SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 18, 1998
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C-PHONE CORPORATION
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(Exact name of registrant as specified in its charter)
New York 0-24424 06-1170506
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(State or Other Jurisdiction (Commission) (IRS Employer
of Incorporation) File Number) Identification No.)
6714 NETHERLANDS DRIVE, WILMINGTON, NORTH CAROLINA 28405
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (910) 395-6100
N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On September 18, 1998, C-Phone Corporation (the "Company") entered
into a Private Equity Credit Agreement (the "Equity Line") with Sovereign
Partners, L.P. (the "Investor"). Pursuant to the terms of the Equity Line,
subject to the satisfaction of certain conditions, the Company may require the
Investor to purchase shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), over a period of 18 months from the effective date
of the Registration Statement (as defined below), for an aggregate purchase
price of up to $5 million (but in no event more that 1,543,765 shares of Common
Stock). Under the terms of the Equity Line, during any 30-day period following
the effective date of the Registration Statement, the Company, subject to the
satisfaction of certain conditions, can require the Investor to purchase shares
of Common Stock for an aggregate purchase price of between $500,000 and $1
million. The purchase price per share to be paid by the Investor for the shares
of Common Stock acquired under the Equity Line will equal 85% of the average
closing bid price of the Common Stock during the five trading days immediately
preceding the notice of purchase (the "Put Notice") given by the Company to the
Investor.
The Investor's obligation to purchase shares of Common Stock under the
Equity Line is subject to various conditions, including, among other things: (i)
effectiveness of the Registration Statement; (ii) the average closing bid price
of the Common Stock being at least $1.00 per share for the 20 trading days
preceding the date of the Put Notice; (iii) continued trading of the Common
Stock on The Nasdaq Stock Market; and (iv) the percentage of the Common Stock
beneficially owned by the Investor being not more than 9.9% of the then
outstanding Common Stock. The Company may terminate the Equity Line without
further obligation to the Investor at any time after it has sold to the Investor
$1 million of Common Stock.
Under a related Registration Rights Agreement, the Company has agreed
to file, and maintain effectiveness (subject to certain penalties for
non-compliance) of, a registration statement (the "Registration Statement")
under the Securities Act of 1933 (the "Securities Act") for the resale by the
Investor of the shares of Common Stock purchased by it under the Equity Line.
In connection with entering into the Equity Line, the Company issued to
Cardinal Capital Management, Inc, as finder, a two-year warrant (the "Warrant")
to purchase 100,000 shares of Common Stock at an exercise price equal to $8.00
per share. The Warrant is redeemable for $0.01 per warrant at the option of the
Company if the closing sales price of the Common Stock exceeds $10.00 for five
consecutive trading days. The Company also paid the finder a cash fee of $30,000
upon signing of the Equity Line and has agreed to pay the finder an additional
cash fee equal to 6% of the amount of any sales by the Company pursuant to the
Equity Line; with the $30,000 payment to be credited against the first sale
under the Equity Line.
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The securities to be purchased by the Investor under the Equity Line
have been offered for sale, and will be sold, without registration thereof under
the Securities Act, pursuant to the exemption from registration provided by
Section 4(2) under the Securities Act.
The foregoing summaries of agreements are necessarily incomplete and
selective, and are qualified in their entirety by reference to the agreements
summarized, each of which is attached hereto as an exhibit.
* * * * * *
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
1. Private Equity Credit Agreement, dated as of September 18, 1998,
between C-Phone Corporation and Sovereign Partners, L.P.
2. Registration Rights Agreement, dated as of September 18, 1998,
between C-Phone Corporation and Sovereign Partners, L.P.
3. Common Stock Purchase Warrant, dated as of September 18, 1998, of
C-Phone Corporation issued to Cardinal Capital Management, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
C-PHONE CORPORATION
By: /s/ Paul H. Albritton
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Paul H. Albritton
Vice President and Chief
Financial Officer
Date: September 24, 1998
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