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EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 31, 1997, between Phoenix Network, Inc., a Delaware
corporation (the "Company"), and JNC Opportunity Fund Ltd., a Cayman Islands
corporation (the "Purchaser").
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof between the Company and
the Purchaser (the "Purchase Agreement").
The Company and the Purchaser hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.001
per share.
"Effectiveness Date" means July 3, 1997.
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"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means April 24, 1997.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"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" means the shares of Series G Convertible
Preferred Stock, par value $.001 per share, of the Company issued to the
Purchaser pursuant to the Purchase Agreement.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means the shares of Common Stock
issuable (a) upon conversion of all shares of Preferred Stock (b) upon payment
of dividends in respect of the Preferred Stock and (c) upon exercise of the
Common Stock purchase warrants issued by the Company to Xxxxxxx Capital
Partners, Ltd. and Xxxxx X. Xxxxxx in connection with the transactions
contemplated by the Purchase Agreement; provided, however that in order to
account for the fact that the number of shares of Common Stock that are
issuable upon conversion of shares of Preferred Stock is determined in part
upon the market price of the
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Common Stock at the time of conversion, Registrable Securities shall include
(but not be limited to) a number of shares of Common Stock equal to no less
than the sum of (1) two times the number of shares of Common Stock issuable
upon conversion in full of the Preferred Stock, assuming such conversion
occurred on the Closing Date, and (2) the number of shares of Common Stock
issuable upon conversion in full of the warrants described above.
Notwithstanding anything herein contained to the contrary, if the actual number
of shares of Common Stock issuable upon conversion in full of the Preferred
Stock at any time exceeds twice the number of shares of Common Stock issuable
if such conversion occurred on the Closing Date, the term "Registrable
Securities" shall be deemed to include such additional shares of Common Stock
and the Company shall promptly, but in any case within 7 days of notice of such
fact, file one or more additional Registration Statements covering such
additional shares of Common Stock. The Company shall use its best efforts to
cause such additional Registration Statements to be declared effective as
promptly as possible, but in any event within 60 days after the date of the
notice triggering such requirement.
"Registration Statement" means the registration statement
contemplated by Section 2(a) (and any additional Registration Statements
contemplated in the definition of Registrable Securities), including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.
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"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except
if otherwise directed by the Holders in accordance herewith or if the Company
is not then eligible to register for resale the Registrable Securities on Form
S-3, in which case such registration shall be on another appropriate form in
accordance herewith). The Company shall (i) not permit any securities other
than the Registrable Securities to be included in the Registration Statement
and (ii) use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event prior to the Effectiveness Date, and to keep
such Registration Statement continuously effective under the Securities Act
until the date which is three years after the date that such Registration
Statement is declared effective by the Commission or such earlier date when all
Registrable Securities covered by such Registration Statement have been sold or
may be sold without volume restrictions pursuant to Rule 144 as determined by
the counsel to the Company pursuant to a written opinion letter, addressed to
the Holders to such effect (the "Effectiveness Period"); provided, however,
that the Company shall not be deemed to have used its best efforts to keep the
Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being able to
sell the Registrable Securities covered by such Registration Statement during
the Effectiveness Period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the Commission has not declared it effective.
(b) If the Holders of a majority of the Registrable Securities
so elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such Underwritten Offering exceeds the amount of Registrable
Securities which can be sold in such Underwritten Offering, there shall be
included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders
of a majority of the Registrable Securities included in such offering. No
Holder may participate in any Underwritten Offering
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hereunder unless such Person (i) agrees to sell its Registrable Securities on
the basis provided in any underwriting agreements approved by the Persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date a Registration Statement on Form S-3 (or such other form if
directed by the Holders in connection with an Underwritten Offering hereunder
or if the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance herewith) in accordance with the method or
methods of distribution thereof as specified by the Holders (except if
otherwise directed by the Holders), and cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
that not less than five (5) Business Days prior to the filing of the
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 (i) furnish to the
Holders, their Special Counsel and any managing underwriters, 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 Holders, their Special Counsel and such managing underwriters,
and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
opinion of respective counsel to such Holders and such underwriters, to conduct
a reasonable investigation within the meaning of the Securities Act. The
Company shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any managing underwriters,
shall reasonably object within five (5) Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to all
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as practicable to any comments received from the
Commission with respect to the
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Registration Statement or any amendment thereto and promptly provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to the Registration Statement; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters immediately (and, in the
case of (i)(A) below, not less than five (5) days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is
proposed to be filed; (B) when the Commission notifies the Company whether
there will be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) if at any time any
of the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true
and correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, 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.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of
a majority of the Registrable Securities to be sold in connection with an
Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the
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Registration Statement such information as such managing underwriters and such
Holders reasonably agree should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any action
pursuant to this Section 3(e) that would, in the opinion of counsel for the
Company, violate applicable law.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
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.
(g) Promptly deliver to each Holder, their Special Counsel,
and any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any material tax in any such jurisdiction
where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such managing underwriters or
Holders may request at least two Business Days prior to any sale of Registrable
Securities.
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(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the American Stock
Exchange and any other securities exchange, quotation system, market or over-
the-counter bulletin board, if any, on which similar securities issued by the
Company are then listed as and when required pursuant to the Purchase
Agreement.
(l) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not
an underwriting agreement is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested; (ii) obtain and deliver copies thereof to each Holder
and the managing underwriters, if any, of opinions of counsel to the Company
and updates thereof addressed to each selling Holder and each such underwriter,
in form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling Holders covering the matters
customarily covered in opinions requested in Underwritten Offerings and such
other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of
delivery of any Registrable Securities sold pursuant thereto, obtain and
deliver copies to the Holders and the managing underwriters, if any, of "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data is, or is
required to be, included in the Registration Statement), addressed to each
selling Holder and each of the underwriters, if any, in form and substance as
are customary in connection with Underwritten Offerings; (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling Holders and the
underwriters, if any, than those set forth in Section 6 (or such other
provisions and procedures acceptable to the managing underwriters, if any, and
holders of a majority of Registrable Securities participating in such
Underwritten Offering; and (v) deliver such documents and certificates as may
be reasonably requested by the Holders of a majority
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of the Registrable Securities being sold, their Special Counsel and any
managing underwriters to evidence the continued validity of the representations
and warranties made pursuant to clause 3(l)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case requested by any such
Holder, representative, underwriter, attorney or accountant in connection with
the Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential
by such Persons, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by
such Person to be bound by a confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90
days after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts Underwritten Offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective date
of the Registration Statement, which statement shall cover said 12-month
period, or end shorter periods as is consistent with the requirements of Rule
158.
(o) Provide a CUSIP number for all Registrable Securities, not
later than the effective date of the Registration Statement.
The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement
and the Company may exclude from such registration the Registrable Securities
of any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
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If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (i) the inclusion therein of language, in form
and substance reasonably satisfactory to such Holder, to the effect that the
ownership by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such ownership does not imply that such
Holder will assist in meeting any future financial requirements of the Company,
or (ii) if such reference to such Holder by name or otherwise is not required
by the Securities Act or any similar Federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Purchaser covenants and agrees that (i) it will not offer or
sell any Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 3(c) and (ii) the Purchaser and its officers, directors
or Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of
Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
4. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall, except as and to the
extent specified in Section 4(c), be borne by the Company whether or not
pursuant to an Underwritten Offering and whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the American Stock Exchange and each other securities exchange or market
on which Registrable Securities are required hereunder to be listed and (B) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of
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counsel for the Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities
may designate)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company
and Special Counsel for the Holders, in the case of the Special Counsel, to a
maximum amount of $10,000, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
(b) In connection with the Registration Statement, the Company
shall reimburse the Holders for up to $10,000 of the fees and disbursements of
one firm of attorneys chosen by the Holders of a majority of the Registrable
Securities.
(c) If the Holders require an Underwritten Offering pursuant
to the terms hereof, the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of the
Underwriters and their legal counsel and accountants (which shall be borne by
the Holders). Therefore, in such circumstances the Holder shall bear the
expenses of the fees and disbursements of any legal counsel or accounting firm
retained by the underwriters in connection with such Underwritten Offering and
the costs of any determination (but not filing) by the underwriters of the
eligibility of the Registrable Securities for investment under the applicable
state securities laws. By way of illustration which is not intended to
diminish from the provisions of Section 4(a), the Holders shall not be
responsible for, and the Company shall be required to pay the fees or
disbursements incurred by the Company (including by its legal counsel and
accountants) in connection with, the preparation and filing of a Registration
Statement and related Prospectus for such offering, the maintenance of such
Registration Statement in accordance with the terms hereof, the listing of the
Registrable Securities in accordance with the requirements hereof, and printing
expenses incurred to comply with the requirements hereof.
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5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement and without limitation as to
time, indemnify and hold harmless each Holder, the officers, directors, agents
(including any underwriters retained by such Holder in connection with the
offer and sale of Registrable Securities), brokers (including brokers who offer
and sell Registrable Securities as principal as a result of a pledge or any
failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by or on behalf of such Holder expressly for use therein, which
information was reasonably relied on by the Company for use therein or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all Losses (as determined by a court of competent jurisdiction in a final
judgment not subject to appeal or review) arising solely out of or based solely
upon any untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably
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relied upon by the Company for use in the Registration Statement, such
Prospectus or such form of prospectus or to the extent that such information
relates to such Holder or such Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant
to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to
pay such fees and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(3) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such
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Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within 10 Business Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a
failure or refusal of a governmental authority to enforce such indemnification
in accordance with its terms (by reason of public policy or otherwise), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any attorneys' or other fees or expenses incurred by
such party in connection with any Proceeding to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), the Purchaser
shall not be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by the Purchaser from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that the Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
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6. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at any
time the Company is not required to file such reports, they will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144. Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except as and to the extent
specifically set forth in Schedule 7(b) attached hereto, neither the Company
nor any of its subsidiaries has, as of the date hereof, nor shall the Company
or any of its subsidiaries, on or after the date of this Agreement, enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except and to the extent specifically set forth on Schedule
7(b) attached hereto, neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the
generality of the foregoing, without the written consent of the Holders of a
majority of the then outstanding Registrable Securities, the Company shall not
grant to any Person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are
subject in all respects to the prior rights in full of the Holders set forth
herein, and are not otherwise in conflict or inconsistent with the provisions
of this Agreement.
(c) No Piggyback on Registrations. Except as and to the
extent specifically set forth on Schedule 7(c) attached hereto, neither the
Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the
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Company in the Registration Statement other than the Registrable Securities,
and the Company shall not enter into any agreement providing any such right to
any of its securityholders.
(d) Piggy-Back Registrations. If at any time the Company
shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-
4 or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice, any
such holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Registrable Securities such
holder requests to be registered, except that if, in connection with any
Underwritten Offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the registration statement because, in
such underwriter(s)' judgment, such limitation is necessary to effect an
orderly public distribution of securities covered thereby, then the Company
shall be obligated to include in such registration statement only such limited
portion of the Registrable Securities for to which such holder has requested
inclusion hereunder. Any exclusion of Registrable Securities shall be made pro
rata among the holders seeking to include Registrable Securities, in proportion
to the number of Registrable Securities sought to be included by such holders;
provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in such
registration statement; and provided, further, however, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in such registration statement. No right to
registration of Registrable Securities under this Section shall be construed to
limit any registration otherwise required hereunder.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
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17
(f) 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 the Purchase Agreement 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.
If to the Company: Phoenix Network, Inc.
0000 Xxxx Xxxx.
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
With copies to: Xxxxxx Xxxxxxxx Xxxxxx
& X'Xxxxxxx, P.C.
0000 00xx Xx., #0000
Xxxxxx, XX 00000
Fax: 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
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- and -
Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. The Purchaser may assign its rights hereunder in the manner and
to the Persons as permitted under the Purchase Agreement.
(h) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid 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 were the original
thereof.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
(j) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or
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invalidated, and the parties hereto shall use their reasonable efforts to find
and employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(m) Shares Held by The Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than the Purchaser or transferees or successors or
assigns thereof if such Persons are deemed to be Affiliates solely by reason of
their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
PHOENIX NETWORK, INC.
By: /s/ Xxx Xxxxxx
---------------------------------
Name: Xxx Xxxxxx
Title: CFO
JNC OPPORTUNITY FUND LTD.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Secretary
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