PLACEMENT AGENT AGREEMENT
Xxxxx 00, 0000
Xxxxxxxxxx Xxxx & Xxxx Incorporated
000 Xxxx Xxxxxx, 00xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned C-Phone Corporation, a New York corporation (the
"Company"), hereby agrees with Xxxxxxxxxx Xxxx & Xxxx Incorporated ("Josephthal"
or "Placement Agent") as follows:
1. BEST EFFORTS OFFERING. The Company hereby engages Josephthal to act
as its exclusive agent during the term of the offering (the "Offering") as
outlined herein to sell, in an aggregate offering of not less than $3,400,000
nor more than $5,000,000 on a "best efforts" basis, shares of common stock of
the Company (the "Common Stock") at a purchase price per share of Common Stock
equal to the lesser of (a) $6.00, and (b) 75% of the average of the closing bid
price of the Company's Common Stock for the 10 trading days immediately
preceding the date on which the Contingent Value Right referred to immediately
below is exercised; provided, however, that in no event shall the purchase price
be reduced to less than $2.00 per share. Upon the closing of the Offering (the
"Closing"), investors shall receive certificates representing (a) the Common
Stock on the basis of a $6.00 per share purchase price, and (b) the Contingent
Value Right, exercisable for a period of one (1) year from the effective date of
the Registration Statement (as defined below), entitling them to such additional
number of shares of Common Stock as may be issuable pursuant to the formula set
forth above.
Holders of Common Stock sold in the Offering shall have one demand
registration right with respect to their shares, exercisable at the request of
holders of at least 33-1/3% of the shares issued in the Offering. Such demand is
exercisable at any time commencing 15 days after the Closing. The Company shall
pay all of the fees, expenses and disbursements of such demand registration,
except for (i) any commissions which may be payable by an investor, and (ii)
fees, expenses and disbursements of counsel to any investor. The Company shall
prepare and file a registration statement (the "Registration Statement") with
the Securities and Exchange Commission ("SEC") within 5 days of receipt of
notice of such demand, which Registration Statement shall include the maximum
number of shares of Common Stock issued and potentially issuable in the
Offering. In the event that investors in the Offering are entitled to any shares
of Common Stock in excess of 870,000 shares minus the number of Shares delivered
on the Closing pursuant to the terms of the Contingent Value Rights, then the
Company agrees (i) to include in its proxy materials for the Company's regularly
scheduled 1997 Annual Meeting of Shareholders to be held no later than August
30, 1997, a proposal to authorize the issuance of such additional shares, (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 such Proposal to shareholders. The Company
shall use its reasonable best efforts to have the Registration Statement
declared effective as promptly as practicable. The effectiveness of the
Registration Statement shall be maintained current until the earlier of (a) all
of the shares of Common Stock included therein have been sold, or (b) one year
from the date on which it was declared effective.
As collateral security to ensure compliance by the Company of its
registration obligations hereunder, Xxx Xxxxx, the Company's Chairman of the
Board and Chief Executive Officer, shall enter into a Stock Pledge Agreement in
the form annexed hereto as Exhibit A, pursuant to which he shall pledge 250,000
shares of Common Stock. In the event that for whatever reason the Registration
Statement is not declared effective by the SEC within 95 days following receipt
by the Company of the demand notice, then for each day subsequent to such 95th
day for which the Registration Statement is not declared effective, the
investors, through the escrow agent, shall be entitled to foreclose on 1,000
shares of Common Stock, up to a maximum of 90 days, or 90,000 shares. If, on the
186th day following the Company's receipt of such demand notice the Registration
Statement has not yet been declared effective, then the investors through the
escrow agent, may foreclose on the remaining 160,000 shares.
The Common Stock will be offered in units of $500,000 each, but
fractional units may be offered in the joint discretion of the Company and the
Placement Agent. The Common Stock shall be offered without registration under
the Securities Act of 1933, as amended (the "Act") pursuant to the exemption
from registration created by Regulation D thereof, and shall be offered to
"accredited investors" only, as such term is defined pursuant to Regulation D.
2. OFFERING DOCUMENT. The Company has prepared a confidential draft,
dated March 28, 1997 of a proposed Form S-3 Prospectus contained in the
Company's proposed Post-effective Amendment No. 1 on Form S-3 to the Company's
registration statement on Form S-1 (registration no. 33-80280) (the "Disclosure
Document"), which shall be in form and substance reasonably satisfactory to
Josephthal. The Company agrees that it shall modify or supplement the Disclosure
Document during the course of the offering to insure that the Disclosure
Document does 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. Josephthal will not make any use of the
Disclosure Document other than for purposes of implementing this Agreement, nor
will it or any of its agents, employees or participating soliciting dealers use
the same or do any other act or thing in the course of the offering or sale
hereunder which would constitute a violation of the Act, the Securities Exchange
Act of 1934, as amended (the "1934 Act") or any "Blue Sky" laws or regulations
applicable to the offering and sale. Josephthal shall use its reasonable best
efforts to deliver the Disclosure Document only to those entities whom it
reasonably believes to be "accredited investors" (as such term is defined in
Regulation D under the Act) and who Josephthal reasonably believes have an
interest in participating in the offering contemplated hereby.
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3. COMPENSATION. You will be paid at the Closing a cash commission of
nine percent (9%) of the subscription price of the Common Stock sold by or
through you. In addition, you will receive an expense allowance of up to
$25,000, to cover your expenses of this Offering including legal fees and
disbursements, but exclusive of any "Blue Sky" legal fees or disbursements or
filing fees.
In addition, you shall receive 100,000 warrants (the "Josephthal
Warrants"), each of which shall entitle you to purchase one share of the
Company's Common Stock at an exercise price of 120% of the closing bid price of
the Common Stock on the date immediately preceding the Closing. The Josephthal
Warrants shall be exercisable for a period of 90 days following the effective
date of the Registration Statement, and the Common Stock underlying the
Josephthal Warrants shall be included in the Registration Statement.
If, the Placement Agent delivers a copy of the Disclosure Document to
an investor who does not participate in the Offering but who purchases from the
Company in a private placement within one (1) year after the date hereof any
securities of the Company which are different from those being offered
hereunder, the Placement Agent shall be entitled to compensation which it would
obtain hereunder on the same basis as it would have been entitled if it had
arranged for the sale of a comparable dollar amount of securities offered
hereunder.
4. EXPENSES. Whether or not this Offering is successfully completed, it
shall be the Company's obligation to bear all of its expenses in connection with
the proposed offering, including, but not limited to, the following: filing
fees, printing and duplicating costs, the Company's and, subject to the
provisions of the first paragraph of Section 3, your postage and delivery
expenses, registrar and transfer agent fees, reasonable counsel and accounting
fees of the Company, issue and transfer taxes, if any, and "Blue Sky" counsel
fees and expenses. The "Blue Sky" legal work shall be handled by the Company's
counsel for the Company's account.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company represents, warrants and agrees that (i) it is authorized to enter into
this Agreement and to carry out the offering contemplated hereunder and this
Agreement constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, (ii) there is no finder in connection
with this Offering, (iii) the Company will deliver at the Closing (a) a
certificate of each of the Company's President and Treasurer to the effect that
the Disclosure Document conforms to the requirements hereof and has been
modified or supplemented as required by Paragraph 2 hereof and does not contain
any untrue statement of material fact or fail to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and all necessary corporate approvals have been obtained to enable
the Company to deliver the Common Stock in accordance with the terms of the
offering and (b) an opinion of counsel for the Company to the effect that to the
best of their knowledge the Disclosure Document conforms to the requirements
hereof and does not (except with respect to the financial statements or
forecasts as to which no opinion need be expressed) contain any untrue statement
of material fact or fail to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and such
other opinions as Josephthal shall reasonably require.
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6. INDEMNIFICATION. (a) Subject to the conditions set forth below, the
Company and Josephthal hereby agree that they will indemnify and hold harmless
each other and each director, officer, shareholder, employee or representative
thereof and each person controlling, controlled by or under common control with
such party within the meaning of Section 15 of the Act or Section 20 of the 1934
Act,(individually, an "Indemnified Person") from and against any and all loss,
claim, damage, liability, cost or expense whatsoever (including, but not limited
to, any and all reasonable legal fees and other expenses and disbursements
incurred in connection with investigating, preparing to defend or defending any
claim, action, suit or proceeding (collectively, a "Claim"), including any
inquiry or investigation, commenced or threatened, or in appearing or preparing
for appearance as a witness in any Claim including any inquiry, investigation or
pretrial proceeding such as a deposition) (collectively, a "Loss") to which such
Indemnified Person may become subject under the Act, the 1934 Act or other
federal or state statutory law or regulation at common law or otherwise, arising
out of an act or omission of the other party related to (i) this Agreement, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the Disclosure Document (except those statements given in writing by an
Indemnified Person expressly for inclusion therein) or omission of a material
fact from the Disclosure Document, or (iii) the breach of any representation or
warranty made by the other party in this Agreement. Each party further agrees
that upon demand by an Indemnified Person at any time or from time to time, it
will promptly reimburse such Indemnified Person for any Loss actually and
reasonably paid by the Indemnified Person as to which the other party has
indemnified such Indemnified Person pursuant hereto. Notwithstanding the
foregoing provisions of this Paragraph 6, any such payment or reimbursement by
the other party of fees, expenses or disbursements incurred by an Indemnified
Person in any Claim in which a final judgment by a court of competent
jurisdiction (after all appeals or the expiration of time to appeal) is entered
against such Indemnified Person as a direct result of such person's gross
negligence, bad faith or willful misfeasance will be promptly repaid to the
other party.
(b) Promptly after receipt by an Indemnified Person under paragraph (a)
above of notice of the commencement of any Claim, such Indemnified Person will,
if a claim in respect thereof is to be made against the other party under
paragraph (a), notify the other party in writing of the commencement thereof. In
case any such Claim is brought against any Indemnified Person, such Indemnified
Person promptly shall notify the other party of the commencement thereof, and
the other party shall assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Person; provided, however, that if the
defendants in any such action include both the Indemnified Person and the other
party or any corporation controlling, controlled by or under common control with
the other party, or any director, officer, employee, representative or agent of
any thereof, and the Indemnified Person shall have reasonably concluded that
there may be legal defenses available to it which are different from or
additional to those available to such other defendant, the Indemnified Person
shall have the right to select separate counsel to represent it, and the other
party shall pay the reasonable fees and expenses of such separate counsel.
Failure of the Indemnified Person to so notify the other party shall not relieve
the other party from any obligation it may have hereunder, unless and only to
the extent such failure results in the forfeiture by the other party of
substantial rights and defenses and will not in any event relieve the other
party from any other obligation or liability it may have to any Indemnified
Person otherwise than under this Agreement.
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Each party further agrees that it will not, without the prior written
consent of the relevant Indemnified Person, settle, compromise or consent to the
entry of any judgment in any pending or threatened Claim in respect of which
indemnification may be sought hereunder (whether or not any Indemnified Person
is a party to such Claim), unless such settlement, compromise or consent
includes an unconditional, irrevocable release of each Indemnified Person from
any and all liability arising out of such Claim.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph (a) of this
Paragraph 6 is due in accordance with its terms, but is for any reason held by a
court to be unavailable on grounds of policy or otherwise, the Company and
Josephthal shall contribute to the aggregate Losses to which the Company and
Josephthal may be subject in such proportion so that Josephthal is responsible
for that portion represented by the percentage that the aggregate of its
commissions actually received under this Agreement bears to the aggregate
offering price for all shares of Common Stock sold under the Disclosure Document
and the Company is responsible for the balance, except as the Company may
otherwise agree to reallocate a portion of such liability with respect to such
balance with any other person; provided, however, that no person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the Act
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (c), any person
controlling, controlled by or under common control with Josephthal, or any
partner, director, officer, employee, representative or any agent of any
thereof, shall have the same rights to contribution as Josephthal and each
person who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the 1934 Act, each officer of the Company and each director of the
Company shall have the same rights to contribution as the Company. Any party
entitled to contribution shall, promptly after receipt of notice of commencement
of any Claim against such party in respect of which a claim for contribution may
be made against the other party under this paragraph (c), notify such party from
whom contribution may be sought, but the omission to so notify such party shall
not relieve the party from whom contribution may be sought from any obligation
it or they may have hereunder or otherwise than under this paragraph (c). The
indemnity and contribution agreements contained in this Paragraph 6 shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Indemnified Person or any termination of this Agreement.
7. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement is delivered in the State of New York
and shall be construed and enforced in accordance with and governed by, the laws
of the State of New York, without giving effect to its conflict of law
principles. The parties hereto hereby agree that any action, proceeding or claim
against it arising out of or of or in any way related to this Agreement shall be
brought and enforced in the courts of the State of New York or the United States
of America for the Southern District of New York and irrevocably submits to such
exclusive jurisdiction, and hereby irrevocably waives any objection to such
exclusive jurisdiction and waives any objection or claim that the same may be an
inconvenient forum.
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(b) COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
(c) NOTICES. Whenever notice is required to be given pursuant to this
Agreement, such notice shall be in writing and shall either be (i) mailed by
first class mail, postage prepaid, addressed (a) if to Josephthal, at the
address set forth at the head of this Agreement, Attention: Xxx Xxxxxx,
Chairman; and (b) if to the Company, 0000 Xxxxxxxxxxx Xxxxx, Xxxxxxxxxx, XX
00000; Attention: Xxx Xxxxx, Chairman, or (ii) delivered personally or by
express courier. The notice shall be deemed given, if sent by mail, on the third
day after deposit in a United States post office receptacle, or if delivered
personally or by express courier, then upon receipt.
(d) AMENDMENTS. This Agreement may not be amended, modified or waived,
except in a writing signed by all of the parties hereto.
If the foregoing correctly sets forth the understanding between
Josephthal and the Company, please so indicate in the space provided below for
that purpose whereupon this Agreement shall constitute a binding agreement
between us.
Very truly yours,
C-PHONE CORPORATION
By: /s/ Xxxxxx Xxxxx
--------------------
Xxxxxx Xxxxx
President and CEO
Confirmed and agreed to:
XXXXXXXXXX XXXX & XXXX INCORPORATED
By: /s/ Xxxxx Xxxxxxx
----------------------
Xxxxx Xxxxxxx
Senior Managing Director
Director of Investment Banking
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