1
EXHIBIT 4.3
================================================================================
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
PHOENIX NETWORK, INC.
and
JNC OPPORTUNITY FUND LTD.
------------------------------
July 17, 1997
------------------------------
================================================================================
2
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of
July 17, 1997 (this "Agreement"), between Phoenix Network, Inc., a Delaware
corporation (the "Company"), and JNC Opportunity Fund Ltd., a corporation
organized and existing under the laws of the Cayman Islands (the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to acquire shares of the Company's Series I Convertible
Preferred Stock, par value $.001 per share (the "Preferred Stock"), and certain
of the Company's common stock purchase warrants.
IN CONSIDERATION of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement,
unless the context requires a different meaning, the following terms have the
meanings indicated in this Section 1.1:
"Affiliate" means, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Agreement" shall have the meaning set forth in the recitals
hereto.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a Federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or
other government actions to close.
"Certificate of Designation" shall have the meaning set forth
in Section 2.1(a).
"Closing Dates" shall mean, collectively, the Initial Closing
Date and the Subsequent Closing Date.
3
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$.001 per share.
"Company" shall have the meaning set forth in the recitals
hereto.
"Conversion Ratio" shall have the meaning set forth in the
Certificate of Designation.
"Encore" shall have the meaning set forth in Section
2.1(c)(i).
"Escrow Agent" means Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP.
"Escrow Agreement" means the escrow agreement, dated as of the
date hereof, by and among the Company, the Purchaser and the Escrow Agent, in
the form of Exhibit F, as the same may be amended, supplemented or otherwise
modified in accordance with its terms.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Foothill Facility" means the Amended and Restated Loan and
Security Agreement, dated as of September 26, 1995, between the Company,
Phoenix Network Acquisition Corp. and AmeriConnect, Inc. (as Borrowers) and
Foothill Capital Corporation, as amended, supplemented or otherwise modified in
accordance with its terms.
"Initial Closing" shall have the meaning set forth in Section
2.1(b).
"Initial Closing Date" shall have the meaning set forth in
Section 2.1(b).
"Initial Warrant" means the Common Stock purchase warrant to
be issued to the Purchaser at the Initial Closing, in the form of Exhibit E,
entitling the Purchaser to purchase up to 45,000 shares of Common Stock
(subject to adjustment as therein provided) in accordance with the terms
thereof.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, right of first refusal, charge, security interest or encumbrance of any
kind in or on such asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
-2-
4
"Original Issue Date" shall mean the Initial Closing Date,
regardless of the number of transfers of any particular Share and regardless of
the number of certificates which may be issued to evidence any particular
Share.
"Per Share Market Value" shall have the meaning set forth in
the Certificate of Designation.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Purchaser" shall have the meaning set forth in the recitals
hereto.
"Registration Rights Agreement" means the registration rights
agreement, dated as of the date hereof, between the Company and the Purchaser,
in the form of Exhibit B, as the same may be amended, supplemented or otherwise
modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in
Section 3.1(f).
"SEC Documents" shall have the meaning set forth in Section
3.1(l).
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Preferred Stock to be purchased
by the Purchaser pursuant to this Agreement.
"Subsequent Financing" shall have the meaning set forth in
Section 4.9.
"Subsequent Financing Notice" shall have the meaning set forth
in Section 4.9.
"Subsequent Warrant" means the Common Stock purchase warrant
to be issued to the Purchaser at the Subsequent Closing, if any, in the form of
Exhibit E, entitling the Purchaser to purchase up to 30,000 shares of Common
Stock (subject to adjustment as therein provided) in accordance with the terms
thereof.
"Subsidiaries" shall have the meaning set forth in Section
3.1(a).
"Trading Day" shall have the meaning set forth in the
Certificate of Designation.
"Transaction Documents" shall have the meaning set forth in
Section 3.1(b).
-3-
5
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of Shares and as payment of dividends thereon in accordance
with the terms hereof and the Certificate of Designation, and upon exercise of
the Warrants in accordance with the terms thereof.
"Underlying Shares Registration Statement" shall have the
meaning set forth in Section 3.1(f).
"Warrants" mean, collectively, the Initial Warrant and the
Subsequent Warrant.
ARTICLE II
PURCHASE OF SHARES
Section 2.1. Purchase of Shares; Closings.
(a) Subject to the terms and conditions set forth in this
Agreement, at the closings described below, the Company shall issue and sell to
the Purchaser, and the Purchaser shall purchase from the Company the Shares,
which shall have the respective rights, preferences and privileges set forth in
Exhibit A (the "Certificate of Designation"), at a price per Share of $20.
(b)(i) The closing of the purchase and sale of 75,000 Shares
and the Initial Warrant (the "Initial Closing") shall take place at the offices
of the Escrow Agent, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
immediately following the execution hereof, or at such other time and/or place
as the Purchaser and the Company may agree. The date of the Initial Closing is
referred to herein as the "Initial Closing Date".
(ii) At the Initial Closing, the Escrow Agent, in
accordance with and subject to the terms and conditions of the Escrow
Agreement, shall, pursuant to instructions of the Company and the Purchaser,
deliver (A) to the Purchaser, (1) one or more stock certificates representing
75,000 Shares and the Initial Warrant to be purchased hereunder, each
registered in the name of the Purchaser, and (2) the legal opinion addressed to
it and dated the Initial Closing Date, of Xxxxxx Xxxxxxxx Xxxxxx & X'Xxxxxxx,
P.C., counsel for the Company, substantially in the form of Exhibit C; (B) to
the Company, $1,500,000, less the amounts to be deducted in accordance with the
Escrow Agreement, in United States dollars in immediately available funds by
wire transfer to an account designated in writing by the Company prior to the
Initial Closing; and (iii) to the party entitled thereto, all documents,
instruments and writings required to have been delivered at or prior to the
Initial Closing by either the Company or the Purchaser pursuant to this
Agreement.
-4-
6
(c)(i) The Purchaser and the Company agree that if a managed
account of Encore does not purchase 50,000 Shares from the Company on the
fourth Business Day after the Initial Closing Date, the Company will issue and
the Purchaser will purchase 50,000 Shares and the Subsequent Warrant at a
closing (the "Subsequent Closing") to occur on such fourth Business Day at the
offices of the Escrow Agent, 1290 Avenue of the Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000, or at such other time and/or place as the Purchaser and the Company may
agree. The date of the Subsequent Closing is referred to herein as the
"Subsequent Closing Date". If such managed account timely purchases such
Shares, neither the Company nor the Purchaser shall have any obligation to the
other in respect of a Subsequent Closing.
(ii) At the Subsequent Closing (if any under the
terms hereof), the Escrow Agent, in accordance with and subject to the terms
and conditions of the Escrow Agreement, shall, pursuant to instructions of the
Company and the Purchaser, deliver (A) to the Purchaser, (1) one or more stock
certificates representing 50,000 Shares and the Subsequent Warrant to be
purchased hereunder, each registered in the name of the Purchaser, and (2) the
legal opinion addressed to it and dated the Subsequent Closing Date, of Xxxxxx
Xxxxxxxx Xxxxxx & X'Xxxxxxx, P.C., counsel for the Company, substantially in
the form of Exhibit C; (B) to the Company, $1,000,000, less the amounts to be
deducted in accordance with the Escrow Agreement, in United States dollars in
immediately available funds by wire transfer to an account designated in
writing by the Company prior to the Subsequent Closing; and (C) to the party
entitled thereto, all documents, instruments and writings required to have been
delivered at or prior to the Subsequent Closing by either the Company or the
Purchaser pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser as of the date
hereof and as of each of the Closing Dates as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and assets and to carry on
its business as currently conducted. The Company has no subsidiaries other
than as set forth in the SEC Documents or in Schedule 3.1(a) (collectively, the
"Subsidiaries"). Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
Each of the Company and the Subsidiaries is duly
-5-
7
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually
or in the aggregate, (x) adversely affect the legality, validity or
enforceability of this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Warrants or the Certificate of Designation (collectively, the
"Transaction Documents"), (y) have a material adverse effect on the results of
operations, assets, prospects, or financial condition of the Company and the
Subsidiaries, taken as a whole or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under the Transaction Documents
(a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and to otherwise carry
out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company, including, without limitation, approval
thereof by the Company's Board of Directors. Each of the Transaction Documents
has been duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other charter
documents.
(c) Capitalization. The authorized, issued and
outstanding capital stock of the Company and each of the Subsidiaries is set
forth in Schedule 3.1(c). No shares of Common Stock are entitled to preemptive
or similar rights. Except as specifically disclosed in Schedule 3.1(c), there
are no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Shares and the Warrants hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings, or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. To the knowledge of the Company, except as specifically
disclosed in the SEC Documents or Schedule 3.1(c), no Person beneficially owns
(as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) or
has the right to acquire by agreement with or by obligation binding upon the
Company beneficial ownership of in excess of 5% of the Common Stock.
(d) Issuance of Shares, Warrants and Underlying Shares.
The Shares and the Warrants have been duly authorized and, when paid for in
accordance with the terms
-6-
8
hereof, shall be validly issued, fully paid and nonassessable, free and clear
of any Liens. The Company has and at all times while any Shares or the
Warrants are outstanding will maintain a reserve of shares of Common Stock to
enable it to perform its conversion, exercise and other obligations under this
Agreement, the Certificate of Designation and the Warrants, which reserve shall
be no less than the sum of (i) twice the number of Underlying Shares as are
issuable upon conversion of all of the then outstanding and previously
unconverted Shares into Common Stock pursuant to the terms hereof and the
Certificate of Designation, assuming such conversion occurred on the Original
Issue Date, (ii) such number of Underlying Shares as are issuable as payment of
dividends on account of the Shares and (iii) such number of Underlying Shares
as are issuable upon the exercise in full of the Warrants. When issued in
accordance with the terms hereof, the Certificate of Designation and the
Warrants, the Underlying Shares will have been duly authorized, validly issued,
fully paid and nonassessable, and free and clear of any Liens.
(e) No Conflicts. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated thereby do not and will not (i)
conflict with or violate any provision of its certificate of incorporation or
bylaws (each as amended through the date hereof) or (ii) subject to obtaining
the consents specified in Section 3.1(f), conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, loans or credit
agreement or other instrument or agreement to which the Company is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including Federal and state securities laws
and regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as could not, individually or in the aggregate, have or result in a Material
Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except in such case where the conduct of such business in violation of any law,
ordinance or regulation of any governmental authority, could not, individually
or in the aggregate, have or result in a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set
forth in Schedule 3.1(f), neither the Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other Federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, except
for (i) the filing of the Certificate of Designation with respect to the Shares
with the Secretary of State of Delaware, which filing shall be effected on or
prior to the Initial Closing Date, (ii) the filing of the registration
statement covering the Underlying Shares (the "Underlying Shares Registration
Statement") with the Commission and the making of the applicable blue-sky
filings under state securities laws, each as contemplated by the Registration
Rights Agreement,
-7-
9
and (iii) other than, in all other cases, where the failure to obtain such
consent, waiver, authorization or order, or to give or make such notice or
filing, could not, individually or in the aggregate, have or would result in a
Material Adverse Effect (together with the consents, waivers, authorizations,
orders, notices and filings referred to in Schedule 3.1(f), the "Required
Approvals").
(g) Litigation; Proceedings. There is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, state,
county, local or foreign) which relates to or challenges the legality, validity
or enforceability of the Transaction Documents, Shares, Warrants or Underlying
Shares or which could, individually or in the aggregate, have or result in a
Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (other than such
violations of the Foothill Facility as have been waived in writing, true and
complete copies of which have been delivered to the Purchaser) any indenture,
loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, (ii) is in violation of
any order of any court, arbitrator or governmental body, or (iii) is in
violation of any statute, rule or regulation of any governmental authority,
except as could not, in any case of (i) above, individually or in the
aggregate, have or result in a Material Adverse Effect.
(i) Certain Fees. Except for fees payable by the Company
to Xxxxxxx Capital Partners, Ltd. ("Xxxxxxx") and Xxxxx X. Xxxxxx, no fees or
commissions are or will be payable by the Company to any broker, finder,
investment banker or bank with respect to the consummation of the transactions
contemplated hereby. The Purchaser shall have no obligation with respect to
such fees or with respect to any claims made by other Persons for fees of a
type contemplated in this Section due in connection with this transaction. The
Company shall indemnify and hold harmless the Purchaser, its employees,
officers, directors, agents, and partners, and their respective Affiliates (as
such term is defined under Rule 405 promulgated under the Securities Act), from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees.
(j) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of securities of the Company under circumstances which
would require the integration of such offering with the offering of the Shares,
the Warrants or the Underlying Shares under the Securities Act) which might
subject the offering, issuance or sale of the Shares, the Warrants or the
Underlying Shares to the registration requirements of Section 5 of the
Securities Act.
(k) SEC Documents. The Company has filed all reports
required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the
-8-
10
three years preceding the date hereof (or such shorter period as the Company
was required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents") on a timely basis, or
has received a valid extension of such time of filing (in which case it has
made all such filings in the time required by such extension). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the published rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved, except as may be otherwise specifically indicated
in such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments. The Company last filed
audited financial statements with the Commission on June 18, 1997, and the
Company has not received any comments from the Commission in respect of such
audited financial statements. Since the date of the financial statements
included in the last filed Annual Report on Form 10-K, there has been no event,
occurrence or development that has had could have or would result in a Material
Adverse Effect which has not been specifically disclosed to the Purchaser.
(l) Seniority. No class of equity securities of the
Company is senior to the Shares in right of payment, whether upon liquidation,
dissolution or otherwise.
(m) Form S-3 Eligibility. The Company is, and at each of
the Closing Dates will be, eligible to register securities for resale with the
Commission under Form S-3 promulgated under the Securities Act.
(n) Investment Company. The Company is not and is not an
Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(o) Exclusivity. The Company shall not issue and sell
the Preferred Stock to any Person other than the Purchaser other than with the
specific prior written consent of the Purchaser.
(p) Listing and Maintenance Requirements Compliance. The
Company has not in the two years prior to the date hereof received written
notice from any stock exchange or market on which the Common Stock is or has
been listed (or on which it is or has been
-9-
11
quoted) to the effect that the Company is not in compliance with the listing or
maintenance requirements of such exchange or market.
Section 3.2. Representations and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Company as of the date
hereof and as of each of the Closing Dates as follows:
(a) Organization; Authority. The Purchaser is a
corporation duly and validly existing and in good standing under the laws of
the jurisdiction of its incorporation. The Purchaser has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Registration Rights Agreement and the Escrow
Agreement and otherwise to carry out its obligations hereunder and thereunder.
The purchase of the Shares and the Warrants by the Purchaser hereunder has been
duly authorized by all necessary action on the part of the Purchaser. Each of
this Agreement, the Registration Rights Agreement and the Escrow Agreement has
been duly executed and delivered by or on behalf of the Purchaser and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the
Shares, the Warrants and the Underlying Shares for its own account (and/or on
behalf of managed accounts who are purchasing solely for their own accounts for
investment) for investment purposes only and not with a view to or for
distributing or reselling such Shares, Warrants or Underlying Shares or any
part thereof or interest therein, without prejudice, however, to the
Purchaser's right, subject to the provisions of the Transaction Documents, at
all times to sell or otherwise dispose of all or any part of such Shares,
Warrants or Underlying Shares under an effective registration statement under
the Securities Act and in compliance with applicable State securities laws or
under an exemption or exclusion from such registration.
(c) Purchaser Status. At the time the Purchaser (and any
account for which it is purchasing) was offered the Shares and the Warrants, it
(and any managed account for which it is purchasing) was, and at the date
hereof, it (and any managed account for which it is purchasing) is, and at each
of the Closing Dates, it (and any managed account for which it is purchasing)
will be, an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares and the
Warrants, and has so evaluated the merits and risks of such investment.
-10-
12
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Shares and
the Warrants and, at the present time, is able to afford a complete loss of
such investment.
(f) Prohibited Transactions. Neither Shares nor the
Warrants are being acquired, directly or indirectly, with the assets of any
"employee benefit plan", within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges
that it or its representatives has been afforded (i) the opportunity to ask
such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the Warrants and the merits and risks of an
investment therein; (ii) access to information about the Company and the
Company's financial condition, results of operations, business, properties and
management sufficient to enable it to evaluate such investment; and (iii) the
opportunity to obtain such additional information which the Company possesses
or can acquire without unreasonable effort or expense that is necessary to make
an informed investment decision with respect to the Shares and the Warrants.
The Purchaser has made detailed inquiry concerning the Company, its business
and its personnel. The Company has made available to Purchaser any and all
written information that it has requested and has answered to Purchaser's
satisfaction all inquiries made by Purchaser.
(h) Reliance. The Purchaser understands and acknowledges
that (i) the Shares and the Warrants are being offered and sold, and the
Underlying Shares are being offered, to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption
depends in part on, and that the Company will rely upon the accuracy and
truthfulness of, the foregoing representations and the Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes
no representation or warranty with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Transfer Restrictions. (a) If the Purchaser
should decide to dispose of any of the Shares or any portion of the Warrants
(and upon conversion or exercise (as the case may be) thereof, any Underlying
Shares), the Purchaser understands and agrees that it may do so only pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from the registration requirements
-11-
13
thereof. In connection with any transfer of any of the Shares, any portion of
the Warrants or the Underlying Shares other than pursuant to an effective
registration statement or to the Company, the Company may require the
transferor thereof to provide to the Company an opinion of counsel experienced
in the area of United States securities laws selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
Shares, Warrants or Underlying Shares under the Securities Act.
(b) The Purchaser agrees to the imprinting, so
long as is required by this Section 4.1(b), of the following legend on
certificates representing the Shares, Warrants or Underlying Shares:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] [THE SECURITIES REPRESENTED
HEREBY] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.
[For Shares only] THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH
IN A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF JULY
17, 1997 BETWEEN PHOENIX NETWORK, INC. (THE "COMPANY") AND THE
ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY.
The Underlying Shares issuable upon conversion of Shares or
exercise of Warrants (as the case may be) shall not contain the legend set
forth above if such conversion or exercise occurs at any time while the
Underlying Shares Registration Statement is effective under the Securities Act
or in the event there is not an effective Underlying Shares Registration
Statement at such time, if in the opinion of counsel to the Company experienced
in the area of United States securities laws determines that such legend is not
required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The certificates representing the Shares, the Warrants and the
Underlying Shares shall also bear any other legends required by applicable
Federal or state securities laws, which legends shall be removed when not
required in accordance with this Section 4.1(b). The Company agrees that it
will provide the
-12-
14
Purchaser, upon request, with a certificate or certificates representing
Underlying Shares, free from such legend at such time as such legend is no
longer required in accordance with this Section 4.1(b). The Purchaser agrees
that it will not offer or sell any Underlying Shares except pursuant to an
effective registration statement under the Securities Act or pursuant to an
available exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and in accordance with applicable State
securities laws and in connection with any transfer of Underlying Shares by it
pursuant to an effective registration statement under the Securities Act, it
will comply with the prospectus delivery requirements of the Securities Act.
Section 4.2. Stop Transfer Instruction. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions of transfer set forth in Section
4.1 above.
Section 4.3. Furnishing of Information. For so long as the
Purchaser owns Shares or Underlying Shares, the Company covenants to timely
file (or obtain valid extensions in respect thereof) all reports required to be
filed by the Company after the date hereof pursuant to Section 13(a) or 15(d)
of the Exchange Act and to promptly furnish the Purchaser with true and
complete copies of all such filings. If the Company is not at the time
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchaser annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act in the time
period that such filings would have been required to have been made under the
Exchange Act.
Section 4.4. [INTENTIONALLY OMITTED]
Section 4.5. Increase in Authorized Shares. At such time as
the Company would be, if (with respect to the Shares) a notice of conversion or
(with respect to the Warrants) form of election to purchase were to be
delivered on such date, precluded from converting at least 135% of the full
number of Shares that remain unconverted, or from exercising each entire
Warrant, at such date due to the unavailability of authorized but unissued or
re-acquired Common Stock, the Board of Directors of the Company shall promptly
(and in any case within 14 Business Days from such date prepare and mail to the
shareholders of the Company proxy materials requesting authorization to amend
the Company's certificate of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least 60,000,000
shares. In connection therewith, the Board of Directors shall (a) adopt proper
resolutions authorizing such increase, (b) recommend to and otherwise use its
best efforts to promptly and duly obtain stockholder approval to carry out such
resolutions (and hold a special meeting of the shareholders no later than the
30th day after delivery of the proxy materials relating to such meeting) and
(c) within 5 Business Days of obtaining such shareholder authorization, file an
appropriate amendment to the Company's certificate of incorporation to evidence
such increase.
-13-
15
Section 4.6. Blue Sky Laws. In accordance with the
Registration Rights Agreement, the Company shall qualify the Underlying Shares
under the securities or Blue Sky laws of such jurisdictions as the Purchaser
may reasonably request and continue such qualification at all times until the
earlier of (i) the date the Underlying Shares Registration Statement is no
longer effective pursuant to the Registration Rights Agreement or (ii)
Purchaser notifies the Company in writing that it no longer owns any Shares,
the Warrants or Underlying Shares; provided, however, that neither the Company
nor its Subsidiaries shall be required in connection therewith to qualify as a
foreign corporation where they are not now so qualified.
Section 4.7. Integration. The Company shall not and shall
use its best efforts to ensure that no Affiliate shall sell, offer for sale or
solicit offers to buy security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Shares, the Warrants or
the Underlying Shares in a manner that would require the registration under the
Securities Act of the sale of the Shares, the Warrants or Underlying Shares to
the Purchaser.
Section 4.8. Solicitation Materials. The Company shall not
(i) distribute any offering materials in connection with the offering and sale
of the Shares, the Warrants or Underlying Shares and any amendments and
supplements thereto prepared in compliance herewith or (ii) solicit any offer
to buy or sell the Shares, the Warrants or Underlying Shares by means of any
form of general solicitation or advertising.
Section 4.9. Right of First Refusal; Subsequent
Registrations; Certain Corporate Actions. (a) The Company shall not, directly
or indirectly, without the prior written consent of the Purchaser, offer, sell,
grant any option to purchase, or otherwise dispose (or announce any offer,
sale, grant or any option to purchase or other disposition) of any of its or
its Affiliates equity or equity-equivalent securities at a price which is on
the face thereof or implied therein, less than either the market price or fair
market value for such securities (a "Subsequent Financing") for a period of 180
days after the later to occur of the Initial Closing Date or the Subsequent
Closing Date, except (i) the granting of options to employees, officers and
directors, and the issuance of shares upon exercise of options granted, under
any stock option plan heretofore or hereinafter duly adopted by the Company,
(ii) shares of Common Stock issued upon exercise of any currently outstanding
warrants and upon conversion of any currently outstanding convertible preferred
stock in each case disclosed in Schedule 3.1(c), (iii) shares of Common Stock
issued for the acquisition of another company by the Company by merger,
purchase of substantially all of the assets of such company, or other
reorganization resulting in the ownership by the Company of more than 50% of
the voting power of such company, and (iv) shares of Common Stock issued upon
conversion of Shares in accordance herewith and the Certificate of Designation,
unless (A) the Company delivers to Encore a written notice (the "Subsequent
Financing Notice") of its intention to effect such Subsequent Financing, which
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be
raised thereunder, the Person with whom such Subsequent Financing shall be
-14-
16
effected, and an executed term sheet or similar document relating thereto shall
be attached to such Subsequent Financing Notice and (B) Encore shall not have
notified the Company by 5:00 p.m. (Eastern Time) on the seventh Business Day
after its receipt of the Subsequent Financing Notice of its willingness to
designate the Purchaser or another fund managed by Encore to provide financing
to the Company on substantially the terms set forth in the Subsequent Financing
Notice and to cause such managed fund to provide such Subsequent Financing
within 20 Business Days after its receipt of the Subsequent Financing Notice,
subject to completion of mutually satisfactory final documentation for such
Subsequent Financing. If Encore shall fail to notify the Company of its
intention to commit within such time period, the Company may effect the
Subsequent Financing substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Financing Notice;
provided, that the Company shall provide Encore with a second Subsequent
Financing Notice, and Encore shall again have the right of first refusal set
forth above in this paragraph (a), if the Subsequent Financing subject to the
initial Subsequent Financing Notice shall not have been consummated for any
reason on substantially the terms set forth in such Subsequent Financing Notice
within 60 Business Days after the date of the initial Subsequent Financing
Notice with the Person (or an Affiliate of such Person) identified in the
Subsequent Financing Notice.
(b) Except Underlying Shares and other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to
be registered in accordance with the Registration Rights Agreement and as set
forth in Schedule 3.1(c), the Company shall not, without the prior written
consent of the Purchaser, (i)issue or sell any of its or any of its Affiliates'
equity or equity-equivalent securities pursuant to Regulation S promulgated
under the Securities Act, or (ii) register for resale any securities of the
Company, in either case of (i) or (ii) above, for a period of not less than 90
days after the date that the Underlying Shares Registration Statement is
declared effective by the Commission. Any days that the Purchaser is unable to
sell Underlying Shares under the Underlying Shares Registration Statement as a
result of the failure of the Underlying Shares Registration Statement being
effective and not subject to any suspension or blackout; any action taken by
the Company to prevent such ability to sell Underlying Shares under the
Underlying Shares Registration Statement; or a delisting or a suspension of
trading of the Common Stock, shall be added to such 90 day period for the
purposes of (i) and (ii) above.
(c) As long as there are Shares outstanding, the Company
shall not and shall cause the Subsidiaries not to, without the consent of the
Purchaser, (i) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Purchaser; (ii) repay,
repurchase or offer to repay, repurchase or otherwise acquire shares of its
Common Stock other than as to the Underlying Shares; or (iii) enter into any
agreement with respect to any of the foregoing.
Section 4.10. Purchaser Ownership of Common Stock. The
Purchaser may not use its ability to convert Shares hereunder or under the
terms of the Certificate of Designation to the extent that such conversion
would result in the Purchaser beneficially owning (for
-15-
17
\purposes of Rule 13d-3 under the Exchange Act) more than 4.9% of the
outstanding shares of the Common Stock; provided, however, that if ten days
shall have elapsed since the Purchaser has declared an event of default under
any Transaction Document and such event shall not have been cured to the
Purchaser's satisfaction prior to the expiration of such ten-day period, the
provisions of this Section 4.10 shall be null and void ab initio.
Section 4.11. Listing of Underlying Shares. The Company
shall (a) not later than the fifth Business Day following the Initial Closing
Date, prepare and file with the American Stock Exchange (and each other
national securities exchange or market on which the Common Stock is then
listed) an additional shares listing application covering at least 2,600,000
Underlying Shares, (b) take all steps necessary to cause such shares to be
approved for listing on such exchanges and markets as soon as possible
thereafter, and (c) provide to the Purchaser evidence of such filing and
listing, and the Company shall maintain the listing of its Common Stock on such
exchange.
Section 4.12. Purchaser's Rights if Trading in Common Stock
is Suspended or Delisted. If at any time within the three-year period after
the last to occur of the Initial Closing Date or Subsequent Closing Date, if
any, trading in the shares of the Common Stock is suspended on or delisted from
the American Stock Exchange or any other principal market or exchange for such
shares (other than as a result of the suspension of trading in securities on
such market or exchange generally or temporary suspensions pending the release
of material information) for more than three Trading Days, at the Purchaser's
option exercisable by five Business Days prior written notice to the Company,
the Company shall redeem all Shares and Underlying Shares then held by the
Purchaser, at an aggregate purchase price equal to the sum of (I) the number of
Shares then held by the Purchaser multiplied by the product of (1) the average
Per Share Market Value for the five (5) Trading Days immediately preceding (a)
the day of such notice or (b) the date of payment in full of the redemption
price calculated under this Section 4.12, whichever is greater, multiplied by
(2) the Conversion Ratio on the date of the repurchase notice, (II) the number
of Underlying Shares then held by the Purchaser multiplied by the average Per
Share Market Value for the five (5) Trading Days immediately preceding (A) the
date of the notice or (B) the date of payment in full by the Company of the
redemption price calculated under this Section 4.12, whichever is greater, and
(III) interest on the amounts set forth in I - II above accruing from the 5th
day after such notice until the redemption price under this Section 4.12 is
paid in full at the rate of 15% per annum.
Section 4.13. No Violation of Applicable Law.
Notwithstanding any provision of this Agreement to the contrary, if any
redemption of Shares or Underlying Shares otherwise required under the
Transaction Documents would be prohibited by the relevant provisions of the
Delaware General Corporation Law, such redemption shall be effected as soon as
it is permitted under such law; provided, however, that, interest payable by
the Company with respect to any such redemption shall continue to accrue in
accordance with Section 4.12 during any such period.
-16-
18
Section 4.14. Redemption Restrictions. Notwithstanding any
provision of this Agreement to the contrary, if any redemption of Shares or
Underlying Shares otherwise required under this Agreement would be prohibited
in the absence of consent from any lender of the Company or of any Subsidiary,
or by the holders of any class of securities of the Company, the Company shall
use its best efforts to obtain such consent as promptly as practicable after
the redemption is required. Interest payable by the Company with respect to
any such redemption shall continue to accrue in accordance with Section 4.12
until such consent is obtained. Nothing contained in this Section shall be
construed as a waiver by the Purchaser of any rights it may have by virtue of
any breach of any representation or warranty of the Company herein as to the
absence of any requirement to obtain any such consent.
Section 4.15. Notice of Breaches. Each of the Company and
the Purchaser shall give prompt written notice to the other of any breach of
any representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof
and prior to the Subsequent Closing Date, which could reasonably be likely to
cause any representation or warranty or other agreement of such party, as the
case may be, contained therein to be incorrect or breached as of the Subsequent
Closing Date. However, no disclosure by either party pursuant to this Section
shall be deemed to cure any breach of any such representation, warranty or
other agreement. Neither the Company, any Subsidiary nor the Purchaser will
take, or agree to commit to take, any action that is intended to make any
representation or warranty of the Company or the Purchaser, as the case may be,
contained in the Transaction Documents inaccurate in any respect at either the
Initial Closing Date or the Subsequent Closing Date.
Notwithstanding the generality of the foregoing, the Company
shall promptly notify the Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated by any of the Transaction
Documents violates or would violate any written agreement or understanding
between such lender and the Company, and the Company shall promptly furnish by
facsimile to the holders of the Shares a copy of any written statement in
support of or relating to such claim or notice.
Section 4.16. Conversion Procedures. Exhibit D attached
hereto sets forth the procedures with respect to the conversion of the Shares
and exercise of the Warrants, including any forms of conversion and or exercise
notice to be provided upon conversion or exercise, as the case may be,
instructions as to the procedures for conversion, the form of legal opinion, if
necessary, that shall be rendered to the Company's transfer agent and such
other information and instructions as may be reasonably necessary to enable the
Purchaser to exercise its rights of conversion and exercise smoothly and
expeditiously, which are not otherwise specified in this Agreement, the Shares
or the Warrants.
Section 4.17. Conversion and Exercise Obligations of the
Company. The Company covenants to honor conversions of the Shares and
exercises of the Warrants, and to
-17-
19
deliver Underlying Shares, each in accordance with the terms and conditions and
time periods set forth in the Certificate of Designation and the Warrants.
Section 4.18. Use of Proceeds. The Company shall use all of
the net proceeds from the placement of the securities offered hereby for
working capital purposes and not for the satisfaction of any portion of Company
debt (other than under the Foothill Facility) or to redeem any Company equity
or equity-equivalent securities. Pending their permitted application, the
Company will invest such proceeds in interest bearing accounts and short-term,
interest bearing securities.
ARTICLE V
MISCELLANEOUS
Section 5.1. Fees and Expenses. Except as set forth in
the Registration Rights Agreement, each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay
all stamp and other taxes and duties levied in connection with the issuance of
the Shares and the Warrants (and upon conversion or exercise thereof, the
Underlying Shares) pursuant hereto. The Purchaser shall be responsible for its
own tax liability that may arise as a result of the investment hereunder or the
transactions contemplated by this Agreement.
Section 5.2. Entire Agreement; Amendments. This
Agreement, together with the Exhibits and Schedules hereto, the Escrow
Agreement, the Certificate of Designation, the Registration Rights Agreement
(together with the respective Exhibits and Schedules thereto), the Warrants and
that certain letter agreement between the Company and the Purchaser, dated the
date hereof and relating to the Foothill Facility, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters.
Section 5.3. Notices. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
4:30 p.m. (New York City time) on a Business Day, (ii) the Business Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section later
than 4:30 p.m. (New York City time) on any date and earlier than 11:59 p.m.
(New York City time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
-18-
20
If to the Company: Phoenix Network, Inc.
0000 Xxxx Xxxx.
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Executive Officer
With copies to: Xxxxxx Xxxxxxxx Xxxxxx & X'Xxxxxxx, P.C.
0000 00xx Xx., Xxxxx 0000
Xxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
If to JNC: JNC Opportunity Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Xxxxxxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxxxxx XX00
Xxxxxxx
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxx
with copies to: Encore Capital Management, L.L.C.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx Xxxx
- and -
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
Section 5.4. Amendments; Waivers. No provision of this
Agreement may be waived or amended except in a written instrument signed, in
the case of an amendment, by both the Company and the Purchaser, or, in the
case of a waiver, by the party against whom
-19-
21
enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
Section 5.5. Headings. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
Section 5.6. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties and their successors
and permitted assigns. Neither the Company nor the Purchaser may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other, except that the Purchaser may assign its rights under any
Transaction Document to an Affiliate thereof or to a managed account of either
the Purchaser or such Affiliate, provided, that such assignee demonstrates to
the reasonable satisfaction of the Company its satisfaction of the
representations and warranties set forth in Section 3.2 herein. The assignment
by a party of this Agreement or any rights hereunder shall not affect the
obligations of such party under this Agreement.
Section 5.7. No Third-Party Beneficiaries. This Agreement
is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and, other than with respect to the rights
specified under Section 4.9, which are intended for the benefit of, and may be
enforced by, Encore, and other than permitted assignees under Section 5.6, is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
Section 5.8. Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York without regard to the principles of conflicts of law
thereof.
Section 5.9. Survival. The representations and warranties
of the Company and the Purchaser contained in Article III and the agreements
and covenants of the parties contained in Article IV and this Article V shall
survive the Closing Dates (or any earlier termination of this Agreement) and
any conversion of Shares and exercise of Warrants hereunder until five (5)
years after the date hereof.
Section 5.10. Counterpart Signatures. This Agreement may be
executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) the same with the same force
and effect as if such facsimile signature page were an original thereof.
-20-
22
Section 5.11. Publicity. The Company and the Purchaser shall
consult with each other in issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement.
Section 5.12. Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affecting or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
Section 5.13. Remedies. In addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, the Purchaser will be entitled to specific performance of the
obligations of the Company under this Agreement and the Company will be
entitled to specific performance of the obligations of the Purchaser hereunder
with respect to the subsequent transfer of Shares and the Underlying Shares.
Each of the Company and the Purchaser agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
-21-
23
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first indicated above.
Company:
PHOENIX NETWORK, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO
Purchaser:
JNC OPPORTUNITY FUND LTD.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Secretary
