ATTACHMENT C TO
SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the 31st day of March, 1997,
between the person listed on the signature page hereto (the "Subscriber") and
C-PHONE CORPORATION, a New York corporation having its principal place of
business at 6714 Netherlands Drive, Wilmington, NC 28405 (the "Company").
WHEREAS, the Company is a party to certain Securities Purchase
Agreements dated the date hereof (the "Purchase Agreements"), pursuant to which
it has agreed to issue and sell an aggregate of not less than three million four
hundred thousand dollars ($3,400,000) nor more than five million dollars
($5,000,000) of its shares (the "Shares") of common stock, $.01 par value per
share ("Common Stock"), and accompanying contingent value rights (the "Rights",
and collectively with the Shares the "Securities"); and
WHEREAS, the Company has agreed to grant to the Subscriber and the
other subscriber parties to the various Purchase Agreements (each, a "Holder"
and collectively, the "Holders") certain registration rights set forth herein
with respect to the Securities; and
WHEREAS, Daniel Flohr, President and Chief Executive Officer of the
Company ("Flohr") has delivered to Josephthal Lyon & Ross Incorporated ("JLR")
250,000 shares of his Common Stock (the "Escrowed Shares") to be used to satisfy
certain obligations to the Holders.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. REGISTRABLE SECURITIES. As used herein, the term
"Registrable Security" means the Shares and the shares of Common Stock issuable
upon exercise of the Rights (the "Right Shares"); provided, however, that with
respect to any particular Registrable Security, such security shall cease to be
a Registrable Security when, as of the date of determination, (i) it has been
effectively registered under the Securities Act of 1933, as amended (the "1933
Act") and disposed of pursuant thereto, (ii) registration under the 1933 Act is
no longer required for the immediate public distribution of such Common Stock as
a result of the provisions of Rule 144, or (iii) with respect to any Right
Shares, they have not yet been issued and the Rights have ceased to be
outstanding. The term "Registrable Securities" means any and/or all of the
shares of Common Stock falling within the foregoing definition of a Registrable
Security. In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of Registrable Security
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 1.
Section 2. RESTRICTIONS ON TRANSFER. The Holder acknowledges and
understands that prior to the registration of the Registrable Securities as
provided herein, the Securities are "restricted securities" as defined in Rule
144 promulgated under the 1933 Act. The Holder understands that no disposition
or transfer of the Securities may be made by the Holder in the absence of (i) an
opinion of counsel reasonably satisfactory to the Company that such transfer may
be made, or (ii) a registration statement under the 1933 Act then being
effective with respect thereto.
Section 3. REGISTRATION RIGHTS.
(a) At any time commencing fifteen (15) days after the date hereof, the
Holders owning at least thirty-three percent (33%) of the Shares shall have the
right (if not previously exercised by any other Holder or Holders), exercisable
by written notice to the Company (the "Demand Registration Request"), to have
the Company prepare and file with the Securities and Exchange Commission (the
"SEC") within five
(5) days after receipt of the Demand Registration Request a registration
statement on Form S-3 (the "Registration Statement"), on one occasion, at the
sole expense of the Company (except as provided in Section 3(c) hereof), in
respect of all Holders of Registrable Securities, each of whom shall have the
right to include their Registrable Securities therein if they have provided to
the Company, within five (5) days after receipt thereof, a properly completed
questionnaire of the type commonly used for offerings of this kind, so as to
permit a public offering and sale of the Registrable Securities under the 1933
Act.
(b) The Company will use its reasonable best efforts to maintain any
Registration Statement or post-effective amendment filed under this Section 3
hereof current under the 1933 Act until the earlier of (i) the date that all of
the Registrable Securities have been sold pursuant to the Registration Statement
and (ii) the first anniversary of the effective date of the Registration
Statement.
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of any
Registration Statement under Section 3(a) hereof and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company. The Holder shall bear the cost
of underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The
Company at its expense will supply the Holder with copies of such Registration
Statement and the prospectus or offering circular included therein and other
related documents in such quantities as reasonably may be requested by the
Holder.
(d) The Company shall not be required by this Section 3 to include a
Holder's Registrable Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters reasonably acceptable to counsel for the Holder and the
Company) the proposed offering or other transfer as to which such registration
is requested is exempt from applicable federal and state securities laws and
would result in all purchasers or transferees thereof obtaining securities which
are not "restricted securities", as defined in Rule 144 under the 1933 Act.
(e) (i) In the event that the Registration Statement to be filed by the
Company pursuant to Section 3(a) hereof is not declared effective by the SEC
within ninety five (95) days after receipt by the Company of the Demand
Registration Request, then JLR shall cause to be delivered from the Escrowed
Shares to each Holder, as a penalty, for each day thereafter until the earlier
of (A) the date that the Registration Statement is declared effective (the
"Effective Date") and (B) the 185th day after the receipt by the Company of the
Demand Registration Request, all rights with respect to such number of shares of
Common Stock as shall equal the product of (x) 1,000 and (y) a fraction, the
numerator of which is the purchase price paid for the Securities by the Holder
and the denominator of which is the aggregate purchase price paid for the
Securities by all of the Holders.
(ii) In the event that the Registration Statement is not declared
effective by the SEC within one hundred eighty five (185) days after receipt by
the Company of the Demand Registration Request, then JLR shall cause to be
delivered from the Escrowed Shares to each Holder, as a penalty, all rights with
respect to such number of shares of Common Stock as shall equal the product of
(A) 160,000 and (B) a fraction, the numerator of which is the purchase price
paid for the Securities by the Holder and the denominator of which is the
aggregate purchase price paid for the Securities by all of the Holders.
(f) No provision contained herein shall preclude the Company from
selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to this Section 3.
Section 4. APPROVAL OF ISSUANCE OF EXCESS RIGHTS. Notwithstanding the
obligation of the Company hereunder to register the Right Shares, the Holder
acknowledges that, pursuant to the listing requirements of The Nasdaq National
Market ("NNM"), the Company will be required to seek the approval (the "Rights
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Proposal") of its shareholders prior to the issuance of any Excess Right Shares
(as defined below). For purposes of this Agreement, "Excess Right Shares" shall
mean any Right Shares in excess of the difference between 870,000 and the
aggregate number of Shares sold pursuant to the Purchase Agreements. The Company
agrees (i) to include the Rights Proposal in its proxy materials for the
Company's regularly scheduled 1997 Annual Meeting of Shareholders to be held no
later than August 30, 1997, (ii) to use its best efforts to obtain timely
clearance from the SEC of such proxy materials, (iii) to mail such proxy
materials in a timely manner and (iv) to use its best efforts to cause the
Company's board of directors to recommend (and not subsequently withdraw)
approval of the Rights Proposal to shareholders.
Section 5. COOPERATION WITH THE COMPANY. The Holders will reasonably
cooperate with the Company in all respects in connection with this Agreement,
including, timely supplying all information reasonably requested by the Company
and executing and returning all documents reasonably requested in connection
with the registration and sale of the Registrable Securities.
Section 6. REGISTRATION PROCEDURES. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the 1933 Act, the Company shall
(except as otherwise provided in this Agreement), expeditiously:
(a) prepare and file with the SEC and the National Association of
Securities Dealers, Inc., if applicable, such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective and to comply with the
provisions of the 1933 Act with respect to the sale or other disposition of all
Registrable Securities covered by the Registration Statement whenever the Holder
or Holders of such Registrable Securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities from time to time in connection with a Registration Statement
pursuant to Rule 415 under the 1933 Act);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the 1933 Act, and such other documents, as such Holder may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by such Holder;
(c) use its reasonable best efforts to register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Holders shall
reasonably request, and do any and all other acts and things which may be
necessary or advisable to enable each Holder to consummate the public sale or
other disposition in such jurisdictions of such Registrable Securities owned by
such Holder, except that the Company shall not for any such purpose be required
to qualify to do business as a foreign corporation in any jurisdiction wherein
it is not so qualified or to file therein any general consent to service of
process;
(d) use its best efforts to list the Registrable Securities on the NNM
or any securities exchange on which the Common Stock is then listed, if the
listing of such Registrable Securities is then permitted under the rules of the
NNM or such exchange;
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter or underwriters of such underwritten
offering;
(f) notify each Holder of Registrable Securities covered by the
Registration Statement, at any time when a prospectus relating thereto covered
by the Registration Statement is required to be delivered under the 1933 Act, of
the happening of any event of which it has knowledge as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a
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material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
Section 7. INFORMATION BY THE HOLDER. Each Holder of Registrable
Securities included in any Registration Statement shall furnish to the Company
such information regarding such Holder and the distribution proposed by such
Holder as the Company reasonably may request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement.
Section 8. ASSIGNMENT OF REGISTRATION RIGHTS. The rights granted the
Holders under this Agreement may not be assigned except to a transferee of all
or a portion of the Registrable Securities.
Section 9. TERMINATION OF REGISTRATION RIGHTS. The rights granted
pursuant to this Agreement shall terminate as to each Holder (and permitted
transferee under Section 8 hereof) upon the occurrence of any of the following:
(a) all such Holder's Registrable Securities subject to this Agreement
have been sold; or
(b) such Holder's Registrable Securities subject to this Agreement may
be sold without such registration pursuant to Rule 144 promulgated by the SEC
pursuant to the 1933 Act.
Section 10. INDEMNIFICATION.
(a) In the event of the filing of any Registration Statement with
respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Holder and each person, if any, who
controls the Holder within the meaning of the 1933 Act ("Distributing Holders")
against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees and expenses), to
which the Distributing Holders may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such Registration
Statement, or any related preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, preliminary prospectus,
final prospectus, offering circular, notification or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by the Distributing Holders, specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and hold
harmless the Company, and each officer, director of the Company or person, if
any, who controls the Company within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees and expenses) to which the Company or any
such officer, director or controlling person may become subject under the 1933
Act or otherwise, insofar as such losses claims, damages or liabilities (or
actions in respect thereof); arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in a Registration
Statement, or any related preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that such untrue statement
or alleged
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untrue statement or omission or alleged omission was made in such Registration
Statement, preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by such
Distributing Holder, specifically for use in the preparation thereof and,
provided further, that the indemnity agreement contained in this Section 10(b)
shall not inure to the benefit of the Company with respect to any person
asserting such loss, claim, damage or liability who purchased the Registrable
Securities which are the subject thereof if the Company was responsible for the
failure to send or give (in violation of the 1933 Act or the rules and
regulations promulgated thereunder) a copy of the prospectus contained in such
Registration Statement to such person at or prior to the written confirmation to
such person of the sale of such Registrable Securities, where the Company was
obligated to do so under the 1933 Act or the rules and regulations promulgated
thereunder. This indemnity agreement will be in addition to any liability which
the Distributing Holders may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion, in which
event, such legal or other expenses shall become the responsibility of the
indemnifying party from and after it relinquishes its role of so pursuing such
action. The indemnified party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the indemnifying party
if the indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party; provided that if the
indemnified party is the Distributing Holder, the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the indemnifying
party, or (ii) the named parties to any such action (including any impleaded
parties) include both the Distributing Holder and the indemnifying party and the
Distributing Holder shall have been advised by such counsel that there may be
one or more legal defenses available to the indemnifying party different from or
in conflict with any legal defenses which may be available to the Distributing
Holder (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of the Distributing Holder, it being
understood, however, that the indemnifying party shall, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable only for the reasonable fees and expenses of one separate firm of
attorneys for all Distributing Holders, which firm shall be designated in
writing by the Distributing Holders). No settlement of any action against an
indemnified party shall be made without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld.
Section 11. CONTRIBUTION. In order to provide for just and equitable
contribution under the 1933 Act in any case in which (i) the Distributing Holder
makes a claim for indemnification pursuant to Section 10 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 10 hereof
provide for indemnification in such case, or (ii) contribution under the 1933
Act may be required on the part of any Distributing Holder, then the Company and
the applicable Distributing Holder shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which
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shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees and expenses), in
either such case (after contribution from others) on the basis of relative fault
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Holder, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Holder
agree that it would not be just and equitable if contribution pursuant to this
Section were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Notwithstanding the provisions of this
Section 11, the Holder shall not be required to contribute any amount in excess
of the Purchase Price.
Section 12. NOTICES. Any notice pursuant to this Agreement by the
Company or by the Holder shall be in writing and shall be deemed to have been
duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery, or (iii) if mailed by certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Holder, to its, his or her address set forth on the
signature page of this Agreement, with a copy to the person designated in the
Purchase Agreement; and
(b) If to the Company, at:
6714 Netherlands Drive
Wilmington, NC 28405
Attn: Daniel P. Flohr, President
Fax: (910) 395-6108;
with a copy to:
Warshaw Burstein Cohen Schlesinger & Kuh, LLP
555 Fifth Avenue
New York, NY 10017
Attn: Arthur A. Katz, Esq.
Fax: (212) 972-9150;
or to such other address as any such party may designate by notice to the other
party. Notices shall be deemed given at the time they are delivered personally
or five (5) days after they are mailed in the manner set forth above. If notice
is delivered by facsimile and followed by mail, delivery shall be deemed given
two (2) business days after such facsimile is sent.
Section 13. ASSIGNMENT. This Agreement is binding upon and inures to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. This Agreement cannot be assigned, amended or modified by the
parties hereto, except by written agreement executed by the parties hereto. If
requested by the Company, the Holder shall have furnished to the Company an
opinion of counsel reasonably satisfactory to the Company to such effect.
Section 14. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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Section 15. HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 15. GOVERNING LAW, VENUE. This Agreement shall be governed by
and construed in accordance with the laws and jurisdiction of the State of New
York, with regard to conflicts of law principles.
Section 17. SEVERABILITY. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceablity
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, on the day and year first above written.
C-PHONE CORPORATION
By:
-------------------------
Name:
Title:
HOLDER
By:
-------------------------
Name:
Title:
JOSEPHTHAL LYON & ROSS INCORPORATED
By:
-------------------------
Name:
Title:
Solely for the Purposes
of Section 3(e) of this
Agreement
- ------------------------
Daniel P. Flohr
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