AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 1999
REGISTRATION NO. 333-____
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
ION NETWORKS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 22-2413505
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation Identification No.)
or Organization)
STEPHEN B. GRAY, PRESIDENT
ION NETWORKS, INC.
21 MERIDIAN ROAD
EDISON, NEW JERSEY 08820
(732) 494-4440
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
----------------------------
COPY TO:
JAMES ALTERBAUM, ESQ.
DAVID R. FISHKIN, ESQ.
PARKER CHAPIN FLATTAU & KLIMPL, LLP
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 704-6000
-----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective, as determined
by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
---------------------
If this Form is a post-effective amendment filed pursuant to rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
---------------------
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of each class of securities Amount to Aggregate price Aggregate registration
to be registered be registered per share offering price fee
====================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, $.001 par
value per share 4,087,741 $5.53125(1) $22,610,317.41 $6,285.67
Common Stock, $.001 par 546,875(2) $5.53125(1) $3,024,902.34 $840.92
value per share
Common Stock, $.001 par 259,375(2) $6.00(3) $1,556,250 $432.64
value per share
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c); based on the average of the high ask ($5.8125)
and low bid ($5.25) prices for the Common Stock as reported on the
Nasdaq Stock Market on August 13, 1999.
(2) Represents shares of Common Stock issuable upon exercise of warrants.
(3) Represents the exercise price per share of Common Stock underlying each
such warrant.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT SEEKING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
---------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SEEKING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION,
DATED AUGUST 20, 1999
ION NETWORKS, INC.
4,893,991 SHARES OF COMMON STOCK
-----------------------
o The shares of our common stock offered by this prospectus are
being sold by the selling stockholders.
o We will not receive any proceeds from the sale of these
shares. Since 806,250 of these shares are issuable upon
exercise of warrants, we will receive proceeds from the
exercise of such warrants, if any, and those proceeds will be
used for our general corporate purposes.
o On August 13, 1999, the closing bid price of our common stock
on the Nasdaq SmallCap Market was $5.5625.
o Our executive offices are located at 21 Meridian Road, Edison,
New Jersey 08820, our telephone number is (732) 494-4440 and
our website is at "www.ionnetworks.com."
NASDAQ SmallCap symbol for our Common Stock:
"IONN"
THE SECURITIES OFFERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
--------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------------------------
___________, 1999
<PAGE>
TABLE OF CONTENTS
Where You Can Find More Information About Us..................................3
Incorporation of Certain Documents by Reference...............................3
Risk Factors..................................................................5
Forward-Looking Statements...................................................10
Use of Proceeds..............................................................10
Dividend Policy..............................................................10
Selling Stockholders ........................................................11
Description of Securities....................................................15
Plan of Distribution ........................................................17
Indemnification for Securities Act Liabilities...............................18
Legal Matters................................................................18
Experts .....................................................................18
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
over the Internet at the SEC's Website at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 to
register the shares being offered. This Prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all the
information included in the registration statement. For further information with
respect to us and our common stock, you should refer to the registration
statement and to the exhibits and schedules filed as part of that registration
statement, as well as the documents we have incorporated by reference which are
discussed below.
You can review and copy the registration statement, its exhibits and schedules,
as well as the documents we have incorporated by reference, at the public
reference facilities maintained by the SEC as described above. The registration
statement, including its exhibits and schedules, are also available on the SEC's
web site.
This Prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this Prospectus, and information that we file later
with the SEC will automatically update or supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
1. Annual Report on Form 10-KSB for the year ended March 31, 1999;
2. Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999;
3. The Company's Proxy Statement for the 1999 Annual Meeting of
Stockholders;
4. Current Report on Form 8-K dated (date of earliest event reported)
March 31, 1999 (as filed on April 9, 1999);
5. The description of our Common Stock contained in the
Registration Statement on Form 8-A filed with the SEC on
January 23, 1985.
You may request a copy of these filings, at no cost, by writing or
telephoning us at 21 Meridian Road, Edison, New Jersey 08820, (732) 494-4440.
Attention: Mr. Kenneth G. Hay, Chief Financial Officer.
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<PAGE>
This Prospectus contains certain forward-looking statements which
involve substantial risks and uncertainties. These forward-looking statements
can generally be identified because the context of the statement includes words
such as "may," "will," "expect," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. Similarly, statements that describe our
future plans, objectives and goals are also forward-looking statements. Our
factual results, performance or achievements could differ materially from those
expressed or implied in these forward-looking statements as a result of certain
factors, including those listed in "Risk Factors" and elsewhere in this
Prospectus.
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO
GIVE ANY INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS.
YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT
OFFER TO SELL OR BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE
INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF ______________, 1999.
-------------------------
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<PAGE>
RISK FACTORS
BEFORE YOU BUY SHARES OF OUR COMMON STOCK, YOU SHOULD BE AWARE THAT
THERE ARE VARIOUS RISKS ASSOCIATED WITH SUCH PURCHASE, INCLUDING THOSE DESCRIBED
BELOW. YOU SHOULD CONSIDER CAREFULLY THESE RISK FACTORS, TOGETHER WITH ALL OF
THE OTHER INFORMATION IN THIS PROSPECTUS, AND THE DOCUMENTS WE HAVE INCORPORATED
BY REFERENCE IN THE SECTION "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"
BEFORE YOU DECIDE TO PURCHASE SHARES OF OUR COMMON STOCK.
RISKS ASSOCIATED WITH OUR BUSINESS
WE ARE VULNERABLE TO TECHNOLOGICAL CHANGES
The markets we serve experience rapid technological change, changing
customer requirements, frequent new product introductions and evolving industry
standards that may render existing products and services obsolete. As a result,
more advanced products produced by our competitors could erode our position in
our existing markets or other markets that we may enter. It is difficult to
estimate the life cycles of our products and services. Our future success will
depend, in part, upon our ability to enhance existing products and services and
to develop new products and services on a timely basis. In addition, our
products and services must keep pace with technological developments and we must
address increasingly sophisticated customer needs. We might experience
difficulties that could delay or prevent the successful development,
introduction and marketing of new products and services. New products and
services and enhancements might not meet the requirements of the marketplace and
achieve market acceptance. If these things happen, they would materially and
negatively affect our financial condition and results of operations.
WE CANNOT BE CERTAIN ABOUT OUR PRODUCT DEVELOPMENT
Our products are currently being used by a small number of customers
and there can be no assurance that the products will prove to be sufficiently
reliable in widespread commercial use. It is common for hardware and software as
complex and sophisticated as that incorporated in our products to experience
errors or "bugs" both during development and subsequent to commercial
introduction. We cannot assure you that all the potential problems will be
identified, that any bugs that are located can be corrected on a timely basis or
at all, or that additional errors will not be located in existing or future
products at a later time or when usage increases. Any such errors could delay
the commercial introduction or use of existing or new products and require
modifications in systems that have already been installed. Remedying such errors
has been and may continue to be costly and time consuming. Delays in debugging
or modifying our products could materially and adversely affect our competitive
position with respect to existing and new technologies and products offered by
our competitors.
THERE IS POTENTIAL FOR FLUCTUATION IN OUR QUARTERLY AND ANNUAL OPERATING RESULTS
In the past, we experienced fluctuations in our quarterly and annual
operating results and we anticipate that such fluctuations will continue and
could intensify. Our quarterly and annual operating results may vary
significantly depending on a number of factors, including:
o the timing of the introduction or acceptance of new products and
services;
o changes in the mix of products and services provided;
o long sales cycles;
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<PAGE>
o changes in regulations affecting our business;
o amount of research and development expenditures necessary for new
product development and innovation;
o changes in our operating expenses;
o uneven revenue streams; and
o general economic conditions.
Revenue recognition for our products is based upon various performance criteria
and varies from customer to customer and product to product. We cannot assure
you that our levels of profitability will not vary significantly among quarterly
periods or that in future quarterly periods our results of operations will not
be below prior results or the expectations of public market analysts and
investors. If this occurs, the price of our common stock could significantly
decrease.
WE CANNOT BE CERTAIN THAT OUR PRODUCTS IN DEVELOPMENT WILL EVER BECOME
COMMERCIALLY VIABLE
We have a variety of products that are in the research and development
stage, including those incomplete products that we purchased from SolCom Systems
Limited when we acquired SolCom in March 1999. These products have not yet met
technological feasibility and therefore do not contribute to our revenue. If, as
a result of the uncertainties surrounding the successful completion of these
projects, we are unable to establish technological feasibility and are unable to
produce commercially viable products, the anticipated future revenue
attributable to the expected sales and profits from such products will not be
realized. This would have a significant negative effect on our future financial
condition, results of operations and cash flows.
WE HAVE SIGNIFICANT COMPETITION
We are subject to significant competition from different sources for
our different products and services. We can not assure you that the market will
continue to accept our hardware and software technology or that we will be able
to compete successfully in the future. We believe that the main factors
affecting competition in the network management business are:
o the products' ability to meet various network management and
security requirements;
o the products' ability to conform to the network and/or
computer systems;
o the products' ability to avoid becoming technologically outdated;
o the willingness and the ability of distributors to provide
support customization, training and installation; and
o the price.
Although we believe that our present products and services are competitive, we
compete with a number of large computer, electronics and telecommunications
manufacturers which have financial, research and development, marketing and
technical resources far greater than ours. Our competitors include Net Scout
Inc., Hewlett- Packard, Inc., 3Com Corp., Technically Elite, Inc., Bay Networks
Inc., Shomiti Systems Inc., Visual Networks, Inc., Concord Communications, Inc.
and Sync Research, Inc. Such companies may succeed in producing and distributing
competitive products more effectively than we can produce and distribute our
products, and may also develop new products which compete effectively with our
products.
-6-
<PAGE>
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, PERMITTING COMPETITORS TO
DUPLICATE OUR PRODUCTS AND SERVICES
We hold no patents on any of our technology. Although we do license
some of our technology from third parties, we do not consider any of these
licenses to be material to our operations. We have made a consistent effort to
minimize the ability of competitors to duplicate our software technology
utilized in our products. However, there remains the possibility of duplication
of our products, and competing products have already been introduced. Any such
duplication by our competitors could negatively impact on our business and
operations.
WE RELY ON SEVERAL KEY CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR BUSINESS
Our business is dependent to a great extent on several key customer
relationships, including PTT Holland (KPN), Lucent Technologies, AT&T, RHYTHMS
NetConnections and MCI WorldCom. Our sales to these customers represented
approximately 61% of our revenue for the fiscal year 1999. We also have
significant "original equipment manufacturer" relationships with Lucent
Technologies and Hewlett-Packard, Inc., which accounted for approximately 21% of
our revenues for fiscal year 1999. In addition, as a result of our recent
acquisitions of SolCom and certain selected assets of LeeMAH DataCom Security
Corporation, we have established new customer relationships with
Hewlett-Packard, Inc., Siemens Corporation and Bell South. The loss of any of
these customers would likely significantly decrease our revenues and future
prospects.
WE DEPEND UPON KEY MEMBERS OF OUR EMPLOYEES AND MANAGEMENT
Our business is greatly dependent on the efforts of our executive
officers and key employees, and on our ability to attract key personnel. Our
success depends in large part on the continued services of our key management,
sales, engineering, research and development and operational personnel and on
our ability to continue to attract, motivate and retain highly qualified
employees and independent contractors in those areas. Competition for such
personnel is intense and we can not assure you that we will successfully
attract, motivate and retain key personnel. The inability to hire and retain
qualified personnel or the loss of the services of key personnel could have a
material adverse effect upon our business, financial condition and results of
operations. Currently, we do not maintain "key man" insurance policies with
respect to any of our employees.
WE MAY HAVE DIFFICULTY COMPLYING WITH GOVERNMENT REGULATION
Due to the sophistication of the technology employed in our devices,
export of our products is subject to governmental regulation. As required by law
or demanded by customer contract, we routinely obtain approval of our products
by Underwriters' Laboratories. Additionally, because many of our products
interface with telecommunications networks, our products are subject to several
key Federal Communications Commission ("FCC") rules and thus FCC approval is
necessary as well.
Part 68 of the FCC rules contains the majority of the technical
requirements with which telephone systems must comply to qualify for FCC
registration for interconnection to the public telephone network. Part 68
registration represents a determination by the FCC that telecommunication
equipment interfacing with the public telephone network complies with certain
interference parameters and we intend to apply for FCC Part 68 registration for
all of our new products.
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<PAGE>
Part 15 of the FCC rules requires equipment classified as containing a
Class A computing device to meet certain radio and television interference
requirements, especially as such requirements relate to operations of such
equipment in a residential area. Certain of our products are subject to Part 15.
The European Community is developing a similar set of requirements for
its members and we have begun the process of compliance for Europe.
RISKS RELATING TO THE YEAR 2000 ISSUE
Many currently installed computer systems and software products accept
only two digit codes to define a specific year. Computer equipment and software
with embedded technology which are time-sensitive may recognize the two digit
date code "00" as the year 1900 rather than the year 2000, resulting in system
failure or miscalculations. This problem is generally referred to as the "Year
2000 issue". We use software and related technologies that will be affected by
the "Year 2000 issue." We began the process of identifying the changes required
to our computer programs and hardware during 1996. We believe that all of our
major programs and hardware are Year 2000 compliant. We believe that we will not
incur any significant costs between now and January 1, 2000 to resolve Year 2000
issues. However, we cannot assure you that other companies' computer systems and
applications on which our operations rely will be timely converted, or that any
such failure to convert by another company would not have a material negative
effect on our systems and operations. Furthermore, there can be no assurance
that the software that we use which has been designed to be Year 2000 compliant,
contains all necessary date code changes.
THERE ARE LIMITATIONS ON THE LIABILITY OF OUR DIRECTORS AND OFFICERS
Our Certificate of Incorporation, as amended, and our Bylaws contain
provisions limiting the liability of our directors for monetary damages to the
fullest extent permissible under Delaware law. This is intended to eliminate the
personal liability of a director for monetary damages on an action brought by or
in our right for breach of a director's duties to us or to our stockholders
except in certain limited circumstances. In addition, our Certificate of
Incorporation, as amended, and our Bylaws contain provisions requiring us to
indemnify our directors, officers, employees and agents serving at our request,
against expenses, judgments (including derivative actions), fines and amounts
paid in settlement. This indemnification is limited to actions taken in good
faith in the reasonable belief that the conduct was lawful and in or not opposed
to our best interests. The Certificate of Incorporation and the Bylaws provide
for the indemnification of directors and officers in connection with civil,
criminal, administrative or investigative proceedings when acting in their
capacities as agents for us. These provisions may reduce the likelihood of
derivative litigation against directors and executive officers and may
discourage or deter stockholders or management from suing directors or executive
officers for breaches of their fiduciary duties, even though such an action, if
successful, might otherwise benefit us and our stockholders.
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<PAGE>
RISKS ASSOCIATED WITH OUR SECURITIES
WE DO NOT ANTICIPATE THE PAYMENT OF DIVIDENDS
We have never declared or paid cash dividends on our common stock. We
currently anticipate that we will retain all available funds for use in the
operation of our business. Thus, we do not anticipate paying any cash dividends
on our common stock in the foreseeable future.
THERE IS POTENTIAL FOR FLUCTUATION IN THE MARKET PRICE OF OUR SECURITIES
Because of the nature of the industry in which we operate, the market
price of our securities is highly volatile. Factors such as announcements by us
or others of technological innovations, new commercial products, regulatory
approvals or proprietary rights developments, and competitive developments all
may have a significant impact on our future business prospects and market price
of our securities.
WE MAY NEED TO RAISE MORE MONEY IN THE FUTURE
We may need to seek additional financing in the future as a result of a
variety of factors, including in the event of unanticipated technical or other
problems. We cannot assure you that additional financing will be available to us
on acceptable terms or at all. If we are not able to secure additional financing
on terms that we consider acceptable to us, our business may be negatively
impacted and we may not be able to expand, take advantage of opportunities in
the marketplace or respond effectively to competitive pressures.
SHARES THAT ARE ELIGIBLE FOR SALE IN THE FUTURE MAY AFFECT THE MARKET PRICE OF
OUR COMMON STOCK
As of August 18, 1999, an aggregate of 5,851,444 of the outstanding
shares of our common stock are "restricted securities" as that term is defined
in Rule 144 under the federal securities laws. These restricted shares may be
sold pursuant only to an effective registration statement under the securities
laws or in compliance with the exemption provisions of Rule 144 or other
securities law provisions. Rule 144 permits sales of restricted securities by
any person (whether or not an affiliate) after one year, at which time sales can
be made subject to the Rule's existing volume and other limitations. Rule 144
also permits sales of restricted securities by non-affiliates without adhering
to Rule 144's existing volume or other limitations after two years. In general,
an "affiliate" is a person with the power to manage and direct our policies. The
SEC has stated that generally, executive officers and directors of an entity are
deemed affiliates of the entity. Future sales of substantial amounts of shares
in the public market, or the perception that such sales could occur, could
negatively affect the price of our common stock.
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<PAGE>
FORWARD - LOOKING STATEMENTS
In this prospectus, we make statements about our future financial
condition, results of operations and business. These are based on estimates and
assumptions made from information currently available to us. Although we believe
these estimates and assumptions are reasonable, they are uncertain. These
forward-looking statements can generally be identified because the context of
the statement includes words such as may, will, expect, anticipate, intend,
estimate, continue, believe or other similar words. Similarly, statements that
describe our future expectations, objectives and goals or contain projections of
our future results of operations or financial condition are also forward-looking
statements. Our future results, performance or achievements could differ
materially from those expressed or implied in these forward-looking statements,
including those listed under the heading "Risk Factors" and other cautionary
statements in this prospectus. Unless otherwise required by applicable
securities laws, we assume no obligation to update any such forward-looking
statements, or to update the reasons why actual results could differ from those
projected in the forward-looking statements.
USE OF PROCEEDS
The Selling Stockholders are selling all of the shares covered by this
Prospectus for their own account. Accordingly, we will not receive any of the
proceeds from the resale of the shares. We may receive proceeds from the
exercise of the warrants. We will use such net proceeds, if any, for general
corporate purposes and working capital. We have agreed to bear the expenses
relating to the registration of the shares, other than brokerage commissions and
expenses, if any, which will be paid by the Selling Stockholders.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock. We
currently anticipate that we will retain all available funds for use in the
operation of our business. As such, we do not anticipate paying any cash
dividends on our common stock in the foreseeable future.
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<PAGE>
SELLING STOCKHOLDERS
This Prospectus covers the resale by the Selling Stockholders of up to
4,893,991 shares (the "Shares") of common stock, par value $.001 per share, of
the Company (the "Common Stock"), which includes an aggregate of 500,000 shares
of Common Stock issuable upon exercise of warrants (the "Warrants") and 306,250
shares of Common Stock issuable upon exercise of additional warrants (the
"Additional Warrants"). The Shares, Warrants and Additional Warrants were issued
by the Company pursuant to transactions consummated in March 1999, June 1999 and
August 1999, respectively. For more details regarding such transactions, see
"Description of Securities -- The Transactions" and "Description of Securities
- -- Common Stock".
The following table lists certain information regarding the Selling
Stockholders' ownership of shares of Common Stock as of August 13, 1999, and as
adjusted to reflect the sale of the Shares. Information concerning the Selling
Stockholders may change from time to time. The information in the table
concerning the Selling Stockholders who may offer Shares hereunder from time to
time is based on information provided to us by such stockholders.
<TABLE>
<CAPTION>
Shares of Shares of Shares of Common Stock Owned
Common Stock Common after Offering (1)
Owned Prior to Stock to be ---------------------------------
Name of Selling Stockholder Offering Sold Number Percent
------------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Special Situations Private
Equity Fund, L.P. 499,999(2)(3) 499,999(2)(3) 0 0
Special Situations Fund III,
L.P. 1,251,633(2)(4)(7) 656,250(2)(4) 595,383(7) 4.6
Special Situations Cayman
Fund, L.P. 432,419(2)(5)(8) 218,749(2)(5) 213,670(8) 1.6
Special Situations
Technology Fund, L.P. 125,002(2)(6) 125,002(2)(6) 0 0
Alza Corporation
Retirement Plan 40,000 40,000 0 0
City of Milford Pension &
Retirement Fund 75,000 75,000 0 0
NFIB Corporate Account 60,000 60,000 0 0
Public Employee Retirement
System of Idaho 500,000 500,000 0 0
City of Stamford Firemen's
Pension Fund 75,000 75,000 0 0
State of Oregon PERS/ZCG 645,000 645,000 0 0
The Jenifer Altman
Foundation 40,000 40,000 0 0
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Shares of Shares of Shares of Common Stock Owned
Common Stock Common after Offering (1)
Owned Prior to Stock to be ---------------------------------
Name of Selling Stockholder Offering Sold Number Percent
------------------- ---------------- ------------- -------------
Dean Witter Foundation 45,000 45,000 0 0
Roanoke College 45,000 45,000 0 0
Butler Family LLC 20,000 20,000 0 0
David Zesiger 12,000 12,000 0 0
Fred & Lucy Giampino
JTWROS 10,000 10,000 0 0
The Ferris Hamilton Family
Trust 15,000 15,000 0 0
Mary Ann S. Hamilton
Trust for Self 15,000 15,000 0 0
HBL Charitable Unitrust 15,000 15,000 0 0
Andrew Heiskell 40,000 40,000 0 0
Helen Hunt 15,000 15,000 0 0
Jeanne L. Morency 12,000 12,000 0 0
Murray Capital, LLC 13,000 13,000 0 0
Domenic J. Mizio 50,000 50,000 0 0
Morgan Trust Co. of the
Bahamas Ltd. as Trustee
U/A/D 11/30/93 35,000 35,000 0 0
Susan Uris Halpern 20,000 20,000 0 0
William B. Lazar 13,000 13,000 0 0
Wells Family LLC 85,000 85,000 0 0
Harold & Grace Willens
JTWROS 10,000 10,000 0 0
Albert L. Zesiger 50,000 50,000 0 0
Barrie Ramsay Zesiger 25,000 25,000 0 0
Wolfson Investment
Partners LP 20,000 20,000 0 0
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Shares of Shares of Shares of Common Stock Owned
Common Stock Common after Offering (1)
Owned Prior to Stock to be ---------------------------------
Name of Selling Stockholder Offering Sold Number Percent
------------------- ---------------- ------------- -------------
Lady Margaret Elliot 148,322 94,349 53,973 *
Ann H. Gloag 137,796 87,654 50,142 *
Helen Sealey 189,907 120,802 69,105 *
Andrew Sealey 111,523 70,941 40,582 *
Brian Souter 277,028 176,221 100,807 *
Michael David Rutterford 71,769 45,653 26,116 *
June Georgina Rutterford 9,570 6,087 3,483 *
Ali Taheri 7,177 4,565 2,612 *
Hugh Evans 446,338(9) 60,209 386,129(9) 3.0
Trustees of the Hugh Evans
Family Trust 4,785 3,043 1,742 *
Keith Laing 75,051(10) 34,088 40,963(10) *
Colin Laing 479 304 175 *
Peter J. MacLaren 224,123(11) 31,169 192,954(11) 1.5
Elizabeth Marie McQuillan 43,062 27,391 15,671 *
Peter Wilson 436,770(12) 54,123 382,647(12) 2.9
Alison Wilson 7,656 4,870 2,786 *
Francis DeLaura 162,618(13) 92,791 69,827(13) *
Anderson Strathern
Nominees Limited 52,631 33,479 19,152 *
EFG Reads Trustees
Limited as Trustees of M.D.
Rutterford's Trust 110,046 70,001 40,045 *
EFG Reads Trustees
Limited as Trustees of J.G.
Rutterford's 1991 Trust 110,046 70,001 40,045 *
-13-
<PAGE>
Shares of Shares of Shares of Common Stock Owned
Common Stock Common after Offering (1)
Owned Prior to Stock to be ---------------------------------
Name of Selling Stockholder Offering Sold Number Percent
------------------ ---------------- ------------- -------------
First Security Van Kasper 206,250(2)(14) 206,250(2)(14) 0 0
Baruch Halpern 100,000(2)(15) 100,000(2)(15) 0 0
================ ================ ============== ==============
Total 7,242,000(16) 4,893,991 2,348,009(16) 18.1
</TABLE>
- ---------------------
* Represents less than one (1%) percent of the issued and outstanding
Common Stock.
(1) Assumes that all of the Shares are sold and no other shares of Common
Stock are sold by the Selling Stockholders during the offering period.
(2) Assumes the exercise by each such Selling Stockholder of all of their
respective Warrants or Additional Warrants, as the case may be.
(3) Includes 166,666 shares of Common Stock issuable upon exercise of
Warrants.
(4) Includes 218,750 shares of Common Stock issuable upon exercise of
Warrants.
(5) Includes 72,916 shares of Common Stock issuable upon exercise of
Warrants.
(6) Includes 41,668 shares of Common Stock issuable upon exercise of
Warrants.
(7) Includes 267,242 shares of Common Stock issuable upon exercise of
currently exercisable Common Stock purchase warrants.
(8) Includes 97,180 shares of Common Stock issuable upon exercise of
currently exercisable Common Stock purchase warrants.
(9) Includes 165,480 shares of Common Stock issuable upon exercise of
currently exercisable stock options.
(10) Includes 21,462 shares of Common Stock issuable upon exercise of
currently exercisable stock options.
(11) Includes 82,020 shares of Common Stock issuable upon exercise of
currently exercisable stock options.
(12) Includes 165,480 shares of Common Stock issuable upon exercise of
currently exercisable stock options.
(13) Includes 16,746 shares of Common Stock issuable upon exercise of
currently exercisable stock options.
(14) Includes 206,250 shares of Common Stock issuable upon exercise of
Additional Warrants.
(15) Includes 100,000 shares of Common Stock issuable upon exercise of
Additional Warrants.
(16) Includes an aggregate of (i) 670,672 shares of Common Stock issuable
upon exercise of currently exercisable Common Stock purchase warrants
and (ii) 451,188 shares of Common Stock issuable upon exercise of
currently exercisable stock options.
-14-
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The total amount of authorized capital stock of the Company consists of
50,000,000 shares of common stock, par value $.001 per share (the "Common
Stock"), and 200,000 shares of preferred stock, par value $10.00 per share (the
"Preferred Stock"). As of August 13, 1999, there were 12,977,329 shares of
Common Stock issued and outstanding and no shares of Preferred Stock issued and
outstanding.
THE TRANSACTIONS
ACQUISITION OF SOLCOM SYSTEMS LIMITED
On March 31, 1999, the Company consummated the purchase of all of the
outstanding share capital of SolCom Systems Limited ("SolCom"), a company
incorporated under the Companies Act 1985 of the United Kingdom, in
consideration of the issuance by the Company to the shareholders of SolCom of
(i) an aggregate of 2,200,233 shares of Common Stock and (ii) options to
purchase an aggregate of 451,188 shares of Common Stock. An aggregate of
1,087,741 shares of Common Stock issued to the SolCom shareholders are being
offered hereby.
JUNE 1999 PRIVATE FINANCING
Pursuant to a stock purchase agreement dated as of June 7, 1999 (the
"June 1999 Stock Purchase Agreement"), certain Selling Stockholders purchased an
aggregate of 1,000,000 shares of Common Stock and were granted Warrants to
purchase an aggregate of 500,000 shares of Common Stock (the "Warrant Shares")
for an aggregate consideration equal to $3,000,000.
Subject to the terms and conditions set forth in the Warrants, each of
the Warrants is exercisable for a period of three (3) years from the date of
grant. The Warrants are exercisable at $4.50 per share with respect to 250,000
Warrant Shares and $6.00 with respect to the remaining 250,000 Warrant Shares.
The exercise prices of the Warrants and the number of shares of Common Stock
issuable upon exercise thereof are subject to adjustment as provided therein,
including without limitation, anti-dilution provisions pertaining to the
declaration of stock dividends, mergers, consolidations or liquidations.
AUGUST 1999 PRIVATE PLACEMENT
Pursuant to a stock purchase agreement dated as of August 5, 1999 (the
"August 1999 Stock Purchase Agreement"), certain Selling Stockholders purchased
an aggregate of 2,000,000 shares of Common Stock for an aggregate consideration
equal to $9,500,000.
ADDITIONAL WARRANTS
In addition, two Selling Stockholders were granted warrants (the
"Additional Warrants") to purchase an aggregate of 306,250 shares of Common
Stock (the "Additional Warrant Shares") in consideration of financial advisory
services provided to the Company by such Selling Stockholders in connection with
the June 1999 Private Financing and August 1999 Private Placement. An aggregate
of 18,750 Additional Warrants are exercisable for a period of three (3) years
from the date of grant and the remaining 287,500 Additional Warrants are
exercisable for a period of five (5) years from the date of grant. The
Additional Warrants are exercisable at $4.75 per share
-15-
<PAGE>
with respect to 250,000 Additional Warrant Shares, $3.00 per share with respect
to 37,500 Additional Warrant Shares, $4.50 per share with respect to 9,375
Additional Warrant Shares and $6.00 with respect to the remaining 9,375
Additional Warrant Shares.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share on
all matters that are submitted to the stockholders for their approval and have
no cumulative voting rights. The holders of the Common Stock are entitled to
receive dividends, if any, as may be declared by the Board of Directors from
funds legally available from time to time for this purpose. Upon liquidation or
dissolution of the Company, the remainder of the Company's assets will be
distributed ratably among the holders of Common Stock, after the payment of all
liabilities and payment to the holders of any Preferred Stock. All of the
outstanding shares of Common Stock are fully-paid and nonassessable.
PREFERRED STOCK
The Company's Preferred Stock may be issued from time to time by the
Company's Board of Directors without the approval of the Company's stockholders.
The Board of Directors is authorized to issue these shares in different classes
and series and, with respect to each class or series, to determine the dividend
rights, the redemption provisions, conversion provisions, liquidation
preferences and other rights and preferences not in conflict with the Company's
Certificate of Incorporation or with Delaware law.
TRANSFER AGENT AND WARRANT AGENT
American Stock Transfer & Trust Company, New York, New York is the
transfer agent and registrar for the Common Stock and warrant agent for the
Warrant Shares.
DELAWARE TAKEOVER STATUTE AND CERTAIN CHARTER PROVISIONS
The Company is subject to Section 203 of the Delaware General
Corporation Law which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the Board of
Directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
-16-
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders may offer their shares of Common Stock at
various times in one or more of the following transactions:
o on any U.S. securities exchange on which the Common Stock may be
listed at the time of such sale;
o in the over-the-counter market;
o in transactions other than on such exchanges or in the
over-the-counter market;
o in connection with short sales;
o in a combination of any of the above transactions.
The Selling Stockholders may offer their shares of Common Stock at
prevailing market prices at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices.
The Selling Stockholders may use broker-dealers to sell their shares of
Common Stock. If this happens, broker-dealers will either receive discounts or
commissions from the Selling Stockholder, or they will receive commissions from
purchasers of shares of Common Stock for whom they acted as agents. Such brokers
may act as dealers by purchasing any and all of the Shares covered by this
Prospectus either as agents for others or as principals for their own accounts
and reselling such securities pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or other persons acting
on the behalf of parties that participate in the distribution of the shares may
be deemed to be underwriters. As such, any commissions or profits they receive
on the resale of the shares may be deemed to be underwriting discounts and
commissions under the Securities Act.
As of the date of this Prospectus, the Company is not aware of any
agreement, arrangement or understanding between any broker or dealer and any of
the Selling Stockholders with respect to the offer or sale of Shares pursuant to
this Prospectus.
To the extent required under the Securities Act, the Company will file
a supplemental prospectus to disclose (a) the name of any such broker-dealers,
(b) the number of Shares involved, (c) the price at which such Shares are to be
sold, (d) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable, (e) that such broker-dealers did not conduct
any investigation to verify the information set out in this Prospectus, as
supplemented, and (f) other facts material to the transaction.
The Selling Stockholders are selling all of the shares covered by this
Prospectus for their own account. Accordingly, the Company will not receive any
proceeds from the resale of these shares. The Company shall receive proceeds
from the exercise of the Warrants. The Company anticipates using such net
proceeds for general corporate purposes.
-17-
<PAGE>
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law provides, in
general, that a corporation incorporated under the laws of the State of
Delaware, such as the Company, may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than a derivative action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. In the case of a derivative action, a Delaware corporation may
indemnify any such person against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
The Certificate of Incorporation, as amended, provides that the
liability of the Company's directors shall be limited to the fullest extent
permitted by the Delaware General Corporation Law. In addition, the Certificate
of Incorporation provides that the Company shall indemnify directors, officers,
employees and agents of the Company acting in such capacity to the fullest
extent permitted by such law.
LEGAL MATTERS
The validity of the securities being offered hereby was passed upon by
Parker Chapin Flattau & Klimpl, LLP, New York, New York.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Company's Annual Report on Form 10-KSB for the year ended March 31, 1999,
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
-18-
<PAGE>
WE HAVE NOT AUTHORIZED ANY DEALER,
SALESPERSON OR ANY OTHER PERSON TO GIVE
ANY INFORMATION OR TO REPRESENT ANYTHING
NOT CONTAINED IN THIS PROSPECTUS. YOU
MUST NOT RELY ON ANY UNAUTHORIZED 4,893,991 SHARES OF
INFORMATION. THIS PROSPECTUS DOES NOT COMMON STOCK
OFFER TO SELL OR BUY ANY SHARES IN ANY
JURISDICTION WHERE IT IS UNLAWFUL. THE
INFORMATION IN THIS PROSPECTUS IS
CURRENT AS OF _______________, 1999.
----------------------
TABLE OF CONTENTS
Page
----
Where You Can Find More Information
About Us..............................3
Incorporation of Certain Documents
by Reference..........................3
Risk Factors.............................5
Forward-Looking Statements..............10
Use of Proceeds.........................10 --------------
Dividend Policy.........................10
Selling Stockholders ...................11 PROSPECTUS
Description of Securities...............15
Plan of Distribution ...................17 --------------
Indemnification for Securities
Act Liabilities.......................18
Legal Matters...........................18
Experts ................................18
_____________, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable in
connection with the issuance and distribution of the securities being registered
under this Registration Statement which will be paid by the Company. The Selling
Stockholders will not incur any of the expenses set forth below. All amounts
shown are estimates.
Filing fee for registration statement.. $ 7,559.23
Legal fees and expenses................ $ 25,000.00
Accounting fees and expenses........... $ 2,500.00
Blue Sky expenses...................... $ 1,450.00
Miscellaneous expenses................. $ 990.77
----------------
Total............................. $ 37,500.00
================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 ("Section 145") of the General Corporation Law of the State
of Delaware ("DGCL") provides, in general, that a corporation incorporated under
the laws of the State of Delaware, such as the Company, may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than a derivative action
by or in the right of the corporation) by reason of the fact that such person is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
Article Tenth of the Company's Certificate of Incorporation, as
amended, provides that the Company shall indemnify all persons whom the Company
shall have the power to indemnify under Section 145 to the fullest extent
permitted by such Section 145. In addition, Article Ninth of the Company's
Certificate of Incorporation provides, in general, that the liability of the
directors of the Company shall be limited to the fullest extent permitted by the
DGCL. The DGCL generally permits the limitation of a director's liability,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (which provides that, under certain circumstances,
directors may be jointly and severally liable for willful or negligent
violations of the DGCL's provisions regarding the payment of dividends or stock
repurchases or redemptions), or (iv) for any transaction from which the director
derived an improper personal benefit.
II - 1
<PAGE>
ITEM 16. EXHIBITS.
Number Description of Exhibit
- ------ ----------------------
4.1 Stock Purchase Agreement by and among the Company and certain of the
Selling Stockholders dated as of June 7, 1999.
4.2 Form of Warrant to Purchase Common Stock.
4.3 Stock Purchase Agreement by and among the Company and certain of the
Selling Stockholders dated as of August 5, 1999.
4.4* Share Purchase Agreement, as amended, dated as of
December 28, 1998, by and among the Company, SolCom
Systems Limited ("SolCom"), the shareholders of
SolCom and certain representatives thereof.
4.5* Registration Rights Agreement dated as of March 31,
1999, by and among the Company, the shareholders of
SolCom and certain representatives thereof.
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Parker Chapin Flattau & Klimpl, LLP (included in Exhibit
5.1 hereto).
24.1 Power of Attorney (included on Signature Page hereto).
- ----------------------
* Incorporated by Reference to Appendix A of the Company's
Definitive Information Statement on Schedule 14C filed with
the Securities and Exchange Commission on March 11, 1999.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II - 2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of the issue.
The undersigned small business issuer hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Edison, State of New Jersey on August 16, 1999.
ION NETWORKS, INC.
By: /s/ Stephen B. Gray
------------------------
Stephen B. Gray
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Stephen B. Gray and Kenneth G.
Hay and each of them with power of substitution, as his attorney-in-fact, in all
capacities, to sign any amendments to this registration statement (including
post-effective amendments) and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 16th day of August, 1999.
Signature Title
- --------- -----
/s/ Stephen B. Gray President, Chief Executive Officer,
- ----------------------- Chief Operating Officer and Director
Stephen B. Gray
/s/ Stephen M. Deixler Chairman of the Board of Directors
- -----------------------
Stephen M. Deixler
/s/ Kenneth G. Hay Chief Financial Officer and Treasurer (Principal
- ------------------------ Financial Officer and Principal Accounting Officer)
Kenneth G. Hay
/s/ Michael Radomsky Director
- ------------------------
Michael Radomsky
/s/ Alexander C. Stark Director
- ------------------------
Alexander C. Stark
/s/ William Martin Ritchie Director
- --------------------------
William Martin Ritchie
/s/ Alan Hardie Director
- --------------------------
Alan Hardie
II - 4
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 21 Meridian Road, Edison, New Jersey 08820 (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 153 East 53rd Street, New York, New York 10022 (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 Van Kasper (a "Van Kasper Offering") and (ii) the consideration
paid by such third party for the securities purchased in the Van Kasper Offering
and/or the exercise prices of the warrants granted pursuant to such Van Kasper
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
<PAGE>
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 Van Kasper 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 Van Kasper
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 Van Kasper 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 Van Kasper 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.
-2-
<PAGE>
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.
21 Meridian Road
Edison, New Jersey 08820
Attention: Mr. Stephen B. Gray
Facsimile No.: (732) 494-3134
If to the Buyer: c/o Special Situations Private Equity Fund
153 East 53rd Street
New York, New York 10022
Attention: Mr. Steven Becker
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Facsimile No.: (212) 832-6141
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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<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
on the day and year first above written.
ION NETWORKS, INC.
By:_____________________________________
Name: Stephen B. Gray
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
- -------------- --------------------------------
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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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE STATE SECURITIES LAWS AND
HAS BEEN ISSUED IN RELIANCE UPON REGULATION D PROMULGATED UNDER THE SECURITIES
ACT. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN
OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL.
THIS WARRANT MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
TRANSACTION DOES NOT REQUIRE REGISTRATION THEREOF.
NO. __
WARRANT
To Purchase ___________ Shares of Common Stock of
ION NETWORKS, INC.
THIS CERTIFIES that, for value received, [Name of entity] (the
"Buyer") is entitled, upon the terms and subject to the conditions hereinafter
set forth, at any time on or after June 7, 1999 and on or prior to 5:00 P.M.,
New York time on June 7, 2002 (the "Termination Date") but not thereafter, to
subscribe for and purchase from ION NETWORKS, INC., a corporation incorporated
under the laws of the State of Delaware (the "Company"), ____________ shares
(the "Warrant Shares") of Common Stock, par value $.001 per share, of the
Company (the "Common Stock"). The exercise price of each share of Common Stock
(the "Exercise Price") under this Warrant shall be equal to $[4.50 or $6.00].
The Exercise Price and the number of shares for which the Warrant is exercisable
shall be subject to adjustment as provided herein. This Warrant is being granted
in connection with that certain Stock Purchase Agreement of even date herewith
by and between the Company and the Buyer (the "Agreement"). Capitalized terms
used herein and not otherwise defined herein shall have the meanings
respectively ascribed to such terms in the Agreement.
<PAGE>
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Company by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
2. Authorization of Shares. The Company covenants that all
shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by
this Warrant, be duly authorized, validly issued, fully-paid and nonassessable
and free from all taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).
3. Exercise of Warrant. Except as provided in Section 4 below,
exercise of the purchase rights represented by this Warrant may be made at any
time or from time to time before the close of business on the Termination Date,
or such earlier date on which this Warrant may terminate as provided in this
Warrant, by the surrender of this Warrant and the Notice of Exercise Form
annexed hereto duly executed, at the office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company) and upon payment of the Exercise Price of the shares thereby
purchased; whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the holder hereof within
three (3) business days after the date on which this Warrant shall have been
exercised as aforesaid. Payment of the Exercise Price of the shares may be by
certified check or cashier's check or by wire transfer of immediately available
funds to an account designated by the Company in an amount equal to the Exercise
Price multiplied by the number of Warrant Shares.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the holder of this Warrant or in such name or names as may be
directed by the holder of this Warrant; provided however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and provided further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of Common
Stock, the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
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<PAGE>
6. Redemption. (a) In the event that the average of the bid
and ask prices of the Common Stock as reported on the Nasdaq Stock Market for
any thirty (30) consecutive trading day period equals a minimum of One Hundred
Fifty (150%) percent of the Exercise Price (as adjusted in accordance with
Section 12 herein), the Company shall have the right, at any time thereafter, to
deliver a notice of redemption to the Buyer (the "Redemption Notice") setting
forth the Company's intention to redeem any or all of the Warrants (the
"Redemption Warrants") on a date that is no earlier than the thirty-first (31st)
day following the date of the Redemption Notice (the "Redemption Date"), at a
redemption price equal to $.01 per Warrant (the "Redemption Price").
(b) The Buyer shall have the right, at any time on or
prior to the Redemption Date, to exercise any or all of the Redemption Warrants
at the Exercise Price and upon the terms and conditions set forth herein by
following the procedures set forth in Section 3 hereof no later than the
Redemption Date.
(c) In the event that the Buyer fails to exercise the
Redemption Warrants in accordance with Section 3 hereof on or before the
Redemption Date, the Company shall have the right, but not the obligation, to
redeem the Redemption Warrants at the Redemption Price at any time within thirty
(30) business days of the Redemption Date by delivering the aggregate Redemption
Price to the Buyer, after which the Redemption Warrants shall immediately be
deemed automatically canceled and of no further force or effect and shall be
promptly returned by the Buyer to the Company marked "canceled."
7. No Rights as Shareholder until Exercise. This Warrant does
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise thereof. Upon the surrender of
this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares
so purchased shall be and be deemed to be issued to such holder as the record
owner of such shares as of the close of business on the later of the date of
such surrender or payment.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company.
9. Loss, Theft, Destruction or Mutilation of Warrant. The
Company represents and warrants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant certificate or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, if mutilated, and upon surrender and cancellation
of such Warrant or stock certificate, the Company will make and deliver a new
Warrant or stock certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a Saturday, Sunday or legal holiday.
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11. Effect of Certain Events. If the Common Stock issuable
upon exercise of this Warrant shall be changed into the same or different number
of shares of any class or classes of stock, whether by capital reorganization,
reclassification, stock split, stock dividend, or similar event, then and in
each such event, the holder of this Warrant shall have the right thereafter to
exercise this Warrant into the kind and amount of shares of stock and other
securities and property receivable upon such capital reorganization,
reclassification or other change which such holder would have received had this
Warrant been exercised immediately prior to such capital reorganization,
reclassification or other change. If at any time or from time to time there
shall be a capital reorganization of the Common Stock (other than a subdivision,
reclassification or exchange of shares provided in the previous sentence), or a
merger or consolidation of the Company with or into another corporation, or the
sale of all or substantially all of the Company's properties and/or assets to
any other person or entity (any of which events is herein referred to as a
"Reorganization"), then as part of such Reorganization, provision shall be made
so that the holders of this Warrant shall thereafter be entitled to receive upon
exercise of this Warrant, the number of shares of stock or other securities or
property of the Company, or of the successor corporation (or entity) resulting
from such Reorganization, to which such holder would have been entitled if such
holder had exercised its exercise rights granted hereunder immediately prior to
such Reorganization. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section with respect to the rights of
the holder of this Warrant after the Reorganization, to the end that the
provision of this Section (including adjustment of the number of shares issuable
upon exercise of this Warrant) shall be applicable after that event in as nearly
equivalent manner as may be practicable.
12. Adjustments of Exercise Price and Number of Warrant
Shares. In the event the Company shall (i) declare or pay a dividend in shares
of Common Stock or make a distribution in shares of Common Stock to holders of
its outstanding Common Stock, (ii) subdivide its outstanding shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this Section shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
13. Adjustment of Exercise Price-Below Market Value Issuances.
In the event that the Company issues or sells any shares of Common Stock for a
consideration per share less than the greater of the (x) closing bid price per
share of Common Stock (as reported on the Nasdaq Stock Market or the principal
securities exchange on which the Common Stock is then traded on the date
immediately preceding such issuance or sale) (the "Market Price") or (y)
Exercise Price in effect
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<PAGE>
immediately prior to such issuance or sale, then the Exercise Price, as of the
date of such issuance or sale, shall be reduced (except as provided below) to
such lesser price (calculated to the nearest cent) as shall be determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of (x) the number of shares of
Common Stock outstanding immediately prior to the issuance or sale of such
additional shares and (y) the number of shares of Common Stock which the
aggregate consideration received for the issuance or sale of such additional
shares would purchase at the greater of the Market Price on the date of such
issuance or sale or the Exercise Price then in effect, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after the issuance or sale of such additional shares, provided that, with
respect to any issuances or sales pursuant to any Van Kasper Offering, the
provisions of this Section 13 shall only apply in the event that such issuances
or sales are for a consideration per share less than the Market Price on the
date of such issuance or sale, further provided that, the Company shall not be
required to make any such adjustment in the event of (aa) the issuance of shares
of Common Stock pursuant to the exercise of the Warrants or any other warrants
or options to purchase shares of Common Stock outstanding on the date hereof,
(bb) the issuance of shares of Common Stock pursuant to that certain Stock
Purchase Agreement of even date herewith by and between the Company and the
Buyer, (cc) the granting of any stock options pursuant to the Company's 1998
Stock Option Plan or (dd) the issuance of shares of Common Stock by the Company
in connection with any merger, consolidation, or stock or asset acquisition.
14. Voluntary Adjustment by the Company. The Company may at
any time during the term of this Warrant reduce the then current Exercise Price
to any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.
15. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares (and other securities or property) after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made. Such notice, in
absence of manifest error, shall be conclusive evidence of the correctness of
such adjustment.
16. Authorized Shares. The Company covenants that during the
period this Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this Warrant.
17. Miscellaneous.
(a) Choice of Law; Venue; Jurisdiction. This Warrant will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters
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arising under federal securities law, without reference to principles of
conflicts or choice of law thereof. Each of the parties consents to the
jurisdiction of the U.S. District Court sitting in the Southern District of the
State of New York or the state courts of the State of New York sitting in
Manhattan in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Warrant obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
other state or county having jurisdiction over the party against whom such
judgment was obtained, and each party hereby waives any defenses available to it
under local law and agrees to the enforcement of such a judgment. Each party to
this Warrant irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such party at its address set forth herein. Nothing herein
shall affect the right of any party to serve process in any other manner
permitted by law. Each party waives its right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities laws.
Each certificate representing the Warrant Shares issued to the Holder upon
exercise will bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY 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."
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof by the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized as of the date first written
above.
ION NETWORKS, INC.
By: ____________________________________
Name:
Title:
[NAME OF ENTITY]
By: ____________________________________
Name:
Title:
-7-
<PAGE>
NOTICE OF EXERCISE
To: ION NETWORKS, INC.
(1) The undersigned hereby elects to purchase ________ shares
of Common Stock, par value $.001 per share (the "Common Stock") of ION NETWORKS,
INC. pursuant to the terms of the attached Warrant, and tenders herewith payment
of the exercise price in full, together with all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing
said shares of Common Stock in the name of the undersigned or in such other name
as is specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:
--------------------------------------------
Signature
-8-
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute
this form and supply required information.
Do not use this form to exercise the Warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________________________.
_______________________________________________________________________________
Dated: ________________
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
-9-
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of August __, 1999 by and
between ION NETWORKS, INC., a Delaware corporation having its principal offices
at 21 Meridian Road, Edison, New Jersey 08820 (the "Company"), and each of the
parties set forth on the schedule (the "Schedule") attached hereto
(collectively, the "Buyers").
W I T N E S S E T H:
WHEREAS, the Company desires to issue and sell to the Buyers
shares of common stock, par value $.001 per share, of the Company (the "Common
Stock"); and
WHEREAS, the Buyers desire to purchase two million (2,000,000)
shares of Common Stock (the "Shares") in accordance with the allocation set
forth in the Schedule.
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 Buyers, and each of the Buyers hereby purchases from the
Company, for and in consideration of the Purchase Price (as hereinafter
defined), the Shares in accordance with the allocation set forth on the
Schedule.
2. Purchase Price and Payment.
2.1. Subject to the terms and conditions of this Agreement,
the purchase price to be paid by the Buyers to the Company for and in
consideration of the sale to the Buyers of the Shares is an amount equal to
$9,500,000 (the "Purchase Price").
2.2. The Purchase Price shall be paid by the Buyers to the
Company at the Closing (as hereinafter defined) by wire transfer of immediately
available funds to an account designated by the Company to the Buyers.
3. Closing.
3.1. The sale and purchase of the Shares shall take place at
the offices of the Company on the date hereof or on such other date or at such
other location 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:
(a) sell, transfer, assign and deliver to the Buyers
the Shares;
<PAGE>
(b) deliver to Zesiger Capital Group LLC, the
representative of the Buyers (the "Representative"), (i) copies of the
certificate of incorporation, as amended, and the by-laws of the Company, each
as certified by a duly authorized officer of the Company, (ii) resolutions or
minutes of the board of directors of the Company authorizing this Agreement and
the transactions contemplated hereby, as certified by a duly authorized officer
of the Company, (iii) a certificate of good standing of the Company from the
Secretary of State of the State of Delaware bearing a recent date thereof and
(iv) certificates representing the Shares in the respective names of the Buyers
(or their respective nominees as indicated on the Schedule) and (v) and an
opinion of Parker Chapin Flattau & Klimpl, LLP, counsel to the Company,
addressed to the Buyers with respect to the valid existence and good standing of
the Company, the due authorization, execution and delivery of this Agreement and
the issuance and sale of the Shares, and that the Shares, upon issuance and sale
to the Buyers, are duly authorized, validly issued, fully paid and
nonassessable.
4. Registration of Shares.
4.1. The Company shall use its best 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 (ii) cause the Registration Statement to be declared effective
under the Securities Act of 1933, as amended (the "Act") as soon thereafter as
reasonably practicable. The Company promptly shall provide Buyers with such
copies of the final Prospectus contained in the Registration Statement after it
becomes effective as they shall reasonably request. In addition, the Company
shall (a) use its best efforts to keep the Registration Statement effective for
a period ending on the earlier of (x) two (2) years from its effective date or
(y) when all such Shares can be sold without limitation or delay under Rule 144
and (b) file all reports and forms required to be filed by it under the
Securities Exchange Act of 1934, as amended ("Reports") on a timely basis so
long as Buyers own any Shares and shall provide the Representative copies
thereof when filed.
4.2. 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 4.1 or, in the event the Registration Statement has been
declared effective, without suspending such effectiveness, instruct the Buyers
(or any subsequent holders thereof) not to sell or distribute any Shares (a
"Delay") 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 reasonably determines is in the best
interests of the Company not to disclose at such time, and 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, with respect to such Buyer's Shares being sold under
the Registration Statement provided that, with respect to clauses (i) and (ii)
above, the Company shall only be entitled to a maximum of three (3) Delays, each
Delay not to exceed a period of thirty (30) days; and further provided, that no
period of Delay shall commence within 60 days of a previous Delay.
-2-
<PAGE>
4.3. Each of the Buyers shall (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 pursuant to the Registration Statement,
until such time as the Buyers (or any holders) have received a supplemented or
amended prospectus from the Company relating thereto. The Company agrees to use
its best efforts to prepare any necessary amendments or supplements to the
Registration Statement as soon as reasonably practicable after the same becomes
necessary and to provide to the Representative and/or Buyers quantities of such
amendments or supplements reasonably sufficient for the distribution thereof.
4.4. The Company shall indemnify and hold harmless each of the
Buyers, the Representative and their respective officers, directors, employees,
members, agents, affiliates and control persons (each of the foregoing, a "Buyer
Indemnitee") 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 actual or alleged misrepresentation or misstatement of facts or
omission to represent or state any fact or omission to state a fact necessary to
make the facts stated under the circumstances not materially misleading, in the
Registration Statement or any amendment or supplement thereto or to the
prospectus incorporated therein from and against any claim, losses, liabilities,
costs and expenses (including attorney's fees, judgments, fines and amounts paid
in settlement) ("Loss") actually and reasonably incurred by any such Buyer
Indemnitee in connection with such claim, action, suit or proceeding or the
defense thereof, except to the extent such Loss is the direct result of a
misstatement or omission for which such Buyer Indemnitee is liable to the
Company under Section 5.10; provided, however, that the indemnification
contained in this Section 4.4 with respect to any preliminary prospectus shall
not inure to the benefit of any Buyer Indemnitee on account of any such Loss
arising from the sale of the Shares by such Buyer Indemnitee to any person if a
copy of the definitive prospectus shall not have been delivered or sent to such
person within the time required by the Act and the regulations thereunder, and
an untrue statement or alleged untrue statement or omission or alleged omission
of a material fact contained in such preliminary prospectus was corrected in the
definitive prospectus.
5. Representations and Warranties of the Buyers. Each of the
Buyers represents, warrants and covenants to the Company as to himself, herself
or itself, as follows:
5.1. The decision to purchase the Shares and the execution and
delivery of this Agreement by each of the Buyers, the performance by the Buyers
of their respective obligations hereunder and the consummation by the Buyers of
the transactions contemplated hereby have been
-3-
<PAGE>
duly authorized and no other proceedings on the part of the Buyers are
necessary. The person(s) executing this Agreement on behalf of the Buyers have
all right, power and authority to execute and deliver this Agreement on behalf
of the Buyers. This Agreement has been duly executed and delivered by the Buyers
and, assuming the due authorization, execution and delivery hereof by the
Company, will constitute the legal, valid and binding obligations of each of the
Buyers, enforceable against each of the Buyers 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.
5.2. The execution and delivery of this Agreement and the
agreements and documents contemplated hereby by the Buyers 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 any of the Buyers, 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 any of the
Buyers is a party or by which any of the Buyers' 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 any
of the Buyers.
5.3. Each of the Buyers is aware of what constitutes an
Accredited Investor as that term is defined under Regulation D promulgated under
the Act (an "Accredited Investor"), and under the laws, if any, of each state
governing the Buyers, and each of the Buyers is an Accredited Investor for
purposes of Regulation D and the laws, if any, of the state governing the
Buyers. Each of the Buyers 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.
5.4. Each of the Buyers acknowledges that it is a
sophisticated investor, has such knowledge and experience in financial and
business matters in general and through its investment adviser, the
Representative, 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 Buyers and including copies of all of the publicly
available information prepared by the Company in order to make an informed
decision as to the acquisition of the Shares by the Buyers, including without
limitation, the Annual Report of the Company on Form 10-KSB for the year ended
March 31, 1999. In addition, each of the Buyers 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. Each of the Buyers
through its investment adviser, the Representative, has reached an independent
-4-
<PAGE>
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.
5.5. Each of the Buyers 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
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.
5.6. Each of the Buyers understands that the sale of the
Shares has not been registered under the Act in reliance upon an exemption
therefrom for non-public or limited offerings. Each of the Buyers understands
that the Shares 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.
5.7. No Buyer (i) is a "broker-dealer" or an "affiliate" of a
broker-dealer as such terms are defined under the Act or (ii) is acting in
concert with any other Buyer in connection with the transactions contemplated
hereby.
5.8. Any obligation or liability for taxes (state, federal or
otherwise) incurred by any of the Buyers in connection with this Agreement or
the transactions contemplated hereby shall be the responsibility of and be paid
for by the Buyers.
5.9. Each of the Buyers 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.
5.10. Each of the Buyers 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, to the extent by reason of or
arising from any misrepresentation or misstatement of material facts or omission
to state material facts necessary to make the facts stated, under the
circumstances, not materially misleading, made or omitted by such Buyer to the
Company in a writing provided to the Company expressly for the purpose of
inclusion in 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.
-5-
<PAGE>
5.11. The power of attorney executed and delivered to the
Representative by each of the Buyers, a copy of which powers of attorney have
been provided to the Company, is in full force and effect.
5.12. None of the Buyers has employed any broker or incurred
any liability for any brokerage fees in connection with the transactions
contemplated hereby.
5.13. 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 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.
6. Representations and Warranties of the Company. The Company
represents and warrants to each of the Buyers as follows:
6.1. 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,
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 Company 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 Company, pursuant to
the terms or provisions of any contract, agreement, commitment, indenture,
mortgage, deed of trust, pledge, security agreement,
-6-
<PAGE>
note, lease, license, covenant, understanding or other instrument or obligation
to which the Company is a party or by which the Company'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 Company.
6.3. The Shares, when issued and delivered to the Buyers in
accordance with the terms of this Agreement, shall be duly authorized, validly
issued, fully-paid and nonassessable.
6.4. The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 200,000 shares of preferred stock, par
value $10.00 per share ("Preferred Stock"). As of July 26, 1999, 10,961,859
shares of Common Stock and no shares of Preferred Stock were issued and
outstanding. The Company has not granted or issued any rights, options or
warrants to acquire, or securities convertible into or exchangeable for any
Common Stock or other capital stock of the Company or rights or agreements with
respect to any thereof (all of the foregoing, collectively, the "Rights"),
except for those Rights disclosed in the annual report on Form 10-KSB/A filed by
the Company for the fiscal year ended March 31, 1999 and/or in the preliminary
proxy statement filed by the Company for the 1999 annual meeting of the
Company's shareholders (the "Proxy Statement"). The Company has not granted or
issued any Rights since the date of the Proxy Statement.
6.5. The Company has timely filed all Reports within the last
two (2) years, and to the Company's knowledge, all such Reports (i) were
prepared substantially in accordance with the Act and the rules and regulations
thereunder and (ii) did not, at the time they were filed, 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 the
light of the circumstances under which they were made, not misleading.
6.6. Each of the Company's audited financial statements for
the last two (2) fiscal years (including any notes thereto) and all unaudited
financial statements delivered to the Representative were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout such periods and fairly present the financial position of the Company
on the dates and for the periods referred to therein.
6.7. The Company presently intends to utilize the proceeds
from the sale of the Shares contemplated by this Agreement for general corporate
and working capital purposes.
6.8. No sales of Common Stock or other securities by the
Company within the last six (6) months would require integration under the Act
and Regulation D promulgated thereunder or would materially adversely affect the
sale of the Shares or the timely effectiveness of the Registration Statement
referred in Section 4.1.
-7-
<PAGE>
7. 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.
8. 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.
21 Meridian Road
Edison, New Jersey 08820
Attention: Mr. Stephen B. Gray
Facsimile No.: (732) 494-3134
If to the Buyers: c/o Zesiger Capital Group LLC
320 Park Avenue
New York, New York 10022
Attention: Mr. Albert Zesiger
Facsimile No.: (212) 508-6399
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.
9. 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.
10. Miscellaneous.
10.1. 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 enforced to the greatest extent enforceable.
10.2. 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.
10.3. 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
-8-
<PAGE>
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.
10.4. 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.
10.5. Headings. Headings of the Sections in this Agreement are
for reference purposes only and shall not be deemed to have any substantive
effect.
10.6. 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.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
on the day and year first above written.
ION NETWORKS, INC.
By:_____________________________________
Name: Stephen B. Gray
Title: President
ALZA CORPORATION RETIREMENT PLAN,
CITY OF MILFORD PENSION & RETIREMENT
FUND, NFIB CORPORATE ACCOUNT, PUBLIC
EMPLOYEE RETIREMENT SYSTEM OF IDAHO,
CITY OF STAMFORD FIREMEN'S PENSION
FUND, STATE OF OREGON PERS/ZCG, THE
JENIFER ALTMAN FOUNDATION, DEAN
WITTER FOUNDATION, ROANOKE COLLEGE,
BUTLER FAMILY LLC, DAVID ZESIGER, FRED
& LUCY GIAMPINO JTWROS, THE FERRIS
HAMILTON FAMILY TRUST, MARY ANN S.
HAMILTON TRUST FOR SELF, HBL
-9-
<PAGE>
CHARITABLE UNITRUST, ANDREW HEISKELL,
HELEN HUNT, JEANNE L. MORENCY, MURRAY
CAPITAL, LLC, DOMENIC J. MIZIO, MORGAN
TRUST CO. OF THE BAHAMAS LTD. AS
TRUSTEE U/A/D 11/30/93, SUSAN URIS
HALPERN, WILLIAM B. LAZAR, WELLS
FAMILY LLC, HAROLD & GRACE WILLENS
JTWROS, ALBERT L. ZESIGER, BARRIE
RAMSAY ZESIGER, WOLFSON INVESTMENT
PARTNERS LP
By: Zesiger Capital Group LLC
as agent and attorney-in-fact for each of
the persons named as Buyers on the Schedule
attached hereto
By:______________________________
Name: Albert L. Zesiger
Title: President
---------------------------------------
Albert L. Zesiger
-10-
<PAGE>
SCHEDULE
<TABLE>
<CAPTION>
PURCHASER SHARE QTY TOTAL COST
--------- --------- ----------
<S> <C> <C>
Alza Corporation Retirement Plan 40,000 $ 190,000
City of Milford Pension & Retirement Fund 75,000 $ 356,250
NFIB Corporate Account 60,000 $ 285,000
Public Employee Retirement System of Idaho 500,000 $ 2,375,000
City of Stamford Firemen's Pension Fund 75,000 $ 356,250
State of Oregon PERS/ZCG 645,000 $ 3,063,750
The Jenifer Altman Foundation 40,000 $ 190,000
Dean Witter Foundation 45,000 $ 213,750
Roanoke College 45,000 $ 213,750
Butler Family LLC 20,000 $ 95,000
David Zesiger 12,000 $ 57,000
Fred & Lucy Giampino JTWROS 10,000 $ 47,500
The Ferris Hamilton Family Trust 15,000 $ 71,250
Mary Ann S. Hamilton Trust for Self 15,000 $ 71,250
HBL Charitable Unitrust 15,000 $ 71,250
Andrew Heiskell 40,000 $ 190,000
Helen Hunt 15,000 $ 71,250
Jeanne L. Morency 12,000 $ 57,000
Murray Capital, LLC 13,000 $ 61,750
Domenic J. Mizio 50,000 $ 237,500
Morgan Trust Co. of the Bahamas Ltd. as Trustee
U/A/D 11/30/93 35,000 $ 168,250
Susan Uris Halpern 20,000 $ 95,000
William B. Lazar 13,000 $ 61,750
Wells Family LLC 85,000 $ 403,750
Harold & Grace Willens JTWROS 10,000 $ 47,500
Albert L. Zesiger 50,000 $ 237,500
Barrie Ramsay Zesiger 25,000 $ 118,750
Wolfson Investment Partners LP 20,000 $ 95,000
Total 2,000,000 $ 9,500,000
</TABLE>
EXHIBIT 5.1
PARKER CHAPIN FLATTAU & KLIMPL, LLP
1211 Avenue of the Americas
New York, NY 10036
(212) 704-6000
August 20, 1999
Ion Networks, Inc.
21 Meridian Road
Edison, New Jersey 08820
Gentlemen:
We have acted as counsel to Ion Networks, Inc. (the "Company") in
connection with a Registration Statement on Form S-3 filed by the Company with
the Securities and Exchange Commission (the "Registration Statement") relating
to up to 4,893,991 shares (the "Shares") of the Company's common stock, par
value $0.001 per share (the "Common Stock"). Of such Shares, 4,087,741 such
Shares have been issued by the Company and the remaining 806,250 Shares may be
issued upon exercise of warrants issued to certain holders of the Shares (the
"Warrants").
In connection with the foregoing, we have examined, among other things,
the Registration Statement, the Warrants and originals or copies, satisfactory
to us, of all such corporate records and of all such agreements, certificates
and other documents as we have deemed relevant and necessary as a basis for the
opinion hereinafter expressed. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents of all documents
submitted to us as copies. As to any facts material to such opinion, we have, to
the extent that relevant facts were not independently established by us, relied
on certificates of public officials and certificates, oaths and declarations of
officers or other representatives of the Company.
Based upon the foregoing, we are of the opinion that the Shares are,
and the Shares issuable upon exercise of the Warrants (when such Shares are paid
for and issued in accordance with the terms of the Warrants) will be, duly
authorized, validly issued, fully-paid and non-assessable.
<PAGE>
We hereby consent to the use of our name under the caption "Legal
Matters" in the Prospectus constituting a part of the Registration Statement and
to the filing of a copy of this opinion as an exhibit.
Very truly yours,
/s/ PARKER CHAPIN FLATTAU & KLIMPL, LLP
PARKER CHAPIN FLATTAU & KLIMPL, LLP
-2-
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated July 12, 1999 relating to the
financial statements, which appears in Ion Networks' Annual Report on Form
10-KSB for the year ended March 31, 1999. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
New York, New York
August 17, 1999
