are
given with respect to this Agreement shall be in writing and shall be personally
served or deposited in the mail, registered or certified, return receipt
requested, postage prepaid, or delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice:
(a) if to the Company, to:
Telscape International, Inc.
0000 Xxxx Xxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx, Executive Vice
President
Facsimile No.: (000) 000-0000
with a copy to:
Gardere Xxxxx Xxxxxx & Xxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Investors, to:
Kendu Partners
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
MDNH Partners, L.P.
000 Xxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx.
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxxxx, Patch, Xxxxx & Bass, LLP
000 Xxxxxx Xxxxxx, Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by facsimile. Notice otherwise sent as provided
herein shall be deemed given on the third business day following the date mailed
or on the second business day following delivery of such notice by a reputable
air courier service.
SECTION 9.2 INDEMNIFICATION.
(a) INDEMNIFICATION OF INVESTOR. The Company hereby agrees to indemnify
and hold harmless each of the Investors and each Person, if any, who controls
the Investors within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, and their respective directors and officers
(each, an "Investor Indemnified Person") from and against and to pay any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
("Damages") to which such Investor Indemnified Person may become subject as the
result of any material breach of any representation or warranty or covenant made
or to be performed on the part of the Company under this Agreement, and will
reimburse any Investor Indemnified Person for all expenses (including, without
limitation, reasonable counsel and expert fees) as they are incurred by any such
Investor Indemnified Person in connection with any such misrepresentation or
breach of warranty or covenant or investigating, preparing or defending any such
action or proceeding, whether pending or threatened, and whether or not such
Investor Indemnified Person is a party hereto. Notwithstanding the foregoing,
the Company will not be responsible for any Damages or expenses to the extent
that a court of competent jurisdiction shall have finally determined that such
Damages or expenses resulted primarily from such Investor Indemnified Person's
bad faith or gross negligence or material breach of this Agreement or other
documents delivered pursuant hereto.
(b) INDEMNIFICATION OF THE COMPANY. The Investors, jointly and severally,
hereby agree to indemnify and hold harmless the Company, its Subsidiaries and
each Person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, and their
respective directors and officers (each, a "Company Indemnified Person") from
and against and to pay any Damages to which such Company Indemnified Person may
become subject as the result of any material breach of any representation or
warranty or covenant made or to be performed on the part of an Investor under
this Agreement or other documents delivered pursuant hereto, and will reimburse
any Company Indemnified Person for all expenses (including, without limitation,
reasonable counsel and expert fees) as they are incurred by any such Company
Indemnified Person in connection with any such misrepresentation or breach of
warranty or covenant or investigating, preparing or defending any such action or
proceeding, whether pending or threatened, and whether or not such Company
Indemnified Person is a party hereto. Notwithstanding the foregoing, the
Investors will not be responsible for any Damages or expenses to the extent that
a court of competent jurisdiction shall have finally determined that such
Damages or expenses resulted primarily from such Company Indemnified Person's
bad faith or gross negligence or material breach of this Agreement or other
documents delivered pursuant hereto.
(c) ACTION AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action, suit or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. Upon receipt of such notice from the
indemnified party, the indemnifying party shall assume the defense of any such
action, suit or proceeding, including the employment of counsel (who shall be
reasonably acceptable to the indemnified party) and payment of all fees and
expenses. An indemnified party shall have the right to employ separate counsel
in any such action, suit or proceeding and may participate at its own expense in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified person unless (i) the indemnifying party has agreed
in writing to pay such fees and expenses, (ii) the indemnifying party has failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding include both the indemnified party and the
indemnifying party and the indemnified party shall have been advised by its
counsel in writing that representation of such indemnified party and
indemnifying party by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by the
same counsel has been proposed) due to actual or potential differing interests
between them (in which case the indemnifying party shall not have the right to
assume the defense of such action, suit or proceeding). In no event shall the
indemnifying party be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry or any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section or Section 9.3 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation proceeding or claim and (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of an any
indemnified party. The indemnifying party shall not be liable for any settlement
of any action, suit or proceeding effected without its express prior written
consent, but if settled with such written consent or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying party agrees to indemnify and hold harmless the indemnified party
to the extent provided in this Section 9.2 from and against any Damages by
reason of such settlement or judgment.
SECTION 9.3 CONTRIBUTION. If the indemnification provided for in Section
9.2 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to herein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Investors on the other hand from the offering of the Initial Shares
and Option Shares pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Investors on the other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Investors on the other hand in connection with the purchase and sale of the
Common Stock pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the purchase and sale of
the Option Shares and Initial Shares pursuant to this Agreement received by the
Company and the total net proceeds received by the Investors bear to the
aggregate purchase price.
The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to this Section 9.3 were determined on a
pro-rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 9.3.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 9.3 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 9.3, the Investors shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Common Stock purchased by the Investors exceeds the
amount of any Damages which the Investors have otherwise been required to pay
pursuant to this Article IX.
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.
For purposes of this Section 9.3, each person, if any, who controls an
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Investor,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act shall have the same rights to contribution as the Company.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one instrument.
SECTION 10.2 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and
agreements of the parties hereto shall survive each Closing hereunder. The
indemnity and contribution agreements contained in Sections 9.2 and 9.3 hereof
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement or of the Commitment Period, (ii) any
investigation made by or on behalf of any indemnified party or by or on behalf
of the Company, and (iii) the consummation of the sale or successive resales of
the Common Stock. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
SECTION 10.3 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used
for convenience only and are not to be considered in construing or
interpreting this Agreement.
SECTION 10.4 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg L.P. or any other reputable pricing service chosen by the Investors
and reasonably acceptable to the Company.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first
written
above.
TELSCAPE INTERNATIONAL, INC.
By: ______________________________
Name: Xxxx X. Xxxxx
Title: Executive Vice President
MDNH PARTNERS, L.P.
By MDNH Trading Corp., its General Partner
By: ______________________________
Name:
Title:
KENDU PARTNERS
By: ______________________________
Name:
Title:
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
December 18, 1998 (the "EFFECTIVE DATE"), is made and entered into by and among
MDNH Partners, L.P., a California limited partnership ("MDNH"), Kendu Partners,
a California general partnership ("Kendu," and together with MDNH, the
"INVESTORS"), and Telscape International, Inc., a Texas corporation (the
"COMPANY").
RECITALS:
A. The Company and the Investors have entered into that certain Securities
Purchase Agreement, dated of even date herewith (the "SECURITIES PURCHASE
AGREEMENT"), pursuant to which the Company will sell to the Investors up to
950,000 shares of its Common
Stock, par value $.001 per share.
B. Pursuant to the terms of, and in partial consideration for, the
Investors' agreement to enter into the Securities Purchase Agreement, the
Company has agreed to provide the Investors with certain registration rights
with respect to the Registrable Securities (as defined
below).
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Securities
Purchase Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1.DEFINITIONS. Capitalized terms defined in the Securities
Purchase Agreement shall have the same meanings herein as are ascribed to them
therein. In addition, the following terms shall have the meanings ascribed
below:
"REGISTRABLE SECURITIES" means all of the Common Stock and any other
securities issued or issuable pursuant to the Securities Purchase Agreement as
provided therein until (i) a registration statement under the Securities Act
covering the offering of such securities has been declared effective by the SEC
and such securities have been disposed of pursuant to such effective
registration statement, (ii) such securities are sold under circumstances in
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act ("RULE 144") are met, (iii) such
securities have been otherwise transferred and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, which counsel shall be reasonably acceptable to the Investors, such
securities may be sold without any time, volume or manner limitation pursuant to
Rule 144(k) (or any similar provision then in effect) under the Securities Act.
"REGISTRATION STATEMENT" See Section 2.1 (a).
ARTICLE II
REGISTRATION RIGHTS
Section 2.1. REGISTRATION STATEMENTS.
(a) Subject to the terms and conditions of this Agreement and in
accordance with the provisions of Section 5.3 of the Securities Purchase
Agreement, the Company shall file with the SEC a registration statement on Form
S-1 or otherwise appropriate form under the Securities Act (or shall
appropriately amend an existing registration statement) (the "REGISTRATION
STATEMENT") for the registration of the resale by the Investors of any
Registrable Securities that the Investors purchase pursuant to the Securities
Purchase Agreement.
(b) The Registration Statement relating to the Initial Shares shall be
declared effective by the SEC no later than nine (9) months following the
Initial Closing Date and shall remain in effect until such time as the Investors
have sold all of the Initial Shares. Each Registration Statement relating to any
Option Shares that the Investors purchase pursuant to the Securities Purchase
Agreement shall be declared effective by the SEC no later than nine (9) months
following each respective Optional Closing Date and shall remain in effect until
such time as the Investors have sold all of the Option Shares.
(c) In the event (i) the Company fails to obtain the effectiveness of a
Registration Statement within the time period set forth in Section 2.1(b), (ii)
the effectiveness of the Registration Statement is suspended (other than as
required by the filing of post-effective amendments as required by law), or
(iii) an Investor desires to resell, transfer or otherwise dispose of
Registrable Securities and a current prospectus meeting the requirements of
Section 10 of the Securities Act is not available for delivery by such Investor,
and such occurrence is not the result of any information provided or failed to
be provided by such Investor or some unforeseeable catastrophe affecting the
operation of the SEC, the Company shall pay to such Investor the amounts set
forth in Section 5.8 of the Securities Purchase Agreement.
ARTICLE III
REGISTRATION PROCEDURES
Section 3.1. FILINGS; INFORMATION. Whenever the Company is required to
effect or cause the registration of Registrable Securities pursuant to Section
2.1 hereof, the Company will use its best efforts to effect the registration of
such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
request:
(a) The Company will as expeditiously as possible, prepare and file with
the SEC the Registration Statement and use its best efforts to cause such filed
Registration Statement to be declared effective as soon as possible and to
remain effective thereafter (pursuant to Rule 415 under the Securities Act or
otherwise), and the Company will as expeditiously as possible prepare and file
with the SEC such amendments and supplements to such Registration Statement and
the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for the time periods prescribed in Section
2.1(b) hereof and comply with the provisions of the Securities
2
Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended
methods of disposition by the Investors set forth in such Registration
Statement.
(b) The Company will (i) prior to filing a Registration Statement or
prospectus or any amendment or supplement thereto (excluding amendments deemed
to result from the filing of documents incorporated by reference therein),
furnish to the Investors and counsel for the Investors, copies of such
Registration Statement, prospectus, amendment or supplement as proposed to be
filed, together with exhibits thereto, (ii) provide the Investors and counsel an
adequate and appropriate opportunity to review and comment on such documents,
(iii) not file any such documents to which the Investors or counsel shall have
reasonably objected on the grounds that such filing does not comply in all
material respects with the requirements of the Securities Act or of the rules or
regulations thereunder, and (iv) thereafter furnish to the Investors and its
counsel for their review such number of copies of such Registration Statement,
each amendment and supplement thereto (in each case including all exhibits
thereto), the prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents or information as the Investors
or counsel may reasonably request in order to facilitate the disposition of the
Registrable Securities that the Investors purchase pursuant to the Securities
Purchase Agreement.
(c) After the filing of the Registration Statement, the Company will
promptly notify the Investors of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation or threatening of any proceeding
for that purpose; and take all reasonable actions required to prevent the entry
of such stop order or to remove it if entered.
(d) The Company will use its reasonable good faith efforts to register or
qualify the Registrable Securities it sells to the Investors under such other
securities or blue sky laws of such jurisdictions in the United States as the
Investors may reasonably (in light of its intended plan of distribution)
request, and (ii) cause such Registrable Securities to be registered with or
approved by such other governmental agencies or authorities in the United States
as may be necessary by virtue of the business and operations of the Company and
do any and all other acts and things that may be reasonably necessary or
advisable to enable the Investors to consummate the disposition of the
Registrable Securities that the Investors purchase pursuant to the Securities
Purchase Agreement; provided that the Company will not be required to (A)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (d), (B) subject itself
to taxation in any such jurisdiction or (C) consent or subject itself to general
service of process in any such jurisdiction.
(e) The Company will immediately notify the Investors upon the occurrence
of any of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of Registrable Securities: (i) receipt of
any request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement, for amendments or supplements to the Registration Statement or
related
3
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding for
that purpose; (iii) receipt of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose that the Company has knowledge of; (iv) the
happening of any event which makes any statement made in the Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or which
requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (vi) the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate; and
the Company will promptly make available to the Investors and counsel for the
Investors any such supplement or amendment to the related prospectus in
accordance with paragraph (b) hereof.
(f) The Company will make available to the Investors (and Investors'
counsel), subject to restrictions imposed by the United States federal
government or any agency or instrumentality thereof, copies of all
correspondence between the SEC and the Company, its counsel or auditors and will
also make available for inspection by the Investors and any attorney, accountant
or other professional retained by the Investors (collectively, the
"INSPECTORS"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "RECORDS") as shall be
reasonably necessary to enable each Investor to exercise its due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with such
Registration Statement. Records which the Company determines, in good faith, to
be confidential and which it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other process; provided that prior to any disclosure or release pursuant to
clause (ii), the Inspectors shall provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such Inspectors' obligation not to disclose such
Records; and, provided further, that if failing the entry of a protective order
or the waiver by the Company permitting the disclosure or release of such
Records, the Inspectors, upon advice of counsel, are compelled to disclose such
Records, the Inspectors may disclose that portion of the Records which counsel
has advised the Inspectors that the Inspectors are compelled to disclose. Each
Investor agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Investor after reasonable inquiry, is not prohibited
from providing such information by a contractual, legal
4
or fiduciary obligation to the Company) shall be deemed confidential and shall
not be used by it as the basis for any market transactions in the securities of
the Company or its Affiliates unless and until such information is made
generally available to the public. Each Investor further agrees that it will,
upon learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential.
(g) The Company will appoint a transfer agent and registrar for all such
Registrable Securities covered by such Registration Statement not later than the
effective date of such Registration
Statement.
The Company may require the Investors to promptly furnish in writing to
the Company such information regarding the distribution of the Registrable
Securities as the Company may from time to time reasonably request and such
other information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the SEC, the NASD or the Principal Market. Each Investor agrees to
provide such information requested in connection with such registration within
ten (10) business days after receiving such written request and the Company
shall not be responsible for (and the penalties specified in Section 2.1(c)
hereof shall not apply in respect of) any delays in obtaining or maintaining the
effectiveness of the Registration Statement caused by the Investor's failure to
timely provide such information. Each Investor agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3.1(e) hereof, the Investor will forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until the Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3.1(e) hereof, and,
if so directed by the Company, the Investor will deliver to the Company all
copies, other than permanent file copies then in the Investor's possession, of
the most recent prospectus covering such Registrable Securities at the time of
receipt of such notice. In the event the Company shall give such notice, the
Company shall extend the period during which such Registration Statement shall
remain effective (including the period referred to in Section 3.1(a) hereof) by
the number of days during the period from and including the date of the giving
of notice pursuant to Section 3.1(e) hereof to the date when the Company shall
make available to such Investor a prospectus supplemented or amended to conform
with the requirements of Section 3.1 (e) hereof.
Section 3.2.REGISTRATION EXPENSES. In connection with each Registration
Statement, the Company shall pay all expenses incurred in connection with the
registration thereunder including, without limitation, the following (the
"REGISTRATION EXPENSES"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), (iii) printing expenses, (iv) the Company's
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), (v) the fees
and expenses incurred in connection with the listing of the Registrable
Securities, (vi) reasonable fees and disbursements of counsel for the Company
and customary fees and expenses, if any, for independent certified public
accountants retained by the Company, (vii) the fees and
5
expenses of any special experts retained by the Company in connection with such
registration and (viii) reasonable fees and expenses (which shall not exceed the
sum of (Y) $1,000 of such fees and expenses, and (Z) 50% of any additional fees
and expenses in excess thereof up to $5,000 in the aggregate for the Investors,
it being understood that the Company shall not have liability for such fees and
expenses in excess of $3,000 in the aggregate pursuant to this clause) of
counsel for the Investors retained as the Investors' counsel with respect to
such Registration Statement. The Company shall have no obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities, such costs to be borne by the Investors.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1 INDEMNIFICATION.
(a) INDEMNIFICATION OF INVESTOR. The Company agrees to indemnify and hold
harmless each Investor, its members, partners, Affiliates (as defined below),
officers, directors, employees and duly authorized agents, and each Person (as
defined below), if any, who controls the Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, together with the
partners, Affiliates, officers, directors, employees and duly authorized agents
of such controlling Person (collectively, the "CONTROLLING PERSONS"), from and
against any loss, claim, damage, liability (joint or several), reasonable
attorneys' fees, costs or expenses and costs and expenses of investigating and
defending any such claim (collectively, "DAMAGES"), and any action in respect
thereof to which the Investor, its partners, Affiliates, officers, directors,
employees and duly authorized agents, and any such Controlling Person may become
subject under the Securities Act or otherwise, insofar as such Damages (or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or prospectus relating to the Registrable Securities or
any preliminary prospectus, or arises out of, or are based upon, 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, except insofar as
the same are based upon information furnished in writing to the Company by the
Investor expressly for use therein, and shall reimburse the Investor, its
partners, Affiliates, officers, directors, employees and duly authorized agents,
and each such Controlling Person for any legal and other expenses reasonably
incurred by the Investor, its partners, Affiliates, officers, directors,
employees and duly authorized agents, or any such Controlling Person in
investigating or defending or preparing to defend against any such Damages or
proceedings; provided, however, that the Company shall not be liable to the
Investor to the extent that any such Damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Investor failed to send or deliver a copy of the final prospectus with or prior
to the delivery of written confirmation of the sale by the Investor to the
Person asserting the claim from which such Damages arise, and (ii) the final
prospectus would have corrected such untrue statement or alleged untrue
statement or such omission or alleged omission.
For purposes of this agreement, "AFFILIATE" shall mean, as to any Person,
any other Person
6
that directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person; and "PERSON" shall
mean an individual, corporation, partnership, limited liability company,
business trust, association, joint-stock company, trust, unincorporated
organization, joint venture or governmental authority or other regulatory body.
(b) INDEMNIFICATION OF COMPANY. Each Investor agrees, jointly and
severally, to indemnify and hold harmless the Company, its directors, each of
its officers who signed the Registration Statement, and each of its Controlling
Persons from and against any Damages, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in the Registration Statement (or any amendment thereto), including any
prospectus (or any amendment or supplement thereto), or offering circular or
other document, as applicable, in reliance upon and in conformity with written
information furnished to the Company by the Investor expressly for use in the
Registration Statement (or any amendment or supplement thereto), or in any
offering circular or other document, as applicable.
(c) ACTION AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action, suit or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. Upon receipt of such notice from the
indemnified party, the indemnifying party shall assume the defense of any such
action, suit or proceeding, including the employment of counsel (who shall be
reasonably acceptable to the indemnified party) and payment of all fees and
expenses. An indemnified party shall have the right to employ separate counsel
in any such action, suit or proceeding and may participate at its own expense in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified person unless (i) the indemnifying party has agreed
in writing to pay such fees and expenses, (ii) the indemnifying party has failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding include both the indemnified party and the
indemnifying party and the indemnified party shall have been advised by its
counsel in writing that representation of such indemnified party and
indemnifying party by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by the
same counsel has been proposed) due to actual or potential differing interests
between them (in which case the indemnifying party shall not have the right to
assume the defense of such action, suit or proceeding). In no event shall the
indemnifying party be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry or any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 4.1 or Section 4.2 hereof (whether or not the
indemnified parties are actual or potential
7
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of an any indemnified party. The indemnifying party shall not be
liable for any settlement of any action, suit or proceeding effected without its
express prior written consent, but if settled with such written consent or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the indemnifying party agrees to indemnify and hold harmless the
indemnified party to the extent provided in this Section 4.1 from and against
any Damages by reason of such settlement or judgment.
Section 4.2 CONTRIBUTION. If the indemnification provided for in this
Article IV is unavailable to the indemnified parties in respect of any Damages
referred to herein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Damages as between the Company on the one
hand and the Investors on the other, 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 Damages, as well as any other
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged 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 statement or omission.
The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to this Section 4.2 were determined by a pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 4.2. The
amount paid or payable by an indemnified party as a result of the Damages
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim.
Notwithstanding the provisions of this Section 4.2, the Investors shall in
no event be required to contribute any amount in excess of the amount by which
the total proceeds from the public sale of the Registrable Securities (less
underwriting discounts and commissions) exceeds the amount of any Damages which
the Investors have otherwise paid in accordance with this Article IV.
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.
For purposes of this Section 4.2, each person, if any, who controls the
Investors within the
8
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as an Investor, and each director of
the Company, each officer of the Company who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company.
ARTICLE V
MISCELLANEOUS
Section 5.1.TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate two (2) years from the date
hereof; PROVIDED, HOWEVER, that the provisions of Article IV hereof shall
survive any termination of this Agreement.
Section 5.2.RULE 144. The Company covenants that it will file all reports
required to be filed by it under the Act and the Exchange Act and that it will
take such further action as holders of Registrable Securities may reasonably
request, all to the extent required from time to time to enable the Investor to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144, as such Rule may be
amended from time to time, or (b) any successor or similar rule or regulation
hereafter adopted by the SEC. If at any time the Company is not required to file
such reports, it will, upon the request of any holder of Registrable Securities,
make publicly available other information so long as necessary to permit sales
pursuant to Rule 144. Upon the request of the Investors, the Company will
deliver to the Investors a written statement as to whether it has complied with
such requirements.
Section 5.3.AMENDMENT AND MODIFICATION. Any provision of this Agreement
may be waived, provided that such waiver is set forth in a writing executed by
the party against whom the enforcement of such waiver is sought. The provisions
of this Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of the holders of a majority of the then outstanding Registrable
Securities. Notwithstanding the foregoing, the waiver of any provision hereof
with respect to a matter that relates exclusively to the rights of holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and does not directly or indirectly affect the rights of
other holders of Registrable Securities may be given by holders of at least a
majority of the Registrable Securities being sold by such holders; provided that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
No course of dealing between or among any Persons having any interest in this
Agreement will be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any person under or by reason of
this Agreement.
Section 5.4.SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Each Investor
may assign its rights under this Agreement to any subsequent holder of the
Registrable Securities, provided that the Company shall have the right to
9
require any holder of the Registrable Securities to execute a counterpart of
this Agreement as a condition to such holder's claim to any rights hereunder.
This Agreement, together with the Securities Purchase Agreement, sets forth the
entire agreement and understanding among the parties as to the subject matter
hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
Section 5.5.SEPARABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
Section 5.6.NOTICES. All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder or which are
given with respect to this Agreement shall be in writing and shall be personally
served or deposited in the mail, registered or certified, return receipt
requested, postage prepaid, or delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice:
(a) if to the Company, to:
Telscape International, Inc.
0000 Xxxx Xxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx,
Executive Vice President
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. XxXxx, Xx., Esq.
Facsimile No.: (000) 000-0000
(b) if to the Investor, to:
Kendu Partners
000 Xxxx Xxxxxx,
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
10
MDNH Partners, L.P.
000 Xxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxxxx, Patch, Xxxxx & Bass LLP
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: 415-989-1663
Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on the third business
day following the date mailed or on the second business day following delivery
of such notice by a reputable air courier service.
Section 5.7.GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
Section 5.8.SUBMISSION TO JURISDICTION. The parties hereby agree that all
actions or proceedings arising directly or indirectly from or in connection with
this Agreement shall, at the option of either party, be litigated only in a
state or federal court located in the State of Texas. The parties consent to the
jurisdiction and venue of the foregoing court and consent that any process or
notice of motion or other application to said court or a judge thereof may be
served inside or outside the State of Texas by registered mail, return receipt
requested, directed to the party for which it is intended at its address set
forth in this Agreement (and service so made shall be deemed complete five (5)
days after the same has been posted as aforesaid) or by personal service or in
such other manner as may be permissible under the rules of said court.
Section 5.9.WAIVER OF JURY TRIAL. Each of the Company and each Investor
hereby waives any right to a trial by jury in any action, proceeding or
counterclaim concerning any rights under this Agreement or under any amendment,
waiver, consent, instrument, document or the Agreement delivered or which in the
future may be delivered in connection herewith, or arising from any relationship
existing in connection with this Agreement, and agrees that any such action,
proceeding or counterclaim shall be tried before a court and not before a jury.
The Company
11
certifies that no officer, representative, agent or attorney of the Investors
has represented, expressly or otherwise, that the Company would not, in the
event of any action, proceeding or counterclaim, seek to enforce the foregoing
waivers. The Company hereby acknowledges that this provision is a material
inducement for the Investors entering into this Agreement.
Section 5.10HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not constitute a part of this Agreement, nor shall
they affect their meaning, construction or
effect.
Section 5.11COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
Section 5.12FURTHER ASSURANCES. Each party hereto shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 5.13REMEDIES. In the event of a breach or a threatened breach by
any party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
[SIGNATURES ON FOLLOWING PAGE]
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, hereunto duly authorized, as of the date first set
forth above.
TELSCAPE INTERNATIONAL, INC.
By: ______________________________
Name: Xxxx X. Xxxxx
Title: Executive Vice President
MDNH PARTNERS, L.P.
By MDNH Trading Corp., its General Partner
By: ______________________________
Name:
Title:
KENDU PARTNERS
By: ______________________________
Name:
Title:
13
