FONIX SPEECH, INC. SECURITIES PURCHASE AGREEMENT
FONIX
SPEECH, INC.
THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of April 4, 2007, is
entered into by and among Fonix Speech, Inc., a Delaware corporation (the
"Company"), Fonix Corporation, a Delaware corporation (the “Parent”) and
Sovereign Partners, LP (the “Purchaser”). In consideration of the mutual
promises and covenants contained in this Agreement, the parties hereto agree
as
follows:
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1.
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Authorization;
Sale of Shares.
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1.1
Authorization.
The
Company has, or before the Closing (as defined in Section 2) will have, duly
authorized the sale and issuance in this offering, pursuant to the terms
of this
Agreement, a minimum of one thousand (1,000) shares of the Company’s Series B
Convertible Preferred Stock (the “Shares”),
having
those rights and preferences as set forth in Exhibit A hereto.
1.2
Sale
of Shares.
Subject
to the terms and conditions of this Agreement, at the Closing (as defined
in
Section 2.2), the Company will sell and issue to the Purchaser, and the
Purchaser will purchase, 125 Shares for the purchase price of $10,000 per
share (the "Purchase Price"), with an aggregate purchase price of $1,250,000
(the “Aggregate Purchase Price”).
1.3
Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Shares for product
development and other general corporate purposes.
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2.
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Closing.
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2.1
The
Closing.
Subject
to the terms and conditions of this Agreement, the closing (the "Closing")
of
the sale and purchase of the Securities under this Agreement shall take place
on
the date of this Agreement (the " Closing Date"). At the Closing:
(a)
The
Company shall deliver to the Purchaser a certificate, as of the most recent
practicable dates, as to the corporate good standing of the Company issued
by
the Secretary of State of the State of Delaware;
(b)
The
Company shall deliver to the Purchaser a copy of the Articles of Incorporation
of the Company;
(c)
The
Company shall deliver to the Purchaser a resolution of the Board of Directors
of
the Company, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby;
(d)
The
Company shall deliver to the Purchaser a certificate for the Shares registered
in the name of such Purchaser;
(e)
The
Purchaser shall pay the Aggregate Purchase Price as follows:
(i)
The
Purchaser shall pay the amount of $800,000 to the Company, by wire transfer
of
immediately available funds, for the Shares being purchased.
(ii) Additionally,
the Purchaser shall pay the amount of $450,000 to the Parent, by wire transfer
of immediately available funds, as consideration for the Parent’s agreement to
issue shares of its Common Stock upon conversion of the Shares by the
Purchaser.
(iii) The
Closing shall not be deemed to occur, and all such payments by the Purchaser
shall be deemed to be held in escrow, until the Purchaser shall have tendered
to
the Company the payments of the Aggregate Purchase Price as set forth
above.
3. Representations
of the Company.
The
Company hereby represents and warrants to the Purchaser that the statements
contained in this Section 3 are complete and accurate as of the date of this
Agreement.
3.1
Organization
and Standing.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to conduct its business as presently conducted and as proposed
to be
conducted by it and to enter into and perform this Agreement and all other
agreements required to be executed by the Company at or prior to the Closing
pursuant to Section 2 (the "Ancillary Agreements") and to carry out the
transactions contemplated by this Agreement and the Ancillary
Agreements.
3.2
Subsidiaries,
Etc.
The
Company has no subsidiaries and does not own or control, directly or indirectly,
any shares of capital stock of any other corporation or any interest in any
partnership, limited liability company, joint venture or other non-corporate
business enterprise.
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3.3
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Capitalization.
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(a)
The
authorized capital stock of the Company (immediately prior to the Closing)
consists of (i) 10,000,000 shares of Common Stock, $0.0001 par value per
share,
of which, as of April 3, 2007, 11,000 shares are issued and outstanding and
no
shares are held in the treasury of the Company, and (ii) 1,000,000 shares
of
Preferred Stock, $0.0001 par value per share, of which 0 shares are issued.
All
issued and outstanding capital stock of the Company is fully paid and
nonassessable and has been issued in compliance with all federal and state
securities laws.
(b)
Except
as
set forth in this Section 3.3, (i) no subscription, warrant, option, convertible
security or other right (contingent or otherwise) to purchase or acquire
any
shares of capital stock of the Company is authorized or outstanding, and
there
are no statutory or contractual stockholders’ preemptive rights or rights of
refusal with respect to the issuance of the Shares, (ii) the Company has
no
obligation (contingent or otherwise) 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 to make any other distribution
in
respect thereof, and (iv) there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the
Company.
3.4
Issuance
of Shares.
The
issuance, sale and delivery of the Shares in accordance with this Agreement,
have been, or will be on or prior to the Closing, duly authorized by all
necessary corporate action on the part of the Company, and all such shares
have
been reserved for issuance by the Board of Directors. The Shares when so
issued,
sold and delivered against payment therefor in accordance with the provisions
of
this Agreement, when issued upon such conversion, will be duly and validly
issued, fully paid and nonassessable, and free of restrictions on transfer
other
than restrictions imposed or created under this Agreement or the Ancillary
Agreements, restrictions required as necessary to qualify this offering as
exempt from the registration requirements of the Securities Act of 1933,
as
amended (together with the rules and regulations thereunder, the “Securities
Act”) or any other applicable law, or by the Purchaser.
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3.5
Authority
for Agreement; No Conflict.
The
execution, delivery and performance by the Company of this Agreement and
the
Ancillary Agreements, and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement has been, and the Ancillary Agreements when
executed at the Closing will be, duly executed and delivered by the Company
and
constitute valid and binding obligations of the Company enforceable in
accordance with their respective terms. The execution and delivery of this
Agreement and the Ancillary Agreements, the consummation of the transactions
contemplated hereby and thereby and the compliance with their respective
provisions by the Company will not (a) conflict with or violate any provision
of
the Articles of Incorporation or By-laws of the Company, (b) conflict with,
result in a breach of, constitute (with or without due notice or lapse of
time
or both) a default under, result in the acceleration of obligations under,
create in any party the right to accelerate, terminate, modify or cancel,
or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage
for
borrowed money, instrument of indebtedness, Security Interest (as defined
below)
or other arrangement to which the Company is a party or by which the Company
is
bound or to which its assets are subject, (c) result in the imposition of
any
Security Interest upon any assets of the Company or (d) violate any order,
writ,
injunction, decree, statute, rule or regulation applicable to the Company
or any
of its properties or assets. For purposes of this Agreement, "Security Interest"
means any mortgage, pledge, security interest, encumbrance, charge or other
lien
(whether arising by contract or by operation of law).
3.6
Governmental
Consents.
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any local, state, federal or foreign
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (each of the foregoing is
hereafter referred to as a "Governmental Entity") is required on the part
of the
Company in connection with the offer, issuance, sale and delivery of the
Shares,
the issuance and delivery of the shares of Common Stock issuable upon conversion
of the Shares or the other transactions to be consummated at the Closing,
as
contemplated by this Agreement and the Ancillary Agreements, except such
filings
as shall have been made prior to and shall be effective on and as of the
Closing
and such filings required to be made after the Closing under applicable federal
and state securities laws.
3.7
Litigation.
There
is no action, suit or proceeding, or governmental inquiry or investigation,
pending, or, to the best of the Company’s knowledge, any basis therefor or
threat thereof, against the Company, which (a) questions the validity of
this
Agreement, the Ancillary Agreements or the right of the Company to enter
into
any such agreements or (b) might result, either individually or in the
aggregate, in a Company Material Adverse Effect. The
Company is not a party to or subject to the provisions of any injunction,
judgment, decree or order of any Government Entity.
3.8
Financial
Statements.
The
Company has made available to the Purchaser a complete and accurate copy
of (a)
the unaudited balance sheet of the Company at September 30, 2004, 2005 and
2006
and the related unaudited statements of operations.
3.9
Property
and Assets.
The
Company has good and marketable title to, or a valid leasehold interest in,
all
of its material properties and assets, including all properties and assets
reflected in the Balance Sheet.
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3.10
Compliance.
The
Company has complied with all laws, regulations and orders applicable to
its
present and proposed business and has all permits and licenses required thereby,
except to the extent such a violation could not reasonably be expected to
result
in or have a Company Material Adverse Effect. There is no term or provision
of
any mortgage, indenture, contract, agreement or instrument to which the Company
is a party or by which it is bound, or, to the best of the Company’s knowledge,
of any provision of any judgment, decree, order, statute, rule or regulation
of
any Government Entity applicable to or binding upon the Company, which has
or
could reasonably be expected to result in or have a Company Material Adverse
Effect. To the best of the Company’s knowledge, none of the employees of the
Company is in violation of any term of any contract or covenant (either with
the
Company or with another entity) relating to employment, patents, assignment
of
inventions, proprietary information disclosure, non-competition or
non-solicitation.
3.11
Non-Public
Information.
The
Company has not disclosed to the Purchaser information that would constitute
material non-public information as of the Closing.
4. Representations
of the Purchaser.
The
Purchaser represents and warrants to the Company as follows:
4.1
Investment.
The
Purchaser is acquiring the Shares for its own account for investment and
not
with a view to, or for sale in connection with, any distribution thereof,
nor
with any present intention of distributing or selling the same; and, except
as
contemplated by this Agreement, and the Exhibits hereto, the Purchaser has
no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof.
4.2
Accredited
Investor.
The
Purchaser is an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
4.3
Authority.
The
Purchaser has full power and authority to enter into and to perform this
Agreement and the Ancillary Agreements in accordance with their terms. If
the
Purchaser is a corporation, limited liability company, partnership or trust
represents that it has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company.
4.4
Disclosure
and Experience.
Such
Purchaser has carefully read and reviewed the information, representations,
and
risks concerning the Company contained in this Agreement, any Ancillary
Agreement, and any exhibits or schedules thereto or documents incorporated
by
reference therein. The officers of the Company have made available to such
Purchaser any and all written information which he, she or it has requested
and
have answered to such Purchaser’s satisfaction all inquiries made by such
Purchaser; and such Purchaser has sufficient knowledge and experience in
finance
and business that he, she or it is capable of evaluating the risks and merits
of
his, her or its investment in the Company and such Purchaser is able financially
to bear the risks thereof.
4.5
No
Outside Representations.
The
Purchaser acknowledges that it is not relying upon statements or representations
by any person, firm or corporation, other than the Company, in making its
decision to invest in the Company.
4.6
Risk
Factors.
The
Purchaser agrees and acknowledges that it has been informed about and fully
understands that there are risks associated with an investment in the Company.
Additionally, the Purchaser agrees and acknowledges that the Company is not
a
publicly-traded company, and that the Shares are not and will not be registered
with any exchange or trading facility.
4.7
Sole
Party in Interest.
The
Purchaser represents and warrants that it is the sole and true party in interest
with respect to the Shares being issued to it.
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4.8
Investment
Purpose.
The
Purchaser represents and warrants that it is acquiring the Shares for its
own
account, for investment purposes, and not for the account or benefit of any
other person or entity or for or with a view to resale or distribution thereof,
and it has no present intention to effect any distribution of the Shares,
provided that the disposition of the Shares owned by such Purchaser shall
at all
times be and remain within its control, subject to the provisions of this
Agreement and the Ancillary Agreements.
4.9
Knowledge
and Experience.
The
Purchaser is experienced in evaluating and making speculative investments,
and
has such knowledge and experience in financial and business matters that
it is
capable of evaluating the merits and risks of its investment in the Company.
The
Purchaser understands that an investment in the Company is speculative and
has
concluded that its proposed investment is appropriate in light of its overall
investment objectives and financial situation.
4.10
Disclosure;
Access to Information.
The
Purchaser has received, read and understands this Agreement; that all documents,
records, books and other information pertaining to its investment in the
Company
requested by it have been made available for inspection and copying and there
are no additional materials or documents that have been requested by it that
have not been made available by or on behalf of the Company.
4.11
Accuracy
of Representations and Information.
All
representations made by the Purchaser in this Agreement, and all information
provided by it to the Company concerning it, are correct and complete in
all
material respects as of the date hereof, and further that if there is any
material change in such information before the Closing Date and the issuance
of
the Shares, it promptly will provide such information to the
Company.
4.12
Tax
Matters.
The
Purchaser represents and warrants that it has reviewed and understands the
U.S.
federal and any applicable state income tax aspects of its purchase of the
Shares, and has received such advice in this regard as it deems necessary
from
qualified sources such as attorneys, tax advisors or accountants, and is
not
relying on any representative or employee of the Company for such
advice.
4.13
Manner
of Sale.
The
Purchaser represents and warrants that at no time was such Purchaser presented
with or solicited by or through any leaflet, public promotional meeting,
television advertisement or any other form of general solicitation or
advertising.
4.14
Liquidity.
The
Purchaser presently has sufficient liquid assets to pay the Purchase Price
for
all Shares to be purchased by it hereunder, has adequate means of providing
for
its current needs and contingencies and has no need for liquidity in its
investment in the Company or for a source of income from the Company and
is
capable of bearing the economic risk and the burden of the investment
contemplated by this Agreement including, but not limited to, the possibility
of
the complete loss of the value of the Shares and the limited transferability
of
the Shares, which may make the liquidation of the Shares impossible in the
near
future.
4.15
Absence
of Conflicts.
Neither
the execution and delivery of this Agreement or any other agreement or
instrument to be executed in connection therewith, nor the consummation of
the
transactions contemplated thereby and compliance with the requirements thereof,
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Purchaser, or the provision of any indenture,
instrument or agreement to which it is a party or is subject, or by which
it or
any of its properties is bound, or conflict with or constitute a material
default thereunder, or result in the creation or imposition of any lien pursuant
to the terms of any such indenture, instrument or agreement, or constitute
a
breach of any fiduciary duty owed by or to it to any third party, or require
the
approval of any third party pursuant to any material contract, agreement,
instrument, relationship or legal obligation to which it is subject or to
which
any of its properties, operations or management may be subject. If the Purchaser
is, or is purchasing Shares on behalf of, a mutual fund, venture capital
fund,
investment partnership, or other entity formed for the purpose of group
investing on behalf of fund equity owners (an “Investment Fund”), the Purchaser
has made its own determination of the suitability of an investment in Shares
for
the Investment Fund and an investment in Shares satisfies all diversification,
liquidity and other requirements applicable to an investment by such Investment
Fund.
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5.
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Representations
and Warranties of Fonix Corporation.
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5.1
Organization
and Standing.
The
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to conduct its business as presently conducted and as proposed
to be
conducted by it and to enter into and perform this Agreement and all other
agreements required to be executed by the Parent at or prior to the Closing
pursuant to Section 2 (the "Ancillary Agreements") and to carry out the
transactions contemplated by this Agreement and the Ancillary
Agreements.
5.2
Capitalization.
The
authorized capital stock of the Parent (immediately prior to the Closing)
consists of (i) 5,000,000,000 shares of Common Stock, $0.0001 par value per
share, of which, as of April 3, 2007, 1,642,139,820 shares are issued and
outstanding and no shares are held in the treasury of the Parent, and (ii)
50,000,000 shares of Preferred Stock, $0.0001 par value per share, of which
168,480 shares are issued. All issued and outstanding capital stock of is
fully
paid and nonassessable and has been issued in compliance with all federal
and
state securities laws.
5.3
Issuance
of Shares.
The
issuance, sale and delivery of the shares of the Parent’s common stock upon
conversion of the Shares (the “Conversion Shares”), in accordance with this
Agreement, have been, or will be on or prior to the Closing, duly authorized
by
all necessary corporate action on the part of the Parent, and all such shares
have been reserved for issuance by the Board of Directors. The Conversion
Shares
when so issued, sold and delivered against payment therefor in accordance
with
the provisions of this Agreement, when issued upon such conversion, will
be duly
and validly issued, fully paid and nonassessable, and free of restrictions
on
transfer other than restrictions imposed or created under this Agreement
or the
Ancillary Agreements, restrictions required as necessary to qualify this
offering as exempt from the registration requirements of the Securities Act
of
1933, as amended (together with the rules and regulations thereunder, the
“Securities Act”) or any other applicable law, or by the Purchaser.
5.4
Authority
for Agreement; No Conflict.
The
execution, delivery and performance by the Parent of this Agreement and the
Ancillary Agreements, and the consummation by the Parent of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement has been, and the Ancillary Agreements when
executed at the Closing will be, duly executed and delivered by the Parent
and
constitute valid and binding obligations of the Parent enforceable in accordance
with their respective terms. The execution and delivery of this Agreement
and
the Ancillary Agreements, the consummation of the transactions contemplated
hereby and thereby and the compliance with their respective provisions by
the
Parent will not (a) conflict with or violate any provision of the Articles
of
Incorporation or By-laws of the Parent, (b) conflict with, result in a breach
of, constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any party
the
right to accelerate, terminate, modify or cancel, or require any notice,
consent
or waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below) or other arrangement to
which
Parent is a party or by which the Parent is bound or to which its assets
are
subject, (c) result in the imposition of any Security Interest upon any assets
of the Parent or (d) violate any order, writ, injunction, decree, statute,
rule
or regulation applicable to the Parent or any of its properties or assets.
For
purposes of this Agreement, "Security Interest" means any mortgage, pledge,
security interest, encumbrance, charge or other lien (whether arising by
contract or by operation of law).
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5.5
Governmental
Consents.
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any local, state, federal or foreign
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (each of the foregoing is
hereafter referred to as a "Governmental Entity") is required on the part
of the
Parent in connection with the offer, issuance, sale and delivery of the Shares,
the issuance and delivery of the shares of Common Stock issuable upon conversion
of the Shares or the other transactions to be consummated at the Closing,
as
contemplated by this Agreement and the Ancillary Agreements, except such
filings
as shall have been made prior to and shall be effective on and as of the
Closing
and such filings required to be made after the Closing under applicable federal
and state securities laws.
5.6
Litigation.
Other
than as disclosed in the Parent’s public reports filed with the U.S. Securities
and Exchange Commission (the “Public Reports”), there is no action, suit or
proceeding, or governmental inquiry or investigation, pending, or, to the
best
of the Parent’s knowledge, any basis therefor or threat thereof, against the
Parent, which (a) questions the validity of this Agreement, the Ancillary
Agreements or the right of the Parent to enter into any such agreements or
(b)
might result, either individually or in the aggregate, in a Material Adverse
Effect to the Parent. The Parent is not a party to or subject to the provisions
of any injunction, judgment, decree or order of any Government
Entity.
5.7 Financial
Statements.
The
Parent has made available to the Purchaser its Public Reports, which contain
the
Parent’s publicly available financial statements and information.
5.8 Property
and Assets.
The
Parent has good and marketable title to, or a valid leasehold interest in,
all
of its material properties and assets.
5.9 Compliance.
The
Parent has complied with all laws, regulations and orders applicable to its
present and proposed business and has all permits and licenses required thereby,
except to the extent such a violation could not reasonably be expected to
result
in or have a Material Adverse Effect on the Parent. There is no term or
provision of any mortgage, indenture, contract, agreement or instrument to
which
the Parent is a party or by which it is bound, or, to the best of the Parent’s
knowledge, of any provision of any judgment, decree, order, statute, rule
or
regulation of any Government Entity applicable to or binding upon the Parent,
which has or could reasonably be expected to result in or have a Material
Adverse Effect on the Parent. To the best of the Parent’s knowledge, none of the
employees of the Parent is in violation of any term of any contract or covenant
(either with the Parent or with another entity) relating to employment, patents,
assignment of inventions, proprietary information disclosure, non-competition
or
non-solicitation.
5.10
Non-Public
Information.
The
Parent has not disclosed to the Purchaser information that would constitute
material non-public information as of the Closing.
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6.
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Transfer
of Shares; Conversion of Shares.
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6.1
Restricted
Shares.
"Restricted Shares" means (a) the Shares; (b) all shares of the Parent’s
Common Stock issued upon conversion of the Shares or as payment of any dividends
accrued on the Shares; and (c) any other shares of capital stock of the
Company issued in respect of such shares (as a result of stock splits, stock
dividends, reclassifications, recapitalizations or similar events); provided,
however,
that
shares of the Parent’s Common Stock which are Restricted Shares shall cease to
be Restricted Shares (x) upon any sale pursuant to a registration statement
under the Securities Act, Section 4(1) of the Securities Act or
Rule 144 under the Securities Act or (y) at such time as they become
eligible for sale under Rule 144(k) under the Securities Act.
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6.2
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Requirements
for Transfer.
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(a)
Restricted
Shares shall not be sold or transferred unless either (i) they first shall
have been registered under the Securities Act, or (ii) the Company first
shall have been furnished with an opinion of legal counsel, reasonably
satisfactory to the Company, to the effect that such sale or transfer is
exempt
from the registration requirements of the Securities Act.
(b)
Notwithstanding
the foregoing, no registration or opinion of counsel shall be required for
(i) a transfer by the Purchaser to an Affiliated Party (as such term is
defined below) of such Purchaser, (ii) a transfer by the Purchaser which
is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, or (iii) a transfer by the Purchaser which is
a
limited liability company to a member of such limited liability company or
a
retired member who resigns after the date hereof or to the estate of any
such
member or retired member; provided that the transferee in each case agrees
in
writing to be subject to the terms of this Section 5 to the same extent as
if it were the original Purchaser hereunder, or (iv) a transfer made in
accordance with Rule 144 under the Securities Act. For purposes of this
Agreement "Affiliated Party" shall mean, with respect to the Purchaser, any
person or entity which, directly or indirectly, controls, is controlled by
or is
under common control with such Purchaser, including, without limitation,
any
general partner, officer or director of such Purchaser and any venture capital
fund now or hereafter existing which is controlled by one or more general
partners of, or shares the same management company as, such
Purchaser.
6.3
Legend.
Each
certificate representing Restricted Shares shall bear a legend substantially
in
the following form:
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED
TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
6.4
The
foregoing legend shall be removed from the certificates representing any
Restricted Shares, at the request of the holder thereof, at such time as
they
become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
6.5
The
Shares shall be convertible into shares of the Parent’s common stock pursuant to
the terms set forth in the Certificate of Designation set forth in Exhibit
A
hereto. By signing below, the Parent agrees to issue the shares of its common
stock upon conversion by the Purchaser of the Shares, pursuant to the terms
in
the Certificate of Designation.
6.6 All
shares of the Parent’s common stock issued upon conversion of the Shares by the
Purchaser shall bear the restricted securities legend set forth in Section
5.3
above, which may be removed pursuant to section 6.4 above.
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7.
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Indemnification.
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7.1
The
Company hereby agrees to indemnify, defend and hold harmless the Purchaser
and
its respective affiliates, directors, officers, trustees, employees and
representatives (any of the foregoing, a “Purchaser Indemnified Party”), from
and against any and all causes of actions, suits, losses, liabilities, claims,
obligations, damages, deficiencies, costs and expenses, fines or penalties,
including interest, reasonable attorneys’ fees and all reasonable amounts paid
in investigation, defense or settlement of any of the foregoing (“Losses”)
suffered, sustained, incurred or required to be paid by any such Purchaser
Indemnified Party due to, based upon or arising out of any material
inaccuracy in, or any material breach of, a representation or warranty of
the
Company contained in this Agreement.
7.2 The
Purchaser hereby agrees to indemnify, defend and hold harmless the Company
and
its affiliates, directors, officers, trustees, managers, employees and
representatives (any of the foregoing, a “Company Indemnified Party”), from and
against any Losses suffered, sustained, incurred or required to be paid by
any
such Company Indemnified Party due to, based upon or arising out of any material
inaccuracy in, or any material breach of, a representation or warranty of
such
Purchaser contained in this Agreement.
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8.
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Miscellaneous.
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8.1 Successors
and Assigns.
This
Agreement, and the rights and obligations of the Purchaser hereunder, may
be
assigned by such Purchaser to (a) any person or entity to which Shares are
transferred by such Purchaser, or (b) to any affiliate, partner, member,
stockholder or subsidiary of such Purchaser, and, in each case, such transferee
shall be deemed a "Purchaser" for purposes of this Agreement; provided that
each
such assignment of rights shall be contingent upon the transferee providing
a
written instrument to the Company notifying the Company of such transfer
and
assignment and agreeing in writing to be bound by the terms of this Agreement.
The Company may not assign its rights under this Agreement.
8.2 Survival
of Representations and Warranties.
All
representations and warranties contained herein shall survive the execution
and
delivery of this Agreement and the closings of the transactions contemplated
hereby.
8.3 Brokers.
The
Company and the Purchaser each (a) represents and warrants to the other
parties hereto that he, she or it has not retained a finder or broker in
connection with the transactions contemplated by this Agreement, and
(b) will indemnify and save the other parties harmless from and against any
and all claims, liabilities or obligations with respect to brokerage or finders’
fees or commissions, or consulting fees in connection with the transactions
contemplated by this Agreement asserted by any person on the basis of any
statement or representation alleged to have been made by such indemnifying
party.
8.4 Severability.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.
8.5 Specific
Performance.
In
addition to any and all other remedies that may be available at law in the
event
of any breach of this Agreement, the Purchaser shall be entitled to specific
performance of the agreements and obligations of the Company hereunder and
to
such other injunctive or other equitable relief as may be granted by a court
of
competent jurisdiction.
8.6 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York (without reference to the conflicts of law
provisions thereof), as to all other matters.
-9-
8.7 Notices.
All
notices, requests, consents and other communications under this Agreement
shall
be in writing and shall be deemed delivered (a) three business days after
being sent by registered or certified mail, return receipt requested, postage
prepaid or (b) one business day after being sent via a reputable nationwide
overnight courier service guaranteeing next business day delivery, in each
case
to the intended recipient as set forth below:
If
to the
Company, at
Fonix
Speech, Inc.
0000
Xxxxx, 000 Xxxx, Xxxxx 000
Xxxxx,
XX
00000
Attn:
Chief Financial Officer
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
With
a
copy (which shall not constitute notice), to
Durham
Xxxxx & Xxxxxxx, P.C.
000
Xxxx
Xxxxxxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn:
Xxxxxxx X. Xxxxx, Esq.
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
If
to the
Parent, at
Fonix
Corporation
0000
Xxxxx, 000 Xxxx, Xxxxx 000
Xxxxx,
XX
00000
Attn:
Chief Financial Officer
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
With
a
copy (which shall not constitute notice), to
Durham
Xxxxx & Xxxxxxx, P.C.
000
Xxxx
Xxxxxxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn:
Xxxxxxx X. Xxxxx, Esq.
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
If
to
Purchaser, at
Sovereign
Partners, L.P.
_________________________________
_________________________________
_________________________________
_________________________________
Attention:
_________________________
Facsimile:
_________________________
-10-
With
a
copy to:
_________________________________
_________________________________
_________________________________
_________________________________
ATTN:
_________________________
and
_________________________________
_________________________________
_________________________________
Attention:
_________________________
Telephone:
________________________
Facsimile:
_________________________
Any
party
may give any notice, request, consent or other communication under this
Agreement using any other means (including, without limitation, personal
delivery, messenger service, telecopy, first class mail or electronic mail),
but
no such notice, request, consent or other communication shall be deemed to
have
been duly given unless and until it is actually received by the party for
whom
it is intended. Any party may change the address to which notices, requests,
consents or other communications hereunder are to be delivered by giving
the
other parties notice in the manner set forth in this Section.
8.8
Complete
Agreement.
This
Agreement (including its Exhibits) constitutes the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to such subject
matter.
8.9 Amendments
and Waivers.
This
Agreement may be amended or terminated and the observance of any term of
this
Agreement may be waived with respect to all parties to this Agreement (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of both the Company and the Purchaser.
No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed
as,
a further or continuing waiver of any such term, condition or
provision.
8.10
Pronouns.
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural, and vice
versa.
8.11
Counterparts;
Facsimile Signatures.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, and all of which shall constitute one and the same
document. This Agreement may be executed by facsimile signatures.
8.12 Section
Headings and References.
The
section headings are for the convenience of the parties and in no way alter,
modify, amend, limit or restrict the contractual obligations of the parties.
Any
reference in this agreement to a particular section or subsection shall refer
to
a section or subsection of this Agreement, unless specified
otherwise.
8.13 Payment
of Fees.
The
Company agrees to pay the reasonable legal fees of counsel for the Purchaser,
in
an amount not to exceed $10,000.
-11-
Executed
as of the date first written above.
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COMPANY:
|
|
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FONIX
SPEECH, INC.
|
|
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By:
/s/ Xxxxx X.
Xxxxxx
|
|
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Exec.
VP & CFO
|
|
|
PARENT:
|
|
|
FONIX
CORPORATION
|
|
|
By:
/s/ Xxxxxx X.
Xxxxxxx
|
|
|
President
& CEO
|
|
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PURCHASER:
|
|
|
SOVEREIGN
PARTNERS, LP
|
|
|
BY: /s/
Xxxxxxx
Xxxxx
|
|
|
ITS:
______________________________
|
EXHIBIT
A
CERTIFICATE
OF DESIGNATION
