STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of June 7, 1999 by and
between ION NETWORKS, INC., a Delaware corporation having its principal offices
at 00 Xxxxxxxx Xxxx, Xxxxxx, Xxx Xxxxxx 00000 (the "Company"), and SPECIAL
SITUATIONS PRIVATE EQUITY FUND, L.P. a Delaware limited partnership, SPECIAL
SITUATIONS FUND III, L.P., a Delaware limited partnership, SPECIAL SITUATIONS
CAYMAN FUND, L.P., a Cayman Islands limited partnership and SPECIAL SITUATIONS
TECHNOLOGY FUND, L.P., a Delaware limited partnership, each having its principal
offices at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (collectively, the
"Buyer").
W I T N E S S E T H:
WHEREAS, the Company desires to issue and sell to the Buyer
shares of common stock, par value $.001 per share, of the Company (the "Common
Stock"); and
WHEREAS, the Buyer desires to purchase one million (1,000,000)
shares of Common Stock (the "Shares") in accordance with the allocation set
forth in Schedule A annexed hereto.
NOW THEREFORE, in consideration of the promises and mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
1. Sale and Purchase of Shares. Subject to the terms and
conditions of this Agreement, the Company hereby sells, assigns, transfers and
delivers to the Buyer, and the Buyer hereby purchases from the Company, for and
in consideration of the Purchase Price (as hereinafter defined), the Shares.
2. Purchase Price and Payment; Additional Consideration.
2.1. Subject to the terms and conditions of this Agreement,
the purchase price to be paid by the Buyer to the Company for and in
consideration of the sale to the Buyer of the Shares is an amount equal to
$3,000,000 (the "Purchase Price").
2.2. The Purchase Price shall be paid by the Buyer to the
Company by delivery of a certified or bank check or immediately available funds
in the amount of the Purchase Price at the Closing (as hereinafter defined).
2.3. In the event that, within six (6) months of the Closing
Date, (i) the Company consummates a private equity financing of Common Stock
and/or warrants to purchase Common Stock to a third party which is arranged by
First Security Xxx Xxxxxx (a "Xxx Xxxxxx Offering") and (ii) the consideration
paid by such third party for the securities purchased in the Xxx Xxxxxx Offering
and/or the exercise prices of the warrants granted pursuant to such Xxx Xxxxxx
Offering, as such amounts are adjusted pursuant to stock splits, stock
dividends, recapitalizations or other similar events (it being expressly
understood and agreed by the parties that in the event that such
consideration consists of property, the valuation thereof shall be determined by
the Board of Directors of the Company in its sole discretion, which shall be
binding and conclusive on the parties), are more favorable to such third party
than the terms of this Agreement and the transactions contemplated hereby from a
financial point of view, taking into account all terms and conditions (and if
the Xxx Xxxxxx Offering consists of both Common Stock and warrants, taking into
account all terms and conditions of both the Common Stock and warrants), the
Company shall, within fifteen (15) days after the closing of the Xxx Xxxxxx
Offering, upon written request from the Buyer, allow the Buyer to exchange any
or all shares of Common Stock or warrants acquired pursuant to this Agreement
and the transactions contemplated hereby (at the Buyer's discretion) for new
shares of Common Stock or warrants, as the case may be (it being agreed by the
parties that the Buyer shall only be entitled to exchanges of the identical
securities sold in the Xxx Xxxxxx Offering, i.e., shares of Common Stock for
shares of Common Stock, warrants for warrants, or Common Stock and warrants for
Common Stock and warrants), having the same financial terms and conditions
contained in the Xxx Xxxxxx Offering, such that the Buyer would be placed in no
worse financial position than it otherwise would have been without such
exchange, provided that, any such exchanges that result in an issuance of
securities exceeding in the aggregate 19.99% of the issued and outstanding
Common Stock shall be subject to approval of the stockholders of the Company, in
accordance with Marketplace Rule 4310(c)(25)(H) of the Nasdaq Stock Market.
3. Closing.
3.1. The sale and purchase of the Shares shall take place at a
location and time as the parties hereto shall mutually agree upon (hereinafter
referred to as the "Closing" or the "Closing Date").
3.2. At the Closing, the Company shall sell, transfer, assign
and deliver to the Buyer the Shares.
4. Warrants. Simultaneously with the Closing, the Company
shall grant to the Buyer warrants to purchase an aggregate of 500,000 shares of
Common Stock (the "Warrant Shares"), at exercise prices and with terms and
conditions as set forth in the Warrants substantially in the form annexed hereto
as Exhibit A.
5. Registration of Shares and Warrant Shares.
5.1. The Company shall use its reasonable efforts to (i) file
a registration statement (the "Registration Statement"), within sixty (60) days
of the Closing Date, on Form S-3 or other applicable form, registering for
resale the Shares and the Warrant Shares, and any New Shares, if applicable,
within sixty (60) days after the issuance thereof (except to the extent such
Shares, Warrant Shares or New Shares are eligible for resale under Rule 144
under the Securities Act of 1933, as amended (the "Act")) and (ii) cause the
Registration Statement to be declared effective under the Act as soon thereafter
as reasonably practicable.
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5.2. Notwithstanding anything contained herein to the
contrary, the Company shall be entitled to postpone the filing of the
Registration Statement otherwise required to be prepared and filed by it in
accordance with Section 5.1 or, in the event the Registration Statement has been
declared effective, without suspending such effectiveness, instruct the Buyer
(or any subsequent holders thereof) not to sell or distribute any Shares,
Warrant Shares or New Shares (collectively, a "Delay") (i) during any period
reasonably necessary in order to prepare financial statements of the Company
required to be included in the Registration Statement, (ii) as long as the
reason for non-disclosure continues, if the Company would be required to
disclose in the Registration Statement the existence of any fact relating to a
material business situation, transaction or negotiation, or would be required to
disclose information that the Company has not otherwise made public, in each
case, that the Company determines is in the best interests of the Company not to
disclose at such time, (iii) during the ten-day period prior to, and during the
ninety-day period beginning on the effective date of a registration statement
covering an underwritten public offering of any Common Stock or any securities
of the Company convertible into or exchangeable or exercisable for Common Stock
and (iv) unless and until the Holders furnish to the Company in writing
information that may be required to prepare the disclosure required by Items 507
and 508 of Regulation S-K promulgated under the Act, provided that, with respect
to (i) and (ii) above, the Company shall only be entitled to two (2) Delays,
each such Delay to be limited to no more than twenty (20) business days, except
as otherwise determined to be necessary or appropriate by the Board of Directors
of the Company acting in its fiduciary capacity.
5.3. The Buyer shall, and shall cause any subsequent holder of
the Warrants to, (i) reasonably cooperate with the Company in connection with
the preparation and filing of the Registration Statement and execute and deliver
any agreements or instruments reasonably requested by the Company or its counsel
in connection therewith and (ii) upon discovery that, or upon the happening of
any event as a result of which, the Registration Statement (or any prospectus
included therein), as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made (as determined by the Company or its
counsel in its sole discretion), forthwith discontinue its disposition of
Shares, Warrant Shares or New Shares, as the case may be, pursuant to the
Registration Statement, until such time as the Buyer (or any holder) has
received a supplemented or amended prospectus from the Company relating thereto.
6. Representations and Warranties of the Buyer. The Buyer
represents, warrants and covenants to the Company, as follows:
6.1. The decision to purchase the Shares and the execution and
delivery of this Agreement by the Buyer, the performance by the Buyer of its
obligations hereunder and the consummation by the Buyer of the transactions
contemplated hereby have been duly authorized and no other proceedings on the
part of the Buyer is necessary. The person executing this Agreement on behalf of
the Buyer has all right, power and authority to execute and deliver this
Agreement on behalf of the Buyer. This Agreement has been duly executed and
delivered by the Buyer and, assuming the due authorization, execution and
delivery hereof by the Company, will constitute the legal, valid and
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binding obligations of the Buyer, enforceable against the Buyer in accordance
with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally and the availability of equitable remedies.
6.2. The execution and delivery of this Agreement and the
agreements and documents contemplated hereby by the Buyer and the consummation
of the transactions contemplated hereby do not and will not (a) with or without
the giving of notice or the passage of time or both, violate, conflict with,
result in the breach or termination of, constitute a default under, or result in
the right to accelerate or loss of rights under or the creation of any lien,
encumbrance or charge upon any assets or property of the Buyer, pursuant to the
terms or provisions of any contract, agreement, commitment, indenture, mortgage,
deed of trust, pledge, security agreement, note, lease, license, covenant,
understanding or other instrument or obligation to which the Buyer is a party or
by which any of the Buyer's properties or assets may be bound or affected, or
(b) violate any order, writ, injunction, judgment or decree of any court,
administrative agency or governmental body binding upon the Buyer.
6.3. The Buyer is aware of what constitutes an Accredited
Investor as that term is defined under Regulation D promulgated under the Act,
and under the laws, if any, of each state governing the Buyer, and the Buyer is
an Accredited Investor for purposes of Regulation D and the laws, if any, of the
state governing the Buyer. The Buyer is able to bear the economic risks of this
investment and, consequently, without limiting the generality of the foregoing,
is able to hold the Shares for an indefinite period of time and has a sufficient
net worth to sustain a loss of its entire investment in the Company in the event
such loss should occur.
6.4. The Buyer acknowledges that it is a sophisticated
investor, has such knowledge and experience in financial and business matters in
general and has full familiarity with the current business and future business
prospects of the Company and the financial and other affairs of the Company and
acknowledges that it has had access to and has received sufficient written and
oral information about the Company, including any and all such information
requested by the Buyer and including copies of all of the publicly available
information prepared by the Company in order to make an informed decision as to
the disposition of the Shares by the Buyer, including without limitation, the
Annual Report of the Company on Form 10-KSB for the year ended March 31, 1998
and all subsequent Quarterly Reports on Forms 10-QSB. In addition, the Buyer
acknowledges that it has had access to the officers, directors and employees of
the Company to discuss the business, affairs and prospects of the Company and
has had the opportunity to obtain additional information necessary to evaluate
the merits and the risks of engaging in the transactions contemplated by this
Agreement. The Buyer has reached an independent decision with respect to the
advisability of the sale of the Shares and, in arriving at its decision, has
considered both the value of the Shares as well as the present condition and
future prospects of the Company.
6.5. The Buyer is acquiring the Shares for its own account for
investment and not with a view to or for resale in connection with any
distribution of the Shares. It has not offered or sold any portion of the Shares
and has no present intention of dividing the Shares with others or of
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selling, distributing or otherwise disposing of any portion of the Shares either
currently or after the passage of a fixed or determinable period of time or upon
the occurrence or non-occurrence of any predetermined event or circumstance.
6.6. The Buyer understands that the sale of the Shares has not
been (and any sale of New Shares will not be) registered under the Act in
reliance upon an exemption therefrom for non-public or limited offerings. The
Buyer understands that the Shares or the New Shares, as the case may be, must be
held indefinitely unless the sale or other transfer thereof is subsequently
registered under the Act or an exemption from such registration is available at
that time.
6.7. The Buyer is neither a "broker-dealer" nor an "affiliate"
of a broker-dealer as such terms are defined under the Act.
6.8. Any obligation or liability for taxes (state, federal or
otherwise) incurred by the Buyer in connection with this Agreement or the
transactions contemplated hereby shall be the responsibility of and be paid for
by the Buyer.
6.9. The Buyer acknowledges that it has been advised to
consult with its own attorney regarding legal matters concerning the Company and
to consult with its tax advisor regarding the tax consequences of acquiring the
Shares.
6.10. The Buyer agrees to indemnify and hold harmless the
Company and each officer, director, employee, agent or control person of the
Company, who is or may be a party or is or may be threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of or arising from
any (i) breach of any of its representations, warranties, covenants or
obligations contained herein or (ii) actual or alleged misrepresentation or
misstatement of facts or omission to represent or state facts made or alleged to
have been made by the Buyer to the Company, or omitted or alleged to have been
omitted by the Buyer, that is contained in (x) this Agreement or any other
agreement or document contemplated hereby or (y) the Registration Statement or
any amendment thereto, against losses, liabilities and expenses for which the
Company, or any officer, director or control person of the Company has not
otherwise been reimbursed (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the Company or
such officer, director or control person in connection with such action, suit or
proceeding. In connection with this indemnity, the Buyer represents that all of
the information provided herein by the Buyer is true, complete and correct in
all respects.
6.11. Certificates for the Shares shall contain a restrictive
legend substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT@), OR ANY
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OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION REQUIREMENTS.
7. Representations and Warranties of the Company. The Company
represents and warrants to the Buyer as follows:
7.1. The Company has the authority to execute and deliver this
Agreement and perform all of its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement and the agreements and
documents contemplated hereby are valid and legally binding obligations of the
Company, enforceable against it in accordance with their respective terms.
7.2. The Shares, when issued and delivered to the Buyer in
accordance with the terms of this Agreement, shall be duly authorized, validly
issued, fully-paid and nonassessable.
8. Survival of Representations, Warranties, Covenants and
Agreements. The parties covenant and agree that their respective
representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution and delivery of this Agreement.
9. Notices. All notices and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered in person or sent by registered or
certified mail, return receipt requested, postage prepaid, or delivered via
facsimile to the parties hereto at the following addresses:
If to the Company: Ion Networks, Inc.
00 Xxxxxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxx
Facsimile No.: (000) 000-0000
If to the Buyer: c/o Special Situations Private Equity Fund
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxxx
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Facsimile No.: (000) 000-0000
or to such other address as any party hereto shall have specified by notice in
writing to the other party hereto. All such notices and communications shall be
deemed to have been received on the date of delivery thereof or the fifth
business day after the mailing thereof.
10. Expenses. Each of the parties hereto shall pay the fees
and expenses of its counsel, accountants and other experts and all other
expenses incurred by such party incident to the negotiation, preparation and
execution of this Agreement.
11. Miscellaneous.
11.1. Partial Invalidity. If it is found in a final judgment
of a court of competent jurisdiction (not subject to a further appeal) that any
term or provision of this Agreement is invalid or unenforceable, (a) the
remaining terms and provisions of this Agreement shall be unimpaired and shall
remain in full force and effect and (b) the invalid or unenforceable provision
or term of this Agreement shall be replaced by a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
11.2. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument. This Agreement may
be executed via facsimile.
11.3. Successors and Assigns. The benefits of this Agreement
shall inure to the parties hereto, their respective successors and assigns and
to the indemnified parties hereunder and their successors and representatives,
and the obligations and liabilities assumed in this Agreement by the parties
hereto shall be binding upon their respective successors and assigns.
11.4. Governing Law. This Agreement and the legal relations
between the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without giving effect to
principles of conflicts or choice of law thereof.
11.5. Headings. Headings of the Sections in this Agreement
are for reference purposes only and shall not be deemed to have any substantive
effect.
11.6. Entire Agreement; Amendments. This Agreement and any
documents contemplated hereby contain, and are intended as, a complete statement
of all the terms of the arrangements between the parties with respect to the
matters provided for, and supersede any and all prior agreements, arrangements
and understandings between the parties with respect to the matters provided for
herein. No alteration, waiver, amendment, change or supplement hereto shall be
binding or effective unless the same is set forth in writing, signed by the
parties hereto or a duly authorized representative thereof.
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IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
on the day and year first above written.
ION NETWORKS, INC.
By:_____________________________________
Name: Xxxxxxx X. Xxxx
Title: President
SPECIAL SITUATIONS PRIVATE EQUITY FUND,
L.P.
By:_____________________________________
Name:
Title:
SPECIAL SITUATIONS FUND III, L.P.
By:_____________________________________
Name:
Title:
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By:_____________________________________
Name:
Title:
SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.
By:_____________________________________
Name:
Title:
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SCHEDULE A
Name of Entity Number of Shares of Common Stock
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Special Situations Private Equity Fund, L.P. 333,333
Special Situations Fund III, L.P. 437,500
Special Situations Cayman Fund, L.P. 145,833
Special Situations Technology Fund, L.P. 83,334
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