EXHIBIT 4.1


 


EXECUTION COPY


 


 




 





 


INVESTOR
RIGHTS AGREEMENT



BY AND AMONG



EVOLVING SYSTEMS, INC.,



TERTIO TELECOMS GROUP LTD.



AND



THE INVESTORS LISTED HEREIN



DATED:  NOVEMBER 2, 2004


 


 




 





 





















 


TABLE OF CONTENTS


 


	
  1.

  	
  Definitions

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Registration Rights

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.1.

  	
   

  	
  Demand Registrations

  	
   

  	
   

  
	
  2.2.

  	
   

  	
  Incidental Registrations

  	
   

  	
   

  
	
  2.3.

  	
   

  	
  Shelf
  Registration.

  	
   

  	
   

  
	
  2.4.

  	
   

  	
  Registration Procedures

  	
   

  	
   

  
	
  2.5.

  	
   

  	
  Payment of Expenses.

  	
   

  	
   

  
	
  2.6.

  	
   

  	
  Indemnification and Contribution

  	
   

  	
   

  
	
  2.7.

  	
   

  	
  Other Matters with Respect to
  Underwritten Offerings.

  	
   

  	
   

  
	
  2.8.

  	
   

  	
  Information by Investor.

  	
   

  	
   

  
	
  2.9.

  	
   

  	
  Effective Date and
  Termination of Registration Rights.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Preemptive Rights

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.1.

  	
   

  	
  Rights of Investors.

  	
   

  	
   

  
	
  3.2.

  	
   

  	
  Excluded Transactions.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Board of Directors

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.1.

  	
   

  	
  Series B Director.

  	
   

  	
   

  
	
  4.2.

  	
   

  	
  Designation of Series B Director.

  	
   

  	
   

  
	
  4.3.

  	
   

  	
  Observer Rights.

  	
   

  	
   

  
	
  4.4.

  	
   

  	
  Other Covenants.

  	
   

  	
   

  
	
  4.5.

  	
   

  	
  Consent Right of Investors.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Additional Covenants

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.1.

  	
   

  	
  Compliance with Federal Securities
  Laws.

  	
   

  	
   

  
	
  5.2.

  	
   

  	
  Other Registration Rights.

  	
   

  	
   

  
	
  5.3.

  	
   

  	
  Financial and Business Information.

  	
   

  	
   

  
	
  5.4.

  	
   

  	
  VCOC
  Rights.

  	
   

  	
   

  
	
  5.5.

  	
   

  	
  Available
  Copy.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Nonpublic Information

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  General

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.1.

  	
   

  	
  Use of Best Efforts

  	
   

  	
   

  
	
  7.2.

  	
   

  	
  Notices

  	
   

  	
   

  
	
  7.3.

  	
   

  	
  Amendments and Waivers

  	
   

  	
   

  
	
  7.4.

  	
   

  	
  Successors and Assigns

  	
   

  	
   

  
	
  7.5.

  	
   

  	
  Governing Law; Venue; Waiver of Jury
  Trial

  	
   

  	
   

  
	
  7.6.

  	
   

  	
  Entire Agreement

  	
   

  	
   

  
	
  7.7.

  	
   

  	
  Severability

  	
   

  	
   

  
	
  7.8.

  	
   

  	
  Headings

  	
   

  	
   

  
	
  7.9.

  	
   

  	
  Counterparts; Facsimile
  Signatures; Effectiveness

  	
   

  	
   

  



 





















 


INVESTOR RIGHTS AGREEMENT


 


THIS INVESTOR RIGHTS AGREEMENT (this “Agreement”) dated
November _2_, 2004 by and among EVOLVING SYSTEMS, INC., a Delaware
corporation (the “Company”),
TERTIO TELECOMS GROUP LTD., a an entity formed and registered in England and
Wales with a company number 4419858 (“Tertio”) and the entities listed on the
signature pages hereto (such entities and Tertio are hereinafter referred to
collectively as the “Investors”).


 


BACKGROUND


 


A.      The Company and
Tertio entered into a Stock Purchase Agreement, dated as of the date hereof
(the “Purchase Agreement”),
pursuant to which the Company acquired from Tertio, its wholly owned
subsidiary, Tertio Telecoms Ltd., an entity formed and registered in England
and Wales with a company number 2325854 (the “Target”) in exchange for certain
consideration, including shares of Series B Convertible Preferred Stock, par
value $0.001 per share, of the Company and certain additional securities of the
Company which may become convertible into the Company’s Common Stock.


 


B.       Under Sections
2.4(a)(ii) and 2.4(b)(vi) of such Purchase Agreement, the delivery of this
Agreement is a condition to the sale of Target to Company.


 


C.       Following the
closing of the transactions contemplated by the Purchase Agreement, it is
intended that Tertio will be dissolved and its assets, including the Series B
Convertible Preferred Stock and the other consideration issued to Tertio
pursuant to the Purchase Agreement, will be distributed to the then
shareholders of Tertio.  The Company and
Tertio agree that the shareholders of Tertio be entitled to the benefit of this
Agreement upon such distribution.


 


AGREEMENT


 


NOW THEREFORE, in
consideration of the mutual covenants and agreements set forth herein, the
parties hereto agree as follows:


 


1.        Definitions. 
As used in this Agreement, the following terms shall have the indicated
meanings:


 


“Acceptance”
means a written notice from a holder of Series B Preferred Stock to the Company
containing the information specified in Section 3.1(b).


 


“Advent”
means Advent International Corporation, a Delaware corporation.


 


“Advent
Funds” means Global Private Equity III Limited Partnership,
Global Private Equity III-A Limited Partnership, Global Private Equity III-B
Limited Partnership, Global Private Equity III-C Limited Partnership, Advent
PGGM Global Limited Partnership, Advent Euro-Italian Direct Investment Program
Limited Partnership, Advent European Co-Investment Program Limited Partnership,
Advent Partners GPE III Limited Partnership, Advent Partners (NA) GPE III
Limited Partnership, Digital Media & Communications II Limited Partnership,
Advent Global GECC III Limited Partnership, and Advent Partners Limited
Partnership, each a Delaware limited partnership, and Advent Crown Fund II C.V,
a Dutch limited partnership.


 


“Adverse Disclosure” means public
disclosure of material non-public information, which disclosure in the good faith
judgment of the Board of Directors (after consultation with external legal
counsel) (i) would be required to be made in any Registration Statement so that
such Registration Statement would not be materially misleading, (ii) would not
be required to be made at such time but for the filing,


 





















 


effectiveness or
continued use of such Registration Statement, and (iii) would be materially
detrimental to the Company’s ability to effect a material proposed merger,
acquisition or sale.


 


“Available
Unsubscribed Amount” means the difference between the total of
all of the Basic Amounts available for purchase by the Institutional
Stockholders pursuant to Section 3.1(a) and the Basic Amounts subscribed for
pursuant to Section 3.1(b).


 


“Basic
Amount” means, with respect to an Institutional Stockholder, its
pro rata portion of the Securities, determined by multiplying the number of
Securities by a fraction, the numerator of which is the aggregate number of
shares of Common Stock then held by such holder (giving effect to the
conversion into Common Stock of all shares of convertible preferred stock and
exercise or conversion of all convertible securities to purchase Securities of
the Company then held by such holder) and the denominator of which is the total
number of shares of Common Stock then outstanding (giving effect to the
conversion into Common Stock of all shares of convertible preferred stock or
exercise or conversion of other convertible securities or other rights to
purchase Securities of the Company then outstanding).


 


“Board of Directors” means the
Board of Directors of the Company.


 


“CMS Registration
Rights Agreement”  has
the meaning ascribed to it in Section 5.2(b) of this Agreement.


 


“Commission”
means the Securities and Exchange Commission.


 


“Common Stock” means the common
stock, par value $0.001 per share, of the Company, or any common stock or other
securities issued in respect of such Common Stock, or into which such Common
Stock is converted, due to stock splits, stock dividends or other distributions,
merger, consolidation, reclassifications, recapitalizations or otherwise.


 


“Company”
has the meaning ascribed to it in the introductory paragraph hereto.


 


“Company
Election Notice” has the meaning ascribed to it in Section 4.2
of this Agreement.


 


“Company
Policies” means the Company’s (a) Insider Trading Policy, (b)
Pre-Clearance and Blackout Policy and (c) Section 16 Compliance Program, as
such policies may be amended or modified from time to time.


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.


 


“GAAP”
means generally accepted accounting principles as applied in the United States
of America.


 


“Indemnified
Person” means a Person entitled to indemnification pursuant to
Sections 2.6(a) or 2.6(b) of this Agreement.


 


“Indemnifying
Person” means a Person obligated to provide indemnification
pursuant to Sections 2.6(a) or 2.6(b) of this Agreement.


 


“Institutional
Stockholders” – shall mean Tertio, the Advent
Funds, Apax Funds Nominees Limited, an entity formed and registered in England
and Wales with company number 02140054, and Four Seasons Venture II A.S, a
Norwegian registered corporation.


 


“Investor”
has the meaning ascribed to it in the introductory paragraph hereto.


 


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“Investor
Indemnified Person” has the meaning ascribed to it in Section
2.6(a) of this Agreement.


 


“Offer”
means a written notice of any proposed issuance, sale or exchange of Securities
containing the information specified in Section 3.1(a).


 


“Other
Registration Rights” means written agreements under which the
Company has agreed to include securities of the Company (other than Registrable
Shares) in a Registration Statement.


 


“Other
Registration Rights Holders” means holders of securities subject
to Other Registration Rights.


 


“Person”
means an individual or a corporation, partnership, limited liability company,
association, trust, or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.


 


“Prospectus”
means the prospectus included in any Registration Statement, as amended or
supplemented by an amendment or prospectus supplement, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.


 


“Purchase
Agreement” has the meaning ascribed to it in the recitals of
this Agreement.


 


“Refused
Securities” means those Securities as to which an Acceptance has
not been given by the Institutional Stockholders pursuant to Section 3.1(b).


 


“Registrable
Shares” means (a) the shares of Common Stock issued or issuable
upon conversion of the Series B Stock held by an Investor pursuant to the
Series B Certificate, (b) any other shares of Common Stock issued or issuable
upon the conversion or exercise of any other securities issued in connection
with the transactions contemplated by the Purchase Agreement (including
convertible debt instruments) held by an Investor, (c) any other shares of
Common Stock issued to the Institutional Stockholders pursuant to their
exercise of the preemptive rights arising under Section 3 of this Agreement,
(d) any Registrable Shares acquired by an Investor from another Investor; provided, however,
that shares of Common Stock that are Registrable Shares shall cease to be
Registrable Shares upon any sale pursuant to a Registration Statement or Rule
144, and, with respect to Registrable Shares held by Investors who are not
Institutional Stockholders, when such Investors may sell pursuant to Rule
144(k).


 


“Registration
Expenses” means all expenses incurred by the Company in
complying with the provisions of Section 2 of this Agreement, including (i) all
registration and filing fees, exchange listing fees, printing expenses, fees
and expenses of counsel for the Company; (ii) the reasonable fees and expenses
of Registration Selling Investor Counsel (in an aggregate amount not to exceed
$15,000 per registration); (iii) state Blue Sky fees and expenses, and (iv) the
expense of any special audits incident to or required by any such registration,
but excluding underwriting discounts, selling commissions and the fees and
expenses of Registration Selling Investors’ own counsel (other than the
Registration Selling Investor Counsel).


 


“Registration
Initiating Investors” means the Investors initiating a request
for registration pursuant to Section 2.1(a) of this Agreement.


 


“Registration
Selling Investor” means any Investor owning Registrable Shares
included in a Registration Statement.


 


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“Registration
Selling Investor Counsel” means, if Investors are participating
as Registration Selling Investors with respect to a registration, counsel
selected by Advent to represent all Registration Selling Investors with respect
to such registration.


 


“Registration
Statement” means a registration statement filed by the Company
with the Commission for a public offering and sale of securities of the
Company, other than (a) a registration statement on Form S-4 or Form S-8, or
their successors, or any other form for a similar limited purpose, or (b) any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation or other entity.


 


“Registration
Threshold Amount” has the meaning ascribed to it in Section
2.1(a) of this Agreement.


 


“Required
Investor Information” has the meaning ascribed to it in Section
2.3(b) of this Agreement.


 


“Rule
144” means Rule 144 promulgated under the Securities Act, and
any successor rule or regulation thereto, and in the case of any referenced
section of such rule, any successor section thereto, collectively and as from
time to time amended and in effect.


 


“Sarbanes-Oxley
Act” means the Sarbanes-Oxley Act of 2002, as amended, and the
rules and regulations promulgated thereunder.


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.


 


“Securities”
means (a) any shares of Common Stock, (b) any other equity securities of the
Company, including shares of preferred stock, (c) any option, warrant or other
right to subscribe for, purchase or otherwise acquire any equity securities of
the Company, and (d) any debt securities convertible into capital stock of the
Company.


 


“Series
B Certificate” means the Certificate of Designations of Series B
Convertible Preferred Stock forming a part of the Certificate of Incorporation
of the Company, as amended from time to time in accordance with the terms
thereof.


 


“Series
B Director” means the member of the Board of Directors
designated by the holders of shares of Series B Stock pursuant to the Series B
Certificate.


 


“Series
B Stock” means the Series B Convertible Preferred Stock of the
Company issued pursuant to the Purchase Agreement.


 


“Shares”
means the shares of Series B Stock held by the Investors.


 


“Shelf
Registration Statement” means the Registration Statement filed
by the Company with the Commission pursuant to Section 2.3 of this Agreement
covering the resale of all Registrable Shares for an offering to be made on a
continuous basis pursuant to Rule 415 promulgated under the Securities Act.


 


“Subsidiary”
means any corporation or other entity of which the capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions is at the time
directly or indirectly owned by the Company.


 


“Trading
Day” means (a) any day on which the Common Stock is listed or
quoted and traded on the Nasdaq National Market, the New York Stock Exchange,
the American Stock Exchange or the Nasdaq


 


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SmallCap Market or (b) if
the Common Stock is not traded on any such market, then a day on which trading
occurs on the New York Stock Exchange (or any successor thereto).


 


“Transfer”
means, as the context requires, (a) any sale, transfer, distribution or other
disposition, whether voluntarily or by operation of law, or (b) the act of
effecting such a sale, transfer, distribution or other disposition.


 


“Unsubscribed
Amount” means, with respect to an Institutional Stockholder, any
additional portion of the Securities attributable to the Basic Amounts of other
Institutional Stockholders as such holder indicates it will purchase or acquire
should the other holders subscribe for less than their Basic Amounts.


 


2.             Registration Rights


 


2.1.          Demand Registrations


 


(a)           Subject to
the last sentence of this Section 2.1(a), if for any reason the Shelf
Registration Statement to be prepared and filed by the Company has not been
declared effective by the Commission within 120 consecutive days from the date
hereof as contemplated by Section 2.3 of this Agreement, Investors holding in
the aggregate at least a majority of the shares of Series B Stock then
outstanding may, at any time and from time to time, request, in writing, that
the Company file a Registration Statement on Form S-3 (or any successor form)
to effect the registration of an offering of Registrable Shares owned by such Investor(s)
and having an aggregate value of at least $5,000,000 based on the last reported
sale price of the Common Stock on the trading day immediately preceding the
date of such request (the “Registration
Threshold Amount”); provided,
however, that, if at the time of such request the Company is not
eligible to register for resale the Registrable Shares on Form S-3, the Company
shall register the Registrable Shares on such other form as the Company is
eligible to use.  The Company shall set
forth in such Form S-3 any information that may be required in a registration
that is filed on Form S-1 and that the lead underwriter managing the offering
reasonably requests (as determined by the Company) be expressly included in the
Registration Statement.  Notwithstanding
the foregoing, in the event that the Shelf Registration Statement has not
become effective by the expiration of such 120 consecutive day period as a
result of an ongoing review by the Commission, the Company shall not be deemed
to be in breach of its obligations under this Section 2.1(a) so long as it
continues to diligently pursue and use its best efforts to cause the Shelf
Registration Statement to become effective as soon as possible thereafter.


 


(b)           Upon
receipt of any request for registration pursuant to this Section 2 of this
Agreement, the Company shall promptly (but in any event within ten (10)
consecutive days of receipt of such request) give written notice of such
proposed registration to all other Investors. 
Such other Investors shall have the right, by giving written notice to
the Company within twenty (20) consecutive days after the Company provides its
notice, to elect to have included in such registration such of their
Registrable Shares as such Investors may request in such notice of election,
subject in the case of an underwritten offering to the terms of
Section 2.1(c) of this Agreement. 
Thereupon, the Company shall, as expeditiously as possible, use its best
efforts to effect the registration on an appropriate registration form of all Registrable
Shares that the Company has been requested to so register.


 


(c)           If the
Registration Initiating Investors intend to distribute the Registrable Shares
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to Section 2.1(a) of this
Agreement and the Company shall include such information in its written notice
referred to in Section 2.1(b) of this Agreement.  In such event, (i) the right of any other
Investor to include its Registrable Shares in such registration pursuant to
Section 2.1(a) of this Agreement shall be conditioned upon such other
Investor’s participation in such underwriting on the terms set forth herein,
and (ii) all Investors including Registrable Shares in such registration shall


 


5





















 


enter
into an underwriting agreement upon customary terms with the underwriter or
underwriters managing the offering; provided
that such underwriting agreement shall not provide for indemnification or
contribution obligations on the part of the Investors materially greater than
the obligations of the Investors pursuant to Section 2.6 of this
Agreement.  If the Company and the
Registration Initiating Investors are unable to mutually agree on the managing
underwriter(s) for any underwritten offering pursuant to Section 2.1(a) of this
Agreement within 15 consecutive days after the Company receives the
Registration Initiating Investors’ request, the Company shall select an
underwriter out of a pool of three underwriting firms chosen by the
Registration Initiating Investors, each of which firms shall have a national
reputation and experience with software companies.  If any Investor that has requested inclusion
of its Registrable Shares in such registration as provided above disapproves of
the terms of the underwriting, such Person may elect, by written notice to the
Company, to withdraw its Registrable Shares from such Registration Statement
and underwriting; provided, however,
that, if Registration Selling Investors holding a majority of the remaining
Registrable Shares mutually agree, the Company shall continue to effect the
registration of such remaining Registrable Shares regardless of whether the
aggregate value of the remaining Registrable Shares is less than the
Registration Threshold Amount.  If the
lead managing underwriter advises the Company in writing that marketing factors
require a limitation on the number of shares to be underwritten, the number of
Registrable Shares to be included in the Registration Statement and
underwriting shall be allocated among all Investors requesting registration in
proportion, as nearly as practicable, to the respective number of Registrable
Shares each Investor has requested be included in such registration.


 


(d)           The
Company shall not be required to effect more than a total of three (3)
registrations requested pursuant to Section 2.1(a) of this Agreement (an
offering which is not consummated shall not be counted for this purpose).  The Investors shall not deliver a notice
pursuant to Section 2.1(a) of this Agreement requesting registration of any
underwritten offering until at least 6 months after the closing of any prior
underwritten offering registered pursuant to a request under Section 2.1(a) of
this Agreement.  For purposes of this
Section 2.1(d), a Registration Statement shall not be counted until such time
as such Registration Statement has been declared effective by the Commission.  Notwithstanding the foregoing, the first, and
only the first, time any request for registration that is withdrawn by the
Registration Initiating Investors (other than at the request of the Company)
and that is primarily as a result of material adverse information concerning
the business or financial condition of the Company, where such information is
made known to the Registration Initiating Investors after the date on which
such registration statement was filed, shall not count as a Registration
Statement.  Except as set forth in the
previous sentence, all Registration Statements withdrawn by the Investors shall
count as a Registration Statement; provided however, that a Registration
Statement that is withdrawn by the Investors at the request of the Company
shall not count as a Registration Statement for purposes of this Section 2.1.


 


(e)           If at the
time of any request to register Registrable Shares by Registration Initiating
Investors pursuant to this Section 2.1, the Company is engaged or has plans to
engage in a registered public offering or is engaged in a material proposed
acquisition, disposition, financing, reorganization, recapitalization or
similar transaction that, in the good faith determination of the Board of
Directors, could be adversely affected by the requested registration, then the
Company may at its option direct that such request be delayed for a period not
in excess of 45 consecutive days from the date of such request, such right to
delay a request to be exercised by the Company not more than once in any
12-month period.


 


2.2.          Incidental Registrations


 


(a)           Whenever
the Company proposes to file a Registration Statement covering shares of Common
Stock (other than a Registration Statement filed pursuant to Section 2.1 or 2.3
of this


 


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Agreement)
at any time and from time to time, it shall, prior to such filing, give written
notice to all Investors of its intention to do so; provided that no such notice need be given if no Registrable
Shares are to be included therein as a result of a written notice from the managing
underwriter pursuant to Section 2.2(b) of this Agreement.  Upon the written request of an Investor or
Investors given within 10 consecutive days after the Company provides such
notice (which request shall state the intended method of disposition of such
Registrable Shares), the Company shall use its best efforts to cause all
Registrable Shares that the Company has been requested by such Investor or
Investors to register to be registered under the Securities Act to the extent
necessary to permit their sale or other disposition in accordance with the
intended methods of distribution specified in the request of such Investor or
Investors; provided that the
Company shall have the right to postpone or withdraw any registration effected
pursuant to this Section 2.2 without obligation upon 5 consecutive days’
advance written notice to the Investors. 
Upon receipt of any such notice, the Investors may elect to exercise
their right to demand a registration in accordance with Section 2.1 of
this Agreement.


 


(b)           If the
registration for which the Company gives notice pursuant to Section 2.2(a) of
this Agreement is a registered public offering involving an underwriting, the
Company shall so advise the Investors as a part of the written notice given
pursuant to Section 2.2(a) of this Agreement. 
In such event, (i) the right of any Investor to include its Registrable
Shares in such registration pursuant to this Section 2.2 shall be
conditioned upon such Investor’s participation in such underwriting on the
terms set forth herein and (ii) all Investors including Registrable Shares in
such registration shall enter into an underwriting agreement upon customary
terms with the underwriter or underwriters selected for the underwriting by the
Company, provided that such
underwriting agreement shall not provide for indemnification or contribution
obligations on the part of the Investors materially greater than the
obligations of the Investors pursuant to Section 2.6 of this Agreement.   If any Investor who has requested inclusion of
its Registrable Shares in such registration as provided above disapproves of
the terms of the underwriting, such Investor may elect, by written notice to
the Company, to withdraw its shares from such Registration Statement and
underwriting.  If the managing
underwriter advises the Company in writing that marketing factors require a
limitation on the number of shares to be underwritten, the shares held by
holders other than the Investors shall be excluded from such Registration
Statement and underwriting to the extent deemed advisable by the managing
underwriter, and if a further reduction of the number of shares is required,
the number of shares that may be included in such Registration Statement and
underwriting shall be allocated among all Investors requesting registration in
proportion, as nearly as practicable, to the respective number of shares of
Common Stock (on an as converted basis) held by them on the date the Company
gives the notice specified in Section 2.2(a) of this Agreement.  If any Investor would thus be entitled to
include more shares than such holder has requested to be registered, the excess
shall be allocated among other requesting Investors pro rata in the manner
described in the preceding sentence.


 


2.3.          Shelf Registration.


 


(a)           The Company
shall prepare and file with the Commission a Shelf Registration Statement as
promptly as practicable after the date hereof (and in any event by no later
than 60 consecutive days after the date hereof), and shall take such steps as
are necessary to enable the Shelf Registration to be declared effective by the
Commission as promptly as practicable after the date hereof and in any event by
no later than 90 consecutive days after the date of this Agreement or, if the
Shelf Registration Statement (including any of the documents incorporated by
reference therein) is the subject of a complete or partial review by the
Commission, in any event by no later than 120 consecutive days after the date
of this Agreement.  Notwithstanding the
foregoing, in the event that the Shelf Registration Statement has not become
effective by the expiration of such 120 consecutive day period as a result of
an ongoing review by the Commission, the Company shall not be deemed to be in
breach of its obligations under this Section 2.3(a) so long as it continues to
diligently pursue and use its best efforts to cause the


 


7





















 


Shelf
Registration Statement to become effective as soon as possible thereafter.  The Shelf Registration Statement shall be on
Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Shares on Form S-3, in which case such Shelf Registration Statement
shall be on such other form as the Company is eligible to use).  The Company shall notify each Investor in
writing promptly (in any event within one Trading Day) after receiving
notification from the Commission that the Shelf Registration Statement has been
declared effective.


 


(b)           Notwithstanding
any of the foregoing, in the event that the Investors do not provide the
Company with information regarding the Investors and the Target reasonably
requested by the Company in order to prepare and file the Shelf Registration
Statement (including, but not necessarily limited to, (i) a plan of distribution
of the Securities to be registered, (ii) financial statements of Target meeting
the requirements of Regulation S-X promulgated under the Securities Act and
(iii) such other information that relate to the Investors and the Target that
is both customary and necessary for the completion of the Shelf Registration
Statement that the Company may reasonably request (collectively, the “Required Information”)
on or before the fiftieth (50th) day after the date hereof, the date
by which the Company’s obligation hereunder must be satisfied shall be extended
until that date which is ten (10) consecutive days after the delivery by the
Investors of the Required Information.


 


2.4.          Registration Procedures


 


(a)          If
and whenever the Company is required by the provisions of this Agreement to use
its best efforts to effect the registration of any Registrable Shares under the
Securities Act, the Company shall:


 


(i)            prepare and file with
the Commission a Registration Statement with respect to such Registrable Shares
and use its best efforts to cause that Registration Statement to become
effective as soon as possible;


 


(ii)           not less than (A) five
Trading Days prior to the filing of the Shelf Registration Statement or any
related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), or (B) ten (10) Trading Days prior to the filing of any
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (1) furnish to each
Registration Selling Investor and the Registration Selling Investor Counsel
copies of all such documents proposed to be filed, which documents (other than
those incorporated or deemed to be incorporated by reference) will be subject
to the review of such Registration Selling Investor and Registration Selling
Investor Counsel, and (2) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act; and the
Company shall not file any Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Registration Selling Investors
holding a majority of the Registrable Securities to be registered thereunder
and their counsel shall reasonably object, provided
that such objection is communicated to the Company within three Trading Days of
receipt of such documents;


 


(iii)          as expeditiously as
possible prepare and file with the Commission any amendments and supplements to
the Registration Statement and the prospectus included in the Registration
Statement as may be necessary to comply with the provisions of the Securities
Act (including the anti-fraud provisions thereof) and use its best efforts to
keep the Registration Statement continuously effective:


 


8





















 


(A)          in
the case of the Shelf Registration Statement filed pursuant to Section 2.3
of this Agreement, until the date on which all of the Registrable Shares
covered by the Shelf Registration Statement have been sold; and


 


(B)           in
the case of all other registrations, for (1) 180 consecutive days from the
effective date or such greater period, up to 360 consecutive days, as an
underwriter may require, or (2) such lesser period until all such Registrable
Shares are sold; provided that
the number of days specified in this clause (B) shall not include any day on
which a Registration Selling Investor is restricted from offering or selling
Registrable Shares pursuant to Sections 2.4(a)(iv) or 2.4(a)(v) of this
Agreement;


 


(iv)          in all cases respond as
promptly as possible to any comments received from the Commission with respect
to any Registration Statement or any amendment thereto;


 


(v)           as expeditiously as
possible furnish to each Registration Selling Investor and Registration Selling
Investor Counsel, without charge, at least one conformed copy of the
applicable  Registration Statement and
each amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission;


 


(vi)          as expeditiously as
possible furnish to each Registration Selling Investor (with a copy to
Registration Selling Investor Counsel) such reasonable numbers of copies of the
Prospectus, including any preliminary Prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such
Registration Selling Investor may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Shares owned by such
Registration Selling Investor; and the Company hereby consents to the use of
any such Prospectus and each amendment or supplement thereto by each
Registration Selling Investor in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto;


 


(vii)         use its best efforts to avoid
the issuance of or, if issued, obtain the withdrawal of (x) any order
suspending the effectiveness of any Registration Statement or (y) any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction as soon as reasonably
practicable;


 


(viii)        as expeditiously as
possible (and in the case of the Shelf Registration Statement, prior to the
public offering of Registrable Securities pursuant thereto) use its best
efforts to register or qualify the Registrable Shares covered by the
Registration Statement under the securities or Blue Sky laws of such states as
the Registration Selling Investors shall reasonably request, and do any and all
other acts and things that may be necessary or desirable to enable the
Registration Selling Investors to consummate the public sale or other
disposition in such states of the Registrable Shares owned by the Registration
Selling Investors; provided, however, that the Company shall not be
required in connection with this paragraph (viii) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;


 


(ix)           as expeditiously as
possible, cause all such Registrable Shares to be listed on each securities
exchange or automated quotation system on which similar securities issued by
the Company are then listed;


 


(x)            promptly provide a
transfer agent and registrar for all such Registrable Shares not later than the
effective date of such registration statement;


 


9





















 


(xi)           cooperate with the
Registration Selling Investors to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to an effective Registration Statement, which
certificates shall be free, to the extent permitted hereunder, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Registration Selling
Investors may request;


 


(xii)          promptly
make available for inspection by the Registration Selling Investors, any
managing underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant or other agent retained by
any such underwriter or selected by the Registration Selling Investors, all
financial and other records, pertinent corporate documents and properties of
the Company and cause the Company’s officers, directors, employees and
independent accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
Registration Statement; provided
that, unless otherwise mutually agreed by the Company and the recipient
Investor, the Company will not make any material nonpublic information
available to an Investor; and provided further that, for purposes of
this Section 2.4(a)(xii), to the extent that any material non public
information is made available to the Series B Director, or any material
nonpublic information is made available to the individual designated by the
Investors to attend all meetings of the Board of Directors (and all committees
thereof) as a nonvoting observer in accordance with Section 4.3 of this
Agreement, any such material nonpublic information shall not be considered to
have been made available to or received by any of the respective Investors.


 


(xiii)         in connection with an
underwritten disposition of Registrable Shares, provide such reasonable
assistance in the marketing of the Registrable Shares as is customary of
issuers in primary underwritten public offerings (including participation by
its senior management in “road shows”).


 


(b)           At any
time when a Prospectus is required to be delivered under the Securities Act,
the Company shall promptly notify each Registration Selling Investor and
Registration Selling Investor Counsel of any of the following events: (i) the
Commission notifies the Company whether there will be a “review” of the
Registration Statement; (ii) the Commission comments in writing on the
Registration Statement (in which case the Company shall deliver to each
Registration Selling Investor a copy of such comments and of all written
responses thereto); (iii) the Registration Statement or any post-effective amendment
is declared effective or a supplement to any Prospectus forming a part of such
Registration Statement has been filed; (iv) the Commission or any other Federal
or state governmental authority requests any amendment or supplement to the
Registration Statement or Prospectus or requests additional information related
thereto; (v) the Commission issues any stop order suspending the effectiveness
of the Registration Statement or initiates any Proceeding (as defined in the
Purchase Agreement) for that purpose; (vi) the Company receives notice of any
suspension of the qualification or exemption from qualification of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threat of any Proceeding for such purpose; or (vii) the financial statements
included in the Registration Statement become ineligible for inclusion therein
or any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference is
untrue in any material respect or any revision to the Registration Statement,
Prospectus or other document is required so that 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 light of the
circumstances under which they were made, not misleading.  If requested, the Registration Selling
Investors shall immediately cease making offers of Registrable Shares pursuant
to the Registration Statement until their receipt of the copies of the
supplemented or amended Prospectus. 
Following receipt of the revised Prospectuses, the Registration Selling
Investors shall be free to resume making offers of the Registrable Shares.


 


10





















 


(c)           In the
event that it is advisable to suspend use of a Prospectus included in a
Registration Statement because continued use would require Adverse Disclosure,
the Company shall notify all Registration Selling Investors to such effect,
and, upon receipt of such notice, each such Registration Selling Investor shall
immediately discontinue any sales of Registrable Shares pursuant to such
Registration Statement until such Registration Selling Investor has received
copies of a supplemented or amended Prospectus or until such Registration
Selling Investor is advised in writing by the Company that the then current
Prospectus may be used and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus.  Notwithstanding
anything to the contrary herein, the Company shall not exercise its rights
under this Section 2.4(c) to suspend sales of Registrable Shares for a period
in excess of 60 consecutive days or a total of 90 days in any 365 consecutive
day period; provided that the
Company may suspend such sales for a period of up to 90 consecutive days (and a
total of 120 days in a 365 consecutive day period) if the reason for the
continued suspension beyond 60 consecutive days relates solely to the
preparation of financial statements required to be filed in accordance with
Item 9.01 of Form 8-K under the Exchange Act (in which event the Company shall
use its best efforts to cause such financial statements to be prepared as
promptly as reasonably practicable in the circumstances), and such suspension
period shall automatically terminate two Trading Days after the filing of such
financial statements.  In no event shall
the Company’s right under this Section 2.4(c) be exercised to suspend sales of
Registrable Shares beyond the period during which sales of Registrable Shares
would require Adverse Disclosure.  After
the end of any suspension period under this Section 2.4, the Company shall use
its best efforts (including filing any required supplemental prospectus) to
restore, as promptly as reasonably possible, the effectiveness of the
Registration Statement and the ability of the Registration Selling Investors to
publicly resell their Registrable Securities pursuant to such effective Registration
Statement.


 


2.5.          Payment of Expenses.  The Company will pay all Registration
Expenses for all registrations under this Agreement.


 


2.6.          Indemnification and Contribution


 


(a)           In the
event of any registration of any of the Registrable Shares under the Securities
Act pursuant to this Agreement, the Company shall indemnify and hold harmless
each Registration Selling Investor and each underwriter of such Registrable
Shares, their respective partners, members, agents, directors, officers,
fiduciaries, investment advisors, brokers and employees of each of them, and
each other Person, if any, who controls such Registration Selling Investor or
underwriter within the meaning of the Securities Act or the Exchange Act and
the officers, directors, partners, members, agents and employees of each such
controlling Person (each such Person an “Investor Indemnified Person”), to the fullest
extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, settlement costs and expenses, as incurred, joint
or several, that arise out of, relate to or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement or any amendment or supplement to such
Registration Statement or Prospectus, (ii) the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the
Registration Statement or the offering contemplated thereby; and the Company
will reimburse such Investor Indemnified Person for any legal or any other
expenses reasonably incurred by such Investor Indemnified Person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be
liable to any Investor Indemnified Person, in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
untrue statement or omission made in such Registration


 


11





















 


Statement,
preliminary prospectus or prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to the Company, in
writing, by such Person specifically for use in the preparation thereof.


 


(b)           In the
event of any registration of any of the Registrable Shares under the Securities
Act pursuant to this Agreement, each Registration Selling Investor, severally
and not jointly, will indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any) and each Person, if any,
who controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any and all losses, claims,
damages, liabilities, settlement costs and expenses arising solely out of (i)
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or supplement
to the Registration Statement or Prospectus, or (ii) any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, if and to the extent (and only to
the extent) that the statement or omission was made in reliance upon and in
conformity with information relating to such Registration Selling Investor
furnished in writing to the Company by such Registration Selling Investor
specifically for use in connection with the preparation of such Registration
Statement, prospectus, amendment or supplement; provided, however, that the obligations of a Registration
Selling Investor hereunder shall be limited to an amount equal to the net
proceeds to such Registration Selling Investor of Registrable Shares sold in
connection with such registration.


 


(c)           Each
Indemnified Person shall give notice to the Indemnifying Person promptly after
such Indemnified Person has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Person to assume the defense
of any such claim or any litigation resulting therefrom; provided, that counsel for the
Indemnifying Person, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Person (whose approval shall not be
unreasonably withheld, conditioned or delayed); and  provided  further, that the failure of any
Indemnified Person to give notice as provided herein shall not relieve the
Indemnifying Person of its obligations under this Section 2.6 except to the
extent that the Indemnifying Person is actually prejudiced by such failure. The
Indemnified Person may participate in such defense at such party’s expense; provided, however,
that the Indemnifying Person shall pay such expense if the Indemnified Person
reasonably concludes that representation of such Indemnified Person by the
counsel retained by the Indemnifying Person would be inappropriate due to
actual or potential conflicts of interests between the Indemnified Person and
any other party represented by such counsel in such proceeding; and provided  further, that in no event shall the Indemnifying Person be
required to pay the expenses of more than one law firm per jurisdiction as
counsel for the Indemnified Person.  The
Indemnifying Person also shall be responsible for the expenses of such defense
if the Indemnifying Person does not elect to assume such defense.  No Indemnifying Person, in the defense of any
such claim or litigation shall, except with the consent of each Indemnified
Person, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Person of a release from all liability in respect
of such claim or litigation, and no Indemnified Person shall consent to entry
of any judgment or settle such claim or litigation without the prior written
consent of the Indemnifying Person, which consent shall not be unreasonably
withheld, conditioned or delayed.


 


(d)           In order
to provide for just and equitable contribution in circumstances in which the
indemnification provided for in this Section 2.6 is due in accordance with its
terms but for any reason is held to be unavailable to an Indemnified Person in
respect to any losses, claims, damages and liabilities referred to herein, then
the Indemnifying Person shall, in lieu of indemnifying such Indemnified Person,
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities to which such party may be
subject in such proportion as is appropriate to reflect


 


12





















 


the
relative fault of the Company on the one hand and the Registration Selling
Investors on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities.  The relative fault of the Company and the
Registration Selling Investors shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact related
to information supplied by the Company or the Registration Selling Investors
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.  The Company and the Registration Selling
Investors agree that it would not be just and equitable if contribution
pursuant to this Section 2.6(d) were determined by pro rata allocation or by
any other method of allocation that does not take account of the equitable
considerations referred to above. 
Notwithstanding the provisions of this Section 2.6(d), in no case shall
any one Registration Selling Investor be liable or responsible for any amount
in excess of the net proceeds received by such Registration Selling Investor
from the offering of Registrable Shares; provided,
however, that 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. 
Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties under this Section 2.6(d), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
from whom contribution may be sought shall not relieve such party from any other
obligation it or they may have thereunder or otherwise under this Section
2.6(d).  No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed.


 


(e)           The
indemnity and contribution agreements contained in this Section 2.6 are in
addition to any other liability that any Indemnifying Person may have to any
Indemnified Person.


 


2.7.          Other Matters with Respect to
Underwritten Offerings.  In the event
that Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2.1 of this Agreement, the
Company agrees to (a) enter into an underwriting agreement containing customary
representations and warranties with respect to the business and operations of
the Company and customary covenants and agreements to be performed by the
Company, including customary provisions with respect to indemnification by the
Company of the underwriters of such offering; (b) use its best efforts to
cause its legal counsel to render customary opinions to the underwriters with
respect to the Registration Statement; and (c) use its best efforts to cause
its independent public accounting firm to issue customary “cold comfort letters”
to the underwriters with respect to the Registration Statement.


 


2.8.          Information by Investor.  Without limiting anything set forth in
Section 2.3 of this Agreement, each holder of Registrable Shares included in
any registration shall furnish to the Company such customary information
regarding such holder and the distribution proposed by such holder as the
Company may reasonably request in writing and that is required under applicable
laws, rules and regulations.


 


2.9.          Effective Date and Termination of
Registration Rights.  The rights and
obligations under this Section 2 shall (a) become effective with respect to
each Investor upon the issuance or transfer of Registrable Shares to the
Investor and (b) terminate with respect to each Investor on the first date on
which such Investor no longer holds any Registrable Shares, except that the
rights and obligations of the Company and the Registration Selling Investors
under Section 2.6 of this Agreement (relating to indemnification) shall survive
any termination of this Agreement or any part thereof.


 


13





















 


3.             Preemptive Rights.


 


3.1.          Rights of Investors.


 


(a)           The
Company shall not issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, any Securities, unless in
each such case the Company shall have first complied with this Section 3.  The Company shall deliver to the
Institutional Stockholders an Offer, which shall (i) identify and describe the
Securities, (ii) describe the price (expressed in either a fixed dollar amount
or a definitive formula pursuant to which the only variable is the market price
of the Common Stock at or near the time of the proposed issuance, sale or exchange)
and other terms upon which they are to be issued, sold or exchanged, and the
number or amount of the Securities to be issued, sold or exchanged, (iii)
identify the offerees or purchasers (if known) to which or with which the
Securities are to be offered, issued, sold or exchanged, and (iv) offer to
issue and sell to or exchange with such Institutional Stockholders (1) such
holder’s Basic Amount and (2) such holder’s Unsubscribed Amount.


 


(b)           To accept
an Offer, in whole or in part, the Institutional Stockholders must deliver to
the Company, on or prior to the date fifteen (15) consecutive days after the
date of delivery of the Offer, an Acceptance indicating the portion of such
holder’s Basic Amount that such holder elects to purchase and, if such holder
shall elect to purchase all of its Basic Amount, the Unsubscribed Amount (if
any) that such holder elects to purchase. 
If the Basic Amounts subscribed for by all Institutional Stockholders
are less than the total of all of the Basic Amounts available for purchase,
then each holder who has set forth an Unsubscribed Amount in its Acceptance
shall be entitled to purchase, in addition to the Basic Amounts subscribed for,
the Unsubscribed Amount it has subscribed for; provided, however, that if the
Unsubscribed Amounts subscribed for exceed the Available Unsubscribed Amount,
each holder who has subscribed for any Unsubscribed Amount shall be entitled to
purchase only that portion of the Available Unsubscribed Amount as the
Unsubscribed Amount subscribed for by such holder bears to the total
Unsubscribed Amounts subscribed for by all Institutional Stockholders, subject
to rounding by the Board to the extent it deems reasonably necessary.


 


(c)           The
Company shall have ninety (90) consecutive days from the expiration of the
period set forth in Section 3.1(b) to issue, sell or exchange all or any part
of the Refused Securities, but only to the offerees or purchasers described in
the Offer (if so described therein) and only upon terms and conditions
(including unit prices and interest rates) that are not more favorable, in the
aggregate, to the offerees or purchasers than those set forth in the Offer.


 


(d)           In the
event the Company shall propose to sell less than all the Refused Securities,
then each Institutional Stockholder may, at its sole option and in its sole
discretion, reduce the number or amount of the Securities specified in its
Acceptance to an amount that shall be not less than the number or amount of the
Securities that the holder elected to purchase pursuant to Section 3.1(b)
multiplied by a fraction, (i) the numerator of which shall be the number or
amount of Securities the Company actually proposes to issue, sell or exchange
(including Securities to be issued or sold to the Institutional Stockholders pursuant
to Section 3.1(b) prior to such reduction) and (ii) the denominator of which
shall be the original amount of the Securities. 
In the event that any of the Institutional Stockholders so elects to
reduce the number or amount of Securities specified in its Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Securities unless and until such securities have again been offered to
the Institutional Stockholders in accordance with Section 3.1(a).


 


(e)           Upon (i)
the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities or (ii) such other date agreed to by the Company, the
Institutional Stockholders who have subscribed for a majority of the Securities
subscribed for by the Institutional Stockholders, such holder or holders shall
acquire from the Company and the Company shall issue to such holder or holders,
the number or amount of Securities specified in the Acceptances, as reduced
pursuant to Section 3.1(d) if any of the holders has so elected, upon the terms
and conditions specified in the Offer.


 


14





















 


(f)            The
purchase by the Institutional Stockholders of any Securities is subject in all
cases to the preparation, execution and delivery by the Company and the
Institutional Stockholders of a purchase agreement relating to such Securities
reasonably satisfactory in form and substance to the Institutional
Stockholders.


 


(g)           Securities
not acquired by the Institutional Stockholders in accordance with Section
3.1(a) and not sold pursuant to Section 3.1(b) may not be issued, sold or
exchanged until they are again offered to the Institutional Stockholders under
the procedures specified in this Section 3.


 


(h)           The
preemptive rights provided to the Institutional Stockholders under this Section
3 shall be effective (i) with respect to Tertio upon the execution of this
Agreement and with respect to all other Institutional Stockholders upon the
date on which shares of Series B Preferred Stock or Common Stock are
transferred to the Institutional Stockholders by Tertio; and (ii) only for so
long as the Institutional Stockholders continue to hold Common Stock and other
Securities convertible into Common Stock consisting no less than an aggregate of
ten (10%) percent of the aggregate number of shares of Registrable Shares held
by the Institutional Stockholders as of the date of this Agreement.


 


3.2.          Excluded Transactions.  The rights of the Institutional Stockholders
under this Section 3 shall not apply to:


 


(a)           any
issuance of securities of the Company for consideration other than cash,
including the issuance of shares (i) as a stock dividend to holders of Common
Stock, Series B Preferred Stock or any other Company securities, or upon any
subdivision or combination of shares of Common Stock, Series B Preferred Stock
or any other Company securities and (ii) upon exercise or conversion of
preferred stock, options, warrants or debt securities exercisable or
convertible for Common Stock pursuant to their terms; and


 


(b)           any
issuance of securities of the Company if such issuance (i) is excluded from the
definition of “Additional Shares of Common Stock” as set forth in the Series B
Certificate or (ii) is in connection with a merger, consolidation, recapitalization,
reorganization or other transaction in which (x) the Company is a constituent
party or (y) a subsidiary of the Company is a constituent party and the
Corporation issues shares of its capital stock pursuant to such transaction.


 


4.             Board of Directors.


 


4.1.          Series B Director.


 


(a)           The
Company confirms that, effective contemporaneously with the execution and
delivery of this Agreement, Peter Skinner has become a director of the Company,
pursuant to the right of the Investors to designate the Series B Director under
Section 3(b) of the Series B Certificate. 
The Compensation Committee of the Board of Directors of the Company
shall include the Series B Director if requested in writing by the Investors
holding a majority of the shares of Series B Preferred Stock.


 


(b)           The
Company and the Investors agree to take any such further actions as may be
necessary or desirable to effect the election, from time to time in the future,
of the Series B Director to (i) the Board of Directors, and (ii) the
Compensation Committee of the Board of Directors, if so requested.


 


(c)           No
individual designated to serve on the Board of Directors as the Series B
Director shall be deemed to be the deputy of or otherwise required to discharge
his or her duties under the direction of, or with special attention to the
interests of, the Investors.


 


15





















 


4.2.          Designation of Series B Director.  For so long as the Investors retain the right
to designate the Series B Director under Section 3(b) or Section 4(b) of the
Series B Certificate, the Company shall provide the Investors with at least 30
consecutive days’ prior written notice (a “Company Election Notice”) of any intended
mailing of a notice to stockholders for a meeting or other action relating to
an election of directors.  The Company
Election Notice shall specify (i) the date of such meeting, (ii) the date on
which such mailing is intended to be made, and (iii) the name or names of the
directors of the Company whose terms are to expire at such meeting.  If the Series B Director is one of the
directors whose term is indicated in the Company Election Notice as expiring
and the Investors retain the right to designate the Series B Director under
Section 3(b) of the Series B Certificate, then the Investors holding in the
aggregate at least a majority of the shares of Series B Stock on the record
date for such election shall give written notice to the other Investors and the
Company, no later than 15 days after receipt of the Company Election Notice, of
such individual to be designated by the Investors as the Series B Director for
election to the Board of Directors as of the date of such meeting.  It shall be a condition to including any such
individual in the applicable proxy materials that the designated Series B
Director provide the information concerning his or her history, background, or
as otherwise required under the Exchange Act. 
The individual designated pursuant to the preceding sentence or
otherwise in accordance with the Series B Certificate, shall be elected to the
Board of Directors as the Series B Director contemporaneously with such
election of directors.  If the Investors
fail to give notice to the Company provided above, then the individual then
serving as the Series B Director shall be deemed to have been designated for
reelection.


 


4.3.          Observer Rights.  For so long as the Investors hold, in the
aggregate such number of shares of Series B Preferred Stock and other
convertible securities of the Company (including convertible debt instruments)
which would, upon the conversion into Common Stock of all such shares of Series
B Preferred Stock and such other convertible securities when taken together
with that number of Common Stock then held by the Investors constitute no less
than two (2%) percent of the Company’s issued and outstanding Common Stock
after having given effect to such conversion, the Company shall give the
Investors written notice of each meeting of the Board of Directors and each
committee thereof at least at the same time and in the same manner as notice is
given to the directors, and the Company shall permit a representative of the
Investors to attend as a non-voting observer all meetings of the Board of
Directors and all committees thereof. 
The Investors shall provide the Company with written notice identifying
the individual who shall exercise board observations rights on behalf of the
Investors.  Effective upon execution and
delivery of this Agreement, the Investors hereby appoint James Brocklebank as
the initial board observer.  The Company
shall deliver to the representative of the Investors all written materials and
other information (including without limitation copies of meeting minutes)
given to directors in connection with such meetings at the same time such materials
and information are given to the directors. 
The Investors understand and acknowledge that the Board of Directors (or
a committee of the Board of Directors, as the case may be) shall have and
reserve the right to exclude the observer from all or any portion of a meeting
to the extent (i) necessary to preserve attorney client privilege or (ii) the
Board of Directors (or such committee), in its sole discretion, deems the
presence of such observer to be inconsistent with the Company’s goal of
adhering to best practices of corporate governance or otherwise inadvisable
under then-current laws, rules, regulations, including any guidelines and
interpretations thereof applicable to the Company set forth or proposed by
Nasdaq, exchange or any trading quotation system on which the Common Stock is
then traded.  The Company shall use its
best efforts to provide such observer with as much advance notice as is
reasonably practicable of such need for exclusion.  If any action is proposed to be taken by
written consent in lieu of a meeting of the Board of Directors or any committee
thereof, the Company shall give written notice thereof to the Investors on or
before the effective date of such consent describing in reasonable detail the
nature and substance of such proposed action. 
Notwithstanding the foregoing, (a) the observer rights granted pursuant
to this Section 3.3 shall be subject to the Investors and the observer
complying with the Company Policies, and (b) the Investors agree, and any
observer will agree in writing, to hold in confidence all confidential
information


 


16





















 


concerning the Company provided to the Investors or
learned by the Investors in connection with its rights under this Section 4.3,
using the same degree of care as the Investors use to protect their own
confidential information, except to the extent higher standards otherwise
required by law and any other regulatory process to which any Investor is
subject.


 


4.4.          Other Covenants.


 


(a)           For so
long as any Series B Director is serving on the Board of Directors pursuant to
Section 4.2 of this Agreement or otherwise in accordance with the Series B
Certificate:


 


(i)            The Company shall
reimburse the Series B Director for his or her reasonable out-of-pocket expenses
incurred in attending meetings of the Board of Directors or any committee
thereof, to the extent provided in, and in accordance with, the Company’s
reimbursement policy in effect from time to time with respect to other
directors who are not employees of the Company or a Subsidiary.  The Series B Director shall be entitled to
receive such fees or other compensation as may be paid by the Company from time
to time to directors who are not employees of the Company or a Subsidiary.


 


(ii)           The Company’s Certificate
of Incorporation shall at all times provide for the indemnification of the
members of the Board of Directors to the fullest extent provided by the
Delaware General Corporation Law and to the maximum extent provided in any
indemnification agreement entered into between the Company and any of its
directors and officers.  In the event
that the Company or any of its successors or assigns (A) consolidates with or
merges into any other entity and shall not be the continuing or surviving
corporation in such consolidation or merger or (B) Transfers all or
substantially all of its properties and assets to any entity, then, and in each
such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of the Company assume the obligations of the Company
with respect to indemnification of members of the Board of Directors as
contained in the Company’s Certificate of Incorporation.


 


(iii)          The Company shall use
its best efforts to carry and maintain insurance against directors’ and
officers’ liability to cover the Series B Director to the same extent as
directors elected by the holders of Common Stock in the amounts presently in
place which are set forth on Schedule 4.4(a)(iii).


 


(b)           For so
long as the representative of the Investors attends as a non-voting observer
all meetings of the Board of Directors and all committees thereof, the Company
shall reimburse the representative of the Investors for his or her reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or any committee thereof, to the extent provided in, and in accordance with,
the Company’s reimbursement policy in effect from time to time with respect to
directors who are not employees of the Company or a Subsidiary.


 


(c)           By
executing the signature page to this Agreement, each of the Investors hereby
(i) acknowledges the receipt of a copy of each Company Policy as in effect on
the date hereof, (ii) agrees to comply with such Company Policies, and (iii)
agrees to use its best efforts to cause the Series B Director and the observer
to comply with such Company Policies.


 


4.5.          Consent Right of Investors.  For so long as the Investors are not entitled
to vote their shares of Series B Preferred Stock due to restrictions imposed by
the applicable rules and regulations of NASDAQ, the Company hereby agrees that
it shall not take any of the actions set forth in Section 3(c) of the Series B
Certificate without the prior written consent of the Investors holding a
majority of the then outstanding shares of Series B Preferred Stock.


 


17





















 


5.             Additional Covenants.


 


5.1.          Compliance with Federal Securities Laws.  With a view to making available to the
Investors the benefits of Rule 144 and any other rule or regulation of the
Commission that may at any time permit an Investor to sell securities of the
Company to the public without registration, and with a view to making it
possible for Investors to have the Registrable Shares registered for resale
pursuant to a registration on Form S-3 (or any successor form), the Company
shall:


 


(a)           use its
best efforts to make and keep current public information about the Company
available, as those terms are understood and defined in Rule 144, at all times;


 


(b)           use its
best efforts to file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act;


 


(c)           use its
best efforts to comply with the applicable provisions of the Sarbanes-Oxley Act
that are currently in effect and to comply with any other applicable provisions
of the Sarbanes-Oxley Act not currently in effect as such provisions become
effective; and


 


(d)           furnish to
any Investor upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 and (ii) such other
reports and documents of the Company as such Investor may reasonably request to
avail itself of any similar rule or regulation of the Commission allowing it to
sell any Registrable Shares without registration.


 


5.2.          Other Registration Rights.


 


(a)           Subsequent
to the date hereof, the Company shall not enter into any Other Registration
Rights with any Other Registration Rights Holder unless such Other Registration
Rights do not conflict with the provisions of this Agreement.  Other Registration Rights shall not be deemed
to conflict with this Agreement solely as a result of a grant of incidental
registration rights to the Other Registration Rights Holders with respect to a
Registration Statement filed pursuant to Section 2.1 of this Agreement; provided that:


 


(i)            Investors are granted
the right to exercise incidental registration rights with respect to any
registration required by such Other Registration Rights Holders to be made by
the Company;


 


(ii)           if a managing
underwriter advises the Company that marketing factors require a limitation on
the number of shares to be underwritten in an offering made at the request of
the Other Registration Rights Holders, the shares held by such Other Registration
Rights Holders shall be excluded first, before any shares of the Investors are
excluded; and


 


(iii)          if a managing
underwriter advises the Company that marketing factors require a limitation on
the number of shares to be underwritten in an offering requested under Section
2.1 of this Agreement, the shares held by such Other Registration Rights
Holders shall be excluded first, before any shares of the Investors are
excluded.


 


(b)           The
Investors hereby acknowledge that the Company has granted certain registration
rights pursuant to that certain Registration Rights Agreement, dated as of the
3rd day of November, 2003, among the Company and the former stockholders of CMS
Communications, Inc., an Ohio corporation (the “CMS Registration Rights Agreement”).  Notwithstanding anything herein to the
contrary, the Company’s satisfaction of its obligations under, and compliance
with, the CMS Registration Rights Agreement shall in no event be deemed a
breach of this Agreement.


 


18





















 


5.3.          Financial and Business Information.  From and after the date hereof, in the event
(and during the continuance of the period) that the Company is no longer a
publicly reporting company, the Company shall deliver to each Investor that has
executed or otherwise has in effect a non-disclosure agreement with the
Company, the following:


 


(a)           Annual
Statements.  As soon as practicable
after the end of each fiscal year of the Company, and in any event within
ninety (90) consecutive days thereafter:


 


(i)            consolidated and
consolidating balance sheets of the Company and any subsidiaries at the end of
such year;


 


(ii)           consolidated and
consolidating statements of income, stockholders’ equity and cash flows of the
Company and any subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by an opinion thereon of independent certified public
accountants of recognized national standing selected by the Company, which
opinion shall state that such financial statements fairly present the financial
position of the Company and any subsidiaries on a consolidated basis and have
been prepared in accordance with GAAP (except as described in the notes thereto
and for changes in application in which such accountants concur) and that the
examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances; and


 


(iii)          comparisons of each
pertinent item in (i) and (ii) above to the operating and capital budget
referred to in Section 5.3(b) of this Agreement.


 


(b)           Business
Plans and Budgets.  At least thirty
(30) consecutive days prior to the end of each fiscal year, (i) an annual
business plan setting forth the anticipated strategic business activities and
goals, including an expected budget, of the Company an projections of operating
results, prepared on a quarterly basis, and (ii) an annual capital budget
describing the intended capital investment strategy of the Company that has
been approved and adopted by the Board.


 


(c)           Quarterly
Statements.  Within forty-five (45)
consecutive days after the close of each of the first three (3) fiscal quarters
of each fiscal year of the Company, a consolidated balance sheet, statement of
income and statement of cash flows of the Company and any subsidiaries as at
the close of such quarter and covering operations for such quarter and the
portion of the Company’s fiscal year ending on the last day of such quarter,
all in reasonable detail and prepared in accordance with GAAP, subject to audit
and year-end adjustments, setting forth in each case in comparative form the
figures for the comparable period of the previous fiscal year, and a summary
written analysis of such comparison.  The
Company shall also provide comparisons of each pertinent item to the operating
and capital budget referred to in Section 5.3(b) of this Agreement.


 


(d)           Monthly
Statements.  Within thirty (30)
consecutive days after the end of each month, a consolidated balance sheet,
statement of income and statement of cash flows of the Company and any
subsidiaries as at the close of such month and covering operations for such
month and the portion of the Company’s fiscal year ending on the last day of
such quarter, all in reasonable detail and prepared in accordance with GAAP,
subject to audit and year-end adjustments, setting forth in each case in
comparative form the figures for the comparable period of the previous fiscal
year, and a summary written analysis of such comparison.  The Company shall also provide comparisons of
each pertinent item to the operating and capital budget referred to in Section
5.3(b) of this Agreement.


 


19





















 


(e)           Audit
Reports.  As soon as practicable
after receipt thereof, a copy of any financial report and internal control
letter submitted to the Company by independent accountants in connection with
any annual, interim or special audit made by them of the books of the Company.


 


(f)            Other
Reports.  As soon as practicable
after receipt thereof, one copy of each financial statement, report, notice of
proxy statement, if any, sent by the Company to stockholders generally, of each
written communication received by the Company from any domestic or foreign
securities exchange, the Commission or any foreign regulatory authority
performing functions similar to the Commission.


 


5.4.          VCOC Rights.


 


(a)           In order
to permit compliance with applicable laws (including, without limitation,
Department of Labor “plan asset” regulations, 29 C.F.R. §§2510.3-101) and to
facilitate the input of the Advent Funds with respect to the management of the
business of the Company, the Company agrees to grant the Advent Funds the
rights described below and the Company further agrees that it will give due
consideration to such input as may be provided by the Advent Funds in exercise
of such rights:


 


(i)            at reasonable times
and on reasonable notice, the right to discuss, and provide advice with respect
to, the business operations, properties and financial and other conditions of
the Company with each of the Company’s officers, employees and managers and the
right to consult with and advise the senior management of the Company on
matters materially affecting the business and affairs of the Company;


 


(ii)           at reasonable times and
on reasonable notice, the right to submit business proposals or suggestions to
the senior management of the Company from time to time and to have such
proposals or suggestions reasonably considered; and


 


(iii)          the right: (A) to visit
the business premises and other properties of the Company during normal
business hours and on reasonable notice; (B) to receive the budgets and
financial statements of the Company; (C) to examine the books and records of
each of the Company during normal business hours and on reasonable notice; and
(D) to request such other information at reasonable times and intervals in
light of the Company’s normal business operations concerning the general status
of the Company’s business, financial condition and operations but only to the
extent such information is reasonably available to the Company and in a format
consistent with how the Company maintains such information.


 


(b)           In the
event the Advent Funds demonstrate to the Company that the above-mentioned
rights do not satisfy the requirement of management rights for the purpose of
qualifying the Advent Funds’ ownership of an equity interest in the Company as
a venture capital investment for purposes of the Department of Labor “plan
asset” regulations, 29 C.F.R. §§2510.3-101, the Company and the Advent Funds
shall reasonably cooperate in good faith to agree upon mutually satisfactory
consultation rights which satisfy such regulations.  The rights afforded by this Section 5.4 shall
be assignable to any Person who is a transferee of the Advent Funds’ interest
in the Company.


 


(c)           Any
provision of this Section 5.4 may be amended and the observance thereof may be
waived, only with the approval of Advent.


 


(d)           The rights
and obligations under this Section 5.4 shall become effective upon the issuance
or transfer of Series B Stock or Registrable Shares to any Advent Fund.


 


20





















 


5.5.          Available Copy.  The Secretary of the Company shall maintain
an original copy of this Agreement, duly executed by each of the parties
hereto, at the principal executive office of the Company and shall make such
copy available for inspection by any Person requesting it.


 


6.             Nonpublic Information.  Neither the Company nor any Person acting on
its behalf shall provide any Investor with any material, nonpublic information
about the Company unless, in advance of the delivery of such information, the
Investor consents to the receipt of such information and agrees to maintain the
confidentiality of such information in writing, regardless of whether the
delivery of such information is otherwise required pursuant to the terms of
this Agreement or any other Transaction Document (as defined in the Purchase
Agreement).  The Company understands and
confirms that each of the Investors will rely on the foregoing covenant in
effecting transactions in securities of the Company.


 


7.             General.


 


7.1.          Use of Best Efforts.  Where this Agreement requires the “best
efforts” of the Company, it is understood and agreed that the Company shall not
be required by its obligation to undertake “best efforts” to incur any
extraordinary expense or undertake or engage in any litigation.


 


7.2.          Notices. 
All notices, requests and other communications to any party hereunder
shall be in writing (including facsimile or similar writing) and shall be given
to such party at its address or facsimile number set forth on the signature
page hereof, or such other address or facsimile number as such party may
hereinafter specify for the purpose of this Section 7.2 to the party giving
such notice.  Each such notice, request
or other communication shall be effective (a) if given by facsimile
transmission, when such facsimile is transmitted to the facsimile number
specified on the signature pages of this agreement and the appropriate
confirmation is received or, (b) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or, (c) if given by any other means, when delivered at
the address specified on the signature pages of this Agreement.


 


7.3.          Amendments and Waivers.


 


(a)           Other than
with regard to the provisions of Section 2 and Section 5.4 of this Agreement,
this Agreement may be amended or terminated and the observance of any term of
this Agreement may be waived with respect to all parties to this Agreement
(either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and Investors holding
at least a majority of the Series B Stock then held by Investors.


 


(b)           The
provisions of Section 2 of this Agreement may be amended or terminated and the
observance of any term of Section 2 of this Agreement may be waived with
respect to all parties to this Agreement (either generally or in a particular
instance and either retroactively or prospectively), with the written consent
of the Company and Investors holding at least two-thirds of the Series B Stock
then held by Investors.


 


(c)           The
provisions of Section 5.4 of this Agreement may be amended and the observance
thereof may be waived, only with the approval of Advent.


 


(d)           Notwithstanding
the foregoing, this Agreement may not be amended or terminated and the
observance of any term hereunder may not be waived with respect to any Investor
without the written consent of such Investor unless such amendment, termination
or waiver applies to all Investors in the same fashion.


 


21





















 


(e)           The
Company shall give prompt written notice of any amendment or termination of
this Agreement or waiver hereunder to any party hereto that did not consent in
writing to such amendment, termination or waiver.  Any amendment, termination or waiver effected
in accordance with this Section 7.3 shall be binding on all parties hereto,
even if they do not execute such consent. 
No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such term, condition or provision.


 


7.4.          Successors and Assigns.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that
the Company may not assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the written consent of Investors
holding at least a majority of the Series B Stock then held by Investors.  For purposes of clarity and without limiting
any of the foregoing, to the extent not otherwise provided herein (or, to the extent
applicable, in the Series B Certificate), any Investor may assign, delegate or
otherwise transfer any of its respective rights or obligations under this
Agreement.  Notwithstanding anything
contained herein to the contrary, the rights and privileges set forth in
Sections 4.1, 4.2 and 4.3 are personal to the Investors and may not be assigned
without the prior written consent of the Company.


 


7.5.          Governing Law; Venue; Waiver of Jury Trial.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Delaware.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in the State of Delaware, for the adjudication of any dispute hereunder or in
connection with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, or that such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law.  Each of the parties
hereby waives all rights to a trial by jury.


 


7.6.          Entire Agreement.  This Agreement constitutes the entire
agreement and understanding among the parties hereto with respect to the
subject matter of this Agreement and supersedes any and all prior agreements
and understandings, written or oral, relating to such subject matter.


 


7.7.          Severability. 
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.


 


7.8.          Headings. 
The headings in this Agreement are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.


 


7.9.          Counterparts; Facsimile Signatures;
Effectiveness.  This Agreement may be
executed in any number of counterparts (including facsimile signature) each of
which shall be an original with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by the
other party hereto.


 


22





















 


[signature pages follow]


 


23





















 


IN
WITNESS WHEREOF, the parties hereto have caused this Investor Rights Agreement
to be duly executed by their respective authorized signatories as of the date first
above written.


 


	
   

  	
  EVOLVING
  SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Stephen K. Gartside, Jr.

  	
   

  
	
   

  	
  Name:

  	
  Stephen K. Gartside, Jr.

  
	
   

  	
  Title:

  	
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for notices:

  
	
   

  	
   

  	
   

  
	
   

  	
  Evolving Systems, Inc.

  
	
   

  	
  9777 Mt. Pyramid Ct., Suite 100

  
	
   

  	
  Englewood, CO 80112

  
	
   

  	
  Attn: Anita Moseley, General
  Counsel

  
	
   

  	
  Tel.: (303) 802-2599

  
	
   

  	
  Fax: (303) 802-1138

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Holme Roberts & Owen LLP

  
	
   

  	
  1700 Lincoln St., Suite 4100

  
	
   

  	
  Denver, CO 80203-4541

  
	
   

  	
  Attention: Charles D. Maguire,
  Jr., Esq.

  
	
   

  	
  Tel: (303) 861-7000

  
	
   

  	
  Fax: (303) 866-0200

  
					



 


[Investor signature pages follow]


 





















 


	
  INVESTORS:

  	
  TERTIO TELECOMS GROUP LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nigel Clifford

  	
   

  
	
   

  	
  Name:  Nigel
  Clifford

  
	
   

  	
  Title:   Director

  
	
   

  	
   

  
	
   

  	
  c/o Apax Partners Ltd.

  
	
   

  	
  15 Portland Place

  
	
   

  	
  London W1B 1PT

  
	
   

  	
  United Kingdom

  
	
   

  	
  Attn: Peter Skinner

  
	
   

  	
   

  
	
   

  	
  Tel: +44 (0)20 7872 6300

  
	
   

  	
  Fax: + 44(0)20 7666 6441

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Pepper Hamilton LLP

  
	
   

  	
  3000 Two Logan Square

  
	
   

  	
  18th and Arch Streets

  
	
   

  	
  Philadelphia, Pennsylvania 19103

  
	
   

  	
  Attention:    Cary
  Levinson, Esquire

  
	
   

  	
  Tel: (215) 981-4091

  
	
   

  	
  Fax: (215) 981-4750

  
	
   

  	
   

  
	
   

  	
  FOUR SEASONS VENTURE II AS

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gunnar Rydning

  	
   

  
	
   

  	
  Name:   Gunnar Rydning

  
	
   

  	
  Title:     Senor Partner

  
	
   

  	
   

  
	
   

  	
  Four Seaons Venture

  
	
   

  	
  Postboks 1216 Vika

  
	
   

  	
  0110 Oslo

  
	
   

  	
  Norway

  
	
   

  	
   

  
	
   

  	
  Tel: +47 2283 0660

  
	
   

  	
  Fax: +47 2283 8518

  
					



 





















 


	
   

  	
  ADVENT INTERNATIONAL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  Global Private Equity III Limited
  Partnership

  
	
   

  	
  Global Private Equity III-A Limited
  Partnership

  
	
   

  	
  Global Private Equity III-B Limited
  Partnership

  
	
   

  	
  Global Private Equity III-C Limited
  Partnership

  
	
   

  	
  Advent PGGM Global Limited
  Partnership

  
	
   

  	
  Advent Euro-Italian Direct
  Investment Program Limited Partnership

  
	
   

  	
  Advent Co-Investment Program
  Limited Partnership

  
	
   

  	
  Digital Media & Communications
  II Limited Partnership

  
	
   

  	
  Advent Crown Fund II C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Advent International Limited Partnership,

  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Advent International Corporation,

  General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Janet L. Hennessy,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Janet L. Hennessy, Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Advent
  Partners Limited Partnership

  
	
   

  	
  Advent
  Partners(NA) GPE III Limited Partnership

  
	
   

  	
  Advent
  Partners GPE III Limited Partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Advent International Corporation, General

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Janet L. Hennessy,

  	
   

  
	
   

  	
   

  	
   

  	
  Janet L. Hennessy, Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Advent Global GECC III Limited
  Partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Advent Global
  Management Limited

  Partnership, General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Advent
  International Limited

  Partnership, General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Advent
  International Corporation,

  General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Janet L. Hennessey,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Janet L. Hennessy, Vice

  President

  	
   

  
								



 





















 


	
   

  	
   

  	
  Address
  for notices:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o Advent International Company

  
	
   

  	
   

  	
  75 State Street

  
	
   

  	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
   

  	
  Attention: Janet L. Hennessy

  
	
   

  	
   

  	
  Fax: 617.951.0566

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Advent International
  plc

  
	
   

  	
   

  	
  123 Buckingham Palace
  Road

  
	
   

  	
   

  	
  London SW1W 9SL

  
	
   

  	
   

  	
  Attention: James L.
  Brocklebank

  
	
   

  	
   

  	
  Tel: 44.20.7333.5516

  
	
   

  	
   

  	
  Fax: 44.20.7333.0801

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pepper Hamilton LLP

  
	
   

  	
   

  	
  3000 Two Logan Square

  
	
   

  	
   

  	
  18th and Arch Streets

  
	
   

  	
   

  	
  Philadelphia, Pennsylvania
  19103

  
	
   

  	
   

  	
  Attention: Cary
  Levinson, Esquire

  
	
   

  	
   

  	
  Tel: (215) 981-4091

  
	
   

  	
   

  	
  Fax: (215) 981-4750

  



 





















 


	
   

  	
  APAX
  PARTNERS LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Apax
  WW Nominees Limited

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Apax
  Europe IV – A, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Apax Europe IV
  GP, L.P., Managing General

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Apax Europe IV
  GP Company Limited.,

  Managing General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Connie A.E.
  Helyar,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Connie A.E.
  Helyar, Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Apax
  Europe IV – B, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Apax Europe IV
  GP, L.P., Managing General

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Apax Europe IV
  GP Company Limited.,

  Managing General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Connie A.E.
  Helyar,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Connie A.E.
  Helyar, Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Apax
  Europe IV – C GmbH & Co. KG

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Apax Europe IV
  GP, L.P., Managing General

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Apax Europe IV
  GP Company Limited.,

  Managing General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Connie A.E.
  Helyar,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Connie A.E.
  Helyar, Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Apax
  Europe IV – D, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Apax Europe IV
  GP, L.P., Managing General

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Apax Europe IV
  GP Company Limited.,

  Managing General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Connie A.E.
  Helyar,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Connie A.E.
  Helyar, Director

  
																



 





















 


	
   

  	
  Apax
  Europe IV – E, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Apax Europe IV
  GP, L.P., Managing General

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Apax Europe IV
  GP Company Limited.,

  Managing General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Connie A.E.
  Helyar,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Connie A.E.
  Helyar, Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Apax
  Europe IV – F, C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Apax Europe IV
  GP, L.P., Managing General

  Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Apax Europe IV
  GP Company Limited.,

  Managing General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Connie A.E.
  Helyar,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Connie A.E.
  Helyar, Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Apax
  Europe IV – G, C.V.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Apax Europe IV
  GP, L.P., Managing General

  Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Apax Europe IV GP Company Limited.,

  Managing General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Connie A.E. Helyar,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Connie A.E. Helyar, Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Address
  for notices:

  
	
   

  	
   

  	
   

  
	
   

  	
  c/o Apax Partners Ltd.

  
	
   

  	
  15 Portland Place

  
	
   

  	
  London W1B 1PT

  
	
   

  	
  United Kingdom

  
	
   

  	
  Attn: Peter Skinner

  
	
   

  	
   

  
	
   

  	
  Tel: +44 (0)20 7872 6300

  
	
   

  	
  Fax: + 44(0)20 7666 6441

  



 





















 


Schedule 4.4 (a) (iii)



Directors’ and Officers’

Liability Insurance Coverage



[Attach Insurance Binders]