|
EXHIBIT 10.2
COMMON STOCK PURCHASE
AGREEMENT
Dated as of February 17, 2004
by and among
GLOWPOINT, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
Table of Contents
Page
COMMON STOCK PURCHASE AGREEMENT..................................................................................1
ARTICLE I PURCHASE AND SALE OF COMMON STOCK AND WARRANTS.............................................1
Section 1.1 Purchase and Sale of Common Stock and Warrants....................................1
Section 1.2 Purchase Price and Closing........................................................1
ARTICLE II REPRESENTATIONS AND WARRANTIES.............................................................2
Section 2.1 Representations and Warranties of the Company.....................................2
Section 2.2 Representations and Warranties of the Purchasers.................................11
ARTICLE III COVENANTS.................................................................................14
Section 3.1 Securities Compliance............................................................14
Section 3.2 Registration and Listing.........................................................14
Section 3.3 Inspection Rights................................................................14
Section 3.4 Compliance with Laws.............................................................15
Section 3.5 Keeping of Records and Books of Account..........................................15
Section 3.6 Reporting Requirements...........................................................15
Section 3.7 Other Agreements.................................................................15
Section 3.8 Subsequent Financings; Right of First Refusal....................................15
Section 3.9 Use of Proceeds..................................................................17
Section 3.10 Reporting Status; Eligibility to Use Form S-3....................................17
Section 3.11 Disclosure of Transaction........................................................17
Section 3.12 Disclosure of Material Information...............................................17
Section 3.13 Pledge of Securities.............................................................17
ARTICLE IV CONDITIONS................................................................................18
Section 4.1 Conditions Precedent to the Obligation of the Company to Close and to
Sell the Securities..............................................................18
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Close and to
Purchase the Securities..........................................................18
ARTICLE V CERTIFICATE LEGEND........................................................................20
Section 5.1 Legend...........................................................................20
ARTICLE VI INDEMNIFICATION...........................................................................21
Section 6.1 General Indemnity................................................................21
-i-
Table of Contents
(continued)
Page
Section 6.2 Indemnification Procedure........................................................21
ARTICLE VII MISCELLANEOUS.............................................................................22
Section 7.1 Fees and Expenses................................................................22
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue.............................23
Section 7.3 Entire Agreement; Amendment......................................................23
Section 7.4 Notices..........................................................................23
Section 7.5 Waivers..........................................................................24
Section 7.6 Headings.........................................................................24
Section 7.7 Successors and Assigns...........................................................24
Section 7.8 No Third Party Beneficiaries.....................................................24
Section 7.9 Governing Law....................................................................25
Section 7.10 Survival.........................................................................25
Section 7.11 Counterparts.....................................................................25
Section 7.12 Publicity........................................................................25
Section 7.13 Severability.....................................................................25
Section 7.14 Further Assurances...............................................................25
-ii-
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT this ("Agreement"), dated as of
February 17, 2004 by and between Glowpoint, Inc., a Delaware corporation (the
"Company"), and the purchasers listed on Exhibit A hereto (each a "Purchaser"
and collectively, the "Purchasers"), for the purchase and sale of shares of the
Company's common stock, par value $.0001 per share (the "Common Stock") by the
Purchasers.
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK AND WARRANTS
Section 1.1 Purchase and Sale of Common Stock and Warrants.
(a) Upon the following terms and conditions, the Company shall issue
and sell to the Purchasers, and the Purchasers shall purchase from the Company,
an aggregate of 6,100,000 shares of Common Stock (the "Shares") at a price per
share of $2.25 (the "Per Share Purchase Price") for an aggregate purchase price
of $13,725,000 (the "Purchase Price"). The Company and the Purchasers are
executing and delivering this Agreement in accordance with and in reliance upon
the exemption from securities registration afforded by Section 4(2) of the U.S.
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"), including Regulation D ("Regulation D"),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder.
(b) Upon the following terms and conditions, the Purchasers shall be
issued Warrants, in substantially the form attached hereto as Exhibit B (the
"Warrants"), to purchase the number of shares of Common Stock set forth opposite
such Purchaser's name on Exhibit A hereto. The Warrants shall have an exercise
price equal to $2.75 per share and shall be exercisable beginning on the date
that is six months and one day following the Closing Date. Any shares of Common
Stock issuable upon exercise of the Warrants (and such shares when issued) are
herein referred to as the "Warrant Shares". The Shares, the Warrants and the
Warrant Shares are sometimes collectively referred to herein as the
"Securities".
Section 1.2 Purchase Price and Closing. The Company agrees to issue and
sell to the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the number of
Shares and Warrants, in each case, set forth opposite their respective names on
Exhibit A. The closing of the purchase and sale of the Shares and Warrants to be
acquired by the Purchasers from the Company under this Agreement shall take
place at the offices of Jenkens & Gilchrist Parker Chapin LLP, The Chrysler
Building, 405 Lexington Avenue, New York, New York 10174 (the "Closing") at
10:00 a.m., New York time (i) on or before February 20, 2004, provided, that all
of the conditions set forth in Article IV hereof and applicable to the Closing
shall have been fulfilled or waived in accordance herewith, or (ii) at such
other time and place or on such date as the Purchasers and the Company may agree
upon (the "Closing Date"). At the Closing, the Company shall deliver or cause to
be delivered to each Purchaser (i) a certificate registered in the name of the
Purchaser representing the number of Shares as is set forth opposite the name of
such Purchaser on Exhibit A and (ii) a certificate representing a Warrant to
purchase such number of shares of Common Stock as is set forth opposite the name
of such Purchaser on Exhibit A. At the Closing, each Purchaser shall deliver its
Purchase Price by wire transfer to an account designated by the Company.
1
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers as follows, as of the date
hereof and the Closing Date, except as set forth on the Schedule of Exceptions
attached hereto with each numbered Schedule corresponding to the section number
herein:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. The Company does not have any Subsidiaries (as defined in Section
2.1(g)) or own securities of any kind in any other entity except as set forth on
Schedule 2.1(g) hereto. The Company and each such Subsidiary (as defined in
Section 2.1(g)) is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, "Material Adverse Effect" means any effect on the business, results
of operations, prospects, assets or financial condition of the Company that is
material and adverse to the Company and its subsidiaries, taken as a whole
and/or any condition, circumstance, or situation that would prohibit or
otherwise materially interfere with the ability of the Company from entering
into and performing any of its obligations under the Transaction Documents (as
defined below) in any material respect; provided, however, that the foregoing
shall not include operating losses of the Company in the amounts contemplated by
the Commission Documents (as defined in Section 2.1(f) hereof).
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement, the Warrants and
that certain Registration Rights Agreement by and among the Company and the
Purchasers, dated as of the date hereof, substantially in the form of Exhibit C
attached hereto (the "Registration Rights Agreement" and, together with this
Agreement and the Warrants, the "Transaction Documents") and to issue and sell
the Securities in accordance with the terms hereof. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action, and, except as set forth on
Schedule 2.1(b), no further consent or authorization of the Company, its Board
of Directors or stockholders is required. When executed and delivered by the
Company, each of the Transaction Documents shall constitute a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
2
(c) Capitalization. The authorized capital stock of the Company as of
February 6, 2004 is set forth on Schedule 2.1(c) hereto. All of the outstanding
shares of the Common Stock and any other outstanding security of the Company
have been duly and validly authorized. Except as set forth in this Agreement and
as set forth on Schedule 2.1(c) hereto, no shares of Common Stock or any other
security of the Company are entitled to preemptive rights or registration rights
and there are no outstanding options, warrants, scrip, rights to subscribe to,
call or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company.
Furthermore, except as set forth in this Agreement and as set forth on Schedule
2.1(c) hereto, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as provided on Schedule 2.1(c) hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. Except as set forth on Schedule 2.1(c), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
(d) Issuance of Securities. The Shares and the Warrants to be issued at
the Closing have been duly authorized by all necessary corporate action and,
when paid for and issued in accordance with the terms hereof and the Warrants,
respectively, the Shares and the Warrant Shares will be validly issued, fully
paid and nonassessable and free and clear of all liens, encumbrances and rights
of refusal of any kind and the holders shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company's Certificate of Incorporation (the "Certificate") or
Bylaws (the "Bylaws"), each as amended to date, or any Subsidiary's comparable
charter documents, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries' respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries are bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws) above, except, for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is required
under federal, state, foreign or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under the Transaction Documents or issue and sell the
Securities in accordance with the terms hereof (other than any filings, consents
and approvals which may be required to be made by the Company under applicable
state and federal securities laws, rules or regulations, the Nasdaq National
Market prior to or subsequent to the Closing, or any registration provisions
provided in the Registration Rights Agreement).
3
(f) Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
on Schedule 2.1(f) hereto, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission (the "Commission") pursuant to the reporting
requirements of the Exchange Act (all of the foregoing including filings
incorporated by reference therein being referred to herein as the "Commission
Documents"). At the times of their respective filings, the Form 10-Q for the
fiscal quarter ended September 30, 2003 (the "Form 10-Q") and the Form 10-K for
the fiscal year ended December 31, 2002 (the "Form 10-K") complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such documents, and the Form
10-Q and Form 10-K did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the Commission Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the Notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of
the Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any Subsidiary for the purchase
or acquisition of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence except as set forth on Schedule 2.1(g) hereto. Neither
the Company nor any Subsidiary is party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of any Subsidiary.
4
(h) No Material Adverse Change. Since September 30, 2003, the Company
has not experienced or suffered any Material Adverse Effect, except as disclosed
on Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i)
hereto, since September 30, 2003, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) other than those incurred in the ordinary course of the
Company's or its Subsidiaries respective businesses or which, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. Since September 30, 2003,
except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $300,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of
others in excess of $100,000, whether or not the same are or should be reflected
in the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the Subsidiaries has good
and valid title to all of its real and personal property reflected in the
Commission Documents, free and clear of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated on Schedule
2.1(l) hereto or such that, individually or in the aggregate, do not cause a
Material Adverse Effect. All said leases of the Company and each of its
Subsidiaries are valid and subsisting and in full force and effect.
5
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or involving the
Company, any Subsidiary or any of their respective properties or assets, which
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Subsidiary or any officers or
directors of the Company or Subsidiary in their capacities as such, which
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or on Schedule
2.1(n) hereto or such that, individually or in the aggregate, the noncompliance
therewith could not reasonably be expected to have a Material Adverse Effect.
The Company and each of its Subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 2.1(o) hereto, the Company
and each of the Subsidiaries has accurately prepared and filed all federal,
state and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the
financial statements of the Company and the Subsidiaries for all current taxes
and other charges to which the Company or any Subsidiary is subject and which
are not currently due and payable. Except as disclosed on Schedule 2.1(o)
hereto, none of the federal income tax returns of the Company or any Subsidiary
have been audited by the Internal Revenue Service. The Company has no knowledge
of any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any Subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.
6
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(q) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. Except as set forth on Schedule 2.1(r)
hereto, the Company and each of the Subsidiaries owns or possesses the rights to
all patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict with the rights of others.
(s) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
Subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance 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 conformity 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 actions are taken
with respect to any differences.
(t) Material Agreements. Except for the Transaction Documents (with
respect to clause (i) only), as disclosed in the Commission Documents or as set
forth on Schedule 2.1(t) hereto, or as would not be reasonably likely to have a
Material Adverse Effect, (i) the Company and each of its Subsidiaries have
performed all obligations required to be performed by them to date under any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, filed or required to be filed with the Commission (the "Material
Agreements"), (ii) neither the Company nor any of its Subsidiaries has received
any notice of default under any Material Agreement and, (iii) to the best of the
Company's knowledge, neither the Company nor any of its Subsidiaries is in
default under any Material Agreement now in effect.
(u) Transactions with Affiliates. Except as set forth on Schedule
2.1(u) hereto, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand, any officer,
employee, consultant or director of the Company, or any of its Subsidiaries, or
any person owning any capital stock of the Company or any Subsidiary or any
member of the immediate family of such officer, employee, consultant, director
or stockholder or any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder, or a member of the immediate
family of such officer, employee, consultant, director or stockholder which, in
each case, is required to be disclosed in the Commission Documents or in the
Company's most recently filed definitive proxy statement on Schedule 14A, that
is not so disclosed in the Commission Documents or in such proxy statement.
7
(v) Securities Act of 1933. Based in material part upon the
representations herein of the Purchasers, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Securities hereunder. Neither the Company
nor anyone acting on its behalf, directly or indirectly, has or will sell, offer
to sell or solicit offers to buy any of the Securities or similar securities to,
or solicit offers with respect thereto from, or enter into any negotiations
relating thereto with, any person, or has taken or will take any action so as to
bring the issuance and sale of any of the Securities under the registration
provisions of the Securities Act and applicable state securities laws, and
neither the Company nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of any of the Securities.
(w) Employees. Neither the Company nor any Subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth on Schedule 2.1(w) hereto. Except as set forth on Schedule
2.1(w) hereto, neither the Company nor any Subsidiary has any employment
contract, agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
Subsidiary required to be disclosed in the Commission Documents that is not so
disclosed. Since September 30, 2003, no officer, consultant or key employee of
the Company or any Subsidiary whose termination, either individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.
(x) Absence of Certain Developments. Except as provided on Schedule
2.1(x) hereto, since September 30, 2003, neither the Company nor any Subsidiary
has:
(i) issued any stock, bonds or other corporate securities or any
right, options or warrants with respect thereto;
(ii) borrowed any amount in excess of $300,000 or incurred or
become subject to any other liabilities in excess of $100,000 (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and volume of the
business of the Company and its Subsidiaries;
(iii) discharged or satisfied any lien or encumbrance in excess of
$250,000 or paid any obligation or liability (absolute or contingent) in excess
of $250,000, other than current liabilities paid in the ordinary course of
business;
8
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock,
in each case in excess of $50,000 individually or $100,000 in the aggregate;
(v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, in each case in excess of $250,000, except in the
ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights in excess of $250,000, or disclosed any proprietary
confidential information to any person except to customers in the ordinary
course of business or to the Purchasers or their representatives;
(vii) suffered any material losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $500,000;
(x) entered into any material transaction, whether or not in the
ordinary course of business;
(xi) made charitable contributions or pledges in excess of $25,000;
(xii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xiii) experienced any material problems with labor or management
in connection with the terms and conditions of their employment; or
(xiv) entered into an agreement, written or otherwise, to take any
of the foregoing actions.
(y) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(z) ERISA. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Plan by the Company or any of its Subsidiaries
which is or would be materially adverse to the Company and its Subsidiaries. The
execution and delivery of this Agreement and the issuance and sale of the
Securities will not involve any transaction which is subject to the prohibitions
of Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or in connection with which a tax could be imposed pursuant to
Section 4975 of the Internal Revenue Code of 1986, as amended, provided that, if
any of the Purchasers, or any person or entity that owns a beneficial interest
in any of the Purchasers, is an "employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA) with respect to which the Company is a "party
in interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 2.1(z), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any Subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any Subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
9
(aa) Delisting Notification. The Company has not received notice
(written or oral) from the Nasdaq National Market to the effect that the Company
is not in compliance with the listing or maintenance requirements of such
market.
(bb) Independent Nature of Purchasers. The Company acknowledges
that the obligations of each Purchaser under the Transaction Documents are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under the Transaction Documents. The Company acknowledges
that nothing contained herein, or in any Transaction Document, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that for reasons of administrative convenience only, the Transaction Documents
have been prepared by counsel for one of the Purchasers and such counsel does
not represent all of the Purchasers but only such Purchaser and the other
Purchasers have retained their own individual counsel with respect to the
transactions contemplated hereby. The Company acknowledges that all Purchasers
have been provided with the same terms and Transaction Documents for the purpose
of closing the transaction with multiple Purchasers and not because it was
required or requested to do so by the Purchasers.
(cc) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Regulation D and Rule 506 thereof under
the Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Securities to be
integrated with other offerings. The Company does not have any registration
statement pending before the Commission or currently under the Commission's
review.
10
(dd) Sarbanes-Oxley Act. The Company is in substantial compliance
with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act"), and the rules and regulations promulgated thereunder,
that are effective and intends to comply substantially with other applicable
provisions of the Sarbanes-Oxley Act, and the rules and regulations promulgated
thereunder, upon the effectiveness of such provisions.
Section 2.2 Representations and Warranties of the Purchasers. Each of
the Purchasers hereby represents and warrants to the Company with respect solely
to itself and not with respect to any other Purchaser as follows as of the date
hereof and as of the Closing Date:
(a) Organization and Standing of the Purchasers. If the Purchaser
is an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Each Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Securities being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by each Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders, or
partners, as the case may be, is required. When executed and delivered by the
Purchasers, the other Transaction Documents shall constitute valid and binding
obligations of each Purchaser enforceable against such Purchaser in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) No Conflict. The execution, delivery and performance of the
Transaction Documents by the Purchaser and the consummation by the Purchaser of
the transactions contemplated thereby and hereby do not and will not (i) violate
any provision of the Purchaser's charter or organizational documents, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Purchaser is a party or by which the
Purchaser's respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Purchaser or by which any property or asset of
the Purchaser are bound or affected, except, in all cases, other than violations
pursuant to clauses (i) or (iii) (with respect to federal and state securities
laws) above, except, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, materially and adversely affect the Purchaser's ability to perform
its obligations under the Transaction Documents.
11
(d) Acquisition for Investment. Each Purchaser is purchasing the
Shares and Warrants solely for its own account for the purpose of investment and
not with a view to or for sale in connection with distribution. Each Purchaser
does not have a present intention to sell any of the Shares or Warrants, nor a
present arrangement (whether or not legally binding) or intention to effect any
distribution of any of the Shares or Warrants to or through any person or
entity; provided, however, that by making the representations herein, such
Purchaser does not agree to hold the Shares or the Warrants for any minimum or
other specific term and reserves the right to dispose of the Shares or the
Warrants at any time in accordance with Federal and state securities laws
applicable to such disposition. Each Purchaser acknowledges that it (i) has such
knowledge and experience in financial and business matters such that Purchaser
is capable of evaluating the merits and risks of Purchaser's investment in the
Company, (ii) is able to bear the financial risks associated with an investment
in the Securities and (iii) has been given full access to such records of the
Company and the Subsidiaries and to the officers of the Company and the
Subsidiaries as it has deemed necessary or appropriate to conduct its due
diligence investigation.
(e) Rule 144. Each Purchaser understands that the Securities must
be held indefinitely unless such Securities are registered under the Securities
Act or an exemption from registration is available. Each Purchaser acknowledges
that such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Each Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. Each Purchaser understands that the Securities are
being offered and sold in reliance on a transactional exemption from the
registration requirements of federal and state securities laws and the Company
is relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Securities. Each Purchaser
understands that no United States federal or state agency or any government or
governmental agency has passed upon or made any recommendation or endorsement of
the Securities.
(g) No General Solicitation. Each Purchaser has received and
carefully reviewed copies of the Form 10-K, the Form 10-Q and the Confidential
Offering Memorandum dated February 13, 2004. Each Purchaser acknowledges that
the Securities were not offered to such Purchaser by means of any form of
general or public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of
communications. Each Purchaser, in making the decision to purchase the
Securities, has relied upon independent investigation made by it and has not
relied on any information or representations made by third parties.
(h) Accredited Investor. Each Purchaser is an "accredited investor"
(as defined in Rule 501 of Regulation D), and such Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the Securities. Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange Act and such
Purchaser is not a broker-dealer. Each Purchaser acknowledges that an investment
in the Securities is speculative and involves a high degree of risk. Each
Purchaser has completed or caused to be completed the Investor Questionnaire
Certification attached hereto as Exhibit D certifying as to its status as an
"accredited investor" and understands that the Company is relying upon the truth
and accuracy of the Purchaser set forth therein to determine the suitability of
such Purchaser to acquire the Securities.
12
(i) Certain Fees. The Purchasers have not employed any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
(j) Independent Investment. No Purchaser has agreed to act with any
other Purchaser for the purpose of acquiring, holding, voting or disposing of
the Securities purchased hereunder for purposes of Section 13(d) under the
Exchange Act, and each Purchaser is acting independently with respect to its
investment in the Securities. The decision of each Purchaser to purchase
Securities pursuant to this Agreement has been made by such Purchaser
independently of any other purchase and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. Each Purchaser
shall be entitled to independently protect and enforce its rights, including
without limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
(k) Patriot Act. If the Purchaser is an individual, the Purchaser
certifies that he or she is not nor to his or her knowledge has been designated,
a "suspected terrorist" as defined in Executive Order 13224. If the Purchaser is
a corporation, trust, partnership, limited liability company or other
organization, the Purchaser certifies that, to the best of Purchaser's
knowledge, the Purchaser has not been designated, and is not owned or
controlled, by a "suspected terrorist" as defined in Executive Order 13224. The
Purchaser hereby acknowledges that the Company seeks to comply with all
applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Purchaser hereby represents, warrants and
agrees that to its knowledge: (i) none of the cash or property that the
Purchaser will pay or will contribute to the Company has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (ii) no contribution or payment by the Purchaser to the Company,
to the extent that they are within the Purchaser's control shall cause the
Company to be in violation of the United States Bank Secrecy Act, the United
States International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. The Purchaser shall promptly notify the Company if any of these
representations ceases to be true and accurate regarding the Purchaser. The
Purchaser agrees to provide the Company any additional information regarding the
Purchaser that the Company deems necessary or convenient to ensure compliance
with all applicable laws concerning money laundering and similar activities. The
Purchaser understands and agrees that if at any time it is discovered that any
of the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities, the
Company may undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or redemption of
the Purchaser's investment in the Company. In the event that the Company is
requested or required (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar legal, judiciary or regulatory
process or as otherwise required by applicable law or regulation) to disclose
any confidential information about a Purchaser, the Company shall (A) provide
such Purchaser with prompt written notice of such request or requirement and (B)
cooperate with the Purchaser so that the Purchaser may seek a protective order
or other appropriate remedy. In the event that such protective order or other
remedy is not obtained, the Company and its respective representatives shall
disclose only that portion of the confidential information that such person is
advised by legal counsel is legally required to be disclosed, and provided that
the Company in each instance shall request that confidential treatment be
accorded to any confidential information so disclosed.
13
ARTICLE III
COVENANTS
The Company covenants with each Purchaser as follows, which covenants
are for the benefit of each Purchaser and their respective permitted assignees.
Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with its rules and regulations, of the transactions
contemplated by any of the Transaction Documents and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities to
the Purchasers, or their respective subsequent holders.
Section 3.2 Registration and Listing. The Company shall use its
reasonable best efforts to cause its Common Stock to continue to be registered
under Sections 12(b) or 12(g) of the Exchange Act, to comply in all respects
with its reporting and filing obligations under the Exchange Act, to comply with
all requirements related to any registration statement filed pursuant to this
Agreement, and to not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company shall use its reasonable best efforts to continue
the listing or trading of its Common Stock on the Nasdaq National Market or any
successor market. The Company will promptly file the "Listing Application" for,
or in connection with, the issuance and delivery of the Shares and the Warrant
Shares.
Section 3.3 Inspection Rights. The Company shall permit, during normal
business hours and upon reasonable request and reasonable notice, each Purchaser
or any employees, agents or representatives thereof, so long as such Purchaser
shall be obligated hereunder to purchase the Shares or shall beneficially own
any Shares or Warrant Shares, for purposes reasonably related to such
Purchaser's interests as a stockholder to examine and make reasonable copies of
the records and books of account of, and visit and inspect the properties,
assets, operations and business of the Company and any Subsidiary, and to
discuss the affairs, finances and accounts of the Company and any Subsidiary
with any of its officers, consultants, directors, and key employees.
14
Section 3.4 Compliance with Laws. The Company shall comply, and cause
each Subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which would be reasonably likely to have a Material
Adverse Effect.
Section 3.5 Keeping of Records and Books of Account. The Company shall
keep and cause each Subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.6 Reporting Requirements. If the Company ceases to file its
periodic reports with the Commission, or if the Commission ceases making these
periodic reports available via the Internet without charge, then the Company
shall furnish the following to each Purchaser so long as such Purchaser shall be
obligated hereunder to purchase the Securities or shall beneficially own Shares
or Warrant Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as
soon as available, and in any event within forty-five (45) days after the end of
each of the first three fiscal quarters of the Company;
(b) Annual Reports filed with the Commission on Form 10-K as soon
as available, and in any event within ninety (90) days after the end of each
fiscal year of the Company; and
(c) Copies of all notices, information and proxy statements in
connection with any meetings, that are, in each case, provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.
Section 3.7 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any Subsidiary under any
Transaction Document.
15
Section 3.8 Subsequent Financings; Right of First Refusal. (a) For a
period of one (1) year following the Closing Date, the Company covenants and
agrees to promptly notify (in no event later than five (5) trading days after
making or receiving an applicable offer) in writing (a "Rights Notice") the
Purchasers of the terms and conditions of any proposed offer or sale to, or
exchange with (or other type of distribution to) any third party (a "Subsequent
Financing"), of Common Stock or any securities convertible, exercisable or
exchangeable into Common Stock, including convertible debt securities
(collectively, the "Financing Securities"). The Rights Notice shall describe, in
reasonable detail, the proposed Subsequent Financing, the proposed closing date
of the Subsequent Financing, which shall not be within twenty (20) calendar days
from the date the Rights Notice is given nor later than forty five (45) calendar
days from the date the Rights Notice is given, including, without limitation,
all of the material terms and conditions thereof and proposed definitive
documentation to be entered into in connection therewith. The Rights Notice
shall provide each Purchaser an option (the "Rights Option") during the five (5)
trading days following delivery of the Rights Notice (the "Option Period") to
purchase up to fifty percent (50%) of its Purchase Price for the securities
being offered in such Subsequent Financing on the same, absolute terms and
conditions as contemplated by such Subsequent Financing (the "First Refusal
Rights"). If any Purchaser elects not to participate in such Subsequent
Financing, the other Purchasers may participate on a pro-rata basis so long as
such participation in the aggregate does not exceed fifty percent (50%) of the
total Purchase Price hereunder. For purposes of this Section, all references to
"pro rata" means, for any Purchaser electing to participate in such Subsequent
Financing, the percentage obtained by dividing (x) the total number of Shares
purchased by such Purchaser at the Closing by (y) the total number of Shares
purchased by all of the participating Purchasers at the Closing. Delivery of any
Rights Notice constitutes a representation and warranty by the Company that
there are no other material terms and conditions, arrangements, agreements or
otherwise except for those disclosed in the Rights Notice, to provide additional
compensation to any party participating in any proposed Subsequent Financing,
including, but not limited to, additional compensation based on changes in the
Purchase Price or any type of reset or adjustment of a purchase or conversion
price or to issue additional securities at any time after the closing date of a
Subsequent Financing. If the Company does not receive notice of exercise of the
Rights Option from any of the Purchasers within the Option Period, the Company
shall have the right to close the Subsequent Financing on the scheduled closing
date with a third party (and, if applicable, with such Purchasers as shall have
exercised their Rights Option); provided that all of the material terms and
conditions of the closing are the same as those provided to the Purchasers in
the Rights Notice. If the closing of the proposed Subsequent Financing does not
occur within 60 days from the date the Rights Notice is given, any closing of
the contemplated Subsequent Financing or any other Subsequent Financing shall be
subject to all of the provisions of this Section, including, without limitation,
the delivery of a new Rights Notice.
16
(b) For purposes of this Agreement, a Permitted Financing (as
defined hereinafter) shall not be considered a Subsequent Financing. A
"Permitted Financing" shall mean (i) the Company's issuance of Common Stock and
warrants therefore in connection with a merger and/or acquisition,
consolidation, sale or disposition of all or substantially all of the Company's
assets, (ii) the issuance of shares of Common Stock or warrants therefore in
connection with strategic agreements so long as such issuances are not for the
purpose of raising capital, (iii) the Company's issuance of Common Stock or the
issuance or grants of options to purchase Common Stock pursuant to the Company's
stock option plans and employee stock purchase plans as they now exist, (iv) the
Company's issuance of Common Stock or the issuance or grants of options to
purchase Common Stock pursuant to any future stock option plan or employee stock
purchase plan which is approved by the Company's Board of Directors or any
amendment to the Company's existing stock option plans and employee stock
purchase plans which is approved by the Company's Board of Directors so long as
such issuances in the aggregate do not exceed 6,500,000 shares of Common Stock,
(v) any issuances of securities or Common Stock pursuant to Company 401(k)
matches, (vi) any issuances of securities to consultants, financial advisers,
public relations consultants or secured lenders to the Company so long as such
issuances to such secured lenders do not in the aggregate exceed ten percent
(10%) of the Company's issued and outstanding shares of Common Stock as of the
date hereof, (vii) the payment of any dividends on the Company Series B
Convertible Preferred Stock, (viii) securities issued pursuant to a bona fide
firm underwritten public offering of the Company's securities and (ix) the
issuance of Common Stock upon the exercise or conversion of any securities
described in clauses (i) through (viii) above.
Section 3.9 Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company for working capital and general corporate purposes.
Section 3.10 Reporting Status; Eligibility to Use Form S-3. So long as
a Purchaser beneficially owns any of the Securities, the Company shall timely
file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination. The Company
currently meets, and will take all necessary action to continue to meet, the
"registrant eligibility" requirements set forth in the general instructions to
Form S-3 applicable to "resale" registrations on Form S-3 during the
Effectiveness Period (as defined in the Registration Rights Agreement).
Section 3.11 Disclosure of Transaction. The Company shall issue a press
release describing the material terms of the transactions contemplated hereby
(the "Press Release") as soon as practicable after the Closing; provided,
however, that if Closing occurs after 4:00 P.M. Eastern Time on any Trading Day
but in no event later than one hour after the Closing, the Company shall issue
the Press Release no later than 9:00 A.M. Eastern Time on the first Trading Day
following the Closing Date. The Company shall also file with the Commission a
Current Report on Form 8-K (the "Form 8-K") describing the material terms of the
transactions contemplated hereby (and attaching as exhibits thereto this
Agreement, the Registration Rights Agreement and the form of Warrant) as soon as
practicable following the date of execution of this Agreement but in no event
more than two (2) Trading Days following the date of execution of this
Agreement, which Press Release and Form 8-K shall be subject to prior review and
comment by the Purchasers. "Trading Day" means any day during which the Nasdaq
National Market (or other principal exchange on which the Common Stock is
traded) shall be open for trading.
Section 3.12 Disclosure of Material Information. The Company covenants
and agrees that neither it nor any other person acting on its behalf has
provided or will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
Section 3.13 Pledge of Securities. The Company acknowledges and agrees
that the Securities may be pledged by a Purchaser in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by the
Common Stock. The pledge of Common Stock shall not be deemed to be a transfer,
sale or assignment of the Common Stock hereunder, and no Purchaser effecting a
pledge of Common Stock shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document; provided that a Purchaser and its pledgee
shall be required to comply with the provisions of Article V hereof in order to
effect a sale, transfer or assignment of Common Stock to such pledgee. At the
Purchasers' expense, the Company hereby agrees to execute and deliver such
documentation as a pledgee of the Common Stock may reasonably request in
connection with a pledge of the Common Stock to such pledgee by a Purchaser.
17
ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Securities. The obligation hereunder of the Company to
close and issue and sell the Securities to the Purchasers at the Closing Date is
subject to the satisfaction or waiver, at or before the Closing of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Shares
shall have been delivered to the Company on the Closing Date.
(e) Delivery of Transaction Documents. The Transaction Documents
shall have been duly executed and delivered by the Purchasers to the Company.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Securities. The obligation hereunder of the Purchasers
to purchase the Securities and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the Closing
Date, of each of the conditions set forth below. These conditions are for the
Purchasers' sole benefit and may be waived by the Purchasers at any time in
their sole discretion.
18
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all material respects
as of the Closing Date, except for representations and warranties that speak as
of a particular date, which shall be true and correct in all material respects
as of such date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.
(c) No Suspension, Etc. Trading in the Common Stock shall not have
been suspended by the Commission or the Nasdaq National Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets ("Bloomberg") shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any Subsidiary, or any of the officers, directors or
affiliates of the Company or any Subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(f) Opinion of Counsel. The Purchasers shall have received an
opinion of counsel to the Company, dated the date of such Closing, substantially
in the form of Exhibit E hereto, with such exceptions and limitations as shall
be reasonably acceptable to counsel to the Purchasers.
(g) Shares and Warrants. At or prior to the Closing, the Company
shall have delivered to the Purchasers certificates representing the Shares (in
such denominations as each Purchaser may request) and certificates representing
the Warrants, in each case, being acquired by the Purchasers at the Closing.
(h) Secretary's Certificate. The Company shall have delivered to
the Purchasers a secretary's certificate, dated as of the Closing Date, as to
(i) the resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
19
(i) Officer's Certificate. On the Closing Date, the Company shall
have delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company, dated as of the Closing Date, confirming the accuracy of
the Company's representations, warranties and covenants as of the Closing Date
and confirming the compliance by the Company with the conditions precedent set
forth in paragraphs (b)-(e) of this Section 4.2 as of the Closing Date (provided
that, with respect to the matters in paragraphs (d) and (e) of this Section 4.2,
such confirmation shall be based on the knowledge of the executive officer after
due inquiry).
(j) Registration Rights Agreement. As of the Closing Date, the
parties shall have entered into the Registration Rights Agreement in the form of
Exhibit C attached hereto.
(k) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
ARTICLE V
CERTIFICATE LEGEND
Section 5.1 Legend. Each certificate representing the Securities shall
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required by applicable state securities or "blue
sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR GLOWPOINT,
INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF
SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing any of the
Shares and the Warrant Shares, without the legend set forth above if at such
time, prior to making any transfer of any such Shares or Warrant Shares, such
holder thereof shall give written notice to the Company describing the manner
and terms of such transfer and removal as the Company may reasonably request.
Such proposed transfer and removal will not be effected until: (a) either (i)
the Company has received an opinion of counsel reasonably satisfactory to the
Company, to the effect that the registration of the Shares or Warrant Shares
under the Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act covering such
proposed disposition has been filed by the Company with the Commission and has
become effective under the Securities Act, (iii) the Company has received other
evidence reasonably satisfactory to the Company that such registration and
qualification under the Securities Act and state securities laws are not
20
required, or (iv) the holder provides the Company with reasonable assurances
that such security can be sold pursuant to Rule 144 under the Securities Act;
and (b) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that registration or qualification
under the securities or "blue sky" laws of any state is not required in
connection with such proposed disposition, or (ii) compliance with applicable
state securities or "blue sky" laws has been effected or a valid exemption
exists with respect thereto. The Company will respond to any such notice from a
holder within five (5) business days. In the case of any proposed transfer under
this Section 5.1, the Company will use reasonable efforts to comply with any
such applicable state securities or "blue sky" laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or "blue sky" laws of any state for which registration by
coordination is unavailable to the Company. The restrictions on transfer
contained in this Section 5.1 shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement. Whenever a certificate representing the Shares or Warrant
Shares is required to be issued to a Purchaser without a legend, in lieu of
delivering physical certificates representing the Shares or Warrant Shares,
provided the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, the Company shall
use its reasonable best efforts to cause its transfer agent to electronically
transmit the Shares or Warrant Shares to a Purchaser by crediting the account of
such Purchaser's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system (to the extent not inconsistent with any provisions
of this Agreement).
ARTICLE VI
INDEMNIFICATION
Section 6.1 General Indemnity. The Company agrees to indemnify and hold
harmless the Purchasers (and their respective directors, officers, affiliates,
agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. Each
Purchaser severally but not jointly agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and disbursements) incurred by the Company as result of any inaccuracy in or
breach of the representations, warranties or covenants made by such Purchaser
herein. The maximum aggregate liability of each Purchaser pursuant to its
indemnification obligations under this Article VI shall not exceed the portion
of the Purchase Price paid by such Purchaser hereunder.
Section 6.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
21
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnifying party a conflict of interest between it
and the indemnified party exists with respect to such action, proceeding or
claim (in which case the indemnifying party shall be responsible for the
reasonable fees and expenses of one separate counsel for the indemnified
parties), to assume the defense thereof with counsel reasonably satisfactory to
the indemnified party. In the event that the indemnifying party advises an
indemnified party that it will not contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VI to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such claim. The indemnification
required by this Article VI shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
indemnified party irrevocably agrees to refund such moneys if it is ultimately
determined by a court of competent jurisdiction that such party was not entitled
to indemnification. The indemnity agreements contained herein shall be in
addition to (a) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
22
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided,
however, that the Company shall pay (i) such fees and expenses set forth on
Schedule 2.1(p) hereto, including all reasonable attorneys' fees and expenses
(exclusive of disbursements and out-of-pocket expenses) incurred by the
Purchasers in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Transaction Documents and the
transactions contemplated thereunder and (ii) the costs of any amendments,
modifications or waivers of this Agreement or any of the other Transaction
Documents.
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) The parties agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in New
York County, New York, and the parties irrevocably waive any right to raise
forum non conveniens or any other argument that New York is not the proper
venue. The parties irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York. The Company and each Purchaser consent
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Securities, this
Agreement or the Registration Rights Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.
Section 7.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the Purchasers holding at least a majority
of all Shares then held by the Purchasers. Any amendment or waiver effected in
accordance with this Section 7.3 shall be binding upon each Purchaser (and their
permitted assigns) and the Company.
23
Section 7.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company: Glowpoint, Inc.
225 Long Avenue
Hillside, New Jersey 07205
Attention: Chief Executive Officer and President
Tel. No.: (973) 282-2000
Fax No.: (973) 391-9776
with copies (which copies
shall not constitute notice
to the Company) to: Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Michael J.W. Rennock
Tel. No.: (212) 468-8000
Fax No.: (212) 468-7999
If to any Purchaser: At the address of such Purchaser set forth
on Exhibit A to this Agreement.
Any party hereto may from time to time change its address for notices
by giving written notice of such changed address to the other party hereto.
Section 7.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 7.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 7.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After the Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
Subject to Section 5.1 hereof, the Purchasers may assign the Securities and its
rights under this Agreement and the other Transaction Documents and any other
rights hereto and thereto without the consent of the Company.
Section 7.8 No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
24
Section 7.9 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 choice of law provisions.
Section 7.10 Survival. The representations and warranties of the
Company and the Purchasers shall survive the execution and delivery hereof and
the Closing until the second anniversary of the Closing Date, except the
agreements and covenants set forth in Articles I, III, V, VI and VII of this
Agreement shall survive the execution and delivery hereof and the Closing
hereunder.
Section 7.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart.
Section 7.12 Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the names of the
Purchasers without the consent of the Purchasers, which consent shall not be
unreasonably withheld or delayed, or unless and until such disclosure is
required by law, rule or applicable regulation, and then only to the extent of
such requirement.
Section 7.13 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 7.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement, the Warrants
and the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
1IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.
GLOWPOINT, INC.
By:_____________________________________
Name: David C. Trachtenberg
Title: Chief Executive Officer and President
PURCHASER:
By:_____________________________________
Name:
Title:
PURCHASER:
By:_____________________________________
Name:
Title:
PURCHASER:
By:_____________________________________
Name:
Title: