EXHIBIT 10.26
SECURITIES PURCHASE AGREEMENT
ILINC COMMUNICATIONS, INC.
JAMES M. POWERS, JR., PRESIDENT
2999 NORTH 44TH STREET, SUITE 650
PHOENIX, AZ 85016
The undersigned investor (the "INVESTOR") hereby confirms Investor's agreement
with iLinc Communications, Inc. ("iLinc" or the "Company") as follows:
1. This Securities Purchase Agreement is made as of the date set forth below
between the Company and the Investor.
2. The Company has authorized the sale and issuance of up to 5,400,000 shares
(the "SHARES") of the common stock of the Company, $0.001 par value per share
(the "COMMON STOCK"), to certain investors in a private placement (the
"OFFERING").
3. The Company and the Investor agree that the Investor will purchase from the
Company and the Company will issue and sell to the Investor 2,702,703 Shares at
a purchase price of $0.37 per Share, for an aggregate purchase price of
$1,000,000 (the "PURCHASE PRICE"), subject to the Terms and Conditions for
Purchase of Shares attached hereto as Annex I and incorporated herein by
reference as if fully set forth herein. Unless otherwise requested by the
Investor in Exhibit "A", certificates representing the Shares purchased by the
Investor will be registered in the Investor's name and address as set forth
below.
4. The Investor represents that, except as set forth below, (a) it has had no
position, office or other material relationship within the past three (3) years
with the Company or its affiliates, (b) neither it, nor any group of which it is
a member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company, and (c) it has no direct or
indirect affiliation or association with any National Association of Securities
Dealers, Inc. ("NASD") member. Exceptions:
None
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(If no exceptions, write "none." If left blank, response
will be deemed to be "none.")
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Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
DATED AS OF: June 6, 2006
Herald Investment Management Limited
on behalf of Herald Investment Trust PLC
By: /s/ Fraser Elms
-------------------------------------
Name: Fraser Elms
Title: Fund Manager
Herald Investment Management Ltd.
Address: 10-11 Charterhouse Square
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London, ECIM 6AX
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AGREED AND ACCEPTED:
iLinc Communications, Inc.
By: /s/ James M. Powers, Jr.
-----------------------------------
Name: James M. Powers, Jr.
Title: President
[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
Securities Purchase Agreement - Subscription Letter Page 2 of 12
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. AGREEMENT TO SELL AND PURCHASE THE SHARES; SUBSCRIPTION DATE.
1.1 PURCHASE AND SALE. At the Closing (as defined in Section
2), the Company will sell to the Investor, and the Investor will purchase from
the Company, upon the terms and subject to the conditions set forth herein, and
at the Purchase Price, the number of Shares described in paragraph 3 of the
Securities Purchase Agreement attached hereto (collectively with this Annex I
and the other exhibits attached hereto, this "Agreement").
1.2 OTHER INVESTORS. As part of the Offering, the Company
proposes to enter into Securities Purchase Agreements in the same form as this
Agreement with certain other investors (the "OTHER INVESTORS"), and the Company
expects to complete sales of Shares to them. The Investor and the Other
Investors are sometimes collectively referred to herein as the "INVESTORS," and
this Agreement, the Registration Rights Agreement and the Securities Purchase
Agreements executed by the Other Investors are sometimes collectively referred
to herein as the "AGREEMENTS." The Company may accept executed Agreements from
Investors for the purchase of Shares commencing upon the date on which the
Company provides the Investors with the proposed purchase price per Share and
concluding upon the date (the "SUBSCRIPTION DATE") on which the Company has
notified Canaccord Adams, Inc. (in its capacity as placement agent for the
Shares, the "PLACEMENT AGENT") in writing that it will no longer accept
Agreements for the purchase of Shares in the Offering, but in no event shall the
Subscription Date be later than JUNE 8, 2006. Each Investor must execute and
deliver a Securities Purchase Agreement and a Registration Rights Agreement and
must complete a Stock Certificate Questionnaire (in the form attached as Exhibit
"A" hereto) and an Investor Questionnaire (in the form attached as Exhibit "B"
hereto) in order to purchase Shares in the Offering.
1.3 PLACEMENT AGENT FEE. The Investor acknowledges that the
Company intends to pay to the Placement Agent a fee in respect of the sale of
Shares to the Investor from the proceeds of the Offering.
2. DELIVERY OF THE SHARES AT CLOSING. The completion of the purchase
and sale of the Shares (the "CLOSING") shall occur on a date specified by the
Company and the Placement Agent that is anticipated to be June 9, 2006 (the
"CLOSING DATE"), but which date shall not be later than June 16, 2006 (the
"OUTSIDE DATE"), and of which the Investors will be notified in writing in
advance by the Placement Agent. At the Closing, the Company shall deliver to the
Investor one or more stock certificates representing the number of Shares set
forth in paragraph 3 of the Stock Purchase Agreement, each such certificate to
be registered in the name of the Investor or, if so indicated on the Stock
Certificate Questionnaire, in the name of a nominee designated by the Investor.
In exchange for the delivery of the subscription agreements, the Investor shall
deliver the Purchase Price to the Placement Agent by wire transfer of
immediately available funds pursuant to written instructions to be held in
escrow pending closing of the Offering. On the Closing Date, the Company shall
cause counsel to the Company to deliver to the Investors a legal opinion, dated
the Closing Date, substantially in the form attached hereto as Exhibit "C" (the
"LEGAL OPINION").
The Company's obligation to issue and sell the Shares to the Investor
shall be subject to the following conditions, any one or more of which may be
waived by the Company: (a) prior receipt by the Company of an executed copy of
this Securities Purchase Agreement; (b) completion of purchases and sales of
Shares under the Agreements with the Other Investors; (c) the accuracy of the
representations and warranties made by the Investor in this Agreement and the
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fulfillment of the obligations of the Investor to be fulfilled by it under this
Agreement on or prior to the Closing; and (d) the absence of any order, writ,
injunction, judgment or decree that questions the validity of the Agreements or
the right of the Company or the Investor to enter into such Agreements or to
consummate the transactions contemplated hereby and thereby.
The Investor's obligation to purchase the Shares shall be subject to
the following conditions, any one or more of which may be waived by the
Investor: (a) the completion, execution and return of the completed Securities
Purchase Agreement (with exhibits thereto) by all Investors and the funding into
escrow of no less than one million dollars ($1,000,0000); (b) the delivery of
the Legal Opinion to the Investor by counsel to the Company; (c) the accuracy of
the representations and warranties made by the Company in this Agreement on the
Closing Date; (c) the execution and delivery by the Company of the Registration
Rights Agreement, (d) the absence of any order, writ, injunction, judgment or
decree that questions the validity of the Agreements or the right of the Company
or the Investor to enter into such Agreements or to consummate the transactions
contemplated hereby and thereby; and (e) the delivery to the Investor by the
Secretary or Assistant Secretary of the Company of a certificate stating that
the conditions specified in this paragraph have been fulfilled.
In the event that the Closing does not occur on or before the Outside
Date as a result of the Company's failure to satisfy any of the conditions set
forth above (and such condition has not been waived by the Investor), the
Company shall return any and all funds paid hereunder to the Investor no later
than one Business Day following the Outside Date and the Investors shall have no
further obligations hereunder. For purposes of this Agreement, "BUSINESS DAY"
shall mean any day other than a Saturday, Sunday or other day on which the New
York Stock Exchange are permitted or required by law to close.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. Except as
otherwise described in the Company's Annual Report on Form 10-K for the year
ended March 31, 2005 (and any amendments thereto filed at least two (2) Business
Days prior to the Closing Date), Company's most recent Quarterly Report on Form
10-Q for the quarter ended December 31, 2005 (and any amendments thereto filed
at least two (2) Business Days prior to the Closing Date), the Company's Proxy
Statement for its 2005 Annual Meeting of Shareholders, and any of the Company's
Current Reports on Form 8-K filed since December 31, 2005 (and any amendments
thereto filed at least two (2) Business Days prior to the Closing Date) (all
collectively, the "SEC REPORTS"), the Company hereby represents and warrants to,
and covenants with, the Investor as of the date hereof and the Closing Date, as
follows:
3.1 ORGANIZATION. The Company is duly incorporated and validly
existing in good standing under the laws of the State of Delaware. The Company
has full power and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and is registered or qualified to do
business and in good standing in each jurisdiction in which it owns property or
transacts business and where the failure to be so qualified would have a
material adverse effect upon the Company and its subsidiaries as a whole or the
business, financial condition, properties, operations or assets of the Company
and its subsidiaries as a whole or the Company's ability to perform its
obligations under the Agreements in all material respects ("MATERIAL ADVERSE
EFFECT"), and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
3.2 DUE AUTHORIZATION. The Company has all requisite power and
authority to execute, deliver and perform its obligations under the Agreements.
The execution and delivery of the Agreements, and the consummation by the
Company of the transactions contemplated hereby, have been duly authorized by
all necessary corporate action and no further action on the part of the Company
or its Board of Directors or stockholders is required. The Agreements have been
validly executed and delivered by the Company and constitute legal, valid and
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binding agreements of the Company enforceable against the Company in accordance
with their terms, except to the extent (i) rights to indemnity and contribution
may be limited by state or federal securities laws or the public policy
underlying such laws, (ii) such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and (iii) such
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.3 NO CONFLICT OR DEFAULT. The execution and delivery of the
Agreements, the issuance and sale of the Shares to be sold by the Company under
the Agreements, the fulfillment of the terms of the Agreements and the
consummation of the transactions contemplated thereby will not: (A) result in a
conflict with or constitute a material violation of, or material default (with
the passage of time or otherwise) under, (i) any bond, debenture, note, loan
agreement or other evidence of indebtedness, or any material lease, or contract
to which the Company is a party or by which the Company or their respective
properties are bound, (ii) the Certificate of Incorporation, by-laws or other
organizational documents of the Company, as amended, or (iii) any law,
administrative regulation, or existing order of any court or governmental
agency, or other authority binding upon the Company or the Company's respective
properties; or, (B) result in the creation or imposition of any lien,
encumbrance, claim, or security interest upon any of the material assets of the
Company or an acceleration of indebtedness pursuant to any obligation, agreement
or condition contained in any material bond, debenture, note or any other
evidence of indebtedness or any material indenture, mortgage, deed of trust or
any other agreement or instrument to which the Company is a party or by which it
is bound or to which any of the property or assets of the Company is subject. No
consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or
other governmental body is required for the execution and delivery of the
Agreements by the Company and the valid issuance or sale of the Shares by the
Company pursuant to the Agreements, other than such as have been made or
obtained, and except for any filings required to be made under federal or state
securities laws.
3.4 CAPITALIZATION. The outstanding capital stock of the
Company is as described in the Company's Quarterly Report on Form 10-Q for the
three month period ending December 31, 2005 and the private placement memorandum
dated May 31, 2006 (the "Memorandum") provided to Investor. The Company has not
issued any capital stock since December 31, 2005, other than pursuant to the
purchase of shares under the Company's employee stock option plan and the
exercise of outstanding warrants or stock options, in each case as disclosed in
the Memorandum or the SEC Reports. The Shares to be sold pursuant to the
Agreements have been duly authorized, and when issued and paid for in accordance
with the terms of the Agreements, will be duly and validly issued, fully paid
and nonassessable, subject to no lien, claim or encumbrance (except for any such
lien, claim or encumbrance created, directly or indirectly, by the Investor).
The outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, have been issued in
compliance with the registration requirements of federal and state securities
laws, and were not issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. The Company owns one hundred
percent of all of the outstanding capital stock of each of its subsidiaries,
free and clear of all liens, claims and encumbrances. There are not (i) any
outstanding preemptive rights, or (ii) any rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company not disclosed in
the SEC Reports or Memorandum, or (iii) any contract, commitment, agreement,
understanding or arrangement of any kind to which the Company is a party that
would provide for the issuance or sale of any capital stock of the Company, any
such convertible or exchangeable securities or any such rights, warrants or
options not disclosed in the SEC Reports or the Memorandum. There are no
shareholders agreements, voting agreements or other similar agreements with
respect to the Common Stock to which the Company is a party.
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3.5 LEGAL PROCEEDINGS. There is no material legal or
governmental proceeding pending, or to the knowledge of the Company, threatened,
to which the Company is a party or of which the business or property of the
Company is subject that is required to be disclosed and that is not so disclosed
in the SEC Reports. Other than the information disclosed in the SEC Reports, the
Company is not subject to any injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other government body.
3.6 NO VIOLATIONS. The Company is not in violation of its
Certificate of Incorporation, bylaws or other organizational documents, as
amended. The Company is not in violation of any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company, which violation, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect. The Company
is not in default (and there exists no condition which, with the passage of time
or otherwise, would constitute a default) in the performance of any bond,
debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company is a party or by which the Company is bound, which such default
would have a Material Adverse Effect upon the Company.
3.7 GOVERNMENTAL PERMITS, ETC. Each of the Company has all
necessary franchises, licenses, certificates and other authorizations from any
foreign, federal, state or local government or governmental agency, department
or body that are currently necessary for the operation of the business of the
Company as currently conducted, except where the failure to currently possess
such franchises, licenses, certificates and other authorizations is not
reasonably likely to have a Material Adverse Effect.
3.8 INTELLECTUAL PROPERTY.
(a) Except for matters which are not reasonably
likely to have a Material Adverse Effect, (i) each of the Company has ownership
of, or a license or other legal right to use, all patents, copyrights, trade
secrets, trademarks, customer lists, designs, manufacturing or other processes,
computer software, systems, data compilation, research results or other
proprietary rights used in the business of the Company (collectively,
"INTELLECTUAL PROPERTY") and (ii) all of the Intellectual Property owned by the
Company consisting of patents, registered trademarks and registered copyrights
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Register of Copyrights or the corresponding
offices of other jurisdictions and have been maintained and renewed in
accordance with all applicable provisions of law and administrative regulations
in the United States and/or such other jurisdictions.
(b) Except for matters which are not reasonably
likely to have a Material Adverse Effect, all material licenses or other
material agreements under which (i) the Company employs rights in Intellectual
Property, or (ii) the Company has granted rights to others in Intellectual
Property owned or licensed by the Company are in full force and effect, and
there is no default by the Company with respect thereto.
(c) The Company believes that it has taken all steps
reasonably required in accordance with sound business practice and business
judgment to establish and preserve the ownership of the Company's material
Intellectual Property.
(d) Except for matters which are not reasonably
likely to have a Material Adverse Effect, to the knowledge of the Company, (i)
the present business, activities and products of the Company do not infringe any
intellectual property of any other person; (ii) neither the Company is making
unauthorized use of any confidential information or trade secrets of any person;
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and (iii) the activities of any of the employees of the Company, acting on
behalf of the Company, do not materially violate any agreements or arrangements
related to confidential information or trade secrets of third parties.
(e) Except for matters which are not reasonably
likely to have a Material Adverse Effect, and except as disclosed in the SEC
Reports, no proceedings are pending, or to the knowledge of the Company,
threatened, which challenge the rights of the Company to the use the Company's
Intellectual Property.
3.9 FINANCIAL STATEMENTS. The financial statements of the
Company and the related notes contained in the SEC Reports present fairly and
accurately in all material respects the financial position of the Company as of
the dates therein indicated, and the results of its operations, cash flows and
the changes in shareholders' equity for the periods therein specified, subject,
in the case of unaudited financial statements for interim periods, to normal
year-end audit adjustments. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis at the times and throughout the periods
therein specified, except that unaudited financial statements may not contain
all footnotes required by generally accepted accounting principles.
3.10 NO MATERIAL ADVERSE CHANGE. Except as disclosed in the
SEC Reports or in any press releases issued by the Company prior to the Closing
Date, there has not been (i) an event, circumstance or change that has had or is
reasonably likely to have a Material Adverse Effect upon the Company, (ii) any
obligation incurred by the Company that is material to the Company, (iii) any
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company, or (iv) any loss or damage (whether or not insured) to the
physical property of the Company which has had a Material Adverse Effect.
3.11 AMEX COMPLIANCE. The Company's Common Stock is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and is listed on the American Stock Exchange (the "AMEX"),
and the Company has taken no action intended to, or which to its knowledge could
have the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from the Amex. The issuance of the
Shares does not require shareholder approval, including, without limitation,
pursuant to Section 713 of the Amex Company Guide.
3.12 REPORTING STATUS. The Company has timely made all filings
required under the Exchange Act during the twelve (12) months preceding the date
of this Agreement, and all of those documents complied in all material respects
with the SEC's requirements as of their respective filing dates, and the
information contained therein as of the respective dates thereof did not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading. The Company is
currently eligible to register the resale of Common Stock by the Investors
pursuant to a registration statement on Form S-3 under the Securities Act (the
"REGISTRATION STATEMENT").
3.13 NO MANIPULATION; DISCLOSURE OF INFORMATION. The Company
has not taken and will not take any action designed to or that might reasonably
be expected to cause or result in an unlawful manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares. The Company has not
disclosed any material non-public information to the Investors.
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3.14 ACCOUNTANTS. Epstein Weber & Conover, PLC, who expressed
their opinion with respect to the consolidated financial statements to be
incorporated by reference from the Company's Annual Report on Form 10-K for the
year ended March 31, 2005 into the Registration Statement and the prospectus
which forms a part thereof (the "PROSPECTUS"), have advised the Company that
they are, and to the knowledge of the Company they are, independent accountants
as required by the Securities Act and the rules and regulations promulgated
thereunder.
3.15 CONTRACTS. Except for matters which are not reasonably
likely to have a Material Adverse Effect and those contracts that are
substantially or fully performed or expired by their terms, the contracts listed
as exhibits to or described in the SEC Reports that are material to the Company
and all amendments thereto, are in full force and effect on the date hereof, and
neither the Company nor, to the Company's knowledge, any other party to such
contracts is in breach of or default under any of such contracts.
3.16 TAXES. Except for tax matters which are not reasonably
likely to have a Material Adverse Effect, each of the Company and each of its
Subsidiaries has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon.
3.17 TRANSFER TAXES. On the Closing Date, all stock transfer
or other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares hereunder will be, or will
have been, fully paid or provided for by the Company and the Company will have
complied with all laws imposing such taxes.
3.18 INVESTMENT COMPANY. The Company is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for an investment company, within the meaning of the Investment Company Act of
1940, as amended, and will not be deemed an "investment company" as a result of
the transactions contemplated by this Agreement.
3.19 INSURANCE. The Company maintains insurance of the types
and in the amounts that the Company reasonably believes is adequate for its
businesses, including, but not limited to, insurance covering real and personal
property owned or leased by the Company against theft, damage, destruction, acts
of vandalism and all other risks customarily insured against by similarly
situated companies, all of which insurance is in full force and effect.
3.20 OFFERING PROHIBITIONS. Neither the Company nor any person
acting on its behalf or at its direction has in the past or will in the future
take any action to sell, offer for sale or solicit offers to buy any securities
of the Company which would bring the offer or sale of the Shares as contemplated
by this Agreement within the provisions of Section 5 of the Securities Act.
3.21 LISTING. The Company shall comply with all requirements
with respect to the issuance of the Shares and the listing thereof on Amex.
3.22 RELATED PARTY TRANSACTIONS. Other than described in the
SEC Reports, to the knowledge of the Company, no transaction has occurred
between or among the Company or any of its affiliates, officers or directors or
any affiliate or affiliates of any such officer or director that with the
passage of time are reasonably likely be required to be disclosed pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
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3.23 BOOKS AND RECORDS. The books, records and accounts of the
Company accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the operations of, the Company. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.24 ADDITIONAL CONTINGENT CONSIDERATION. The Company expects
that with the funding of the Offering and the additional capital provided
thereby, that the Company's auditor will not express doubt about the company's
ability to continue as a going concern (i.e. provided a so-called "Clean
Opinion"). However, should the auditor again express such doubt and not provide
a Clean Opinion despite the additional capital as a part of the annual report
for the fiscal year ending March 31, 2006 on Form 10-K, then the Company will
issue to Investors additional cash consideration ("Additional Consideration")
equal to five percent (5.000%) of the gross proceeds. By way of example, should
the Company raise $2,000,000, and the Company's auditor not provide a Clean
Opinion, then iLinc will owe to Investors $100,000, with such Additional
Consideration, if due, paid to within fifteen (15) days of the filing of the
Company's Form 10-K in which the opinion expressing doubt is included. Provided
however, that should the auditor issue an opinion that is a Clean Opinion then
the obligation to provide Contingent Consideration under this Section 3.24 shall
forever expire without further obligation to Investors.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.
4.1 INVESTOR KNOWLEDGE AND STATUS. The Investor represents and
warrants to, and covenants with, the Company that: (i) the Investor is an
"accredited investor" as defined in Regulation D under the Securities Act, is
knowledgeable, sophisticated and experienced in making, and is qualified to make
decisions with respect to, investments in securities presenting an investment
decision similar to that involved in the purchase of the Shares, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Shares; (ii) the Investor
understands that the Shares are "restricted securities" and have not been
registered under the Securities Act and is acquiring the number of Shares set
forth in paragraph 3 of the Securities Purchase Agreement in the ordinary course
of its business and for its own account for investment only, has no present
intention of distributing any of such Shares and has no arrangement or
understanding with any other persons regarding the distribution of such Shares
(this representation and warranty not limiting the Investor's right to sell
Shares pursuant to a Registration Statement filed under the Registration Rights
Agreement or otherwise, or other than with respect to any claim arising out of a
breach of this representation and warranty, the Investor's right to
indemnification under Section 3 of the Registration Rights Agreement); (iii) the
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder; (iv) the Investor has answered all questions
in paragraph 4 of the Securities Purchase Agreement and the Investor
Questionnaire attached hereto as Exhibit B for use in preparation of the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; (v) the
Investor will notify the Company promptly of any change in any of such
information until such time as the Investor has sold all of its Shares or until
the Company is no longer required to keep the Registration Statement effective;
and (vi) the Investor has, in connection with its decision to purchase the
number of Shares set forth in paragraph 3 of the Securities Purchase Agreement,
relied upon the representations and warranties of the Company contained herein
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and the information contained in the SEC Reports. The Investor understands that
the issuance of the Shares to the Investor has not been registered under the
Securities Act, or registered or qualified under any state securities law, in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the representations made by the Investor in this Agreement.
No person (including without limitation the Placement Agent) is authorized by
the Company to provide any representation that is inconsistent with or in
addition to those contained herein or in the SEC Reports, and the Investor
acknowledges that it has not received or relied on any such representations.
4.2 TRANSFER OF SHARES. The Investor agrees that it will not
make any sale, transfer or other disposition of the Shares (a "DISPOSITION")
other than Dispositions that are made pursuant to the Registration Statement in
compliance with any applicable prospectus delivery requirements or that are
exempt from registration under the Securities Act. Investor has not taken and
will not take any action designed to or that might reasonably be expected to
cause or result in manipulation of the price of the Common Stock to facilitate
the subscription to, or the sale or resale of the Shares. The Company has not
disclosed any material non-public information to the Investors.
4.3 POWER AND AUTHORITY. The Investor represents and warrants
to the Company that (i) the Investor has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) this Agreement
constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its terms, except to the extent (i) rights to
indemnity and contribution may be limited by state or federal securities laws or
the public policy underlying such laws, (ii) such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and (iii) such
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.4 NO SHORT POSITION. The Investor has not prior to the
Closing Date, and will not for the one (1) year period beginning with the
Closing Date, established any hedge or other position in the Common Stock that
is issued and outstanding, and that is designed to or could reasonably be
expected to lead to or result in a sale, transfer or other disposition by the
Investor or any other person or entity under the control or direction of
Investor. For purposes hereof, a "hedge or other position" would include,
without limitation, effecting any short sale or having in effect any short
position (whether or not such sale or position is against the box and regardless
of when such position was entered into) or any purchase, sale or grant of any
right (including, without limitation, any put or call option) with respect to
the Common Stock or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from the Common Stock.
4.5 NO INVESTMENT, TAX OR LEGAL ADVICE. The Investor
understands that nothing in the SEC Reports, this Agreement, or any other
materials presented to the Investor in connection with the purchase and sale of
the Shares constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of Shares.
4.6 ACKNOWLEDGMENTS REGARDING PLACEMENT AGENT. The Investor
acknowledges that the Placement Agent has acted solely as placement agent for
the Company in connection with the Offering of the Shares by the Company, and
that the Placement Agent has made no representation or warranty whatsoever with
respect to the accuracy or completeness of information, data or other related
disclosure material that has been provided to the Investor. The Investor further
acknowledges that in making its decision to enter into this Agreement and
purchase the Shares, it has relied on its own examination of the Company and the
terms of, and consequences of holding, the Shares. The Investor further
Securities Purchase Agreement Page 10 of 12
acknowledges that the provisions of this Section 4.7 are for the benefit of, and
may be enforced by, the Placement Agent. Investor has not received any general
solicitation or advertising regarding the Offering and Investor has not been
furnished with any oral or written representation or information in connection
with the Offering which is not contained in the SEC Reports or set forth in the
Memorandum.
4.7 ADDITIONAL ACKNOWLEDGEMENT. Investor has thoroughly
reviewed and the SEC Reports and the Memorandum (the "Disclosure Documents")
prior to making this investment. Investor has been granted a reasonable time
prior to the date hereof during which we have had the opportunity to obtain such
additional information as Investor deems necessary to permit Investor to make an
informed decision with respect to the purchase of the Common Stock. After
examination of the SEC Reports and other information available, Investor is
fully aware of the business prospects, financial condition, risks associated
with investment and the operating history relating to the Company, and therefore
in subscribing for the purchase of the Shares, Investor is not relying upon any
information other than information contained in the Disclosure Documents. The
Investor acknowledges that it has independently evaluated the merits of the
transactions contemplated by this Agreement, that it has independently
determined to enter into the transactions contemplated hereby, that it is not
relying on any advice from or evaluation by any Other Investor, and that it is
not acting in concert with any Other Investor in making its purchase of the
Shares hereunder. The Investor and, to its knowledge, the Company acknowledge
that the Investors have not taken any actions that would deem the Investors to
be members of a "group" for purposes of Section 13(d) of the Exchange Act.
5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Investor herein shall survive the execution of this
Agreement, the delivery to the Investor of the Shares being purchased and the
payment therefor, and a party's reliance on such representations and warranties
shall not be affected by any investigation made by such party or any information
developed thereby.
6. REGISTRATION OF SHARES; PUBLIC STATEMENTS.
6.1 In connection with the purchase and sale of the Shares by
the Investors contemplated hereby, the Company has entered into a Registration
Rights Agreement with each Investor providing for the filing by the Company of a
Registration Statement on Form S-3 to enable the resale of the Shares by the
Investors from time to time.
6.2 The Company agrees to disclose on a Current Report on Form
8-K the existence of the Offering and the material terms, thereof, including
pricing, within four (4) days after the Closing. The Company will not issue any
public statement, press release or any other public disclosure listing the
Investor as one of the purchasers of the Shares without the Investor's prior
review of the statement and prior consent thereto, except as may be required by
applicable law or rules of any exchange on which the Company's securities are
listed.
7. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be delivered (A) if within the United
States, by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if from
outside the United States, by International Federal Express (or comparable
service) or facsimile, and shall be deemed given (i) if delivered by first-class
registered or certified mail domestic, upon the Business Day received, (ii) if
delivered by nationally recognized overnight carrier, one (1) Business Day after
timely delivery to such carrier, (iii) if delivered by International Federal
Express (or comparable service), two (2) Business Days after timely delivery to
Securities Purchase Agreement Page 11 of 12
such carrier, (iv) if delivered by facsimile, upon electric confirmation of
receipt and shall be addressed as follows, or to such other address or addresses
as may have been furnished in writing by a party to another party pursuant to
this paragraph:
(a) if to the Company, to:
iLinc Communications, Inc.
2999 North 44th Street, Suite 650
Phoenix, AZ 85016
Attention: James L. Dunn, Jr.
Telephone: 602-952-1200
Fax: 602-952-1200
with a copy to:
Jackson Walker, LLP
901 Main Street, Suite 6000
Dallas, TX 75202
Attention: James Ryan III
Telephone: (516) 433-1200
Fax: (214) 661-6688
(b) if to the Investor, at its address on the
signature page to the Stock Purchase Agreement.
8. AMENDMENTS; WAIVER. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Investor. Any waiver of a provision of this Agreement must be in writing and
executed by the party against whom enforcement of such waiver is sought.
9. HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
10. ENTIRE AGREEMENT; SEVERABILITY. This Agreement sets forth the
entire agreement and understanding of the parties relating to the subject matter
hereof and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. If any provision contained in this Agreement is
determined to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
11. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of New York, without giving
effect to the principles of conflicts of law.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
Securities Purchase Agreement Page 12 of 12
SECURITIES PURCHASE AGREEMENT
ILINC COMMUNICATIONS, INC.
JAMES M. POWERS, JR., PRESIDENT
2999 NORTH 44TH STREET, SUITE 650
PHOENIX, AZ 85016
The undersigned investor (the "INVESTOR") hereby confirms Investor's agreement
with iLinc Communications, Inc. ("iLinc" or the "Company") as follows:
1. This Securities Purchase Agreement is made as of the date set forth below
between the Company and the Investor.
2. The Company has authorized the sale and issuance of up to 5,400,000 shares
(the "SHARES") of the common stock of the Company, $0.001 par value per share
(the "COMMON STOCK"), to certain investors in a private placement (the
"OFFERING").
3. The Company and the Investor agree that the Investor will purchase from the
Company and the Company will issue and sell to the Investor 1,621,621 Shares at
a purchase price of $0.37 per Share, for an aggregate purchase price of $600,000
(the "PURCHASE PRICE"), subject to the Terms and Conditions for Purchase of
Shares attached hereto as Annex I and incorporated herein by reference as if
fully set forth herein. Unless otherwise requested by the Investor in Exhibit
"A", certificates representing the Shares purchased by the Investor will be
registered in the Investor's name and address as set forth below.
4. The Investor represents that, except as set forth below, (a) it has had no
position, office or other material relationship within the past three (3) years
with the Company or its affiliates, (b) neither it, nor any group of which it is
a member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company, and (c) it has no direct or
indirect affiliation or association with any National Association of Securities
Dealers, Inc. ("NASD") member. Exceptions:
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If no exceptions, write "none." If left blank, response
will be deemed to be "none.")
Securities Purchase Agreement Page 1 of 12
Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
DATED AS OF: June 8, 2006
Sophrosyne Technology Fund Ltd.
-----------------------------------------------
By: /s/ Benjamin James Taylor
-------------------------------------------
Name: Benjamin James Taylor
Title: Director
Address: Ogier Fiduciary Services (Cayman) Ltd.
--------------------------------------
Queensgate House, South Church St.
-----------------------------------------
P.O. Box 1234 GT, Grand Cayman
-----------------------------------------
AGREED AND ACCEPTED:
iLinc Communications, Inc.
By: /s/ James M. Powers, Jr.
-----------------------------------
Name: James M. Powers, Jr.
Title: President
[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
Securities Purchase Agreement - Subscription Letter Page 2 of 12
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. AGREEMENT TO SELL AND PURCHASE THE SHARES; SUBSCRIPTION DATE.
1.1 PURCHASE AND SALE. At the Closing (as defined in Section
2), the Company will sell to the Investor, and the Investor will purchase from
the Company, upon the terms and subject to the conditions set forth herein, and
at the Purchase Price, the number of Shares described in paragraph 3 of the
Securities Purchase Agreement attached hereto (collectively with this Annex I
and the other exhibits attached hereto, this "Agreement").
1.2 OTHER INVESTORS. As part of the Offering, the Company
proposes to enter into Securities Purchase Agreements in the same form as this
Agreement with certain other investors (the "OTHER INVESTORS"), and the Company
expects to complete sales of Shares to them. The Investor and the Other
Investors are sometimes collectively referred to herein as the "INVESTORS," and
this Agreement, the Registration Rights Agreement and the Securities Purchase
Agreements executed by the Other Investors are sometimes collectively referred
to herein as the "AGREEMENTS." The Company may accept executed Agreements from
Investors for the purchase of Shares commencing upon the date on which the
Company provides the Investors with the proposed purchase price per Share and
concluding upon the date (the "SUBSCRIPTION DATE") on which the Company has
notified Canaccord Adams, Inc. (in its capacity as placement agent for the
Shares, the "PLACEMENT AGENT") in writing that it will no longer accept
Agreements for the purchase of Shares in the Offering, but in no event shall the
Subscription Date be later than JUNE 8, 2006. Each Investor must execute and
deliver a Securities Purchase Agreement and a Registration Rights Agreement and
must complete a Stock Certificate Questionnaire (in the form attached as Exhibit
"A" hereto) and an Investor Questionnaire (in the form attached as Exhibit "B"
hereto) in order to purchase Shares in the Offering.
1.3 PLACEMENT AGENT FEE. The Investor acknowledges that the
Company intends to pay to the Placement Agent a fee in respect of the sale of
Shares to the Investor from the proceeds of the Offering.
2. DELIVERY OF THE SHARES AT CLOSING. The completion of the purchase
and sale of the Shares (the "CLOSING") shall occur on a date specified by the
Company and the Placement Agent that is anticipated to be June 9, 2006 (the
"CLOSING DATE"), but which date shall not be later than June 16, 2006 (the
"OUTSIDE DATE"), and of which the Investors will be notified in writing in
advance by the Placement Agent. At the Closing, the Company shall deliver to the
Investor one or more stock certificates representing the number of Shares set
forth in paragraph 3 of the Stock Purchase Agreement, each such certificate to
be registered in the name of the Investor or, if so indicated on the Stock
Certificate Questionnaire, in the name of a nominee designated by the Investor.
In exchange for the delivery of the subscription agreements, the Investor shall
deliver the Purchase Price to the Placement Agent by wire transfer of
immediately available funds pursuant to written instructions to be held in
escrow pending closing of the Offering. On the Closing Date, the Company shall
cause counsel to the Company to deliver to the Investors a legal opinion, dated
the Closing Date, substantially in the form attached hereto as Exhibit "C" (the
"LEGAL OPINION").
The Company's obligation to issue and sell the Shares to the Investor
shall be subject to the following conditions, any one or more of which may be
waived by the Company: (a) prior receipt by the Company of an executed copy of
this Securities Purchase Agreement; (b) completion of purchases and sales of
Shares under the Agreements with the Other Investors; (c) the accuracy of the
representations and warranties made by the Investor in this Agreement and the
Securities Purchase Agreement Page 3 of 12
fulfillment of the obligations of the Investor to be fulfilled by it under this
Agreement on or prior to the Closing; and (d) the absence of any order, writ,
injunction, judgment or decree that questions the validity of the Agreements or
the right of the Company or the Investor to enter into such Agreements or to
consummate the transactions contemplated hereby and thereby.
The Investor's obligation to purchase the Shares shall be subject to
the following conditions, any one or more of which may be waived by the
Investor: (a) the completion, execution and return of the completed Securities
Purchase Agreement (with exhibits thereto) by all Investors and the funding into
escrow of no less than one million dollars ($1,000,0000); (b) the delivery of
the Legal Opinion to the Investor by counsel to the Company; (c) the accuracy of
the representations and warranties made by the Company in this Agreement on the
Closing Date; (c) the execution and delivery by the Company of the Registration
Rights Agreement, (d) the absence of any order, writ, injunction, judgment or
decree that questions the validity of the Agreements or the right of the Company
or the Investor to enter into such Agreements or to consummate the transactions
contemplated hereby and thereby; and (e) the delivery to the Investor by the
Secretary or Assistant Secretary of the Company of a certificate stating that
the conditions specified in this paragraph have been fulfilled.
In the event that the Closing does not occur on or before the Outside
Date as a result of the Company's failure to satisfy any of the conditions set
forth above (and such condition has not been waived by the Investor), the
Company shall return any and all funds paid hereunder to the Investor no later
than one Business Day following the Outside Date and the Investors shall have no
further obligations hereunder. For purposes of this Agreement, "BUSINESS DAY"
shall mean any day other than a Saturday, Sunday or other day on which the New
York Stock Exchange are permitted or required by law to close.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. Except as
otherwise described in the Company's Annual Report on Form 10-K for the year
ended March 31, 2005 (and any amendments thereto filed at least two (2) Business
Days prior to the Closing Date), Company's most recent Quarterly Report on Form
10-Q for the quarter ended December 31, 2005 (and any amendments thereto filed
at least two (2) Business Days prior to the Closing Date), the Company's Proxy
Statement for its 2005 Annual Meeting of Shareholders, and any of the Company's
Current Reports on Form 8-K filed since December 31, 2005 (and any amendments
thereto filed at least two (2) Business Days prior to the Closing Date) (all
collectively, the "SEC REPORTS"), the Company hereby represents and warrants to,
and covenants with, the Investor as of the date hereof and the Closing Date, as
follows:
3.1 ORGANIZATION. The Company is duly incorporated and validly
existing in good standing under the laws of the State of Delaware. The Company
has full power and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and is registered or qualified to do
business and in good standing in each jurisdiction in which it owns property or
transacts business and where the failure to be so qualified would have a
material adverse effect upon the Company and its subsidiaries as a whole or the
business, financial condition, properties, operations or assets of the Company
and its subsidiaries as a whole or the Company's ability to perform its
obligations under the Agreements in all material respects ("MATERIAL ADVERSE
EFFECT"), and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
3.2 DUE AUTHORIZATION. The Company has all requisite power and
authority to execute, deliver and perform its obligations under the Agreements.
The execution and delivery of the Agreements, and the consummation by the
Company of the transactions contemplated hereby, have been duly authorized by
all necessary corporate action and no further action on the part of the Company
or its Board of Directors or stockholders is required. The Agreements have been
validly executed and delivered by the Company and constitute legal, valid and
Securities Purchase Agreement Page 4 of 12
binding agreements of the Company enforceable against the Company in accordance
with their terms, except to the extent (i) rights to indemnity and contribution
may be limited by state or federal securities laws or the public policy
underlying such laws, (ii) such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and (iii) such
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.3 NO CONFLICT OR DEFAULT. The execution and delivery of the
Agreements, the issuance and sale of the Shares to be sold by the Company under
the Agreements, the fulfillment of the terms of the Agreements and the
consummation of the transactions contemplated thereby will not: (A) result in a
conflict with or constitute a material violation of, or material default (with
the passage of time or otherwise) under, (i) any bond, debenture, note, loan
agreement or other evidence of indebtedness, or any material lease, or contract
to which the Company is a party or by which the Company or their respective
properties are bound, (ii) the Certificate of Incorporation, by-laws or other
organizational documents of the Company, as amended, or (iii) any law,
administrative regulation, or existing order of any court or governmental
agency, or other authority binding upon the Company or the Company's respective
properties; or, (B) result in the creation or imposition of any lien,
encumbrance, claim, or security interest upon any of the material assets of the
Company or an acceleration of indebtedness pursuant to any obligation, agreement
or condition contained in any material bond, debenture, note or any other
evidence of indebtedness or any material indenture, mortgage, deed of trust or
any other agreement or instrument to which the Company is a party or by which it
is bound or to which any of the property or assets of the Company is subject. No
consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or
other governmental body is required for the execution and delivery of the
Agreements by the Company and the valid issuance or sale of the Shares by the
Company pursuant to the Agreements, other than such as have been made or
obtained, and except for any filings required to be made under federal or state
securities laws.
3.4 CAPITALIZATION. The outstanding capital stock of the
Company is as described in the Company's Quarterly Report on Form 10-Q for the
three month period ending December 31, 2005 and the private placement memorandum
dated May 31, 2006 (the "Memorandum") provided to Investor. The Company has not
issued any capital stock since December 31, 2005, other than pursuant to the
purchase of shares under the Company's employee stock option plan and the
exercise of outstanding warrants or stock options, in each case as disclosed in
the Memorandum or the SEC Reports. The Shares to be sold pursuant to the
Agreements have been duly authorized, and when issued and paid for in accordance
with the terms of the Agreements, will be duly and validly issued, fully paid
and nonassessable, subject to no lien, claim or encumbrance (except for any such
lien, claim or encumbrance created, directly or indirectly, by the Investor).
The outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, have been issued in
compliance with the registration requirements of federal and state securities
laws, and were not issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. The Company owns one hundred
percent of all of the outstanding capital stock of each of its subsidiaries,
free and clear of all liens, claims and encumbrances. There are not (i) any
outstanding preemptive rights, or (ii) any rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company not disclosed in
the SEC Reports or Memorandum, or (iii) any contract, commitment, agreement,
understanding or arrangement of any kind to which the Company is a party that
would provide for the issuance or sale of any capital stock of the Company, any
such convertible or exchangeable securities or any such rights, warrants or
options not disclosed in the SEC Reports or the Memorandum. There are no
shareholders agreements, voting agreements or other similar agreements with
respect to the Common Stock to which the Company is a party.
Securities Purchase Agreement Page 5 of 12
3.5 LEGAL PROCEEDINGS. There is no material legal or
governmental proceeding pending, or to the knowledge of the Company, threatened,
to which the Company is a party or of which the business or property of the
Company is subject that is required to be disclosed and that is not so disclosed
in the SEC Reports. Other than the information disclosed in the SEC Reports, the
Company is not subject to any injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other government body.
3.6 NO VIOLATIONS. The Company is not in violation of its
Certificate of Incorporation, bylaws or other organizational documents, as
amended. The Company is not in violation of any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company, which violation, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect. The Company
is not in default (and there exists no condition which, with the passage of time
or otherwise, would constitute a default) in the performance of any bond,
debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company is a party or by which the Company is bound, which such default
would have a Material Adverse Effect upon the Company.
3.7 GOVERNMENTAL PERMITS, ETC. Each of the Company has all
necessary franchises, licenses, certificates and other authorizations from any
foreign, federal, state or local government or governmental agency, department
or body that are currently necessary for the operation of the business of the
Company as currently conducted, except where the failure to currently possess
such franchises, licenses, certificates and other authorizations is not
reasonably likely to have a Material Adverse Effect.
3.8 INTELLECTUAL PROPERTY.
(a) Except for matters which are not reasonably
likely to have a Material Adverse Effect, (i) each of the Company has ownership
of, or a license or other legal right to use, all patents, copyrights, trade
secrets, trademarks, customer lists, designs, manufacturing or other processes,
computer software, systems, data compilation, research results or other
proprietary rights used in the business of the Company (collectively,
"INTELLECTUAL PROPERTY") and (ii) all of the Intellectual Property owned by the
Company consisting of patents, registered trademarks and registered copyrights
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Register of Copyrights or the corresponding
offices of other jurisdictions and have been maintained and renewed in
accordance with all applicable provisions of law and administrative regulations
in the United States and/or such other jurisdictions.
(b) Except for matters which are not reasonably
likely to have a Material Adverse Effect, all material licenses or other
material agreements under which (i) the Company employs rights in Intellectual
Property, or (ii) the Company has granted rights to others in Intellectual
Property owned or licensed by the Company are in full force and effect, and
there is no default by the Company with respect thereto.
(c) The Company believes that it has taken all steps
reasonably required in accordance with sound business practice and business
judgment to establish and preserve the ownership of the Company's material
Intellectual Property.
(d) Except for matters which are not reasonably
likely to have a Material Adverse Effect, to the knowledge of the Company, (i)
the present business, activities and products of the Company do not infringe any
intellectual property of any other person; (ii) neither the Company is making
unauthorized use of any confidential information or trade secrets of any person;
Securities Purchase Agreement Page 6 of 12
and (iii) the activities of any of the employees of the Company, acting on
behalf of the Company, do not materially violate any agreements or arrangements
related to confidential information or trade secrets of third parties.
(e) Except for matters which are not reasonably
likely to have a Material Adverse Effect, and except as disclosed in the SEC
Reports, no proceedings are pending, or to the knowledge of the Company,
threatened, which challenge the rights of the Company to the use the Company's
Intellectual Property.
3.9 FINANCIAL STATEMENTS. The financial statements of the
Company and the related notes contained in the SEC Reports present fairly and
accurately in all material respects the financial position of the Company as of
the dates therein indicated, and the results of its operations, cash flows and
the changes in shareholders' equity for the periods therein specified, subject,
in the case of unaudited financial statements for interim periods, to normal
year-end audit adjustments. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis at the times and throughout the periods
therein specified, except that unaudited financial statements may not contain
all footnotes required by generally accepted accounting principles.
3.10 NO MATERIAL ADVERSE CHANGE. Except as disclosed in the
SEC Reports or in any press releases issued by the Company prior to the Closing
Date, there has not been (i) an event, circumstance or change that has had or is
reasonably likely to have a Material Adverse Effect upon the Company, (ii) any
obligation incurred by the Company that is material to the Company, (iii) any
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company, or (iv) any loss or damage (whether or not insured) to the
physical property of the Company which has had a Material Adverse Effect.
3.11 AMEX COMPLIANCE. The Company's Common Stock is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and is listed on the American Stock Exchange (the "AMEX"),
and the Company has taken no action intended to, or which to its knowledge could
have the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from the Amex. The issuance of the
Shares does not require shareholder approval, including, without limitation,
pursuant to Section 713 of the Amex Company Guide.
3.12 REPORTING STATUS. The Company has timely made all filings
required under the Exchange Act during the twelve (12) months preceding the date
of this Agreement, and all of those documents complied in all material respects
with the SEC's requirements as of their respective filing dates, and the
information contained therein as of the respective dates thereof did not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading. The Company is
currently eligible to register the resale of Common Stock by the Investors
pursuant to a registration statement on Form S-3 under the Securities Act (the
"REGISTRATION STATEMENT").
3.13 NO MANIPULATION; DISCLOSURE OF INFORMATION. The Company
has not taken and will not take any action designed to or that might reasonably
be expected to cause or result in an unlawful manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares. The Company has not
disclosed any material non-public information to the Investors.
Securities Purchase Agreement Page 7 of 12
3.14 ACCOUNTANTS. Epstein Weber & Conover, PLC, who expressed
their opinion with respect to the consolidated financial statements to be
incorporated by reference from the Company's Annual Report on Form 10-K for the
year ended March 31, 2005 into the Registration Statement and the prospectus
which forms a part thereof (the "PROSPECTUS"), have advised the Company that
they are, and to the knowledge of the Company they are, independent accountants
as required by the Securities Act and the rules and regulations promulgated
thereunder.
3.15 CONTRACTS. Except for matters which are not reasonably
likely to have a Material Adverse Effect and those contracts that are
substantially or fully performed or expired by their terms, the contracts listed
as exhibits to or described in the SEC Reports that are material to the Company
and all amendments thereto, are in full force and effect on the date hereof, and
neither the Company nor, to the Company's knowledge, any other party to such
contracts is in breach of or default under any of such contracts.
3.16 TAXES. Except for tax matters which are not reasonably
likely to have a Material Adverse Effect, each of the Company and each of its
Subsidiaries has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon.
3.17 TRANSFER TAXES. On the Closing Date, all stock transfer
or other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares hereunder will be, or will
have been, fully paid or provided for by the Company and the Company will have
complied with all laws imposing such taxes.
3.18 INVESTMENT COMPANY. The Company is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for an investment company, within the meaning of the Investment Company Act of
1940, as amended, and will not be deemed an "investment company" as a result of
the transactions contemplated by this Agreement.
3.19 INSURANCE. The Company maintains insurance of the types
and in the amounts that the Company reasonably believes is adequate for its
businesses, including, but not limited to, insurance covering real and personal
property owned or leased by the Company against theft, damage, destruction, acts
of vandalism and all other risks customarily insured against by similarly
situated companies, all of which insurance is in full force and effect.
3.20 OFFERING PROHIBITIONS. Neither the Company nor any person
acting on its behalf or at its direction has in the past or will in the future
take any action to sell, offer for sale or solicit offers to buy any securities
of the Company which would bring the offer or sale of the Shares as contemplated
by this Agreement within the provisions of Section 5 of the Securities Act.
3.21 LISTING. The Company shall comply with all requirements
with respect to the issuance of the Shares and the listing thereof on Amex.
3.22 RELATED PARTY TRANSACTIONS. Other than described in the
SEC Reports, to the knowledge of the Company, no transaction has occurred
between or among the Company or any of its affiliates, officers or directors or
any affiliate or affiliates of any such officer or director that with the
passage of time are reasonably likely be required to be disclosed pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
Securities Purchase Agreement Page 8 of 12
3.23 BOOKS AND RECORDS. The books, records and accounts of the
Company accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the operations of, the Company. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.24 ADDITIONAL CONTINGENT CONSIDERATION. The Company expects
that with the funding of the Offering and the additional capital provided
thereby, that the Company's auditor will not express doubt about the company's
ability to continue as a going concern (i.e. provided a so-called "Clean
Opinion"). However, should the auditor again express such doubt and not provide
a Clean Opinion despite the additional capital as a part of the annual report
for the fiscal year ending March 31, 2006 on Form 10-K, then the Company will
issue to Investors additional cash consideration ("Additional Consideration")
equal to five percent (5.000%) of the gross proceeds. By way of example, should
the Company raise $2,000,000, and the Company's auditor not provide a Clean
Opinion, then iLinc will owe to Investors $100,000, with such Additional
Consideration, if due, paid to within fifteen (15) days of the filing of the
Company's Form 10-K in which the opinion expressing doubt is included. Provided
however, that should the auditor issue an opinion that is a Clean Opinion then
the obligation to provide Contingent Consideration under this Section 3.24 shall
forever expire without further obligation to Investors.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.
4.1 INVESTOR KNOWLEDGE AND STATUS. The Investor represents and
warrants to, and covenants with, the Company that: (i) the Investor is an
"accredited investor" as defined in Regulation D under the Securities Act, is
knowledgeable, sophisticated and experienced in making, and is qualified to make
decisions with respect to, investments in securities presenting an investment
decision similar to that involved in the purchase of the Shares, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Shares; (ii) the Investor
understands that the Shares are "restricted securities" and have not been
registered under the Securities Act and is acquiring the number of Shares set
forth in paragraph 3 of the Securities Purchase Agreement in the ordinary course
of its business and for its own account for investment only, has no present
intention of distributing any of such Shares and has no arrangement or
understanding with any other persons regarding the distribution of such Shares
(this representation and warranty not limiting the Investor's right to sell
Shares pursuant to a Registration Statement filed under the Registration Rights
Agreement or otherwise, or other than with respect to any claim arising out of a
breach of this representation and warranty, the Investor's right to
indemnification under Section 3 of the Registration Rights Agreement); (iii) the
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder; (iv) the Investor has answered all questions
in paragraph 4 of the Securities Purchase Agreement and the Investor
Questionnaire attached hereto as Exhibit B for use in preparation of the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; (v) the
Investor will notify the Company promptly of any change in any of such
information until such time as the Investor has sold all of its Shares or until
the Company is no longer required to keep the Registration Statement effective;
and (vi) the Investor has, in connection with its decision to purchase the
number of Shares set forth in paragraph 3 of the Securities Purchase Agreement,
relied upon the representations and warranties of the Company contained herein
Securities Purchase Agreement Page 9 of 12
and the information contained in the SEC Reports. The Investor understands that
the issuance of the Shares to the Investor has not been registered under the
Securities Act, or registered or qualified under any state securities law, in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the representations made by the Investor in this Agreement.
No person (including without limitation the Placement Agent) is authorized by
the Company to provide any representation that is inconsistent with or in
addition to those contained herein or in the SEC Reports, and the Investor
acknowledges that it has not received or relied on any such representations.
4.2 TRANSFER OF SHARES. The Investor agrees that it will not
make any sale, transfer or other disposition of the Shares (a "DISPOSITION")
other than Dispositions that are made pursuant to the Registration Statement in
compliance with any applicable prospectus delivery requirements or that are
exempt from registration under the Securities Act. Investor has not taken and
will not take any action designed to or that might reasonably be expected to
cause or result in manipulation of the price of the Common Stock to facilitate
the subscription to, or the sale or resale of the Shares. The Company has not
disclosed any material non-public information to the Investors.
4.3 POWER AND AUTHORITY. The Investor represents and warrants
to the Company that (i) the Investor has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) this Agreement
constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its terms, except to the extent (i) rights to
indemnity and contribution may be limited by state or federal securities laws or
the public policy underlying such laws, (ii) such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and (iii) such
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.4 NO SHORT POSITION. The Investor has not prior to the
Closing Date, and will not for the one (1) year period beginning with the
Closing Date, established any hedge or other position in the Common Stock that
is issued and outstanding, and that is designed to or could reasonably be
expected to lead to or result in a sale, transfer or other disposition by the
Investor or any other person or entity under the control or direction of
Investor. For purposes hereof, a "hedge or other position" would include,
without limitation, effecting any short sale or having in effect any short
position (whether or not such sale or position is against the box and regardless
of when such position was entered into) or any purchase, sale or grant of any
right (including, without limitation, any put or call option) with respect to
the Common Stock or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from the Common Stock.
4.5 NO INVESTMENT, TAX OR LEGAL ADVICE. The Investor
understands that nothing in the SEC Reports, this Agreement, or any other
materials presented to the Investor in connection with the purchase and sale of
the Shares constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of Shares.
4.6 ACKNOWLEDGMENTS REGARDING PLACEMENT AGENT. The Investor
acknowledges that the Placement Agent has acted solely as placement agent for
the Company in connection with the Offering of the Shares by the Company, and
that the Placement Agent has made no representation or warranty whatsoever with
respect to the accuracy or completeness of information, data or other related
disclosure material that has been provided to the Investor. The Investor further
acknowledges that in making its decision to enter into this Agreement and
purchase the Shares, it has relied on its own examination of the Company and the
terms of, and consequences of holding, the Shares. The Investor further
Securities Purchase Agreement Page 10 of 12
acknowledges that the provisions of this Section 4.7 are for the benefit of, and
may be enforced by, the Placement Agent. Investor has not received any general
solicitation or advertising regarding the Offering and Investor has not been
furnished with any oral or written representation or information in connection
with the Offering which is not contained in the SEC Reports or set forth in the
Memorandum.
4.7 ADDITIONAL ACKNOWLEDGEMENT. Investor has thoroughly
reviewed and the SEC Reports and the Memorandum (the "Disclosure Documents")
prior to making this investment. Investor has been granted a reasonable time
prior to the date hereof during which we have had the opportunity to obtain such
additional information as Investor deems necessary to permit Investor to make an
informed decision with respect to the purchase of the Common Stock. After
examination of the SEC Reports and other information available, Investor is
fully aware of the business prospects, financial condition, risks associated
with investment and the operating history relating to the Company, and therefore
in subscribing for the purchase of the Shares, Investor is not relying upon any
information other than information contained in the Disclosure Documents. The
Investor acknowledges that it has independently evaluated the merits of the
transactions contemplated by this Agreement, that it has independently
determined to enter into the transactions contemplated hereby, that it is not
relying on any advice from or evaluation by any Other Investor, and that it is
not acting in concert with any Other Investor in making its purchase of the
Shares hereunder. The Investor and, to its knowledge, the Company acknowledge
that the Investors have not taken any actions that would deem the Investors to
be members of a "group" for purposes of Section 13(d) of the Exchange Act.
5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Investor herein shall survive the execution of this
Agreement, the delivery to the Investor of the Shares being purchased and the
payment therefor, and a party's reliance on such representations and warranties
shall not be affected by any investigation made by such party or any information
developed thereby.
6. REGISTRATION OF SHARES; PUBLIC STATEMENTS.
6.1 In connection with the purchase and sale of the Shares by
the Investors contemplated hereby, the Company has entered into a Registration
Rights Agreement with each Investor providing for the filing by the Company of a
Registration Statement on Form S-3 to enable the resale of the Shares by the
Investors from time to time.
6.2 The Company agrees to disclose on a Current Report on Form
8-K the existence of the Offering and the material terms, thereof, including
pricing, within four (4) days after the Closing. The Company will not issue any
public statement, press release or any other public disclosure listing the
Investor as one of the purchasers of the Shares without the Investor's prior
review of the statement and prior consent thereto, except as may be required by
applicable law or rules of any exchange on which the Company's securities are
listed.
7. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be delivered (A) if within the United
States, by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if from
outside the United States, by International Federal Express (or comparable
service) or facsimile, and shall be deemed given (i) if delivered by first-class
registered or certified mail domestic, upon the Business Day received, (ii) if
delivered by nationally recognized overnight carrier, one (1) Business Day after
timely delivery to such carrier, (iii) if delivered by International Federal
Express (or comparable service), two (2) Business Days after timely delivery to
Securities Purchase Agreement Page 11 of 12
such carrier, (iv) if delivered by facsimile, upon electric confirmation of
receipt and shall be addressed as follows, or to such other address or addresses
as may have been furnished in writing by a party to another party pursuant to
this paragraph:
(a) if to the Company, to:
iLinc Communications, Inc.
2999 North 44th Street, Suite 650
Phoenix, AZ 85016
Attention: James L. Dunn, Jr.
Telephone: 602-952-1200
Fax: 602-952-1200
with a copy to:
Jackson Walker, LLP
901 Main Street, Suite 6000
Dallas, TX 75202
Attention: James Ryan III
Telephone: (516) 433-1200
Fax: (214) 661-6688
(b) if to the Investor, at its address on the
signature page to the Stock Purchase Agreement.
8. AMENDMENTS; WAIVER. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Investor. Any waiver of a provision of this Agreement must be in writing and
executed by the party against whom enforcement of such waiver is sought.
9. HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
10. ENTIRE AGREEMENT; SEVERABILITY. This Agreement sets forth the
entire agreement and understanding of the parties relating to the subject matter
hereof and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. If any provision contained in this Agreement is
determined to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
11. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of New York, without giving
effect to the principles of conflicts of law.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
Securities Purchase Agreement Page 12 of 12
SECURITIES PURCHASE AGREEMENT
ILINC COMMUNICATIONS, INC.
JAMES M. POWERS, JR., PRESIDENT
2999 NORTH 44TH STREET, SUITE 650
PHOENIX, AZ 85016
The undersigned investor (the "INVESTOR") hereby confirms Investor's agreement
with iLinc Communications, Inc. ("iLinc" or the "Company") as follows:
1. This Securities Purchase Agreement is made as of the date set forth below
between the Company and the Investor.
2. The Company has authorized the sale and issuance of up to 5,400,000 shares
(the "SHARES") of the common stock of the Company, $0.001 par value per share
(the "COMMON STOCK"), to certain investors in a private placement (the
"OFFERING").
3. The Company and the Investor agree that the Investor will purchase from the
Company and the Company will issue and sell to the Investor 1,081,081 Shares at
a purchase price of $0.37 per Share, for an aggregate purchase price of $400,000
(the "PURCHASE PRICE"), subject to the Terms and Conditions for Purchase of
Shares attached hereto as Annex I and incorporated herein by reference as if
fully set forth herein. Unless otherwise requested by the Investor in Exhibit
"A", certificates representing the Shares purchased by the Investor will be
registered in the Investor's name and address as set forth below.
4. The Investor represents that, except as set forth below, (a) it has had no
position, office or other material relationship within the past three (3) years
with the Company or its affiliates, (b) neither it, nor any group of which it is
a member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company, and (c) it has no direct or
indirect affiliation or association with any National Association of Securities
Dealers, Inc. ("NASD") member. Exceptions:
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If no exceptions, write "none." If left blank, response
will be deemed to be "none.")
Securities Purchase Agreement Page 1 of 12
Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
DATED AS OF: June 8, 2006
Benjamin James Taylor and Diane Wong Shoda
---------------------------------------------
By: /s/ Benjamin James Taylor
-----------------------------------------
Name: Benjamin James Taylor, individually
By: /s/ Diane Wong Shoda
-----------------------------------------
Name: Diane Wong Shoda, individually
Address: 54 E. Allendale Avenue
------------------------------------
Allendale, NJ 07401
---------------------------------------------
AGREED AND ACCEPTED:
iLinc Communications, Inc.
By: /s/ James M. Powers, Jr.
-----------------------------------
Name: James M. Powers, Jr.
Title: President
[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
Securities Purchase Agreement - Subscription Letter Page 2 of 12
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. AGREEMENT TO SELL AND PURCHASE THE SHARES; SUBSCRIPTION DATE.
1.1 PURCHASE AND SALE. At the Closing (as defined in Section
2), the Company will sell to the Investor, and the Investor will purchase from
the Company, upon the terms and subject to the conditions set forth herein, and
at the Purchase Price, the number of Shares described in paragraph 3 of the
Securities Purchase Agreement attached hereto (collectively with this Annex I
and the other exhibits attached hereto, this "Agreement").
1.2 OTHER INVESTORS. As part of the Offering, the Company
proposes to enter into Securities Purchase Agreements in the same form as this
Agreement with certain other investors (the "OTHER INVESTORS"), and the Company
expects to complete sales of Shares to them. The Investor and the Other
Investors are sometimes collectively referred to herein as the "INVESTORS," and
this Agreement, the Registration Rights Agreement and the Securities Purchase
Agreements executed by the Other Investors are sometimes collectively referred
to herein as the "AGREEMENTS." The Company may accept executed Agreements from
Investors for the purchase of Shares commencing upon the date on which the
Company provides the Investors with the proposed purchase price per Share and
concluding upon the date (the "SUBSCRIPTION DATE") on which the Company has
notified Canaccord Adams, Inc. (in its capacity as placement agent for the
Shares, the "PLACEMENT AGENT") in writing that it will no longer accept
Agreements for the purchase of Shares in the Offering, but in no event shall the
Subscription Date be later than JUNE 8, 2006. Each Investor must execute and
deliver a Securities Purchase Agreement and a Registration Rights Agreement and
must complete a Stock Certificate Questionnaire (in the form attached as Exhibit
"A" hereto) and an Investor Questionnaire (in the form attached as Exhibit "B"
hereto) in order to purchase Shares in the Offering.
1.3 PLACEMENT AGENT FEE. The Investor acknowledges that the
Company intends to pay to the Placement Agent a fee in respect of the sale of
Shares to the Investor from the proceeds of the Offering.
2. DELIVERY OF THE SHARES AT CLOSING. The completion of the purchase
and sale of the Shares (the "CLOSING") shall occur on a date specified by the
Company and the Placement Agent that is anticipated to be June 9, 2006 (the
"CLOSING DATE"), but which date shall not be later than June 16, 2006 (the
"OUTSIDE DATE"), and of which the Investors will be notified in writing in
advance by the Placement Agent. At the Closing, the Company shall deliver to the
Investor one or more stock certificates representing the number of Shares set
forth in paragraph 3 of the Stock Purchase Agreement, each such certificate to
be registered in the name of the Investor or, if so indicated on the Stock
Certificate Questionnaire, in the name of a nominee designated by the Investor.
In exchange for the delivery of the subscription agreements, the Investor shall
deliver the Purchase Price to the Placement Agent by wire transfer of
immediately available funds pursuant to written instructions to be held in
escrow pending closing of the Offering. On the Closing Date, the Company shall
cause counsel to the Company to deliver to the Investors a legal opinion, dated
the Closing Date, substantially in the form attached hereto as Exhibit "C" (the
"LEGAL OPINION").
The Company's obligation to issue and sell the Shares to the Investor
shall be subject to the following conditions, any one or more of which may be
waived by the Company: (a) prior receipt by the Company of an executed copy of
this Securities Purchase Agreement; (b) completion of purchases and sales of
Shares under the Agreements with the Other Investors; (c) the accuracy of the
representations and warranties made by the Investor in this Agreement and the
Securities Purchase Agreement Page 3 of 12
fulfillment of the obligations of the Investor to be fulfilled by it under this
Agreement on or prior to the Closing; and (d) the absence of any order, writ,
injunction, judgment or decree that questions the validity of the Agreements or
the right of the Company or the Investor to enter into such Agreements or to
consummate the transactions contemplated hereby and thereby.
The Investor's obligation to purchase the Shares shall be subject to
the following conditions, any one or more of which may be waived by the
Investor: (a) the completion, execution and return of the completed Securities
Purchase Agreement (with exhibits thereto) by all Investors and the funding into
escrow of no less than one million dollars ($1,000,0000); (b) the delivery of
the Legal Opinion to the Investor by counsel to the Company; (c) the accuracy of
the representations and warranties made by the Company in this Agreement on the
Closing Date; (c) the execution and delivery by the Company of the Registration
Rights Agreement, (d) the absence of any order, writ, injunction, judgment or
decree that questions the validity of the Agreements or the right of the Company
or the Investor to enter into such Agreements or to consummate the transactions
contemplated hereby and thereby; and (e) the delivery to the Investor by the
Secretary or Assistant Secretary of the Company of a certificate stating that
the conditions specified in this paragraph have been fulfilled.
In the event that the Closing does not occur on or before the Outside
Date as a result of the Company's failure to satisfy any of the conditions set
forth above (and such condition has not been waived by the Investor), the
Company shall return any and all funds paid hereunder to the Investor no later
than one Business Day following the Outside Date and the Investors shall have no
further obligations hereunder. For purposes of this Agreement, "BUSINESS DAY"
shall mean any day other than a Saturday, Sunday or other day on which the New
York Stock Exchange are permitted or required by law to close.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. Except as
otherwise described in the Company's Annual Report on Form 10-K for the year
ended March 31, 2005 (and any amendments thereto filed at least two (2) Business
Days prior to the Closing Date), Company's most recent Quarterly Report on Form
10-Q for the quarter ended December 31, 2005 (and any amendments thereto filed
at least two (2) Business Days prior to the Closing Date), the Company's Proxy
Statement for its 2005 Annual Meeting of Shareholders, and any of the Company's
Current Reports on Form 8-K filed since December 31, 2005 (and any amendments
thereto filed at least two (2) Business Days prior to the Closing Date) (all
collectively, the "SEC REPORTS"), the Company hereby represents and warrants to,
and covenants with, the Investor as of the date hereof and the Closing Date, as
follows:
3.1 ORGANIZATION. The Company is duly incorporated and validly
existing in good standing under the laws of the State of Delaware. The Company
has full power and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and is registered or qualified to do
business and in good standing in each jurisdiction in which it owns property or
transacts business and where the failure to be so qualified would have a
material adverse effect upon the Company and its subsidiaries as a whole or the
business, financial condition, properties, operations or assets of the Company
and its subsidiaries as a whole or the Company's ability to perform its
obligations under the Agreements in all material respects ("MATERIAL ADVERSE
EFFECT"), and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
3.2 DUE AUTHORIZATION. The Company has all requisite power and
authority to execute, deliver and perform its obligations under the Agreements.
The execution and delivery of the Agreements, and the consummation by the
Company of the transactions contemplated hereby, have been duly authorized by
all necessary corporate action and no further action on the part of the Company
or its Board of Directors or stockholders is required. The Agreements have been
validly executed and delivered by the Company and constitute legal, valid and
Securities Purchase Agreement Page 4 of 12
binding agreements of the Company enforceable against the Company in accordance
with their terms, except to the extent (i) rights to indemnity and contribution
may be limited by state or federal securities laws or the public policy
underlying such laws, (ii) such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and (iii) such
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.3 NO CONFLICT OR DEFAULT. The execution and delivery of the
Agreements, the issuance and sale of the Shares to be sold by the Company under
the Agreements, the fulfillment of the terms of the Agreements and the
consummation of the transactions contemplated thereby will not: (A) result in a
conflict with or constitute a material violation of, or material default (with
the passage of time or otherwise) under, (i) any bond, debenture, note, loan
agreement or other evidence of indebtedness, or any material lease, or contract
to which the Company is a party or by which the Company or their respective
properties are bound, (ii) the Certificate of Incorporation, by-laws or other
organizational documents of the Company, as amended, or (iii) any law,
administrative regulation, or existing order of any court or governmental
agency, or other authority binding upon the Company or the Company's respective
properties; or, (B) result in the creation or imposition of any lien,
encumbrance, claim, or security interest upon any of the material assets of the
Company or an acceleration of indebtedness pursuant to any obligation, agreement
or condition contained in any material bond, debenture, note or any other
evidence of indebtedness or any material indenture, mortgage, deed of trust or
any other agreement or instrument to which the Company is a party or by which it
is bound or to which any of the property or assets of the Company is subject. No
consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or
other governmental body is required for the execution and delivery of the
Agreements by the Company and the valid issuance or sale of the Shares by the
Company pursuant to the Agreements, other than such as have been made or
obtained, and except for any filings required to be made under federal or state
securities laws.
3.4 CAPITALIZATION. The outstanding capital stock of the
Company is as described in the Company's Quarterly Report on Form 10-Q for the
three month period ending December 31, 2005 and the private placement memorandum
dated May 31, 2006 (the "Memorandum") provided to Investor. The Company has not
issued any capital stock since December 31, 2005, other than pursuant to the
purchase of shares under the Company's employee stock option plan and the
exercise of outstanding warrants or stock options, in each case as disclosed in
the Memorandum or the SEC Reports. The Shares to be sold pursuant to the
Agreements have been duly authorized, and when issued and paid for in accordance
with the terms of the Agreements, will be duly and validly issued, fully paid
and nonassessable, subject to no lien, claim or encumbrance (except for any such
lien, claim or encumbrance created, directly or indirectly, by the Investor).
The outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, have been issued in
compliance with the registration requirements of federal and state securities
laws, and were not issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. The Company owns one hundred
percent of all of the outstanding capital stock of each of its subsidiaries,
free and clear of all liens, claims and encumbrances. There are not (i) any
outstanding preemptive rights, or (ii) any rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company not disclosed in
the SEC Reports or Memorandum, or (iii) any contract, commitment, agreement,
understanding or arrangement of any kind to which the Company is a party that
would provide for the issuance or sale of any capital stock of the Company, any
such convertible or exchangeable securities or any such rights, warrants or
options not disclosed in the SEC Reports or the Memorandum. There are no
shareholders agreements, voting agreements or other similar agreements with
respect to the Common Stock to which the Company is a party.
Securities Purchase Agreement Page 5 of 12
3.5 LEGAL PROCEEDINGS. There is no material legal or
governmental proceeding pending, or to the knowledge of the Company, threatened,
to which the Company is a party or of which the business or property of the
Company is subject that is required to be disclosed and that is not so disclosed
in the SEC Reports. Other than the information disclosed in the SEC Reports, the
Company is not subject to any injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other government body.
3.6 NO VIOLATIONS. The Company is not in violation of its
Certificate of Incorporation, bylaws or other organizational documents, as
amended. The Company is not in violation of any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company, which violation, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect. The Company
is not in default (and there exists no condition which, with the passage of time
or otherwise, would constitute a default) in the performance of any bond,
debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company is a party or by which the Company is bound, which such default
would have a Material Adverse Effect upon the Company.
3.7 GOVERNMENTAL PERMITS, ETC. Each of the Company has all
necessary franchises, licenses, certificates and other authorizations from any
foreign, federal, state or local government or governmental agency, department
or body that are currently necessary for the operation of the business of the
Company as currently conducted, except where the failure to currently possess
such franchises, licenses, certificates and other authorizations is not
reasonably likely to have a Material Adverse Effect.
3.8 INTELLECTUAL PROPERTY.
(a) Except for matters which are not reasonably
likely to have a Material Adverse Effect, (i) each of the Company has ownership
of, or a license or other legal right to use, all patents, copyrights, trade
secrets, trademarks, customer lists, designs, manufacturing or other processes,
computer software, systems, data compilation, research results or other
proprietary rights used in the business of the Company (collectively,
"INTELLECTUAL PROPERTY") and (ii) all of the Intellectual Property owned by the
Company consisting of patents, registered trademarks and registered copyrights
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Register of Copyrights or the corresponding
offices of other jurisdictions and have been maintained and renewed in
accordance with all applicable provisions of law and administrative regulations
in the United States and/or such other jurisdictions.
(b) Except for matters which are not reasonably
likely to have a Material Adverse Effect, all material licenses or other
material agreements under which (i) the Company employs rights in Intellectual
Property, or (ii) the Company has granted rights to others in Intellectual
Property owned or licensed by the Company are in full force and effect, and
there is no default by the Company with respect thereto.
(c) The Company believes that it has taken all steps
reasonably required in accordance with sound business practice and business
judgment to establish and preserve the ownership of the Company's material
Intellectual Property.
(d) Except for matters which are not reasonably
likely to have a Material Adverse Effect, to the knowledge of the Company, (i)
the present business, activities and products of the Company do not infringe any
intellectual property of any other person; (ii) neither the Company is making
unauthorized use of any confidential information or trade secrets of any person;
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and (iii) the activities of any of the employees of the Company, acting on
behalf of the Company, do not materially violate any agreements or arrangements
related to confidential information or trade secrets of third parties.
(e) Except for matters which are not reasonably
likely to have a Material Adverse Effect, and except as disclosed in the SEC
Reports, no proceedings are pending, or to the knowledge of the Company,
threatened, which challenge the rights of the Company to the use the Company's
Intellectual Property.
3.9 FINANCIAL STATEMENTS. The financial statements of the
Company and the related notes contained in the SEC Reports present fairly and
accurately in all material respects the financial position of the Company as of
the dates therein indicated, and the results of its operations, cash flows and
the changes in shareholders' equity for the periods therein specified, subject,
in the case of unaudited financial statements for interim periods, to normal
year-end audit adjustments. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis at the times and throughout the periods
therein specified, except that unaudited financial statements may not contain
all footnotes required by generally accepted accounting principles.
3.10 NO MATERIAL ADVERSE CHANGE. Except as disclosed in the
SEC Reports or in any press releases issued by the Company prior to the Closing
Date, there has not been (i) an event, circumstance or change that has had or is
reasonably likely to have a Material Adverse Effect upon the Company, (ii) any
obligation incurred by the Company that is material to the Company, (iii) any
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company, or (iv) any loss or damage (whether or not insured) to the
physical property of the Company which has had a Material Adverse Effect.
3.11 AMEX COMPLIANCE. The Company's Common Stock is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and is listed on the American Stock Exchange (the "AMEX"),
and the Company has taken no action intended to, or which to its knowledge could
have the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from the Amex. The issuance of the
Shares does not require shareholder approval, including, without limitation,
pursuant to Section 713 of the Amex Company Guide.
3.12 REPORTING STATUS. The Company has timely made all filings
required under the Exchange Act during the twelve (12) months preceding the date
of this Agreement, and all of those documents complied in all material respects
with the SEC's requirements as of their respective filing dates, and the
information contained therein as of the respective dates thereof did not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading. The Company is
currently eligible to register the resale of Common Stock by the Investors
pursuant to a registration statement on Form S-3 under the Securities Act (the
"REGISTRATION STATEMENT").
3.13 NO MANIPULATION; DISCLOSURE OF INFORMATION. The Company
has not taken and will not take any action designed to or that might reasonably
be expected to cause or result in an unlawful manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares. The Company has not
disclosed any material non-public information to the Investors.
Securities Purchase Agreement Page 7 of 12
3.14 ACCOUNTANTS. Epstein Weber & Conover, PLC, who expressed
their opinion with respect to the consolidated financial statements to be
incorporated by reference from the Company's Annual Report on Form 10-K for the
year ended March 31, 2005 into the Registration Statement and the prospectus
which forms a part thereof (the "PROSPECTUS"), have advised the Company that
they are, and to the knowledge of the Company they are, independent accountants
as required by the Securities Act and the rules and regulations promulgated
thereunder.
3.15 CONTRACTS. Except for matters which are not reasonably
likely to have a Material Adverse Effect and those contracts that are
substantially or fully performed or expired by their terms, the contracts listed
as exhibits to or described in the SEC Reports that are material to the Company
and all amendments thereto, are in full force and effect on the date hereof, and
neither the Company nor, to the Company's knowledge, any other party to such
contracts is in breach of or default under any of such contracts.
3.16 TAXES. Except for tax matters which are not reasonably
likely to have a Material Adverse Effect, each of the Company and each of its
Subsidiaries has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon.
3.17 TRANSFER TAXES. On the Closing Date, all stock transfer
or other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares hereunder will be, or will
have been, fully paid or provided for by the Company and the Company will have
complied with all laws imposing such taxes.
3.18 INVESTMENT COMPANY. The Company is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for an investment company, within the meaning of the Investment Company Act of
1940, as amended, and will not be deemed an "investment company" as a result of
the transactions contemplated by this Agreement.
3.19 INSURANCE. The Company maintains insurance of the types
and in the amounts that the Company reasonably believes is adequate for its
businesses, including, but not limited to, insurance covering real and personal
property owned or leased by the Company against theft, damage, destruction, acts
of vandalism and all other risks customarily insured against by similarly
situated companies, all of which insurance is in full force and effect.
3.20 OFFERING PROHIBITIONS. Neither the Company nor any person
acting on its behalf or at its direction has in the past or will in the future
take any action to sell, offer for sale or solicit offers to buy any securities
of the Company which would bring the offer or sale of the Shares as contemplated
by this Agreement within the provisions of Section 5 of the Securities Act.
3.21 LISTING. The Company shall comply with all requirements
with respect to the issuance of the Shares and the listing thereof on Amex.
3.22 RELATED PARTY TRANSACTIONS. Other than described in the
SEC Reports, to the knowledge of the Company, no transaction has occurred
between or among the Company or any of its affiliates, officers or directors or
any affiliate or affiliates of any such officer or director that with the
passage of time are reasonably likely be required to be disclosed pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
Securities Purchase Agreement Page 8 of 12
3.23 BOOKS AND RECORDS. The books, records and accounts of the
Company accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the operations of, the Company. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.24 ADDITIONAL CONTINGENT CONSIDERATION. The Company expects
that with the funding of the Offering and the additional capital provided
thereby, that the Company's auditor will not express doubt about the company's
ability to continue as a going concern (i.e. provided a so-called "Clean
Opinion"). However, should the auditor again express such doubt and not provide
a Clean Opinion despite the additional capital as a part of the annual report
for the fiscal year ending March 31, 2006 on Form 10-K, then the Company will
issue to Investors additional cash consideration ("Additional Consideration")
equal to five percent (5.000%) of the gross proceeds. By way of example, should
the Company raise $2,000,000, and the Company's auditor not provide a Clean
Opinion, then iLinc will owe to Investors $100,000, with such Additional
Consideration, if due, paid to within fifteen (15) days of the filing of the
Company's Form 10-K in which the opinion expressing doubt is included. Provided
however, that should the auditor issue an opinion that is a Clean Opinion then
the obligation to provide Contingent Consideration under this Section 3.24 shall
forever expire without further obligation to Investors.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.
4.1 INVESTOR KNOWLEDGE AND STATUS. The Investor represents and
warrants to, and covenants with, the Company that: (i) the Investor is an
"accredited investor" as defined in Regulation D under the Securities Act, is
knowledgeable, sophisticated and experienced in making, and is qualified to make
decisions with respect to, investments in securities presenting an investment
decision similar to that involved in the purchase of the Shares, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Shares; (ii) the Investor
understands that the Shares are "restricted securities" and have not been
registered under the Securities Act and is acquiring the number of Shares set
forth in paragraph 3 of the Securities Purchase Agreement in the ordinary course
of its business and for its own account for investment only, has no present
intention of distributing any of such Shares and has no arrangement or
understanding with any other persons regarding the distribution of such Shares
(this representation and warranty not limiting the Investor's right to sell
Shares pursuant to a Registration Statement filed under the Registration Rights
Agreement or otherwise, or other than with respect to any claim arising out of a
breach of this representation and warranty, the Investor's right to
indemnification under Section 3 of the Registration Rights Agreement); (iii) the
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder; (iv) the Investor has answered all questions
in paragraph 4 of the Securities Purchase Agreement and the Investor
Questionnaire attached hereto as Exhibit B for use in preparation of the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; (v) the
Investor will notify the Company promptly of any change in any of such
information until such time as the Investor has sold all of its Shares or until
the Company is no longer required to keep the Registration Statement effective;
and (vi) the Investor has, in connection with its decision to purchase the
number of Shares set forth in paragraph 3 of the Securities Purchase Agreement,
relied upon the representations and warranties of the Company contained herein
Securities Purchase Agreement Page 9 of 12
and the information contained in the SEC Reports. The Investor understands that
the issuance of the Shares to the Investor has not been registered under the
Securities Act, or registered or qualified under any state securities law, in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the representations made by the Investor in this Agreement.
No person (including without limitation the Placement Agent) is authorized by
the Company to provide any representation that is inconsistent with or in
addition to those contained herein or in the SEC Reports, and the Investor
acknowledges that it has not received or relied on any such representations.
4.2 TRANSFER OF SHARES. The Investor agrees that it will not
make any sale, transfer or other disposition of the Shares (a "DISPOSITION")
other than Dispositions that are made pursuant to the Registration Statement in
compliance with any applicable prospectus delivery requirements or that are
exempt from registration under the Securities Act. Investor has not taken and
will not take any action designed to or that might reasonably be expected to
cause or result in manipulation of the price of the Common Stock to facilitate
the subscription to, or the sale or resale of the Shares. The Company has not
disclosed any material non-public information to the Investors.
4.3 POWER AND AUTHORITY. The Investor represents and warrants
to the Company that (i) the Investor has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) this Agreement
constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its terms, except to the extent (i) rights to
indemnity and contribution may be limited by state or federal securities laws or
the public policy underlying such laws, (ii) such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and (iii) such
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.4 NO SHORT POSITION. The Investor has not prior to the
Closing Date, and will not for the one (1) year period beginning with the
Closing Date, established any hedge or other position in the Common Stock that
is issued and outstanding, and that is designed to or could reasonably be
expected to lead to or result in a sale, transfer or other disposition by the
Investor or any other person or entity under the control or direction of
Investor. For purposes hereof, a "hedge or other position" would include,
without limitation, effecting any short sale or having in effect any short
position (whether or not such sale or position is against the box and regardless
of when such position was entered into) or any purchase, sale or grant of any
right (including, without limitation, any put or call option) with respect to
the Common Stock or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from the Common Stock.
4.5 NO INVESTMENT, TAX OR LEGAL ADVICE. The Investor
understands that nothing in the SEC Reports, this Agreement, or any other
materials presented to the Investor in connection with the purchase and sale of
the Shares constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of Shares.
4.6 ACKNOWLEDGMENTS REGARDING PLACEMENT AGENT. The Investor
acknowledges that the Placement Agent has acted solely as placement agent for
the Company in connection with the Offering of the Shares by the Company, and
that the Placement Agent has made no representation or warranty whatsoever with
respect to the accuracy or completeness of information, data or other related
disclosure material that has been provided to the Investor. The Investor further
acknowledges that in making its decision to enter into this Agreement and
purchase the Shares, it has relied on its own examination of the Company and the
terms of, and consequences of holding, the Shares. The Investor further
Securities Purchase Agreement Page 10 of 12
acknowledges that the provisions of this Section 4.7 are for the benefit of, and
may be enforced by, the Placement Agent. Investor has not received any general
solicitation or advertising regarding the Offering and Investor has not been
furnished with any oral or written representation or information in connection
with the Offering which is not contained in the SEC Reports or set forth in the
Memorandum.
4.7 ADDITIONAL ACKNOWLEDGEMENT. Investor has thoroughly
reviewed and the SEC Reports and the Memorandum (the "Disclosure Documents")
prior to making this investment. Investor has been granted a reasonable time
prior to the date hereof during which we have had the opportunity to obtain such
additional information as Investor deems necessary to permit Investor to make an
informed decision with respect to the purchase of the Common Stock. After
examination of the SEC Reports and other information available, Investor is
fully aware of the business prospects, financial condition, risks associated
with investment and the operating history relating to the Company, and therefore
in subscribing for the purchase of the Shares, Investor is not relying upon any
information other than information contained in the Disclosure Documents. The
Investor acknowledges that it has independently evaluated the merits of the
transactions contemplated by this Agreement, that it has independently
determined to enter into the transactions contemplated hereby, that it is not
relying on any advice from or evaluation by any Other Investor, and that it is
not acting in concert with any Other Investor in making its purchase of the
Shares hereunder. The Investor and, to its knowledge, the Company acknowledge
that the Investors have not taken any actions that would deem the Investors to
be members of a "group" for purposes of Section 13(d) of the Exchange Act.
5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Investor herein shall survive the execution of this
Agreement, the delivery to the Investor of the Shares being purchased and the
payment therefor, and a party's reliance on such representations and warranties
shall not be affected by any investigation made by such party or any information
developed thereby.
6. REGISTRATION OF SHARES; PUBLIC STATEMENTS.
6.1 In connection with the purchase and sale of the Shares by
the Investors contemplated hereby, the Company has entered into a Registration
Rights Agreement with each Investor providing for the filing by the Company of a
Registration Statement on Form S-3 to enable the resale of the Shares by the
Investors from time to time.
6.2 The Company agrees to disclose on a Current Report on Form
8-K the existence of the Offering and the material terms, thereof, including
pricing, within four (4) days after the Closing. The Company will not issue any
public statement, press release or any other public disclosure listing the
Investor as one of the purchasers of the Shares without the Investor's prior
review of the statement and prior consent thereto, except as may be required by
applicable law or rules of any exchange on which the Company's securities are
listed.
7. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be delivered (A) if within the United
States, by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if from
outside the United States, by International Federal Express (or comparable
service) or facsimile, and shall be deemed given (i) if delivered by first-class
registered or certified mail domestic, upon the Business Day received, (ii) if
delivered by nationally recognized overnight carrier, one (1) Business Day after
timely delivery to such carrier, (iii) if delivered by International Federal
Express (or comparable service), two (2) Business Days after timely delivery to
Securities Purchase Agreement Page 11 of 12
such carrier, (iv) if delivered by facsimile, upon electric confirmation of
receipt and shall be addressed as follows, or to such other address or addresses
as may have been furnished in writing by a party to another party pursuant to
this paragraph:
(a) if to the Company, to:
iLinc Communications, Inc.
2999 North 44th Street, Suite 650
Phoenix, AZ 85016
Attention: James L. Dunn, Jr.
Telephone: 602-952-1200
Fax: 602-952-1200
with a copy to:
Jackson Walker, LLP
901 Main Street, Suite 6000
Dallas, TX 75202
Attention: James Ryan III
Telephone: (516) 433-1200
Fax: (214) 661-6688
(b) if to the Investor, at its address on the
signature page to the Stock Purchase Agreement.
8. AMENDMENTS; WAIVER. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Investor. Any waiver of a provision of this Agreement must be in writing and
executed by the party against whom enforcement of such waiver is sought.
9. HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
10. ENTIRE AGREEMENT; SEVERABILITY. This Agreement sets forth the
entire agreement and understanding of the parties relating to the subject matter
hereof and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. If any provision contained in this Agreement is
determined to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
11. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of New York, without giving
effect to the principles of conflicts of law.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
Securities Purchase Agreement Page 12 of 12