0000909518-95-000248.txt : 19951110
0000909518-95-000248.hdr.sgml : 19951110
ACCESSION NUMBER: 0000909518-95-000248
CONFORMED SUBMISSION TYPE: SC 13D
PUBLIC DOCUMENT COUNT: 3
FILED AS OF DATE: 19951030
DATE AS OF CHANGE: 19951109
SROS: AMEX
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: PHOENIX NETWORK INC
CENTRAL INDEX KEY: 0000704862
STANDARD INDUSTRIAL CLASSIFICATION: 4899
IRS NUMBER: 840881154
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC 13D
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-37603
FILM NUMBER: 95585679
BUSINESS ADDRESS:
STREET 1: 550 CALIFORNIA ST
STREET 2: 11TH FLOOR
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94104
BUSINESS PHONE: 4159813000
MAIL ADDRESS:
STREET 1: 550 CALIFORNIA ST
STREET 2: 11TH FLOOR
CITY: SAN FRANCICO
STATE: CA
ZIP: 94104
FORMER COMPANY:
FORMER CONFORMED NAME: COMMONWEALTH CAPITAL LTD
DATE OF NAME CHANGE: 19871229
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: THORNHILL MAX E
CENTRAL INDEX KEY: 0001002662
STANDARD INDUSTRIAL CLASSIFICATION:
FILING VALUES:
FORM TYPE: SC 13D
BUSINESS ADDRESS:
STREET 1: 504 SOUTH JACKSON STREET
CITY: BROOKHAVEN
STATE: MS
ZIP: 39601
MAIL ADDRESS:
STREET 1: 504 SOUTH JACKSON STREET
CITY: BROOKHAVEN
STATE: MS
ZIP: 39601
SC 13D
1
SCHEDULE 13D
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PHOENIX NETWORK, INC.
---------------------
(Name of issuer)
COMMON STOCK, $0.001 PAR VALUE
------------------------------
(Title of class of securities)
718910 10 2
-----------
(CUSIP number)
Mary R. Korby
100 Crescent Court, Suite 1300, Dallas, Texas 75201
(214) 746-7864
---------------------------------------------------
(Name, address and telephone number of person
authorized to receive notices and communications)
October 20, 1995
-------------------------------------------------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with this statement. [x]
(A fee is not required only if the reporting person:(1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934, as amended ("Act"), or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act.
- -------------------------------------- -----------------------------
CUSIP No. 718910 10 2 13D
- -------------------------------------- -----------------------------
===============================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MAX E. THORNHILL
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A)
(B)[X]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E)
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 1,159,000
-----------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
EACH -----------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 1,159,000
-----------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,159,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES [X]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
7.43
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
===============================================================================
ITEM 1. SECURITY AND ISSUER
(a) Title of Class of Equity Security:
Common Stock, par value $.001 per share (the "Common Stock")
(b) Name of Issuer and Address of Issuer's Principal Executive Offices:
Phoenix Network, Inc. (the "Company")
550 California Street
San Francisco, California 94107
ITEM 2. IDENTITY AND BACKGROUND
(a) Name:
This statement is being filed pursuant to Section 13(g) of the
Securities Exchange Act, as amended, and Rule 13d-1(a) promulgated
thereunder by Max E. Thornhill (the "Filing Party").
(b) Business Address of Filing Party:
Max E. Thornhill
504 South Jackson Street
Brookhaven, Mississippi 39601
(c) Max E. Thornhill is principally occupied as an investor.
(d) During the last five years the Filing Party has not been convicted in a
criminal proceeding (excluding traffic violations and similar
misdemeanors).
(e) During the last five years the Filing Party has not been a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which proceeding the Filing Party was or is
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect
to such laws.
(f) Citizenship:
The Filing Party is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Filing Party acquired his interest in the equity securities which
are the subject of this statement with personal funds.
ITEM 4. PURPOSE OF TRANSACTION
In connection with the private placement (the "Private Placement") by
the Company of up to 1,200,000 shares of its Series F Preferred Stock
and warrants to purchase up to 480,000 shares of Common Stock, the
Filing Party purchased 172,500 shares of the Series F Preferred Stock
of the Company, each of which shares is initially convertible (subject
to customary antidilution provisions), at the discretion of the Filing
Party, into four shares of Common Stock. The Filing Party also
purchased in the Private Placement a warrant (the "Warrant")
immediately exercisable for 69,000 shares of Common Stock (subject to
customary antidilution provisions). The Filing Party purchased the
Series F Preferred Stock and the Warrant pursuant to the Series F
Preferred Stock and Warrant Purchase Agreement dated as of October 20,
1995 among the Company and the purchasers named therein.
The Filing Party acquired his interest in the Series F Preferred Stock
and the Warrant solely for investment purposes and not with the purpose
nor the effect of changing or influencing the control of the issuer nor
in connection with a transaction having such purpose or effect.
Depending on market conditions and other factors, the Filing Party may
from time to time acquire additional Common Stock or securities
convertible or exchangeable for Common Stock for investment purposes or
dispose of such securities. Notwithstanding the foregoing, pursuant to
the Certificate of Designations for the Series F Preferred Stock
offered in the Private Placement and the Stockholders Agreement
described in Item 6, the Filing Party along with the other
holders of the Series F Preferred Stock, the warrants offered in
connection therewith and the Common Stock issued pursuant to such
preferred stock and warrants (other than such Common Stock sold in a
registered offering pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), or pursuant to Rule 144 under the Securities
Act) have the right to elect up to two directors of the Company.
ITEM 5. INTEREST IN SECURITIES OF ISSUER
(a) After giving effect to the Private Placement and assuming the
conversion of all the shares of the Series F Preferred Stock purchased
by the Filing Party in the Private Placement and the full exercise of
the Warrant, the Filing Party would beneficially own an aggregate of
1,159,000 shares or 7.43% of the Common Stock outstanding.
In addition to the foregoing securities, the Max E. Thornhill and
Bonnie P. Thornhill Foundation, Inc. (the "Thornhill Foundation"), a
private charitable foundation, owns 50,000 shares of Series F Preferred
Stock, which are
convertible into an aggregate of 200,000 shares of Common Stock
(subject to customary antidilution provisions), and a warrant
exercisable for 20,000 shares of Common Stock (subject to customary
antidilution provisions) (collectively, the "Foundation Securities").
The Filing Party is a director and the President and Treasurer of the
Thornhill Foundation and in his capacity as an officer of the Thornhill
Foundation may direct the vote and disposition of the Foundation
Securities on behalf of the Thornhill Foundation. The Filing Party
disclaims beneficial ownership of the Foundation Securities.
(b) The Filing Party owns individually and has sole voting power and
dispositive power with respect to 172,500 shares of Series F Preferred
Stock convertible into 690,000 shares of Common Stock (subject to
customary antidilution provisions) and a Warrant exercisable for 69,000
shares of Common Stock (subject to customary antidilution provisions).
In addition, in his capacity as an officer of the Thornhill Foundation,
the Filing Party may direct the voting or disposition of the Foundation
Securities.
(c) On October 20, 1995 in connection with the Private Placement, the
Filing Party purchased for $10.00 per share 172,500 shares of the
Series F Preferred Stock of the Company, which are convertible into an
aggregate of 690,000 shares of Common Stock (subject to customary
antidilution provisions) at a conversion price of $2.50 per share and
purchased for $.01 per share a warrant exercisable for 69,000 shares of
Common Stock (subject to customary antidilution provisions) with an
exercise price of $2.00 per share. The Filing Party has not effected
any other transactions in the Common Stock in the past 60 days. The
Private Placement was effected in a transaction intended to comply with
Rule 506 under the Securities Act of 1933, as amended.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
The Filing Party is a party to a Stockholders Agreement (the
"Stockholders Agreement") between the Company and the holders
of the Series F Preferred Stock pursuant to which the Filing Party
and each other holder (collectively, the "Holders") of the Series
F Preferred Stock, the warrants sold in connection therewith and
the Common Stock issued upon conversion or exercise of the foregoing
(other than Common Stock registered in a public offering under the
Securities Act or pursuant to Rule 144 under the Securities Act) are
bound to do all things in their respective power to cause certain
persons designated pursuant to such stockholders agreement to be
elected to the Board of Directors of the Company (the "Series F
Directors"). Pursuant to such agreement, the Filing Party has been
elected as a Series F Director and has been granted a proxy to
vote the
securities of the Holders with respect to the election of the Series F
Directors, in accordance with the terms of the agreement.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
Exhibit 7.1 Form of Series F Preferred Stock and Warrant Purchase
Agreement dated as of October 20, 1995 among the Company
and the purchasers named therein.
Exhibit 7.2 Form of Stockholders Agreement dated as of October
20, 1995 among the Company and the holders named therein.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 20, 1995 By: /s/ Max E. Thornhill
- ---------------- ----------------------------
Date Max E. Thornhill
INDEX TO EXHIBITS
Exhibit 7.1 Form of Series F Preferred Stock and Warrant Purchase
Agreement dated as of October 20, 1995 among the Company and
the purchasers named therein.
Exhibit 7.2 Form of Stockholders Agreement dated as of October 20, 1995
among the Company and the holders named therein.
EX-7.1
2
SERIES F STOCK AND WARRANT PURCHASE AGRMNT
EXHIBIT 7.1
PHOENIX NETWORK, INC.
------------------------------------------------------------
SERIES F PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
------------------------------------------------------------
OCTOBER 20, 1995
TABLE OF CONTENTS
PAGE
SECTION 1 - PURCHASE AND SALE OF SERIES F PREFERRED STOCK AND WARRANTS..... 1.
1.1 Commitment to Purchase Series F Preferred......................... 1.
1.2 Commitment to Purchase Warrants................................... 1.
SECTION 2 - CLOSING DATE; DELIVERY......................................... 1.
2.1 Closing Date...................................................... 1.
2.2 Closing........................................................... 2.
2.3 Additional Closings............................................... 2.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 2.
3.1 Organization and Standing......................................... 2.
3.2 Corporate Power................................................... 2.
3.3 Capitalization.................................................... 2.
3.4 Authorization..................................................... 3.
3.5 Disclosure........................................................ 3.
3.6 Violations........................................................ 4.
3.7 Conflicts......................................................... 4.
3.8 Other Representations and Warranties.............................. 4.
SECTION 4 - INVESTMENT REPRESENTATION...................................... 5.
4.1 Experience........................................................ 5.
4.2 Investment........................................................ 5.
4.3 Rule 144.......................................................... 6.
4.4 Access to Data.................................................... 6.
4.5 Investor Status................................................... 6.
SECTION 5 - CONDITIONS TO PURCHASERS' OBLIGATIONS AT CLOSING............... 6.
5.1 Representations and Warranties Correct............................ 6.
5.2 Covenants......................................................... 7.
5.3 Compliance Certificate............................................ 7.
5.5 Proceedings and Documents......................................... 7.
5.6 Laws and Regulations.............................................. 7.
5.7 Consents and Permits.............................................. 7.
5.8 No Material Judgment or Order..................................... 7.
5.9 Certificate of Designation........................................ 7.
5.10 Stockholders Agreement............................................ 7.
SECTION 6 - CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING................. 8.
6.1 Representations Correct........................................... 8.
6.2 No Material Judgment or Order..................................... 8.
6.3 Stockholders Agreement............................................ 8.
SECTION 7 - CONFIDENTIALITY................................................ 8.
7.1 Confidentiality................................................... 8.
SECTION 8 - REGISTRATION RIGHTS............................................ 8.
8.1 Certain Definitions............................................... 8.
8.2 Demand Registration and Dividend Registration..................... 9.
8.3 Registration of Dividend Shares...................................11.
8.4 Further Limitations on Registrations..............................11.
8.5 Piggyback Registration............................................11.
TABLE OF CONTENTS
(CONTINUED)
PAGE
8.6 Expenses of Registration..........................................12.
8.7 Registration Procedures...........................................12.
8.8 Indemnification...................................................13.
8.9 Information by Holder.............................................14.
8.10 Transfer of Registration Rights...................................14.
SECTION 9 - POST-CLOSING COVENANTS OF THE COMPANY..........................15.
9.1 Reserve Sufficient Shares for the Conversion Shares and Warrant
Shares............................................................15.
9.2 Negative Covenants................................................15.
SECTION 10 - MISCELLANEOUS.................................................16.
10.1 Governing Law.....................................................16.
10.2 Survival..........................................................16.
10.3 Successors and Assigns............................................16.
10.4 Entire Agreement; Amendment.......................................16.
10.5 Effect of Amendment or Waiver.....................................17.
10.6 Rights of Purchasers..............................................17.
10.7 Exculpation Among Purchasers......................................17.
10.8 Notices, Etc......................................................17.
10.9 Delays or Omissions...............................................18.
10.10 State Corporate Securities Law....................................18.
10.11 Finders' Fees.....................................................18.
10.12 Expenses..........................................................18.
10.13 Counterparts......................................................18.
10.14 Severability......................................................19.
PHOENIX NETWORK, INC.
SERIES F PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
THIS SERIES F PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT ("Agreement") is
made as of October 20, 1995, by and among PHOENIX NETWORK, INC., a Delaware
corporation (the "Company"), and the investors listed on the Schedule of
Purchasers attached hereto as Exhibit A (the "Purchasers").
In consideration of the mutual promises, covenants and conditions hereinafter
set forth, the parties hereto mutually agree as follows:
SECTION 1
PURCHASE AND SALE OF SERIES F PREFERRED STOCK AND WARRANTS
1.1 COMMITMENT TO PURCHASE SERIES F PREFERRED. Subject to the terms and
conditions hereof, at the Closing (as hereinafter defined) the Company agrees to
issue and sell to each Purchaser, and each Purchaser agrees, severally and not
jointly, to purchase from the Company, the number of shares (collectively, the
"Shares") of Series F Preferred Stock, par value $0.01 per share, of the Company
(the "Series F Preferred"), specified opposite such Purchaser's name on the
Schedule of Purchasers attached hereto as Exhibit A, for the cash purchase price
of Ten Dollars ($10.00) per share.
1.2 COMMITMENT TO PURCHASE WARRANTS. The Company agrees to issue and sell to
each Purchaser, and each Purchaser agrees, severally and not jointly, to
purchase a warrant (collectively, the "Warrants"), substantially in the form
attached hereto as Exhibit B, to purchase the number of shares of common stock
of the Company, par value $.001 per share (the "Common Stock"), set forth
opposite such Purchaser's name on the Schedule of Purchasers attached hereto as
Exhibit A at a purchase price of $0.01 per share. The exercise price of each
Warrant shall be $3.00 per share of Common Stock represented by such Warrant, as
adjusted pursuant to the terms of such Warrant.
SECTION 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The closing for the purchase and sale of the Shares and the
Warrants (the "Closing") shall be held at the offices of Cooley Godward Castro
Huddleson & Tatum, One Maritime Plaza, Suite 2000, San Francisco, California on
October __, 1995 at 10:00 a.m., or at such other time and place as the Company
and a majority in interest of the Purchasers mutually agree (the "Closing
Date").
2.2 CLOSING. At the Closing, the Company will deliver to each Purchaser
certificates registered in the name of such Purchaser or its designee
representing the number
of Shares purchased by such Purchaser and a Warrant to purchase the number of
shares of Common Stock set forth opposite such Purchaser's name in the Schedule
of Purchasers attached hereto as Exhibit A, against payment of the applicable
purchase price therefor in the amount specified in the Schedule of Purchasers by
check or wire transfer payable to the order of the Company.
2.3 ADDITIONAL CLOSINGS. If less than all of the authorized shares of Series
F Preferred are purchased at the Closing, the Company may, at any time until
thirty (30) days after the Closing, sell and issue the balance of the authorized
but unissued Series F Preferred, under purchase agreements substantially similar
to this Agreement, at an additional closing or closings (hereinafter the
"Additional Closing") at the same price per share as the Series F Preferred
purchased and sold at the Closing. The purchasers of such remaining Series F
Preferred shall be deemed "Purchasers" and such shares of Series F Preferred
purchased by them shall be deemed "Series F Preferred" for the purposes of this
Agreement. The Additional Closings of the purchase and sale of the Series F
Preferred hereunder shall take place at such time and place as the Company and
the additional Purchasers may agree. In the event that Additional Closings
pursuant to this Agreement occur, the term "Closing" with respect to such later
sales of Series F Preferred shall refer to such later closing or closings and
the term "Closing Date" shall refer to the date on which each such closing or
Closings occur.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser as follows:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
The Company has all requisite corporate power to own and operate its properties
and assets and to carry on its business as presently conducted. The Company is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary.
3.2 CORPORATE POWER. The Company has all requisite legal and corporate power
and authority to execute and deliver this Agreement and the Warrants, to perform
its obligations under the terms of this Agreement and the Warrants and to issue
and sell the Shares, the shares of Common Stock issuable upon conversion of the
Shares (the "Conversion Shares"), the Warrants and the shares of Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares").
3.3 CAPITALIZATION. The authorized capital stock of the Company consists of
(i) 30,000,000 shares of Common Stock of which 14,246,954 shares are issued and
outstanding as of the date hereof, and (ii) 5,000,000 shares of Preferred Stock
consisting of 300,000 authorized shares of Series A Preferred Stock of which
101,750 shares are issued and outstanding, 200,000 authorized shares of Series B
Preferred Stock of which 126,250 shares are issued and outstanding, 1,000,000
authorized shares of Series C Preferred Stock
of which 1,000,000 shares are issued and outstanding, 666,666 shares of Series D
Preferred Stock of which 333,333 shares are issued and outstanding, 100,000
authorized shares of Series E Preferred Stock of which 55,893 shares are issued
and outstanding and 1,200,000 authorized shares of Series F Preferred Stock,
_________ of which will be issued and outstanding immediately after the Closing.
Each share of Series A Preferred Stock is convertible into 4.132 shares of
Common Stock, subject to certain antidilution provisions; each share of Series B
Preferred Stock is convertible into 6.667 shares of Common Stock, subject to
certain antidilution provisions; each share of Series C Preferred Stock is
convertible into two shares of Common Stock; each share of Series D Preferred is
convertible into one share of Common Stock and each share of Series E Preferred
Stock is convertible into four shares of Common Stock. All of the issued and
outstanding capital stock of the Company is duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except for the
Preferred Stock, the Warrants and as set forth on Schedule 3.3 hereto, there are
no options, warrants, calls, subscriptions, conversion or other rights or
agreements obligating the Company to issue any shares of its capital stock or
any other securities. All of the outstanding shares of Common Stock (and options
and warrants to purchase Common Stock), Preferred Stock and other outstanding
securities of the Company have been duly and validly issued in compliance with
federal and state securities laws.
3.4 AUTHORIZATION. The execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated hereby
(including the authorization, sale and issuance of the Shares, the Conversion
Shares, the Warrants and the Warrant Shares) and the adoption, execution and
filing of the Certificate of Designations for the Series F Preferred with the
Secretary of State of the State of Delaware, in the form of Exhibit C hereto
(the "Certificate of Designations"), have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly and
validly executed and delivered by the Company. This Agreement is, and the
Warrants upon execution and delivery will be, the legal, valid and binding
obligations of the Company, enforceable in accordance with their terms, subject
to enforceability as to laws of general application relating to bankruptcy,
insolvency, the relief of debtors and to general principles of equity. The
Shares, the Conversion Shares and the Warrant Shares, when issued in compliance
with the provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any liens, claims or encumbrances; provided,
however, that the Shares, the Conversion Shares and the Warrant Shares may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein. Neither the issuance, sale or delivery of the Shares or the
Warrants nor the issuance or delivery of the Conversion Shares or the Warrant
Shares is subject to any preemptive right of stockholders of the Company or to
any right of first refusal or other right in favor of any person.
3.5 DISCLOSURE. The Company has previously delivered to each of the
Purchasers documents and other communications and information related to the
business of the Company. These documents have been prepared by the management of
the Company in a good faith effort to describe the Company's business and
markets. None of such documents, nor any representation or warranty by the
Company contained in this Agreement, nor any other statement or certificate
furnished or to be furnished to the Purchasers pursuant hereto or in connection
with the transactions contemplated hereby by the Company (when read together)
contains or will contain any untrue statement of a material fact or omits or
will
omit to state a material fact necessary to make the statements contained therein
or herein not misleading in light of the circumstances under which they were
made; except that no representation whatsoever is made with respect to any
projections that have been or may be presented to any Purchaser.
3.6 VIOLATIONS. The Company is not in violation of, has not been charged with
violating, nor to the best of the Company's knowledge, is it under investigation
with respect to a possible violation of, any federal, state, local or foreign
law, statute, rule, governmental regulation, or order, relating to the business
and operations of the Company, to the extent such violation would have a
material adverse effect on the Company's business or operations.
3.7 CONFLICTS. The execution and delivery of this Agreement and the other
documents to be executed and delivered in connection herewith do not, and the
fulfillment and compliance by the Company with the terms and conditions hereof
and thereof and the consummation of the transactions contemplated hereby
(including the issuance of the Shares, the Warrants, the Conversion Shares and
the Warrant Shares (collectively the "Securities")) will not (i) conflict with
any of the terms, conditions or provisions of the certificate of incorporation
or by-laws of the Company; (ii) violate any provisions of, or require any
consent, authorization or approval under, any law, rule or regulation or any
judicial decision, order, judgment, writ, injunction or decree applicable to, or
any governmental permit or license issued to, the Company; (iii) violate, result
in a breach of, or constitute a default under any of the terms, conditions or
provisions of any document, agreement or other instrument to which the Company
is a party or by which it or its properties are bound; or (iv) result in the
creation of any tax, charge, lien or encumbrance of any kind whatsoever on any
of the properties or assets of the Company.
3.8 OTHER REPRESENTATIONS AND WARRANTIES.
(A) The Company has filed all federal income tax returns and all other
federal and state tax returns which are required to have been filed and has paid
all taxes which are required to have been paid. The Company has not been advised
that any federal income tax returns of the Company have been, or will be,
examined or audited by the Internal Revenue Service.
(B) The Company is not in default or alleged default under any lease,
license, contract or agreement to which the Company is a party or by which the
Company is bound, to the extent such default would have a material adverse
effect on the Company's business or operations.
(C) The Company is not in default with respect to any judgment, order,
writ, injunction or decree of any court or governmental body or entity, and the
Company has complied with all laws, rules, regulations and orders which are
applicable to the Company or its business as presently conducted, to the extent
any such default or noncompliance would have a material adverse effect on the
Company's business or operations. The Company has all necessary permits,
licenses and other authorizations required to conduct its business as conducted
and proposed to be conducted. To the best of the Company's knowledge, there is
no existing law, rule, regulation or order, and the Company after due inquiry is
not aware of
any proposed law, rule, regulation or order, whether federal or state, which
would prohibit or restrict the Company from or otherwise materially adversely
affect the Company in, conducting its business in any jurisdiction in which it
is now conducting business or in which it proposes to conduct business.
(D) Except as set forth in Schedule 3.8(d) attached hereto, no
litigation, proceedings, investigations, arbitrations or claims are pending or,
to the best knowledge of the Company, threatened against the Company, its
officers or directors, or any of the Company's assets or properties, or which
question the validity of this Agreement or any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement, and the
Company does not know of any basis for any such litigation, proceedings,
investigations, arbitrations or claims.
(E) For at least the past twenty-four (24) months, the Company has
filed all proxy statements, schedules and reports required to be filed by it
with the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). None of such reports when filed
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements or facts contained therein not misleading,
except to the extent any such report was corrected by a subsequently filed
report. The Company has delivered to the Purchasers true, complete and accurate
copies of all Forms 10-K and 10-Q.
(F) Assuming the truth and accuracy of certain representations and
warranties of the Purchasers contained herein, the issuance of the Shares and
the Warrants by the Company to the Purchasers complies with all federal and
state securities laws and is not required to be registered under the Securities
Act of 1933, as amended (the "Securities Act"), or any other state or federal
securities laws.
SECTION 4
INVESTMENT REPRESENTATION
Each Purchaser hereby represents and warrants (with respect to itself only)
to the Company as follows:
4.1 EXPERIENCE. Purchaser is experienced in evaluating and investing in
companies such as the Company.
4.2 INVESTMENT. Purchaser is acquiring the Shares and the Warrants for
investment for its own account and not with a view to, or for resale in
connection with, any distribution thereof, and it has no present intention of
selling or distributing any of the Securities in any transaction that would be
in violation of the securities laws of the United States of America or any state
thereof, without prejudice, however, to such Purchaser's right at all times to
sell or otherwise dispose of all or any part of said Securities pursuant to an
effective registration statement under the Securities Act and applicable state
securities laws, or under an exemption from such registration available under
the Securities Act and applicable state securities laws. Purchaser understands
that the Securities have not been
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act that depends upon, among other
things, the bona fide nature of the investment intent as expressed herein.
4.3 RULE 144. Purchaser acknowledges that, because they have not been
registered under the Securities Act, the Securities may not be sold or
transferred unless subsequently registered under the Securities Act or an
exemption from such registration is available. Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of securities purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the securities of the Company, the availability of
certain current public information about the Company, the resale occurring not
less than two years after a party has purchased and paid for the security to be
sold, the sale being through a "broker's transaction" or in transactions
directly with a "market maker" (as provided by Rule 144(f)) and the number of
shares being sold during any three-month period not exceeding specified
limitations (unless the sale is within the requirements of Rule 144(k)).
4.4 ACCESS TO DATA. Purchaser has been furnished with such materials and has
been given access to such information relating to the Company as it or its
professional advisor has requested and it has been afforded the opportunity to
ask questions regarding the Company and the Shares and Warrants, all as it has
found necessary to make an informed investment decision.
4.5 INVESTOR STATUS. Purchaser is either an "accredited investor" within the
meaning of Rule 501(a) of Regulation D as promulgated under the Securities Act,
or by reason of its business or financial experience, or the business or
financial experience of its professional advisor, it has the capacity to protect
its own interests in connection with this transaction, and is able to bear the
economic risk of losing its entire investment in the Shares and the Warrants.
SECTION 5
CONDITIONS TO PURCHASERS' OBLIGATIONS AT CLOSING
The obligation of each Purchaser to purchase the Shares and the Warrants at
the Closing is subject to the fulfillment on or prior to the Closing Date of the
following conditions to the extent not waived by each Purchaser:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true, correct and
complete when made, and shall be true, correct and complete on the Closing Date
with same force and effect as if made on and as of the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all respects.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchasers a certificate, executed by the President of the Company, dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 of this Agreement.
5.4 OPINION OF COUNSEL. The Purchasers shall have received an opinion of
Cooley Godward Castro Huddleson & Tatum in substantially the form of Exhibit C
attached hereto.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers and their counsel, and the
Purchasers and their counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
5.6 LAWS AND REGULATIONS. At the Closing, the purchase of the Shares and the
Warrants to be purchased by such Purchaser hereunder (i) shall not be prohibited
or enjoined (temporarily or permanently) by any applicable law or governmental
regulation of which the Company or a Purchaser is aware, (ii) shall not subject
such Purchaser to any penalty, or in its reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental regulation and
(iii) shall be permitted by the laws and regulations of the jurisdictions to
which such Purchaser is subject.
5.7 CONSENTS AND PERMITS. The Company shall have obtained all consents,
permits and authorizations, and made all filings and declarations required in
connection with the performance by the Company of the transactions to be
performed at or prior to the time of Closing by the Company pursuant to this
Agreement.
5.8 NO MATERIAL JUDGMENT OR ORDER. There shall not be any judgment or order
of a court or competent jurisdiction or any ruling of any governmental agency
which would prohibit the sale or issuance of the Shares and the Warrants or
subject the Company or such Purchaser to any material penalty in the event of
the sale or issuance of the Shares and the Warrants.
5.9 CERTIFICATE OF DESIGNATION. The Certificate of Designations shall have
been duly filed with the Secretary of State of the State of Delaware.
5.10 STOCKHOLDERS AGREEMENT. The Stockholders Agreement shall have been
executed by the Company and each Purchaser.
SECTION 6
CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING
The Company's obligation to sell the Shares and the Warrants at the Closing
is subject to the fulfillment on or prior to the Closing Date of the following
conditions to the extent not waived by the Company:
6.1 REPRESENTATIONS CORRECT. The representations made by each Purchaser in
Section 4 hereof shall be true, correct and complete when made, and shall be
true, correct and complete on the Closing Date with the same force and effect as
if made on and as of the Closing Date.
6.2 NO MATERIAL JUDGMENT OR ORDER. There shall not be any judgment or order
of a court of competent jurisdiction or any ruling of any governmental agency
which would prohibit the sale or issuance of the Shares or the Warrants or
subject the Company or any Purchaser to any material penalty in the event of the
sale or issuance of the Shares or the Warrants.
6.3 STOCKHOLDERS AGREEMENT. The Stockholders Agreement shall have been
executed by each Purchaser.
SECTION 7
CONFIDENTIALITY
7.1 CONFIDENTIALITY. Each Purchaser agrees that, except as required by law or
regulation or legal or judicial process upon the advice of counsel, he or it
will keep confidential and will not disclose or divulge any confidential,
proprietary or secret information (which information shall be so identified at
the time of disclosure thereof to each Purchaser) that such Purchaser has
obtained in connection with this investment or may obtain after the date hereof
relating to the Company unless such information is or becomes publicly known or
unless the Company gives its written consent to the Purchaser's release of such
information, except that no such written consent shall be required (and
Purchaser shall be free to release such information) if such information is to
be provided to Purchaser's lawyer, accountant, or to an officer, director or
partner of a Purchaser, provided that the Purchaser shall inform the recipient
of the confidential nature of such information, and shall cause the recipient to
treat the information as confidential.
SECTION 8
REGISTRATION RIGHTS
8.1 CERTAIN DEFINITIONS. As used in this Section 8, the following terms shall
have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"HOLDER" shall mean any holder of outstanding Shares or Warrants or
Registrable Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
"REGISTRABLE SECURITIES" means shares of the Company's Common Stock (i)
issued or issuable pursuant to the conversion of the Shares or exercise of the
Warrants or (ii) issued as a dividend or other distribution with respect to, or
in exchange or in replacement of, the Shares, the Warrant Shares or such Common
Stock, excluding in all cases, however (including exclusion from the calculation
of the number of outstanding Registrable Securities), any Registrable Securities
sold by a person in a transaction registered under the Securities Act or a
transaction pursuant to Rule 144, in which his rights under this Section 8 are
not transferred.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in complying with Sections 8.2 hereof, including, without limitation, all
registration and filing fees, transfer taxes, fees of transfer agents and
registrars, fees and expenses of compliance with securities or blue sky laws,
fees of the National Association of Securities Dealers, Inc., printing expenses,
messenger and delivery expenses, and fees and disbursements of counsel for the
Company, its independent certified public accountants, underwriters (excluding
discounts and commissions) and other persons retained by the Company.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean any fees of counsel for the Holder, and
all underwriting discounts and selling commissions applicable to the sale of
such Registrable Securities.
8.2 DEMAND REGISTRATION AND DIVIDEND REGISTRATION.
(A) If at any time after six (6) months from the date hereof, Holders
in excess of fifty percent (50%) of the Registrable Securities (an "Initiating
Holder") request (a "Request") in writing that the Company effect a
registration, the Company will:
(1) give written notice of the proposed registration to all other
Holders within ten (10) days after a Request; and
(2) use its best efforts to effect as soon as practicable (but in
no event later than sixty (60) days after the Request), such registration
(including, without limitation causing a registration statement with respect
thereto to be declared effective and obtaining appropriate qualifications under
blue sky or other state securities laws and appropriate compliance with
applicable regulations issued under the Securities Act and any
other governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or Holders joining
in such request as are specified in a written request received by the Company
within twenty (20) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to take any
action to effect any such registration (or any related qualification or
compliance) pursuant to this Section 8.2(a):
(I) in any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(II) if prior to receiving the Request, the Board of Directors
had determined to effect a registered underwritten public offering of the
Company's securities for the Company's account and the Company had taken
substantial steps (including, but not limited to, selecting a managing
underwriter for such offering) and is proceeding with reasonable diligence and
in good faith to effect such offering, in which case the Company may defer the
filing (but not the preparation) of a registration statement for the requested
registration and any required qualification or compliance in connection
therewith for a period of ninety (90) days after the effective date of the
Company's registration statement, provided, however, a deferral for effecting a
registration pursuant to this Section 8.2(a)(ii) shall be lifted, and the
requested registration shall be effected, if the proposed registration for the
Company's account is abandoned; or
(III) after the Company has effected three registrations
pursuant to this Section 8.2(a), and each such registration has been declared or
ordered effective and no stop order, injunction, or other order is issued
interfering with such registration.
Subject to the foregoing clauses (i) through (iii), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable (but in no event later than thirty (30)
days) after receipt of a Request.
(B) The Company may require, as a condition precedent to its
obligations under this Section 8.2, that all Holders participating in a
registration effected pursuant to this Section 8.2 so participate through a
single broker reasonably satisfactory to the Company.
(C) The Company may include securities for its own account (or for the
account of other stockholders) in such registration if the number of Registrable
Securities that would otherwise have been included by the Holders in such
registration and underwriting will not thereby be limited.
8.3 REGISTRATION OF DIVIDEND SHARES. No later than ten (10) days prior to the
payment of a dividend to holders of Series F Preferred in shares of the
Company's Common Stock (a "Dividend Payment Date"), the Company shall effect a
registration (including, without limitation causing a registration statement
with respect thereto to be declared effective and obtaining appropriate
qualification under blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act and any
other government requirements or regulations) to permit and facilitate the
distribution of any and all of the shares of Common Stock to be distributed on
such Dividend Payment Date.
8.4 FURTHER LIMITATIONS ON REGISTRATIONS. All Holders proposing to distribute
their securities through an underwriting effected pursuant to Section 8.2 shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding Section 8.2(a), if the Company and the underwriter
determine that marketing factors require a limitation of the number of shares to
be underwritten in an offering pursuant to Section 8.2(a), the underwriter may
exclude some or all Registrable Securities from any such registration and
underwriting. In such case, the Company shall so advise all Holders (except
those Holders who have indicated to the Company their decision not to distribute
any of their Registrable Securities through such underwriting), and the number
of shares of Registrable Securities that may be included in such registration
and underwriting shall be allocated among such Holders in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities owned by
such Holders at the time of filing the registration statement. No Registrable
Securities excluded from any underwriting pursuant to Section 8.2(a) by reason
of the underwriter's marketing limitation shall be included in such
registration. If any Holder disapproves of the terms of any such underwriting as
a result of any such limitation imposed by such underwriter, such person may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities and/or other securities so withdrawn
from such underwriting shall also be withdrawn from such registration; provided,
however, that, if by the withdrawal of such Registrable Securities a greater
number of Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities in the same proportion used above in determining the underwriter
limitation.
8.5 PIGGYBACK REGISTRATION.
(A) If, at any time or from time to time, the Company shall determine
to register any of its securities, either for its own account or the account of
a security holder or holders exercising their respective demand registration
rights, other than a registration relating solely to employee benefit plans on
Form S-8 or similar forms which may be promulgated in the future or a
registration on Form S-4 or similar forms which may be promulgated in the future
relating solely to Commission Rule 145 or a similar transaction, the Company
will (i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such
securities under the applicable blue sky or other state securities laws) and
(ii) include in such registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved therein, all
Registrable Securities of such Holders as specified in a written request or
requests made within twenty (20) days after receipt of such written notice from
the Company.
(B) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
indicate in the notice given pursuant to Section 8.5(a). In such event the right
of any Holder to registration pursuant to this Section 8.5 shall be conditioned
upon such Holder's agreeing to participate in such underwriting and in the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company or by other holders exercising any
demand registration rights. Notwithstanding any other provision of this Section
8.5, if the underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the underwriter may exclude some or
all Registrable Securities or other securities from such registration and
underwriting (hereinafter an "Underwriter Cutback"). In the event of an
Underwriter Cutback, the Company shall so advise all Holders and the other
holders distributing their securities through such underwriting, and the number
of Registrable Securities and other securities that may be included in the
registration and underwriting shall be allocated among all holders thereof
(including those holders who are exercising their demand registration rights) on
the basis that the holders who are not Holders shall be cut back before any
cutback of Holders. If the limitation determined by the underwriter requires a
cut-back of the Holders, then the number of shares that may be included in the
Registration and underwriting shall be allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of securities
entitled to inclusion in such registration held by such Holders at the time of
filing the registration statement. If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by written notice
to the Company and the underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration.
8.6 EXPENSES OF REGISTRATION. All Registration Expenses shall be borne by the
Company and all Selling Expenses shall be borne by the holders of the securities
so registered pro rata on the basis of the number of shares so registered.
8.7 REGISTRATION PROCEDURES. In the case of each registration, qualification
or compliance effected by the Company pursuant to Sections 8.2, 8.3 or 8.5, the
Company will keep each Holder advised in writing as to the initiation of each
registration (and any related qualification and compliance) and as to the
completion thereof. At its expense the Company will use its best efforts to:
(A) Keep such registration (and any related qualification or
compliance) effective for a period of ninety (90) days or until the Holder or
Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs; and
(B) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request.
8.8 INDEMNIFICATION.
(A) The Company will indemnify each Holder, each of its officers,
directors, partners and legal counsel, and each person controlling such Holder,
with respect to which registration, qualification or compliance has been
effected pursuant to Sections 8.2, 8.3 or 8.5, and each underwriter, if any, and
each person who controls any underwriter against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on (i) any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other similar document (including any
related registration statement, notification or the like) incident to any such
registration (or related qualification or compliance) or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which they were made, or (ii) any violation by the
Company of any federal, state or common law rule or regulation applicable to the
Company in connection with any such registration (or related qualification or
compliance), and will reimburse each such Holder, each of its officers,
directors, partners and legal counsel, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, as
incurred, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by an instrument duly executed by such Holder or
underwriter and stated to be specifically for use therein.
(B) Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration (or related
qualification or compliance) is being effected, indemnify the Company, each of
its directors and officers, each legal counsel and independent accountant of the
Company, each underwriter, if any, of the Company's securities covered by such a
registration statement (or related qualification or compliance), each person who
controls the Company or such underwriter within the meaning of the Securities
Act, and each other such Holder, each of its officers, directors, and partners
and each person controlling such Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other similar
document (or related qualification or compliance documents), or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and will reimburse the Company, such
Holders, such directors, officers, persons, underwriters or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any
such claim, loss, damage, liability or action, as incurred, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
(C) Each party entitled to indemnification under this Section 8.8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). The Indemnified Party may participate in such defense
at such party's expense; provided, however, that the Indemnifying Party shall
bear the expense of such defense of the Indemnified Party if representation of
both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest. The failure of any Indemnified Party to give
notice as provided herein shall relieve the Indemnifying Party of its
obligations under this Section 8.8 only to the extent that such failure to give
notice shall materially adversely prejudice the Indemnifying Party in the
defense of any such claim or any such litigation. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
8.9 INFORMATION BY HOLDER. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders and the distribution proposed by such Holder or
Holders as the Company may request in writing and as shall be required in
connection with any registration (or related qualification or compliance)
referred to in this Section 8.
8.10 TRANSFER OF REGISTRATION RIGHTS. The rights granted under Sections 8.2,
8.3 and 8.5 may be assigned or otherwise conveyed by any Holder to its
stockholders, partners or former partners (or their estates), or to any
transferee who acquires shares of Registrable Securities; provided in each case,
that the Company is given written notice by such transferee at the time of or
within a reasonable time after said transfer, stating the name and address of
said transferee and said transferee's agreement to be bound by the provisions of
Section 8 of this Agreement.
SECTION 9
POST-CLOSING COVENANTS OF THE COMPANY
9.1 RESERVE SUFFICIENT SHARES FOR THE CONVERSION SHARES AND WARRANT
SHARES. The Company shall at all times reserve and keep available out of its
authorized but unissued
shares of Common Stock, for the purpose of effecting the conversion of the
Series F Preferred and the exercise of the Warrants and otherwise complying with
the terms of this Agreement, the Warrants and the Certificate of Designations,
such number of its duly authorized shares of Common Stock as shall be sufficient
to effect the conversion of the Series F Preferred and the exercise of the
Warrants from time to time outstanding or otherwise to comply with the terms of
this Agreement. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the Series F
Preferred and the exercise of the Warrants or otherwise to comply with the terms
of this Agreement, the Company will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
numbers of shares as shall be sufficient for such purposes. The Company agrees
to obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Series F Preferred or exercise of the
Warrants or the issuance of the Dividend Shares.
9.2 NEGATIVE COVENANTS. So long as 240,000 shares of Registrable Securities
are outstanding, the Company agrees that it will not take any of the following
actions set forth below without the consent of each of the Series F Directors
(as defined in the Stockholders Agreement); provided, however, if such
directorships remain vacant for a period of 30 days following notice of such
vacancy to the holders of the Registrable Securities, then no consent shall be
required.
(A) LIMITATION ON ADDITIONAL INDEBTEDNESS. The Company will not and
will not permit any subsidiary to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to (collectively, "incur") any Indebtedness (as hereinafter defined); provided,
however, that the Company may incur up to an aggregate of Twenty Million Dollars
($20,000,000) in Indebtedness. "Indebtedness" means (i) any liability of the
Company or any subsidiary (1) for borrowed money, or under any reimbursement
obligation relating to a letter of credit or a similar instrument, (2) evidenced
by a bond, note, debenture or similar instrument (including a purchase money
obligation), (3) for the balance deferred and unpaid of the purchase price for
any property (except for any such balance that constitutes a trade payable in
the ordinary course of business), or (4) for the payment of money relating to a
lease that is required to be classified as a capital lease obligation in
accordance with GAAP; and (ii) any liability of others described in clause (i)
that the Company or any subsidiary has guaranteed, that is recourse to the
Company or any subsidiary or that is otherwise the legal liability of the
Company or any subsidiary.
(B) LIMITATION ON SENIOR PREFERRED STOCK; PARI PASSU STOCK; REDEEMABLE
STOCK. The Company will not issue any Preferred Stock that ranks prior to or on
a parity with the Series F Preferred as to dividends or upon liquidation,
dissolution or winding up of the Company, and the Company will not issue or
permit any subsidiary to issue any redeemable capital stock.
(C) LIMITATION ON REPURCHASE. Except as contemplated hereby, the Company
will not, and will not permit any subsidiary to, directly or indirectly,
purchase,
redeem or otherwise acquire or retire for value any capital stock of the Company
or any of the Company's subsidiaries, other than capital stock that is acquired
pursuant to an employee stock repurchase program or other employee stock
repurchase rights held by the Company.
(D) LIMITATIONS ON ACQUISITIONS, MERGER OR SALE OF SUBSTANTIALLY ALL
ASSETS. The Company shall not and shall not permit any subsidiary to acquire all
or substantially all of the assets or capital stock or voting securities of, or
equity interests in, any other Person or to consolidate with, merge with or
into, or transfer, directly or indirectly by lease, assignment, sale or
otherwise, all or substantially all of its assets, in one transaction or a
series of related transactions to, any Person or to enter into any agreement to
do any of the foregoing. Notwithstanding the foregoing, the consent of the
Series F Directors shall not be required in (i) any acquisition of assets with
an aggregate purchase price of less than $500,000 provided such acquisition is
not part of a series of transactions which would require consent hereunder or
(ii) any transaction where the holders of Series F Preferred receive securities
of the acquiring corporation with substantially identical terms to the Series F
Preferred outstanding immediately prior to the completion of the transaction.
"Person" as used herein shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any affiliate group
of the foregoing.
SECTION 10
MISCELLANEOUS
10.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
between California residents entered into and to be performed entirely within
the State of California.
10.2 SURVIVAL. The representations, warranties, covenants and agreements made
by the parties herein shall survive any investigation made by any Purchaser or
the Company and shall survive the closing of the transactions contemplated
hereby indefinitely.
10.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
10.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
Any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) with the written consent of the Company and the
holders of at least sixty-six and two third percent (662/3%) in interest of the
of the outstanding Registrable Securities (including shares of Common Stock
issuable upon conversion of the Shares or exercise of the Warrants). Any
amendment or waiver effected in accordance with this section shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities have been
converted), each future holder of all such securities, and the Company.
10.5 EFFECT OF AMENDMENT OR WAIVER. Each Purchaser acknowledges that by the
operation of Section 10.4 hereof the holders of at least sixty-six and two
thirds percent (662/3%) in interest of the outstanding Registrable Securities
(including shares of Common Stock issuable upon conversion of the Shares or
exercise of the Warrants) will have the right and power to diminish or eliminate
all rights of such Purchaser under this Agreement.
10.6 RIGHTS OF PURCHASERS. Each holder of the Securities shall have the
absolute right to exercise or refrain from exercising any right or rights that
such holder may have by reason of this Agreement or such Securities, including
without limitation the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with the Company for
the purpose of modifying this Agreement or any agreement effecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Securities with respect to exercising or refraining from
exercising any such right or rights.
10.7 EXCULPATION AMONG PURCHASERS. Except as set forth in Section 4.5, each
Purchaser acknowledges that it is not relying upon any person, firm, or
corporation, other than the Company and its officers and directors, in making
its investment or decision to invest in the Company. Each Purchaser agrees that
no Purchaser nor the respective controlling person, officers, directors,
partners, agents, or employees of any Purchaser shall be liable for any action
heretofore or hereafter taken or omitted to be taken by any of them in
connection with the Shares.
10.8 NOTICES, ETC. All notices and other communications required or permitted
hereunder shall be in writing and shall be effective five (5) days after mailed
by first-class, registered, or certified mail, postage prepaid, or upon delivery
if delivered by hand or by messenger or a courier delivery service or upon
confirmation of receipt thereof if sent by facsimile or other similar
transmission, addressed (a) if to a Purchaser, at such Purchaser's address set
forth in the Schedule of Purchasers, or at such other address as such Purchaser
shall have furnished to the Company in writing, or (b) if to any other holder of
any Securities, at such address as such holder shall have furnished the Company
in writing, or, until any such holder so furnishes an address to the Company,
then to and at the address of the last holder of such Securities who has so
furnished an address to the Company, or (c) if to the Company, (i) at the
address set forth below or at such other address as the Company shall have
furnished to each Purchaser and each such other holder in writing and (ii) with
a copy to David R. Lee, Cooley Godward Castro Huddleson & Tatum, One Maritime
Plaza, Suite 2000, San Francisco, California 94111.
10.9 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power
or remedy accruing to any holder of any Securities, upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereunder occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies,
either under this Agreement, or by law or otherwise afforded to any holder,
shall be cumulative and not alternative.
10.10 STATE CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED OR REGISTERED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA NOR WITH THE APPLICABLE
AUTHORITIES OF ANY OTHER STATE AND THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION OR REGISTRATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION OR REGISTRATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH
CONSIDERATION BY THE COMPANY AND NOTWITHSTANDING ANY OTHER PROVISION IN THIS
AGREEMENT, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION OR REGISTRATION BEING OBTAINED OR AN EXEMPTION FROM SUCH
QUALIFICATION OR REGISTRATION BEING AVAILABLE.
10.11 FINDERS' FEES. Each party represents that it has not retained the
services of any finder or broker, and that it neither is nor will be obligated
for any finders' fee or commission in connection with this transaction. Each
Purchaser agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Purchaser or any of its officers, partners, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees, or representatives is responsible. Each party will
indemnify the others for damages resulting from claims arising from the
non-payment or reporting of any brokers' or finders' fees that should have been
paid or reported by such party hereunder.
10.12 EXPENSES. Except where expressly provided otherwise, the Company and
each Purchaser shall bear its own expenses and legal fees incurred on its behalf
with respect to this Agreement and the transactions contemplated hereby.
10.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
10.14 SEVERABILITY. In the case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
The foregoing Series F Preferred Stock and Warrant Purchase Agreement is
hereby executed as of the date first above written.
PHOENIX NETWORK, INC. PURCHASER:
By: By:
------------------------- ---------------------------
Wallace M. Hammond
President and
Chief Executive Officer
ADDRESS:
550 California Street, 11th Floor
San Francisco, CA 94104
EXHIBIT A
SCHEDULE OF PURCHASERS
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
CERTIFICATE OF DESIGNATION OF PREFERENCES OF
SERIES F PREFERRED STOCK
SCHEDULE 3.8(D)
LITIGATION
On January 11, 1995, a company named Chester House Industries apparently
filed a complaint in the Supreme Court, State of New York, Chester County,
against the Company and NYNEX alleging breach of contract and seeking $45,000 in
damages. The Company received a Summons with notice from the court in February
which did not contain or explain the nature of the complaint. The Company is
unaware of who Chester House Industries is or the nature of the complaint. Their
lawyer listed in the complaint was not communicative during telephone
conversations with the Company. The Company has retained an attorney in New York
who tried to obtain a copy of the complaint and recently filed a Notice of
Motion to Dismiss the case based upon the plaintiff not serving the complaint
within twenty days after demand.
In late April of this year the Company received a compliant filed in the U.S.
District Court, Southern District of New York by Sunrise Financial Group, Inc.
("Sunrise") against Thomas Bell and the Company. They allege that Mr. Bell
entered into an agreement with Sunrise to issue an option to purchase 125,000
shares of his personal Phoenix Network stock at $1.50 per share. Sunrise alleges
that they exercised that option and Mr. Bell refused to honor the request. Their
election to exercise would have resulted in a 98,214 net share stock payment to
Sunrise which was trading at $7.00 per share at the time, they claim. Phoenix is
included in the suit as a result of its failure to register the shares. The
Company has provided a copy of the complaint to its counsel but has not taken
any other action.
On September 21, 1995, Laurence Paradise, the Company's former Regional Vice
President of Sales, filed a complaint against the Company alleging claims for
breach of an implied employment contract to terminate only for good cause, and
failure to pay commissions. This action arises out of the Company's termination
of Mr. Paradise's employment on December 31, 1993, and the alleged failure of
the Company to pay override commissions during Mr. Paradise's employment. The
complaint seeks damages in an unspecified amount in excess of the jurisdictional
minimum of $25,000. The Company's response to the complaint is due on October
31, 1995. The Company believes the action is without merit and intends to
vigorously defend against it.
EX-7.2
3
STOCKHOLDERS AGRMNT
EXHIBIT 7.2
PHOENIX NETWORK, INC.
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of October
20, 1995, is entered into by and among PHOENIX NETWORK, INC., a Delaware
corporation (the "Company"), and each of the undersigned Holders. Each of the
capitalized terms used herein and not otherwise defined herein have the meanings
given such terms in the Series F Preferred Stock and Warrant Purchase Agreement
of even date herewith, by and among the Company and each of the Purchasers named
therein (the "Purchase Agreement").
SECTION 1. BOARD OF DIRECTORS.
(a) Composition. Immediately after the Closing (as defined in Section 1(e)
hereof) and so long as at least 200,000 Registrable Securities remain
outstanding, the Holders (as hereinafter defined) and the Company shall take all
action within their respective power, including but not limited to the voting of
capital stock of the Company, required to cause the Board of Directors of the
Company to include two Series F Directors (as hereinafter defined). In the event
there are less than 150,000 but at least 75,000 Registrable Securities
outstanding, the Holders and the Company shall take all action within their
respective power, including but not limited to the voting of capital stock of
the Company, required to cause the Board of Directors of the Company to include
at all times one Series F Director. Each initial Series F Director designated
pursuant hereto agrees to proffer his resignation in the event such initial
Series F Director shall own beneficially (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended) less than
750,000 Registrable Securities. "Holder" means each owner of Registrable
Securities or securities convertible or exercisable for Registrable Securities
who is now or hereafter becomes a party to this Agreement.
(b) By execution hereof, each Holder hereby agrees that the initial Series
F Directors shall be Max E. Thornhill and David Singleton.
(c) Inability of Directors to Serve. In the event that any Series F
Director is unable to serve, or once having commenced to serve, is removed or
withdraws from the Board of Directors of the Company (such a director, a
"Withdrawing Director"), the Withdrawing Director's replacement on such Board of
Directors (and, if applicable, any executive or similar committee thereof) shall
be designated (i) by the vote of both of the Series F Directors then in office,
if such designation takes place prior to the effective date of the resignation
of the Series F Director or (ii) if only one Series F Director remains in
office, then by such remaining Series F Director, in each case in accordance
with Section 223 of the General Corporation Law of the State of Delaware.
(d) Failure to Designate a Director. In the event that a vacancy exists in
the office of Series F Director and such directorship is not filled within 30
days pursuant to Section 1(c), due notice thereof shall be delivered by the
Company to the Holders and such vacancy shall be filled by action of a majority
in interest of the Holders in accordance with the charter and by-laws of the
Company.
(e) Voting of Capital Stock. Each of the Holders agrees that, to the
extent it holds any voting stock of the Company (or any stock that is entitled
to vote upon any particular matter, whether or not such stock is generally
entitled to voting rights), it will at all times vote such stock in such a
manner as to ensure that the terms and intention of this Agreement, the
certificate of incorporation, and the bylaws of the Company are carried out and
observed and to ensure that the certificate of incorporation and bylaws as in
effect on the date hereof do not, at any time hereafter, conflict in any respect
with the provisions of this Agreement. In addition, each of the Holders agrees
that it or he will not vote any voting capital stock of the Company to cause the
removal from the Board of Directors of the Company of any directors serving
pursuant to Section 1 hereof (a "Series F Director") except with the written
consent of such director, except to the extent such removal is for cause. The
Company agrees that it will not take any action, including any amendment to its
certificate of incorporation or bylaws, which would be inconsistent with this
Agreement.
(f) Proxy. Effective upon the Closing, each Holder hereby grants to Max E.
Thornhill, with full power of substitution, a proxy (the "Proxy") to vote, with
respect to the election of the Series F Directors, any capital stock of the
Company which such grantor is entitled to vote and to give written consents in
lieu of voting such capital stock with respect to such election. The Proxy shall
be irrevocable and shall survive the death, disability, or incapacity of the
grantor. After the Closing, Mr. Thornhill shall have the right to vote or
exercise (or refrain from voting or exercising) the Proxy at any time and from
time to time as he may elect in his sole discretion. "Closing" means the closing
of the sale of the Series F Preferred Stock to the Purchasers pursuant to the
Purchase Agreement.
(g) Other Activities. It is understood and accepted that the initial
Series F Directors and all of their respective Affiliates (as hereinafter
defined) have interests in other business ventures which may be competitive with
the activities of the Company and that, to the fullest extent permitted by law,
nothing in this Agreement shall limit the current or future business activities
of any of them or any of their respective Affiliates whether or not such
activities are competitive with those of the Company or any of its subsidiaries.
Except as expressly provided herein, nothing in this Agreement shall limit the
ability of any Holder to exercise its rights under this Agreement or as a
stockholder of the Company in accordance with its own best judgment and
applicable law. Nothing in this Agreement, express or implied, shall relieve any
officer or director, as such, of the Company of any fiduciary duties they may
have to the stockholders of the Company. "Affiliate" means, with respect to any
Person, any other Person who, directly or indirectly, controls, is controlled
by, or is under common control with that Person. "Person" means any individual,
partnership, joint venture, corporation, trust, unincorporated organization, or
other entity.
(g) Indemnification of Series F Directors. The Company and each Holder
agrees, severally and not jointly, to indemnify, reimburse, and hold harmless to
the fullest extent permitted by law, each Series F Director against any and all
losses, claims, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' fees and disbursements incurred in
investigating, preparing, or defending against any litigation, or investigation
or proceeding commenced or threatened, or any claim whatsoever) arising from
such Series F Director's serving in such capacity. In the event of the death of
any person having a right of indemnification under the foregoing provisions,
such right shall inure to the benefit of his or her heirs, executors,
administrators, and personal representatives. The rights conferred above shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, by-law, resolution of stockholders or directors,
agreement, or otherwise.
SECTION 2. OTHER TRANSFER RESTRICTIONS.
(a) Restrictions. Other than (i) transfers to the public pursuant to an
effective registration statement filed pursuant to the Securities Act of 1933,
as amended (the "Securities Act"), or (ii) sales to the public pursuant to Rule
144, no Holder shall transfer any Registrable Securities or securities
convertible or exercisable for Registrable Securities, unless such Holder shall
cause the proposed transferee of such securities to agree, pursuant to a written
agreement reasonably satisfactory to the Company, to take and hold such
securities subject to the provisions and upon the conditions specified in this
Agreement.
(b) Legends. Each certificate evidencing Registrable Securities or
securities convertible or exercisable for Registrable Securities subject to this
Agreement and each certificate issued to any subsequent transferee of such
securities, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
PROVISIONS REGARDING THE VOTING OF SUCH SECURITIES AND CERTAIN TRANSFER
RESTRICTIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER
20, 1995, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES.
(c) Termination of Certain Restrictions.
The legend required by Section 2(b) shall terminate as to any securities
(A) upon the termination of this Agreement or (B) upon the valid transfer of
such shares to a transferee who is not required to agree to take and hold such
shares subject to the provisions of Section 2(a) of this Agreement. Whenever the
legend requirements of Section 2(b) shall terminate as to any securities, the
holder thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate evidencing such securities not bearing the
restrictive legend set forth in Section 2(b) hereof.
(d) Nonconforming Transfers Void. Any purported transfer which is not
effected in compliance with the foregoing provisions of this Section 2 shall be
void and of no force or effect whatsoever.
SECTION 3. TERMINATION.
The provisions of this Agreement shall terminate (i) as to any Holder when
such Holder is no longer the beneficial owner of any Registrable Securities,
(ii) as to all Holders when such Holders no longer have the right to designate
one or more Series F Directors or (iii) as to any Holder upon such time as such
Holder can sell their Registrable Securities under Rule 144 or such Registrable
Securities may be sold under a registration statement that has been declared
effective by the Securities and Exchange Commission.
SECTION 4. MISCELLANEOUS.
(a) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement, and
to exercise all other rights granted by law or otherwise available to such
Persons.
(b) Amendments and Waivers. The provisions of this Agreement may be
amended or waived at any time by the written agreement of the Company and
Holders of at least two-thirds in interest of the Registrable Securities.
(c) Assignment. No Person may assign any of its rights or obligations
under this Agreement (except in connection with sales and transfers of the
securities which are subject to this Agreement or to a successor by merger or
similar succession to the business or assets of such Person).
(d) Notices. All notices, requests, consents, or other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given or delivered by any party (i) when received by
such party if delivered by hand, (ii) upon confirmation when delivered by
telecopy, (iii) within one day after being sent by recognized overnight delivery
service, or (iv) within five business days after being mailed by first-class
mail, postage prepaid, and in each case addressed as follows:
(i) If to the Company:
Phoenix Network, Inc.
550 California Street, 11th Floor
San Francisco, CA 94104
Telecopy No.: (415) 399-3301
with a copy to:
David R. Lee, Esq.
Cooley Godward
3000 Sand Hill Road
Building 3, Suite 230
Menlo Park, CA 94025-7116
Telecopy No.: (415) 854-2691
(ii) If to the Max E. Thornhill:
Max E. Thornhill
504 South Jackson Street
Brookhaven, Mississippi 39601
Telecopy No.: (601) 833-9776
with a copy to:
Mary R. Korby, Esq.
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy No.: (214) 746-7777
(iii) If to David Singleton:
David Singleton
412 1/2 South Jackson St.
Brookhaven, Mississippi 39601
(iv) If to any Holder other than the initial Series F Directors, at
his or its address set forth on such Holder's signature s hereto or, if not
so set forth, as reflected in the Company's records.
Any party by written notice to the other parties pursuant to this Section
may change the address or the Persons to whom notices or copies thereof shall be
directed.
(e) Construction. This Agreement shall be construed and enforced in
accordance with and governed by the internal substantive laws of the State of
Delaware.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument. Each
party shall receive a duplicate original of the counterpart copy or copies
executed by it and the Company.
(g) Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first set forth above.
PHOENIX NETWORK, INC.
By:
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Name:
-------------------------------------
Title:
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HOLDERS: