EX-10 9 ex10-2.htm SERIES A CONVERTIBLE PREFERRED SECURITIES PURCHASE AGREEMENT BETWEEN MEDSONIX, INC. AND DAVINCI-FRANKLIN FUND I, LLC, DATED FEBRUARY 18, 2005. SERIES A CONVERTIBLE PREFERRED SECURITIES PURCHASE AGREEMENT
SERIES A CONVERTIBLE PREFERRED
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is entered into as of February 18, 2005, by and between Medsonix, Inc, a Nevada corporation (the “Company”); and DaVinci-Franklin Fund I, LLC, a Nevada limited liability company (“DFF-I”).
WHEREAS, DFF-I has indicated a desire to purchase the Preferred Stock; and
ARTICLE I
1.1 |
1.2 |
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1.3 |
1.4 |
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce DFF-I to purchase the Purchased Shares, the Company makes the following representations and warranties, which shall be true, correct and complete in all respects on the date hereof.
2.1 |
2.2 |
2.3 |
2.4 |
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(a) |
The authorized capital stock of the Company (immediately prior to the Closing) consists of 100,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”). |
(i) There are 10,000,000 shares of Preferred Stock authorized under the Articles of Incorporation, of which 625,000 shares have been designated Series A Preferred Stock all of which will be sold pursuant to this Agreement. The rights, privileges, and preferences of the Series A Preferred Stock will be as stated in the Company’s Certificate of Designation attached hereto as Appendix A.
(b) The issued and outstanding capital stock of the Company (immediately prior to the Closing) will consist of 6,780,000 shares of Common Stock. There are no outstanding shares of Preferred Stock, and the Company has no plans to issue any Preferred Stock except as stated in this Agreement. All of the issued and outstanding shares of capital stock of the Company are, and when issued in accordance with the terms hereof, duly authorized and validly issued and fully paid and non-assessable, with no personal liability attaching to the ownership thereof. When issued in accordance with the terms hereof, the Purchased Shares will be free and clear of all Liens imposed by or through the Company, except for restrictions imposed by Federal or state securities or “blue sky” laws and except for those imposed pursuant to this Agreement. The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class or series of capital stock of the Company are as set forth in the certified Articles of Incorporation of the Company delivered under Section 5.6 hereof.
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(c) |
Unless otherwise noted in Schedule 2.4, there is (i) no subscription, warrant, option, convertible security or other right (contingent or otherwise) issued by the Company to purchase or acquire any shares of capital stock of the Company, (ii) there is not any commitment of the Company to issue any subscription, warrant, option, convertible security or other such right or to issue or distribute to holders of any shares of its capital stock any evidences of indebtedness or assets of the Company, (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof and (iv) there are no agreements, written or oral, between the Company and any holder of its capital stock relating to the acquisition, disposition or voting of the capital stock of the Company. |
No person or entity is entitled to (i) any preemptive right, right of first refusal or similar rights granted by the Company with respect to the issuance of any capital stock of the Company. No person or entity has been granted rights by the Company with respect to the registration of any capital stock of the Company under the Securities Act of 1933, as amended (the “Securities Act”). All of the issued and outstanding shares of the Company’s capital stock have been offered, issued and sold by the Company in compliance with applicable Federal and state securities laws.
2.5 |
2.6 |
2.7 |
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(a) |
The Company has made available to DFF-I true and complete copies of all financial documents, including financial statements (the “Financial Documents”). As of their respective dates, none of the Financial Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
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(b) |
Except as and to the extent expressly set forth in the Balance Sheet, or the notes, schedules or exhibits thereto, or as disclosed in the Financial Documents, (i) as of December 31, 2004, the Company did not have any material liabilities or obligations (whether absolute, contingent, accrued or otherwise) that would be required to be included on a balance sheet or in the notes, schedules or exhibits thereto prepared in accordance with GAAP and (ii) since December 31, 2004, excluding the financing between the Company and DFF-I, the Company has not incurred any such material liabilities or obligations other than in the ordinary course of business and which do not exceed $10,000 in the aggregate. |
2.8 |
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(a) |
any change or agreement to change the general character or nature of the business of the Company; |
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(b) |
any purchase, sale, transfer, assignment, conveyance or pledge of the assets or properties of the Company, except in the ordinary course of business; |
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(c) |
any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; |
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(d) |
any waiver or modification by the Company of any right or rights of substantial value, or any payment, direct or indirect, in satisfaction of any liability, in each case, having a Material Adverse Effect; |
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(e) |
any damage, destruction or loss, whether or not covered by insurance, which has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. |
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(f) |
any liability, contract, agreement, license, loan, advance, capital expenditure or other commitment entered into or assumed by or on behalf of the Company relating to the business, assets or properties of the Company, whether oral or written, except in the ordinary course of business or which would individually or in the aggregate not have a Material Adverse Effect; |
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(g) |
any change in the accounting principles, methods, practices or procedures followed by the Company in connection with the business of the Company or any change in the depreciation or amortization policies or rates theretofore adopted by the Company in connection with the business of the Company; |
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(h) |
any declaration or payment of any dividends, or other distributions in respect of the outstanding shares of capital stock of the Company or any other change in authorized capitalization of the Company, except as contemplated by this Agreement; |
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(i) |
any grant or award of any options, warrants, conversion rights or other rights to acquire any shares of capital stock of the Company, except as contemplated by this Agreement or except pursuant to employee benefit plans, programs or arrangements in existence on the date hereof, in the ordinary course of business consistent with past practice; any adoption, or amendment in any material respect, by the Company of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, change of control, retention, disability, death benefit, hospitalization, medical, or other plan, arrangement, or understanding (whether or not legally binding) providing benefits to any current or former employee, officer, or director of the Company (collectively, “Benefit Plans”); |
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(j) |
any granting by the Company to any employee earning in excess of $10,000 per year of any increase in compensation, severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of the date of the most recent financial statements or otherwise in the ordinary course of business; or |
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(k) |
entering into any commitment (contingent or otherwise) to do any of the foregoing. |
2.9 |
2.10 |
2.11 |
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(a) |
The Company is in compliance with all of the provisions of this Agreement and its charter and by-laws (or comparable organizational instruments with different names), and, in all material respects with the provisions of each mortgage, indenture, lease, license, other agreement or instrument, and each judgment, decree, judicial order, statute, and regulation (whether issued under domestic, foreign or international law) by which it is bound or to which it or any of its respective properties are subject. |
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(b) |
Assuming the representations of DFF-I set forth in Section 4.1 hereof are true and correct, neither the execution, delivery or performance by the Company of this Agreement and the Related Agreements, nor the offer, issuance, sale or delivery of the Purchased Shares, with or without the giving of notice or passage of time, or both, will violate, or result in any breach of, or constitute a default under, or result in the imposition of any encumbrance upon any asset of the Company pursuant to any provision of the Company’s charter or by-laws (or comparable organizational instruments with different names), or any statute, rule or regulation, contract, lease, judgment, decree or other document or instrument by which the Company is bound or to which the Company or any of its properties is subject, or, to the knowledge of the Company, will cause the Company to lose the benefit of any right or privilege it presently enjoys or, to the knowledge of the Company, cause any Person who is expected to normally do business with the Company to discontinue to do so on the same basis. |
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(c) |
The Company is not in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. |
2.12 |
2.13 |
INTELLECTUAL PROPERTY; PROPRIETARY RIGHTS; EMPLOYEE RESTRICTIONS. |
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(a) |
For purposes of this Agreement, “Intellectual Property Rights” shall mean all registered copyrights, copyright registrations and copyright applications, trademark registrations and applications for registration, patents and patent applications, trademarks, service marks, trade names and Internet domain names that are used by the Company in the Company’s business as presently conducted, together with all other intellectual property rights owned by the Company and used in connection with its business and (i) all licenses, assignments and releases of intellectual property rights of others in material works embodied in the Company’s products, (ii) any and all intellectual property rights, licenses, databases, computer programs and other computer software user interfaces, know-how, trade secrets, customer lists, proprietary technology, processes and formulae, source code, object code, algorithms, architecture, structure, display screens, layouts, development tools, instructions, templates and marketing materials created by or on behalf of the Company, and (iii) inventions, trade dress, logos and designs created by or on behalf of the Company. All Intellectual Property Rights purported to be owned by the Company which were developed, worked on or otherwise held by any employee, officer, consultant or otherwise are owned free and clear by the Company by operation of law or have been validly assigned to the Company. All licenses, assignments, and releases of Intellectual Property Rights are valid and binding agreements of the Company and, to the Company’s knowledge, of the other parties thereto, enforceable in accordance with their terms. All services provided to the Company by non-employees in respect of the creation, modification or improvement of any Intellectual Property Rights of the Company (including, without limitation, software, hardware, copyrightable works and the like) have been performed pursuant to agreements with the Company and, to the Company’s knowledge, of the other parties thereto, enforceable in accordance with its terms. The Intellectual Property Rights are sufficient in all material respects to carry on the business of the Company as presently conducted. The Company has ownership of or license to use all Intellectual Property Rights as owned or licensed by the Company or has obtained any licenses, releases or assignments reasonably necessary to use all third parties’ Intellectual Property Rights in works embodied in the Company’s products. The present business activities or products of the Company does not infringe any Intellectual Property Rights of others, except in those instances in which such infringement would not result in a Material Adverse Effect. The Company has not received any written notice or other claim from any person asserting that any of the Company’s present activities infringe in any material respect any Intellectual Property Rights of such person. |
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(b) |
The Company has all franchises, permits, licenses and other rights and privileges required to permit it to own its property and to conduct its business as it is presently conducted other than franchises, permits, licenses and other rights and privileges which if not held by the Company would not have a Material Adverse Effect or result in a fine or penalty in excess of $5,000 individually or in the aggregate. |
2.14 |
2.15 |
2.16 |
2.17 |
2.18 |
2.19 |
2.20 |
2.21 |
2.22 |
2.23 |
2.24 |
ARTICLE III
Without limiting any other covenants and provisions hereof, covenants and provisions of the Investor Rights Agreement or as may be otherwise set forth below, the Company covenants and agrees that it will observe the following covenants on and after the date hereof and for so long as DFF-I holds any shares of Preferred or Common Stock:
3.1 |
3.2 |
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(a) |
So long as DFF-I owns at least 10% of the Preferred Stock issued under this Agreement between the two parties, DFF-I voting as a class will have the ability to elect the minority of the directors (“Preferred Directors”) to the Company’s Board of Directors. The remaining directors will be elected by the common stock voting as a class (“Common Directors”). In the event of any default in the Preferred voting rights, the Preferred Stock owned by DFF-I will continue to designate the Preferred Directors and in addition, participate in electing the Common Directors, which will be determined with the Preferred Stock having 80 votes per share owned and then voting with the Common Stock as a class. |
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(b) |
A vacancy in the Preferred Directors to be elected by DFF-I shall be filled only by a nominee of DFF-I who must be appointed by the Board of Directors in accordance with the By-laws of the Company. As long as DFF-I owns shares of Preferred Stock or not less than 2% of the shares of Common Stock issued upon conversion thereof, a DFF-I Representative shall be invited to attend in person or by telephone conference call any and all meetings of the Board of Directors and all committees thereof in a nonvoting observer capacity. In addition, the Company will provide such representative copies of all notices, minutes, consents and other material that it provides to its directors, provided however, that such representatives will agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided. |
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(c) |
All board meetings shall be conducted in the State of Nevada at the Company’s corporate offices or other approved location. |
3.3 |
3.4 |
ARTICLE IV
4.1 |
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(a) |
DFF-I is an “Accredited Investor” as that term is defined in Rule 501(a) of Regulation D promulgated under the Act; |
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(b) |
DFF-I is duly authorized to execute this Agreement and the Related Agreements, and assuming due execution and delivery by the Company of the Agreement and the Related Agreements, this Agreement and the Related Agreements to which DFF-I is a party constitute legal, valid and binding obligations of DFF-I, enforceable against DFF-I in accordance with their respective terms; |
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(c) |
DFF-I has been advised by the Company that the Purchased Shares have not been registered under the Act, that the Purchased Shares will be issued on the basis of the statutory exemption provided by Section 4(2) of the Act or Regulation D promulgated thereunder, or both, relating to transactions by an issuer not involving any public offering and under similar exemptions under certain state securities laws, that this transaction has not been reviewed by, passed on or submitted to any federal or state agency or self-regulatory organization where an exemption is being relied upon, and that the Company’s reliance thereon is based in part upon the representations made by DFF-I in this Agreement and the Related Agreements. DFF-I acknowledges that it has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities; |
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(d) |
DFF-I is purchasing the Purchased Shares for investment purposes, for its own account and not with a view to, or for sale in connection with, any distribution thereof in violation of federal or state securities laws; |
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(e) |
By reason of its business or financial experience, DFF-I has the capacity to protect its own interest in connection with the transactions contemplated hereunder; and |
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(f) |
No person has or will have, as a result of the transaction contemplated by this Agreement, any right, interest or claim against or upon DFF-I, or the Company for any commission, fee or other compensation as a finder or broker because of any act or omission by DFF-I. |
4.2 |
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF A CURRENT AND EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT WITH RESPECT TO SUCH SHARES, OR AN OPINION SATISFACTORY TO THE ISSUER AND ITS COUNSEL TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
ARTICLE V
CONDITIONS OF DFF-I’S OBLIGATION
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5.2 |
5.3 |
5.4 |
5.5 |
5.6 |
5.7 |
5.8 |
ARTICLE VI
CONDITIONS OF THE COMPANY’S OBLIGATION
6.1 |
6.2 |
6.3 |
6.4 |
ARTICLE VII
7.1 |
7.2 |
7.3 |
7.4 |
7.5 |
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The Company: |
Medsonix, Inc. |
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0000 Xxxxx Xxxxxxx Xxxx., Xxxxx 000 | |
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Xxx Xxxxx, Xxxxxx 00000 | |
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Attention: Xxxxxxxx Xxxxxxx | |
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Tel: |
(000) 000-0000 |
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Fax: |
(000) 000-0000 |
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E-mail:XxXxxxxxx@xxx.xxx |
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with a copy to: |
Xxxxxxxxxx Law Group | |
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000 Xxxx Xxxxxxxx, Xxxxx 000 | ||
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Xxx Xxxxx, Xxxxxxxxxx 00000 | ||
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Attention: Xxxxxx X. Xxxxxxxxxx | ||
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Tel: |
(000) |
000-0000 |
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Fax: |
(000) |
000-0000 |
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E-mail: |
xxx@xxxxxxxxx.xxx |
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DFF-I: |
DaVinci-Franklin Fund I, LLC | |
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000 Xxxx Xxxx Xxxxxxx Xx., Xxxxx 000 | ||
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Xxx Xxxxx, Xxxxxx 00000 | ||
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Attention: Xxxxxxx X. XxXxxx | ||
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Tel: |
(000) |
000-0000 |
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Fax: |
(000) |
000-0000 |
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E-Mail:xxx@xxxxxxxxxxxxxxx.xxx |
All such notices, request, demands, consents and other communications shall be deemed to have been duly given or sent seven (7) days following the date on which mailed, or on the date on which delivered by hand, by facsimile transmission or e-mail (receipt confirmed), as the case may be, and addressed as aforesaid.
7.6 |
7.7 |
7.8 |
7.9 |
GOVERNING LAW. The parties hereby agree that this Agreement, and the respective rights, duties and obligations of the parties hereunder, shall be governed by and construed in accordance with the laws of the State of Nevada, without giving effect to principles of conflicts of law thereunder. Each of the parties hereby (i) irrevocably consents and agrees that any legal or equitable action or proceeding arising under or in connection with this Agreement shall be brought exclusively in the Federal or state courts sitting in Nevada and any court to which an appeal may be taken in any such litigation, and (ii) by execution and delivery of this Agreement, irrevocably submits to and accepts, with respect to any such action or proceeding, for itself and in respect of its properties and assets, generally and unconditionally, the jurisdiction of the aforesaid courts, and irrevocably waives any and all rights such party may now or hereafter have to object to such jurisdiction. |
In the event that any provision of this agreement or any related agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this agreement or any related agreement.
7.10 |
7.11 |
7.12 |
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THE COMPANY: |
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Medsonix, Inc., |
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a Nevada corporation |
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By:/s/ Xxxxxxxx Xxxxxxx | ||
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Xxxxxxxx Xxxxxxx, President |
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DFF-I:
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DaVinci-Franklin Fund I, LLC |
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By:/s/ Xxxxxxx X. XxXxxx | ||
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Xxxxxxx X. XxXxxx, President |
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APPENDIX A
CERTIFICATE OF DESIGNATION