Exhibit 10.1
SERIES A 8% CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), is made and entered
into by and among Integrated Information Systems, Inc., a Delaware corporation
(the "Company"), and the purchasers named on the attached Schedule A, as the
same may be supplemented from time to time (collectively the "Purchasers" and
each individually a "Purchaser"). With respect to the initial purchase and sale
of Shares hereunder, the effective date of this Agreement shall be February 26,
2003.
RECITALS
A. The Company wishes to issue and sell to one or more Purchasers up to
200,000 shares (the "Shares") of Series A 8% Convertible Preferred Stock par
value $0.001 per share (the "Preferred Stock"), at a per share purchase price of
$10.00.
B. Each Purchaser wishes to purchase the Shares on the terms and subject
to the conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the parties agree as follows:
1. Sale of Shares.
a. Issuance, Sale and Delivery of the Shares. Subject to the terms
and conditions hereof and in reliance upon the representations, warranties,
covenants and agreements contained herein, the Corporation hereby agrees to
issue and sell to the Purchasers, and each Purchaser hereby severally agrees to
purchase from the Corporation at a Closing (as hereinafter defined), the
aggregate number of Shares set forth opposite the name of such Purchaser under
the heading "Number of Preferred Shares" on Schedule A attached hereto. Each
Purchaser's Shares will be convertible into shares of the Company's $0.001 par
value common stock (the "Common Stock") as set forth in the Certificate of
Designation (as hereinafter defined).
b. Closing. Each sale and purchase of any Shares shall take place at
a closing (each, a "Closing") at the Company's offices in Tempe, Arizona at such
date and time as may be mutually agreed upon by the Company and the Purchasers,
with the first Closing to take place on February 20, 2003 at 10:00 a.m.;
provided, however, that the obligations of the Purchasers hereunder are subject
to:
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(i) The Corporation's filing of a Certificate of Designation
with respect to the Preferred Stock in form and substance reasonably
satisfactory to the Purchasers (the "Certificate of Designation"); and
(ii) The Corporation shall have executed and delivered to the
Purchasers a Registration Rights Agreement, in form and substance reasonably
satisfactory to the Purchasers (the "Registration Rights Agreement").
c. Deliveries at Closing. Upon a purchase of Shares at a Closing,
the Corporation shall issue and deliver to each Purchaser a stock certificate
evidencing the Shares purchased at the Closing. As payment in full for the
Shares being purchased by it at the Closing, and against delivery of the
certificates for the Shares, each Purchaser shall deliver to the Corporation, by
official check or wire transfer, the "Aggregate Subscription Price" amount set
forth opposite the Purchaser's name on Schedule A.
2. Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants to each Purchaser as follows:
a. Organization and Corporate Power. The Corporation is duly
incorporated and in good standing under the laws of the State of Delaware and
has all requisite corporate power and corporate authority for the ownership and
operations of its properties and for the carrying on of its business as now
conducted. The Corporation has all requisite corporate power and corporate
authority to execute and deliver this Agreement, to perform all its obligations
hereunder, to issue, sell and deliver the Shares, and to issue and deliver the
shares of Common Stock issuable upon conversion of the Shares (the "Conversion
Shares").
b. Authorization of Agreements and Validity.
(i) The execution and delivery by the Corporation of this
Agreement, the performance by the Corporation of its obligations hereunder, the
issuance, sale and delivery of the Shares and the issuance and delivery of the
Conversion Shares shall, prior to the Closing, be duly authorized by all
requisite corporate action and will not (x) violate (i) any provision of any
applicable law, or any order of any court or other agency of government
applicable to the Corporation, (ii) the Certificate of Incorporation, as
amended, or Bylaws of the Corporation, or (iii) any provision of any material
agreement or other instrument to which the Corporation is bound, or (y) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such material agreement or other instrument.
(ii) This Agreement has been duly executed and delivered by
the Corporation and constitutes a legal, valid and binding obligation of the
Corporation, enforceable in accordance with its terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally.
(iii) Prior to the Closing, the Shares will be duly
authorized, and when issued, sold and delivered in accordance with this
Agreement for the consideration expressed
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herein, will be validly issued, fully paid and nonassessable shares with no
personal liability attaching to the ownership thereof and will be free and clear
of all liens, charges and encumbrances of any nature whatsoever except for
restrictions on transfer under applicable Federal and state securities laws.
(iv) Prior to the Closing, the Conversion Shares will be duly
reserved for issuance upon conversion of the Shares, and, when so issued, will
be duly authorized, validly issued, fully paid and nonassessable shares with no
personal liability attaching to the ownership thereof and will be free and clear
of all liens, charges and encumbrances of any nature whatsoever except for
restrictions on transfer under applicable Federal and state securities laws.
(v) Neither the issuance, sale or delivery of the Shares nor
the issuance or delivery of the Conversion Shares is subject to any preemptive
right of shareholders of the Corporation, or to any right of first refusal or
other right in favor of any person.
c. Authorized Capital Stock. The authorized capital stock of the
Corporation consists of (i) 5,000,000 shares of preferred stock, $0.001 par
value, none of which are issued or outstanding, and (ii) 100,000,000 shares of
Common Stock, of which 3,480,151 shares were issued and outstanding as of
December 31, 2002. All issued and outstanding shares of Common Stock of the
Corporation are authorized and validly issued, and are fully paid and
nonassessable.
d. SEC Reports and Financial Statements. The Corporation has filed
with the Securities and Exchange Commission ("SEC"), and has heretofore made
available to the Purchasers, true and complete copies of, all forms, reports,
schedules, statements and other documents required to be filed by the
Corporation under the Securities Exchange Act of 1934 (the "Exchange Act") (such
forms, reports, schedules, statements and other documents, including any
financial statements or schedules included herein, are referred to as the
"Corporation SEC Documents"). The Corporation SEC Documents, at the time filed,
(a) did not contain any untrue statement of a material fact or omit 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, and (b) complied in all material respects with the applicable
requirements of the Exchange Act, and the applicable rules and regulations of
the SEC thereunder. The financial statements of the Corporation included in the
Corporation SEC Documents complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Rule 10-01 of Regulation S-X promulgated
by the SEC) and fairly present (subject, in the case of the unaudited
statements, to normal, recurring audit adjustments, none of which will be
material) the consolidated financial position of the Corporation and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
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3. Representations and Warranties of the Purchasers. Each Purchaser
severally represents and warrants to the Corporation that:
a. the Purchaser is an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act");
b. the Purchaser has sufficient knowledge and experience in
investing in companies similar to the Corporation so as to be able to evaluate
the risks and merits of its investment in the Corporation and it is able
financially to bear the risks thereof;
c. the Shares and Conversion Shares being purchased by the Purchaser
are being acquired for the Purchaser's own account for the purpose of
investment;
d. the Purchaser understands that (i) the Shares and the Conversion
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 506 promulgated under
the Securities Act, (ii) the Shares and the Conversion Shares must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (iii) the Shares and the
Conversion Shares will bear a legend to such effect, and (iv) the Corporation
will make a notation on its transfer books to such effect;
e. no person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or valid claim against or
upon the Corporation for any commission, fee or other compensation as a finder
or broker because of any act or omission of such Purchaser or any agent for the
Purchaser;
f. the Purchaser has the power and authority to enter into and to
perform this Agreement in accordance with its terms;
g. the execution of, and performance of the transactions
contemplated by, this Agreement is not in conflict with or will not result in
any material breach of any terms, conditions or provisions of, or constitute a
material default under, its charter (if any) or any material agreement or other
instrument to which the Purchaser is a party;
h. the Purchaser understands the risks involved in the purchase of
the Shares and Conversion Shares, including those "Factors That May Affect
Future Results and Our Stock Price" described in the Corporation's Annual Report
on Form 10-K for the year ended December 31, 2001 and the Corporation's
Quarterly Report on Form 10-Q for the period ended September 30, 2002; and
i. the Purchaser has carefully reviewed the representations
concerning the Corporation contained in this Agreement, and to the extent
desired by the Purchaser, has made inquiry regarding the Corporation, its
business, prospects and personnel.
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4. Covenants.
a. Reservation of Conversion Shares. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Shares, such
number of its duly authorized shares of Common Stock as shall be sufficient to
effect the conversion of the Shares from time to time outstanding. If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of the Shares, the Corporation will
forthwith take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes. The Corporation will use reasonable efforts to
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Shares. Without limiting the generality of
the foregoing, in the event that the number of Conversion Shares issuable upon
conversion of the Preferred Stock would exceed 19.99% of the Common Stock issued
and outstanding at the date of the first sale of Preferred Stock, a majority in
interest of the Purchasers may request, by delivering written notice to the
Corporation, that the Corporation call a special meeting of its stockholders to
approve the Corporation's issuance of the full number of Conversion Shares in
order that such issuance will comply with Marketplace Rule 4350(i) of The Nasdaq
Stock Market. Upon receipt of such request, the Corporation agrees to promptly
call such special meeting of its stockholders, and in connection therewith, to
promptly file a preliminary proxy statement with the Securities and Exchange
Commission and otherwise use all reasonable commercial efforts to obtain such
stockholder approval; provided, however, that the Purchasers shall not be
entitled to deliver a call for such a meeting for a period of one year after the
initial sale of Shares under this Agreement and that previously issued
Conversion Shares shall not be eligible to vote on the proposal.
b. Registration Rights. The Corporation and the Purchasers shall
promptly negotiate in good faith, execute and deliver a registration rights
agreement in order to provide the Purchasers with "piggyback" registration
rights with respect to the sale of the Conversion Shares in two registrations,
with the Corporation paying the costs of the Purchasers for such registrations.
c. Further Assurances. Prior to and following the Closing, the
Corporation and the Purchasers shall execute and deliver such documents, and
take such other action, as shall be reasonably requested by any other party
hereto to carry out the transactions contemplated by this Agreement.
5. Miscellaneous.
a. Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby.
b. Brokerage. Each party hereto will indemnify and hold harmless the
others against and in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements,
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arrangements or understandings made or claimed to have been made by such party
with any third party.
c. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona for all purposes and in all
respects, without regard to the conflict of law provisions of such state.
d. Entire Agreement. This Agreement, the Registration Rights
Agreement and the Certificate of Designation constitute the sole and entire
agreement of the parties with respect to the subject matter hereof. Any exhibits
or schedules hereto or thereto are hereby incorporated herein by reference.
e. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute the same instrument. The Purchasers acknowledge that the Corporation
intends to offer shares of the Preferred Stock in a "minimum - maximum" private
placement, with a minimum of $200,000 and a maximum of $2,000,000 and that the
Corporation may take the purchase price directly into its operating accounts,
rather than placing funds in escrow, once the minimum has been satisfied. After
the first Closing, a Purchaser shall join in this Agreement by executing a
signature page hereto, will be deemed to have joined in this Agreement only as
of the date such signature page was executed, and such Purchaser shall deliver
the purchase price funds against delivery of the purchased Shares at a Closing
held in the manner set forth in Section 1.b, above. With each subsequent
purchase, the Corporation shall amend Schedule A and send the amended schedule
to each of the previous Purchasers.
f. Amendments and Waivers. This Agreement may be amended or
modified, and provisions hereof may be waived, with the written consent of the
Corporation and the Purchasers.
g. Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
IN WITNESS WHEREOF, the Corporation and the Purchasers have executed this
Stock Purchase Agreement as of the date first above written.
Corporation:
Integrated Information Systems, Inc.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President,
Chief Financial Officer
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SIGNATURE PAGE
TO
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
INTEGRATED INFORMATION SYSTEMS, INC.
AND
THE PURCHASERS NAMED THEREIN
Purchaser:
/s/ Xxxxx X. Xxxxxx, Xx.
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SCHEDULE A
TO
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
INTEGRATED INFORMATION SYSTEMS, INC.
AND
THE PURCHASERS NAMED THEREIN
Number of Preferred Aggregate
Purchaser Shares Subscription Price
Xxxxx X. Xxxxxx, Xx. 20,000 $200,000
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