C-PHONE CORPORATION
AND
JOSEPHTHAL LYON & ROSS INCORPORATED
PLACEMENT AGENT
WARRANT AGREEMENT
Dated as of March 31, 1997
PLACEMENT AGENT WARRANT AGREEMENT dated as of March 31, 1997 by and
between C-PHONE CORPORATION, a New York corporation (the "Company"), and
JOSEPHTHAL LYON & ROSS INCORPORATED, (hereinafter referred to variously as the
"Holder" or the "Placement Agent").
WITNESSETH
WHEREAS, the Company proposes to issue to the Placement Agent warrants
("Warrants") to purchase up to an aggregate of 150,000 shares of common stock,
$.01 par value, of the Company (the "Common Stock"); and
WHEREAS, the Placement Agent has agreed pursuant to the placement agent
agreement (the "Placement Agent Agreement") dated as of the date hereof by and
between the Placement Agent and the Company to act as the Placement Agent in
connection with the Company's proposed offering of its shares of Common Stock in
an aggregate offering of not less than $3,400,000 nor more than $5,000,000 (the
"Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Placement Agent
Agreement) by the Company to the Placement Agent in consideration for, and as
part of the Placement Agent's compensation in connection with, the Placement
Agent acting as the Placement Agent pursuant to the Placement Agent Agreement;
NOW, THEREFORE, in consideration of the mutual premises made herein,
the payment by the Placement Agent to the Company of an aggregate of ten dollars
($10.00), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. GRANT. The Holder is hereby granted the right to purchase, at any
time from March 31, 1997 until 5:30 P.M., New York time, on the 90th day
following the date on which the Company's registration statement filed with the
Securities and Exchange Commission ("SEC") which includes the shares of Common
Stock issuable upon exercise of the Warrants (the "Warrant Securities") is
declared effective by the SEC (the "Expiration Date"), up to an aggregate of
150,000 shares of Common Stock at an initial exercise price (subject to
adjustment as provided in Section 8 hereof) of $9.60 per share of Common Stock
subject to the terms and conditions of this Agreement.
2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. EXERCISE OF WARRANT. The Warrants initially are exercisable at an
exercise price (subject to adjustment as provided in Section 8 hereof) per share
of Common Stock set forth
in Section 6 hereof payable by certified or official bank check in New York
Clearing House funds. Upon surrender of a Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the shares of Common Stock purchased
at the Company's principal offices presently located at 6714 Netherlands Drive,
Wilmington, North Carolina 28405 the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). In the case of the purchase of less than
all the shares of Common Stock purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock purchasable thereunder.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock or other securities,
properties or rights underlying such Warrants, shall be made forthwith (and in
any event within three (3) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Sections 5 and 7 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and the certificates representing the Common
Stock (and/or other securities, property or rights issuable upon the exercise of
the Warrants) shall be executed on behalf of the Company by the manual or
facsimile signature of the then present Chairman or Vice Chairman of the Board
of Directors or President or Vice President of the Company under its corporate
seal reproduced thereon, attested to by the manual or facsimile signature of the
then present Secretary or Assistant Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; and that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of one
(1) year from the date hereof, except to officers of the Representative.
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6. EXERCISE PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise provided
in Section 8 hereof, the initial exercise price of each Warrant shall be $9.60
per share of Common Stock. The adjusted exercise price shall be the price which
shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 8 hereof.
6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. REGISTRATION RIGHTS.
The Warrant Securities shall be included in the registration statement
to be prepared and filed by the Company with the SEC pursuant to the terms of
that certain Registration Rights Agreement of even date herewith by and among
the Company, the investors in the Offering and the Placement Agent. The
Registration Rights Agreement is incorporated herein by reference and made a
part hereof, and it is expressly agreed that the Warrant Securities shall have
all of the rights and privileges of the shares of Common Stock which are the
subject of the Registration Rights Agreement, and that the Holders of Warrants
are third party beneficiaries of the Registration Rights Agreement.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
8.1 SUBDIVISION AND COMBINATION. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.2 STOCK DIVIDENDS AND DISTRIBUTIONS. In case the Company shall pay a
dividend in, or make a distribution of, shares of Common Stock or of the
Company's capital stock convertible into Common Stock, the Exercise Price shall
forthwith be proportionately decreased. An adjustment made pursuant to this
Section 8.2 shall be made as of the record date for the subject stock dividend
or distribution.
8.3 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
Securities issuable upon the exercise at the adjusted exercise price of each
Warrant shall be adjusted to the nearest full amount by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares issuable upon exercise of the Warrants immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
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8.4 DEFINITION OF COMMON STOCK. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Certificate of Incorporation of the Company as may be amended as of the
date hereof, or (ii) any other class of stock resulting from successive changes
or reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
8.5 MERGER OR CONSOLIDATION. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
subsection shall similarly apply to successive consolidations or mergers.
8.6 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No adjustment of
the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the shares of
Common Stock issuable upon the exercise of the Warrants; or
(b) If the amount of said adjustment shall be less than two cents
(2(cent)) per Warrant Share, provided, however, that in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to at least
two cents (2(cent)) per Warrant Share.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation
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of the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Common Stock and other securities issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any stockholder. As long as the Warrants shall be
outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon the exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges on which the Common
Stock issued to the public in connection herewith may then be listed and/or
quoted on The Nasdaq Stock Market, Inc.
12. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then, in any one or more of said events,
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the Company shall give written notice of such event at least fifteen (15) days
prior to the date fixed as a record date or the date of closing the transfer
books for the determination of the stockholders entitled to such dividend,
distribution, convertible or exchangeable securities or subscription rights, or
entitled to vote on such proposed dissolution, liquidation, winding up or sale.
Such notice shall specify such record date or the date of closing the transfer
books, as the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of any convertible
or exchangeable securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
13. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to the registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice to the
Holders.
14. SUPPLEMENTS AND AMENDMENTS. The Company and the Placement Agent may
from time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates (other than the Placement Agent) in order to
cure any ambiguity, to correct or supplement any provision contained herein
which may be defective or inconsistent with any provisions herein, or to make
any other provisions in regard to matters or questions arising hereunder which
the Company and the Placement Agent may deem necessary or desirable and which
the Company and the Placement Agent deem shall not adversely affect the
interests of the Holders of Warrant Certificates.
15. SUCCESSORS. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. TERMINATION. This Agreement shall terminate at the close of
business on the earlier to occur of (i) the day the last Warrant Security
issuable hereunder is issued, and (ii) the Expiration Date.
17. GOVERNING LAW: Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to its rules
governing the conflicts of laws.
The Company and the Placement Agent hereby agree that any action,
proceeding or claim against it arising out of or relating in any way to, this
Agreement shall be brought and
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enforced in the courts of the State of New York or of the United States of
America for the Southern District of New York, and irrevocably submit to such
jurisdiction, which jurisdiction shall be exclusive. The Company and the
Placement Agent hereby irrevocably waive any objection to such exclusive
jurisdiction or inconvenient forum. Any such process or summons to be served
upon the Company or the Placement Agent (at the option of the party bringing
such action, proceeding or claim) may be served by transmitting a copy thereof,
by registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address referred to in Section 13 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the party
so served in any action, proceeding or claim. The Company and the Placement
Agent agree that the prevailing party(ies) in any such action or proceeding
shall be entitled to recover from the other party(ies) all of its/their
reasonable legal costs and expenses relating to such action or proceeding and/or
incurred in connection with the preparation therefor.
18. ENTIRE AGREEMENT: Modification. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and may not be modified or amended except by a writing duly signed by the
party against whom enforcement of the modification or amendment is sought.
19. SEVERABILITY. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Placement Agent and any other registered Holder(s) of the Warrant Certificates
or Warrant Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company, the Placement Agent and the Holder(s) of the Warrant Certificates or
Warrant Securities.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL]
C-PHONE CORPORATION
By:
----------------------------
Name:
Title:
Attest:
- -----------------
Secretary
JOSEPHTHAL LYON & ROSS
INCORPORATED
By:
----------------------------
Name:
Title:
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EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE HEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
No. W-
-------
WARRANT CERTIFICATE
This Warrant Certificate certifies that --------, or registered assigns, is the
registered holder of 150,000 Warrants, each Warrant entitling the holder to
purchase initially, at any time from March 31, 1997 until 5:30 p.m. New York
time on the 90th day following the date on which the Company's registration
statement filed with the Securities and Exchange Commission ("SEC") which
includes the shares of Common Stock $.01 par value ("Common Stock") issuable
upon the exercise hereof is declared effective by the SEC ("Expiration Date"),
one fully-paid and non-assessable share of Common Stock of C-Phone Corporation,
a New York corporation (the "Company"), at the initial exercise price, subject
to adjustment in certain events (the "Exercise Price"), of $9.60 per share of
Common Stock upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of March 31,
1997 by and between the Company and Josephthal Lyon & Ross Incorporated (the
"Warrant Agreement"). Payment of the Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company or by surrender of this Warrant Certificate.
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No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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IN WITNESS WHEREOF the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of March --, 1997
C-PHONE CORPORATION
[SEAL] By:-------------------------
Name:
Title:
Attest:
- ---------------------------
Secretary
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[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ------------- shares of
Common Stock and herewith tenders in payment for such securities a certified or
official bank check payable in New York Clearing House Funds to the order of
C-Phone Corporation in the amount of $---------, all in accordance with the
terms of Section 3 of the Placement Agent Warrant Agreement dated as of March
31, 1997 between C-Phone Corporation and Josephthal Lyon & Ross Incorporated.
The undersigned requests that a certificate for such securities be registered in
the name of ------------ whose address is --------------------- and that such
Certificate be delivered to ------------------ whose address is ---------------
Dated: --------------------
Signature ----------------------------
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant Certificate.)
--------------------------------------
(Insert Social Security or Other Identifying Number of Holder)
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[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED) --------------------------- hereby sells, assigns and
transfers unto ------------------------------------.
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ------------- Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: --------------------
Signature:
-------------------------
(Signature must conform in all respects to name of holder as
specified on the face of the Warrant Certificate.)
-------------------------------
(Insert Social Security or Other Identifying Number of Assignee)
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