EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September
18, 1998, is made and entered into by and between C-PHONE CORPORATION, a New
York corporation (the "COMPANY"), and SOVEREIGN PARTNERS, L.P., a Delaware
limited partnership (the "INVESTOR").
WHEREAS, the Company and the Investor have entered into that certain
Private Equity Credit Agreement, dated as of the date hereof (the "INVESTMENT
AGREEMENT"), pursuant to which the Company may issue and sell, from time to
time, to the Investor up to $5,000,000 worth of shares of its common stock, par
value $.01 per share (the "COMMON STOCK"); and
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Investment Agreement, the Company has
agreed to provide the Investor with certain registration rights with respect to
the Registrable Securities;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Investment
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows (capitalized terms used herein and
not defined herein shall have the respective meanings ascribed to them in the
Investment Agreement):
ARTICLE I
REGISTRATION RIGHTS
Section
1.1 Form S-3 Registration Statements.
(a) FILING OF FORM S-3 REGISTRATION STATEMENT. Subject to the terms and
conditions of this Agreement, the Company shall (i) prepare and, within thirty
(30) days following the Subscription Date, deliver to the Investor a draft of a
registration statement on Form S-3 under the Securities Act (the "INITIAL
REGISTRATION STATEMENT") for the registration for the resale by the Investor of
at least one million five hundred thousand (1,500,000) Registrable Securities
(the "INITIAL REGISTERABLE SECURITIES") and accompanied or preceded by a
questionnaire (a "SELLING SHAREHOLDER QUESTIONNAIRE") and of the type commonly
used for offerings of this kind and (ii) within ten (10) days after the Company
has received comments, if any, and a properly completed Selling Shareholder
Questionnaire from the Investor, file the Initial Registration Statement with
the SEC. Thereafter, if the Company desires to issue and sell to the Investor
any Registerable Securities in addition to the Initial Registerable Securities,
the Company shall first file with the SEC a registration statement on Form S-3
under the Securities Act (the Initial Registration Statement and any subsequent
registration statement, each, a "REGISTRATION STATEMENT").
(b) EFFECTIVENESS OF THE INITIAL REGISTRATION STATEMENT. The Company
shall use its commercially reasonable efforts (i) to have the Initial
Registration Statement declared effective by the SEC by no later than ninety
(90) days after the filing of the Initial Registration Statement and (ii) to
insure that the Initial Registration Statement and any subsequent Registration
Statement remains in effect throughout the term of this Agreement as set forth
in Section 4.2, subject to the terms and conditions of this Agreement.
(c) FAILURE TO OBTAIN EFFECTIVENESS OF THE INITIAL REGISTRATION
STATEMENT. In the event the Company fails for any reason to obtain the
effectiveness of the Initial Registration Statement within the time period set
forth in Section 1.1(b), the Company shall pay to the Investor, within three (3)
Trading Days of the date by which such Registration Statement was required to
have been declared effective, the sum of $10,000 in immediately available funds
into an account designated by the Investor; provided, however, that such amount
shall not be payable with respect to the postponement of the effectiveness of a
Registration Statement (or use of the underlying prospectus) pursuant to Section
1.1(e). Any payment required to me made pursuant to this Section 1.1(c) shall be
made by wire transfer of immediately available funds to an account designated by
the Investor.
(d) FAILURE TO MAINTAIN EFFECTIVENESS OF A REGISTRATION STATEMENT. In
the event the Company fails to maintain the effectiveness of any Registration
Statement (or the underlying prospectus) throughout the term of this Agreement,
other than temporary suspensions permitted by Section 1.1(e), and the Investor
holds any Registrable Securities at any time during the period of such
ineffectiveness (an "INEFFECTIVE PERIOD"), the Company shall pay to the Investor
in immediately available funds into an account designated by the Investor an
amount equal to one percent (1%) of the aggregate Purchase Price of all of the
Registrable Securities then held by the Investor for each thirty (30) calendar
day period (prorated for partial periods) of such Ineffective Period; provided,
that, the Company shall be entitled to credit against any such payment the value
of the Blackout Shares (based on the applicable New Bid Price) issued to the
Investor pursuant to Section 2.6 of the Investment Agreement. The payments
required by this Section 1.1(d) shall be made on the first Trading Day after the
earliest to occur of (i) the expiration of the Commitment Period, and (ii) the
expiration of an Ineffective Period (or if an Ineffective Period shall last more
than thirty (30) calendar days, the expiration of each thirty (30) calendar days
of an Ineffective Period).
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(e) DEFERRAL OR SUSPENSION DURING A BLACKOUT PERIOD. Notwithstanding
the provisions of Sections 1.1 (c) and (d), if the Company shall furnish to the
Investor notice (a "BLACKOUT NOTICE") signed by the Chief Executive Officer or
Chief Financial Officer of the Company stating that he has determined in good
faith that it would be seriously detrimental to the Company and its shareholders
for the Initial Registration Statement to be filed (or for any Registration
Statement to remain in effect) and it is therefore desirable to defer the filing
of such Initial Registration Statement (or temporarily suspend the effectiveness
of any Registration Statement or use of the related prospectus), the Company
shall have the right (i) immediately to defer such filing for a period of not
more than thirty (30) days beyond the date by which such Initial Registration
Statement was otherwise required hereunder to be filed or (ii) suspend the
effectiveness of any Registration Statement for a period of not more than thirty
(30) (any such deferral or suspension period of up to thirty days, a "BLACKOUT
PERIOD"). The Investor acknowledges that it would be seriously detrimental to
the Company and its shareholders for such initial Registration Statement to be
filed (or for any Registration Statement to remain in effect) during a Blackout
Period and therefore essential to defer such filing (or suspend such
effectiveness) during such Blackout Period and agrees to cease any disposition
of Registrable Securities during such Blackout Period. The Company may not
utilize any of its rights under this Section 1.1(e) to defer the filing of a
Registration Statement (or suspend its effectiveness) more than twice in any
twelve (12) month period. Following such deferral or suspension, the Investor
shall be entitled to such additional number of shares of Common Stock as set
forth in Section 2.7 of the Investment Agreement.
(f) LIQUIDATED DAMAGES. The Company and the Investor hereto acknowledge
and agree that the sums payable under subsections 1(c) or 1(d) above shall
constitute liquidated damages and not penalties. The parties further acknowledge
that (i) the amount of loss or damages likely to be incurred is incapable or is
difficult to precisely estimate, (ii) the amounts specified in such subsections
bear a reasonable relationship to, and are not plainly or grossly
disproportionate to the probable loss likely to be incurred in connection with
any failure by the Company to obtain or maintain the effectiveness of a
Registration Statement, (iii) one of the reasons for the Company and the
Investor reaching an agreement as to such amounts was the uncertainty and cost
of litigation regarding the question of actual damages, and (iv) the Company and
the Investor are sophisticated business parties and have been represented by
sophisticated and able legal counsel and negotiated this Agreement at arm's
length.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1 FILINGS; INFORMATION. The Company will effect the
registration and sale of the Registrable Securities in accordance with the
intended methods of disposition thereof. Without limiting the foregoing, the
Company in each such case will
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do the following as expeditiously as possible, but in no event later than the
deadline, if any, prescribed therefor in this Agreement:
(a) The Company shall (i) prepare and file with the SEC a Registration
Statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies, that counsel for the Company shall
deem appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and in accordance with the intended method of
distribution of such Registrable Securities); (ii) use commercially reasonable
efforts to cause such filed Registration Statement to become and remain
effective (pursuant to Rule 415 under the Securities Act or otherwise); (iii)
prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective for the time period
prescribed by Section 1.1(b); and (iv) comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended
methods of disposition by the Investor set forth in such Registration Statement.
(b) The Company shall file all necessary amendments to any Registration
Statement in order to effectuate the purpose of this Agreement and the
Investment Agreement.
(c) No later than five (5) days prior to filing any amendment or
supplement to the Initial Registration Statement or any subsequent Registration
Statement or prospectus, or any amendment or supplement thereto (excluding, in
each case, amendments deemed to result from the filing of documents incorporated
by reference therein), or such shorter period as is reasonable under the
circumstances, the Company shall deliver to the Investor and one firm of counsel
representing the Investor, in accordance with the notice provisions of Section
4.8, copies of such Registration Statement as proposed to be filed, together
with exhibits thereto, which documents will be subject to review by the Investor
and such counsel, and thereafter deliver to the Investor and such counsel, in
accordance with the notice provisions of Section 4.8, such number of copies of
the Registration Statement, each amendment and supplement thereto (in each case
including all exhibits thereto), the prospectus included in such Registration
Statement (including each preliminary prospectus) and such other documents or
information as the Investor or counsel may reasonably request in order to
facilitate the disposition of the Registrable Securities.
(d) The Company shall deliver, in accordance with the notice provisions
of Section 4.8, to each seller of Registrable Securities covered by a
Registration Statement such number of conformed copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
all
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exhibits and documents incorporated by reference), such number of copies of the
prospectus contained in any Registration Statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 promulgated under the Securities Act relating to such seller's Registrable
Securities, and such other documents, as such seller may reasonably request to
facilitate the disposition of its Registrable Securities.
(e) After the filing of a Registration Statement, the Company shall
promptly notify the Investor of any stop order issued or threatened by the SEC
in connection therewith and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.
(f) The Company shall use its commercially reasonable efforts to (i)
register or qualify the Registrable Securities under such other securities or
blue sky laws of such jurisdictions in the United States as the Investor may
reasonably request in light of its intended plan of distribution and (ii) cause
the Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be reasonably necessary or advisable to enable the
Investor to consummate the disposition of the Registrable Securities in light of
its intended plan of distribution; provided, however, that the Company will not
be required to qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this paragraph (f), subject
itself to taxation in any such jurisdiction, or consent or subject itself to
general service of process in any such jurisdiction.
(g) The Company shall immediately notify the Investor upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request by the SEC or any other federal or state governmental
authority for additional information, amendments or supplements to such
Registration Statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of such Registration Statement or notification of the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in such Registration Statement, related
prospectus or documents so that, in the case of such Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, in the light of the circumstances under which they
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were made, and that in the case of the related prospectus, it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
(v) the Company's reasonable determination that a post-effective amendment to
such Registration Statement would be appropriate, and the Company will promptly
make available to the Investor any such supplement or amendment to the related
prospectus.
(h) The Company shall enter into customary agreements and take such
other customary actions as are reasonably required in order to expedite or
facilitate the disposition by the Investor of such Registrable Securities
(whereupon the Investor may, at its option, require that any or all of the
representations, warranties and covenants of the Company also be made to and for
the benefit of the Investor).
(i) The Company shall make available to the Investor (and will deliver
to Investor's counsel), subject to restrictions imposed by the United States
federal government or any agency or instrumentality thereof, copies of all
correspondence between the SEC and the Company, its counsel or its auditors and
will also make available for inspection by the Investor and any attorney,
accountant or other professional retained by the Investor (collectively, the
"INSPECTORS"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "RECORDS") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with a
Registration Statement. Records that the Company determines, in good faith, to
be confidential and that it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other legal process; provided, however, that prior to any disclosure or
release pursuant to clause (ii), the Inspectors shall provide the Company with
prompt notice of any such request or requirement so that the Company may seek an
appropriate protective order or waive such Inspectors' obligation not to
disclose such Records; and, provided, further, that if failing the entry of a
protective order or the waiver by the Company permitting the disclosure or
release of such Records, the Inspectors, upon advice of counsel, are compelled
to disclose such Records, the Inspectors may disclose that portion of the
Records that counsel has advised the Inspectors that the Inspectors are
compelled to disclose. The Investor agrees that information obtained by it as a
result of such inspections (not including any information obtained from a third
party who, insofar as is known to the Investor after reasonable inquiry, is not
prohibited from providing such information by a contractual, legal or fiduciary
obligation to the Company) shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Company
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unless and until such information has been made generally available to the
public. The Investor further agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(j) The Company shall otherwise comply with all applicable rules and
regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
(k) The Company may require the Investor to promptly furnish in writing
to the Company such information as may be legally required in connection with
such registration including, without limitation, all such information as may be
requested by the SEC or the NASD. The Investor agrees to provide such
information requested in connection with such registration within five (5)
calendar days after receiving such written request, or such shorter period as is
reasonable under the circumstances, and the Company shall not be responsible for
any delays in obtaining or maintaining the effectiveness of any Registration
Statement caused by the Investor's failure to timely provide such information.
Section 2.2 REGISTRATION EXPENSES. In connection with each Registration
Statement, the Company shall pay all registration expenses incurred in
connection with the registration thereunder (the "REGISTRATION EXPENSES"),
including, without limitation: (a) all registration, filing, securities exchange
listing and fees required by the NASD, (b) all registration, filing,
qualification and other fees and expenses of compliance with securities or blue
sky laws (including reasonable fees and disbursements of counsel for the
Company), (c) all word processing, duplicating, printing, messenger and delivery
expenses, (d) the Company's internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), and (e) reasonable fees and disbursements of counsel for the
Company and customary fees and expenses for independent certified public
accountants retained by the Company.
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Investor, its partners, Affiliates, officers, directors,
employees and duly authorized agents, and each Person or entity, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the partners, Affiliates,
officers, directors, employees and
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duly authorized agents of such controlling Person or entity (collectively, the "
CONTROLLING PERSONS"), from and against any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of investigating and defending any such
claim) (collectively, "DAMAGES"), joint or several, and any action or proceeding
in respect thereof to which the Investor, its partners, Affiliates, officers,
directors, employees and duly authorized agents, and any Controlling Person, may
become subject under the Securities Act or otherwise, as incurred, insofar as
such Damages (or actions or proceedings in respect thereof) arise out of, or are
based upon, any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or prospectus
relating to the Registrable Securities or arises out of, or are based upon, 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
light of the circumstances under which they were made, except insofar as any
such untrue statement, alleged untrue statement, omission or alleged omission is
made in reliance upon and in conformity with written information furnished to
the Company by the Investor which is specifically intended by the Investor for
use in the preparation of any such Registration Statement, preliminary
prospectus or prospectus, and shall reimburse the Investor, its partners,
Affiliates, officers, directors, employees and duly authorized agents, and each
such Controlling Person, for any legal and other expenses reasonably incurred by
the Investor, its partners, Affiliates, officers, directors, employees and duly
authorized agents, or any such Controlling Person, as incurred, in investigating
or defending or preparing to defend against any such Damages or actions or
proceedings; provided, however, that the Company shall not be liable to the
Investor to the extent that any such Damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Investor failed to send or deliver a copy of the final prospectus delivered by
the Company to the Investor with or prior to the delivery of written
confirmation of the sale by the Investor to the Person asserting the claim from
which such Damages arise, and (ii) the final prospectus would have corrected
such untrue statement or alleged untrue statement or such omission or alleged
omission.
(b) INDEMNIFICATION BY THE INVESTOR. The Investor agrees to indemnify
and hold harmless the Company, its Affiliates, officers, directors, employees
and duly authorized agents, and each Controlling Persons of the Company, from
and against any and all Damages, joint or several, and any action or proceeding
in respect thereof to which the Investor, its partners, Affiliates, officers,
directors, employees and duly authorized agents, and any such Controlling
Person, may become subject under the Securities Act or otherwise, as incurred,
insofar as such Damages (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus or
prospectus relating to the Registrable Securities or arises out of, or are based
upon, any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
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misleading in light of the circumstances under which they were made, but only
to the extent that any such untrue statement, alleged untrue statement, omission
or alleged omission is made in reliance upon and in conformity with written
information furnished to the Company by the Investor which is specifically
intended for by the Investor for use in the preparation of any such Registration
Statement, preliminary prospectus or prospectus, and shall reimburse the
Company, its partners, Affiliates, officers, directors, employees and duly
authorized agents, and each such Controlling Person, for any legal and other
expenses reasonably incurred by the Investor, its partners, Affiliates,
officers, directors, employees and duly authorized agents, or any such
Controlling Person, as incurred, in investigating or defending or preparing to
defend against any such Damages or actions or proceedings.
Section 3.2 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after
receipt by any person or entity in respect of which indemnity may be sought
pursuant to Section 3.1 (an "INDEMNIFIED PARTY") of notice of any claim or the
commencement of any action, the Indemnified Party shall, if a claim in respect
thereof is to be made against the person or entity against whom such indemnity
may be sought (the "INDEMNIFYING PARTY"), notify the Indemnifying Party in
writing of the claim or the commencement of such action. In the event an
Indemnified Party shall fail to give such notice as provided in this Section 3.2
and the Indemnifying Party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, the indemnification provided for in Section 3.1
shall be reduced to the extent of any actual prejudice resulting from such
failure to so notify the Indemnifying Party; provided, however, that the failure
to notify the Indemnifying Party shall not relieve the Indemnifying Party from
any liability that it may have to an Indemnified Party otherwise than under
Section 3.1. If any such claim or action shall be brought against an Indemnified
Party, and it shall notify the Indemnifying Party thereof, the Indemnifying
Party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified Indemnifying Party, to assume
the defense thereof with counsel reasonably satisfactory to the Indemnified
Party. After notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such claim or action, the Indemnifying Party
shall not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Indemnified Party shall have the right to employ separate counsel to
represent the Indemnified Party and its Controlling Persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Indemnified Party against the Indemnifying Party, but the fees and
expenses of such counsel shall be for the account of such Indemnified Party,
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
the Indemnifying Party and the Indemnified Party, representation of both parties
by the same counsel would be inappropriate due to actual or potential conflicts
of interest between them, it being understood, however, that
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the Indemnifying Party shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties, or for fees and expenses that are not reasonable. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any claim or pending or threatened proceeding in respect of which
the Indemnified Party is or could have been a party and indemnity is sought
hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such claim or proceeding. Whether or not the defense of any claim or action
is assumed by the Indemnifying Party, such Indemnifying Party will not be
subject to any liability for any settlement made without its consent, which
consent will not be unreasonably withheld.
Section 3.3 OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding paragraphs of this Article III (with appropriate
modifications) shall be given by the Company with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act. The
provisions of this Article III shall be in addition to any other rights to
indemnification, contribution or other remedies which an Indemnified Party may
have pursuant to law, equity, contract or otherwise.
Section 3.4 CONTRIBUTION. If the indemnification and reimbursement
obligations provided for in any section of this Article III is unavailable or
insufficient to hold harmless the Indemnified Parties in respect of any Damages
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages as between the Company on the one
hand and the Investor on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of the Investor in connection with
such statements or omissions, as well as other equitable considerations. The
relative fault of the Company on the one hand and of the Investor on the other
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 such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 3.4 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
Damages referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations
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set forth above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 3.4, the Investor shall
in no event be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of the Investor were
sold to the public (less underwriting discounts and commissions) exceeds the
amount of any damages which the Investor has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
ARTICLE IV
MISCELLANEOUS
Section 4.1 NO OUTSTANDING REGISTRATION RIGHTS. The Company represents
and warrants to the Investor that there is not in effect on the date hereof any
agreement by the Company pursuant to which any holders of securities of the
Company have a right to cause the Company to register or qualify such securities
under the Securities Act or any securities or blue sky laws of any jurisdiction,
except as disclosed in the Company's Annual Report on Form 10-KSB for the fiscal
year ended February 28, 1998 (including the documents incorporated therein by
reference).
Section 4.2 TERM. The obligations of the Company and the rights
provided to the holders of Registrable Securities hereunder shall terminate at
such time as all the Commitment Period has expired and any Registrable
Securities theretofore issued have ceased to be Registrable Securities in
accordance with the definition thereof contained in the Investment Agreement.
Notwithstanding the foregoing, Section 1.1(c) and (d), Article III, Section 4.8,
and Section 4.9 shall survive the termination of this Agreement.
Section 4.3 RULE 144. The Company will use its commercially reasonable
efforts to file in a timely manner information, documents and reports in
compliance with the Securities Act and the Exchange Act and will, at its
expense, promptly take such further action as holders of Registrable Securities
may reasonably request to enable such holders of Registrable Securities to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act
("RULE 144"), as such Rule may be amended from time to time, or (b) any similar
rule or regulation hereafter adopted by the SEC. If at any time the Company is
not required to file such reports, it will, at its expense, forthwith upon the
written request of any holder of Registrable Securities, make available
adequate current public information with respect to the Company within the
meaning of paragraph (c)(2) of Rule 144 or such other information as necessary
to permit sales pursuant to Rule 144. Upon the request of the Investor, the
Company will deliver to the Investor a
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written statement, signed by the Company's principal executive or financial
officer, as to whether it has complied with such requirements.
Section 4.4 CERTIFICATE. The Company will, at its expense, forthwith
upon the request of any holder of Registrable Securities, deliver to such holder
a certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the Company's SEC
file number, (d) the number of shares of each class of Stock outstanding as
shown by the most recent report or statement published by the Company, and (e)
whether the Company has filed the reports required to be filed under the
Exchange Act for a period of at least ninety (90) days prior to the date of such
certificate and in addition has filed the most recent annual report required to
be filed thereunder.
Section 4.5 AMENDMENT AND MODIFICATION. No provision of this Agreement
may be waived, unless such waiver is set forth in a writing executed by both
parties to this Agreement. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the holders of a majority
of the then outstanding Registrable Securities. Notwithstanding the foregoing,
the waiver of any provision hereof with respect to a matter that relates
exclusively to the rights of holders of Registrable Securities whose securities
are being sold pursuant to a Registration Statement and does not directly or
indirectly affect the rights of other holders of Registrable Securities may be
given by holders of at least a majority of the Registrable Securities being sold
by such holders; provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. No course of dealing between or among any
Person having any interest in this Agreement will be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.
Section 4.6 SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns. The
Investor may assign its rights under this Agreement to any subsequent holder of
the Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement as a condition to such holder's claim to any rights hereunder. This
Agreement, together with the Investment Agreement, sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
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Section 4.7 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 4.8 NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (a) personally served,
(b) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company: C-Phone Corporation
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxxxx & Kuh, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to Investor: Sovereign Partners, L.P.
Executive Pavilion
00 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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Either party hereto may from time to time change its address or
facsimile number for notices under this Section 4.8 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 4.9 GOVERNING LAW, JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without regard to the principles of conflicts of law. The parties hereto hereby
submit to the exclusive jurisdiction of the United States Federal and state
courts located in New York, New York with respect to any dispute arising under
this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
Section 4.10 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 4.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the parties so delivering this
Agreement.
Section 4.12 FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 4.13 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
C-PHONE CORPORATION
By: /s/ XXXXXX X. XXXXX
---------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President & Chief Executive Officer
SOVEREIGN PARTNERS, L.P.
By: Southridge Capital Management LLC,
general partner
By: /s/ XXXXX XXXXX
---------------------------------------
Name: Xxxxx Xxxxx
Title:
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