VISEON, INC.
SERIES A CONVERTIBLE PREFERRED STOCK AND WARRANTS
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PURCHASE AGREEMENT
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MARCH 19, 2004
To the Purchaser identified
on the signature page hereof
Dear Sirs:
1. Introductory. Viseon, Inc., a Nevada corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
purchaser identified on the signature page hereof (the "Purchaser") the number
of shares of the Company's Series A Convertible Preferred Stock, Series A-1
Warrants, and Series A-2 Warrants set forth on the signature page hereof
(collectively, the "Offered Securities"), each to be issued in a private
placement pursuant to an exemption under Section 4(2) of the United States
Securities Act of 1933 (the "Securities Act") pursuant to which Xxxxxxx & Co
(the "Placement Agent") is acting as a placement agent, and hereby agrees with
the Purchaser as follows:
The Purchaser and other holders (including, to the extent set forth
herein, subsequent transferees) of the Offered Securities will be entitled to
the benefits of a registration rights agreement of even date herewith among the
Company and the Purchaser (the "Registration Rights Agreement"), pursuant to
which the Company agrees to file a registration statement with the Securities
and Exchange Commission (the "Commission") registering the resale of the common
stock which may be obtained upon the conversion or exercise of, or received as
dividends on, the Offered Securities (the "Underlying Common Stock") under the
Securities Act.
2. Purchase, Sale and Delivery of Offered Securities.
(a) On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, the number of units set forth on the signature page of this Agreement,
each Unit consisting of (i) one share of the Company's Series A Convertible
Preferred Stock, (ii) a Series A-1 Warrant [entitling the Purchaser to acquire
twelve thousand five hundred (12,500) shares of the Company's Common Stock, at
the purchase price of ONE DOLLAR AND EIGHT CENTS ($1.08) per share, exercisable
for five (5) years, subject to the terms, conditions and adjustments, as set
forth therein] and (iii) a Series A-2 Warrant [entitling the Purchaser to
acquire twelve thousand five hundred (12,500) shares of the Company's Common
Stock at the purchase price of ONE DOLLAR AND TWENTY-SIX CENTS ($1.26) per
share, exercisable for five (5) years, subject to the terms, conditions and
adjustments, as set forth therein] (each such unit, a "Unit") for a purchase
price of Twenty-Five Thousand Dollars ($25,000) per Unit.
(b) This Agreement is part of an offering of the Offered Securities being
conducted by Xxxxxxx & Co, Inc., as placement agent (the "Placement Agent"), on
behalf of the Company (the "Offering").
(c) The Purchaser has made payment by wire transfer of funds in accordance with
instructions from the Company in the full amount of the purchase price of the
Offered Securities, which Purchaser is purchasing (the "Payment"). The Payment
shall be held in a non-interest bearing escrow or trust account at Xxxxxxxx
Xxxxxxxxx P.C. until such time as the Placement Agent has received executed
purchase agreements, purchaser questionnaires and funds for the purchase of the
Offered Securities providing for aggregate gross proceeds of at least
$6,000.000, but not more than $6,500,000, (which minimum amount may be reduced
to any amount not less than $4,000,000 and which maximum amount may be
increased, subject to the provisions of Paragraph 2(d), to any amount not
greater than $8,500,000, by agreement between the Company and the Placement
Agent, without notice to any Purchaser) and each of the conditions set forth
Section 6 of this Agreement have been satisfied or waived by the Purchaser. The
Purchaser understands that it will not earn interest on any funds held in the
escrow or trust account regardless of the length of time between the date
Purchaser transfers such funds and the date of closing of the Offering. The
Placement Agent and the Company may hold an initial closing of the Offering (the
"Initial Closing") at any mutually agreeable time, but in no event after March
15, 2004 (the "Initial Closing Date"), and in no event shall the minimum amount
of gross proceeds from the sale of the Offered Securities in the Initial Closing
be less than $4,000,000. If the Initial Closing does not occur by March 15,
2004, the Payment will be returned to the Purchaser by wire transfer no later
than 5:00 p.m. Eastern Time, on March 16, 2004. The Company may hold additional
interim closings after the Initial Closing provided that the terms of the
Offering are the same for each closing, and the gross proceeds thereof are at
least $250,000. Any such interim closings are each hereinafter referred to as an
"Additional Closing" and shall occur on one or more dates, each hereinafter
referred to as an "Additional Closing Date". The Initial Closing Date and the
Additional Closing Dates are each hereinafter sometimes referred to as a
"Closing Date" and the Initial Closing and Additional Closings are each
hereinafter sometimes referred to herein as a "Closing". The last Closing is
sometimes referred to herein as the "Final Closing". Upon receipt by the Company
of the requisite payment for all Offered Securities to be purchased by the
purchasers whose purchase agreements are accepted at the Initial Closing or any
Additional Closing, as applicable, and subject to the satisfaction of certain
conditions, the Offered Securities so purchased will be issued in the name of
each such purchaser, and the name of such purchaser will be registered on the
stock transfer books of the Company as the record owner of such Offered
Securities. The Company will promptly thereafter issue to each purchaser
participating in such Closing a stock certificate for the Offered Securities so
purchased. From and after the Final Closing, the Offering shall terminate and
the Company shall thereafter be precluded from issuing any additional shares of
Series A Convertible Preferred Stock. In no event shall the Final Closing occur
more than thirty (30) days after the Initial Closing.
(d) In no event shall any Closing occur after April 30, 2004. Any agreement
between the Company and the Placement Agent to increase the size of the Offering
to an aggregate amount of gross proceeds of more than $6,500,000, is contingent
upon the Company filing an amendment to its Articles of Incorporation for the
purpose of increasing the number of authorized shares of Common Stock therein
and until such Amended Articles are effective, the Company and the Placement
Agent shall not conduct any Closing that would result in the aggregate gross
proceeds of the Offering exceeding $6,500,000. Notwithstanding any increase in
the size of the Offering, the dates and time, limitations set forth hereinabove
shall not be extended.
(e) The Purchaser hereby agrees to be bound hereby upon (i) execution and
delivery to the Company, in care of the Placement Agent, of the signature page
to this Agreement and (ii) if the Company so chooses to accept this Agreement
from the Purchaser, written acceptance on the Initial Closing Date or an
Additional Closing Date, as the case may be, by the Company and the Placement
Agent of this Agreement, which shall be confirmed by faxing to the Purchaser the
signature page to this Agreement that has been executed by the Company.
3. Representations and Warranties of the Company1. The Company represents and
warrants to, and agrees with, the Purchaser that:
(a) As of the date of this Agreement, all reports (collectively, the "Exchange
Act Reports") which have been required to be filed by the Company under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") have been filed
under the Exchange Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The Exchange
Act Reports, when they were filed with the Commission, conformed in all material
respects to the requirements of the Exchange Act and the rules and regulations
of the Commission thereunder.
(b) (i) The Company's audited consolidated financial statements as of June 30,
2003, contained in the Form 10-KSB and the unaudited financial statements for
the three months ended December 31, 2003, contained in the Form 10-QSB,
including the notes contained therein, fairly present the consolidated financial
position of the Company at the respective dates thereof and the results of its
consolidated operations for the periods purported to be covered thereby. Such
financial statements have been prepared in conformity with generally accepted
accounting principles consistently applied with prior periods subject to any
comments and notes contained therein. All liabilities, contingent and other, of
the Company and its subsidiaries, are set forth in the financial statements as
of June 30, 2003 and December 31, 2003 contained in the Form 10-KSB and Form
10-QSB respectively, excepting only liabilities incurred in the ordinary course
of business subsequent to December 31, 2003, and liabilities of the type not
required under generally accepted accounting principles to be reflected in such
financial statements.
(ii) Since December 31, 2003, there has been no
material adverse change in the financial condition of the
Company from the financial condition stated in such financial statements. The
capitalization of the Company, including the authorized capital stock, the
number of shares issued and outstanding, the number of shares issuable and
reserved for issuance pursuant to the Company's stock and stock option plans,
the number of shares issuable and reserved for issuance pursuant to securities
exercisable for, or convertible into or exchangeable for any shares of capital
stock as of the date of this Agreement, is as described in Schedule 3(b)
attached to this Agreement.
(c) The Offered Securities have been duly authorized by the Company and, when
delivered and paid for pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered, will be validly issued, fully paid and
non-assessable (in the case of Series A Convertible Preferred Stock) and will
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their terms.
(d) The Company has been duly incorporated and is an existing corporation in
good standing under the laws of the State of Nevada, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Exchange Act Reports.
(e) Each wholly-owned subsidiary of the Company (each, a "Subsidiary") has been
duly incorporated and is an existing corporation in good standing under the laws
of the jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described in the
Exchange Act Reports; each Subsidiary is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification; all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued and is fully paid and
nonassessable and is owned free from liens, encumbrances and defects. The
Subsidiaries listed in Exhibit 21 to the Form 10-KSB for the year ended June 30,
2003 constitute the only subsidiaries of the Company.
(f) When the Offered Securities are delivered and paid for pursuant to this
Agreement, such Offered Securities will be convertible into or exercisable for
the Underlying Common Stock in accordance with the terms of such Offered
Securities. The Underlying Common Stock initially issuable upon conversion or
exercise of, or, at the option of the Company, issuable as payment of dividends
on, such Offered Securities has been duly authorized and reserved for issuance
upon such conversion, exercise, or payment and, when issued upon such
conversion, exercise or payment, will be validly issued, fully paid and
nonassessable; the outstanding Common Stock of the Company has been duly
authorized and validly issued, is fully paid and nonassessable and conforms to
the description thereof contained in the Exchange Act Reports; and the
shareholders of the Company have no preemptive rights with respect to the
Offered Securities or the Underlying Common Stock. Except as set forth on
Schedule 3(b), there are no outstanding rights, options, warrants, right of
first refusal agreements, commitments or similar rights for the purchase or
acquisition from the Company or any of its Subsidiaries of any securities of the
Company or any of its Subsidiaries. The Offered Securities and the Underlying
Common Stock, when issued, will be free and clear of all pledges, liens,
encumbrances and other restrictions (other than those arising under federal or
state securities laws as a result of the private placement of the Offered
Securities). No co-sale right, right of first refusal or other similar right
exists with respect to the Offered Securities and the Underlying Common Stock or
the issuance and sale thereof. The issue and sale of the Offered Securities and
the Underlying Common Stock will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Offered Securities and Underlying Common Stock. The issuance and
sale of the Offered Securities and Underlying Common Stock under the Agreements
does not contravene the rules and regulations of any self-regulatory
organization, exchange or market (an "SRO"). Except for the registration rights
listed on Schedule 2, no holder of any of the securities of the Company has any
rights ("demand," "piggyback" or otherwise) to have such securities registered
by reason of the intention to file, filing or effectiveness of a registration
statement.
(g) Except for the Placement Agency Agreement between the Company and Xxxxxxx &
Co dated February 23, 2004 (the "Placement Agency Agreement"), there are no
contracts, agreements or understandings between the Company and any person in
connection with the sale of the Offered Securities that would give rise to a
valid claim against the Company or the Purchaser for a brokerage commission,
finder's fee or other like payment.
(h) No consent, approval, authorization, or order of, or filing with, any
governmental agency or body, any SRO, or any court is required for the
consummation of the transactions contemplated by this Agreement and the
Registration Rights Agreement in connection with the issuance and sale of the
Offered Securities and the Underlying Common Stock by the Company except for
post-Closing compliance with Blue Sky laws of the jurisdictions, if any, where
any Purchaser may reside and the order of the Commission declaring the
Registration Statement (as defined in the Registration Rights Agreement)
effective.
(i) The execution, delivery and performance this Agreement and the Registration
Rights Agreement, and the issuance and sale of the Offered Securities and the
Underlying Common Stock and compliance with the terms and provisions hereof and
thereof, will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any rule, regulation
or order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any Subsidiary or any of their
properties, or any agreement or instrument to which the Company or any such
Subsidiary is a party or by which the Company or any such subsidiary is bound or
to which any of the properties of the Company or any Subsidiary is subject, or
the charter or by-laws of the Company or any such Subsidiary, and the Company
has full power and authority to authorize, issue and sell the Offered Securities
and the Underlying Common Stock as contemplated by this Agreement. Neither the
Company nor any of its Subsidiaries is (i) in violation of its articles of
incorporation, bylaws, or other organizational document, or in violation of any
law, administrative regulation, rule, ordinance or order of any court or
governmental agency, arbitration panel or authority or SRO applicable to the
Company or any of its Subsidiaries, which violation, individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect (as
defined below) or which would be reasonably likely to have a material adverse
effect on the transactions contemplated hereby or by the Registration Rights
Agreement, or (ii) in default (and assuming that the Closing shall have occurred
there exists no condition which, with or without the passage of time or giving
of notice or both, would constitute a default) in any material respect in the
performance of any bond, debenture, note or any other evidence of indebtedness
in any indenture, mortgage, deed of trust or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound or by which the properties
of the Company are bound, which would be reasonably likely to have a Material
Adverse Effect or which would be reasonably likely to have a material adverse
effect on the transactions contemplated hereby or by the Registration Rights
Agreement.
(j) This Agreement and the Registration Rights Agreement have been duly
authorized, executed and delivered by the Company. This Agreement and the
Registration Rights Agreement are legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability and except as rights of indemnity or contribution may be limited
by federal or state securities or other laws or the public policy underlying
such laws.
(k) The Company and the Subsidiaries have good and marketable title to all real
properties and all other properties and assets owned by them, in each case free
from liens and encumbrances other than as set forth in the Company's Form 10-KSB
for the twelve month period ending June 30, 2003 or in the Company's Form 10-QSB
for the three month period ending December 31, 2003 filed with Commission (the
"Current Exchange Act Reports"). All real properties and all other properties
and assets owned by the Company and the Subsidiaries, that are material to the
business of either of them or that have a value of $10,000 or more, are free of
any defects that would materially affect the value thereof or materially
interfere with the use made or to be made thereof by them. To the best of the
Company's knowledge and belief, the Company and its Subsidiaries hold any leased
real or personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or to be made thereof by them.
(l) The Company and the Subsidiaries each possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and have not received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
any Subsidiary, would have a material adverse effect on the business, assets,
operations, financial condition or results of operations of the Company (a
"Material Adverse Effect").
(m) No labor dispute with the employees of the Company or any Subsidiary exists
or, to the knowledge of the Company, is imminent that might have a Material
Adverse Effect.
(n) The Company and the Subsidiaries have, own, or possess or can acquire
adequate trademarks, trade names and other rights to inventions, know-how,
patents, copyrights, confidential information and other intellectual property
(collectively, "intellectual property rights") necessary to conduct the business
now operated by them, or presently employed by them, and have not received any
notice of infringement of, or conflict with the intellectual property rights
owned by others with respect to such intellectual property rights.
(o) There are no pending actions, suits or proceedings against or affecting the
Company or any Subsidiary or any of their respective properties or officers or
directors, in their capacity as such, that, if determined adversely to the
Company, would have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement the Registration Rights Agreement or the Offered Securities or which
are otherwise material in the context of the sale of the Offered Securities; and
to the best of the Company's knowledge and belief, no such actions, suits or
proceedings are threatened.
(p) Each of the Company and its Subsidiaries has filed, excepting federal income
tax returns for fiscal years 2001 and 2002 which have been prepared in
anticipation of filing, all necessary federal and state income and franchise tax
returns and has paid all taxes shown thereon as due, and there is no tax
deficiency that has been or, to the Company's knowledge, might be asserted
against the Company or any Subsidiary. All tax liabilities are adequately
provided for on the books of the Company and its Subsidiaries.
(q) The Company is in compliance with the applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002, and the rules and regulations thereunder, that are
currently in effect and is actively taking steps to ensure that it will be in
compliance with other applicable provisions of such Act not currently in effect
at all times after the effectiveness of such provisions except where such
noncompliance would not have or reasonably be expected to result in a Material
Adverse Effect or which would be reasonably likely to have a material adverse
effect on the transactions contemplated hereby or by the Registration Rights
Agreement. The Company and each Subsidiary maintains a system of internal
accounting controls sufficient to provide the Company's management with timely
and accurate information as to its financial position
(r) . The Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company's Form 10-KSB or 10-QSB, as the case may be, is being
prepared. The Company's certifying officers have evaluated the effectiveness of
the Company's controls and procedures as of the date required by the
Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and regulations thereunder
(such date, the "Evaluation Date"). The Company has presented in the applicable
Form 10-KSB or Form 10-QSB the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal controls (as such term is
defined in Regulation S-B) or, to the Company's knowledge, in other factors that
could significantly affect the Company's internal controls. The Company meets
the requirements for the use of Form SB-2 for the registration of the resale of
the Offered Securities and the Underlying Common Stock by the Purchaser.
(s) Since December 31, 2003 there has been no development or event that would
constitute a Material Adverse Effect, nor any development or event known to the
Company that prospectively involves a Material Adverse Effect, and there has
been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(t) The Company is not and is not required to be registered under Section 8 of
the United States Investment Company Act of 1940, as amended (the "Investment
Company Act") and at all times maintains satisfactory controls and procedures to
provide accurate data upon which to base such statement; the Company's intended
use of the proceeds of the Offering are to retire long and short term
indebtedness, and for general working capital for the continued operation of its
business and the Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof as
described in the Offering Document, will not be an "investment company" as such
term is defined in the Investment Company Act.
(u) All offers and sales of securities by the Company have been made by the
Company in compliance with the Securities Act and the rules and regulations of
the Commission thereunder.
(v) Assuming the accuracy of the representations of the Purchaser in the
Purchaser Questionnaires and herein, the offer and sale of the Offered
Securities by the Company to the Purchaser, and the issuance of the Underlying
Common Stock, in the manner contemplated by this Agreement will be exempt from
the registration requirements of the Securities Act by reason of Section 4(2)
thereof and Regulation D thereunder and will be exempt from and from the
registration or qualification requirements of the laws of any applicable state
or United States jurisdiction.
(w) Neither the Company, nor any of its affiliates, nor any person acting on its
or their behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any security under circumstances that
would require registration under the Securities Act of the issuance of the
Offered Securities to Purchaser. The issuance of the Offered Securities to the
Purchaser will not be integrated with any other issuance of the Company's
securities (past, current or future) for purposes of the Securities Act or any
applicable rules of the Nasdaq Stock Market. The Company will not make any
offers or sales of any security that would cause the offering of the Offered
Securities to be integrated with any other offering of securities by the Company
for purposes of any registration requirement under the Securities Act or any
applicable rules of the Nasdaq Stock Market.
(x) The Company is in material compliance with all applicable securities (or
"Blue Sky") laws of the states of the United States identified in writing by the
Placement Agent to the Company, which includes the state in which the Purchaser
resides and of each other state in which the Offering has been made to the
Purchaser, as identified in writing by the Placement Agent to the Company.
(y) The Company has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities or the
Underlying Common Stock except for this Agreement, the Registration Rights
Agreement and the Placement Agency Agreement.
(z) The Company is subject to Section 13 or 15(d) of the Exchange Act.
(aa) The Company has not taken any action outside the ordinary course of
business designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock of the Company to
facilitate the sale or resale of the Common Stock in any manner in contravention
of applicable securities laws.
(bb) The Company has provided the Purchaser in writing with all material public
information in connection with the business of the Company and the transactions
contemplated by this Agreement, and no representation or warranty made, nor any
document, statement, or financial statement prepared or furnished by the Company
in connection herewith contains any untrue statement of material fact, or omits
to state a material fact necessary to make the statements or facts contained
herein or therein, in light of the circumstances under which they were made, not
misleading. The Company confirms that neither it nor any person acting on its
behalf has provided the Purchaser or its agents or counsel with any information
that the Company believes constitutes material, non-public information. The
Company understands and confirms that the Purchaser will rely on the foregoing
representation in effecting transactions in securities of the Company.
(cc) (i) For the purposes of this Agreement, the term "Intellectual Property"
means all intellectual property rights of the Company and its Subsidiaries,
including (a) all inventions, including discoveries related thereto, conceived
of or reduced to practice as of the date hereof, whether patentable or not in
any jurisdiction, patents, applications for patents (including, without
limitation, divisions, continuations, continuations in part and renewal
applications), and any renewals, extensions or reissues thereof, in any
jurisdiction; (b) trademarks, service marks, brand names, certification marks,
trade dress, assumed names, trade names and other indications of origin, the
goodwill associated with the foregoing and registrations in any jurisdiction of,
and applications in any jurisdiction to register, the foregoing, including any
extension, modification of or renewal of any such registration or application;
(c) computer software (including software, data, and related documentation); (d)
non-public information, trade secrets, know-how (including, without limitation,
research and development, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings and specifications)
and confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any person or entity; (e) writings or other works, whether
copyrightable or not in any jurisdiction, registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof; (f) any similar intellectual property rights, and (g) any claims or
causes of action arising our of or related to any infringement or
misappropriation of any of the foregoing.
(i) The Company and its Subsidiaries own all right, title and interest in and to
all of the Intellectual Property owned by the, free and clear of any and all
liens, encumbrances or other adverse claims or interests of any kind or nature,
except as previously disclosed in any Current Exchange Act Report. Neither the
Company nor any Subsidiary has received any notice or claim (whether written,
oral or otherwise) challenging their ownership of any of the Intellectual
Property owned by them or suggesting that any other third party has any claim of
legal or beneficial ownership or interest with respect thereto.
(ii) All of the Intellectual Property necessary to the operation of the business
of the Company and its Subsidiaries is, to the knowledge of the Company, valid
and enforceable, without any qualification, limitation or restriction thereon or
on the use thereof and the Company has not received any notice or claim (whether
written, oral or otherwise) challenging or questioning the validity or
enforceability of any of the Intellectual Property or indicating an intention on
the part of any third party to bring a claim that any of the Intellectual
Property is invalid or unenforceable or has been misused which has not been
previously disclosed in any Current Exchange Act Report or as discussed in the
attached due diligence opinion of Howison and Arnott, provided that the Company
represents and warrants that the matters identified in such due diligence
opinion will not have a Material Adverse Effect nor is there a reasonable basis
for a claim that any of the Intellectual Property is invalid or unenforceable or
has been misused, and, with respect to all patents included in the Intellectual
Property, to the knowledge of the Company, there is no relevant prior art
pertaining to any issued patents thereof that was not disclosed during the
prosecution of the patent application(s) therefor and which if such prior art
had been disclosed may have affected the prosecution thereof or the scope of the
patent claims ultimately granted in respect thereof.
(iii) The Company and its Subsidiaries have not taken any action or failed to
take any action (including the manner in which they have conducted its business,
or used or enforced, or failed to use or enforce, any of the Intellectual
Property) that would result in the abandonment, cancellation, forfeiture,
relinquishment, invalidation or unenforceability of any of the Intellectual
Property (including, with respect to the patents included in the Intellectual
Property, failing to disclose any known material prior art in connection with
the prosecution of patent applications, and with respect to the copyrights
included in the Intellectual Property, failing to disclose required information
to the United States Copyright Office or any other copyright registry). The
Company and each Subsidiary has taken reasonable steps to protect and maintain
its rights in and to the Intellectual Property. All registered trademarks,
service marks, and copyrights included in the Intellectual Property have been
registered or filed, and all patents included in the Intellectual Property have
been filed and obtained, in accordance with all applicable legal requirements
and are currently in effect and in compliance with all applicable legal
requirements (including, in the case of registered trademarks or service marks,
the timely post-registration filing of affidavits of use and incontestability
and renewal applications), and without limiting the generality of any of the
foregoing, the Company and its Subsidiaries have timely paid all filing,
examination, issuance, post registration and maintenance fees, annuities and the
like associated with or required with respect to any of the Intellectual
Property.
(iv) No patent, trademark or service xxxx included in the Intellectual Property
has been or is now involved in any interference, reissue, reexamination,
opposition or cancellation proceeding, that is material to the ownership,
existence or validity of such Intellectual Property, which has not been
previously disclosed in any Current Exchange Act Report and, to the Company's
knowledge and belief, (A) no such action is or has been threatened with respect
to any such patent, trademark or service xxxx, and (B) there is no patent or
patent application of any third party potentially interfering with any such
patent.
(v) To the knowledge of the Company, there has been no prior use of any of the
trademarks and service marks included in the Intellectual Property by any third
party, which would confer upon such party superior rights in such marks. All
registered trademarks or service marks included in the Intellectual Property are
being used, have been continuously used in the form appearing in, and in
connection with, the goods and services listed in their respective registration
certificates and applications therefor, respectively.
(vi) The Company and the Subsidiaries have not disclosed, nor are they under any
contractual or other obligation to disclose, to another third party any trade
secrets included in the Intellectual Property, except pursuant to a
confidentiality and non-disclosure agreement, and, to the Company's knowledge,
no third party has materially breached any such agreement.
(vii) The Company has the right to practice all inventions disclosed in the
patents included in the Intellectual Property.
(viii) The Intellectual Property constitutes all of the intellectual property
rights necessary for the conduct of the current business activities of the
Company and its Subsidiaries.
(dd) The Company and its Subsidiaries are not a party to any action or
proceeding that involves or involved a claim of infringement, misappropriation
or other wrongful use or exploitation, either (i) by the Company or any
Subsidiary against any third party or (ii) by any third party against the
Company or any Subsidiary, pertaining to any of the Intellectual Property, nor
has any such claim been made (whether written oral or otherwise) or threatened
or is there any reasonable basis therefor, which has not been previously
disclosed in any Current Exchange Act Report. None of the Intellectual Property
is subject to any outstanding order, judgment, decree, stipulation or agreement
restricting the use, exercise, practice or other exploitation thereof by the
Company or any Subsidiary, with the exception of certain Intellectual Property
licensed to third parties. To the knowledge of the Company, neither the
Intellectual Property nor the products sold by the Company or any Subsidiary
enveloped, practiced, copied, modified (including the creation of derivatives),
displayed, made, sold, offered for sale, marketed, used, leased, licensed or
sublicensed, imported, exported or otherwise distributed or disposed of, or
otherwise exercised or exploited by or for the Company, nor use of such products
by customers or distributors, nor the activities or operations of Company or any
Subsidiary infringe, misappropriate or otherwise inappropriately conflict with
or violate, or has any of them infringed, misappropriated, or otherwise
inappropriately conflicted with or violated, any intellectual property right or
other right of any third party.
(ee) Each current employee, independent contractor and consultant to the Company
who has participated in the development of any of the Intellectual Property has
(a) executed an agreement requiring each of them to maintain in strict
confidence the trade secrets and information of the Company related to the
Intellectual Property and (b) properly assigned such individual's rights in such
Intellectual Property to the Company or such work product otherwise constitutes
the property of the Company as a work made for hire. The Company and its
Subsidiaries are not utilizing (A) any inventions of any independent contractors
or consultants, or confidential information (including trade secrets) of any
third party to which any independent contractors or consultants have been
exposed, and (B) any inventions of any employees of the Company made, or any
confidential information (including trade secrets) of another person to which
any employees were exposed, prior to their employment by the Company, in each
case excluding any inventions or confidential information that have been duly
assigned in writing to the Company. To the Company's knowledge and belief, at no
time during the conception of or reduction to practice of any of the
Intellectual Property was any developer, inventor or other contributor to such
Intellectual Property operating under any grants from any governmental entity or
private source, or performing research sponsored by any governmental entity or
private source.
(ff) No securities were sold in the offering sought to be registered by the
Company's registration statement on Form SB-2 filed with the Commission on June
19, 2003 (the "Abandoned Registered Offering"). The Company voluntarily withdrew
the registration statement for the Abandoned Registered Offering on or about
September 10, 2003, the effective date of the withdrawal. Neither the Company
nor any person acting on the Company's behalf engaged in any effort to sell
equity securities of the Company within the thirty (30) calendar day period
immediately following the effective date of the withdrawal of the registration
statement for the Abandoned Registered Offering. The Exchange Act Reports
disclose all changes in the Company's business or financial condition that
occurred after June 19, 2003 that are material to the Purchaser's investment
decision in the Offering. Accordingly, the Company is entitled to the protection
of Rule 155(c) under the Securities Act.
(gg) Affiliates. Except as set forth in the Company's Exchange Act Reports, none
of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(hh) Solvency. Based on the financial condition of the Company as of the Closing
Date (and assuming that the Closing shall have occurred), (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to be paid
on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company's
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash of the
Company, together with the proceeds that the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
(ii) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company's articles of incorporation (or similar charter documents) or
the laws of its state of incorporation that is or could become applicable to the
Purchaser as a result of the Purchaser and the Company fulfilling their
obligations or exercising their rights under this Agreement, including without
limitation the Company's issuance of the Offered Securities and the Underlying
Common Stock and the Purchaser's ownership thereof.
(jj) Other. No other purchaser of Series A Preferred Stock, Series A-1 Warrants
and Series A-2 Warrants has received, or will receive, more favorable terms,
conditions or covenants than those contained herein.
4. Representations by the Purchaser: Resale by the Purchaser. The Purchaser
represents, warrants and acknowledges and agrees with the Company and Placement
Agent as follows:
(a) The Purchaser is an "Accredited Investor" (as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act). By reason of his
business and financial experience, the Purchaser has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the investment in the Offered
Securities and the Underlying Common Stock, has the capacity to protect the
Purchaser's own interests and is able to bear the economic risk of such
investment. The Purchaser has had an opportunity to review all publicly
disclosed financial information, publicly available information from the
Company's books and records and all regulatory filings of the Company and to ask
questions of representatives of the Company concerning the terms and conditions
of the transactions contemplated by this Agreement.
(b) The Purchaser is acquiring the Offered Securities for the Purchaser's own
account, for investment purposes only, and not with a view to the public sale or
distribution thereof in violation of the Securities Act. The Purchaser
understands that the Offered Securities and the Underlying Common Stock have not
been registered under the Securities Act or registered or qualified under any
state securities law in reliance upon specific exemptions therefrom, which
exemptions depend upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein.
(c) The Purchaser is not purchasing the Offered Securities as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper magazine or similar media or broadcast over
television or radio or presented at any seminar.
(d) The Purchaser is, and on the Closing Date will be, able to bear the economic
risk of an investment in the Offered Securities and is able to afford a complete
loss of such investment. The Purchaser has adequate means of providing for the
Purchaser's current financial needs and contingencies, is able to bear the
substantial economic risks of an investment in the Offered Securities for an
indefinite period of time, and has no need for liquidity in such investment.
(e) The Purchaser acknowledges that the Purchaser has been afforded (i) the
opportunity to ask such questions as he has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Offered Securities, and the merits and risks of investing
in the Offered Securities; (ii) access to information about the Company and the
Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable the Purchaser to evaluate the
Purchaser's investment; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to his investment.
(f) The Purchaser understands and acknowledges that (i) the Offered Securities
and, upon conversion or exercise, the Underlying Common Stock are being offered
and sold without registration under the Securities Act in a private placement
that is exempt from the registration provisions of the Securities Act under
Section 4(2) of the Securities Act or Regulation D promulgated thereunder; (ii)
neither of the Offered Securities nor the Underlying Common Stock have been
registered under any Blue Sky law of any state and (iii) the availability of
such exemptions depends in part on, and the Company is relying on the accuracy,
completeness and truthfulness of, the representations made by Purchaser herein
and the statements made by the Purchaser in the Purchaser Questionnaire.
Purchaser hereby acknowledges and consents to such reliance by the Company. The
Purchaser understands further that in absence of an effective Registration
Statement, the Offered Securities can only be sold pursuant to some exemption
from registration, such as Rule 144 of the Act, which requires, among other
conditions, that the Offered Securities must be held for a minimum of one (1)
year.
(g) The Purchaser understands and recognizes that investment in the Offered
Securities involves substantial risks. The Purchaser has, by reason of the
Purchaser's business or financial experience either alone or together with the
Purchaser's representatives and professional advisers (who are unaffiliated with
and who are not compensated, directly or indirectly, by the Company or the
Placement Agent or any affiliate of either of them), such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Offered Securities and the Underlying Common Stock, has so evaluated the merits
and risks of the prospective investment in the Offered Securities and the
Underlying Common Stock. The Purchaser has evaluated the merits and risks of
such investment to such Purchaser's satisfaction, and has the capacity to
protect Purchaser's own interests in connection with the Offering. The Purchaser
further acknowledges that he has read the Exchange Act Reports of the Company,
including the risk factors identified therein. The Purchaser further recognizes
that no Federal or state agencies have passed upon the offering of the Offered
Securities or made any finding or determination as to the fairness of this
investment.
(h) The Purchaser has made a decision to purchase the Offered Securities based
solely upon the representations and warranties made by the Company in this
Agreement, the Purchaser's review of the Exchange Act Reports and such other
information made available to the Purchaser by the Company in writing and is not
relying on any investigation or statements made by the Placement Agent. The
Purchaser acknowledges that the Placement Agent cannot make any assurances that
the Exchange Act Reports or other information supplied by the Company are
accurate or complete.
(i) The Company confirms that this Section (4)(i) supercedes any legend
requirements of Section 7.03(d) of the Company's By-Laws which would otherwise
be applicable to the Offered Securities and the Underlying Common Stock. (i) The
Purchaser acknowledges that each certificate representing the Offered Securities
and the Underlying Common Stock shall contain a legend substantially in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AVAILABLE
EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT THE SELLER
DELIVERS TO THE COMPANY AN OPINION OF COUNSEL (WHICH OPINION
AND COUNSEL ARE REASONABLY SATISFACTORY TO THE COMPANY)
CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME.
(ii) Certificates evidencing the Offered Securities and Underlying
Common Stock shall not contain any legend (including the legend set forth
above), (A) while a registration statement covering the resale of such security
is effective under the Securities Act (provided, however, that the Purchaser's
prospectus delivery requirements under the Securities Act will remain
applicable), or (B) following any sale of such Offered Securities and/or
Underlying Common Stock pursuant to Rule 144, or (C) if such Offered Securities
and/or Underlying Common Stock are eligible for sale under Rule 144(k), or (D)
if such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the Staff
of the SEC). The Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly after the effective date of any registration
statement (the "Effective Date") if required by the Company's transfer agent to
effect the removal of the legend hereunder. The Company agrees that following
the Effective Date or at such time as such legend is no longer required under
this clause (ii), it will, no later than three trading days following the
delivery by the Purchaser to the Company or the Company's transfer agent of a
certificate representing Offered Securities and/or Underlying Common Stock
issued with a restrictive legend, deliver or cause to be delivered to such
Purchaser a certificate representing such Offered Securities and/or Underlying
Common Stock that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to any transfer
agent of the Company that enlarge(s) the restrictions on transfer set forth
herein.
(iii) The Company acknowledges and agrees that the Purchaser may from
time to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Offered
Securities and/or Underlying Common Stock to a financial institution that is an
"accredited investor" as defined in Rule 501(a) under the Securities Act and, if
required under the terms of such arrangement, the Purchaser may transfer pledged
or secured Offered Securities and/or Underlying Common Stock to the pledgees or
secured parties. Such a pledge or transfer would not be subject to approval of
the Company and no legal opinion of legal counsel of the pledgee, secured party
or pledgor shall be required in connection therewith. Further, no notice shall
be required of such pledge. At the Purchaser's expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Offered Securities and/or Underlying Common Stock may reasonably request in
connection with a pledge or transfer of the Offered Securities and/or Underlying
Common Stock, including, subject to the provisions of Section 2 (g) of the
Registration Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.
(iv) In addition to the Purchaser's other available remedies, the
Company shall pay to the Purchaser, in cash, as partial liquidated damages and
not as a penalty, for each $1,000 of Offered Securities and/or Underlying Common
Stock (based on liquidation preference, in the case of Series A Preferred Stock,
and based on the closing price of the Common Stock on the date such Offered
Securities and/or Underlying Common Stock are submitted to the Company's
transfer agent), $5 per trading day (increasing to $10 per trading day five (5)
trading days after such damages have begun to accrue) for each trading day after
the seventh (7th) trading day following delivery by the Purchaser to the Company
or the Company's transfer agent of a certificate representing Offered Securities
and/or Underlying Common Stock issued with a restrictive legend, until such
certificate is delivered. Nothing herein shall limit the Purchaser's right to
pursue actual damages for the failure of the Company and its transfer agent to
deliver certificates representing any securities as required hereby or by the
Irrevocable Transfer Agent Instructions (as defined below), and the Purchaser
shall have the right to pursue all remedies available to it at law or in equity,
including, without limitation, a decree of specific performance and/or
injunctive relief.
(i) The Purchaser has all requisite power and authority to enter into this
Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby. This Agreement and the
Registration Rights Agreement have been duly executed and delivered by the
Purchaser. This Agreement and the Registration Rights Agreement are legal, valid
and binding obligations of the Purchaser, enforceable against the Purchaser in
accordance with their terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or conveyance or
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability and except as rights of indemnity or
contribution may be limited by federal or state securities or other laws or the
public policy underlying such laws.
(j) If Purchaser is a partnership, corporation, trust or estate: (i) such
partnership, corporation, trust or estate has the full legal right and power and
all authority and approval required (a) to execute and deliver, or authorize
execution and delivery of, this Agreement and all other instruments executed and
delivered by or on behalf of such partnership, corporation, trust or estate in
connection with the purchase of the Offered Securities, (b) to delegate
authority pursuant to a power of attorney and (c) to purchase and hold such
Offered Securities; (ii) the signature of the party signing on behalf of such
partnership, corporation, trust or estate is binding upon such partnership,
corporation, trust or estate; and (iii) such partnership, corporation or trust
has not been formed for the specific purpose of acquiring the Offered
Securities, unless each beneficial owner of such entity is qualified as an
"accredited investor" within the meaning of Regulation D and has submitted
information substantiating such individual qualification.
(k) If the Purchaser is a retirement plan or is investing on behalf of a
retirement plan, the Purchaser acknowledges that investment in the Offered
Securities poses risks in addition to those associated with other investments,
including the inability to use losses generated by an investment in the Offered
Securities to offset taxable income.
(l) No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required for the consummation of the
transactions contemplated by this Agreement and the Registration Rights
Agreement by the Purchaser, except for such as have been obtained prior to the
date hereof.
(m) The information furnished by the Purchaser herein and in the Purchaser
Questionnaire signed by Purchaser is true and accurate as of the date hereof and
will be true and accurate on the Closing Date, absent notification by the
Purchaser to the Company of any material change in the information contained
therein prior to the Closing Date.
(n) The execution, delivery and performance this Agreement and the Registration
Rights Agreement will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any statute, any rule,
regulation or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Purchaser or any of the Purchaser's
properties, or any agreement or instrument to which the Purchaser is a party or
by which the Purchaser is bound or to which any of the properties of the
Purchaser is subject, or any charter or by-laws of the Purchaser.
(o) The Purchaser acknowledges that (i) the Offered Securities and, if converted
or exercised, the Underlying Common Stock are "restricted securities" (as that
term is defined in Securities Act Rule 144(a)(3) and may not be resold unless
they are registered under the Securities Act or an exemption from such
registration is available; (ii) the Purchaser does not have available the
protection of Section 11 of the Securities Act, (iii) the Company filed a
registration statement for the offer and sale of Common Stock on Form SB-2 on or
about June 19, 2003 and withdrew that registration statement under Securities
Act Rule 477 on or about September 10, 2003 and the effective date of that
withdrawal was September 10, 2003 and (iv) the Offered Securities and the
Underlying Common Stock are not being offered for sale to the Purchaser pursuant
to a registered offering under the Securities Act.
(p) The Purchaser acknowledges that the Placement Agent will receive
compensation from the Company in connection with the offering of the Offered
Securities, but is not guaranteeing or assuming responsibility for the operation
or possible liability of the Company, including, without limitation, compliance
by the Company with the agreements entered into in connection with the offering,
and the Placement Agent will not supervise or participate in the operation or
management of the Company.
(q) No person or entity acting on behalf, or under the authority, of the
Purchaser is or will be entitled to any broker's finder's or similar fee or
commission in connection with this Agreement or the purchase by the Purchaser of
the Offered Securities.
(r) PURCHASER HEREBY ACKNOWLEDGES THAT THE COMPANY HAS DELIVERED TO THE
PURCHASER ALL INFORMATION AND DOCUMENTS THAT PURCHASER HAS REQUESTED OF THE
COMPANY. IN MAKING AN INVESTMENT DECISION, THE PURCHASER HAS RELIED UPON THE
PURCHASER'S OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED.
(s) The Purchaser acknowledges that the Placement Agent has been retained by the
Company to act as the Company's placement agent in the offering of the Offered
Securities and that, for its services, the Placement Agent will be compensated
by the Company as follows: (i) a fee equal to (a) ten percent (10%) of the gross
proceeds from the sale of the Offered Securities, (ii) a $50,000 non-accountable
expense allowance, (iii) warrants to purchase fifteen percent (15%) of the
number of shares of the Company's Common Stock receivable upon conversion of the
Series A Convertible Preferred Stock sold in the Offering, exercisable for a
five (5) year period for one dollar ($1.00) per share, subject to adjustment,
and (iv) the reimbursement of certain expenses not to exceed Forty Thousand
Dollars ($40,000).
(t) The Purchaser acknowledges that upon notice of acceptance from the Company,
this Purchase Agreement is irrevocable by the Purchaser, that, except as
required by law, the Purchaser is not entitled to cancel, terminate or revoke
this Agreement or any agreements of Purchaser hereunder and that this Purchase
Agreement and such other agreements shall survive the death or disability of the
Purchaser and shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors, legal
representatives and permitted assigns. If the Purchaser is more than one person,
the obligations of the Purchaser hereunder shall be joint and several and the
agreements, representations, warranties and acknowledgments herein contained
shall be deemed to be made by and be binding upon each such person and his or
her heirs, executors, administrators, successors, legal representatives and
permitted assigns.
5. Certain Agreements of the Company. The Company agrees with the Purchaser
that:
(a) In addition to any and all other public statements or disclosures made by
the Company in its sole discretion (subject to the last sentence of this Section
5(a)), the Company will issue a press release and file a Current Report on Form
8-K with the Commission regarding the Final Closing of the purchase and sale of
the Offered Securities on the date of the Initial Closing and, if applicable,
within one (1) business day after such Final Closing. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of the Purchaser, or
include the name of the Purchaser in any filing with the Commission or any SRO,
without the prior written consent of the Purchaser, except (i) as required by
federal securities law and (ii) to the extent such disclosure is required by law
or regulations, in which case the Company shall provide the Purchaser with prior
notice of such disclosure permitted under subclause (i) or (ii). Furthermore,
the Company covenants and agrees that neither it nor any other Person acting on
its behalf will provide the Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto the Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that the Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
(b) The Company shall indemnify and hold the Purchaser harmless from and against
all fees, commissions or other payments owing by the Company to the Placement
Agent or any other person or from acting on behalf of the Company with respect
to the Offering.
(c) The Company will pay all expenses incidental to the performance of its
obligations under this Agreement and the Registration Rights Agreement including
all expenses in connection with the execution, issue, authentication, packaging
and initial delivery of the Offered Securities and, as applicable, the
Underlying Common Stock, the preparation of this Agreement, the Registration
Rights Agreement, and amendments and supplements thereto, and any other document
relating to the issuance, offer, sale and delivery of the Offered Securities and
as applicable the Underlying Common Stock.
(d) For a period of 90 days after the Final Closing Date, the Company will not
offer, sell, contract to sell, pledge, or otherwise dispose of, directly or
indirectly, any Common Stock or any securities which are convertible into, or
exercisable for, Common Stock, except for (i) shares of Common Stock issued or
issuable pursuant to the Offered Securities, specifically including all shares
issuable upon conversion or exchange of, or as dividends on, the Offered
Securities, (ii) shares of Common Stock issuable upon the exercise of any
options or warrants outstanding on the date of this Agreement and identified in
Schedule 3(b), (iii) shares of Common Stock issuable pursuant to or upon the
conversion of any note, debenture, debt instrument and any other written
agreement to which the Company is a party on the date of this Agreement and
identified in Schedule 3(b) and (iv) shares of Common Stock (including grants,
options and warrants) issuable pursuant to or in accordance with any plan for
which the Company has filed a registration statement that has been declared
effective and identified in Schedule 3(b), including, without limitation, the
1994 Stock Plan and the Consultant Compensation Plan, or any other stock plan,
option plan or written agreements to which the Company is a party on the date of
this Agreement and identified in Schedule 3(b). (the securities described in
sections (i) through (iv) inclusive may sometimes be referred to herein as the
"Excluded Securities"). The Company will not at any time offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any securities
under circumstances where such offer, sale, pledge, contract or disposition
would cause the exemption afforded by Section 4(2) of the Securities Act to
cease to be applicable to the offer and sale of the Offered Securities and the
Underlying Common Stock to the Purchaser hereunder.
(e) The Company shall use the net proceeds received from the sale of the Offered
Securities solely for working capital, including the development of technology
and, in the event that the gross proceeds to the Company in the Offering has
been $6,000,000 or more, the Company may repay any portion of the outstanding
principal of, and accrued interest and other amounts payable on, certain
outstanding convertible indebtedness of the Company, in an amount not to exceed
One Million Three Hundred Thousand Dollars ($1,300,000) in the aggregate.
(f) In the event that the Company intends to make a sale of any equity
securities or securities which may be converted into, or exercised or
exchangeable for, equity securities within twelve (12) months after the Closing
Date for cash consideration (a "Subsequent Financing"), with the exception of
any equity securities issued or sold by the company pursuant to any written
agreements to which the Company is a party on the date of this Agreement and
which are identified on Schedule 3(b), the Company shall provide the Purchaser
with notice of the Subsequent Financing (the "Notice") as soon as practicable,
but in any event no later than fifteen (15) Business Days prior to the scheduled
closing of the Subsequent Financing. The Notice shall be accompanied by all
offering materials provided to the investors in the Subsequent Financing. The
Purchaser shall have the option, but not the obligation, to purchase up to such
amount of securities in the Subsequent Financing, upon the same terms and
conditions made available to the other investors in the Subsequent Offering, as
may be purchased for the dollar amount that is the equivalent of the purchase
price paid by the Purchaser for the Offered Securities in this offering. In the
event that the Purchaser elects to exercise its option to participate in the
Subsequent Financing, the Purchaser must provide the Company with written notice
of such exercise no later than ten (10) Business Days after the Purchaser has
received the Notice, specifying the number of securities that Purchaser has
elected to purchase in the Subsequent Financing. For the purposes of this
Agreement, the term "Business Day" means any calendar day other than a Saturday,
Sunday, or other day on which commercial banks in the State of New York are
required or authorized by law to close. The provisions of this paragraph shall
not apply to any sale of equity securities or securities which may be converted
into, or exercised for, equity securities (i) pursuant to an effective
registration statement under the Securities Act, (ii) in connection with a
strategic, non-financing related, strategic partnership, or (iii) as
consideration for an acquisition of another company made by the Company.
6. Conditions of the Obligations of the Purchaser. The obligations of the
Purchaser to purchase and pay for the Offered Securities on the Closing Date
will be subject to the accuracy of the representations and warranties on the
part of the Company herein, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions
precedent:
(a) The Company shall have executed this Agreement and the Registration Rights
Agreement and delivered the same to the Placement Agent.
(b) The Purchaser shall have received copies of all documents and information,
which it may have reasonably requested in connection with the offering and sale
of the Offered Securities.
(c) The Company shall have caused its legal counsel to deliver to the Purchaser
a legal opinion in substantially the form attached hereto as Exhibit A,
including a "10b-5" statement in customary form.
(d) The Company shall have caused its intellectual property counsel to deliver
to the Purchaser a legal opinion relating to the Intellectual Property
substantially in the form attached hereto as Exhibit B.
(e) No stop order or suspension of trading shall have been imposed by Nasdaq,
the Commission, any SRO or any other governmental regulatory body with respect
to public trading in Common Stock of the Company.
(f) Subsequent to the execution and delivery of this Agreement, but prior to the
respective Closing Date for such Purchaser (whether the Initial Closing Date or
any Subsequent Closing Date) there shall not have occurred (i) a change in U.S.
or international financial, political or economic conditions or currency
exchange rates or exchange controls as would, in the judgment of the Placement
Agent, be likely to prejudice materially the success of the proposed issue, sale
or distribution of the Offered Securities, whether in the primary market or in
respect of dealings in the secondary market, or (ii) (A) any change, or any
development or event involving a prospective change, in the condition (financial
or other), business, properties or results of operations of the Company and its
Subsidiaries taken as one enterprise which, in the judgment of the Purchaser is
material and adverse and makes it impractical or inadvisable to proceed with
completion of the offering or the sale of and payment for the Offered
Securities; (B) any material suspension or material limitation of trading in
securities generally on NASDAQ or any setting of minimum prices for trading on
NASDAQ, or any suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market; (D) any banking moratorium declared
by United States Federal or New York authorities; or (E) any outbreak or
escalation of major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of the Purchaser, the
effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the offering
or sale of and payment for the Offered Securities.
(g) The Purchaser shall have received a certificate, dated such Closing Date, of
the President or any Vice President and a principal financial or accounting
officer of the Company in which such officers, to the best of their knowledge
customary to officers of such capacity in such circumstance, shall state that
the representations and warranties of the Company in this Agreement are true and
correct, that the Company has complied in all material respects with all
agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date, and that there has been no
development or event that would constitute a Material Adverse Effect, nor any
development or event known to the Company that prospectively involves a Material
Adverse Effect.
(h) The holders of the Company's outstanding convertible indebtedness, as last
identified to the Company, are set forth in Schedule 5(h) together with the
corresponding principal amounts of such convertible indebtedness outstanding to
such holder, having an aggregate original principal amount of approximately
$1,100,000 (the "Convertible Debt"). Concurrently with the Closing, the Company
shall cause each such holder to (i) exercise such holder's right to convert the
Convertible Debt into Common Stock of the Company at the conversion price set
forth in the in the convertible debt instrument representing the portion of the
Convertible Debt owned by such holder, (ii) accept a cash payment of all
outstanding principal, interest and any other amounts payable with respect to
the convertible debt instrument owned by such holder, without regard to the
maturity date of such convertible debt instrument, or (iii) any combination of
(i) and (ii) which the Company may offer, provided that, in each such case the
payment, conversion or combination thereof shall result in the complete
satisfaction of all outstanding Convertible Debt and in connection with each
such transaction the Company shall not, other than as forth in clauses (i), (ii)
or (iii) hereinabove, pay any cash consideration, issue any additional
securities or confer upon the holders of the Convertible Debt any other
consideration capable of monetization.
(i) The security holders identified in Schedule 5(i) shall have entered into an
agreement for the benefit of the Purchaser pursuant to which such holders have
agreed not to sell any Common Stock of the Company owned or held by them that is
included in the Initial Registration Agreement during the first ninety (90) day
period after the Initial Registration Statement required by Section 2 of the
Registration Rights Agreement has been declared effective by the Commission.
(j) (j) The Offering shall have resulted in gross proceeds of $6,000,000 or more
being made available to the Company, provided that, the Company and the
Placement Agent may agree, without notice to any Purchaser, to reduce the
required amount of minimum gross proceeds being made available to the Company as
a result of the Offering to any amount not less than $4,000,000 at any time
following the execution hereof, in their sole and absolute discretion.
(k) The Company and the Company's transfer agent shall have executed irrevocable
instructions in the form attached hereto as Exhibit C (the "Irrevocable Transfer
Agent Instructions"), instructing such transfer agent, and any subsequent
transfer agent, to promptly issue certificates, registered in the name of each
Purchaser or its respective nominee(s), for the Underlying Common Stock in such
amounts as specified from time to time by the Purchaser to the Company upon
conversion of the Series A Convertible Preferred Stock and/or upon exercise of
the Series A-1 or A-2 Warrants.
(l) The Purchaser shall have received a certificate evidencing the incorporation
and good standing of the Company in Nevada issued by the Secretary of State of
the State of Nevada as of a date within ten (10) days of the Closing Date,
together with a certificate evidencing the good standing of the Company as a
foreign corporation in the State of Texas issued by the Secretary of State of
the State of Texas.
(m) The Purchaser shall have received a certified copy of the Certificate of
Incorporation and the Certificate of Designations, as certified by the Secretary
of State of the State of Nevada as of a date within ten (10) days of the Closing
Date.
(n) The Purchaser shall have received from the Company a secretary's
certificate, dated as of the Closing Date, certifying as to (A) resolutions, (B)
the Articles of Incorporation and (C) the Bylaws, each as in effect at the date
hereof.
The Company will furnish the Purchaser such number of conformed copies of such
opinions, certificates, letters and documents as the Purchaser may reasonably
request in writing. Any Purchaser may in its sole discretion waive compliance
with any conditions to the obligations of the Purchaser hereunder.
7. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the Purchaser set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
the Purchaser, the Company or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and payment
for the Offered Securities.
8. Notices. All notices, requests, demands, waivers, consents and other
communications hereunder shall be in writing, and (i) if sent to the Purchaser
or the Placement Agent shall be delivered either in person, by telegraphic,
facsimile, or other electronic means, by overnight air courier or by as
certified or registered mail, return receipt requested or (ii) if sent to the
Company, shall be delivered either in person, by telegraphic, facsimile, or
other electronic means, by overnight air courier, and shall be deemed to have
been duly given and to have become effective: (a) upon receipt if delivered in
person or by telegraphic, facsimile or other electronic means calculated to
arrive on any Business Day prior to 5:00 p.m., local time, or on the next
succeeding Business Day if delivered on a non-business day or after 5:00 p.m.,
local time; (b) one Business Day after having been delivered to an air courier
for overnight delivery or (c) three Business Days after having been deposited in
the United States mails as certified or registered mail, return receipt
requested, all fees prepaid, directed to the parties at the following addresses
(or at such other address as shall have been previously given in writing in
accordance with the terms hereof by any party hereto):
If to Purchaser, to the address set forth on the signature
page hereof.
If to Placement Agent: Xxxxxxx & Co, Inc.
000 Xxxx Xxxxxx
00xx xxxxx
Xxx Xxxx, XX 00000
Facsimile: 212.418.1225
With a copy to:
Xxxxxxxx Ingersoll PC
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. North, Esquire
If to Viseon, Inc.:
Viseon, Inc.
Attn: President
0000 Xxxxxxxx Xxxxxxx Xxxxx 000
Xxxxxx, XX 00000
With a copy to:
Xxxxxx X. Xxxxx, Xx.
Law Offices of Xxxxxx X. Xxxxx, Xx.
00000 X. Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
9. Successors. This Agreement will inure to the benefit of and be binding upon
the parties hereto and their respective successors.
10. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same Agreement.
11. Applicable Law: Consent to Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York without
regard to principles of conflicts of laws. The Company hereby submits to the
non-exclusive jurisdiction of the Federal and State courts situated in the
Borough of Manhattan in the City of New York in any suit or proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby.
12. Changes. This Agreement may not be modified, amended or waived except
pursuant to an instrument in writing signed by the Company and the Purchaser.
13. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof, and any and all
other written or oral agreements relating to such subject matter are expressly
cancelled.
14. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company and the
Purchaser, including without limitation and without the need for an express
assignment, affiliates of the Purchaser. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Purchaser. Upon any transfer, the Company shall be obligated to
such transferee to perform all of its covenants under this Agreement as if such
transferee were an Purchaser.
15. Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the Purchaser and the
Company will be entitled to specific performance under the Agreement. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agree to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.
16. Independent Nature of Purchaser's Obligations and Rights. The obligations of
the Purchaser under this Agreement are several and not joint with the
obligations of any other purchaser under any other agreement, and the Purchaser
shall not be responsible in any way for the performance of the obligations of
any other purchaser under any other agreements. The decision of the Purchaser to
purchase Offered Securities pursuant to this Agreement has been made by such
Purchaser independently of any other purchaser. Nothing contained herein or in
any of the other agreement, and no action taken by Purchaser pursuant thereto,
shall be deemed to constitute the Purchaser and any other purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchaser is in any way acting in concert or as a
group with others with respect to such obligations or the transactions
contemplated hereby. The Purchaser acknowledges that no other purchaser has
acted as agent for Purchaser in connection with making its investment hereunder
and that no other purchaser will be acting as agent of the Purchaser in
connection with monitoring its investment in the Offered Securities and
Underlying Common Stock or enforcing its rights under this Agreement. The
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and it
shall not be necessary for any other purchaser to be joined as an additional
party in any proceeding for such purpose.
17. Replacement of Offered Securities and/or Underlying Common Stock. If any
certificate or instrument evidencing any Offered Securities and/or Underlying
Common Stock is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Offered Securities and/or
Underlying Common Stock.
18. Stock Splits, Etc. The provisions of this Agreement shall be appropriately
adjusted to reflect any stock split, stock divided, reverse stock split,
reorganization or other similar event effected after the date hereof.
If the foregoing is in accordance with the Purchaser's understanding of
our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement between the Company and the
Purchaser in accordance with its terms.
[Signature page follows]
VISEON, INC.
--------------------------
By: Xxxx Xxxxxx, President
ACCEPTED AND AGREED:
Number of Offered Securities Being Purchased:
Series A Convertible Preferred Stock:
Series A-1 Warrants:
Series A-2 Warrants:
The Offered Securities
Are to be issued in (check one box): _____________________________
---
Print Name of Purchaser
_____ individual name ______________________________
Print Name of Joint Purchaser
(if applicable)
_____ joint tenants
with rights of Survivorship ______________________________
Signature of Purchaser
_____ tenants in the Entirety
------------------------------
Signature of Joint Purchaser
_____ corporation (an officer must sign)
------------------------------
Address of Purchaser
_____ partnership (all general Partners
must sign).
_____ limited liability company
Accepted as of _________ ___, 2004
VISEON, INC.
---------------------------
By: Xxxx Xxxxxx, President
--------
1 The term "knowledge" when used herein in reference to any representation or
warranty of the Company shall mean (a) with respect to the period commencing on
February 23, 2001 through the Closing "actual knowledge or knowledge that a
reasonable person would have, after conducting due diligence" and (b) with
respect to all times prior to February 23, 2001 "actual knowledge or knowledge
that a reasonable person would have relying on the veracity of all available
documentation, without conducting further due diligence."
