-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SORX37EjQurS060FaSzutllRu+25wqyS96AgRfqwdqP68Nam8zbH1X985MsXQLrq /vt71oMkBgQxgu51R98iwg== 0000910680-99-000270.txt : 19990823 0000910680-99-000270.hdr.sgml : 19990823 ACCESSION NUMBER: 0000910680-99-000270 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19990820 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ION NETWORKS INC CENTRAL INDEX KEY: 0000754813 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 222413505 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-85693 FILM NUMBER: 99697018 BUSINESS ADDRESS: STREET 1: 21 MERIDIAN RD CITY: EDISON STATE: NJ ZIP: 08820 BUSINESS PHONE: 2014944440 MAIL ADDRESS: STREET 1: 21 MERIDIAN RD CITY: EDISON STATE: NJ ZIP: 08820 FORMER COMPANY: FORMER CONFORMED NAME: MICROFRAME INC DATE OF NAME CHANGE: 19920703 S-3 1 ION NETWORKS, INC. FORM S-3 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. CALCULATION OF REGISTRATION FEE
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 ==================================================================================================================================== 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 ====================================================================================================================================
(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. --------------------------- 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 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 -2- 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. -3- 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. ------------------------- -4- 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; -5- 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- 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. -7- 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. -8- 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. -9- 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. -10- 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.
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 ------------------- ---------------- ------------- ------------- 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 - 11- 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 -12- 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- 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
- --------------------- * 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- 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- 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- 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- 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- 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 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 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 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 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 EX-4.1 2 STOCK PURCHASE AGREEMENT 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 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- 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 -3- 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 -4- 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 -5- 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 -6- 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. -7- 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: -8- 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 -9- EX-4.2 3 WARRANT 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. 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. -2- 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. -3- 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 -4- 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 -5- 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- 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- 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- 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- EX-4.3 4 STOCK PURCHASE AGREEMENT 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; (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- 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- 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- 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- 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- 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- 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- 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- 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- SCHEDULE
PURCHASER SHARE QTY TOTAL COST --------- --------- ---------- 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
EX-5.1 5 OPINION OF PARKER CHAPIN 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. 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- EX-23.1 6 CONSENT OF INDEPENDENT ACCOUNTANTS 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 -----END PRIVACY-ENHANCED MESSAGE-----