EXHIBIT 10.1
COMMON STOCK PURCHASE
AGREEMENT
DATED AS OF MARCH 14, 2005
AMONG
GLOWPOINT, INC.
AND
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
PAGE
ARTICLE I Purchase and Sale of Common Stock............................................................1
Section 1.1 Purchase and Sale of Stock........................................................1
Section 1.2 The Warrant Shares................................................................1
Section 1.3 Purchase Price and Closing........................................................1
Section 1.4 Warrants..........................................................................2
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...................................................................................12
Section 3.1 Securities Compliance............................................................12
Section 3.2 Ownership Limitations............................................................13
Section 3.3 Registration and Listing.........................................................13
Section 3.4 Compliance with Laws.............................................................13
Section 3.5 Keeping of Records and Books of Account..........................................13
Section 3.6 Other Agreements.................................................................13
Section 3.7 Reservation of Shares............................................................14
Section 3.8 Non-Disclosure of Material Non-Public Information................................14
Section 3.9 Transfer Agent Instructions......................................................14
Section 3.10 Subsequent Financings; Right of Participation....................................15
ARTICLE IV Conditions..................................................................................16
Section 4.1 Conditions Precedent to the Obligation of the Company to Sell the Shares.........16
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the
Shares...........................................................................17
ARTICLE V Indemnification.............................................................................19
Section 5.1 General Indemnity................................................................19
Section 5.2 Indemnification Procedure........................................................19
ARTICLE VI Miscellaneous...............................................................................20
Section 6.1 Fees and Expenses................................................................20
Section 6.2 Specific Enforcement; Consent to Jurisdiction....................................20
Section 6.3 Entire Agreement; Amendment......................................................21
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TABLE OF CONTENTS
(continued)
PAGE
Section 6.4 Notices..........................................................................21
Section 6.5 Waivers..........................................................................22
Section 6.6 Headings.........................................................................22
Section 6.7 Successors and Assigns...........................................................22
Section 6.8 No Third Party Beneficiaries.....................................................22
Section 6.9 Governing Law....................................................................22
Section 6.10 Survival.........................................................................22
Section 6.11 Counterparts.....................................................................22
Section 6.12 Publicity; Confidentiality.......................................................22
Section 6.13 Severability.....................................................................23
Section 6.14 Further Assurances...............................................................23
-ii-
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is dated as of
this 14th day of March 2005 by and among Glowpoint, Inc., a Delaware corporation
(the "Company"), and each of the Purchasers of shares of Common Stock of the
Company whose names are set forth on Exhibit A hereto (individually, a
"Purchaser" and collectively, the "Purchasers").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
Section 1.1 Purchase and Sale of Stock. Upon the following terms and
conditions, the Company shall issue and sell to the Purchasers and each of the
Purchasers shall purchase from the Company, the number of shares (the "Purchased
Shares") of the Company's Common Stock, par value $.0001 per share (the "Common
Stock"), at a purchase price per Purchased Share of $1.50, set forth opposite
such Purchaser's name on Exhibit A hereto. Upon the following terms and
conditions, each of the Purchasers shall be issued Warrants, in substantially
the form attached hereto as Exhibit B (the "Warrants"), to purchase the number
of shares of the Company's Common Stock set forth opposite such Purchaser's name
on Exhibit A hereto. The aggregate purchase price for the Purchased Shares and
the Warrants shall be $10,150,000. The Purchased Shares and the shares of Common
Stock issuable upon exercise of the Warrants shall be registered pursuant to the
Company's Registration Statement on Form S-3 (Registration Number 333-114207),
which was filed with the Securities and Exchange Commission (the "SEC") on April
5, 2004 and declared effective on April 16, 2004 (the "Registration Statement").
Section 1.2 The Warrant Shares. The Company has authorized and has
reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, such number of shares of
Common Stock as shall from time to time be sufficient to effect the exercise of
the Warrants then outstanding; provided that the number of shares of Common
Stock so reserved shall at no time be less than 100% of its authorized but
unissued shares of its Common Stock required to effect the exercise of the
Warrants. 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
Purchased Shares and the Warrant Shares are sometimes collectively referred to
as the "Shares".
Section 1.3 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 that
number of the Purchased Shares and Warrants set forth opposite their respective
names on Exhibit A. The aggregate purchase price of the Purchased Shares and
Warrants being acquired by each Purchaser is set forth opposite such Purchaser's
name on Exhibit A (for each such purchaser, the "Purchase Price" and
collectively referred to as the "Purchase Prices"). The closing of the purchase
and sale of the Purchased Shares and Warrants shall take place at the offices of
Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, NY (the
"Closing") at 10:00 a.m. (eastern time) upon the satisfaction of each of the
conditions set forth in Article IV hereof (the "Closing Date"). Funding with
respect to the Closing shall take place by wire transfer of immediately
available funds on or prior to the Closing Date.
Section 1.4 Warrants. The Company agrees to issue to each of the
Purchasers 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 the Warrant Price (as defined in the Warrant) and shall
expire five (5) years after the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers, except as set forth in the Company's disclosure schedule (the
"Disclosure Schedule") delivered with this Agreement as follows:
(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 except as set forth in the
Company's Form 10-K, as amended, for the year ended December 31, 2003, including
the accompanying financial statements (the "Form 10-K"), or in the Company's
Forms 10-Q, as amended, for the fiscal quarters ended March 31, 2004, June 30,
2004 or September 30, 2004 (collectively, the "Form 10-Q"). The Company and each
such subsidiary 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 material adverse effect on the
business, operations, properties, prospects, or financial condition of 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 to perform any of its obligations under this
Agreement in any material respect; provided, however, that the foregoing shall
not include operating losses of the Company in the amounts contemplated by the
SEC 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 and the Warrants
(collectively, the "Transaction Documents") and to issue and sell the Shares and
the Warrants in accordance with the terms hereof. The execution, delivery and
performance of the Transaction Documents by the Company and, except as disclosed
on Schedule 2.1(b) hereto, the consummation by it of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors or stockholders is required. This Agreement
has been duly executed and delivered by the Company. The other Transaction
Documents will have been duly executed and delivered by the Company at the
Closing. Each of the Transaction Documents constitutes, or shall constitute when
executed and delivered, 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, 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.
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(c) Capitalization. The authorized capital stock of the Company and the
shares thereof currently issued and outstanding as of March 4, 2005 are set
forth on Schedule 2.1(c) hereto. All of the outstanding shares of the Company's
Common Stock and Series B Convertible Preferred Stock have been duly and validly
authorized. Except as set forth on Schedule 2.1(c) hereto, no shares of Common
Stock 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 or on Schedule 2.1(c), 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 set forth on Schedule 2.1(c) hereto, the Company is not a party to any
agreement granting registration or anti-dilution rights to any person with
respect to any of its equity or debt securities. The Company is not a party to,
and it has no knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of the Company. Except as set forth on Schedule
2.1(c) hereto, the offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable Federal and state securities laws, and no stockholder has a
right of rescission or claim for damages with respect thereto which would have a
Material Adverse Effect. The Company has furnished or made available to the
Purchasers true and correct copies of the Company's Certificate of Incorporation
as in effect on the date hereof (the "Certificate"), and the Company's Bylaws as
in effect on the date hereof (the "Bylaws").
(d) Issuance of Shares. The Purchased Shares and the Warrants to be
issued at the Closing have been duly authorized by all necessary corporate
action and the Purchased Shares, when paid for or issued in accordance with the
terms hereof, shall be validly issued and outstanding, fully paid and
nonassessable, and the holders shall be entitled to all rights accorded to a
holder of Common Stock. When the Warrant Shares are issued in accordance with
the terms of the Warrants, such shares will be duly authorized by all necessary
corporate action and validly issued and outstanding, fully paid and
nonassessable, 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 herein and therein do not and will not (i) violate any
provision of the Company's Certificate or Bylaws, (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 is a party or by which it or its properties or assets are
bound, (iii) create or impose a lien, mortgage, security interest, charge or
encumbrance of any nature on any property of the Company under any agreement or
any commitment to which the Company is a party or by which the Company is bound
or by which any of its respective properties or assets are bound, or (iv) 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)
and (iv) above, for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations that
singularly or in the aggregate do not and will not have a Material Adverse
Effect.
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(f) SEC Documents, Financial Statements. The Common Stock 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, since January 1, 2004, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of
the foregoing including filings incorporated by reference therein being referred
to herein as the "SEC Documents"; for purposes of this Agreement, such term
shall also include the Registration Statement, the Prospectus included therein,
the Prospectus Supplement (as defined below) and the documents incorporated by
reference therein). The Company has delivered or made available to each of the
Purchasers true and complete copies of the SEC Documents filed with the SEC
since January 1, 2004. Neither the Company nor any person acting on behalf of
the Company has provided to the Purchasers any material non-public information
or any other information which, according to applicable law, rule or regulation,
was required to have been disclosed publicly by the Company but which has not
been so disclosed, other than with respect to the transactions contemplated by
this Agreement. As of their respective dates, the Form 10-K and the Form 10-Q
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such documents, and,
as of their respective dates, none of the Form 10-K and the Form 10-Q contained
any untrue statement of a material fact or omitted 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. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with United States 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. The
Company owns, directly or indirectly, all 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. 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.
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(h) No Material Adverse Change. Since September 30, 2004, the Company
has not experienced or suffered any Material Adverse Effect, except as disclosed
on Schedule 2.1(h) hereto or in the SEC Documents.
(i) No Undisclosed Liabilities. Except as set forth on Schedule 2.1(i)
hereto or in the SEC Documents, neither the Company nor any of its subsidiaries
has 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 since September 30, 2004 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Except as set forth 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. The SEC Documents or Schedule 2.1(k) hereto sets
forth as of a recent date 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. Except as set forth on
Schedule 2.1(k), 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 Form
10-K, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated in the SEC Documents
or on Schedule 2.1(l) hereto or such that, individually or in the aggregate, do
not cause a Material Adverse Effect on the Company's financial condition or
operating results. All said leases of the Company and each of its subsidiaries
are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any 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 the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the SEC Documents or on Schedule 2.1(m) hereto, there is no action,
suit, claim, investigation, arbitration, alternate dispute resolution proceeding
or any 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 could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in 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.
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(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 SEC Documents, or such that, individually
or in the aggregate, do not cause 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, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth in the SEC Documents, the Company and
each of the subsidiaries has accurately prepared and filed all federal, state
and other material 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 material
current taxes and other charges to which the Company or any subsidiary is
subject and which are not currently due and payable. 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.
(p) Certain Fees. Except as set forth in this Agreement or on Schedule
2.1(p) hereto, no brokers, finders or financial advisory fees or commissions
will be payable by the Company or any subsidiary or any Purchaser with respect
to the transactions contemplated by this Agreement.
(q) Disclosure. All information relating to or concerning the Company
or any of its subsidiaries set forth in this Agreement and provided to the
Purchasers in connection with the transactions contemplated hereby, including
the Prospectus included in the Registration Statement and the Prospectus
Supplement, is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading (other than any information the Purchasers have refused to
accept). No event or circumstance has occurred or exists, nor is the Company in
possession of any information, with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which has not been publicly announced or disclosed but
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company (assuming for this purpose that the Company's
reports filed under the Exchange Act are being incorporated into an effective
registration statement filed by the Company under the Securities Act).
(r) Operation of Business. Except as set forth in the SEC Documents,
the Company and each of the subsidiaries owns or possesses 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 that are necessary or material for use
in connection with their respective businesses as described in the Form 10-K and
which the failure to so have could, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any subsidiary has received a written notice that the foregoing
intellectual property rights used by the Company or any subsidiary violates or
infringes upon the rights of any other party.
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(s) Environmental Compliance. The Company and each of its subsidiaries
have obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. The SEC Documents describe all material permits, licenses and other
authorizations issued under any Environmental Laws to the Company or its
subsidiaries. "Environmental Laws" shall mean all applicable laws relating to
the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. The Company has all necessary material governmental approvals
required under all Environmental Laws and used in its business or in the
business of any of its subsidiaries. The Company and each of its subsidiaries
are also in material compliance with all other limitations, restrictions,
conditions, standards, requirements, schedules and timetables required or
imposed under all Environmental Laws. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect, there are no
past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its subsidiaries
that violate or may violate any Environmental Law after the Closing Date or that
may give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
(t) Books and Record Internal Accounting Controls. The books and
records 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, 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 GAAP 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 is taken with respect to any differences.
(u) Material Agreements. Except as set forth in the SEC Documents or on
Schedule 2.1(u) hereto, neither the Company nor any subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the SEC as an
exhibit to a Form 10-K (collectively, "Material Agreements"). Except as set
forth on Schedule 2.1(u) or in the SEC Documents, the Company and each of its
subsidiaries has in all material respects performed all the obligations required
to be performed by them to date under the foregoing agreements, have received no
notice of default and, to the best of the Company's knowledge are not in default
under any Material Agreement now in effect, the result of which could cause a
Material Adverse Effect.
(v) Transactions with Affiliates. Except as set forth in the SEC
Documents or on Schedule 2.1(v) hereto, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company or any subsidiary on the one
hand, and (b) on the other hand, any officer 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 or director
or any corporation or other entity controlled by such officer, director or
stockholder, or a member of the immediate family of such officer, director or
stockholder.
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(w) Registration Statement. The Registration Statement was declared
effective by the SEC on April 16, 2004. The Registration Statement is effective
on the date hereof and as of the Closing and the Company has not received notice
that the SEC has issued or intends to issue a stop order with respect to the
Registration Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of the Registration Statement, either temporarily or permanently,
or intends or has threatened in writing to do so. The Registration Statement
(including the information or documents incorporated by reference therein), as
of the time it was declared effective, and any amendments or supplements
thereto, each as of the time of filing, did not contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Purchased Shares
and the Warrant Stock are registered under the Registration Statement.
(x) Governmental Approvals. Except as set forth in the SEC Documents,
and except for the filing with the SEC of a prospectus supplement relating to
the transaction contemplated hereby, no authorization, consent, approval,
license, exemption of, filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the execution or
delivery of the Purchased Shares and the Warrants, or for the performance by the
Company of its obligations under the Transaction Documents.
(y) Employees. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the SEC Documents. Except as set forth in the SEC
Documents, 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 or
employee to be employed by the Company or such subsidiary. Since September 30,
2004, no officer or key employee of the Company or any subsidiary whose
termination, either individually or in the aggregate, could have a Material
Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment with the Company or any
subsidiary.
(z) Absence of Certain Developments. Except as provided on Schedule
2.1(z) hereto or in the SEC Documents, since September 30, 2004, neither the
Company nor any subsidiary has:
(i) issued any stock, bonds or other corporate securities or
any rights, options or warrants with respect thereto;
(ii) borrowed any amount in excess of $300,000 or incurred or
become subject to any 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 Company's or
such subsidiary's business;
8
(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;
(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;
(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 substantial 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 other transaction other than in the
ordinary course of business, or entered into any other 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;
(xiv) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its subsidiaries; or
(xv) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
(aa) Use of Proceeds. The proceeds from the sale of the Purchased
Shares will be used by the Company for working capital and general corporate
purposes.
9
(bb) 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.
(cc) 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 Purchased Shares will not involve any transaction which is subject
to the prohibitions of Section 406 of 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(ac), 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.
(dd) 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 further
acknowledges that nothing contained herein, or in any Transaction Document, and
no action taken by any Purchaser pursuant hereto or thereto, including any
renegotiation, amendment, early conversion, exercise, termination or other
modification of the Transaction Documents or the transactions related 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" for purposes of
Section 13(d) of the Exchange Act with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company has elected
to provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested by the
Purchasers.
(ee) Delisting Notification. The Company has not received a delisting
notification from the Nasdaq National Market ("Nasdaq") or any letter from
Nasdaq to the effect that the Company does not meet the Nasdaq listing
requirements. The Company is not aware of any existing events or conditions that
could reasonably be expected to cause the Common Stock to be delisted from
Nasdaq in the foreseeable future.
(ff) 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.
10
(gg) Off-Balance Sheet Arrangements. Except as described in the SEC
Documents or in the Registration Statement, there are no material off-balance
sheet arrangements (as defined in Regulation S-K Item 303(a)(4)(ii)), or any
other relationships with unconsolidated entities or other persons, that may have
a material current or future effect on the Company's financial condition,
changes in financial condition, results of operations, liquidity, capital
expenditures, capital resources, or significant components of revenues or
expenses.
(hh) Money Laundering and Related Laws.
(i) The operations of the Company and its subsidiaries are
and have been conducted at all times in compliance with applicable financial
record keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all applicable jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any applicable governmental agency (collectively, the "Money
Laundering Laws") and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of it subsidiaries with respect to the Money Laundering Laws is pending,
or to the best knowledge of the Company, threatened.
(ii) Neither the Company nor any of its subsidiaries nor, to
the knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of its subsidiaries is currently subject to any
U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department ("OFAC"); and the Company will not directly or indirectly
use the proceeds of the offering, or lend, contribute or otherwise make
available such proceeds to any subsidiary, joint venture partner or other person
or entity, for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC.
(ii) No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby,
other than an arrangement with Burnham Hill Partners, a division of Pali
Capital, Inc.
Section 2.2 Representations and Warranties of the Purchasers. Each of
the Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
(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.
11
(b) Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the Purchased
Shares and Warrants being sold to it hereunder. The execution, delivery and
performance of this Agreement by such Purchaser and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary
corporate or partnership action, as the case may be, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders, or
partners, as the case may be, is required. This Agreement has been duly
authorized, executed and delivered by such Purchaser and constitutes a valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with the terms thereof.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by such Purchaser of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or other
organizational documents or (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, indenture or instrument or obligation to which
such Purchaser is a party or by which its properties or assets are bound, or
result in a violation of any law, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to such Purchaser or its
properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a material adverse effect on such
Purchaser). Such Purchaser is not required 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 this Agreement or to purchase the Purchased Shares or acquire the Warrants
in accordance with the terms hereof.
(d) Independent Investment. No Purchaser has agreed to act with any
other Purchaser for the purpose of acquiring, holding, voting or disposing of
the Shares 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 Shares. The decision of each Purchaser to purchase Shares 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 Purchaser (or
any other person) relating to or arising from any such information, materials,
statements or opinions. Each Purchaser has retained its own legal counsel in
connection with the negotiation and review of the Transaction Documents and any
other documents or filings in connection therewith.
ARTICLE III
COVENANTS
The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).
Section 3.1 Securities Compliance. A supplement to the Registration
Statement (the "Prospectus Supplement"), in form and substance to be agreed upon
by the parties, setting forth information regarding the Purchased Shares and
Warrants including, without limitation, the Purchase Price, the number of
Purchased Shares and Warrants sold to the Purchasers in connection with the
Closing, if not previously disclosed in an SEC Document, and any additional
information required by SEC rules and regulations shall be filed with the SEC by
9:30 a.m. on the second (2nd) Trading Day, following the execution of this
Agreement, on which the Prospectus Supplement may be filed with the SEC. The
Company 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 Purchased Shares (and the issuance of such shares pursuant to
the Registration Statement), the Warrants and the Warrant Shares to the
Purchasers or subsequent holders.
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Section 3.2 Ownership Limitations. Unless waived by a Purchaser by
means of providing sixty-one (61) days written notice to the Company, in
connection with the exercise of the Warrants, the Company covenants and agrees
that upon receipt of an Exercise Form pursuant to Section 2(b) of the Warrants
that it will not issue such number of Warrant Shares that, when aggregated with
all other shares of Common Stock then owned by a Purchaser beneficially or
deemed beneficially owned by a Purchaser, would result in a Purchaser owning
more than 4.99% of all of such Common Stock as would be outstanding on such date
of exercise of the Warrant, as determined in accordance with Section 13 of the
Exchange Act and the regulations promulgated thereunder.
Section 3.3 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, and to not
take any action or file any document (whether or not permitted by the Securities
Act of 1933, as amended (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
keep the Registration Statement continuously effective under the Securities Act
until such date as is the earlier of (x) the date when all of the Warrants have
been exercised or have expired and (y) the date on which all of the Warrant
Shares may be sold without restriction pursuant to Rule 144 under the Securities
Act. The Company shall use its reasonable best efforts to continue the listing
or trading of its Common Stock on the Nasdaq National Market, or if such listing
is no longer available, the Nasdaq SmallCap Market, or if such listing is no
longer available, on the over-the-counter electronic bulletin board.
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 could 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 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would materially restrict or
impair the right or ability to perform of the Company or any subsidiary under
any Transaction Document.
13
Section 3.7 Reservation of Shares. So long as any of the Warrants
remain outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, no less than 100% of
the aggregate number of shares of Common Stock needed to provide for the
issuance of the Warrant Shares. The reserved Common Stock issuable upon exercise
of the Warrants shall be free of restrictive legend and freely tradable by the
Purchasers upon delivery to them.
Section 3.8 Non-Disclosure of Material Non-Public Information. The
Company covenants and agrees that it shall refrain from disclosing, and shall
cause its officers, directors, employees and agents to refrain from disclosing,
any material non-public information to the Purchaser, unless prior to disclosure
of such information the Company identifies such information as being material
non-public information and provides the Purchaser and its advisors and
representatives with the opportunity to accept or refuse to accept such material
non-public information for review and consents in writing to receive such
material non-public information. Nothing herein shall require the Company to
disclose material non-public information to the Purchaser or its advisors or
representatives.
Section 3.9 Transfer Agent Instructions. The Company shall issue
irrevocable instructions in the forms attached hereto as Exhibit C to the
Company's Transfer Agent to electronically transmit the Warrant Shares to the
Purchaser via the DWAC (as defined below) system upon exercise of the Warrants
in accordance with the terms thereof (the "Irrevocable Transfer Agent
Instructions"). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 3.9 (or
substantially similar instructions) will be given by the Company to the Transfer
Agent with respect to the Warrant Shares without the consent of the Purchasers
and that the Warrant Shares shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement.
14
Section 3.10 Subsequent Financings; Right of Participation.
(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 seven
(7) trading days after making or receiving an applicable offer) in writing (a
"Participation 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
Participation 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
Participation Notice is given nor later than forty five (45) calendar days from
the date the Participation 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 Participation
Notice shall provide each Purchaser an option (the "Participation Option")
during the seven (7) trading days following delivery of the Participation 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
terms and conditions as contemplated by such Subsequent Financing (the
"Participation 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 Purchased Shares purchased by such Purchaser at the Closing by (y) the
total number of Purchased Shares purchased by all of the participating
Purchasers at the Closing. Delivery of any Participation 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 Participation 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
Participation 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 Participation Option); provided that all of the
material terms and conditions of the closing are the same as those provided to
the Purchasers in the Participation Notice. If the closing of the proposed
Subsequent Financing does not occur within 60 days from the date the
Participation 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
Participation Notice.
(b) For a period of six (6) months following the Closing Date, the
Company covenants and agrees that it will not engage in any Subsequent Financing
other than a Permitted Financing (as defined below).
15
(c) For purposes of this Agreement, a Permitted Financing shall not be
considered a Subsequent Financing. A "Permitted Financing" shall mean (i) the
Company's issuance of Common Stock and warrants therefor 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 therefor in connection with strategic agreements or
investments by strategic investors, (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.
ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of the Company
to Sell the Shares. The obligation hereunder of the Company to issue and sell
the Purchased Shares and the Warrants to the Purchasers is subject to the
satisfaction or waiver, at or before the Closing, of each 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 Each Purchaser's 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 such Purchaser at or prior to the Closing.
(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 Purchased
Shares and Warrants shall have been delivered to the Company at the Closing
Date.
(e) Delivery of this Agreement. This Agreement has been duly executed
and delivered by the Purchasers to the Company.
(f) No Proceeding or Litigation. No action, suit or proceeding shall
have been commenced or investigation threatened by any governmental authority
against 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.
16
Section 4.2 Conditions Precedent to the Obligation of the Purchasers
to Purchase the Shares. The obligation hereunder of each Purchaser to acquire
and pay for the Purchased Shares and the Warrants is subject to the satisfaction
or waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for each Purchaser's sole benefit and may be waived by such
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company 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 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.
(c) No Suspension, Etc. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the SEC
(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, 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, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on, or any material adverse change in any
financial market which, in each case, in the judgment of such Purchaser, makes
it impracticable or inadvisable to purchase the Purchased Shares.
(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. At the Closing, the Purchasers shall have
received an opinion of counsel to the Company, dated the date of the Closing, in
substantially the form of Exhibit D hereto.
(g) Purchased Shares. At the Closing, the Company shall deliver the
Purchased Shares to such Purchaser either, at the option of such Purchaser, (i)
in certificated form without restrictive legends or (ii) to the Depository Trust
Company account on such Purchaser's behalf via the Deposit Withdrawal Agent
Commission System ("DWAC").
17
(h) Warrants. The Company shall have executed and delivered to the such
Purchaser the Warrants being acquired by such Purchaser at the Closing.
(i) Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) above in a form reasonably
acceptable to such Purchaser (the "Resolutions").
(j) Reservation of Shares. As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the Warrants, a number of shares of Common
Stock equal to at least 100% of the aggregate number of Warrant Shares issuable
upon exercise of the number of Warrants assuming such Warrants were granted on
the Closing Date.
(k) Secretary's Certificate. The Company shall have delivered to such
Purchaser a secretary's certificate, dated as of the Closing Date, as to (i) the
Resolutions, (ii) the Certificate, (iii) the Bylaws 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.
(l) Officer's Certificate. The Company shall have delivered to the
Purchasers a certificate of an executive officer 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 this Section 4.2 as of
the Closing Date.
(m) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
(n) Effective Registration Statement. (i) The Registration Statement
shall have previously been declared effective and shall remain effective at all
times up to an including the Closing Date and the issuance of the Purchased
Shares and Warrants to the Purchasers may be made thereunder; (ii) the form of
Prospectus Supplement shall have been delivered to the Purchasers; (iii) neither
the Company nor any of the Purchasers shall have received notice that the SEC
has issued or intends to issue a stop order with respect to the Registration
Statement or that the SEC otherwise has suspended or withdrawn the effectiveness
of the Registration Statement either, temporarily or permanently, or intends or
has threatened to do so; and (iv) no other suspension of the use or withdrawal
of the effectiveness of the Registration Statement or Prospectus shall exist.
(o) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in form attached as Exhibit C, shall have been delivered to and
acknowledged in writing by the Company's Transfer Agent.
18
ARTICLE V
INDEMNIFICATION
Section 5.1 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.
Section 5.2 Indemnification Procedure. Any party entitled to
indemnification under this Article V (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 V except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any 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 indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, 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 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 that 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 V 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 V 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.
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ARTICLE VI
MISCELLANEOUS
Section 6.1 Fees and Expenses. Except as otherwise set forth in this
Agreement, 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 that the Company shall pay, at the
Closing all actual attorneys' fees and expenses incurred by the Purchasers up to
$20,000 (exclusive of disbursements and out-of-pocket expenses) in connection
with the preparation, negotiation, execution and delivery of this Agreement and
the transactions contemplated thereunder. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the
Purchased Shares pursuant hereto.
Section 6.2 Specific Enforcement; Consent to Jurisdiction.
(a) Specific Enforcement. The Company and the Purchasers acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement 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 and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) Consent to Jurisdiction. Each of the Company and the Purchasers (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court sitting in the Southern District of New York and the courts of
the State of New York for the purposes of any suit, action or proceeding arising
out of or relating to this Agreement or any of the other Transaction Documents
or the transactions contemplated hereby or thereby and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the
Purchasers consents 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 6.2 shall affect or limit any right to serve process in any other manner
permitted by law.
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Section 6.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding of the parties with
respect to the matters covered hereby and, except as specifically set forth
herein, neither the Company nor any of the Purchasers makes any representations,
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 holders of at least a majority of the Purchased Shares then outstanding, and
no provision hereof may be waived other than by an a written instrument signed
by the party against whom enforcement of any such amendment or waiver is sought;
provided that this Section 6.3 may not be amended or waived other than by a
written instrument signed by each holder of the Purchased Shares. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Purchased Shares then outstanding. No consideration shall be
offered or paid to any person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
is also offered to all of the parties to the Transaction Documents.
Section 6.4 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 telex (with correct answer
back received), 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, NJ 07205
Attention: Chief Financial Officer
Tel. No.: (973) 391-2001
Fax No.: (973) 923-3352
with copies to: Morrison & Foerster LLP
1290 Avenue of the Americas
New York, NY 10104
Attention: Michael J.W. Rennock, Esq.
Tel. No.: (212) 468-8288
Fax No.: (212) 468-7900
If to any Purchaser: At the address of such Purchaser set
forth on Exhibit A to this
Agreement, with copies to
Purchaser's counsel as set
forth on Exhibit A or as
specified in writing by such
Purchaser.
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
21
Section 6.5 Waivers. No waiver by any 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
provisions, 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 6.6 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 6.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Section 6.8 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.
Section 6.9 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. This Agreement shall not
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 6.10 Survival. The representations, warranties and covenants
of the Company and the Purchasers contained in this Agreement shall survive the
execution and delivery hereof and the Closing hereunder.
Section 6.11 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 6.12 Publicity; Confidentiality. The Company shall issue a
press release describing the material terms of the transactions contemplated
hereby (the "Press Release") immediately upon Closing; provided, however, that
if Closing occurs after 4:00 P.M. Eastern Time on any trading day, 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 SEC
a Current Report on Form 8-K (the "Form 8-K") describing the material terms of
the transactions contemplated hereby as soon as practicable following the date
of execution of this Agreement but in no event more than four (4) trading days
following the date of execution of this Agreement. The Company agrees that it
will not disclose, and will not include in any public announcement, the name of
the Purchasers without the consent of the Purchasers unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement. The Purchasers agree to hold in strict confidence
information regarding the transactions contemplated by this Agreement, as well
as any material, non-public information contained in the disclosure schedules to
this Agreement or otherwise conveyed to the Purchasers in accordance with
Section 3.8, until such time as the Company has issued the Press Release.
22
Section 6.13 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 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 6.14 Further Assurances. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers shall execute and deliver such instrument, 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 and the
Warrants.
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23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
GLOWPOINT, INC.
By: ________________________________
Name:
Title:
NAME OF PURCHASER:
By: ________________________________
Name:
Title:
NAME OF PURCHASER:
By: ________________________________
Name:
Title
NAME OF PURCHASER:
By: ________________________________
Name:
Title