UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported) September 21, 2007
Glowpoint,
Inc.
(Exact
name of registrant as specified in its Charter)
|
Delaware
|
0-25940
|
77-0312442
|
|
(State
or other jurisdiction
|
(Commission
|
(I.R.S
Employer
|
|
of
incorporation)
|
File
Number)
|
Identification
No.)
|
|
225
Long Avenue Hillside, NJ
|
07205
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
|
|
Registrant's
telephone number, including area code
(312)
235-3888
|
Not
Applicable
|
|
(Former
name or former address, if changed since last
report)
|
ITEM
1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On
September 21, 2007, Glowpoint, Inc. (“Glowpoint”) entered in to an amendment to
the terms of its outstanding 10% Senior Secured Convertible Notes (the “Existing
Notes”) to, among other things, extend the maturity date to March 31, 2009 from
September 30, 2007. This brief description of the amendment to the Existing
Notes is qualified by reference to the provisions of the form of Amendment
No. 1
to Senior Secured Promissory Notes attached to this report as Exhibit 4.1.
In
consideration for the amendment to the Existing Notes, Glowpoint issued Series
A-2 Warrants to the noteholders to purchase an aggregate of approximately
4,772,820 shares of common stock (which represents thirty-three (33%) percent
of
the shares of common stock issuable upon conversion of the Existing Notes)
at an
exercise price of $0.65 per share. The Series A-2 warrants are exercisable
for a
period of five years and are otherwise subject to the terms and conditions
of
the form of Series A-2 Warrant attached hereto as Exhibit 4.2.
Additionally,
Glowpoint issued $3.538 million of additional 10% senior secured convertible
notes and warrants in a private placement, the investors of which included
(but
are not limited to) some of the holders of its Existing Notes and participating
Glowpoint officers and directors, including Michael Brandofino, Aziz Ahmad,
Bami
Bastani, Edwin F. Heinen, Joseph Laezza and David W. Robinson. Attached as
Exhibit 10.1 is the Note and Warrant Purchase Agreement among Glowpoint and
the
purchasers named therein. In the transaction, Glowpoint issued $3,538,000
aggregate principal amount of its 10% Senior Secured Convertible Notes (the
“New
Notes”) and additional Series A-2 Warrants to purchase 3,538,000 shares of
common stock at an exercise price of $0.65 per share. The New Notes bear
interest at 10% per annum (which increases to 12% commencing one (1) year
following the issuance date), mature on March 31, 2009 and are convertible
into
common stock at a conversion rate of $0.50 per share. The form of the New
Note
is attached hereto as Exhibit 4.3, which is materially the same as the amended
Existing Notes. The New Notes and other transaction documents provide that
the
participating Glowpoint officers and directors will not be entitled to all
of
the rights and benefits available to the other purchasers upon the occurrence
of
certain events, including, but not limited to, an event of default, the failure
by the Company to achieve specified EBITDA, and the failure to timely file
the required registration statement. The proceeds of the offering will be
used
to pay outstanding aged payables and for working capital.
Pursuant
to an Exchange Agreement, dated September 21, 2007, Glowpoint also issued
an
aggregate of approximately 474.8126 shares of a new Series C Preferred Stock
in
exchange for cancelling all of its issued and outstanding Series B Preferred
Stock, cancelling approximately $1,097,614 of accrued but unpaid dividends
due
on the Series B Preferred Stock, and surrendering 1,525,000 shares of common
stock held by North Sound Capital LLC entities. This brief description of
the
Exchange Agreement is qualified by reference to the provisions of the Exchange
Agreement attached to this report as Exhibit 10.4.
Unlike
the cancelled Series B Preferred Stock, the new Series C Preferred Stock
will
not accrue dividends and may be redeemed by Glowpoint. Each share of Series
C
Preferred Stock, par value $0.0001 per share, has a liquidation preference
equal
to its stated value, which is $10,000 per share, and is convertible at the
holder’s election into 10,000 shares of common stock, subject to adjustment.
This brief description of the Series C Preferred Stock is qualified by reference
to the provisions of the
Certificate
of Designations, Preferences and Rights of Series C Preferred Stock
attached
to this report as Exhibit 4.5. The shares of common stock issuable upon
conversion of the Series C Preferred Stock are entitled to registration rights
in accordance with the Registration Rights Agreement dated March 31, 2006,
as
amended by the amendment attached hereto as Exhibit 10.2.
Glowpoint
also created a new Series D Preferred Stock, which does not have any voting
rights but is convertible into Glowpoint’s common stock and is entitled to any
liquidating distribution to holders of common stock. The Existing Notes,
as
amended, the New Notes, the Series A Warrants, as amended, the Series A-2
Warrants and the Series C Preferred Stock are convertible or exercisable,
as the
case may be, into Glowpoint’s common stock, but provide that, unless
specifically waived by such holder, in no event shall any holder of such
securities own more than 4.99% or 9.99% of Glowpoint’s outstanding common stock.
In the event a holder would own more than either percentage upon conversion
or
exercise and does not waive such ownership cap, Glowpoint will issue new
Series
D Preferred Stock for the amount above such limitation. The holder may then
convert Series D Preferred Stock into common stock in the future as permitted
by
the ownership limitations or upon waiver of such restriction. This brief
description of the Series D Preferred Stock is qualified by reference to
the
provisions of the
Certificate
of Designations, Preferences and Rights of Series D Preferred Stock
attached
to this report as Exhibit 4.6.
In
connection with the foregoing, Glowpoint and the holders of the Existing
Notes
also: (i) amended the outstanding Series A Warrants, dated March 31, 2006
and
April 12, 2006, to amend certain definitions; (ii) amended the Registration
Rights Agreement, dated March 31, 2006, which amendment (x) included among
the
registrable securities the shares issuable upon conversion of the New Notes
and
the Series C Preferred Stock and the exercise of the Series A-2 Warrants
and (y)
provided Glowpoint additional time to file the required registration statement
and cause its effectiveness; and (iii) amended the Security Agreement, dated
March 31, 2006, to include as Permitted Liens (as defined therein) equipment
purchase money financing and a credit facility collateralized by up to $1
million of receivables, which amendment Glowpoint believes will provide it
greater flexibility to handle future liquidity issues, if any, and to finance
any equipment needs. This brief description of these amendments is qualified
in
its entirety by reference to the provisions of the documents attached to
this
report as Exhibits 4.4, 10.2, and 10.3.
Burnham
Hill Partners acted as placement agent for the new financing and acted as
financial advisor for the other transactions disclosed herein and received
a cash fee
of approximately $283,000, which equaled eight (8%) percent of the gross
proceeds received by the Company in connection with the financing. Glowpoint also issued warrants to Burnham
Hill
Partners to purchase (i) approximately 566,080 shares of common stock at an exercise price
of
$0.55 per share and (ii) 250,000 shares of common stock at an exercise price
of
$0.65 per share to Burnham Hill Partners. The placement agent warrants and
advisory warrants are subject to the terms and conditions of the form of
Warrant
attached hereto as Exhibit 4.7.
ITEM
2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AND OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The
information disclosed in Item 1.01 of this Form 8-K is incorporated into
this
Item 2.03.
ITEM
3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
The
information disclosed in Item 1.01 of this Form 8-K is incorporated into
this
Item 3.02. The issuances were made in a private placement in reliance upon
exemptions from registration pursuant to Section 4(2) of the Securities Act
of
1933, as amended, and Rules 506 of Regulation D promulgated thereunder. Each
investor is an accredited investor as defined in Rule 501 of Regulation
D.
ITEM
3.03
MATERIAL
MODIFICATION TO RIGHTS OF SECURITY HOLDERS.
The
information disclosed in Item 1.01 of this Form 8-K is incorporated into
this
Item 3.03.
ITEM
5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN
OFFICERS.
Glowpoint
amended the employment agreement of David W. Robinson, the Company’s Executive
Vice President and General Counsel, to provide 12 months, rather than six
months, of severance upon his t
ermination
without Cause (as defined therein), his resignation for
Good
Reason
(as
defined therein)
or
his
death, which is consistent with the amount provided to other Glowpoint officers.
Attached as Exhibit 99.2 is Mr. Robinson’s employment agreement
amendment.
ITEM
5.03 AMENDMENT TO ARTICLES OF INCORPORATION AND BYLAWS; CHANGE IN FISCAL
YEAR
At
the
registrant’s annual meeting of stockholders held August 14, 2007, the
stockholders of the registrant approved an amendment to the Amended and Restated
Certificate of Incorporation of Glowpoint to increase the number of authorized
shares of common stock from 100,000,000 shares to 150,000,000 shares. The
Certificate of Amendment was effective on filing with the Secretary of State
of
the State of Delaware on August 22, 2007. The Certificate of Amendment to
the
Amended and Restated Certificate of Incorporation is attached hereto as Exhibit
3.1.
ITEM
8.01 OTHER EVENTS.
At
the
2007 Annual Meeting of Stockholders, which occurred on August 14, 2007, all
of
the proposals for consideration were approved. Therefore, Jim Lusk and Peter
Rust were each elected Class
I
members
of our board of directors to serve a two-year term, which expires on the
date of
the Annual Meeting in 2009 or until their respective successors are elected
and
qualified, and Bami Bastani and Michael Brandofino were each elected Class
II
members of our board of directors to serve a three-year term each, which
expires
on the date of the Annual Meeting in 2010 or until their respective successors
are elected and qualified. Stockholders also (i) approved the 2007 Stock
Incentive Plan and reserving 3,000,000 shares of common stock for issuance
under
such plan, (ii) ratified the appointment of Amper, Politziner & Mattia, P.C.
as our Registered Public Accounting Firm for the fiscal year ending
December 31, 2007, and (iii) approved an amendment to Glowpoint’s
certificate of incorporation to increase the number of authorized shares
of
common stock from 100,000,000 shares to 150,000,000 shares.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a)
Financial
Statements of Businesses Acquired. Not Applicable.
(b)
Pro
Forma
Financial Information. Not Applicable.
(c)
Shell
Company Transactions. Not Applicable
(d)
Exhibits
|
|
3.1
|
Certificate
of Amendment to the Amended and Restated Certificate of
Incorporation
|
|
|
4.1
|
Form
of Amendment No. 1 to Senior Secured Convertible Promissory Notes,
dated
September 21, 2007.
|
|
|
4.2
|
Form
of Series A-2 Warrant, dated September 21,
2007.
|
|
|
4.3
|
Form
of 10% Senior Secured Convertible Promissory Note, dated September
21,
2007.
|
|
|
4.4
|
Form
of Amendment No. 1 to Series A Warrant, dated September 21,
2007.
|
|
|
4.5
|
Certificate
of Designations, Preferences and Rights of Series C Preferred Stock
of
Glowpoint.
|
|
|
4.6
|
Certificate
of Designations, Preferences and Rights of Series D Preferred Stock
of
Glowpoint.
|
|
|
4.7
|
Form
of Placement Agent Warrant, dated September 21,
2007.
|
|
|
10.1
|
Note
and Warrant Purchase Agreement, dated as of September 21, 2007,
between
Glowpoint and the Purchasers set forth
therein.
|
|
|
10.2
|
Amendment
No. 1 to Registration Rights Agreement, dated as of September 21,
2007,
between Glowpoint and the Purchasers set forth
therein.
|
|
|
10.3
|
Amendment
No. 1 to Security Agreement, dated as of September 21, 2007, between
Glowpoint and the Secured Parties set forth
therein.
|
|
|
10.4
|
Exchange
Agreement, dated September 21, 2007, between Glowpoint and the
Holders set
forth therein.
|
|
|
99.1
|
Text
of press release dated September 24,
2007.
|
|
|
99.2
|
Employment
Agreement Amendment between the Company and David W. Robinson,
dated
September 20, 2007
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934,
the
Registrant has duly caused this report to be signed on its behalf by the
undersigned
hereunto duly authorized.
|
|
|
|
|
|
GLOWPOINT,
INC.
|
|
|
|
|
Dated:
September 24, 2007
|
By:
|
/s/
Michael Brandofino
|
|
|
Michael
Brandofino
|
|
|
Chief
Executive Officer and President
|
CERTIFICATE
OF AMENDMENT
TO
THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
GLOWPOINT, INC.
Glowpoint,
Inc. (the “Corporation”), a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (“DGCL”), does
hereby certify:
FIRST
:
The
name
of the Corporation is Glowpoint, Inc.
SECOND
:
The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on November 4, 1996. The original
Certificate of Incorporation was amended by the Agreement and Plan of Merger
dated as November 27, 1996. The Certificate of Amendment to the Certificate
of
Incorporation was filed with the Secretary of State on May 18, 2000. The Amended
and Restated Certificate of Incorporation was subsequently filed on May 18,
2000
(such certificate, as amended and restated, the “Certificate of Incorporation”).
The Certificate of Designations, Preferences and Rights of Series A Preferred
Stock was filed with the Secretary of State on June 14, 2000. The Certificate
of
Amendment to the Certificate of Designations, Preferences and Rights of Series
A
Preferred Stock was filed with the Secretary of State on June 22, 2001. The
Certificate of Designations, Preferences and Rights of Series B Preferred Stock
was filed with the Secretary of State on January 22, 2004.
THIRD
:
The
first
paragraph of Article FOURTH of the Certificate of Incorporation is hereby
amended and restated in its entirety to increase the number of authorized shares
of common stock from 100,000,000 shares to 150,000,000 shares and shall
hereafter read as follows:
“
FOURTH:
The
total
number of shares of all classes of stock that the Corporation is authorized
to
issue is one hundred fifty-five million (155,000,000) shares, consisting of
one
hundred fifty million (150,000,000) shares of Common Stock with a par value
of
$0.0001 per share and five million (5,000,000) shares of Preferred Stock with
a
par value of $0.0001 per share.”
No
other
change to the Certificate of Incorporation is hereby made, including, without
limitation, any other change to Article FOURTH.
FOURTH
:
In
accordance with Section 242 of the DGCL, the amendment to the Certificate of
Incorporation set forth herein was duly adopted by the Corporation’s Board of
Directors by unanimous written consent and duly adopted by its stockholders
at
the Corporation’s Annual Meeting of Stockholders on August 14, 2007, which was
duly called and held upon notice in accordance with Section 222 of the
DGCL.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to
be
signed this 22
nd
day of
August, 2007.
|
|
|
|
|
|
|
|
|
By:
|
/s/
Michael Brandofino
|
|
|
Michael
Brandofino, President and CEO
|
|
|
|
AMENDMENT
NO. 1
TO
SENIOR
SECURED CONVERTIBLE PROMISSORY NOTES
THIS
AMENDMENT NO. 1 TO SENIOR SECURED CONVERTIBLE PROMISSORY NOTES (this
“Amendment”), dated as of September 21, 2007, is made by and among Glowpoint,
Inc., a Delaware corporation (the “Maker”) and ___________________ (the
“Holder”).
Preliminary
Statement
WHEREAS,
the Maker is the issuer and the Holder is the holder of each of the senior
secured convertible promissory notes set forth on
Exhibit
A
hereof
(each, a “Note”, and collectively, the “Notes”); and
WHEREAS,
in consideration for the issuance of warrants (the “Amendment Warrants”) to
acquire a number of shares of Common Stock equal to the product of (i) the
Conversion Rate (as defined in the Notes) for the outstanding principal balance
plus any accrued but unpaid interest under the Notes, times (ii) 0.33,
substantially in the form of the warrants issued in connection with the 2007
Purchase Agreement (as defined herein), to the Holder, the Maker and the Holder
desire to amend certain provisions of each of the Notes as described
herein.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the parties, intending to be legally bound, hereby
agree as follows:
1.
Capitalized
Terms
.
Capitalized terms used, but not defined, herein, shall have the meanings
ascribed to such terms in the Notes.
2.
Amendments
to Notes
.
(a)
Maturity
Date
.
The
Maturity Date of each of the Notes is hereby extended from September 30, 2007
to
March 31, 2009. All references to “Maturity Date” in each of the Notes shall be
the Maturity Date as amended by this Amendment.
(b)
Security
Agreement
.
Section
1.3 of each Note is hereby amended by adding the clause “, as amended,”
immediately after the words “Security Agreement dated as of March 31,
2006”.
(c)
Remedies
Upon an Event of Default
.
Subclause (ii) of the proviso contained in Section 2.2 is hereby deleted and
the
following new subclause (ii) of such proviso shall be substituted in lieu
thereof:
“(ii)
Sections 2.1(a)-(g) and (j)-(l), the Holder may demand the prepayment of this
Note pursuant to Section 3.7 hereof,”
(d)
Conversion
.
(i)
Section
3.1 of each Note is hereby deleted in its entirety and the following Section
3.1
shall be substituted in lieu thereof:
“Section
3.1
Conversion
.
(a)
Optional
Conversion
.
At any
time on or after the Issuance Date , this Note shall be convertible (in whole
or
in part), at the option of the Holder (the "
Conversion
Option
"),
into
such number of fully paid and non-assessable shares of Common Stock (the
"
Conversion
Rate
")
as is
determined by dividing (x) that portion of the outstanding principal balance
plus any accrued but unpaid interest under this Note as of such date that the
Holder elects to convert by (y) the Conversion Price (as defined in Section
3.2(a) hereof) then in effect on the date on which the Holder faxes a notice
of
conversion (the "
Conversion
Notice
"),
duly
executed, to the Maker (facsimile number (973) 860-0754, Attn.: Chief Executive
Officer, with a copy to facsimile number 973-556-1272, Attn.: General Counsel)
(the “
Conversion
Date
”),
provided, however, that the Conversion Price shall be subject to adjustment
as
described in Section 3.6 below. The Holder shall deliver this Note to the Maker
at the address designated in the Purchase Agreement at such time that this
Note
is fully converted. With respect to partial conversions of this Note, the Maker
shall keep written records of the amount of this Note converted as of each
Conversion Date.
(b)
Mandatory
Conversion
.
On the
Mandatory Conversion Date (as defined below), this Note shall automatically
and
without any action on the part of the Holder, convert into such number of fully
paid and non-assessable shares of Common Stock as is determined by dividing
(x)
that portion of the outstanding principal balance plus any accrued but unpaid
interest under this Note as of the Mandatory Conversion Date by (y) the
Conversion Price then in effect on the Mandatory Conversion Date, provided,
however, that the Conversion Price shall be subject to adjustment as described
in Section 3.6 below. As used herein, "Mandatory Conversion Date" shall be
the
first date that the Closing Bid Price (as defined below) of the Common Stock
exceeds $1.25 (as adjusted for stock splits, stock dividends, combinations
and
similar transactions) for twenty (20) consecutive trading days. The Mandatory
Conversion Date and the Voluntary Conversion Date collectively are referred
to
in this Note as the "Conversion Date". Notwithstanding the foregoing to the
contrary, the Note shall automatically convert pursuant to this Section 3.1(b)
only if (1) the Registration Statement is effective and has been effective,
without lapse or suspension of any kind, for such twenty (20) consecutive
trading day period, (2) trading in the Common Stock shall not have been
suspended by the Securities and Exchange Commission or the OTC Bulletin Board
(or other exchange or market on which the Common Stock is trading), and (3)
the
Maker is in material compliance with the terms and conditions of this Note
and
the other Transaction Documents. The term "Closing Bid Price" shall mean, on
any
particular date (i) the last closing bid price per share of the Common Stock
on
such date on the OTC Bulletin Board or another registered national stock
exchange on which the Common Stock is then listed, or if there is no such price
on such date, then the last closing bid price on such exchange or quotation
system on the date nearest preceding such date.”
(ii)
Section
3.4(a) of each Note is hereby amended by adding the following after the last
sentence thereof:
“In
the
event the Holder is unable to fully convert this Note in connection with either
a mandatory conversion pursuant to Section 3.1(b) hereof, or a conversion
election following the delivery of a Maker's Prepayment Notice pursuant to
Section 3.7(k) hereof due to the restrictions set forth in this Section 3.4(a),
such holder may elect to receive Series D Convertible Preferred Stock of the
Company in lieu of shares of Common Stock convertible into the number of shares
of Common Stock that would have been delivered to such holder but for the
limitations set forth in this Section 3.4(a). The foregoing sentence shall
not
preclude the Holder from waiving at any time its rights to limit its ownership
to (i) 4.9% of all of the Common Stock issued and outstanding at such time
in
accordance with this Section 3.4(a) or (ii) 9.9% of all of the Common Stock
issued and outstanding at such time in accordance with Section 3.4(b)
hereof.”
(e)
Anti-Dilution
Exemptions
.
Section
3.6(c) of each Note is hereby deleted in its entirety and the following new
Section 3.6(c) shall be substituted in lieu thereof:
“(c)
Certain
Issues Excepted
.
Anything herein to the contrary notwithstanding, the Maker shall not be required
to make any adjustment to the Conversion Price in connection with (i) securities
issued (other than for cash) in connection with a merger, acquisition, or
consolidation, (ii) securities issued pursuant to the conversion or exercise
of
convertible or exercisable securities issued or outstanding on or prior to
the
date hereof (so long as the conversion or exercise price in such securities
are
not amended to lower such price and/or adversely affect the Holders)
or
issued
pursuant to the Purchase Agreement, (iii) securities issued pursuant to the
terms of that certain Exchange Agreement, dated as of September 21, 2007, by
and
among the Maker and the holders signatory thereto, (iv) the issuance of the
Promissory Notes and the Warrants (each as defined below), (v) the shares of
Common Stock issuable upon the conversion of the Promissory Notes or the
exercise of the Warrants, (vi) securities issued in connection with bona fide
strategic license agreements or other partnering arrangements so long as such
issuances are not for the purpose of raising capital, (vii) Common Stock issued
or the issuance or grants of options to purchase Common Stock pursuant to the
Maker’s stock option plans and employee stock purchase plans approved by the
Makers board of directors, so long as such issuances in the aggregate do not
exceed the number of shares of Common Stock (or options to purchase such number
of shares of Common Stock) issuable pursuant to such plans as they exist as
of
September 21, 2007, (viii) any warrants issued to the placement agent and its
designees for the transactions contemplated by the Purchase Agreement, (ix)
the
payment of any dividends on the Maker’s Series B convertible preferred stock,
(x) securities issued pursuant to a bona fide firm underwritten public offering
of the Maker’s securities, (xi) the payment of liquidated damages pursuant to
the Registration Rights Agreement dated February 17, 2004 between the Maker
and
the parties listed therein and (xii) the issuance of Common Stock upon the
exercise or conversion of any securities described in clauses (i) through (xi)
above. For purposes of this Note, (A) “
Promissory
Notes
”
shall
mean collectively, each of the following, as the same may be amended from time
to time: (1) the senior secured convertible promissory notes issued pursuant
to
the Purchase Agreement, or that certain Note and Warrant Purchase Agreement,
dated as of April 12, 2006, by and among the Maker and the purchasers listed
therein (collectively with the Purchase Agreement, the “
2006
Purchase Agreements
”),
(2)
the additional senior secured convertible promissory notes in the aggregate
principal amount of up to $3,600,000 issued pursuant to that certain Note and
Warrant Purchase Agreement, dated as of September 21, 2007, by and among the
Maker and the purchasers listed therein (collectively with the 2006 Purchase
Agreements, the “
Purchase
Agreements
”),
and
(3) any additional senior secured convertible promissory notes issued from
time
to time as interest on the outstanding principal balance of the foregoing
promissory notes; and (B) “
Warrants
”
shall
mean, collectively, each of the following, as the same may be amended from
time
to time: (A) the warrants to purchase shares of Common Stock issued pursuant
to
the Purchase Agreements; and (B) the warrants to purchase shares of Common
Stock
issued in connection with the amendment of the senior secured convertible
promissory notes issued pursuant to the 2006 Purchase Agreements.”
(f)
Maker
Prepayment Option
.
The
following Section 3.7(k) shall be added to each Note:
“(k)
Maker
Prepayment Option
.
(i)
At
any
time following March 19, 2008, the Maker may prepay in cash all or any portion
of the outstanding principal amount of this Note together with all accrued
and
unpaid interest thereon upon ten (10) Trading Days prior written notice to
the
Holder (the “
Maker's
Prepayment Notice
”)
at a
price (the “
Maker's
Prepayment Price
”)
equal
to (A) one hundred ten percent (110
%)
of the
aggregate principal amount of this Note; plus (B) any accrued but unpaid
interest outstanding at such time; (C) plus an amount equal to interest at
the
interest
rate as determined in accordance with Section 1.2 hereof
on
the
principal amount of this Note being prepaid for a period that commences on
the
date of such prepayment and that terminates on the Maturity Date
;
provided
,
however
,
that if
the Holder has delivered a Conversion Notice to the Maker or delivers a
Conversion Notice within such ten (10) Trading Day period following delivery
of
the Maker’s Prepayment Notice, the principal amount of this Note designated to
be converted may not be prepaid by the Maker and shall be converted in
accordance with Section 3.3 hereof;
provided
further
that if
during the period between delivery of the Maker's Prepayment Notice and the
Maker's Prepayment Date (as defined below), the Holder shall become entitled
to
deliver a Notice of Prepayment at Option of Holder Upon Major Transaction or
Notice of Prepayment at Option of Holder upon Triggering Event, then such rights
of the Holder, at its option, shall take precedence over the previously
delivered Maker Prepayment Notice. The Maker's Prepayment Notice shall state
the
date of prepayment which date shall be the eleventh (11
th
)
Trading
Day after the Maker has delivered the Maker's Prepayment Notice (the
“
Maker's
Prepayment Date
”),
the
Maker’s Prepayment Price and the principal amount of this Note to be prepaid by
the Maker. The Maker shall deliver the Maker's Prepayment Price on the Maker’s
Prepayment Date,
provided
,
that if
the Holder delivers a Conversion Notice before the Maker's Prepayment Date,
then
the portion of the Maker's Prepayment Price which would be paid to prepay this
Note covered by such Conversion Notice shall be returned to the Maker upon
delivery of the Common Stock issuable in connection with such Conversion Notice
to the Holder. On the Maker's Prepayment Date, the Maker shall pay the Maker's
Prepayment Price, subject to any adjustment pursuant to the immediately
preceding sentence, to the Holder. If the Maker fails to pay the Maker's
Prepayment Price by the eleventh (11
th
)
Trading
Day after the Maker has delivered the Maker's Prepayment Notice, the Maker’s
Prepayment Notice will be declared null and void
ab
initio
and the
Maker shall lose its right to prepay this Note pursuant to this Section 3.7(k).
Notwithstanding the foregoing to the contrary, the Maker may effect a prepayment
pursuant to this Section 3.7(k) only if (1) the Registration Statement is
effective and has been effective, without lapse or suspension of any kind,
for a
period thirty (30) consecutive calendar days immediately preceding the Maker’s
Prepayment Notice through the Maker’s Prepayment Date, (2)
trading
in the Common Stock shall not have been suspended by the Securities and Exchange
Commission or the OTC Bulletin Board (or other exchange or market on which
the
Common Stock is trading), (3) the Maker is in material compliance with the
terms
and conditions of this Note and the other Transaction Documents, and (4) the
Maker is not in possession of any material non-public information
.
(ii)
In
the
event that this Note is prepaid in accordance with this Section 3.7(k), then
on
the Maker’s Prepayment Date, the Maker shall issue to the Holder warrants (the
“
Prepayment
Warrants
”)
substantially in the form of the Warrants issued to the Holder pursuant to
the
Purchase Agreement to purchase up to such number of fully paid and
non-assessable shares of Common Stock as is determined by multiplying (A) the
quotient of (1) that portion of the
principal
amount of this Note being prepaid
plus
any
accrued but unpaid interest on such principal amount as of the Maker’s
Prepayment Date, divided by (2) the Conversion Price then in effect on the
Maker’s Prepayment Date, by (B) twenty-five percent (25%). The Prepayment
Warrants will have an exercise price equal to 110% of the Closing Sale Price
of
the Common Stock on the Maker’s Prepayment Date, and shall expire on the five
(5) year anniversary of the Maker’s Prepayment Date.”
(g)
EBITDA
.
The
following new Section 1.7 is hereby added to each of the Notes:
“Section
1.7.
EBITDA
.
The
Maker shall maintain the following minimum Adjusted EBITDA (as defined below)
determined as of the following dates:
|
Determination
Date
|
Adjusted
EBITDA
|
|
|
|
|
As
of March 31, 2008
|
$0
for the quarter ending March 31, 2008
|
|
|
|
|
As
of June 30, 2008
|
$1,000,000
for the period commencing on January 1, 2008 and ending on June 30,
2008.
|
|
|
|
|
As
of September 30, 2008
|
$1,500,000
for the quarter ending September 30, 2008, or $2,500,000 for the
period
commencing on January 1, 2008 and ending on September 30,
2008.
|
|
|
|
|
As
of December 31, 2008
|
$2,000,000
for the quarter ending December 31, 2008, or $4,500,000 for the year
ended
December 31, 2008.
|
In
the
event Maker fails to maintain the foregoing minimum Adjusted EBITDA, then the
per annum interest rate on the unpaid principal balance of this Note then in
effect shall increase by 200 basis points, and such increase will be cumulative
for each subsequent breach; provided, however, that the per annum interest
rate
shall revert to the interest rate as determined in accordance with Section
1.2
hereof in the event the Maker achieves or exceeds the cumulative minimum
Adjusted EBITDA for the period commencing on January 1, 2008 through any
subsequent determination date. Failure to maintain the foregoing minimum
Adjusted EBITDA shall not constitute an Event of Default (as defined in Section
2.1 hereof). For purposes of this Note, “
Adjusted
EBITDA
”
shall
mean, for any period, the sum of the amounts (as determined in accordance with
generally accepted accounting principals, consistently applied) for such period
of (i) net income or loss before dividends, plus (ii) charges for foreign,
federal, state and local taxes as computed on the Maker’s income tax returns,
plus (iii) interest expense, plus (iv) depreciation, plus (v) amortization
expense, including, without limitation, amortization of goodwill and other
intangible assets and amortization of stock based compensation expense, plus
(vi) extraordinary losses, plus (vii) charges related to any financing
consummated on or prior to the Issuance Date, plus (viii) the cost of any
beneficial conversion feature of any outstanding security of the Maker, plus
(ix) the cost of any accretion of discounts minus (x) interest income, minus
(xi) extraordinary gains, and (xii) such other adjustments to eliminate the
impact of any derivative financial instruments (e.g., add back increases in
fair
value of derivative financial instruments and subtract decreases in fair value
of derivative financial instruments).”
(h)
Trigger
Events
.
Section
3.7(f)(vi) of each Note is hereby deleted in its entirety.
(i)
Conversion
Notice
.
The
Form of Notice of Conversion attached to each Note is hereby deleted in its
entirety, and the Form of Notice of Conversion attached hereto as
Exhibit
B
shall be
substituted in lieu thereof.
3.
Effective
Time
.
This
Amendment shall be effective contemporaneously with the issuance by the Maker
of
the Amendment Warrants to the Holder.
4.
Ratification
.
Except
as expressly amended hereby, all of the terms, provisions and conditions of
each
Note are hereby ratified and confirmed in all respects by each party hereto
and,
except as expressly amended hereby, are, and hereafter shall continue, in full
force and effect.
5.
Entire
Agreement
.
This
Amendment and each Note, as amended, constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements and understandings, both written and oral, between
the parties with respect thereto.
6.
Amendments
.
No
amendment, supplement, modification or waiver of this Amendment shall be binding
unless executed in writing by all parties hereto.
7.
Counterparts
.
This
Amendment may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute
but
one contract. Each party shall be entitled to rely on a facsimile signature
of
any other party hereunder as if it were an original.
8.
Governing
Law
.
This
Amendment shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction.
9.
Successors
and Assigns
.
This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
IN
WITNESS WHEREOF, the parties have executed this Amendment as of the date first
above written.
|
|
|
|
|
|
GLOWPOINT,
INC.
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[Holder]
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
Signature
Page to Amendment No. 1 to Senior Secured Convertible Promissory
Notes
EXHIBIT
A
Schedule
of Notes
EXHIBIT
B
FORM
OF
NOTICE
OF
CONVERSION
(To
be
Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. CN-06-____ into shares of Common Stock
of
Glowpoint, Inc. (the “Maker”) according to the conditions hereof, as of the date
written below.
Date
of
Conversion
_________________________________________________________
Applicable
Conversion Price __________________________________________________
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder
on
the Date of Conversion: _________________________
Name
of
bank/broker due to receive the underlying Common
Stock:_________________________
Bank/broker's
four digit "DTC" participant number
(obtained
from the receiving
bank/broker):____________________________________________
Signature___________________________________________________________________
[Name]
Address:__________________________________________________________________
_______________________________________________________________________
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF 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 THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
SERIES
A-2 WARRANT TO PURCHASE
SHARES
OF
COMMON STOCK
OF
GLOWPOINT,
INC.
Expires
September 20, 2012
|
No.: W-A-07- __
|
Number
of Shares: ___________
|
|
Date of Issuance: September 21,
2007
|
|
FOR
VALUE
RECEIVED, the undersigned, Glowpoint, Inc., a Delaware corporation (together
with its successors and assigns, the "
Issuer
"),
hereby certifies that _______________________________ or its registered assigns
is entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________________________________ (_____________) shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however,
to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 8 hereof.
|
|
1.
|
Term
.
The term of this Warrant shall commence on September 21, 2007 and
shall
expire at 5:00 p.m., Eastern Time, on September 20, 2012 (such period
being the "
Term
").
|
|
|
2.
|
Method
of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange
.
|
(a)
Time
of Exercise
.
The
purchase rights represented by this Warrant may be exercised in whole or in
part
during the Term.
(b)
Method
of Exercise
.
The
Holder hereof may exercise this Warrant, in whole or in part, by the surrender
of this Warrant (with the exercise form attached hereto duly executed) at the
principal office of the Issuer, and by the payment to the Issuer of an amount
of
consideration therefor equal to the Warrant Price in effect on the date of
such
exercise multiplied by the number of shares of Warrant Stock with respect to
which this Warrant is then being exercised, payable at such Holder's election
(i) by certified or official bank check or
by
wire
transfer to an account designated by the Issuer,
(ii) by
"cashless exercise" in accordance with the provisions of Section 2(c), or (iii)
by a combination of the foregoing methods of payment selected by the Holder
of
this Warrant.
(c)
Cashless
Exercise
.
Notwithstanding any provisions herein to the contrary if the Per Share Market
Value of one share of Common Stock is greater than the Warrant Price (at the
date of calculation as set forth below), in lieu of exercising this Warrant
by
payment of cash, the Holder may exercise this Warrant by a cashless exercise
and
shall receive the number of shares of Common Stock equal to an amount (as
determined below) by surrender of this Warrant at the principal office of the
Issuer together with the properly endorsed Notice of Exercise in which event
the
Issuer shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
X
= Y -
(A)(Y)
B
|
Where
|
X
=
|
the
number of shares of Common Stock to be issued to the
Holder.
|
|
|
Y
=
|
the
number of shares of Common Stock purchasable upon exercise of all
of the
Warrant or, if only a portion of the Warrant is being exercised,
the
portion of the Warrant being exercised.
|
|
|
B
=
|
the
Per Share Market Value of one share of Common
Stock.
|
(d)
Issuance
of Stock Certificates
.
In the
event of any exercise of this Warrant in accordance with and subject to the
terms and conditions hereof, (i) certificates for the shares of Warrant Stock
so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
the
exercise notice is delivered to the Issuer (the “
Delivery
Date
”)
or, at
the request of the Holder (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Stock is then in effect),
issued and delivered to the Depository Trust Company (“
DTC
”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“
DWAC
”)
within
a reasonable time, not exceeding three (3) Trading Days after such exercise,
and
the Holder hereof shall be deemed for all purposes to be the holder of the
shares of Warrant Stock so purchased as of the date of such exercise and (ii)
unless this Warrant has expired, a new Warrant representing the number of shares
of Warrant Stock, if any, with respect to which this Warrant shall not then
have
been exercised (less any amount thereof which shall have been canceled in
payment or partial payment of the Warrant Price as hereinabove provided) shall
also be issued to the Holder hereof at the Issuer's expense within such
time.
(e)
Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise
.
In
addition to any other rights available to the Holder, if the Issuer fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Stock pursuant to an exercise on or before the Delivery
Date, and if after such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Stock which the Holder
anticipated receiving upon such exercise (a “
Buy-In”
),
then
the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was
required to deliver to the Holder in connection with the exercise at issue
times
(B) the price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the portion
of the Warrant and equivalent number of shares of Warrant Stock for which such
exercise was not honored or deliver to the Holder the number of shares of Common
Stock that would have been issued had the Issuer timely complied with its
exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common Stock with
an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Issuer shall be required
to
pay the Holder $1,000. The Holder shall provide the Issuer written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by the
Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation,
a
decree of specific performance and/or injunctive relief with respect to the
Issuer’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of this Warrant as required pursuant to the terms
hereof.
(f)
Transferability
of Warrant
.
Subject
to Section 2(h) hereof, this Warrant may be transferred by a Holder without
the
consent of the Issuer. If transferred pursuant to this paragraph, this Warrant
may be transferred on the books of the Issuer by the Holder hereof in person
or
by duly authorized attorney, upon surrender of this Warrant at the principal
office of the Issuer, properly endorsed (by the Holder executing an assignment
in the form attached hereto) and upon payment of any necessary transfer tax
or
other governmental charge imposed upon such transfer. This Warrant is
exchangeable at the principal office of the Issuer for Warrants to purchase
the
same aggregate number of shares of Warrant Stock, each new Warrant to represent
the right to purchase such number of shares of Warrant Stock as the Holder
hereof shall designate at the time of such exchange. All Warrants issued on
transfers or exchanges shall be dated the Original Issue Date and shall be
identical with this Warrant except as to the number of shares of Warrant Stock
issuable pursuant thereto.
(g)
Continuing
Rights of Holder
.
The
Issuer will, at the time of or at any time after each exercise of this Warrant,
upon the request of the Holder hereof, acknowledge in writing the extent, if
any, of its continuing obligation to afford to such Holder all rights to which
such Holder shall continue to be entitled after such exercise in accordance
with
the terms of this Warrant,
provided
that if
any such Holder shall fail to make any such request, the failure shall not
affect the continuing obligation of the Issuer to afford such rights to such
Holder.
(h)
Compliance
with Securities Laws.
(i)
The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and
the shares of Warrant Stock to be issued upon exercise hereof are being acquired
solely for the Holder's own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement, or
an
exemption from registration, under the Securities Act and any applicable state
securities laws.
(ii)
Except
as
provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following
form:
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF 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 THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
(iii)
The
Issuer agrees to reissue this Warrant or certificates representing any of the
Warrant Stock, without the legend set forth above if at such time, prior to
making any transfer of any such securities, the Holder shall give written notice
to the Issuer describing the manner and terms of such transfer. Such proposed
transfer will not be effected until: (a) either (i) the Issuer has received
an
opinion of counsel reasonably satisfactory to the Issuer, to the effect that
the
registration of such securities 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 Issuer
with the Securities and Exchange Commission and has become effective under
the
Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under the
Securities Act and state securities laws are not required, or (iv) the Holder
provides the Issuer with reasonable assurances that such security can be sold
pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer
has
received an opinion of counsel reasonably satisfactory to the Issuer, 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 Issuer will
respond to any such notice from a holder within three (3) business days. In
the
case of any proposed transfer under this Section 2(h), the Issuer 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 Issuer.
The restrictions on transfer contained in this Section 2(h) shall be in addition
to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant. W
henever
a
certificate representing the Warrant Stock is required to be issued to a Holder
without a legend, in lieu of delivering physical certificates representing
the
Warrant Stock, provided the Issuer’s transfer agent is participating in the DTC
Fast Automated Securities Transfer program, the Issuer shall use its reasonable
best efforts to cause its transfer agent to electronically transmit the Warrant
Stock to the Holder by crediting the account of the Holder's Prime Broker with
DTC through its DWAC system (to the extent not inconsistent with any provisions
of this Warrant or the Purchase Agreement).
(i)
Accredited
Investor Status
.
In no
event may the Holder exercise this Warrant in whole or in part unless the Holder
is an “accredited investor” as defined in Regulation D under the Securities Act.
3.
Stock
Fully Paid; Reservation and Listing of Shares; Covenants
.
(a)
Stock
Fully Paid
.
The
Issuer represents, warrants, covenants and agrees that all shares of Warrant
Stock which may be issued upon the exercise of this Warrant or otherwise
hereunder will, when issued in accordance with the terms of this Warrant, be
duly authorized, validly issued, fully paid and nonassessable and free from
all
taxes, liens and charges created by or through the Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of issuance upon exercise of this Warrant a number of shares of Common
Stock equal to at least one hundred twenty percent (120%) of the aggregate
number of shares of Common Stock to provide for the exercise of this
Warrant.
(b)
Reservation
.
If any
shares of Common Stock required to be reserved for issuance upon exercise of
this Warrant or as otherwise provided hereunder require registration or
qualification with any governmental authority under any federal or state law
before such shares may be so issued, the Issuer will in good faith use its
best
efforts as expeditiously as possible at its expense to cause such shares to
be
duly registered or qualified. If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, maintain and increase when necessary such listing, of, all shares
of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder (provided that such Warrant Stock has been
registered pursuant to a registration statement under the Securities Act then
in
effect), and, to the extent permissible under the applicable securities exchange
rules, all unissued shares of Warrant Stock which are at any time issuable
hereunder, so long as any shares of Common Stock shall be so listed. The Issuer
will also so list on each securities exchange or market, and will maintain
such
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange or
market by the Issuer.
(c)
Covenants
.
The
Issuer shall not by any action including, without limitation, amending the
Certificate of Incorporation or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other action, avoid or seek to avoid the observance
or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against dilution (to the extent specifically provided herein) or
impairment. Without limiting the generality of the foregoing, the Issuer will
(i) not permit the par value, if any, of its Common Stock to exceed the then
effective Warrant Price, (ii) not amend or modify any provision of the
Certificate of Incorporation or by-laws of the Issuer in any manner that would
adversely affect the rights of the Holders of the Warrants, (iii) take all
such
action as may be reasonably necessary in order that the Issuer may validly
and
legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (iv) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this
Warrant.
(d)
Loss,
Theft, Destruction of Warrants
.
Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss,
theft, destruction or mutilation of any Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security satisfactory
to the Issuer or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Issuer will make and deliver, in lieu of
such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
representing the right to purchase the same number of shares of Common
Stock.
4.
Adjustment
of Warrant Price
.
The
price at which such shares of Warrant Stock may be purchased upon exercise
of
this Warrant shall be subject to adjustment from time to time as set forth
in
this Section 4. The Issuer shall give the Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 in accordance
with
the notice provisions set forth in Section 5.
(a)
Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale
.
(i)
In
case the Issuer after the Original Issue Date shall do any of the following
(each, a "
Triggering
Event
"):
(a)
consolidate or merge with or into any other Person and the Issuer shall not
be
the continuing or surviving corporation of such consolidation or merger, or
(b)
permit any other Person to consolidate with or merge into the Issuer and the
Issuer shall be the continuing or surviving Person but, in connection with
such
consolidation or merger, any Capital Stock of the Issuer shall be changed into
or exchanged for Securities of any other Person or cash or any other property,
or (c) transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or reclassification of
its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder of this Warrant shall be entitled upon
the
exercise hereof at any time after the consummation of such Triggering Event,
to
the extent this Warrant is not exercised prior to such Triggering Event, to
receive at the Warrant Price in effect at the time immediately prior to the
consummation of such Triggering Event in lieu of the Common Stock issuable
upon
such exercise of this Warrant prior to such Triggering Event, the Securities,
cash and property to which such Holder would have been entitled upon the
consummation of such Triggering Event if such Holder had exercised the rights
represented by this Warrant immediately prior thereto (including the right
of a
shareholder to elect the type of consideration it will receive upon a Triggering
Event), subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for elsewhere in this Section
4;
provided
,
however
,
in the
event that the Per Share Market Value is less than the Warrant Price at the
time
of such Triggering Event, the Holder shall receive an amount in cash equal
to
the value of this Warrant calculated in accordance with the Black-Scholes
formula. Notwithstanding the foregoing to the contrary, this Section 4(a)(i)
shall only apply if the surviving entity pursuant to any such Triggering Event
is a company that has a class of equity securities
registered
pursuant to the Securities Exchange Act of 1934, as amended, and its common
stock is listed or quoted on a national securities exchange, national automated
quotation system or the OTC Bulletin Board. In the event that
the
surviving entity pursuant to any such Triggering Event is not a public company
that
is
registered pursuant to the Securities Exchange Act of 1934, as amended, or
its
common stock is not listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board, then the Holder shall
have
the right to demand that the Issuer pay to the Holder an amount in cash equal
to
the value of this Warrant calculated in accordance with the Black-Scholes
formula.
(ii)
Notwithstanding
anything contained in this Warrant to the contrary and so long as the surviving
entity pursuant to any Triggering Event is a company that has a class of equity
securities
registered
pursuant to the Securities Exchange Act of 1934, as amended, and its common
stock is listed or quoted on a national securities exchange, national automated
quotation system or the OTC Bulletin Board
,
a
Triggering Event shall not be deemed to have occurred if, prior to the
consummation thereof, each Person (other than the Issuer) which may be required
to deliver any Securities, cash or property upon the exercise of this Warrant
as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a),
such Holder shall be entitled to receive, and such Person shall have similarly
delivered to such Holder an opinion of counsel for such Person, which counsel
shall be reasonably satisfactory to such Holder, or in the alternative, a
written acknowledgement executed by the President or Chief Financial Officer
of
the Issuer, stating that this Warrant shall thereafter continue in full force
and effect and the terms hereof (including, without limitation, all of the
provisions of this subsection (a)) shall be applicable to the Securities, cash
or property which such Person may be required to deliver upon any exercise
of
this Warrant or the exercise of any rights pursuant hereto.
(b)
Stock
Dividends, Subdivisions and Combinations
.
If at
any time the Issuer shall:
(i)
make
or
issue or set a record date for the holders of the Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution of,
shares of Common Stock,
(ii)
subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock, or
(iii)
combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock,
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the occurrence of such event would own or be entitled to receive after the
happening of such event, and (2) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Common Stock
for
which this Warrant is exercisable immediately after such
adjustment.
(c)
Certain
Other Distributions
.
If at
any time the Issuer shall make or issue or set a record date for the holders
of
the Common Stock for the purpose of entitling them to receive any divi-dend
or
other distribution of:
(i)
cash,
(ii)
any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common Stock
Equivalents or Additional Shares of Common Stock), or
(iii)
any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents
or
Additional Shares of Common Stock),
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
shall
be adjusted to equal the product of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Per Share
Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and
of
the fair value (as determined in good faith by the Board of Directors of the
Issuer) of any and all such evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights
so
distributable, and (2) the Warrant Price then in effect shall be adjusted to
equal (A) the Warrant Price then in effect multiplied by the number of shares
of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares of Common Stock for which this
Warrant is exercisable immediately after such adjustment. A reclassification
of
the Common Stock (other than a change in par value, or from par value to no
par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Issuer to
the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock
as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
(d)
Issuance
of Additional Shares of Common Stock
.
(i)
In
the
event the Issuer shall at any time following the Original Issue Date issue
any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less than
the Warrant Price then in effect or without consideration, then the Warrant
Price upon each such issuance shall be adjusted to that price determined by
multiplying the Warrant Price then in effect by a fraction:
(A)
the
numerator of which shall be equal to the sum of (x) the number of shares of
Outstanding Common Stock immediately prior to the issuance of such Additional
Shares of Common Stock
plus
(y) the
number of shares of Common Stock (rounded to the nearest whole share) which
the
aggregate consideration for the total number of such Additional Shares of Common
Stock so issued would purchase at a price per share equal to the Warrant Price
then in effect, and
(B)
the
denominator of which shall be equal to the number of shares of Outstanding
Common Stock immediately after the issuance of such Additional Shares of Common
Stock.
(ii)
No
adjustment of the number of shares of Common Stock for which this Warrant shall
be exercisable shall be made under paragraph (i) of Section 4(d) upon the
issuance of any Additional Shares of Common Stock which are issued pursuant
to
the exercise of any Common Stock Equivalents, if any such adjustment shall
previously have been made upon the issuance of such Common Stock Equivalents
(or
upon the issuance of any warrant or other rights therefor) pursuant to Section
4(e).
(e)
Issuance
of Common Stock Equivalents
.
If at
any time the Issuer shall issue or sell any Common Stock Equivalents, whether
or
not the rights to exchange or convert thereunder are immediately exercisable,
and the aggregate price per share for which Common Stock is issuable upon such
conversion or exchange plus the consideration received by the Issuer for
issuance of such Common Stock Equivalent divided by the number of shares of
Common Stock issuable pursuant to such Common Stock Equivalent (the
“
Aggregate
Per Common Share Price
”)
shall
be less than the Warrant Price then in effect, or if, after any such issuance
of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall make the Aggregate Per Common Share Price be less than
the
Warrant Price in effect at the time of such amendment or adjustment, then the
Warrant Price upon each such issuance or amendment shall be adjusted as provided
in Section 4(d). No further adjustment of the Warrant Price then in effect
shall
be made under this Section 4(e) upon the issuance of any Common Stock
Equivalents which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to this Section 4(e). No further adjustments of the Warrant Price
then
in effect shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Common Stock Equivalents.
(f)
Superseding
Adjustment
.
If, at
any time after any adjustment of the number of shares of Common Stock for which
this Warrant is exercisable and the Warrant Price then in effect shall have
been
made pursuant to Section 4(e) as the result of any issuance of Common Stock
Equivalents, and (i) such Common Stock Equivalents, or the right of conversion
or exchange in such Common Stock Equivalents, shall expire, and all or a portion
of such or the right of conversion or exchange with respect to all or a portion
of such Common Stock Equivalents, as the case may be, shall not have been
exercised, or (ii) the consideration per share for which shares of Common Stock
are issuable pursuant to such Common Stock Equivalents shall be increased,
then
such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Upon the occurrence of an event set forth in this Section 4(f), there shall
be a
recomputation made of the effect of such Common Stock Equivalents on the basis
of: (i) treating the number of Additional Shares of Common Stock theretofore
actually issued or issuable pursuant to the previous exercise of Common Stock
Equivalents or any such right of conversion or exchange, as having been issued
on the date or dates of any such exercise and for the consideration actually
received and receivable therefor, and (ii) treating any such Common Stock
Equivalents which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share
for
which Additional Shares of Common Stock are issuable under such Common Stock
Equivalents; whereupon a new ad-justment of the number of shares of Common
Stock
for which this Warrant is exercisable and the Warrant Price then in effect
shall
be made, which new adjustment shall supersede the previous adjustment so
rescinded and annulled.
(h)
Other
Provisions applicable to Adjustments under this Section
.
The
following provisions shall be ap-plicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and
the
Warrant Price then in effect provided for in this Section 4:
(i)
Computation
of Consideration
.
To the
extent that any Additional Shares of Common Stock or any Common Stock
Equivalents (or any warrants or other rights therefor) shall be issued for
cash
consideration, the consideration received by the Issuer therefor shall be the
amount of the cash received by the Issuer therefor, or, if such Additional
Shares of Common Stock or Common Stock Equivalents are offered by the Issuer
for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Common Stock Equivalents are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering price
(in
any such case subtracting any amounts paid or receivable for accrued interest
or
accrued dividends and without taking into account any compensation, discounts
or
expenses paid or incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). In connection with any
merger or consolidation in which the Issuer is the surviving corporation (other
than any consolidation or merger in which the previously outstanding shares
of
Common Stock of the Issuer shall be changed to or exchanged for the stock or
other securities of another corporation), the amount of consideration therefore
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board, of such portion of the assets and business of the
nonsurviving corporation as the Board may determine to be attributable to such
shares of Common Stock or Common Stock Equivalents, as the case may be. The
consideration for any Additional Shares of Common Stock issuable pursuant to
any
warrants or other rights to subscribe for or purchase the same shall be the
consideration received by the Issuer for issuing such warrants or other rights
plus the additional con-sideration payable to the Issuer upon exercise of such
warrants or other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Common Stock Equivalents shall
be
the consideration received by the Issuer for issuing war-rants or other rights
to subscribe for or purchase such Common Stock Equivalents, plus the
consideration paid or payable to the Issuer in respect of the subscription
for
or purchase of such Common Stock Equivalents, plus the additional consideration,
if any, payable to the Issuer upon the exercise of the right of conversion
or
exchange in such Common Stock Equivalents. In the event of any consolidation
or
merger of the Issuer in which the Issuer is not the surviving corporation or
in
which the previously outstanding shares of Common Stock of the Issuer shall
be
changed into or exchanged for the stock or other securities of another
corporation, or in the event of any sale of all or substantially all of the
assets of the Issuer for stock or other securities of any corporation, the
Issuer shall be deemed to have issued a number of shares of its Common Stock
for
stock or securities or other property of the other corporation computed on
the
basis of the actual exchange ratio on which the transaction was predicated,
and
for a consideration equal to the fair market value on the date of such
transaction of all such stock or securities or other property of the other
corporation. In the event any consideration received by the Issuer for any
securities consists of property other than cash, the fair market value thereof
at the time of issuance or as otherwise applicable shall be as determined in
good faith by the Board. In the event Common Stock is issued with other shares
or securities or other assets of the Issuer for consideration which covers
both,
the consideration computed as provided in this Section 4(h)(i) shall be
allocated among such securities and assets as determined in good faith by the
Board.
(ii)
When
Adjustments to Be Made
.
The
adjustments required by this Section 4 shall be made whenever and as often
as
any specified event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except in the
case of a subdivision or combination of shares of the Common Stock, as provided
for in Section 4(b)) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than one percent (1%) of the shares of Common Stock for which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except
as
aforesaid) which is postponed shall be carried forward and made as soon as
such
adjustment, together with other adjustments required by this Section 4 and
not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its
occurrence.
(iii)
Fractional
Interests
.
In
computing ad-justments under this Section 4, fractional interests in Common
Stock shall be taken into account to the near-est one one-hundredth
(1/100
th
)
of a
share.
(iv)
When
Adjustment Not Required
.
If the
Issuer shall take a record of the holders of its Common Stock for the purpose
of
entitling them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(i)
Form
of Warrant after Adjustments
.
The
form of this Warrant need not be changed because of any adjustments in the
Warrant Price or the number and kind of Securities purchasable upon the exercise
of this Warrant.
(j)
Escrow
of Warrant Stock
.
If
after any property becomes distributable pursuant to this Section 4 by reason
of
the taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, and the Holder
exer-cises this Warrant, any shares of Common Stock issuable upon exercise
by
reason of such adjustment shall be deemed the last shares of Common Stock for
which this Warrant is exercised (notwithstanding any other provision to the
contrary herein) and such shares or other property shall be held in escrow
for
the Holder by the Issuer to be issued to the Holder upon and to the extent
that
the event actually takes place, upon payment of the current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Issuer and escrowed property
returned.
5.
Notice
of Adjustments; Dispute Resolution
.
Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
to
Section 4 hereof (for purposes of this Section 5, each an "
adjustment
"),
the
Issuer shall cause its Chief Financial Officer to prepare and execute a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made
any
determination hereunder), and the Warrant Price and Warrant Share Number after
giving effect to such adjustment, and shall cause copies of such certificate
to
be delivered to the Holder of this Warrant promptly after each adjustment.
Notwithstanding any dispute between the Issuer and the Holder of this Warrant
with respect to the matters set forth in such certificate, the Issuer shall
cause its transfer agent to promptly issue to the Holder the number of shares
of
Warrant Stock that is not disputed.
6.
Fractional
Shares
.
No
fractional shares of Warrant Stock will be issued in connection with any
exercise hereof, but in lieu of such fractional shares, the Issuer shall round
the number of shares to be issued upon exercise up to the nearest whole number
of shares.
7.
Ownership
Cap and Certain Exercise Restrictions.
(a)
Notwithstanding anything to the contrary set forth in this Warrant, at no time
may a Holder of this Warrant exercise this Warrant if the number of shares
of
Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock owned by such Holder at such
time, the number of shares of Common Stock which would result in such Holder
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 4.9% of the then issued
and
outstanding shares of Common Stock;
provided
,
however
,
that
upon a holder of this Warrant providing the Issuer with sixty-one (61) days
notice (pursuant to Section 12 hereof) (the "
Waiver
Notice
")
that
such Holder would like to waive this Section 7(a) with regard to any or all
shares of Common Stock issuable upon exercise of this Warrant, this Section
7(a)
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice;
provided
,
further
,
that
this provision shall be of no further force or effect during the sixty-one
(61)
days immediately preceding the expiration of the term of this
Warrant.
(b)
The
Holder may not exercise the Warrant hereunder to the extent such exercise would
result in the Holder beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.9%
of
the then issued and outstanding shares of Common Stock, including shares
issuable upon exercise of the Warrant held by the Holder after application
of
this Section;
provided
,
however
,
that
upon a holder of this Warrant providing the Issuer with a Waiver Notice that
such holder would like to waive this Section 7(b) with regard to any or all
shares of Common Stock issuable upon exercise of this Warrant, this Section
7(b)
shall be of no force or effect with regard to those shares of Warrant Stock
referenced in the Waiver Notice;
provided
,
further
,
that
this provision shall be of no further force or effect during the sixty-one
(61)
days immediately preceding the expiration of the term of this
Warrant.
8.
Definitions
.
For the
purposes of this Warrant, the following terms have the following
meanings:
"
2006
Purchase Agreements
"
means,
collectively each of the following, as the same may be amended from time to
time, (i) that certain Note and Warrant Purchase Agreement dated as of March
31,
2006, among the Issuer and the Purchasers, and (ii) that certain Note and
Warrant Purchase Agreement, dated as of April 12, 2006, by and among the Issuer
and the Purchasers.
"
Additional
Shares of Common Stock
"
means
all shares of Common Stock issued by the Issuer after the Original Issue Date,
and all shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) securities issued (other than for cash) in connection
with a merger, acquisition, or consolidation, (ii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date hereof (so long as the conversion or
exercise price in such securities are not amended to lower such price and/or
adversely affect the Holders)
or
issued
pursuant to the Purchase Agreements, (iii) securities issued pursuant to the
terms of that certain Exchange Agreement, dated as of September 21, 2007, by
and
among the Maker and the holders signatory thereto, (iv) the issuance of the
Notes and the Warrants, (v) the shares of Common Stock issuable upon the
conversion of the Notes, (vi) the Warrant Stock, (vii) securities issued in
connection with bona fide strategic license agreements or other partnering
arrangements so long as such issuances are not for the purpose of raising
capital, (viii) Common Stock issued or the issuance or grants of options to
purchase Common Stock pursuant to Issuer’s stock option plans and employee stock
purchase plans approved by the Issuer’s board of directors, so long as such
issuances in the aggregate do not exceed the number of shares of Common Stock
(or options to purchase such number of shares of Common Stock) issuable pursuant
to such plans as they exist on the Original Issue Date, (ix) any warrants issued
to the placement agent and its designees for the transactions contemplated
by
the Purchase Agreements, (x) the payment of any dividends on the Issuer’s Series
B convertible preferred stock, (xi) securities issued pursuant to a bona fide
firm underwritten public offering of the Issuer’s securities, (xii) the payment
of liquidated damages pursuant to the Registration Rights Agreement dated
February 17, 2004 between the Issuer and the parties listed therein and (xiii)
the issuance of Common Stock upon the exercise or conversion of any securities
described in clauses (i) through (xii) above.
“
Board
"
shall
mean the Board of Directors of the Issuer.
"
Capital
Stock
"
means
and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including,
without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"
Certificate
of Incorporation
"
means
the Certificate of Incorporation of the Issuer as in effect on the Original
Issue Date, and as hereafter from time to time amended, modified, supplemented
or restated in accordance with the terms hereof and thereof and pursuant to
applicable law.
"
Common
Stock
"
means
the Common Stock, $0.0001 par value per share, of the Issuer and any other
Capital Stock into which such stock may hereafter be changed.
"
Common
Stock Equivalent
"
means
any Convertible Security or warrant, option or other right to subscribe for
or
purchase any Additional Shares of Common Stock or any Convertible
Security.
"
Convertible
Securities
"
means
evidences of Indebtedness, shares of Capital Stock or other Securities which
are
or may be at any time convertible into or exchangeable for Additional Shares
of
Common Stock. The term "Convertible Security" means one of the Convertible
Securities.
"
Governmental
Authority
"
means
any governmental, regulatory or self-regulatory entity, department, body,
official, authority, commission, board, agency or instrumentality, whether
federal, state or local, and whether domestic or foreign.
"
Holders
"
mean
the Persons who shall from time to time own any Warrant. The term "Holder"
means
one of the Holders.
"
Independent
Appraiser
"
means a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may
be
the firm that regularly examines the financial statements of the Issuer) that
is
regularly engaged in the business of appraising the Capital Stock or assets
of
corporations or other entities as going concerns, and which is not affiliated
with either the Issuer or the Holder of any Warrant.
"
Issuer
"
means
Glowpoint, Inc., a Delaware corporation, and its successors.
"
Majority
Holders
"
means
at any time the Holders of Warrants exercisable for a majority of the shares
of
Warrant Stock issuable under the Warrants at the time outstanding.
"
Notes
"
shall
mean collectively, each of the following, as the same may be amended from time
to time: (1) the senior secured convertible promissory notes issued pursuant
to
the Purchase Agreements, and (2) any additional senior secured convertible
promissory notes issued from time to time as interest on the outstanding
principal balance of the foregoing promissory notes.
"
Original
Issue Date
"
means
September 21, 2007.
"
OTC
Bulletin Board
"
means
the over-the-counter electronic bulletin board.
"
Other
Common
"
means
any other Capital Stock of the Issuer of any class which shall be authorized
at
any time after the date of this Warrant (other than Common Stock) and which
shall have the right to participate in the distribution of earnings and assets
of the Issuer without limitation as to amount.
“
Outstanding
Common Stock
”
means,
at any given time, the aggregate amount of outstanding shares of Common Stock,
assuming full exercise, conversion or exchange (as applicable) of all options,
warrants and other Securities which are convertible into or exercisable or
exchangeable for, and any right to subscribe for, shares of Common Stock that
are outstanding at such time.
"
Person
"
means
an individual, corporation, limited liability company, partnership, joint stock
company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.
"
Per
Share Market Value
"
means
on any particular date (a) the last closing sale price per share of the Common
Stock on such date on the
OTC
Bulletin Board
or
another registered national stock exchange on which the Common Stock is then
listed, or if there is no such price on such date, then the closing sale price
on such exchange or quotation system on the date nearest preceding such date,
or
(b) if the Common Stock is not listed then on the OTC Bulletin Board or any
registered national stock exchange, the last closing sale price for a share
of
Common Stock in the over-the-counter market, as reported by the OTC Bulletin
Board or in the National Quotation Bureau Incorporated or similar organization
or agency succeeding to its functions of reporting prices) at the close of
business on such date, or (c) if the Common Stock is not then reported by the
OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), then
the average of the "Pink Sheet" quotes for the five (5) Trading Days preceding
such date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by an
Independent Appraiser selected in good faith by the Majority Holders;
provided
,
however
,
that
the Issuer, after receipt of the determination by such Independent Appraiser,
shall have the right to select an additional Independent Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Independent Appraiser; and
provided
,
further
that all
determinations of the Per Share Market Value shall be appropriately adjusted
for
any stock dividends, stock splits or other similar transactions during such
period. The determination of fair market value by an Independent Appraiser
shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding
on
all parties.
“
Purchase
Agreement
”
means
that certain Note and Warrant Purchase Agreement, dated as of September 21,
2007, among the Issuer and the Purchasers, as the same may be amended from
time
to time.
“
Purchase
Agreements
”
means,
collectively, the 2006 Purchase Agreements and the Purchase
Agreement.
"
Purchasers
"
means
the purchasers of the Notes and the Warrants issued by the Issuer pursuant
to
the Purchase Agreements.
"
Securities
"
means
any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities
or a
Security, and any option, warrant or other right to purchase or acquire any
Security. "Security" means one of the Securities.
"
Securities
Act
"
means
the Securities Act of 1933, as amended, or any similar federal statute then
in
effect.
"
Subsidiary
"
means
any corporation at least 50% of whose outstanding Voting Stock shall at the
time
be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.
"
Term
"
has the
meaning specified in Section 1 hereof.
"
Trading
Day
"
means
any day during which The New York Stock Exchange shall be open for
business.
"
Voting
Stock
"
means,
as applied to the Capital Stock of any corporation, Capital Stock of any class
or classes (however designated) having ordinary voting power for the election
of
a majority of the members of the Board of Directors (or other governing body)
of
such corporation, other than Capital Stock having such power only by reason
of
the happening of a contingency.
"
Warrants
"
shall
mean, collectively, each of the following, as the same may be amended from
time
to time: (A) the warrants to purchase shares of Common Stock issued pursuant
to
the Purchase Agreements (including, without limitation, this Warrant); (B)
the
warrants to purchase shares of Common Stock issued in connection with the
amendment of the senior secured convertible promissory notes issued pursuant
to
the 2006 Purchase Agreements; and (C) any other warrants of like tenor issued
in
substitution or exchange for any of the foregoing Warrants pursuant to the
provisions of Section 2(c), 2(d) or 2(e) thereof.
"
Warrant
Price
"
initially means $0.65, as such price may be adjusted from time to time as shall
result from the adjustments specified in this Warrant, including Section 4
hereto.
"
Warrant
Share Number
"
means
at any time the aggregate number of shares of Warrant Stock which may at such
time be purchased upon exercise of this Warrant, after giving effect to all
prior adjustments and increases to such number made or required to be made
under
the terms hereof.
"
Warrant
Stock
"
means
Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
issuable pursuant to any Warrant or Warrants.
9.
Other
Notices
.
In case
at any time:
|
|
(A)
|
the
Issuer shall make any distributions to the holders of Common Stock;
or
|
|
|
(B)
|
the
Issuer shall authorize the granting to all holders of its Common
Stock of
rights to subscribe for or purchase any shares of Capital Stock of
any
class or other rights; or
|
|
|
(C)
|
there
shall be any reclassification of the Capital Stock of the Issuer;
or
|
|
|
(D)
|
there
shall be any capital reorganization by the Issuer;
or
|
|
|
(E)
|
there
shall be any (i) consolidation or merger involving the Issuer or
(ii)
sale, transfer or other disposition of all or substantially all of
the
Issuer's property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation
and
its shares of Capital Stock shall continue to be outstanding and
unchanged
and except a consolidation, merger, sale, transfer or other disposition
involving a wholly-owned Subsidiary);
or
|
|
|
(F)
|
there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Issuer or any partial liquidation of the Issuer or distribution
to
holders of Common Stock;
|
then,
in
each of such cases, the Issuer shall give written notice to the Holder of the
date on which (i) the books of the Issuer shall close or a record shall be
taken
for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock
for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days prior
to the record date or the date on which the Issuer's transfer books are closed
in respect thereto. Except as otherwise specifically provided herein, no holder,
as such, of this Warrant shall be entitled to vote or receive dividends or
be
deemed the holder of shares of the Issuer for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Issuer or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance
or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Warrant of
the
Warrant Shares which he or she is then entitled to receive upon the due exercise
of this Warrant. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to
the
holders of the Common Stock.
10.
Amendment
and Waiver
.
Any
term, covenant, agreement or condition in this Warrant may be amended, or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by a written instrument or written
instruments executed by the Issuer and the Majority Holders;
provided
,
however
,
that no
such amendment or waiver shall reduce the Warrant Share Number, increase the
Warrant Price, shorten the period during which this Warrant may be exercised
or
modify any provision of this Section 10 without the consent of the Holder of
this Warrant. No consideration shall be offered or paid to any person to amend
or consent to a waiver or modification of any provision of this Warrant unless
the same consideration is also offered to all holders of the
Warrants.
11.
Governing
Law; Jurisdiction
.
This
Warrant shall be governed by and construed in accordance with the internal
laws
of the State of New York, without giving effect to any of the conflicts of
law
principles which would result in the application of the substantive law of
another jurisdiction. This Warrant shall not be interpreted or construed with
any presumption against the party causing this Warrant to be drafted. The Issuer
and the Holder agree that venue for any dispute arising under this Warrant
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 Issuer and the Holder
irrevocably consent to personal jurisdiction in the state and federal courts
of
the state of New York. The Issuer and the Holder 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 Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 11 shall affect or limit any right to serve
process in any other manner permitted by law. The parties hereby waive all
rights to a trial by jury.
12.
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
Issuer:
Glowpoint,
Inc.
225
Long
Avenue
Hillside,
New Jersey 07205
Attention:
Chief Executive Officer
Tel.
No.:
(312) 235-3888 x2053
Fax
No.:
(973) 391-1904
and
General
Counsel
Glowpoint,
Inc.
225
Long
Avenue
Hillside,
New Jersey 07205
Tel.
No.:
(312) 235-3888 x 2087
Fax
No.:
(973) 556-1272
with
copies (which copies
shall
not
constitute notice
to
the
Issuer) to:
Gibbons
P.C.
One
Gateway Center
Newark,
New Jersey 07102
Attn:
Frank Cannone, Esq.
Tel.
No.:
(973) 596-4500
Fax
No.:
(973) 596-0545
If
to any
Holder:
At
the
address of such Holder set forth on
Exhibit
A
to this
Agreement, with copies to
Holder’s
counsel as set forth on
Exhibit
A
or as
specified in writing by such Holder with
copies
to:
with
copies (which copies
shall
not
constitute notice)
to:
Kramer
Levin Naftalis & Frankel LLP
1177
Avenue of the Americas
New
York,
New York 10036
Attention:
Christopher S. Auguste
Tel.
No.:
(212) 715-9100
Fax
No.:
(212) 715-8000
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.
13.
Warrant
Agent
.
The
Issuer may, by written notice to each Holder of this Warrant, appoint an agent
having an office in New York, New York for the purpose of issuing shares of
Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of
Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section
2 hereof or replacing this Warrant pursuant to subsection (d) of Section 3
hereof, or any of the foregoing, and thereafter any such issuance, exchange
or
replacement, as the case may be, shall be made at such office by such
agent.
14.
Remedies
.
The
Issuer stipulates that the remedies at law of the Holder of this Warrant in
the
event of any default or threatened default by the Issuer in the performance
of
or compliance with any of the terms of this Warrant are not and will not be
adequate and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
15.
Successors
and Assigns
.
This
Warrant and the rights evidenced hereby shall inure to the benefit of and be
binding upon the successors and assigns of the Issuer, the Holder hereof and
(to
the extent provided herein) the Holders of Warrant Stock issued pursuant hereto,
and shall be enforceable by any such Holder or Holder of Warrant
Stock.
16.
Modification
and Severability
.
If, in
any action before any court or agency legally empowered to enforce any provision
contained herein, any provision hereof is found to be unenforceable, then such
provision shall be deemed modified to the extent necessary to make it
enforceable by such court or agency. If any such provision is not enforceable
as
set forth in the preceding sentence, the unenforceability of such provision
shall not affect the other provisions of this Warrant, but this Warrant shall
be
construed as if such unenforceable provision had never been contained
herein.
17.
Headings
.
The
headings of the Sections of this Warrant are for convenience of reference only
and shall not, for any purpose, be deemed a part of this Warrant.
IN
WITNESS WHEREOF, the Issuer has executed this Series A-2 Warrant as of the
day
and year first above written.
|
|
|
|
|
|
GLOWPOINT,
INC.
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
EXERCISE
FORM
SERIES
A-2 WARRANT
GLOWPOINT,
INC.
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of Glowpoint, Inc.
covered by the within Warrant.
|
Dated: _________________
|
Signature
|
___________________________
|
|
|
Address
|
_____________________
|
|
|
|
_____________________
|
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
|
Dated: _________________
|
Signature
|
___________________________
|
|
|
Address
|
_____________________
|
|
|
|
_____________________
|
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
|
Dated: _________________
|
Signature
|
___________________________
|
|
|
Address
|
_____________________
|
|
|
|
_____________________
|
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF
AN
OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY
TO
THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
LAWS.
GLOWPOINT,
INC.
Senior
Secured Convertible Promissory Note
due
March
31, 2009
|
No. CN-07-__
|
$___________
|
|
Dated: September 21, 2007
|
|
For
value
received, Glowpoint, Inc., a Delaware corporation (the "
Maker
"),
hereby promises to pay to the order of _______________________ (together with
its successors, representatives, and permitted assigns, the "
Holder
"),
in
accordance with the terms hereinafter provided, the principal amount of
________________________ ($______________), together with interest thereon.
Concurrently with the issuance of this Note, the Maker is issuing separate
convertible promissory notes (the “
Additional
Notes
”)
to
separate purchasers (the “
Additional
Holders
”)
in the
aggregate principal amount of up to $3,600,000 (inclusive of this Note). The
Maker has previously issued separate convertible promissory notes (the
“
Existing
Notes
”,
and
together with the Additional Notes, the “
Other
Notes
”)
to
separate purchasers (the “
Existing
Holders
”,
and
together with the Additional Holders, the “
Other
Holders
”)
pursuant to the 2006 Purchase Agreements (as defined below).
All
payments under or pursuant to this Note shall be made in United States Dollars
in immediately available funds to the Holder
at
the
address of the Holder first set forth above or at such other place as the Holder
may designate from time to time in writing to the Maker or by wire transfer
of
funds to the Holder's account, instructions for which are attached hereto as
Exhibit
A
.
The
outstanding principal balance of this Note shall be due and payable on March
31,
2009 (the "
Maturity
Date
")
or at
such earlier time as provided herein.
ARTICLE
I
Section
1.1
Purchase
Agreement. This Note has been executed and delivered pursuant to the Note and
Warrant Purchase Agreement dated as of September 21, 2007 (the "Purchase
Agreement”), by and among the Maker and the purchasers listed therein.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.
Section
1.2
Interest
.
Beginning on the issuance date of this Note (the “
Issuance Date
”), the
outstanding principal balance of this Note shall bear interest, in arrears,
at a
rate per annum equal to ten percent (10%), increasing to a rate per annum equal
to twelve percent (12%) commencing one (1) year following the Issuance Date,
payable quarterly commencing on October 1, 2007 and on the first business day
of
each following quarter at the option of the Maker in cash or additional senior
secured convertible promissory notes. Interest shall be computed on the basis
of
a 360-day year of twelve (12) 30-day months and shall accrue commencing on
the
Issuance Date.
Furthermore,
upon the occurrence of an Event of Default (as defined in Section 2.1 hereof),
then to the extent permitted by law, the Maker will pay interest in cash to
the
Holder, payable on demand, on the outstanding principal balance of the Note
from
the date of the Event of Default until such Event of Default is cured at the
rate of the lesser of fifteen percent (15%) and the maximum applicable legal
rate per annum.
Section
1.3
Security
Agreement
. The obligations of the Maker hereunder are secured by a
continuing security interest in all of the assets of the Maker pursuant to
the
terms of a Security Agreement dated as of March 31, 2006, as amended, by and
among the Maker, on the one hand, and the Holder and the Other Holders, on
the
other hand.
Section
1.4
Payment
on Non-Business Days
. Whenever any payment to be made shall be due on a
Saturday, Sunday or a public holiday under the laws of the State of New York,
such payment may be due on the next succeeding business day and such next
succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.
Section
1.5
Transfer
.
This Note may be transferred or sold, subject to the provisions of Section
4.8
of this Note, or pledged, hypothecated or otherwise granted as security by
the
Holder.
Section
1.6
Replacement
.
Upon receipt of a duly executed, notarized and unsecured written statement
from
the Holder with respect to the loss, theft or destruction of this Note (or
any
replacement hereof) and a standard indemnity, or, in the case of a mutilation
of
this Note, upon surrender and cancellation of such Note, the Maker shall issue
a
new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed
or
mutilated Note.
Section
1.7
EBITDA
.
Subject to the last sentence of this Section 1.7, the Maker shall maintain
the
following minimum Adjusted EBITDA (as defined below) determined as of the
following dates:
|
Determination
Date
|
Adjusted
EBITDA
|
|
|
|
|
As
of March 31, 2008
|
$0
for the quarter ending March 31, 2008
|
|
|
|
|
As
of June 30, 2008
|
$1,000,000
for the period commencing on January 1, 2008 and ending on June 30,
2008.
|
|
|
|
|
As
of September 30, 2008
|
$1,500,000
for the quarter ending September 30, 2008, or $2,500,000 for the
period
commencing on January 1, 2008 and ending on September 30,
2008.
|
|
|
|
|
As
of December 31, 2008
|
$2,000,000
for the quarter ending December 31, 2008, or $4,500,000 for the year
ended
December 31, 2008.
|
In
the event
Maker fails to maintain the foregoing minimum Adjusted EBITDA, then the per
annum interest rate on the unpaid principal balance of this Note then in effect
shall increase by 200 basis points, and such increase will be cumulative for
each subsequent breach; provided, however, that the per annum interest rate
shall revert to the interest rate as determined in accordance with Section
1.2
hereof in the event the Maker achieves or exceeds the cumulative minimum
Adjusted EBITDA for the period commencing on January 1, 2008 through any
subsequent determination date. Failure to maintain the foregoing minimum
Adjusted EBITDA shall not constitute an Event of Default (as defined in Section
2.1 hereof). For purposes of this Note, “
Adjusted
EBITDA
”
shall
mean, for any period, the sum of the amounts (as determined in accordance with
generally accepted accounting principals, consistently applied) for such period
of (i) net income or loss before dividends, plus (ii) charges for foreign,
federal, state and local taxes as computed on the Maker’s income tax returns,
plus (iii) interest expense, plus (iv) depreciation, plus (v) amortization
expense, including, without limitation, amortization of goodwill and other
intangible assets and amortization of stock based compensation expense, plus
(vi) extraordinary losses, plus (vii) charges related to any financing
consummated on or prior to the Issuance Date, plus (viii) the cost of any
beneficial conversion feature of any outstanding security of the Maker, plus
(ix) the cost of any accretion of discounts minus (x) interest income, minus
(xi) extraordinary gains, and (xii) such other adjustments to eliminate the
impact of any derivative financial instruments (e.g., add back increases in
fair
value of derivative financial instruments and subtract decreases in fair value
of derivative financial instruments). Notwithstanding the foregoing, in the
event that the Holder is an Insider Purchaser (as defined in, and listed on,
Exhibit A to the Purchase Agreement), then this Section 1.7 shall not apply
and
shall have no force or effect.
ARTICLE
II
EVENTS
OF DEFAULT; REMEDIES
Section
2.1
Events
of Default
. The occurrence of any of the following events shall be an
"
Event of Default
" under this Note:
(a)
the
Maker
shall fail to make any principal or interest payments on the date such payments
are due and such default is not fully cured within two (2) business days after
the occurrence thereof; or
(b)
the
Maker's notice to the Holder, including by way of public announcement, at any
time, of its inability to comply (including for any of the reasons described
in
Section 3.8(a) hereof) or its intention not to comply with proper requests
for
conversion of this Note into shares of Common Stock; or
(c)
the
Maker
shall fail to (i) timely deliver the shares of Common Stock upon conversion
of
the Note or any interest accrued and unpaid, (ii) file the Registration
Statement in accordance with the terms of the Registration Rights Agreement
or
(iii) make the payment of any fees and/or liquidated damages under this Note
or
the other Transaction Documents, which failure in the case of items (i) and
(iii) of this Section 2.1(e) is not remedied within five (5) business days
after
the incurrence thereof; or
(d)
while
the
Registration Statement is required to be maintained effective pursuant to the
terms of the Registration Rights Agreement, the effectiveness of the
Registration Statement lapses for any reason (including, without limitation,
the
issuance of a stop order) or is unavailable to the Holder for sale of the
Registrable Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such lapse
or unavailability continues for a period of ten (10) consecutive Trading Days,
provided
that the
Maker has not exercised its rights pursuant to Section 3(n) of the Registration
Rights Agreement; or
(e)
default
shall be made in the performance or observance of (i) any material covenant,
condition or agreement contained in this Note (other than as set forth in clause
(f) of this Section 2.1) and such default is not fully cured within five (5)
business days after the Holder delivers written notice to the Maker of the
occurrence thereof or (ii) any material covenant, condition or agreement
contained in the Purchase Agreement, the Other Notes, the Registration Rights
Agreement or any other Transaction Document which is not covered by any other
provisions of this Section 2.1 and such default is not fully cured within five
(5) business days after the Holder delivers written notice to the Maker of
the
occurrence thereof; or
(f)
any
material representation or warranty made by the Maker herein or in the Purchase
Agreement, the Registration Rights Agreement, the Other Notes or any other
Transaction Document shall prove to have been false or incorrect or breached
in
a material respect on the date as of which made; or
(g)
the
Maker
shall (A) default in any payment of any amount or amounts of principal of or
interest on any Indebtedness (other than the Indebtedness hereunder) the
aggregate principal amount of which Indebtedness is in excess of
$100,000
or
(B)
default in the observance or performance of any other agreement or condition
relating to any Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is
to
cause, or to permit the holder or holders or beneficiary or beneficiaries of
such Indebtedness to cause with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity; or
(h)
the
Maker
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of
all
or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition
seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors'
rights generally, (v) acquiesce in writing to any petition filed against it
in
an involuntary case under United States Bankruptcy Code (as now or hereafter
in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue
a
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or
(i)
a
proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i)
the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of
its
assets in connection with the liquidation or dissolution of the Maker or (iii)
similar relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case described in clause (i), (ii) or (iii)
shall continue undismissed, or unstayed and in effect, for a period of thirty
(30) days or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker
or
action under the laws of any jurisdiction (foreign or domestic) analogous to
any
of the foregoing shall be taken with respect to the Maker and shall continue
undismissed, or unstayed and in effect for a period of thirty (30) days;
or
(j)
the
failure of the Maker to instruct its transfer agent to remove any legends from
shares of Common Stock eligible to be sold under Rule 144 of the Securities
Act
and issue such unlegended certificates to the Holder within ten (10) business
days of the Holder’s request so long as the Holder has complied with Section 5.1
of the Purchase Agreement; or
(k)
the
failure of the Maker to pay any amounts due to the Holder herein or any other
Transaction Document within three (3) business days of the date such payments
are due; or
(l)
the
occurrence of an Event of Default under the Other Notes.
Section
2.2
Remedies
Upon An Event of Default
. If an Event of Default shall have occurred and
shall be continuing, the Holder of this Note may at any time at its option,
(a)
pursuant to Section 3.7(a) hereof, declare the entire unpaid principal balance
of this Note, together with all interest accrued hereon, due and payable, and
thereupon, the same shall be accelerated and so due and payable, without
presentment, demand, protest, or notice, all of which are hereby expressly
unconditionally and irrevocably waived by the Maker; provided, however, that
upon the occurrence of an Event of Default described in (i) Sections 2.1(h)
or
(i), the outstanding principal balance and accrued interest hereunder shall
be
automatically due and payable and (ii) Sections 2.1(a)-(g) and (j)-(l), the
Holder may demand the prepayment of this Note pursuant to Section 3.7 hereof,
(b) demand that the principal amount of this Note then outstanding and all
accrued and unpaid interest thereon shall be converted into shares of Common
Stock at a Conversion Price per share calculated pursuant to Section 3.1 hereof
assuming that the date that the Event of Default occurs is the Conversion Date
(as defined in Section 3.1 hereof), or (c) exercise or otherwise enforce any
one
or more of the Holder's rights, powers, privileges, remedies and interests
under
this Note, the Purchase Agreement, the Registration Rights Agreement or
applicable law. No course of delay on the part of the Holder shall operate
as a
waiver thereof or otherwise prejudice the right of the Holder. No remedy
conferred hereby shall be exclusive of any other remedy referred to herein
or
now or hereafter available at law, in equity, by statute or
otherwise.
ARTICLE
III
CONVERSION;
ANTIDILUTION; PREPAYMENT
Section
3.1
Conversion
.
(a)
Optional
Conversion
.
At any
time on or after the Issuance Date, this Note shall be convertible (in whole
or
in part), at the option of the Holder (the "
Conversion
Option
"),
into
such number of fully paid and non-assessable shares of Common Stock (the
"
Conversion
Rate
")
as is
determined by dividing (x) that portion of the outstanding principal balance
plus any accrued but unpaid interest under this Note as of such date that the
Holder elects to convert by (y) the Conversion Price (as defined in Section
3.2(a) hereof) then in effect on the date on which the Holder faxes a notice
of
conversion (the "
Conversion
Notice
"),
duly
executed, to the Maker (facsimile number (973) 860-0754, Attn.: Chief Executive
Officer, with a copy to facsimile number 973-556-1272, Attn.: General Counsel)
(the “
Optional
Conversion Date
”),
provided, however, that the Conversion Price shall be subject to adjustment
as
described in Section 3.6 below. The Holder shall deliver this Note to the Maker
at the address designated in the Purchase Agreement at such time that this
Note
is fully converted. With respect to partial conversions of this Note, the Maker
shall keep written records of the amount of this Note converted as of each
Conversion Date.
(b)
Mandatory
Conversion
.
On the
Mandatory Conversion Date (as defined below), this Note shall automatically
and
without any action on the part of the Holder, convert into such number of fully
paid and non-assessable shares of Common Stock as is determined by dividing
(x)
that portion of the outstanding principal balance plus any accrued but unpaid
interest under this Note as of the Mandatory Conversion Date by (y) the
Conversion Price then in effect on the Mandatory Conversion Date, provided,
however, that the Conversion Price shall be subject to adjustment as described
in Section 3.6 below. As used herein, "Mandatory Conversion Date" shall be
the
first date that the Closing Bid Price (as defined below) of the Common Stock
exceeds $1.25 (as adjusted for stock splits, stock dividends, combinations
and
similar transactions) for twenty (20) consecutive trading days. The Mandatory
Conversion Date and the Voluntary Conversion Date collectively are referred
to
in this Note as the "Conversion Date". Notwithstanding the foregoing to the
contrary, the Note shall automatically convert pursuant to this Section 3.1(b)
only if (1) the Registration Statement is effective and has been effective,
without lapse or suspension of any kind, for such twenty (20) consecutive
trading day period, (2) trading in the Common Stock shall not have been
suspended by the Securities and Exchange Commission or the OTC Bulletin Board
(or other exchange or market on which the Common Stock is trading), and (3)
the
Maker is in material compliance with the terms and conditions of this Note
and
the other Transaction Documents. The term "Closing Bid Price" shall mean, on
any
particular date (i) the last closing bid price per share of the Common Stock
on
such date on the OTC Bulletin Board or another registered national stock
exchange on which the Common Stock is then listed, or if there is no such price
on such date, then the last closing bid price on such exchange or quotation
system on the date nearest preceding such date.
Section
3.2
Conversion
Price.
(a)
The
term
"
Conversion
Price
"
shall
mean $0.50, subject to adjustment under Section 3.6 hereof.
(b)
Notwithstanding
any of the foregoing to the contrary, if during any period after the Maker
is
obligated to file the registration statement under the Registration Rights
Agreement (a "
Black-out
Period
"),
a
Holder is unable to trade any Common Stock issued or issuable upon conversion
of
this Note immediately due to the postponement of filing or delay or suspension
of effectiveness of the Registration Statement or because the Maker has
otherwise informed such Holder that an existing prospectus cannot be used at
that time in the sale or transfer of such Common Stock (provided that such
postponement, delay, suspension or fact that the prospectus cannot be used
is
not due to factors solely within the control of the Holder of this Note or
due
to the Maker exercising its rights under Section 3(n) of the Registration Rights
Agreement), such Holder shall have the option but not the obligation on any
Conversion Date within ten (10) Trading Days following the expiration of the
Black-out Period of using the Conversion Price applicable on such Conversion
Date or any Conversion Price selected by such Holder that would have been
applicable had such Conversion Date been at any earlier time during the
Black-out Period or within the ten (10) Trading Days thereafter. In no event
shall the Black-out Period have any effect on the Maturity Date of this Note.
Section
3.3
Mechanics
of Conversion.
(a)
Not
later
than three (3) Trading Days after any Conversion Date, the Maker or its
designated transfer agent, as applicable, shall issue and deliver to the
Depository Trust Company (“
DTC
”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“
DWAC
”)
as
specified in the Conversion Notice, registered in the name of the Holder or
its
designee, such number of shares of Common Stock to which the Holder shall be
entitled. In the alternative, not later than three (3) Trading Days after any
Conversion Date, the Maker shall deliver to the applicable Holder by express
courier a certificate or certificates which shall be free of restrictive legends
and trading restrictions (other than those required by Section 5.1 of the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of this Note (the “
Delivery
Date
”).
Notwithstanding the foregoing to the contrary, the Maker or its transfer agent
shall only be obligated to issue and deliver the shares to the DTC on the
Holder’s behalf via DWAC (or certificates free of restrictive legends) if such
conversion is in connection with a sale. If in the case of any Conversion Notice
such certificate or certificates are not delivered to or as directed by the
applicable Holder by the Delivery Date, the Holder shall be entitled by written
notice to the Maker at any time on or before its receipt of such certificate
or
certificates thereafter, to rescind such conversion, in which event the Maker
shall immediately return this Note tendered for conversion, whereupon the Maker
and the Holder shall each be restored to their respective positions immediately
prior to the delivery of such notice of revocation, except that any amounts
described in Sections 3.3(b) and (c) shall be payable through the date notice
of
rescission is given to the Maker.
(b)
The
Maker
understands that a delay in the delivery of the shares of Common Stock upon
conversion of this Note beyond the Delivery Date could result in economic loss
to the Holder. Subject to Section 3.3(d) hereof, if the Maker fails to deliver
to the Holder such shares via DWAC or a certificate or certificates pursuant
to
this Section hereunder by the Delivery Date, the Maker shall pay to such Holder,
in cash, an amount per Trading Day for each Trading Day until such shares are
delivered via DWAC or certificates are delivered, together with interest on
such
amount at a rate of 10% per annum, accruing until such amount and any accrued
interest thereon is paid in full, equal to the greater of (A) (i) 1% of the
aggregate principal amount of the Notes requested to be converted for the first
five (5) Trading Days after the Delivery Date and (ii) 2% of the aggregate
principal amount of the Notes requested to be converted for each Trading Day
thereafter and (B) $2,000 per day (which amount shall be paid as liquidated
damages and not as a penalty). Nothing herein shall limit a Holder's right
to
pursue actual damages for the Maker's failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available
to
it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief). Notwithstanding anything to the contrary
contained herein, the Holder shall be entitled to withdraw a Conversion Notice,
and upon such withdrawal the Maker shall only be obligated to pay the liquidated
damages accrued in accordance with this Section 3.3(b) through the date the
Conversion Notice is withdrawn.
(c)
Subject
to Section 3.3(d) hereof, in addition to any other rights available to the
Holder, if the Maker fails to cause its transfer agent to transmit to the Holder
a certificate or certificates representing the shares of Common Stock issuable
upon conversion of this Note on or before the Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a
sale by the Holder of the shares of Common Stock issuable upon conversion of
this Note which the Holder anticipated receiving upon such exercise (a
“
Buy-In”
),
then
the Maker shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Common Stock issuable upon conversion
of
this Note that the Maker was required to deliver to the Holder in connection
with the conversion at issue times (B) the price at which the sell order giving
rise to such purchase obligation was executed, and (2) at the option of the
Holder, either reinstate the portion of the Note and equivalent number of shares
of Common Stock for which such conversion was not honored or deliver to the
Holder the number of shares of Common Stock that would have been issued had
the
Maker timely complied with its conversion and delivery obligations hereunder.
For example, if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of shares
of Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence
the Maker shall be required to pay the Holder $1,000. The Holder shall provide
the Maker written notice indicating the amounts payable to the Holder in respect
of the Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Maker. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Maker’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of this Note
as
required pursuant to the terms hereof.
(d)
Notwithstanding
the foregoing, in the event that the Holder is an Insider Purchaser, then
subsections (b) and (c) of this Section 3.3 shall not apply and shall have
no
force or effect.
Section
3.4
Ownership
Cap and Certain Conversion Restrictions.
(a)
Notwithstanding
anything to the contrary set forth in Section 3 of this Note, at no time may
the
Holder convert all or a portion of this Note if the number of shares of Common
Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by the Holder at such time, the
number of shares of Common Stock which would result in the Holder beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act
and
the rules thereunder) more than 4.9% of all of the Common Stock outstanding
at
such time;
provided
,
however
,
that
upon the Holder providing the Maker with sixty-one (61) days notice (pursuant
to
Section 4.1 hereof) (the "
Waiver
Notice
")
that
the Holder would like to waive this Section 3.4(a) with regard to any or all
shares of Common Stock issuable upon conversion of this Note, this Section
3.4(a) will be of no force or effect with regard to all or a portion of the
Note
referenced in the Waiver Notice. In the event the Holder is unable to fully
convert this Note in connection with either a mandatory conversion pursuant
to
Section 3.1(b) hereof, or a conversion election following the delivery of a
Maker's Prepayment Notice pursuant to Section 3.7(k) hereof due to the
restrictions set forth in this Section 3.4(a), such holder may elect to receive
Series D Convertible Preferred Stock of the Company in lieu of shares of Common
Stock convertible into the number of shares of Common Stock that would have
been
delivered to such holder but for the limitations set forth in this Section
3.4(a). The foregoing sentence shall not preclude the Holder from waiving at
any
time its rights to limit its ownership to (i) 4.9% of all of the Common Stock
issued and outstanding at such time in accordance with this Section 3.4(a)
or
(ii) 9.9% of all of the Common Stock issued and outstanding at such time in
accordance with Section 3.4(b) hereof.
(b)
Notwithstanding
anything to the contrary set forth in Section 3 of this Note, at no time may
the
Holder convert all or a portion of this Note if the number of shares of Common
Stock to be issued pursuant to such conversion, when aggregated with all other
shares of Common Stock owned by the Holder at such time, would result in the
Holder beneficially owning (as determined in accordance with Section 13(d)
of
the Exchange Act and the rules thereunder) in excess of 9.9% of the then issued
and outstanding shares of Common Stock outstanding at such time;
provided
,
however
,
that
upon the Holder providing the Maker with a Waiver Notice that the Holder would
like to waive Section 3.4(b) of this Note with regard to any or all shares
of
Common Stock issuable upon conversion of this Note, this Section 3.4(b) shall
be
of no force or effect with regard to all or a portion of the Note referenced
in
the Waiver Notice.
Section
3.5
Intentionally
Omitted.
Section
3.6
Adjustment
of Conversion Price.
(a)
The
Conversion Price shall be subject to adjustment from time to time as
follows:
(i)
Adjustments
for Stock Splits and Combinations
.
If the
Maker shall at any time or from time to time after the Issuance Date, effect
a
stock split of the outstanding Common Stock, the applicable Conversion Price
in
effect immediately prior to the stock split shall be proportionately decreased.
If the Maker shall at any time or from time to time after the Issuance Date,
combine the outstanding shares of Common Stock, the applicable Conversion Price
in effect immediately prior to the combination shall be proportionately
increased. Any adjustments under this Section 3.6(a)(i) shall be effective
at
the close of business on the date the stock split or combination
occurs.
(ii)
Adjustments
for Certain Dividends and Distributions
.
If the
Maker shall at any time or from time to time after the Issuance Date, make
or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, then, and in each event, the applicable Conversion Price in effect
immediately prior to such event shall be decreased as of the time of such
issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying, the applicable Conversion
Price then in effect by a fraction:
(1)
the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close
of
business on such record date; and
(2)
the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close
of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution.
(iii)
Adjustment
for Other Dividends and Distributions
.
If the
Maker shall at any time or from time to time after the Issuance Date, make
or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in other than
shares of Common Stock, then, and in each event, an appropriate revision to
the
applicable Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price or otherwise) so that the holders of this
Note shall receive upon conversions thereof, in addition to the number of shares
of Common Stock receivable thereon, the number of securities of the Maker which
they would have received had this Note been converted into Common Stock on
the
date of such event and had thereafter, during the period from the date of such
event to and including the Conversion Date, retained such securities (together
with any distributions payable thereon during such period), giving application
to all adjustments called for during such period under this Section 3.6(a)(iii)
with respect to the rights of the holders of this Note and the Other Notes;
provided
,
however
,
that if
such record date shall have been fixed and such dividend is not fully paid
or if
such distribution is not fully made on the date fixed therefor, the Conversion
Price shall be adjusted pursuant to this paragraph as of the time of actual
payment of such dividends or distributions.
(iv)
Adjustments
for Reclassification, Exchange or Substitution
.
If the
Common Stock issuable upon conversion of this Note at any time or from time
to
time after the Issuance Date shall be changed to the same or different number
of
shares of any class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than by way of a stock split or combination
of
shares or stock dividends provided for in Sections 3.6(a)(i), (ii) and (iii),
or
a reorganization, merger, consolidation, or sale of assets provided for in
Section 3.6(a)(v)), then, and in each event, an appropriate revision to the
Conversion Price shall be made and provisions shall be made (by adjustments
of
the Conversion Price or otherwise) so that the Holder shall have the right
thereafter to convert this Note into the kind and amount of shares of stock
and
other securities receivable upon reclassification, exchange, substitution or
other change, by holders of the number of shares of Common Stock into which
such
Note might have been converted immediately prior to such reclassification,
exchange, substitution or other change, all subject to further adjustment as
provided herein.
(v)
Adjustments
for Reorganization, Merger, Consolidation or Sales of
Assets
.
If at
any time or from time to time after the Issuance Date there shall be a capital
reorganization of the Maker (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in Section 3.6(a)(i),
(ii) and (iii), or a reclassification, exchange or substitution of shares
provided for in Section 3.6(a)(iv)), or a merger or consolidation of the Maker
with or into another corporation where the holders of outstanding voting
securities prior to such merger or consolidation do not own over fifty percent
(50%) of the outstanding voting securities of the merged or consolidated entity,
immediately after such merger or consolidation, or the sale of all or
substantially all of the Maker's properties or assets to any other person (an
"
Organic
Change
"),
then
as a part of such Organic Change, (A) if the surviving entity in any such
Organic Change is a public company that
is
registered pursuant to the Securities Exchange Act of 1934, as amended, and
its
common stock is listed or quoted on a national securities exchange, a national
automated quotation system or the OTC Bulletin Board,
an
appropriate revision to the Conversion Price shall be made and provision shall
be made (by adjustments of the Conversion Price or otherwise) so that the Holder
shall have the right thereafter to convert such Note into the kind and amount
of
shares of stock and other securities or property of the Maker or any successor
corporation resulting from Organic Change, and (B) if the surviving entity
in
any such Organic Change is not a public company that
is
registered pursuant to the Securities Exchange Act of 1934, as amended, or
its
common stock is not listed or quoted on a national securities exchange, a
national automated quotation system or the OTC Bulletin Board,
the
Holder shall have the right to demand prepayment pursuant to Section 3.7(b)
hereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3.6(a)(v) with respect to the
rights of the Holder after the Organic Change to the end that the provisions
of
this Section 3.6(a)(v) (including any adjustment in the applicable Conversion
Price then in effect and the number of shares of stock or other securities
deliverable upon conversion of this Note and the Other Notes) shall be applied
after that event in as nearly an equivalent manner as may be
practicable.
(vi)
Adjustments
for Issuance of Additional Shares of Common Stock.
(1)
In
the
event the Maker, shall, at any time, from time to time, issue or sell any
additional shares of common stock (otherwise than as provided in the foregoing
subsections (i) through (v) of this Section 3.6(a) or pursuant to Common Stock
Equivalents (hereafter defined) granted or issued prior to the Issuance Date)
(“
Additional
Shares of Common Stock
”),
at a
price per share less than the Conversion Price then in effect or without
consideration, then the Conversion Price upon each such issuance shall be
adjusted to that price (rounded to the nearest cent) determined by multiplying
each of the Conversion Price then in effect by a fraction:
(A)
the
numerator of which shall be equal to the sum of (x) the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock
plus
(y) the
number of shares of Common Stock (rounded to the nearest whole share) which
the
aggregate consideration for the total number of such Additional Shares of Common
Stock so issued would purchase at a price per share equal to the Conversion
Price then in effect, and
(B)
the
denominator of which shall be equal to the number of shares of Common Stock
outstanding immediately after the issuance of such Additional Shares of Common
Stock.
(2)
The
provisions of paragraph (1) of Section 3.6(a)(vi) shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Section 3.6(a)(vii). No adjustment of the number of shares of
Common Stock for which this Note shall be convertible shall be made under
paragraph (1) of Section 3.6(a)(vi) upon the issuance of any Additional Shares
of Common Stock which are issued pursuant to the exercise of any Common Stock
Equivalents, if any such adjustment shall previously have been made upon the
issuance of such Common Stock Equivalents pursuant to Section
3.6(a)(vii).
(vii)
Issuance
of Common Stock Equivalents
.
If the
Maker, at any time after the Issuance Date, shall issue any securities
convertible into or exchangeable for, directly or indirectly, Common Stock
("
Convertible
Securities
"),
other
than the Notes, or any rights or warrants or options to purchase any such Common
Stock or Convertible Securities, shall be issued or sold (collectively, the
"
Common
Stock Equivalents
")
and
the aggregate of the price per share for which Additional Shares of Common
Stock
may be issuable thereafter pursuant to such Common Stock Equivalent, plus the
consideration received by the Maker for issuance of such Common Stock Equivalent
divided by the number of shares of Common Stock issuable pursuant to such Common
Stock Equivalent (the “
Aggregate
Per Common Share Price
”)
shall
be less than the applicable Conversion Price then in effect, or if, after any
such issuance of Common Stock Equivalents, the price per share for which
Additional Shares of Common Stock may be issuable thereafter is amended or
adjusted, and such price as so amended shall make the Aggregate Per Share Common
Price be less than the applicable Conversion Price in effect at the time of
such
amendment or adjustment, then the applicable Conversion Price upon each such
issuance or amendment shall be adjusted as provided in the first sentence of
subsection (vi) of this Section 3.6(a) on the basis that (1) the maximum number
of Additional Shares of Common Stock issuable pursuant to all such Common Stock
Equivalents shall be deemed to have been issued (whether or not such Common
Stock Equivalents are actually then exercisable, convertible or exchangeable
in
whole or in part) as of the earlier of (A) the date on which the Maker shall
enter into a firm contract for the issuance of such Common Stock Equivalent,
or
(B) the date of actual issuance of such Common Stock Equivalent. No adjustment
of the applicable Conversion Price shall be made under this subsection (vii)
upon the issuance of any Convertible Security which is issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor,
if
any adjustment shall previously have been made to the exercise price of such
warrants then in effect upon the issuance of such warrants or other rights
pursuant to this subsection (vii). No adjustment shall be made to the Conversion
Price upon the issuance of Common Stock pursuant to the exercise, conversion
or
exchange of any Convertible Security or Common Stock Equivalent where an
adjustment to the Conversion Price was made as a result of the issuance or
purchase of any Convertible Security or Common Stock Equivalent.
(viii)
Consideration
for Stock
.
In case
any shares of Common Stock or any Common Stock Equivalents shall be issued
or
sold:
(1)
in
connection with any merger or consolidation in which the Maker is the surviving
corporation (other than any consolidation or merger in which the previously
outstanding shares of Common Stock of the Maker shall be changed to or exchanged
for the stock or other securities of another corporation), the amount of
consideration therefor shall be, deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of the Maker, of such
portion of the assets and business of the nonsurviving corporation as such
Board
may determine to be attributable to such shares of Common Stock, Convertible
Securities, rights or warrants or options, as the case may be; or
(2)
in
the
event of any consolidation or merger of the Maker in which the Maker is not
the
surviving corporation or in which the previously outstanding shares of Common
Stock of the Maker shall be changed into or exchanged for the stock or other
securities of another corporation, or in the event of any sale of all or
substantially all of the assets of the Maker for stock or other securities
of
any corporation, the Maker shall be deemed to have issued a number of shares
of
its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or other
property of the other corporation. If any such calculation results in adjustment
of the applicable Conversion Price, or the number of shares of Common Stock
issuable upon conversion of the Notes, the determination of the applicable
Conversion Price or the number of shares of Common Stock issuable upon
conversion of the Notes immediately prior to such merger, consolidation or
sale,
shall be made after giving effect to such adjustment of the number of shares
of
Common Stock issuable upon conversion of the Notes. In the event Common Stock
is
issued with other shares or securities or other assets of the Maker for
consideration which covers both, the consideration computed as provided in
this
Section 3.6(viii) shall be allocated among such securities and assets as
determined in good faith by the Board of Directors of the Maker.
(b)
Record
Date
.
In case
the Maker shall take record of the holders of its Common Stock for the purpose
of entitling them to subscribe for or purchase Common Stock or Convertible
Securities, then the date of the issue or sale of the shares of Common Stock
shall be deemed to be such record date.
(c)
Certain
Issues Excepted
.
Anything herein to the contrary notwithstanding, the Maker shall not be required
to make any adjustment to the Conversion Price in connection with (i) securities
issued (other than for cash) in connection with a merger, acquisition, or
consolidation, (ii) securities issued pursuant to the conversion or exercise
of
convertible or exercisable securities issued or outstanding on or prior to
the
date hereof (so long as the conversion or exercise price in such securities
are
not amended to lower such price and/or adversely affect the Holders)
or
issued
pursuant to the Purchase Agreement, (iii) securities issued pursuant to the
terms of that certain Exchange Agreement, dated as of September 21, 2007, by
and
among the Maker and the holders signatory thereto, (iv) the issuance of the
Promissory Notes and the Warrants (each as defined below), (v) the shares of
Common Stock issuable upon the conversion of the Promissory Notes or the
exercise of the Warrants, (vi) securities issued in connection with bona fide
strategic license agreements or other partnering arrangements so long as such
issuances are not for the purpose of raising capital, (vii) Common Stock issued
or the issuance or grants of options to purchase Common Stock pursuant to the
Maker’s stock option plans and employee stock purchase plans approved by the
Makers board of directors, so long as such issuances in the aggregate do not
exceed the number of shares of Common Stock (or options to purchase such number
of shares of Common Stock) issuable pursuant to such plans as they exist on
the
Issuance Date, (viii) any warrants issued to the placement agent and its
designees for the transactions contemplated by the Purchase Agreement, (ix)
the
payment of any dividends on the Maker’s Series B convertible preferred stock,
(x) securities issued pursuant to a bona fide firm underwritten public offering
of the Maker’s securities, (xi) the payment of liquidated damages pursuant to
the Registration Rights Agreement dated February 17, 2004 between the Maker
and
the parties listed therein and (xii) the issuance of Common Stock upon the
exercise or conversion of any securities described in clauses (i) through (xi)
above. For purposes of this Note, (A) “
Promissory
Notes
”
shall
mean collectively, each of the following, as the same may be amended from time
to time: (1) the senior secured convertible promissory notes issued pursuant
to
the that certain Note and Warrant Purchase Agreement, dated as of March 31,
2006, by and among the Maker and the purchasers listed therein or that certain
Note and Warrant Purchase Agreement, dated as of April 12, 2006, by and among
the Maker and the purchasers listed therein (collectively, the “
2006
Purchase Agreements
”),
(2)
the additional senior secured convertible promissory notes in the aggregate
principal amount of up to $3,600,000 issued pursuant to the Purchase Agreement
(collectively with the 2006 Purchase Agreements, the “
Purchase
Agreements
”),
and
(3) any additional senior secured convertible promissory notes issued from
time
to time as interest on the outstanding principal balance of the foregoing
promissory notes; and (B) “
Warrants
”
shall
mean, collectively, each of the following, as the same may be amended from
time
to time: (A) the warrants to purchase shares of Common Stock issued pursuant
to
the Purchase Agreements; and (B) the warrants to purchase shares of Common
Stock
issued in connection with the amendment of the senior secured convertible
promissory notes issued pursuant to the 2006 Purchase Agreements.
(d)
No
Impairment
.
The
Maker
shall
not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the
Maker
,
but
will at all times in good faith, assist in the carrying out of all the
provisions of this Section 3.6 and in the taking of all such action as may
be
necessary or appropriate in order to protect the Conversion Rights of the Holder
against impairment. In the event a Holder shall elect to convert any Notes
as
provided herein, the Maker cannot refuse conversion based on any claim that
such
Holder or any one associated or affiliated with such Holder has been engaged
in
any violation of law, violation of an agreement to which such Holder is a party
or for any reason whatsoever, unless, an injunction from a court, or notice,
restraining and or adjoining conversion of all or of said Notes shall have
issued and the Maker posts a surety bond for the benefit of such Holder in
an
amount equal to one hundred thirty percent (130%) of the amount of the Notes
the
Holder has elected to convert, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Holder (as liquidated damages) in the event it obtains
judgment.
(e)
Certificates
as to Adjustments
.
Upon
occurrence of each adjustment or readjustment of the Conversion Price or number
of shares of Common Stock issuable upon conversion of this Note pursuant to
this
Section 3.6, the
Maker
at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth
such
adjustment and readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. The
Maker
shall,
upon written request of the Holder, at any time, furnish or cause to be
furnished to the Holder a like certificate setting forth such adjustments and
readjustments, the applicable Conversion Price in effect at the time, and the
number of shares of Common Stock and the amount, if any, of other securities
or
property which at the time would be received upon the conversion of this Note.
Notwithstanding the foregoing, the Maker shall not be obligated to deliver
a
certificate unless such certificate would reflect an increase or decrease of
at
least one percent (1%) of such adjusted amount.
(f)
Issue
Taxes
.
The
Maker shall pay any and all issue and other taxes, excluding federal, state
or
local income taxes, that may be payable in respect of any issue or delivery
of
shares of Common Stock on conversion of this Note pursuant thereto;
provided
,
however
,
that
the Maker shall not be obligated to pay any transfer taxes resulting from any
transfer requested by the Holder in connection with any such
conversion.
(g)
Fractional
Shares
.
No
fractional shares of Common Stock shall be issued upon conversion of this Note.
In lieu of any fractional shares to which the Holder would otherwise be
entitled, the Maker shall pay cash equal to the product of such fraction
multiplied by the average of the Closing Sale Prices of the Common Stock for
the
five (5) consecutive Trading Days immediately preceding the Conversion Date.
The
term "
Closing
Sale Price
"
shall
mean, on any particular date (i) the last closing sale price per share of the
Common Stock on such date on the
OTC
Bulletin Board
or
another registered national stock exchange on which the Common Stock is then
listed, or if there is no such price on such date, then the last closing sale
price on such exchange or quotation system on the date nearest preceding such
date, or (ii) if the Common Stock is not listed then on the OTC Bulletin Board
or any registered national stock exchange, the last trading price for a share
of
Common Stock in the over-the-counter market, as reported by the OTC Bulletin
Board or in the National Quotation Bureau Incorporated or similar organization
or agency succeeding to its functions of reporting prices) at the close of
business on such date, or (iii) if the Common Stock is not then reported by
the
OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), then
the average of the "Pink Sheet" quotes for the relevant conversion period,
as
determined in good faith by the Holder, or (iv) if the Common Stock is not
then
publicly traded the fair market value of a share of Common Stock as determined
by the Holder and reasonably acceptable to the Maker.
(h)
Reservation
of Common Stock
.
The
Maker shall at all times when this Note shall be outstanding, reserve and keep
available out of its authorized but unissued Common Stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of this Note and all interest accrued thereon;
provided
that the
number of shares of Common Stock so reserved shall at no time be less than
one
hundred twenty percent (120%) of the number of shares of Common Stock for which
this Note and all interest accrued thereon is at any time convertible. The
Maker
shall, from time to time in accordance with Delaware law, increase the
authorized number of shares of Common Stock if at any time the unissued number
of authorized shares shall not be sufficient to satisfy the Maker’s obligations
under this Section 3.6(h).
(i)
Regulatory
Compliance
.
If any
shares of Common Stock to be reserved for the purpose of conversion of this
Note
or any interest accrued thereon require registration or listing with or approval
of any governmental authority, stock exchange or other regulatory body under
any
federal or state law or regulation or otherwise before such shares may be
validly issued or delivered upon conversion, the Maker shall, at its sole cost
and expense, in good faith and as expeditiously as possible, endeavor to secure
such registration, listing or approval, as the case may be.
Section
3.7
Prepayment
.
(a)
Prepayment
Upon an Event of Default
.
Notwithstanding anything to the contrary contained herein, upon the occurrence
of an Event of Default described in Section 2.1 hereof, the Holder shall have
the right, at such Holder's option, to require the Maker to prepay in cash
all
or a portion of this Note at a price equal to (i) in the case of any Holder
who
is an Insider Purchaser, one hundred percent (100%), or (ii) in the case of
any
Holder who is not an Insider Purchaser, one hundred twenty percent (120%),
of
the aggregate principal amount of this Note plus all accrued and unpaid interest
applicable at the time of such request. Nothing in this Section 3.7(a) shall
limit the Holder's rights under Section 2.2 hereof. In the event the Holder
is
an Insider Purchaser, then the Holder agrees that prepayment of this Note plus
all accrued interest pursuant to this Section 3.7(a) shall be expressly
subordinate to the payment in full of any Other Notes then being prepaid
pursuant to Section 3.7(a) of such Other Notes which are held by Other Holders
which are not Insider Purchasers.
(b)
Prepayment
Option Upon Major Transaction
. In addition to all other rights of the Holder
contained herein, simultaneous with the occurrence of a Major Transaction (as
defined below), the Holder shall have the right, at the Holder's option, to
require the Maker to prepay in cash all or a portion of the Holder's Notes
at a
price equal to one hundred ten percent (110%) of the aggregate principal amount
of this Note plus all accrued and unpaid interest (the "Major Transaction
Prepayment Price"); provided that the Holder shall have the sole option to
request payment of the Major Transaction Prepayment Price in cash
or
registered shares of common stock of the acquiror in a Major Transaction so
long
as the acquiror is a public company that
is
registered pursuant to the Exchange Act and its common stock is listed or quoted
on a national securities exchange, national automated quotation system or the
OTC Bulletin Board.
In
the
event the Holder is an Insider Purchaser, then the Holder agrees that prepayment
of this Note plus all accrued interest pursuant to this Section 3.7(b) shall
be
expressly subordinate to the payment in full of any Other Notes then being
prepaid pursuant to Section 3.7(b) of such Other Notes which are held by Other
Holders which are not Insider Purchasers.
(c)
Prepayment
Option Upon Triggering Event
.
In
addition to all other rights of the Holder contained herein, after a Triggering
Event (as defined below), the Holder shall have the right, at the Holder's
option, to require the Maker to prepay all or a portion of this Note in cash
at
a price equal to (1) in the case of any Holder who is an Insider Purchaser,
one
hundred percent (100%) of the aggregate principal amount of this Note plus
all
accrued and unpaid interest, or (2) in the case of any Holder who is not an
Insider Purchaser, the sum of (i) the greater of (A) one hundred twenty-five
percent (125%) of the aggregate principal amount of this Note and (B) in the
event at such time the Holder is unable to obtain the benefit of its conversion
rights through the conversion of this Note and resale of the shares of Common
Stock issuable upon conversion hereof in accordance with the terms of this
Note
and the other Transaction Documents, the aggregate principal amount of this
Note, divided by the Conversion Price on (x) the date the Prepayment Price
(as
defined below) is demanded or otherwise due or (y) the date the Prepayment
Price
is paid in full, whichever is less, multiplied by the VWAP (as defined below)
on
(x) the date the Prepayment Price is demanded or otherwise due, and (y) the
date
the Prepayment Price is paid in full, whichever is greater, and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of this Note
and
the other Transaction Documents (the "
Triggering
Event Prepayment Price
,"
and,
collectively with the Major Transaction Prepayment Price, the "
Prepayment
Price
").
For
purposes hereof, “
VWAP
”
means,
for any date, (i) the daily volume weighted average price of the Common Stock
for such date on the OTC Bulletin Board as reported by Bloomberg Financial
L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(ii) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price
per
share of the Common Stock so reported; or (iii) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to
the
Maker. In the event the Holder is an Insider Purchaser, then the Holder agrees
that prepayment of this Note plus all accrued interest pursuant to this Section
3.7(c) shall be expressly subordinate to the payment in full of any Other Notes
then being prepaid pursuant to Section 3.7(c) of such Other Notes which are
held
by Other Holders which are not Insider Purchasers.
(d)
Intentionally
Omitted
.
(e)
"
Major
Transaction
." A "
Major Transaction
" shall be deemed to have occurred
at such time as any of the following events:
(i)
the
consolidation, merger or other business combination of the Maker with or into
another Person (as defined in Section 4.14 hereof) (other than (A) pursuant
to a
migratory merger effected solely for the purpose of changing the jurisdiction
of
incorporation of the Maker or (B) a consolidation, merger or other business
combination in which holders of the Maker's voting power immediately prior
to
the transaction continue after the transaction to hold, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities).
(ii)
the
sale
or transfer of more than fifty percent (50%) of the Maker’s assets (based on the
fair market value as determined in good faith by the Maker’s Board of Directors)
other than inventory in the ordinary course of business in one or a related
series of transactions; or
(iii)
closing
of a purchase, tender or exchange offer made to the holders of more than fifty
percent (50%) of the outstanding shares of Common Stock in which more than
fifty
percent (50%) of the outstanding shares of Common Stock were tendered and
accepted.
(f)
"
Triggering
Event."
A "
Triggering Event
" shall be deemed to have occurred at such
time as any of the following events:
(i)
so
long
as any Notes are outstanding, the effectiveness of the Registration Statement,
after it becomes effective, (i) lapses for any reason (including, without
limitation, the issuance of a stop order) or (ii) is unavailable to the Holder
for sale of the shares of Common Stock, and such lapse or unavailability
continues for a period of twenty (20) consecutive Trading Days, and the shares
of Common Stock into which the Holder's Notes can be converted cannot be sold
in
the public securities market pursuant to Rule 144(k) under the Securities Act,
provided that the cause of such lapse or unavailability is not due to factors
primarily within the control of the Holder of the Notes; and provided further
that a Triggering Event shall not have occurred if and to the extent the Maker
exercised its rights set forth in Section 3(n) of the Registration Rights
Agreement;
(ii)
the
Maker's notice to any holder of the Notes, including by way of public
announcement, at any time, of its inability to comply (including for any of
the
reasons described in Section 3.8) or its intention not to comply with proper
requests for conversion of any Notes into shares of Common Stock;
or
(iii)
the
Maker's failure to comply with a Conversion Notice tendered in accordance with
the provisions of this Note within ten (10) business days after the receipt
by
the Maker of the Conversion Notice; or
(iv)
the
Maker
deregisters its shares of Common Stock and as a result such shares of Common
Stock are no longer publicly traded; or
(v)
the
Maker
consummates a “going private” transaction and as a result the Common Stock is no
longer registered under Sections 12(b) or 12(g) of the Exchange
Act.
(g)
Intentionally
Omitted
.
(h)
Mechanics
of Prepayment at Option of Holder Upon Major Transaction.
No sooner than
fifteen (15) days nor later than ten (10) days prior to the consummation of
a
Major Transaction, but not prior to the public announcement of such Major
Transaction, the Maker shall deliver written notice thereof via facsimile and
overnight courier ("Notice
of Major Transaction
") to the Holder of this
Note. At any time after receipt of a Notice of Major Transaction (or, in the
event a Notice of Major Transaction is not delivered at least ten (10) days
prior to a Major Transaction, at any time within ten (10) days prior to a Major
Transaction), any holder of the Notes then outstanding may require the Maker
to
prepay, effective immediately prior to the consummation of such Major
Transaction, all of the holder's Notes then outstanding by delivering written
notice thereof via facsimile and overnight courier ("
Notice of Prepayment at
Option of Holder Upon Major Transaction
") to the Maker, which Notice of
Prepayment at Option of Holder Upon Major Transaction shall indicate (i) the
principal amount of the Notes that such holder is electing to have prepaid
and
(ii) the applicable Major Transaction Prepayment Price, as calculated pursuant
to Section 3.7(b) above.
(i)
Mechanics
of Prepayment at Option of Holder Upon Triggering Event
. Within one (1)
business day after the occurrence of a Triggering Event, the Maker shall deliver
written notice thereof via facsimile and overnight courier ("
Notice of
Triggering Event
") to each holder of the Notes. At any time after the
earlier of a holder's receipt of a Notice of Triggering Event and such holder
becoming aware of a Triggering Event, any holder of this Note may require the
Maker to prepay this Note by delivering written notice thereof via facsimile
and
overnight courier ("
Notice of Prepayment at Option of Holder Upon Triggering
Event
") to the Maker, which Notice of Prepayment at Option of Holder Upon
Triggering Event shall indicate (i) the amount of the Note that such holder
is
electing to have prepaid and (ii) the applicable Triggering Event Prepayment
Price, as calculated pursuant to Section 3.7(c) above. A holder shall only
be
permitted to require the Maker to prepay the Note pursuant to Section 3.7 hereof
for the greater of a period of ten (10) days after receipt by such holder of
a
Notice of Triggering Event or for so long as such Triggering Event is
continuing.
(j)
Payment
of Prepayment Price
.
Upon
the Maker's receipt of a Notice(s) of Prepayment at Option of Holder Upon
Triggering Event or a Notice(s) of Prepayment at Option of Holder Upon Major
Transaction from any holder of the Notes, the Maker shall promptly notify each
holder of the Notes by facsimile of the Maker's receipt of such Notice(s) of
Prepayment at Option of Holder Upon Triggering Event or Notice(s) of Prepayment
at Option of Holder Upon Major Transaction and each holder which has sent such
a
notice shall promptly submit to the Maker such holder's certificates
representing the Notes which such holder has elected to have prepaid. The Maker
shall deliver the applicable Triggering Event Prepayment Price, in the case
of a
prepayment pursuant to Section 3.7(i), to such holder within five (5) business
days after the Maker's receipt of a Notice of Prepayment at Option of Holder
Upon Triggering Event and, in the case of a prepayment pursuant to Section
3.7(h), the Maker shall deliver the applicable Major Transaction Prepayment
Price immediately prior to the consummation of the Major Transaction; provided
that a holder's original Note shall have been so delivered to the Maker;
provided further that if the Maker is unable to prepay all of the Notes to
be
prepaid, the Maker shall prepay an amount from each holder of the Notes being
prepaid equal to such holder's pro-rata amount (based on the number of Notes
held by such holder relative to the number of Notes outstanding) of all Notes
being prepaid. If the Maker shall fail to prepay all of the Notes submitted
for
prepayment (other than pursuant to a dispute as to the arithmetic calculation
of
the Prepayment Price), in addition to any remedy such holder of the Notes may
have under this Note and the Purchase Agreement, the applicable Prepayment
Price
payable in respect of such Notes not prepaid shall bear interest at the rate
of
two percent (2%) per month (prorated for partial months) until paid in full.
Until the Maker pays such unpaid applicable Prepayment Price in full to a holder
of the Notes submitted for prepayment, such holder shall have the option (the
"
Void
Optional Prepayment Option
")
to, in
lieu of prepayment, require the Maker to promptly return to such holder(s)
all
of the Notes that were submitted for prepayment by such holder(s) under this
Section 3.7 and for which the applicable Prepayment Price has not been paid,
by
sending written notice thereof to the Maker via facsimile (the "
Void
Optional Prepayment Notice
").
Upon
the Maker's receipt of such Void Optional Prepayment Notice(s) and prior to
payment of the full applicable Prepayment Price to such holder, (i) the
Notice(s) of Prepayment at Option of Holder Upon Triggering Event or the
Notice(s) of Prepayment at Option of Holder Upon Major Transaction, as the
case
may be, shall be null and void with respect to those Notes submitted for
prepayment and for which the applicable Prepayment Price has not been paid,
(ii)
the Maker shall immediately return any Notes submitted to the Maker by each
holder for prepayment under this Section 3.7(j) and for which the applicable
Prepayment Price has not been paid and (iii) the Conversion Price of such
returned Notes shall be adjusted to the lesser of (A) the Conversion Price
as in
effect on the date on which the Void Optional Prepayment Notice(s) is delivered
to the Maker and (B) the lowest Closing Sale Price during the period beginning
on the date on which the Notice(s) of Prepayment of Option of Holder Upon Major
Transaction or the Notice(s) of Prepayment at Option of Holder Upon Triggering
Event, as the case may be, is delivered to the Maker and ending on the date
on
which the Void Optional Prepayment Notice(s) is delivered to the Maker;
provided
that
no
adjustment shall be made if such adjustment would result in an increase of
the
Conversion Price then in effect. A holder's delivery of a Void Optional
Prepayment Notice and exercise of its rights following such notice shall not
effect the Maker's obligations to make any payments which have accrued prior
to
the date of such notice. Payments provided for in this Section 3.7 shall have
priority to payments to the Maker’s stockholders in connection with a Major
Transaction.
(k)
Maker
Prepayment Option
.
(i)
At
any
time following March 19, 2008, the Maker may prepay in cash all or any portion
of the outstanding principal amount of this Note together with all accrued
and
unpaid interest thereon upon ten (10) Trading Days prior written notice to
the
Holder (the “
Maker's
Prepayment Notice
”)
at a
price (the “
Maker's
Prepayment Price
”)
equal
to (A) one hundred ten percent (110
%)
of the
aggregate principal amount of this Note; plus (B) any accrued but unpaid
interest outstanding at such time; (C) plus an amount equal to interest at
the
interest
rate as determined in accordance with Section 1.2 hereof
on
the
principal amount of this Note being prepaid for a period that commences on
the
date of such prepayment and that terminates on the Maturity Date
;
provided
,
however
,
that if
the Holder has delivered a Conversion Notice to the Maker or delivers a
Conversion Notice within such ten (10) Trading Day period following delivery
of
the Maker’s Prepayment Notice, the principal amount of this Note designated to
be converted may not be prepaid by the Maker and shall be converted in
accordance with Section 3.3 hereof;
provided
further
that if
during the period between delivery of the Maker's Prepayment Notice and the
Maker's Prepayment Date (as defined below), the Holder shall become entitled
to
deliver a Notice of Prepayment at Option of Holder Upon Major Transaction or
Notice of Prepayment at Option of Holder upon Triggering Event, then such rights
of the Holder, at its option, shall take precedence over the previously
delivered Maker Prepayment Notice. The Maker's Prepayment Notice shall state
the
date of prepayment which date shall be the eleventh (11
th
)
Trading
Day after the Maker has delivered the Maker's Prepayment Notice (the
“
Maker's
Prepayment Date
”),
the
Maker’s Prepayment Price and the principal amount of this Note to be prepaid by
the Maker. The Maker shall deliver the Maker's Prepayment Price on the Maker’s
Prepayment Date,
provided
,
that if
the Holder delivers a Conversion Notice before the Maker's Prepayment Date,
then
the portion of the Maker's Prepayment Price which would be paid to prepay this
Note covered by such Conversion Notice shall be returned to the Maker upon
delivery of the Common Stock issuable in connection with such Conversion Notice
to the Holder. On the Maker's Prepayment Date, the Maker shall pay the Maker's
Prepayment Price, subject to any adjustment pursuant to the immediately
preceding sentence, to the Holder. If the Maker fails to pay the Maker's
Prepayment Price by the eleventh (11
th
)
Trading
Day after the Maker has delivered the Maker's Prepayment Notice, the Maker’s
Prepayment Notice will be declared null and void
ab
initio
and the
Maker shall lose its right to prepay this Note pursuant to this Section 3.7(k).
Notwithstanding the foregoing to the contrary, the Maker may effect a prepayment
pursuant to this Section 3.7(k) only if (1) the Registration Statement is
effective and has been effective, without lapse or suspension of any kind,
for a
period of thirty (30) consecutive calendar days immediately preceding the
Maker’s Prepayment Notice through the Maker’s Prepayment Date, (2)
trading
in the Common Stock shall not have been suspended by the Securities and Exchange
Commission or the OTC Bulletin Board (or other exchange or market on which
the
Common Stock is trading), (3) the Maker is in material compliance with the
terms
and conditions of this Note and the other Transaction Documents, and (4) the
Maker is not in possession of any material non-public information
.
(ii)
In
the
event that this Note is prepaid in accordance with this Section 3.7(k), then
on
the Maker’s Prepayment Date, the Maker shall issue to the Holder warrants (the
“
Prepayment
Warrants
”)
substantially in the form of the Warrants issued to the Holder pursuant to
the
Purchase Agreement to purchase up to such number of fully paid and
non-assessable shares of Common Stock as is determined by multiplying (A) the
quotient of (1) that portion of the
principal
amount of this Note being prepaid
plus
any
accrued but unpaid interest on such principal amount as of the Maker’s
Prepayment Date, divided by (2) the Conversion Price then in effect on the
Maker’s Prepayment Date, by (B) twenty-five percent (25%). The Prepayment
Warrants will have an exercise price equal to 110% of the Closing Sale Price
of
the Common Stock on the Maker’s Prepayment Date, and shall expire on the five
(5) year anniversary of the Maker’s Prepayment Date.
Section
3.8
Inability
to Fully Convert
.
(a)
Holder's
Option if Maker Cannot Fully Convert
.
At any
time following the Effectiveness Date (as defined in the Registration Rights
Agreement), if, upon the Maker's receipt of a Conversion Notice, the Maker
cannot issue shares of Common Stock registered for resale under the Registration
Statement for any reason, including, without limitation, because the Maker
(w)
does not have a sufficient number of shares of Common Stock authorized and
available, (x) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Maker or any of its
securities from issuing all of the Common Stock which is to be issued to the
Holder pursuant to a Conversion Notice or (y) fails to have a sufficient number
of shares of Common Stock registered for resale under the Registration
Statement, then the Maker shall issue as many shares of Common Stock as it
is
able to issue in accordance with the Holder's Conversion Notice and, with
respect to the unconverted portion of this Note, the Holder, solely at Holder's
option, can elect to:
(i)
require
the Maker to prepay that portion of this Note for which the Maker is unable
to
issue Common Stock in accordance with the Holder's Conversion Notice (the
"
Mandatory
Prepayment
")
at a
price per share equal to the Triggering Event Prepayment Price as of such
Conversion Date (the "
Mandatory
Prepayment Price
");
(ii)
if
the
Maker's inability to fully convert is pursuant to Section 3.8(a)(x) above,
require the Maker to issue restricted shares of Common Stock in accordance
with
such holder's Conversion Notice;
(iii)
void
its
Conversion Notice and retain or have returned, as the case may be, this Note
that was to be converted pursuant to the Conversion Notice (provided that the
Holder's voiding its Conversion Notice shall not effect the Maker's obligations
to make any payments which have accrued prior to the date of such
notice);
(iv)
subject
to Section 3.3(d) hereof, exercise its Buy-In rights pursuant to and in
accordance with the terms and provisions of Section 3.3(c) of this
Note.
(b)
Mechanics
of Fulfilling Holder's Election
.
The
Maker shall promptly send via facsimile to the Holder, upon receipt of a
facsimile copy of a Conversion Notice from the Holder which cannot be fully
satisfied as described in Section 3.8(a) above, a notice of the Maker's
inability to fully satisfy the Conversion Notice (the "
Inability
to Fully Convert Notice
").
Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Maker
is
unable to fully satisfy such holder's Conversion Notice, (ii) the amount of
this
Note which cannot be converted and (iii) the applicable Mandatory Prepayment
Price. The Holder shall notify the Maker of its election pursuant to Section
3.8(a) above by delivering written notice via facsimile to the Maker
("
Notice
in Response to Inability to Convert
").
(c)
Payment
of Prepayment Price
.
If the
Holder shall elect to have its Notes prepaid pursuant to Section 3.8(a)(i)
above, the Maker shall pay the Mandatory Prepayment Price to the Holder within
thirty (30) days of the Maker's receipt of the Holder's Notice in Response
to
Inability to Convert,
provided
that
prior to the Maker's receipt of the Holder's Notice in Response to Inability
to
Convert the Maker has not delivered a notice to the Holder stating, to the
satisfaction of the Holder, that the event or condition resulting in the
Mandatory Prepayment has been cured and all Conversion Shares issuable to the
Holder can and will be delivered to the Holder in accordance with the terms
of
this Note. If the Maker shall fail to pay the applicable Mandatory Prepayment
Price to the Holder on the date that is one (1) business day following the
Maker's receipt of the Holder's Notice in Response to Inability to Convert
(other than pursuant to a dispute as to the determination of the arithmetic
calculation of the Prepayment Price), in addition to any remedy the Holder
may
have under this Note and the Purchase Agreement, such unpaid amount shall bear
interest at the rate of two percent (2%) per month (prorated for partial months)
until paid in full. Until the full Mandatory Prepayment Price is paid in full
to
the Holder, the Holder may (i) void the Mandatory Prepayment with respect to
that portion of the Note for which the full Mandatory Prepayment Price has
not
been paid, (ii) receive back such Note, and (iii) require that the Conversion
Price of such returned Note be adjusted to the lesser of (A) the Conversion
Price as in effect on the date on which the Holder voided the Mandatory
Prepayment and (B) the lowest Closing Sale Price during the period beginning
on
the Conversion Date and ending on the date the Holder voided the Mandatory
Prepayment. In the event the Holder is an Insider Purchaser, then the Holder
agrees that the Mandatory Prepayment pursuant to Section 3.8(a)(i) above shall
be expressly subordinate to the payment in full of any Other Notes then subject
to Mandatory Prepayment which are held by Other Holders which are not Insider
Purchasers.
(d)
Pro-rata
Conversion and Prepayment
.
In the
event the Maker receives a Conversion Notice from more than one holder of the
Notes on the same day and the Maker can convert and prepay some, but not all,
of
the Notes pursuant to this Section 3.8, the Maker shall convert and prepay
from
each holder of the Notes electing to have its Notes converted and prepaid at
such time an amount equal to such holder's pro-rata amount (based on the
principal amount of the Notes held by such holder relative to the principal
amount of the Notes outstanding) of all the Notes being converted and prepaid
at
such time.
Section
3.9
No
Rights as Shareholder
. Nothing contained in this Note shall be construed
as conferring upon the Holder, prior to the conversion of this Note, the right
to vote or to receive dividends or to consent or to receive notice as a
shareholder in respect of any meeting of shareholders for the election of
directors of the Maker or of any other matter, or any other rights as a
shareholder of the Maker.
ARTICLE
IV
MISCELLANEOUS
Section
4.1
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, telecopy or facsimile at the address or number designated in the
Purchase Agreement (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 Maker will give written notice to the Holder at least ten (10) days prior
to
the date on which the Maker takes a record (x) with respect to any dividend
or
distribution upon the Common Stock, (y) with respect to any pro rata
subscription offer to holders of Common Stock or (z) for determining rights
to
vote with respect to any Organic Change, dissolution, liquidation or winding-up
and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Maker will also give written
notice to the Holder at least ten (10) days prior to the date on which any
Organic Change, dissolution, liquidation or winding-up will take place and
in no
event shall such notice be provided to the Holder prior to such information
being made known to the public. The Maker shall promptly notify the Holder
of
this Note of any notices sent or received, or any actions taken with respect
to
the Other Notes.
Section
4.2
Governing
Law
. This Note shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to any of the
conflicts of law principles which would result in the application of the
substantive law of another jurisdiction. This Note shall not be interpreted
or
construed with any presumption against the party causing this Note to be
drafted.
Section
4.3
Headings
.
Article and section headings in this Note are included herein for purposes
of
convenience of reference only and shall not constitute a part of this Note
for
any other purpose.
Section
4.4
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note, at law or in equity (including, without
limitation, a decree of specific performance and/or other injunctive relief),
no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a holder's
right to pursue actual damages for any failure by the Maker to comply with
the
terms of this Note. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Maker (or the
performance thereof). The Maker acknowledges that a breach by it of its
obligations hereunder will cause irreparable and material harm to the Holder
and
that the remedy at law for any such breach may be inadequate. Therefore the
Maker agrees that, in the event of any such breach or threatened breach, the
Holder shall be entitled, in addition to all other available rights and
remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.
Section
4.5
-Enforcement
Expenses. The Maker agrees to pay all costs and expenses of enforcement of
this
Note, including, without limitation, reasonable attorneys' fees and
expenses.
Section
4.6
-Binding
Effect. The obligations of the Maker and the Holder set forth herein shall
be
binding upon the successors and assigns of each such party, whether or not
such
successors or assigns are permitted by the terms hereof.
Section
4.7
-Amendments.
This Note may not be modified or amended in any manner except in writing
executed by the Maker and the Holder.
Section
4.8
-Compliance
with Securities Laws. The Holder of this Note acknowledges that this Note is
being acquired solely for the Holder's own account and not as a nominee for
any
other party, and for investment, and that the Holder shall not offer, sell
or
otherwise dispose of this Note. This Note and any Note issued in substitution
or
replacement therefor shall be stamped or imprinted with a legend in
substantially the following form:
"
THIS
NOTE
AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL
IN
THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE MAY
BE
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.
"
Section
4.9
Consent
to Jurisdiction
. Each of the Maker and the Holder (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 located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Note 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 Maker and the Holder
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 the Purchase Agreement and agrees that such service shall constitute
good
and sufficient service of process and notice thereof. Nothing in this Section
4.9 shall affect or limit any right to serve process in any other manner
permitted by law. Each of the Maker and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating
to
this Note shall be entitled to reimbursement for reasonable legal fees from
the
non-prevailing party.
Section
4.10
Parties
in Interest
. This Note shall be binding upon, inure to the benefit of and be
enforceable by the Maker, the Holder and their respective successors and
permitted assigns.
Section
4.11
Failure
or Indulgence Not Waiver
. No failure or delay on the part of the Holder in
the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
Section
4.12
Maker
Waivers
. Except as otherwise specifically provided herein, the Maker and all
others that may become liable for all or any part of the obligations evidenced
by this Note, to the extent allowed by applicable law, hereby waive presentment,
demand, notice of nonpayment, protest and all other demands' and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, and do hereby consent to any number of renewals of extensions of the
time
or payment hereof and agree that any such renewals or extensions may be made
without notice to any such persons and without affecting their liability herein
and do further consent to the release of any person liable hereon, all without
affecting the liability of the other persons, firms or Maker liable for the
payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.
(a)
No
delay
or omission on the part of the Holder in exercising its rights under this Note,
or course of conduct relating hereto, shall operate as a waiver of such rights
or any other right of the Holder, nor shall any waiver by the Holder of any
such
right or rights on any one occasion be deemed a waiver of the same right or
rights on any future occasion.
(b)
THE
MAKER
ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL
TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS
RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE
HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
Section
4.14
Definitions
.
For the
purposes hereof, the following terms shall have the following
meanings:
"
Person
"
means
an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.
“
Trading
Day
”
means
any day during which The New York Stock Exchange shall be open for
business.
|
|
|
|
|
|
GLOWPOINT,
INC.
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
EXHIBIT
A
WIRE
INSTRUCTIONS
Payee:
________________________________________________________
Bank:
________________________________________________________
Address:
_____________________________________________________
______________________________________________________
Bank
No.:
_____________________________________________________
Account
No.: __________________________________________________
Account
Name: _________________________________________________
FORM
OF
NOTICE
OF
CONVERSION
(To
be
Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. CN-07-____ into shares of Common Stock
of
Glowpoint, Inc. (the “Maker”) according to the conditions hereof, as of the date
written below.
Date
of
Conversion
_________________________________________________________
Applicable
Conversion Price __________________________________________________
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _________________________
Name
of
bank/broker due to receive the underlying Common Stock:
_________________________
Bank/broker's
four digit "DTC" participant number
(obtained
from the receiving bank/broker):
__________________________________________________
Signature___________________________________________________________________
[Name]
Address:__________________________________________________________________
_______________________________________________________________________
AMENDMENT
NO. 1
TO
SERIES
A WARRANT TO PURCHASE
SHARES
OF COMMON STOCK OF
GLOWPOINT,
INC.
THIS
AMENDMENT NO. 1 TO SERIES A WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
GLOWPOINT, INC. (this “Amendment”), dated as of September 21, 2007, is made by
and among Glowpoint, Inc., a Delaware corporation (the “Issuer”) and
___________________ (the “Holder”).
Preliminary
Statement
WHEREAS,
the Issuer is the issuer and the Holder is the holder of Series A Warrant No.
_______ to Purchase Common Stock of the Issuer (the “Warrant”); and
WHEREAS,
the Issuer and the Holder desire to amend certain provisions of the Warrant
as
described herein.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the parties, intending to be legally bound, hereby
agree as follows:
1.
Capitalized
Terms
.
Capitalized terms used, but not defined, herein, shall have the meanings
ascribed to such terms in the Warrant.
2.
Amendments
to Warrant
.
(a)
Additional
Shares of Common Stock
.
The
definition of “Additional Shares of Common Stock” in Section 8 of the Warrant is
hereby deleted in its entirety and the following new definition shall be
substituted in lieu thereof:
“
“
Additional
Shares of Common Stock
”
means
all shares of Common Stock issued by the Issuer after the Original Issue Date,
and all shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) securities issued (other than for cash) in connection
with a merger, acquisition, or consolidation, (ii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date hereof (so long as the conversion or
exercise price in such securities are not amended to lower such price and/or
adversely affect the Holders)
or
issued
pursuant to the Purchase Agreements, as amended, (iii) securities issued
pursuant to the terms of that certain Exchange Agreement, dated as of September
21, 2007, by and among the Maker and the holders signatory thereto, (iv) the
issuance of the Notes and the Warrants, (v) the shares of Common Stock issuable
upon the conversion of the Notes, (vi) the Warrant Stock, (vii) securities
issued in connection with bona fide strategic license agreements or other
partnering arrangements so long as such issuances are not for the purpose of
raising capital, (viii) Common Stock issued or the issuance or grants of options
to purchase Common Stock pursuant to Issuer’s stock option plans and employee
stock purchase plans approved by the Issuer’s board of directors, so long as
such issuances in the aggregate do not exceed the number of shares of Common
Stock (or options to purchase such number of shares of Common Stock) issuable
pursuant to such plans as they exist as of September 21, 2007, (ix) any warrants
issued to the placement agent and its designees for the transactions
contemplated by the Purchase Agreements, (x) the payment of any dividends on
the
Issuer’s Series B convertible preferred stock, (xi) securities issued pursuant
to a bona fide firm underwritten public offering of the Issuer’s securities,
(xii) the payment of liquidated damages pursuant to the Registration Rights
Agreement dated February 17, 2004 between the Issuer and the parties listed
therein and (xiii) the issuance of Common Stock upon the exercise or conversion
of any securities described in clauses (i) through (xii) above.”
(b)
Notes
.
The
definition of “Notes” in Section 8 of the Warrant is hereby deleted in its
entirety and the following new definition shall be substituted in lieu
thereof:
“
“
Notes
”
shall
mean collectively, each of the following, as the same may be amended from time
to time: (1) the senior secured convertible promissory notes issued pursuant
to
the Purchase Agreement, and that certain Note and Warrant Purchase Agreement,
dated as of April 12, 2006, by and among the Maker and the purchasers listed
therein (collectively with the Purchase Agreement, the “
2006
Purchase Agreements
”),
(2)
the additional senior secured convertible promissory notes in the aggregate
principal amount of up to $3,600,000 issued pursuant to that certain Note and
Warrant Purchase Agreement, dated as of September 21, 2007, by and among the
Maker and the purchasers listed therein (collectively with the 2006 Purchase
Agreements, the “
Purchase
Agreements
”),
and
(3) any additional senior secured convertible promissory notes issued from
time
to time as interest on the outstanding principal balance of the foregoing
promissory notes.”
(c)
Warrants
.
The
definition of “Warrants” in Section 8 of the Warrant is hereby deleted in its
entirety and the following new definition shall be substituted in lieu
thereof:
“
“
Warrants
”
shall
mean, collectively, each of the following, as the same may be amended from
time
to time: (A) the warrants to purchase shares of Common Stock issued pursuant
to
the Purchase Agreements (including, without limitation, this Warrant); (B)
the
warrants to purchase shares of Common Stock issued in connection with the
amendment of the senior secured convertible promissory notes issued pursuant
to
the 2006 Purchase Agreements; and (C) any other warrants of like tenor issued
in
substitution or exchange for any of the foregoing Warrants pursuant to the
provisions of Section 2(c), 2(d) or 2(e) thereof.”
(d)
Notice
of Adjustments
.
Section
5 of the Warrant is hereby deleted in its entirety and the following new Section
5 shall be substituted in lieu thereof:
“5.
Notice
of Adjustments; Dispute Resolution
.
Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
to
Section 4 hereof (for purposes of this Section 5, each an "
adjustment
"),
the
Issuer shall cause its Chief Financial Officer to prepare and execute a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made
any
determination hereunder), and the Warrant Price and Warrant Share Number after
giving effect to such adjustment, and shall cause copies of such certificate
to
be delivered to the Holder of this Warrant promptly after each adjustment.
Notwithstanding any dispute between the Issuer and the Holder of this Warrant
with respect to the matters set forth in such certificate, the Issuer shall
cause its transfer agent to promptly issue to the Holder the number of shares
of
Warrant Stock that is not disputed.”
(e)
Certain
Other Distributions
.
Section
4(c)(i) of the Warrant is hereby amended by deleting the parenthetical contained
therein.
(f)
Notices
to the Company
.
The
notices information for the Issuer in Section 12 of the Warrant is hereby
deleted in its entirety and the following new notices information be substituted
in lieu thereof:
“Glowpoint,
Inc.
225
Long
Avenue
Hillside,
New Jersey 07205
Attention:
Chief Executive Officer
Tel.
No.:
(312) 235-3888 x2053
Fax
No.:
(973) 391-1904
and
General
Counsel
Glowpoint,
Inc.
225
Long
Avenue
Hillside,
New Jersey 07205
Tel.
No.:
(312) 235-3888 x 2087
Fax
No.:
(973) 556-1272
with
copies (which copies
shall
not
constitute notice
to
the
Issuer) to:
Gibbons
P.C.
One
Gateway Center
Newark,
New Jersey 07102
Attn:
Frank Cannone, Esq.
Tel.
No.:
(973) 596-4500
Fax
No.:
(973) 596-0545”
3.
Ratification
.
Except
as expressly amended hereby, all of the terms, provisions and conditions of
the
Warrant are hereby ratified and confirmed in all respects by each party hereto
and, except as expressly amended hereby, are, and hereafter shall continue,
in
full force and effect.
4.
Entire
Agreement
.
This
Amendment and the Warrant constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements and understandings, both written and oral, between the parties with
respect thereto.
5.
Amendments
.
No
amendment, supplement, modification or waiver of this Amendment shall be binding
unless executed in writing by all parties hereto.
6.
Counterparts
.
This
Amendment may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute
but
one contract. Each party shall be entitled to rely on a facsimile signature
of
any other party hereunder as if it were an original.
7.
Governing
Law
.
This
Amendment shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction.
8.
Successors
and Assigns
.
This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
IN
WITNESS WHEREOF, the parties have executed this Amendment as of the date first
above written.
|
|
|
|
|
|
GLOWPOINT,
INC.
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
|
|
|
|
|
|
[Holder]
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
Signature
Page to Amendment No. 1 to Warrant
CERTIFICATE
OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES
C
PREFERRED STOCK
OF
GLOWPOINT,
INC.
The
undersigned, the Chief Executive Officer and President of Glowpoint, Inc.,
a
Delaware corporation (the "Company"), in accordance with the provisions of
the
Delaware General Corporation Law, does hereby certify that, pursuant to the
authority conferred upon the Board of Directors by the Amended and Restated
Certificate of Incorporation of the Company, the following resolution creating
a
series of Series C Convertible Preferred Stock, was duly adopted on September
18, 2007.
RESOLVED,
that pursuant to the authority expressly granted to and vested in the Board
of
Directors of the Company by provisions of the Amended and Restated Certificate
of Incorporation of the Company (the "Certificate of Incorporation"), there
hereby is created out of the shares of Preferred Stock, par value $.0001 per
share, of the Company authorized in Article IV of the Certificate of
Incorporation (the "Preferred Stock"), a series of Preferred Stock of the
Company, to be named "Series C Convertible Preferred Stock,” consisting of One
Thousand Five Hundred (1,500) shares, which series shall have the following
designations, powers, preferences and relative and other special rights and
the
following qualifications, limitations and restrictions:
1.
Designation
and Rank
.
The
designation of such series of the Preferred Stock shall be the Series C
Convertible Preferred Stock, par value $.0001 per share (the "Series C Preferred
Stock"). The maximum number of shares of Series C Preferred Stock shall be
One
Thousand Five Hundred (1,500) shares. The Series C Preferred Stock shall rank
prior to the common stock, par value $.0001 per share (the "Common Stock"),
and
to all other classes and series of equity securities of the Company which by
their terms rank junior to the Series C Preferred Stock ("Junior Stock").
Subject to Section 3(a), the Series C Preferred Stock shall be subordinate
to
and rank junior to all indebtedness of the Company now or hereafter
outstanding.
2.
Dividends
.
No
dividends shall accrue or be payable on any shares of Series C Preferred
Stock.
3.
Voting
Rights
.
(a)
Class
Voting Rights
.
So long
as shares of the Series C Preferred Stock with a value of at least $2 million
remain outstanding, the Company shall not, without the affirmative vote or
consent of the holders of at least 75% of the shares of the Series C Preferred
Stock outstanding at the time, given in person or by proxy, either in writing
or
at a meeting, in which the holders of the Series C Preferred Stock vote
separately as a class, (i) authorize, create, issue or increase the authorized
or issued amount of any class of debt or equity securities, ranking pari passu
or senior to the Series C Preferred Stock, with respect to the distribution
of
assets on liquidation, dissolution or winding up; (ii) amend, alter or repeal
the provisions of the Series C Preferred Stock, whether by merger, consolidation
or otherwise, so as to adversely affect any right, preference, privilege or
voting power of the Series C Preferred Stock;
provided
,
however
,
that
any creation and issuance of another series of Junior Stock shall not be deemed
to adversely affect such rights, preferences, privileges or voting powers;
(iii)
repurchase, redeem or pay dividends on, shares of Common Stock or any other
shares of the Company's Junior Stock (other than (1) in connection with any
employee stock option plan or employee stock purchase plan which is approved
by
the Board of Directors and is existing as of the date hereof, (2) de minimus
repurchases from employees of the Company, and (3) any contractual redemption
obligations existing as of the date hereof as disclosed in the Company’s public
filings with the Securities and Exchange Commission); (iv) amend the Certificate
of Incorporation or By-Laws of the Company so as to affect materially and
adversely any right, preference, privilege or voting power of the Series C
Preferred Stock;
provided
,
however
,
that
any creation and issuance of another series of Junior Stock shall not be deemed
to adversely affect such rights, preferences, privileges or voting powers;
(v)
effect any distribution with respect to Junior Stock other than as permitted
hereby; (vi) reclassify the Company's outstanding securities; or (vii)
materially change the nature of the Company’s business. Notwithstanding the
foregoing to the contrary, the Company may (i) issue the Notes and the Warrants
(each as defined below); (ii) obtain and utilize a credit facility any banking
institution on terms that are no less favorable to the Company than the terms
of
the credit facility it had with JPMorgan Chase Bank; and (iii) obtain and
utilize any line of credit, factoring arrangement or other similar financing
arrangement in connection with servicing the Company’s receivables in an amount
up to $1,000,000.
(b)
General
Voting Rights
.
Except
with respect to transactions upon which the Series C Preferred Stock shall
be
entitled to vote separately as a class pursuant to Section 3(a) above and
Section 10 below, and except as otherwise required by Delaware law, the Series
C
Preferred Stock shall have no voting rights. The Common Stock into which the
Series C Preferred Stock is convertible shall, upon issuance, have all of the
same voting rights as other issued and outstanding Common Stock of the
Company.
4.
Liquidation,
Dissolution; Winding-Up
.
(a)
In
the
event of the liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, the holders of shares of the Series
C
Preferred Stock then outstanding shall be entitled to receive, out of the assets
of the Company available for distribution to its stockholders, an amount equal
to $10,000 per share (the "Liquidation Preference Amount") before any payment
shall be made or any assets distributed to the holders of the Common Stock
or
any other Junior Stock. If the assets of the Company are not sufficient to
pay
in full the Liquidation Preference Amount payable to the holders of outstanding
shares of the Series C Preferred Stock and any series of preferred stock or
any
other class of stock on a parity, as to rights on liquidation, dissolution
or
winding up, with the Series C Preferred Stock, then all of said assets will
be
distributed among the holders of the Series C Preferred Stock and the other
classes of stock on a parity with the Series C Preferred Stock, if any, ratably
in accordance with the respective amounts that would be payable on such shares
if all amounts payable thereon were paid in full. The liquidation payment with
respect to each outstanding fractional share of Series C Preferred Stock shall
be equal to a ratably proportionate amount of the liquidation payment with
respect to each outstanding share of Series C Preferred Stock. All payments
for
which this Section 4(a) provides shall be in cash, property (valued at its
fair
market value as determined reasonably and in good faith by the Board of
Directors of the Company) or a combination thereof; provided, however, that
no
cash shall be paid to holders of Junior Stock unless each holder of the
outstanding shares of Series C Preferred Stock has been paid in cash the full
Liquidation Preference Amount to which such holder is entitled as provided
herein. After payment of the full Liquidation Preference Amount to which each
holder is entitled, such holders of shares of Series C Preferred Stock will
not
be entitled to any further participation as such in any distribution of the
assets of the Company.
(b)
A
consolidation or merger of the Company with or into any other corporation or
corporations, or a sale of all or substantially all of the assets of the
Company, or the effectuation by the Company of a transaction or series of
related transactions in which more than 50% of the voting shares of the Company
is disposed of or conveyed, shall not be deemed to be a liquidation,
dissolution, or winding up within the meaning of this Section 4. In the event
of
the merger or consolidation of the Company with or into another corporation,
subject to Section 5(e)(v), the Series C Preferred Stock shall maintain its
relative powers, designations and preferences provided for herein and no merger
shall result inconsistent therewith.
(c)
Written
notice of any voluntary or involuntary liquidation, dissolution or winding
up of
the affairs of the Company, stating a payment date and the place where the
distributable amounts shall be payable, shall, to the extent possible, be given
by mail, postage prepaid, no less than twenty (20) days prior to the payment
date stated therein, to the holders of record of the Series C Preferred Stock
at
their respective addresses as the same shall appear on the books of the
Company.
5.
Conversion
.
The
holder of Series C Preferred Stock shall have the following conversion rights
(the "Conversion Rights"):
(a)
Right
to Convert
.
At any
time on or after the date of issuance of the Series C Preferred Stock (the
“Issuance Date”), the holder of any shares of Series C Preferred Stock may, at
such holder's option, subject to the limitations set forth in Section 7 herein,
elect to convert (a "Voluntary Conversion") all or any portion of the shares
of
Series C Preferred Stock held by such person into a number of fully paid and
nonassessable shares of Common Stock equal to the quotient of (i) the
Liquidation Preference Amount of the shares of Series C Preferred Stock being
converted divided by (ii) the Conversion Price (as defined in Section 5(d)
below) then in effect as of the date of the delivery by such holder of its
notice of election to convert. In the event of a notice of redemption of any
shares of Series C Preferred Stock pursuant to Section 8 hereof, the Conversion
Rights of the shares designated for redemption shall terminate at the close
of
business on the last full day preceding the date fixed for redemption, unless
the redemption price is not paid on such redemption date, in which case the
Conversion Rights for such shares shall continue until such price is paid in
full. In the event of a liquidation, dissolution or winding up of the Company,
the Conversion Rights shall terminate at the close of business on the last
full
day preceding the date fixed for the payment of any such amounts distributable
on such event to the holders of Series C Preferred Stock. In the event of such
a
redemption or liquidation, dissolution or winding up, the Company shall provide
to each holder of shares of Series C Preferred Stock notice of such redemption
or liquidation, dissolution or winding up, which notice shall (i) be sent at
least fifteen (15) days prior to the termination of the Conversion Rights and
(ii) state the amount per share of Series C Preferred Stock that will be paid
or
distributed on such redemption or liquidation, dissolution or winding up, as
the
case may be.
(b)
Mechanics
of Voluntary Conversion
.
The
Voluntary Conversion of Series C Preferred Stock shall be conducted in the
following manner:
(i)
Holder's
Delivery Requirements
.
To
convert Series C Preferred Stock into full shares of Common Stock on any date
(the "Voluntary Conversion Date"), the holder thereof shall (A) transmit by
facsimile (or otherwise deliver), for receipt on or prior to 5:00 p.m., New
York
time on such date, a copy of a fully executed notice of conversion in the form
attached hereto as Exhibit I (the "Conversion Notice"), to the Company; and
(B)
as soon as practicable following such Voluntary Conversion Date, surrender
to a
common carrier for delivery to the Company the original certificates
representing the shares of Series C Preferred Stock being converted (or an
indemnification undertaking with respect to such shares in the case of their
loss, theft or destruction) (the "Preferred Stock Certificates") and the
originally executed Conversion Notice.
(ii)
Company's
Response
.
Upon
receipt by the Company of a copy of the fully executed Conversion Notice, the
Company or its designated transfer agent (the "Transfer Agent"), as applicable,
shall within three (3) business days following the date of receipt by the
Company of a copy of the fully executed Conversion Notice, issue and deliver
to
the Depository Trust Company ("DTC") account on the holder's behalf via the
Deposit Withdrawal Agent Commission System ("DWAC") as specified in the
Conversion Notice, registered in the name of the holder or its designee, for
the
number of shares of Common Stock to which the holder shall be entitled.
Notwithstanding the foregoing to the contrary, the Company or its Transfer
Agent
shall only be required to issue and deliver the shares to the DTC on a holder's
behalf via DWAC if (i) such conversion is in connection with a sale, (ii) the
shares of Common Stock may be issued without restrictive legends and (iii)
the
Company and the Transfer Agent are participating in DTC through the DWAC
system
.
If all
of the conditions set forth in clauses (i), (ii) and (iii) above are not
satisfied, the Company shall deliver physical certificates to the holder or
its
designee. If the number of shares of Preferred Stock represented by the
Preferred Stock Certificate(s) submitted for conversion is greater than the
number of shares of Series C Preferred Stock being converted, then the Company
shall, as soon as practicable and in no event later than three (3) business
days
after receipt of the Preferred Stock Certificate(s) and at the Company's
expense, issue and deliver to the holder a new Preferred Stock Certificate
representing the number of shares of Series C Preferred Stock not
converted.
(iii)
Dispute
Resolution
.
In the
case of a dispute as to the arithmetic calculation of the number of shares
of
Common Stock to be issued upon conversion, the Company shall cause its Transfer
Agent to promptly issue to the holder the number of shares of Common Stock
that
is not disputed and shall submit the arithmetic calculations to the holder
via
facsimile as soon as possible, but in no event later than two (2) business
days
after receipt of such holder's Conversion Notice. If such holder and the Company
are unable to agree upon the arithmetic calculation of the number of shares
of
Common Stock to be issued upon such conversion within two (2) business days
of
such disputed arithmetic calculation being submitted to the holder, then the
Company shall within two (2) business days submit via facsimile the disputed
arithmetic calculation of the number of shares of Common Stock to be issued
upon
such conversion to the Company's independent, outside accountant (the
"Accountant"). The Company shall cause the Accountant to perform the
calculations and notify the Company and the holder of the results no later
than
five (5) business days from the time it receives the disputed calculations.
The
Accountant's calculation shall be binding upon all parties absent manifest
error. The reasonable expenses of such Accountant in making such determination
shall be paid by the Company, in the event the holder's calculation was correct,
or by the holder, in the event the Company's calculation was correct, or equally
by the Company and the holder in the event that neither the Company's or the
holder's calculation was correct. The period of time in which the Company is
required to effect conversions or redemptions under this Certificate of
Designations shall be tolled with respect to the subject conversion or
redemption pending resolution of any dispute by the Company made in good faith
and in accordance with this Section 5(b)(iii).
(iv)
Record
Holder
.
The
person or persons entitled to receive the shares of Common Stock issuable upon
a
conversion of the Series C Preferred Stock shall be treated for all purposes
as
the record holder or holders of such shares of Common Stock on the Conversion
Date.
(v)
Company's
Failure to Timely Convert
.
If
within five (5) business days of the Company's receipt of an executed copy
of
the Conversion Notice (so long as the applicable Preferred Stock Certificates
and original Conversion Notice are received by the Company on or before such
third business day), the Transfer Agent shall fail to issue and deliver to
a
holder the number of shares of Common Stock to which such holder is entitled
upon such holder's conversion of the Series C Preferred Stock or to issue a
new
Preferred Stock Certificate representing the number of shares of Series C
Preferred Stock to which such holder is entitled pursuant to Section 5(b)(ii)
(a
"Conversion Failure"), in addition to all other available remedies which such
holder may pursue hereunder and under any other agreements entered into in
connection with the issuance of the Series C Preferred Stock (including any
indemnification provisions contained therein), the Company shall pay additional
damages to such holder on each business week after such fifth (5th) business
day
that such conversion is not timely effected (so long as the applicable Preferred
Stock Certificates and original Conversion Notice are received by the Company
on
or before such fifth business day) in an amount equal 0.5% of the product of
(A)
the sum of the number of shares of Common Stock not issued to the holder on
a
timely basis pursuant to Section 5(b)(ii) and to which such holder is entitled
and, in the event the Company has failed to deliver a Preferred Stock
Certificate to the holder on a timely basis pursuant to Section 5(b)(ii), the
number of shares of Common Stock issuable upon conversion of the shares of
Series C Preferred Stock represented by such Preferred Stock Certificate, as
of
the last possible date which the Company could have issued such Preferred Stock
Certificate to such holder without violating Section 5(b)(ii) and (B) the
Closing Bid and Ask Price (as defined below) of the Common Stock on the last
possible date which the Company could have issued such Common Stock and such
Preferred Stock Certificate, as the case may be, to such holder without
violating Section 5(b)(ii). If the Company fails to pay the additional damages
set forth in this Section 5(b)(v) within seven (7) business days of the date
incurred, then such payment shall bear interest at the rate of 1.0% per month
(pro rated for partial months) until such payments are made.
(vi)
Buy-In
Rights
.
In
addition to any other rights available to the holders of Series C Preferred
Stock, if within three (3) business days of the Company's receipt of an executed
copy of the Conversion Notice (so long as the applicable Preferred Stock
Certificates and original Conversion Notice are received by the Company on
or
before such third business day), the Transfer Agent shall fail to issue and
deliver to a holder the number of shares of Common Stock to which such holder
is
entitled upon such holder's conversion of the Series C Preferred Stock (a
"Conversion Failure"), and if after such date the holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the holder of the shares of Common
Stock issuable upon conversion of Series C Preferred Stock which the holder
anticipated receiving upon such conversion (a “Buy-In”), then the Company shall
(1) pay in cash to the holder the amount by which (x) the holder’s total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A)
the
number of shares of Common Stock issuable upon conversion of Series C Preferred
Stock that the Company was required to deliver to the holder in connection
with
the conversion at issue times (B) the price at which the sell order giving
rise
to such purchase obligation was executed, and (2) deliver to the holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its conversion and delivery obligations hereunder. For
example, if the holder purchases Common Stock having a total purchase price
of
$11,000 to cover a Buy-In with respect to an attempted conversion of shares
of
Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence
the Company shall be required to pay to the holder $1,000. The holder shall
provide the Company written notice indicating the amounts payable to the holder
in respect of the Buy-In, together with applicable confirmations and other
evidence reasonably requested by the Company. Nothing herein shall limit a
holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of the Series
C
Preferred Stock as required pursuant to the terms hereof.
(c)
Mandatory
Conversion
.
(i)
Each
share of Series C Preferred Stock outstanding on the Mandatory Conversion Date
(as defined below) shall, automatically and without any action on the part
of
the holder thereof, convert into a number of fully paid and nonassessable shares
of Common Stock equal to the quotient of (i) the Liquidation Preference Amount
of the shares of Series C Preferred Stock outstanding on the Mandatory
Conversion Date divided by (ii) the Conversion Price in effect on the Mandatory
Conversion Date.
(ii)
As
used
herein, "Mandatory Conversion Date" shall be the first date that the Closing
Bid
and Ask Price (as defined below) of the Common Stock exceeds $2.00 (as adjusted
for stock splits, stock dividends, combinations and similar transactions) for
a
period of ten (10) consecutive trading days; provided that a registration
statement covering the resale of the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock is effective on the Mandatory
Conversion Date and on each trading day of such ten (10) trading day period
or
the shares of Common Stock into which the Series C Preferred Stock can be
converted may be offered for sale to the public pursuant to Rule 144(k) under
the Securities Act of 1933, as amended. If on the Mandatory Conversion Date,
a
holder is prohibited from converting all of its shares of Series C Preferred
Stock as a result of the restrictions contained in Section 7 of this Certificate
of Designations, such shares of Series C Preferred Stock shall be exchanged
for
shares of a new series of preferred stock with preferences, rights and
limitations substantially similar to those of the Series C Preferred Stock.
The
Mandatory Conversion Date and the Voluntary Conversion Date collectively are
referred to in this Certificate of Designations as the "Conversion Date."
Notwithstanding the foregoing to the contrary, the Company may effect a
mandatory conversion pursuant to this Section 5(c) only if (A)
a
registration
statement providing for the resale of the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock is then in effect, (B)
trading
in the Common Stock shall not have been suspended by
the
Securities and Exchange Commission or the OTC Bulletin Board (or other exchange
or market on which the Common Stock is trading)
,
and (C)
the Company is in material compliance with the terms and conditions of this
Certificate of Designations, that certain Registration Rights Agreement, dated
as of March 31, 2006, between the Company and the purchasers set forth therein,
as amended, and that certain Exchange Agreement, dated as of September 21,
2007,
by and between the Company and the purchasers set forth therein (collectively,
the Transaction Documents”)
.
(iii)
The
term
"Closing Bid and Ask Price" shall mean, for any security as of any date, the
last average of the closing bid and ask price of such security on the OTC
Bulletin Board or other principal exchange on which such security is traded
as
reported by Bloomberg, or, if no closing bid price is reported for such security
by Bloomberg, the last closing trade price of such security as reported by
Bloomberg, or, if no last closing trade price is reported for such security
by
Bloomberg, the average of the bid and ask prices of any market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau,
Inc.
If the Closing Bid and Ask Price cannot be calculated for such security on
such
date on any of the foregoing bases, the Closing Bid and Ask Price of such
security on such date shall be the fair market value as determined in good
faith
by the Board of Directors of the Company.
(iv)
On
the
Mandatory Conversion Date, the outstanding shares of Series C Preferred Stock
shall be converted automatically without any further action by the holders
of
such shares and whether or not the certificates representing such shares are
surrendered to the Company or its Transfer Agent; provided, however, that the
Company shall not be obligated to issue the shares of Common Stock issuable
upon
conversion of any shares of Series C Preferred Stock unless certificates
evidencing such shares of Series C Preferred Stock are either delivered to
the
Company or the holder notifies the Company that such certificates have been
lost, stolen, or destroyed, and executes an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
therewith. Upon the occurrence of the automatic conversion of the Series C
Preferred Stock pursuant to this Section 5, the holders of the Series C
Preferred Stock shall surrender the certificates representing the Series C
Preferred Stock for which the Mandatory Conversion Date has occurred to the
Company and the Company shall cause its Transfer Agent to deliver the shares
of
Common Stock issuable upon such conversion (in the same manner set forth in
Section 5(b)(ii)) to the holder promptly following the holder's delivery of
the
applicable Preferred Stock Certificates.
(d)
Conversion
Price
.
(i)
The
term
"Conversion Price" shall mean $1.00 per share, subject to adjustment under
Section 5(e) hereof.
(ii)
Notwithstanding
the foregoing to the contrary, if during any period (a "Black-out Period"),
a
holder of Series C Preferred Stock is unable to trade any Common Stock issued
or
issuable upon conversion of the Series C Preferred Stock immediately due to
the
postponement of filing or delay or suspension of effectiveness of a registration
statement or because the Company has otherwise informed such holder of Series
C
Preferred Stock that an existing prospectus cannot be used at that time in
the
sale or transfer of such Common Stock (provided that such postponement, delay,
suspension or fact that the prospectus cannot be used is not due to factors
solely within the control of the holder of Series C Preferred Stock or due
to
the Company exercising its rights under Section 3(n) of (A) the Registration
Rights Agreement, dated as of March 31, 2006, between the Company and the
purchasers set forth therein, (B) the Registration Rights Agreement, dated
as of
February 17, 2004, between the Company and the purchasers set forth therein,
or
(C) the Registration Rights Agreement, dated as of December 17, 2002, between
the Company and the purchasers set forth therein (each of the foregoing as
may
be amended from time to time (a "Registration Rights Agreement")), such holder
of Series C Preferred Stock shall have the option but not the obligation on
any
Conversion Date within ten (10) trading days following the expiration of the
Black-out Period of using the Conversion Price applicable on such Conversion
Date or any Conversion Price selected by such holder of Series C Preferred
Stock
that would have been applicable had such Conversion Date been at any earlier
time during the Black-out Period.
(e)
Adjustments
of Conversion Price
.
(i)
Adjustments
for Stock Splits and Combinations
.
If the
Company shall at any time or from time to time after the Issuance Date, effect
a
stock split of the outstanding Common Stock, the Conversion Price shall be
proportionately decreased. If the Company shall at any time or from time to
time
after the Issuance Date, combine the outstanding shares of Common Stock, the
Conversion Price shall be proportionately increased. Any adjustments under
this
Section 5(e)(i) shall be effective at the close of business on the date the
stock split or combination becomes effective.
(ii)
Adjustments
for Certain Dividends and Distributions
.
If the
Company shall at any time or from time to time after the Issuance Date, make
or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, then, and in each event, the Conversion Price shall be decreased as
of
the time of such issuance or, in the event such record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price then in effect by a fraction:
(1)
the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close
of
business on such record date; and
(2)
the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close
of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution;
provided,
however, that no such adjustment shall be made if the holders of Series C
Preferred Stock simultaneously receive (i) a dividend or other distribution
of
shares of Common Stock in a number equal to the number of shares of Common
Stock
as they would have received if all outstanding shares of Series C Preferred
Stock had been converted into Common Stock on the date of such event or (ii)
a
dividend or other distribution of shares of Series C Preferred Stock which
are
convertible, as of the date of such event, into such number of shares of Common
Stock as is equal to the number of additional shares of Common Stock being
issued with respect to each share of Common Stock in such dividend or
distribution.
(iii)
Adjustment
for Other Dividends and Distributions
.
If the
Company shall at any time or from time to time after the Issuance Date, make
or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in securities
of
the Company other than shares of Common Stock, then, and in each event, an
appropriate revision to the applicable Conversion Price shall be made and
provision shall be made (by adjustments of the Conversion Price or otherwise)
so
that the holders of Series C Preferred Stock shall receive upon conversions
thereof, in addition to the number of shares of Common Stock receivable thereon,
the number of securities of the Company which they would have received had
their
Series C Preferred Stock been converted into Common Stock on the date of such
event and had thereafter, during the period from the date of such event to
and
including the Conversion Date, retained such securities (together with any
distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 5(e)(iii) with
respect to the rights of the holders of the Series C Preferred Stock; provided,
however, that if such record date shall have been fixed and such dividend is
not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Conversion Price shall be adjusted pursuant to this paragraph as of the
time
of actual payment of such dividends or distributions
.
(iv)
Adjustments
for Reclassification, Exchange or Substitution
.
If the
Common Stock issuable upon conversion of the Series C Preferred Stock at any
time or from time to time after the Issuance Date shall be changed to the same
or different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of
a
stock split or combination of shares or stock dividends provided for in Sections
5(e)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale
of
assets provided for in Section 5(e)(v)), then, and in each event, an appropriate
revision to the Conversion Price shall be made and provisions shall be made
(by
adjustments of the Conversion Price or otherwise) so that the holder of each
share of Series C Preferred Stock shall have the right thereafter to convert
such share of Series C Preferred Stock into the kind and amount of shares of
stock and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of Common
Stock
into which such share of Series C Preferred Stock might have been converted
immediately prior to such reclassification, exchange, substitution or other
change, all subject to further adjustment as provided herein.
(v)
Adjustments
for Reorganization, Merger, Consolidation or Sales of Assets
.
If at
any time or from time to time after the Issuance Date there shall be a capital
reorganization of the Company (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in Section 5(e)(i),
(ii) and (iii), or a reclassification, exchange or substitution of shares
provided for in Section 5(e)(iv)), or a merger or consolidation of the Company
with or into another corporation where the holders of outstanding voting
securities prior to such merger or consolidation do not own over 50% of the
outstanding voting securities of the merged or consolidated entity, immediately
after such merger or consolidation, or the sale of all or substantially all
of
the Company's properties or assets to any other person (an "Organic Change"),
then as a part of such Organic Change an appropriate revision to the Conversion
Price shall be made if necessary and provision shall be made if necessary (by
adjustments of the Conversion Price or otherwise) so that the holder of each
share of Series C Preferred Stock shall have the right thereafter to convert
such share of Series C Preferred Stock into the kind and amount of shares of
stock and other securities or property which such holder would have had the
right to receive had such holder converted its shares of Series C Preferred
Stock immediately prior to the consummation of such Organic Change. In any
such
case, appropriate adjustment shall be made in the application of the provisions
of this Section 5(e)(v) with respect to the rights of the holders of the Series
C Preferred Stock after the Organic Change to the end that the provisions of
this Section 5(e)(v) (including any adjustment in the Conversion Price then
in
effect and the number of shares of stock or other securities deliverable upon
conversion of the Series C Preferred Stock) shall be applied after that event
in
as nearly an equivalent manner as may be practicable.
(vi)
Adjustments
for Issuance of Additional Shares of Common Stock
.
(A)
In
the
event the Company, shall, at any time or from time to time, issue or sell any
additional shares of Common Stock (otherwise than as provided in the foregoing
subsections (i) through (v) of this Section 5(e) or pursuant to Common Stock
Equivalents (hereafter defined) granted or issued prior to the Issuance Date)
(the "Additional Shares of Common Stock"), at a price per share less than the
Conversion Price, or without consideration, the Conversion Price then in effect
upon each such issuance shall be adjusted to that price (rounded to the nearest
cent) determined by multiplying the Conversion Price by a fraction:
(1)
the
numerator of which shall be equal to the sum of (A) the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus (B) the number of shares of Common Stock (rounded
to
the nearest whole share) which the aggregate consideration for the total number
of such Additional Shares of Common Stock so issued would purchase at a price
per share equal to the then Conversion Price, and
(2)
the
denominator of which shall be equal to the number of shares of Common Stock
outstanding immediately after the issuance of such Additional Shares of Common
Stock.
No
adjustment of the number of shares of Common Stock shall be made under paragraph
(A) of this Section 5(e)(vi) upon the issuance of any Additional Shares of
Common Stock which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of any conversion
or
exchange rights in any Common Stock Equivalents (as defined below), if any
such
adjustment shall previously have been made upon the issuance of such warrants
or
other rights or upon the issuance of such Common Stock Equivalents (or upon
the
issuance of any warrant or other rights therefore) pursuant to Section
5(e)(vii).
(vii)
Issuance
of Common Stock Equivalents
.
If the
Company, at any time after the Issuance Date, shall issue any securities
convertible into or exchangeable for, directly or indirectly, Common Stock
("Convertible Securities"), other than the Series C Preferred Stock, or any
rights or warrants or options to purchase any such Common Stock or Convertible
Securities, shall be issued or sold (collectively, the "Common Stock
Equivalents") and the aggregate of the price per share for which Additional
Shares of Common Stock may be issuable thereafter pursuant to such Common Stock
Equivalent, plus the consideration received by the Company for issuance of
such
Common Stock Equivalent divided by the number of shares of Common Stock issuable
pursuant to such Common Stock Equivalent (the "Aggregate Per Common Share
Price") shall be less than the Conversion Price, or if, after any such issuance
of Common Stock Equivalents, the price per share for which Additional Shares
of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended or adjusted shall make the Aggregate Per Common Share Price be
less than Conversion Price in effect at the time of such amendment or
adjustment, then the Conversion Price then in effect shall be adjusted pursuant
to Section 5(e)(vi) above assuming that all Additional Shares of Common Stock
have been issued pursuant to the Convertible Securities or Common Stock
Equivalents for a purchase price equal to the Aggregate Per Common Share Price.
No adjustment of the Conversion Price shall be made under this subsection (vii)
upon the issuance of any Convertible Security which is issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefore,
if
any adjustment shall previously have been made to the exercise price of such
warrants then in effect upon the issuance of such warrants or other rights
pursuant to this subsection (vii). No adjustment shall be made to the Conversion
Price upon the issuance of Common Stock pursuant to the exercise, conversion
or
exchange of any Convertible Security or Common Stock Equivalent where an
adjustment to the Conversion Price was made as a result of the issuance or
purchase of any Convertible Security or Common Stock Equivalent.
(viii)
Consideration
for Stock
.
In case
any shares of Common Stock or Convertible Securities other than the Series
C
Preferred Stock, or any rights or warrants or options to purchase any such
Common Stock or Convertible Securities, shall be issued or sold:
(1)
in
connection with any merger or consolidation in which the Company is the
surviving corporation (other than any consolidation or merger in which the
previously outstanding shares of Common Stock of the Company shall be changed
to
or exchanged for the stock or other securities of another corporation), the
amount of consideration therefore shall be deemed to be the fair value, as
determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or warrants or options, as the
case
may be; or
(2)
in
the
event of any consolidation or merger of the Company in which the Company is
not
the surviving corporation or in which the previously outstanding shares of
Common Stock of the Company shall be changed into or exchanged for the stock
or
other securities of another corporation, or in the event of any sale of all
or
substantially all of the assets of the Company for stock or other securities
of
any corporation, the Company shall be deemed to have issued a number of shares
of its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or other
property of the other corporation. If any such calculation results in adjustment
of the applicable Conversion Price, or the number of shares of Common Stock
issuable upon conversion of the Series C Preferred Stock, the determination
of
the applicable Conversion Price or the number of shares of Common Stock issuable
upon conversion of the Series C Preferred Stock immediately prior to such
merger, consolidation or sale, shall be made after giving effect to such
adjustment of the number of shares of Common Stock issuable upon conversion
of
the Series C Preferred Stock. In the event any consideration received by the
Company for any securities consists of property other than cash, the fair market
value thereof at the time of issuance or as otherwise applicable shall be as
determined in good faith by the Board of Directors of the Company. In the event
Common Stock is issued with other shares or securities or other assets of the
Company for consideration which covers both, the consideration computed as
provided in this Section 5(e)(viii) shall be allocated among such securities
and
assets as determined in good faith by the Board of Directors of the
Company.
(ix)
Record
Date
.
In case
the Company shall take record of the holders of its Common Stock or any other
Preferred Stock for the purpose of entitling them to subscribe for or purchase
Common Stock or Convertible Securities, then the date of the issue or sale
of
the shares of Common Stock shall be deemed to be such record date.
(x)
Certain
Issues Excepted
.
Anything herein to the contrary notwithstanding, the Company shall not be
required to make any adjustment to the Conversion Price upon (i) the Company's
issuance of any Additional Shares 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; provided that the
Conversion Price shall be adjusted in accordance with Section 5(e)(v), (ii)
the
Company's issuance of Additional 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) Common Stock or grants of options to purchase
Common Stock pursuant to any stock option plans and employee stock purchase
plans approved by the Company’s board of directors, so long as such issuances in
the aggregate do not exceed the number of shares of Common Stock (or options
to
purchase such number of shares of Common Stock) issuable pursuant to such plans
as they exist on the date hereof, (iv) any issuances of securities of Common
Stock pursuant to Company 401(k) matches, (v) any issuances of securities to
consultants, financial advisers or public relations consultants to the Company
so long as such issuances do not in the aggregate exceed ten percent (10%)
of
the Company's issued and outstanding shares of Common Stock as of the Issuance
Date, (vi) securities issued pursuant to the conversion or exercise of
convertible or exercisable securities issued or outstanding on or prior to
the
date hereof (so long as the conversion or exercise price in such securities
are
not amended to lower such price and/or adversely affect the holders), (vii)
the
issuance of the Notes and the Warrants (each as defined below), (viii)
securities issued pursuant to a bona fide firm underwritten public offering
of
the Company’s securities, (ix) the payment of liquidated damages pursuant to a
Registration Rights Agreement, and (x) the issuance of common stock upon the
exercise or conversion of any securities described in clauses (i) through (ix)
above. For purposes of this Certificate of Designations, (A) “Notes” shall mean
collectively, each of the following, as the same may be amended from time to
time: (1) the senior secured convertible promissory notes issued pursuant to
those certain Note and Warrant Purchase Agreements dated as of March 31, 2006
and April 12, 2006 (the "2006 Purchase Agreements”), by and among the Company
and the purchasers listed therein, (2) the additional senior secured convertible
promissory notes in the aggregate principal amount of up to $3,600,000 issued
pursuant to that certain Note and Warrant Purchase Agreement, dated as of
September 21, 2007 (collectively with the 2006 Purchase Agreements, the
"Purchase Agreements”), and (3) any additional senior secured convertible
promissory notes issued from time to time as interest on the outstanding
principal balance of the foregoing promissory notes; and (B) “Warrants” shall
mean, collectively, each of the following, as the same may be amended from
time
to time: (A) the warrants to purchase shares of Common Stock issued pursuant
to
the Purchase Agreements; and (B) the warrants to purchase shares of Common
Stock
issued in connection with the amendment of the senior secured convertible
promissory notes issued pursuant to the 2006 Purchase Agreements.
(f)
No
Impairment
.
The
Company shall not, by amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith, assist
in the carrying out of all the provisions of this Section 5 and in the taking
of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series C Preferred Stock against
impairment. In the event a holder shall elect to convert any shares of Series
C
Preferred Stock as provided herein, the Company cannot refuse conversion
(subject to the limitations set forth in Section 7 herein) based on any claim
that such holder or any one associated or affiliated with such holder has been
engaged in any violation of law, unless (i) an order from the Securities and
Exchange Commission prohibiting such conversion or (ii) an injunction from
a
court, on notice, restraining and/or adjoining conversion of all or of said
shares of Series C Preferred Stock shall have been issued and the Company posts
a surety bond for the benefit of such holder in an amount equal to 100% of
the
Liquidation Preference Amount of the Series C Preferred Stock such holder has
elected to convert, which bond shall remain in effect until the completion
of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such holder in the event it obtains judgment. If the Company is the
prevailing party in any legal action or other legal proceeding relating to
the
Conversion Rights of the holders of the Series C Preferred Stock, then the
Company shall be entitled to recover from the holders of Series C Preferred
Stock reasonable attorneys’ fees, costs and disbursements (in addition to any
other relief to which the Company may be entitled).
(g)
Certificates
as to Adjustments
.
Upon
occurrence of each adjustment or readjustment of the Conversion Price or number
of shares of Common Stock issuable upon conversion of the Series C Preferred
Stock pursuant to this Section 5, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof
and
furnish to each holder of such Series C Preferred Stock a certificate setting
forth such adjustment and readjustment, showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon written
request of the holder of such affected Series C Preferred Stock, at any time,
furnish or cause to be furnished to such holder a like certificate setting
forth
such adjustments and readjustments, the Conversion Price in effect at the time,
and the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon the conversion
of a share of such Series C Preferred Stock. Notwithstanding the foregoing,
the
Company shall not be obligated to deliver a certificate unless such certificate
would reflect an increase or decrease of at least one percent of such adjusted
amount.
(h)
Issue
Taxes
.
The
Company shall pay any and all issue and other taxes, excluding federal, state
or
local income taxes, that may be payable in respect of any issue or delivery
of
shares of Common Stock on conversion of shares of Series C Preferred Stock
pursuant thereto; provided, however, that the Company shall not be obligated
to
pay any transfer taxes resulting from any transfer requested by any holder
in
connection with any such conversion.
(i)
Notices
.
All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile or three (3) business
days
following being mailed by certified or registered mail, postage prepaid,
return-receipt requested, addressed to the holder of record at its address
appearing on the books of the Company. The Company will give written notice
to
each holder of Series C Preferred Stock at least twenty (20) days prior to
the
date on which the Company closes its books or takes a record (I) with respect
to
any dividend or distribution upon the Common Stock, (II) with respect to any
pro
rata subscription offer to holders of Common Stock or (III) for determining
rights to vote with respect to any Organic Change, dissolution, liquidation
or
winding-up and in no event shall such notice be provided to such holder prior
to
such information being made known to the public. The Company will also give
written notice to each holder of Series C Preferred Stock at least twenty (20)
days prior to the date on which any Organic Change, dissolution, liquidation
or
winding-up will take place and in no event shall such notice be provided to
such
holder prior to such information being made known to the public.
(j)
Fractional
Shares
.
No
fractional shares of Common Stock shall be issued upon conversion of the Series
C Preferred Stock. In lieu of any fractional shares to which the holder would
otherwise be entitled, the Company shall pay cash equal to the product of such
fraction multiplied by the average of the Closing Bid and Ask Prices of the
Common Stock for the five (5) consecutive trading immediately preceding the
Voluntary Conversion Date or Mandatory Conversion Date, as
applicable.
(k)
Reservation
of Common Stock
.
The
Company shall, so long as any shares of Series C Preferred Stock are
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Series
C
Preferred Stock, such number of shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all of the Series C Preferred
Stock then outstanding; provided that the number of shares of Common Stock
so
reserved shall at no time be less than 110% of the number of shares of Common
Stock for which the shares of Series C Preferred Stock are at any time
convertible. The initial number of shares of Common Stock reserved for
conversions of the Series C Preferred Stock and each increase in the number
of
shares so reserved shall be allocated pro rata among the holders of the Series
C
Preferred Stock based on the number of shares of Series C Preferred Stock held
by each holder of record at the time of issuance of the Series C Preferred
Stock
or increase in the number of reserved shares, as the case may be. In the event
a
holder shall sell or otherwise transfer any of such holder's shares of Series
C
Preferred Stock, each transferee shall be allocated a pro rata portion of the
number of reserved shares of Common Stock reserved for such transferor. Any
shares of Common Stock reserved and which remain allocated to any person or
entity which does not hold any shares of Series C Preferred Stock shall be
allocated to the remaining holders of Series C Preferred Stock, pro rata based
on the number of shares of Series C Preferred Stock then held by such
holder.
(l)
Retirement
of Series C Preferred Stock
.
Conversion of Series C Preferred Stock shall be deemed to have been effected
on
the applicable Conversion Date. Upon conversion of only a portion of the number
of shares of Series C Preferred Stock represented by a certificate surrendered
for conversion, the Company shall issue and deliver to such holder at the
expense of the Company, a new certificate covering the number of shares of
Series C Preferred Stock representing the unconverted portion of the certificate
so surrendered as required by Section 5(b)(ii).
(m)
Regulatory
Compliance
.
If any
shares of Common Stock to be reserved for the purpose of conversion of Series
C
Preferred Stock require registration or listing with or approval of any
governmental authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise before such shares may be
validly issued or delivered upon conversion, the Company shall, at its sole
cost
and expense, in good faith and as expeditiously as possible, endeavor to secure
such registration, listing or approval, as the case may be.
6.
No
Preemptive Rights
.
Except
as provided in Section 5 hereof, no holder of the Series C Preferred Stock
shall
be entitled to rights to subscribe for, purchase or receive any part of any
new
or additional shares of any class, whether now or hereinafter authorized, or
of
bonds or debentures, or other evidences of indebtedness convertible into or
exchangeable for shares of any class, but all such new or additional shares
of
any class, or any bond, debentures or other evidences of indebtedness
convertible into or exchangeable for shares, may be issued and disposed of
by
the Board of Directors on such terms and for such consideration (to the extent
permitted by law), and to such person or persons as the Board of Directors
in
their absolute discretion may deem advisable.
7.
Conversion
Restrictions
.
(a)
Notwithstanding
anything to the contrary set forth in Section 5 of this Certificate of
Designations, at no time, other than in a bona fide Change of Control (as
defined below) transaction, may a holder of shares of Series C Preferred Stock
convert shares of the Series C Preferred Stock if the number of shares of Common
Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by such holder at such time, the
number of shares of Common Stock which would result in such holder owning more
than 4.99% of all of the Common Stock outstanding at such time; provided,
however, that upon a holder of Series C Preferred Stock providing the Company
with sixty-one (61) days notice (pursuant to Section 5(i) hereof) (the "Waiver
Notice") that such holder would like to waive Section 7(a) of this Certificate
of Designations with regard to any or all shares of Common Stock issuable upon
conversion of Series C Preferred Stock, this Section 7(a) shall be of no force
or effect with regard to those shares of Series C Preferred Stock referenced
in
the Waiver Notice. In the event a holder is unable to fully convert its shares
of Series C Preferred Stock in connection with either a mandatory conversion
pursuant to Section 5(c) hereof, or a conversion election following the delivery
of a Company's Redemption Notice pursuant to Section 8(e) hereof
due
to
the restrictions set forth in this Section 7(a), such holder may elect to
receive Series D Convertible Preferred Stock of the Company in lieu of shares
of
Common Stock convertible into the number of shares of Common Stock that would
have been delivered to such holder but for the limitations set forth in this
Section 7(a). The foregoing sentence shall not preclude a holder from waiving
at
any time its rights to limit its ownership to (i) 4.99% of all of the Common
Stock issued and outstanding at such time in accordance with this Section 7(a)
or (ii) 9.99% of all of the Common Stock issued and outstanding at such time
in
accordance with Section 7(b) hereof.
(b)
Notwithstanding
anything to the contrary set forth in Section 5 of this Certificate of
Designations, at no time may a holder of shares of Series C Preferred Stock
convert shares of the Series C Preferred Stock if the number of shares of Common
Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by such holder at such time, would
result in such holder beneficially owning (as determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules
thereunder) in excess of 9.99% of the then issued and outstanding shares of
Common Stock outstanding at such time; provided, however, that upon a holder
of
Series C Preferred Stock providing the Company with a Waiver Notice that such
holder would like to waive Section 7(b) of this Certificate of Designations
with
regard to any or all shares of Common Stock issuable upon conversion of Series
C
Preferred Stock, this Section 7(b) shall be of no force or effect with regard
to
those shares of Series C Preferred Stock referenced in the Waiver
Notice.
8.
Redemption
.
(a)
Redemption
Option Upon Change of Control
.
In
addition to any other rights of the Company or the holders of Series C Preferred
Stock contained herein, simultaneous with the occurrence of a Change of Control
(as defined below), the Company, at its option, or each holder of Series C
Preferred Stock, at such holder's option, shall have the right to redeem or
cause the Company to redeem, as applicable, all or a portion of the outstanding
Series C Preferred Stock in cash at a price per share of Series C Preferred
Stock equal to 100% of the Liquidation Preference Amount (the "Change of Control
Redemption Price"). Notwithstanding the foregoing to the contrary, (i) the
Company may effect a redemption pursuant to this Section 8(a) only if (A)
a
registration
statement providing for the resale of the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock is then in effect, (B)
trading
in the Common Stock shall not have been suspended by
the
Securities and Exchange Commission or the OTC Bulletin Board (or other exchange
or market on which the Common Stock is trading)
,
and (C)
the Company is in material compliance with the terms and conditions of this
Certificate of Designations and the other Transaction Documents;
and (ii)
in the case of a redemption at the option of a holder or holders of the Series
C
Preferred Stock, the Company shall have the sole option to pay the Change of
Control Redemption Price in cash or shares of Common Stock. The number of shares
of Common Stock to be issued as the Change of Control Redemption Price shall
be
determined by dividing (i) the total amount of the Change of Control Redemption
Price by (ii) the average Closing Bid and Ask Price of the Common Stock for
the
five (5) trading days immediately preceding the date such Change of Control
Redemption Price is due.
(b)
"Change
of Control"
.
A
"Change of Control" shall be deemed to have occurred at such time as a third
party not affiliated with the Company or any holders of the Series C Preferred
Stock shall have acquired, in one or a series of related transactions, equity
securities of the Company representing more than 50% of the outstanding voting
securities of the Company.
(c)
Mechanics
of Redemption at Option of Buyer Upon Change of Control
.
(i)
No
sooner
than fifteen (15) days nor later than ten (10) days prior to the consummation
of
a Change of Control, but not prior to the public announcement of such Change
of
Control, the Company shall deliver written notice thereof via facsimile and
overnight courier ("Notice of Change of Control") to each holder of Series
C
Preferred Stock. At any time after receipt of a Notice of Change of Control
(or,
in the event a Notice of Change of Control is not delivered at least ten (10)
days prior to a Change of Control, at any time within ten (10) days prior to
a
Change of Control), any holder of Series C Preferred Stock then outstanding
may
require the Company to redeem, effective immediately prior to the consummation
of such Change of Control, all of the holder's Series C Preferred Stock then
outstanding by delivering written notice thereof via facsimile and overnight
courier ("Notice of Redemption at Option of Buyer Upon Change of Control")
to
the Company, which Notice of Redemption at Option of Buyer Upon Change of
Control shall indicate (i) the number of shares of Series C Preferred Stock
that
such holder is electing to redeem and (ii) the Change of Control Redemption
Price, as calculated pursuant to Section 8(a) above.
(ii)
Upon
the
Company's receipt of a Notice(s) of Redemption at Option of Buyer Upon Change
of
Control from any holder of Series C Preferred Stock, the Company shall promptly
notify each holder of Series C Preferred Stock by facsimile of the Company's
receipt of such Notice(s) of Redemption at Option of Buyer Upon Change of
Control and each holder which has sent such a notice shall promptly submit
to
the Company such holder's Preferred Stock Certificates which such holder has
elected to have redeemed. The Change of Control Redemption Price shall be paid
in cash, or at the option of the Company in the case of a redemption at the
option of the holders of Series C Preferred Stock, in shares of Common Stock,
in
accordance with Sections 8(a) and (b) and Section 9 of this Certificate of
Designations. The Company shall deliver the Change of Control Redemption Price
immediately prior to or simultaneously with the consummation of the Change
of
Control; provided that a holder's Preferred Stock Certificates shall have been
so delivered to the Company (or an indemnification undertaking with respect
to
such Preferred Stock Certificates in the event of their loss, theft or
destruction); provided further that if the Company is unable to redeem all
of
the Series C Preferred Stock to be redeemed, the Company shall redeem an amount
from each holder of Series C Preferred Stock being redeemed equal to such
holder's pro-rata amount (based on the number of shares of Series C Preferred
Stock held by such holder relative to the number of shares of Series C Preferred
Stock outstanding) of all Series C Preferred Stock being redeemed. If the
Company shall fail to redeem all of the Series C Preferred Stock submitted
for
redemption (other than pursuant to a dispute as to the arithmetic calculation
of
the Redemption Price), in addition to any remedy such holder of Series C
Preferred Stock may have under this Certificate of Designations, the Change
of
Control Redemption Price payable in respect of such unredeemed Series C
Preferred Stock shall bear interest at the rate of 1.0% per month (prorated
for
partial months) until paid in full. Until the Company pays such unpaid Change
of
Control Redemption Price in full to a holder of shares of Series C Preferred
Stock submitted for redemption, such holder shall have the option (the "Void
Optional Redemption Option") to, in lieu of redemption, require the Company
to
promptly return to such holder(s) all of the shares of Series C Preferred Stock
that were submitted for redemption by such holder(s) under this Section 8 and
for which the Change of Control Redemption Price has not been paid, by sending
written notice thereof to the Company via facsimile (the "Void Optional
Redemption Notice"). Upon the Company's receipt of such Void Optional Redemption
Notice(s) and prior to payment of the full Change of Control Redemption Price
to
such holder, (i) the Notice(s) of Redemption at Option of Buyer Upon Change
of
Control shall be null and void with respect to those shares of Series C
Preferred Stock submitted for redemption and for which the Change of Control
Redemption Price has not been paid, (ii) the Company shall immediately return
any Series C Preferred Stock submitted to the Company by each holder for
redemption under this Section 8(c) and for which the Change of Control
Redemption Price has not been paid, and (iii) the Conversion Price of such
returned shares of Series C Preferred Stock shall be adjusted to the lesser
of
(A) the Conversion Price and (B) the lowest Closing Bid and Ask Price during
the
period beginning on the date on which the Notice(s) of Redemption at Option
of
Buyer Upon Change of Control is delivered to the Company and ending on the
date
on which the Void Optional Redemption Notice(s) is delivered to the Company;
provided that no adjustment shall be made if such adjustment would result in
an
increase of the Conversion Price then in effect. A holder's delivery of a Void
Optional Redemption Notice and exercise of its rights following such notice
shall not effect the Company's obligations to make any payments which have
accrued prior to the date of such notice other than interest
payments.
(d)
Mechanics
of Redemption at Option of Company Upon Change of Control
.
At any
time within ten (10) days prior to a Change of Control transaction, the Company
may redeem, effective immediately prior to the consummation of such Change
of
Control, all of the holder's Series C Preferred Stock then outstanding by
delivering written notice thereof via facsimile and overnight courier ("Notice
of Redemption at Option of Company Upon Change of Control") to each holder
of
Series C Preferred Stock, which Notice of Redemption at Option of Company Upon
Change of Control shall indicate (i) the number of shares of Series C Preferred
Stock that the Company is electing to redeem and (ii) the Change of Control
Redemption Price, as calculated pursuant to Section 8(a) above. The Change
of
Control Redemption Price shall be paid in cash in accordance with Section 8(a)
of this Certificate of Designations. On or prior to the Change of Control,
the
holders of Series C Preferred Stock shall surrender to the Company the
certificate or certificates representing such shares, in the manner and at
the
place designated in the Notice of Redemption at Option of Company Upon Change
of
Control. The Company shall deliver the Change of Control Redemption Price
immediately prior to or simultaneously with the consummation of the Change
of
Control; provided that a holder's Preferred Stock Certificates shall have been
so delivered to the Company (or an indemnification undertaking with respect
to
such Preferred Stock Certificates in the event of their loss, theft or
destruction). From and after the Change of Control transaction, unless there
shall have been a default in payment of the Change of Control Redemption Price,
all rights of the holders of Series C Preferred Stock as a holder of such Series
C Preferred Stock (except the right to receive the Change of Control Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to any redeemed shares of Series C Preferred Stock,
and
such shares shall not thereafter be transferred on the books of the Company
or
be deemed to be outstanding for any purpose whatsoever. Notwithstanding the
foregoing to the contrary, nothing contained herein shall limit a holder’s
ability to convert its shares of Series C Preferred Stock following the receipt
of the Notice of Redemption at Option of Company Upon Change of Control and
prior to the consummation of the Change of Control transaction.
(e)
Company's
Redemption Option
.
The
Company may redeem all or a portion of the Series C Preferred Stock outstanding
upon five (5) business days prior written notice (the "Company's Redemption
Notice") at a price per share of Series C Preferred Stock equal to 110% of
the
Liquidation Preference Amount (the “Company’s Redemption Price”); provided, that
if a holder has delivered a Conversion Notice to the Company for all or a
portion of the shares of Series C Preferred Stock, such shares of Series C
Preferred Stock designated to be redeemed may be converted by such holder;
provided further that if during the period between delivery of the Company's
Redemption Notice and the Redemption Date a holder shall become entitled to
deliver a Notice of Redemption at Option of Buyer Upon Change of Control, then
the right of such holder shall take precedence over the previously delivered
Company Redemption Notice. If a holder delivers a Conversion Notice but is
prohibited from converting all of its shares of Series C Preferred Stock as
a
result of the restrictions contained in Section 7 of this Certificate of
Designations, such shares of Series C Preferred Stock shall be exchanged for
shares of a new series of preferred stock with preferences, rights and
limitations substantially similar to those of the Series C Preferred Stock.
The
Company's Redemption Notice shall state the date of redemption which date shall
be five (5) business days after the Company has delivered the Company's
Redemption Notice (the "Company's Redemption Date"), the Company's Redemption
Price and the number of shares to be redeemed by the Company. The Company shall
deliver the Company's Redemption Price to the holder(s) within five (5) business
days after the Company has delivered the Company's Redemption Notice, provided,
that if the holder(s) delivers a Conversion Notice before the Company's
Redemption Date, then the portion of the Company's Redemption Price which would
be paid to redeem the shares of Series C Preferred Stock covered by such
Conversion Notice shall be returned to the Company upon delivery of the Common
Stock issuable in connection with such Conversion Notice to the holder(s).
On
the Redemption Date, the Company shall pay the Company's Redemption Price,
subject to any adjustment pursuant to the immediately preceding sentence, to
the
holder(s) on a pro rata basis, provided, however, that upon receipt by the
Company of the Preferred Stock Certificates to be redeemed pursuant to this
Section 8(e), the Company shall, on the next business day following the date
of
receipt by the Company of such Preferred Stock Certificates, pay the Company's
Redemption Price, subject to any adjustment pursuant to the immediately
preceding sentence, to the holder(s) on a pro rata basis. Notwithstanding the
foregoing to the contrary, the Company may effect a redemption pursuant to
this
Section 8(e) only if (A)
a
registration
statement providing for the resale of the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock is then in effect, (B)
trading
in the Common Stock shall not have been suspended by
the
Securities and Exchange Commission or the OTC Bulletin Board (or other exchange
or market on which the Common Stock is trading)
,
(C) the
Company is in material compliance with the terms and conditions of this
Certificate of Designations and the other Transaction Documents, and (D) the
Company is not in possession of any material non-public information
.
Nothing
contained herein shall limit a holder’s ability to convert its shares of Series
C Preferred Stock following the receipt of the Company’s Redemption Notice and
prior to the Company's Redemption Date.
9.
Inability
to Fully Convert
.
(a)
Holder's
Option if Company Cannot Fully Convert
.
If,
upon the Company's receipt of a Conversion Notice or on the Mandatory Conversion
Date, the Company cannot issue shares of Common Stock registered for resale
under a registration statement for any reason (unless such registration
statement is not then required to be effective pursuant to the Registration
Rights Agreement), including, without limitation, because the Company (w) does
not have a sufficient number of shares of Common Stock authorized and available,
(x) is otherwise prohibited by applicable law or by the rules or regulations
of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities from issuing
all of the Common Stock which is to be issued to a holder of Series C Preferred
Stock pursuant to a Conversion Notice or (y) fails to have a sufficient number
of shares of Common Stock registered for resale under the registration statement
(unless such registration statement is not then required to be effective
pursuant to the Registration Rights Agreement), then the Company shall issue
as
many shares of Common Stock as it is able to issue in accordance with such
holder's Conversion Notice and pursuant to Section 5(b)(ii) above and, with
respect to the unconverted Series C Preferred Stock (other than unconverted
Series C Preferred Stock as a result of the restrictions contained in Sections
7(a) or 7(b) hereof), the holder, solely at such holder's option, can elect,
within five (5) business days after receipt of notice from the Company thereof
to:
(i)
require
the Company to redeem from such holder those shares of Series C Preferred Stock
for which the Company is unable to issue Common Stock in accordance with such
holder's Conversion Notice ("Mandatory Redemption") at a price per share equal
to the Change of Control Redemption Price as of such Conversion Date (the
"Mandatory Redemption Price"); provided that the Company shall have the sole
option to pay the Mandatory Redemption Price in cash or shares of Common Stock.
The number of shares of Common Stock to be issued as the Mandatory Redemption
Price shall be determined by dividing (i) the total amount of the Mandatory
Redemption Price by (ii) the average Closing Bid and Ask Price of the Common
Stock for the five (5) trading days immediately preceding the date such
Mandatory Redemption Price is due;
(ii)
if
the
Company's inability to fully convert Series C Preferred Stock is pursuant to
Section 9(a)(y) above, require the Company to issue restricted shares of Common
Stock in accordance with such holder's Conversion Notice and pursuant to Section
5(b)(ii) above;
(iii)
void
its
Conversion Notice and retain or have returned, as the case may be, the shares
of
Series C Preferred Stock that were to be converted pursuant to such holder's
Conversion Notice (provided that a holder's voiding its Conversion Notice shall
not effect the Company's obligations to make any payments which have accrued
prior to the date of such notice); or
(iv)
exercise
its Buy-In rights pursuant to and in accordance with the terms and provisions
of
Section 5(b)(vi) hereof.
(b)
Mechanics
of Fulfilling Holder's Election
.
The
Company shall promptly send via facsimile to a holder of Series C Preferred
Stock, upon receipt of a facsimile copy of a Conversion Notice from such holder
which cannot be fully satisfied as described in Section 9(a) above, a notice
of
the Company's inability to fully satisfy such holder's Conversion Notice (the
"Inability to Fully Convert Notice"). Such Inability to Fully Convert Notice
shall indicate (i) the reason why the Company is unable to fully satisfy such
holder's Conversion Notice, (ii) the number of Series C Preferred Stock which
cannot be converted and (iii) the applicable Mandatory Redemption Price. Such
holder shall notify the Company of its election pursuant to Section 9(a) above
by delivering written notice via facsimile to the Company ("Notice in Response
to Inability to Convert").
(c)
Pro-rata
Conversion and Redemption
.
In the
event the Company receives a Conversion Notice from more than one holder of
Series C Preferred Stock on the same day and the Company can convert and redeem
some, but not all, of the Series C Preferred Stock pursuant to this Section
9,
the Company shall convert and redeem from each holder of Series C Preferred
Stock electing to have Series C Preferred Stock converted and redeemed at such
time an amount equal to such holder's pro-rata amount (based on the number
shares of Series C Preferred Stock held by such holder relative to the number
shares of Series C Preferred Stock outstanding) of all shares of Series C
Preferred Stock being converted and redeemed at such time.
(d)
Payment
of Redemption Price
.
If such
holder shall elect to have its shares redeemed pursuant to Section 9(a)(i)
above, the Company shall pay the Mandatory Redemption Price to such holder
within thirty (30) days of the Company's receipt of the holder's Notice in
Response to Inability to Convert, provided that prior to the Company's receipt
of the holder's Notice in Response to Inability to Convert the Company has
not
delivered a notice to such holder stating, to the satisfaction of the holder,
that the event or condition resulting in the Mandatory Redemption has been cured
and all Common Stock issuable to such holder in accordance with such holder's
Conversion Notice can and will be delivered to the holder. If the Company shall
fail to pay the applicable Mandatory Redemption Price to such holder on a timely
basis as described in this Section 8(d) (other than pursuant to a good faith
dispute of the arithmetic calculation of the Mandatory Redemption Price), in
addition to any remedy such holder of Series C Preferred Stock may have under
this Certificate of Designation, such unpaid amount shall bear interest at
the
rate of 1.0% per month (prorated for partial months) until paid in full. Until
the full Mandatory Redemption Price is paid in full to such holder, such holder
may (i) void the Mandatory Redemption with respect to those shares of Series
C
Preferred Stock for which the full Mandatory Redemption Price has not been
paid,
(ii) receive back such shares of Series C Preferred Stock, and (iii) require
that the Conversion Price of such returned shares of Series C Preferred Stock
be
adjusted to the lesser of (A) the Conversion Price and (B) the average Closing
Bid and Ask Price during the five day period ending on the date the holder
voided the Mandatory Redemption.
10.
Vote
to Change the Terms of or Issue Preferred Stock
.
The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than 75% of the then
outstanding shares of Series C Preferred Stock, shall be required (a) for any
change to this Certificate of Designations or the Company's Certificate of
Incorporation which would amend, alter, change or repeal any of the powers,
designations, preferences and rights of the Series C Preferred Stock or (b)
for
the issuance of additional shares of Series C Preferred Stock.
11.
Lost
or Stolen Certificates
.
Upon
receipt by the Company of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Preferred Stock Certificates
representing the shares of Series C Preferred Stock, and, in the case of loss,
theft or destruction, of an indemnification undertaking by the holder to the
Company (in form and substance satisfactory to the Company) and, in the case
of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date; provided, however, the Company shall
not
be obligated to re-issue Preferred Stock Certificates if the holder
contemporaneously requests the Company to convert such shares of Series C
Preferred Stock into Common Stock.
12.
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief
.
The
remedies provided in this Certificate of Designations shall be cumulative and
in
addition to all other remedies available under this Certificate of Designations,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Company to comply with the terms of this Certificate of Designations. Amounts
set forth or provided for herein with respect to payments, conversion and the
like (and the computation thereof) shall be the amounts to be received by the
holder thereof and shall not, except as expressly provided herein, be subject
to
any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the holders of the Series C Preferred Stock and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach, the holders of the Series C
Preferred Stock shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach or the Series C Preferred Stockholders'
reasonable perception of a threatened breach by the Company of the provisions
of
this Certificate of Designations, without the necessity of showing economic
loss
and without any bond or other security being required.
13.
Specific
Shall Not Limit General; Construction
.
No
specific provision contained in this Certificate of Designations shall limit
or
modify any more general provision contained herein. This Certificate of
Designation shall be deemed to be jointly drafted by the Company and all initial
purchasers of the Series C Preferred Stock and shall not be construed against
any person as the drafter hereof.
14.
Failure
or Indulgence Not Waiver
.
No
failure or delay on the part of a holder of Series C Preferred Stock in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right
or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
IN
WITNESS
WHEREOF, the undersigned has executed and subscribed this Certificate and does
affirm the foregoing as true this ___ day of September, 2007.
|
|
|
|
|
|
GLOWPOINT,
INC.
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
EXHIBIT
I
GLOWPOINT,
INC.
CONVERSION
NOTICE
Reference
is made to the Certificate of Designations, Preferences and Rights of the Series
C Preferred Stock of Glowpoint, Inc. (the "Certificate of Designations"). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series C Preferred Stock,
par
value $.0001 per share (the "Preferred Shares"), of Glowpoint, Inc., a Delaware
corporation (the "Company"), indicated below into shares of Common Stock, par
value $.0001 per share (the "Common Stock"), of the Company, by tendering the
stock certificate(s) representing the share(s) of Preferred Shares specified
below as of the date specified below.
Date
of
Conversion:
______________________________________________________________________
Number
of
Preferred Shares to be converted:
____________________________________________________
Stock
certificate no(s). of Preferred Shares to be converted:
_________________________________________
The
Common Stock have been sold pursuant to the Registration Statement (as defined
in the Registration Rights Agreement): YES ____ NO____
Please
confirm the following information:
Conversion
Price:
_________________________________________________________________________
Number
of
shares of Common Stock to be issued:
_________________________________________________
Number
of
shares of Common Stock beneficially owned or deemed
beneficially
owned by the Holder on the Date of Conversion:
________________________________________
Please
issue the Common Stock into which the Preferred Shares are being converted
and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
Issue
to:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
Facsimile
Number:
________________________________________________________________________
Name
of
bank/broker due to receive the underlying Common Stock:
___________________________________
Bank/broker's
four digit "DTC" participant number
(obtained
from the receiving bank/broker):
______________________________________________________
Authorization:
_______________________________________________________________________
By:
Title:
Dated:
__________________
CERTIFICATE
OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES
D
PREFERRED STOCK
OF
GLOWPOINT,
INC.
The
undersigned, the Chief Executive Officer and President of Glowpoint, Inc.,
a
Delaware corporation (the "Company"), in accordance with the provisions of
the
Delaware General Corporation Law, does hereby certify that, pursuant to the
authority conferred upon the Board of Directors by the Amended and Restated
Certificate of Incorporation of the Company, the following resolution creating
a
series of Series D Convertible Preferred Stock, was duly adopted on September
18, 2007.
RESOLVED,
that pursuant to the authority expressly granted to and vested in the Board
of
Directors of the Company by provisions of the Amended and Restated Certificate
of Incorporation of the Company (the "Certificate of Incorporation"), there
hereby is created out of the shares of Preferred Stock, par value $0.0001 per
share, of the Company authorized in Article IV of the Certificate of
Incorporation (the "Preferred Stock"), a series of Preferred Stock of the
Company, to be named "Series D Convertible Preferred Stock,” consisting of Four
Thousand (4,000) shares, which series shall have the following designations,
powers, preferences and relative and other special rights and the following
qualifications, limitations and restrictions:
1.
Designation and Rank
.
The
designation of such series of the Preferred Stock shall be the Series D
Convertible Preferred Stock, par value $0.0001 per share (the "Series D
Preferred Stock"). The maximum number of shares of Series D Preferred Stock
shall be Four Thousand (4,000) shares. The Series D Preferred Stock shall rank
prior to the common stock, par value $0.0001 per share (the "Common Stock")
for
purposes of liquidation preference, and to all other classes and series of
equity securities of the Company that by their terms rank junior to the Series
D
Preferred Stock ("Junior Stock"), but shall be subordinate to the Company’s
Series C Preferred Stock. Subject to Section 3(a), the Series D Preferred Stock
shall be subordinate to and rank junior to all indebtedness of the Company
now
or hereafter outstanding.
2.
Dividends
.
Whenever the Board of Directors declares a dividend on the Common Stock each
holder of record of a share of Series D Preferred Stock, or any fraction of
a
share of Series D Preferred Stock, on the date set by the Board of Directors
to
determine the owners of the Common Stock of record entitled to receive such
dividend (the “Record Date”) shall be entitled to receive, out of any assets at
the time legally available therefore, an amount equal to such dividend declared
on one share of Common Stock multiplied by the number of shares of Common Stock
into which such share, or such fraction of a share, of Series D Preferred Stock
could be converted on the Record Date.
3.
Voting
Rights
.
(a)
Class
Voting Rights
.
The
Series D Preferred Stock shall have the following class voting rights. So long
as any shares of the Series D Preferred Stock remain outstanding, the Company
shall not, without the affirmative vote or consent of the holders of at least
three-fourths (3/4) of the shares of the Series D Preferred Stock outstanding
at
the time, given in person or by proxy, either in writing or at a meeting, in
which the holders of the Series D Preferred Stock vote separately as a class,
amend, alter or repeal the provisions of the Series D Preferred Stock so as
to
adversely affect any right, preference, privilege or voting power of the Series
D Preferred Stock.
(b)
General
Voti
ng
Rights
.
Except
with respect to transactions upon which the Series D Preferred Stock shall
be
entitled to vote separately as a class pursuant to Section 3(a) above, the
Series D Preferred Stock shall have no voting rights. The Common Stock into
which the Series D Preferred Stock is convertible shall, upon issuance, have
all
of the same voting rights as other issued and outstanding Common Stock of the
Company.
4.
Liquidation
Preference
.
(a)
In
the
event of the liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Company, the holders of shares
of the Series D Preferred Stock then outstanding shall be entitled to receive,
out of the assets of the Company, whether such assets are capital or surplus
of
any nature, an amount equal an amount per share of Series D Preferred Stock
calculated by taking the total amount available for distribution to holders
of
all the Company’s outstanding Common Stock before deduction of any preference
payments for the Series D Preferred Stock, divided by the total of (x) all
of
the then outstanding shares of the Company’s Common Stock, plus (y) all of the
shares of the Company’s Common Stock into which all of the outstanding shares of
the Series D Preferred Stock can be converted (the “Liquidation Preference
Amount”) before any payment shall be made or any assets distributed to the
holders of the Common Stock or any other Junior Stock. If the assets of the
Company are sufficient to pay in part, but are not sufficient to pay in full,
the Liquidation Preference Amount payable to the holders of outstanding shares
of the Series D Preferred Stock and any series of preferred stock or any other
class of stock on a parity, as to rights on liquidation, dissolution or winding
up, with the Series D Preferred Stock, then all of said assets available to
pay
a part of the Liquidation Preference Amount to the holders of the outstanding
shares of Series D Preferred Stock and the other classes of stock on a parity
as
to rights on liquidation, dissolution or winding up, will be distributed among
the holders of the Series D Preferred Stock and the other classes of stock
on a
parity with the Series D Preferred Stock, if any, ratably in accordance with
the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. The liquidation payment with respect to each
outstanding fractional share of Series D Preferred Stock shall be equal to
a
ratably proportionate amount of the liquidation payment with respect to each
outstanding share of Series D Preferred Stock. All payments for which this
Section 4(a) provides shall be in cash, property (valued at its fair market
value as determined by an independent appraiser reasonably acceptable to the
holders of a majority of the Series D Preferred Stock), or a combination
thereof;
provided
,
however
,
that no
cash shall be paid to holders of Junior Stock unless each holder of the
outstanding shares of Series D Preferred Stock has been paid in cash the full
Liquidation Preference Amount to which such holder is entitled as provided
herein. After payment of the full Liquidation Preference Amount to which each
holder is entitled, such holders of shares of Series D Preferred Stock will
not
be entitled to any further participation as such in any distribution of the
assets of the Company.
(b)
A
consolidation or merger of the Company with or into any other corporation
or
corporations, or a sale of all or substantially all of the assets of the
Company, or the effectuation by the Company of a transaction or series of
related transactions in which more than 50% of the voting shares of the Company
is disposed of or conveyed, shall not be deemed to be a liquidation,
dissolution, or winding up within the meaning of this Section 4. In the event
of
the merger or consolidation of the Company with or into another corporation,
subject to Section 5(e)(v), the Series D Preferred Stock shall maintain its
relative powers, designations and preferences provided for herein and no
merger
shall result inconsistent therewith.
(c)
Written
notice of any voluntary or involuntary liquidation, dissolution or winding
up of
the affairs of the Company, stating a payment date and the place where the
distributable amounts shall be payable, shall, to the extent possible, be given
by mail, postage prepaid, no less than twenty (20) days prior to the payment
date stated therein, to the holders of record of the Series D Preferred Stock
at
their respective addresses as the same shall appear on the books of the
Company.
5.
Conversion
.
The
holder of Series D Preferred Stock shall have the following conversion rights
(the “Conversion Rights”):
(a)
Right
to Convert
.
At any
time on or after the Issuance Date, the holder of any such shares of Series
D
Preferred Stock may, at such holder’s option, subject to the limitations set
forth in Section 7 herein, elect to convert (a “Voluntary Conversion”) all or
any portion of the shares of Series D Preferred Stock held by such person into
a
number of fully paid and nonassessable shares of Common Stock at a conversion
rate of Ten Thousand (10,000) shares of Common Stock for each share of Series
D
Preferred Stock (subject to adjustments set forth in Section 5(e) herein, the
“Conversion Rate”). The Company shall keep written records of the conversion of
the shares of Series D Preferred Stock converted by each holder. A holder shall
be required to deliver the original certificates representing the shares of
Series D Preferred Stock upon any conversion of the Series D Preferred Stock
as
provided in Section 5(b) below.
(b)
Mechanics
of Voluntary Conversion
.
The
Voluntary Conversion of Series D Preferred Stock shall be conducted in the
following manner:
(i)
Holder's
Delivery Requirements
.
To
convert Series D Preferred Stock into full shares of Common Stock on any date
(the "Voluntary Conversion Date"), the holder thereof shall (A) transmit by
facsimile (or otherwise deliver), for receipt on or prior to 5:00 p.m., New
York
time on such date, a copy of a fully executed notice of conversion in the form
attached hereto as Exhibit I (the "Conversion Notice"), to the Company; and
(B)
as soon as practicable following such Voluntary Conversion Date, surrender
to a
common carrier for delivery to the Company the original certificates
representing the shares of Series D Preferred Stock being converted (or an
indemnification undertaking with respect to such shares in the case of their
loss, theft or destruction) (the "Preferred Stock Certificates") and the
originally executed Conversion Notice.
(ii)
Company's
Response
.
Upon
receipt by the Company of a copy of the fully executed Conversion Notice, the
Company or its designated transfer agent (the "Transfer Agent"), as applicable,
shall within three (3) business days following the date of receipt by the
Company of a copy of the fully executed Conversion Notice, issue and deliver
to
the Depository Trust Company ("DTC") account on the holder's behalf via the
Deposit Withdrawal Agent Commission System ("DWAC") as specified in the
Conversion Notice, registered in the name of the holder or its designee, for
the
number of shares of Common Stock to which the holder shall be entitled.
Notwithstanding the foregoing to the contrary, the Company or its Transfer
Agent
shall only be required to issue and deliver the shares to the DTC on a holder's
behalf via DWAC if (i) such conversion is in connection with a sale, (ii) the
shares of Common Stock may be issued without restrictive legends and (iii)
the
Company and the Transfer Agent are participating in DTC through the DWAC
system
.
If all
of the conditions set forth in clauses (i), (ii) and (iii) above are not
satisfied, the Company shall deliver physical certificates to the holder or
its
designee. If the number of shares of Preferred Stock represented by the
Preferred Stock Certificate(s) submitted for conversion is greater than the
number of shares of Series D Preferred Stock being converted, then the Company
shall, as soon as practicable and in no event later than three (3) business
days
after receipt of the Preferred Stock Certificate(s) and at the Company's
expense, issue and deliver to the holder a new Preferred Stock Certificate
representing the number of shares of Series D Preferred Stock not
converted.
(iii)
Dispute
Resolution
.
In the
case of a dispute as to the arithmetic calculation of the number of shares
of
Common Stock to be issued upon conversion, the Company shall cause its Transfer
Agent to promptly issue to the holder the number of shares of Common Stock
that
is not disputed and shall submit the arithmetic calculations to the holder
via
facsimile as soon as possible, but in no event later than two (2) business
days
after receipt of such holder's Conversion Notice. If such holder and the Company
are unable to agree upon the arithmetic calculation of the number of shares
of
Common Stock to be issued upon such conversion within two (2) business days
of
such disputed arithmetic calculation being submitted to the holder, then the
Company shall within two (2) business days submit via facsimile the disputed
arithmetic calculation of the number of shares of Common Stock to be issued
upon
such conversion to the Company's independent, outside accountant (the
"Accountant"). The Company shall cause the Accountant to perform the
calculations and notify the Company and the holder of the results no later
than
five (5) business days from the time it receives the disputed calculations.
The
Accountant's calculation shall be binding upon all parties absent manifest
error. The reasonable expenses of such Accountant in making such determination
shall be paid by the Company, in the event the holder's calculation was correct,
or by the holder, in the event the Company's calculation was correct, or equally
by the Company and the holder in the event that neither the Company's or the
holder's calculation was correct. The period of time in which the Company is
required to effect conversions or redemptions under this Certificate of
Designations shall be tolled with respect to the subject conversion or
redemption pending resolution of any dispute by the Company made in good faith
and in accordance with this Section 5(b)(iii).
(iv)
Record
Holder
.
The
person or persons entitled to receive the shares of Common Stock issuable upon
a
conversion of the Series D Preferred Stock shall be treated for all purposes
as
the record holder or holders of such shares of Common Stock on the Conversion
Date.
(v)
Company's
Failure to Timely Convert
.
If
within five (5) business days of the Company's receipt of an executed copy
of
the Conversion Notice (so long as the applicable Preferred Stock Certificates
and original Conversion Notice are received by the Company on or before such
fifth business day), the Transfer Agent shall fail to issue and deliver to
a
holder the number of shares of Common Stock to which such holder is entitled
upon such holder's conversion of the Series D Preferred Stock or to issue a
new
Preferred Stock Certificate representing the number of shares of Series D
Preferred Stock to which such holder is entitled pursuant to Section 5(b)(ii)
(a
"Conversion Failure"), in addition to all other available remedies which such
holder may pursue hereunder and under any other agreements entered into in
connection with the issuance of the Series D Preferred Stock (including any
indemnification provisions contained therein), the Company shall pay additional
damages to such holder on each week after such fifth (5th) business day that
such conversion is not timely effected (so long as the applicable Preferred
Stock Certificates and original Conversion Notice are received by the Company
on
or before such fifth business day) in an amount equal 0.5% of the product of
(A)
the sum of the number of shares of Common Stock not issued to the holder on
a
timely basis pursuant to Section 5(b)(ii) and to which such holder is entitled
and, in the event the Company has failed to deliver a Preferred Stock
Certificate to the holder on a timely basis pursuant to Section 5(b)(ii), the
number of shares of Common Stock issuable upon conversion of the shares of
Series D Preferred Stock represented by such Preferred Stock Certificate, as
of
the last possible date which the Company could have issued such Preferred Stock
Certificate to such holder without violating Section 5(b)(ii) and (B) the
Closing Bid and Ask Price (as defined below) of the Common Stock on the last
possible date which the Company could have issued such Common Stock and such
Preferred Stock Certificate, as the case may be, to such holder without
violating Section 5(b)(ii). If the Company fails to pay the additional damages
set forth in this Section 5(b)(v) within seven (7) business days of the date
incurred, then such payment shall bear interest at the rate of 1.0% per month
(pro rated for partial months) until such payments are made. The term "Closing
Bid and Ask Price" shall mean, for any security as of any date, the last average
of the closing bid and ask price of such security on the OTC Bulletin Board
or
other principal exchange on which such security is traded as reported by
Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the last closing trade price of such security as reported by
Bloomberg, or, if no last closing trade price is reported for such security
by
Bloomberg, the average of the bid and ask prices of any market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau,
Inc.
If the Closing Bid and Ask Price cannot be calculated for such security on
such
date on any of the foregoing bases, the Closing Bid and Ask Price of such
security on such date shall be the fair market value as determined in good
faith
by the Board of Directors of the Company.
(vi)
Buy-In
Rights
.
In
addition to any other rights available to the holders of Series D Preferred
Stock, if within three (3) business days of the Company's receipt of an executed
copy of the Conversion Notice (so long as the applicable Preferred Stock
Certificates and original Conversion Notice are received by the Company on
or
before such third business day), the Transfer Agent shall fail to issue and
deliver to a holder the number of shares of Common Stock to which such holder
is
entitled upon such holder's conversion of the Series D Preferred Stock (a
"Conversion Failure"), and if after such date the holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the holder of the shares of Common
Stock issuable upon conversion of Series D Preferred Stock which the holder
anticipated receiving upon such conversion (a “Buy-In”), then the Company shall
(1) pay in cash to the holder the amount by which (x) the holder’s total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A)
the
number of shares of Common Stock issuable upon conversion of Series D Preferred
Stock that the Company was required to deliver to the holder in connection
with
the conversion at issue times (B) the price at which the sell order giving
rise
to such purchase obligation was executed, and (2) deliver to the holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its conversion and delivery obligations hereunder. For
example, if the holder purchases Common Stock having a total purchase price
of
$11,000 to cover a Buy-In with respect to an attempted conversion of shares
of
Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence
the Company shall be required to pay to the holder $1,000. The holder shall
provide the Company written notice indicating the amounts payable to the holder
in respect of the Buy-In, together with applicable confirmations and other
evidence reasonably requested by the Company. Nothing herein shall limit a
holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of the Series
D
Preferred Stock as required pursuant to the terms hereof.
(c)
Intentionally
Omitted
.
(d)
Intentionally
Omitted
.
(e)
Adjustments
of Conversion Rate
.
(i)
Adjustments
for Stock Splits and Combinations
.
If the
Company shall at any time or from time to time after the Issuance Date, effect
a
stock split of the outstanding Common Stock, the Conversion Rate shall be
proportionately increased. If the Company shall at any time or from time to
time
after the Issuance Date, combine the outstanding shares of Common Stock, the
Conversion Rate shall be proportionately decreased. Any adjustments under this
Section 5(e)(i) shall be effective at the close of business on the date the
stock split or combination occurs.
(ii)
Adjustments
for Certain Dividends and Distributions
.
If the
Company shall at any time or from time to time after the Issuance Date, make
or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, then, and in each event, the Conversion Rate shall be increased as of
the
time of such issuance or, in the event such record date shall have been fixed,
as of the close of business on such record date, by multiplying, as applicable,
the Conversion Rate then in effect by a fraction:
(1)
the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately after such issuance on the close of business on
such
record date; and
(2)
the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance on the close
of
business on such record date.
(iii)
Adjustment
for Other Dividends and Distributions
.
If the
Company shall at any time or from time to time after the Issuance Date, make
or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in securities
of
the Company other than shares of Common Stock, then, and in each event, an
appropriate revision to the applicable Conversion Rate shall be made and
provision shall be made (by adjustments of the Conversion Rate or otherwise)
so
that the holders of Series D Preferred Stock shall receive upon conversions
thereof, in addition to the number of shares of Common Stock receivable thereon,
the number of securities of the Company which they would have received had
their
Series D Preferred Stock been converted into Common Stock on the date of such
event and had thereafter, during the period from the date of such event to
and
including the Conversion Date, retained such securities (together with any
distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 5(e)(iii) with
respect to the rights of the holders of the Series D Preferred
Stock.
(iv)
Adjustments
for Reclassification, Exchange or Substitution
.
If the
Common Stock issuable upon conversion of the Series D Preferred Stock at any
time or from time to time after the Issuance Date shall be changed to the same
or different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of
a
stock split or combination of shares or stock dividends provided for in Sections
5(e)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale
of
assets provided for in Section 5(e)(v)), then, and in each event, an appropriate
revision to the Conversion Rate shall be made and provisions shall be made
so
that the holder of each share of Series D Preferred Stock shall have the right
thereafter to convert such share of Series D Preferred Stock into the kind
and
amount of shares of stock and other securities receivable upon reclassification,
exchange, substitution or other change, by holders of the number of shares
of
Common Stock into which such share of Series D Preferred Stock might have been
converted immediately prior to such reclassification, exchange, substitution
or
other change, all subject to further adjustment as provided herein.
(v)
Adjustments
for Reorganization, Merger, Consolidation or Sales of
Assets
.
If at
any time or from time to time after the Issuance Date there shall be a capital
reorganization of the Company (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in Section 5(e)(i),
(ii) and (iii), or a reclassification, exchange or substitution of shares
provided for in Section 5(e)(iv)), or a merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all of
the
Company’s properties or assets to any other person (an “Organic Change”), then
as a part of such Organic Change an appropriate revision to the Conversion
Rate
shall be made and provision shall be made so that the holder of each share
of
Series D Preferred Stock shall have the right thereafter to convert such share
of Series D Preferred Stock into the kind and amount of shares of stock and
other securities or property of the Company or any successor corporation
resulting from the Organic Change which the holder of such share of Series
D
Preferred Stock would have received if such share of Series D Preferred Stock
had been converted prior to such Organic Change.
(vi)
Record
Date
.
In case
the Company shall take record of the holders of its Common Stock or any other
Preferred Stock for the purpose of entitling them to subscribe for or purchase
Common Stock or Convertible Securities, then the date of the issue or sale
of
the shares of Common Stock shall be deemed to be such record date.
(f)
No
Impairment
.
The
Company shall not, by amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith, assist
in the carrying out of all the provisions of this Section 5 and in the taking
of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series D Preferred Stock against
impairment. In the event a holder shall elect to convert any shares of Series
D
Preferred Stock as provided herein, the Company cannot refuse conversion based
on any claim that such holder or any one associated or affiliated with such
holder has been engaged in any violation of law, unless (i) an order from the
Securities and Exchange Commission prohibiting such conversion or (ii) an
injunction from a court, on notice, restraining and/or adjoining conversion
of
all or of said shares of Series D Preferred Stock shall have been
issued.
(g)
Certificates
as to Adjustments
.
Upon
occurrence of each adjustment or readjustment of the Conversion Rate or number
of shares of Common Stock issuable upon conversion of the Series D Preferred
Stock pursuant to this Section 5, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof
and
furnish to each holder of such Series D Preferred Stock a certificate setting
forth such adjustment and readjustment, showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon written
request of the holder of such affected Series D Preferred Stock, at any time,
furnish or cause to be furnished to such holder a like certificate setting
forth
such adjustments and readjustments, the Conversion Rate in effect at the time,
and the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon the conversion
of a share of such Series D Preferred Stock. Notwithstanding the foregoing,
the
Company shall not be obligated to deliver a certificate unless such certificate
would reflect an increase or decrease of at least one percent of such adjusted
amount.
(h)
Issue
Taxes
.
The
Company shall pay any and all issue and other taxes, excluding federal, state
or
local income taxes, that may be payable in respect of any issue or delivery
of
shares of Common Stock on conversion of shares of Series D Preferred Stock
pursuant hereto;
provided
,
however
,
that
the Company shall not be obligated to pay any transfer taxes resulting from
any
transfer requested by any holder in connection with any such
conversion.
(i)
Notices
.
All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile or three (3) business
days
following being mailed by certified or registered mail, postage prepaid,
return-receipt requested, addressed to the holder of record at its address
appearing on the books of the Company. The Company will give written notice
to
each holder of Series D Preferred Stock at least twenty (20) days prior to
the
date on which the Company closes its books or takes a record (I) with respect
to
any dividend or distribution upon the Common Stock, (II) with respect to any
pro
rata subscription offer to holders of Common Stock or (III) for determining
rights to vote with respect to any Organic Change, dissolution, liquidation
or
winding-up and in no event shall such notice be provided to such holder prior
to
such information being made known to the public. The Company will also give
written notice to each holder of Series D Preferred Stock at least twenty (20)
days prior to the date on which any Organic Change, dissolution, liquidation
or
winding-up will take place and in no event shall such notice be provided to
such
holder prior to such information being made known to the public.
(j)
Fractional
Shares
.
No
fractional shares of Common Stock shall be issued upon conversion of the Series
D Preferred Stock. In lieu of any fractional shares to which the holder would
otherwise be entitled, the Company shall pay cash equal to the product of such
fraction multiplied by the average of the closing bid prices of the Common
Stock
for the five (5) consecutive trading immediately preceding the Voluntary
Conversion Date.
(k)
Reservation
of Common Stock
.
The
Company shall, so long as any shares of Series D Preferred Stock are
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Series
D
Preferred Stock, such number of shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all of the Series D Preferred
Stock then outstanding (without giving effect to the limitations set forth
in
Section 7 hereof).
(l)
Retirement
of Series D Preferred Stock
.
Conversion of Series D Preferred Stock shall be deemed to have been effected
on
the applicable Voluntary Conversion Date. The Company shall keep written records
of the conversion of the shares of Series D Preferred Stock converted by each
holder. A holder shall be required to deliver the original certificates
representing the shares of Series D Preferred Stock upon any conversion of
the
Series D Preferred Stock represented by such certificates.
(m)
Regulatory
Compliance
.
If any
shares of Common Stock to be reserved for the purpose of conversion of Series
D
Preferred Stock require registration or listing with or approval of any
governmental authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise before such shares may be
validly issued or delivered upon conversion, the Company shall, at its sole
cost
and expense, in good faith and as expeditiously as possible, endeavor to secure
such registration, listing or approval, as the case may be.
6.
No
Preemptive or Redemption Rights
.
Except
as provided in Section 5 hereof no holder of the Series D Preferred Stock shall
be entitled to rights to subscribe for, purchase or receive any part of any
new
or additional shares of any class, whether now or hereafter authorized, or
of
bonds or debentures, or other evidences of indebtedness convertible into or
exchangeable for shares of any class, but all such new or additional shares
of
any class, or any bond, debentures or other evidences of indebtedness
convertible into or exchangeable for shares, may be issued and disposed of
by
the Board of Directors on such terms and for such consideration (to the extent
permitted by law), and to such person or persons as the Board of Directors
in
their absolute discretion may deem advisable. Except as provided in Section
5
neither the Company nor the holder has the right to have the Company redeem
the
Series D Preferred Stock.
7.
Conversion
Restriction
.
(a)
Notwithstanding
anything to the contrary set forth in Section 5 of this Certificate of
Designations, at no time may a holder of shares of Series D Preferred Stock
convert shares of the Series D Preferred Stock if the number of shares of Common
Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by such holder at such time, the
number of shares of Common Stock which would result in such holder beneficially
owning (as determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules thereunder) more than 4.99%
of
all of the Common Stock outstanding at such time; provided, however, that upon
a
holder of Series D Preferred Stock providing the Company with sixty-one (61)
days notice (pursuant to Section 5(i) hereof) (the "Waiver Notice") that such
holder would like to waive Section 7(a) of this Certificate of Designations
with
regard to any or all shares of Common Stock issuable upon conversion of Series
D
Preferred Stock, this Section 7(a) shall be of no force or effect with regard
to
those shares of Series D Preferred Stock referenced in the Waiver Notice.
(b)
Notwithstanding
anything to the contrary set forth in Section 5 of this Certificate of
Designations, at no time may a holder of shares of Series D Preferred Stock
convert shares of the Series D Preferred Stock if the number of shares of Common
Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by such holder at such time, would
result in such holder beneficially owning (as determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules
thereunder) in excess of 9.99% of the then issued and outstanding shares of
Common Stock outstanding at such time; provided, however, that upon a holder
of
Series D Preferred Stock providing the Company with a Waiver Notice that such
holder would like to waive Section 7(b) of this Certificate of Designations
with
regard to any or all shares of Common Stock issuable upon conversion of Series
D
Preferred Stock, this Section 7(b) shall be of no force or effect with regard
to
those shares of Series D Preferred Stock referenced in the Waiver
Notice.
8.
Inability
to Fully Convert
.
(a)
Holder’s
Option if Company Cannot Fully Convert
.
If,
upon the Company’s receipt of a Conversion Notice, the Company cannot issue
shares of Common Stock for any reason, including, without limitation, because
the Company (x) does not have a sufficient number of shares of Common Stock
authorized and available or (y) is otherwise prohibited by applicable law or
by
the rules or regulations of any stock exchange, interdealer quotation system
or
other self-regulatory organization with jurisdiction over the Company or its
securities, from issuing all of the Common Stock which is to be issued to a
holder of Series D Preferred Stock pursuant to a Conversion Notice, then the
Company shall issue as many shares of Common Stock as it is able to issue in
accordance with such holder’s Conversion Notice and with respect to the
unconverted Series D Preferred Stock (the “Unconverted Preferred Stock”) the
holder, solely at such holder’s option, can elect, at any time after receipt of
notice from the Company that there is Unconverted Preferred Stock, to void
the
holder’s Conversion Notice as to the number of shares of Common Stock the
Company is unable to issue and retain or have returned, as the case may be,
the
certificates for the shares of the Unconverted Preferred Stock.
In
the
event a Holder shall elect to convert any shares of Series D Preferred Stock
as
provided herein, the Company cannot refuse conversion based on any claim that
such Holder or any one associated or affiliated with such Holder has been
engaged in any violation of law, violation of an agreement to which such Holder
is a party or for any reason whatsoever, unless, an injunction from a court,
on
notice, restraining and or enjoining conversion of all or any of said shares
of
Series D Preferred Stock shall have issued.
(b)
Mechanics
of Fulfilling Holder’s Election
.
The
Company shall immediately send via facsimile to a holder of Series D Preferred
Stock, upon receipt of a facsimile copy of a Conversion Notice from such holder
which cannot be fully satisfied as described in Section 8(a) above, a notice
of
the Company’s inability to fully satisfy such holder’s Conversion Notice (the
“Inability to Fully Convert Notice”). Such Inability to Fully Convert Notice
shall indicate (i) the reason why the Company is unable to fully satisfy such
holder’s Conversion Notice and (ii) the number of shares of Series D Preferred
Stock which cannot be converted.
(c)
Pro-rata
Conversion
.
In the
event the Company within a period of ten days receives Conversion Notices from
more than one holder of Series D Preferred Stock and the Company can convert
some, but not all, of the Series D Preferred Stock required to be converted
as a
result of such Conversion Notices, the Company shall convert from each holder
of
Series D Preferred Stock electing to have Series D Preferred Stock converted
within such ten day period, an amount equal to the number of shares of Series
D
Preferred Stock the Company can convert in such ten day period multiplied by
a
fraction, the numerator of which shall be the number of shares of Series D
Preferred Stock such holder elected to have converted in such ten day period
and
the denominator of which shall be the total number of shares of Series D
Preferred Stock all holders elected to have converted in such ten day
period.
9.
Vote
to Change the Terms of or Issue Preferred Stock
.
The
affirmative vote at a meeting duly called for such purpose, or the written
consent without a meeting, of the holders of not less than three-fourths (3/4)
of the then outstanding shares of Series D Preferred Stock, shall be required
for any change to this Certificate of Designation or the Company’s Certificate
of Incorporation which would amend, alter, change or repeal any of the powers,
designations, preferences and rights of the Series D Preferred
Stock.
10.
Lost
or Stolen Certificates
.
Upon
receipt by the Company of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Preferred Stock Certificates
representing the shares of Series D Preferred Stock, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the holder to the
Company and, in the case of mutilation, upon surrender and cancellation of
the
Preferred Stock Certificate(s), the Company shall execute and deliver new
preferred stock certificate(s) of like tenor and date.
11.
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief
.
The
remedies provided in this Certificate of Designation shall be cumulative and
in
addition to all other remedies available under this Certificate of Designation,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder’s right to pursue actual damages for any failure by the
Company to comply with the terms of this Certificate of Designation. Amounts
set
forth or provided for herein with respect to conversion and the like (and the
computation thereof) shall be the amounts to be received by the holder thereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm
to
the holders of the Series D Preferred Stock and that the remedy at law for
any
such breach may be inadequate. The Company therefore agrees that, in the event
of any such breach or threatened breach, the holders of the Series D Preferred
Stock shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
12.
-
Specific
Shall Not Limit General; Construction
.
No
specific provision contained in this Certificate of Designation shall limit
or
modify any more general provision contained herein.
13.
-
Failure
or Indulgence Not Waiver
.
No
failure or delay on the part of a holder of Series D Preferred Stock in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right
or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
IN
WITNESS WHEREOF, the undersigned has executed and subscribed this Amended
Certificate and does affirm the foregoing as true this 21st day of September,
2007.
|
|
|
|
|
|
GLOWPOINT,
INC.
|
|
|
|
|
|
By:
|
|
|
|
Name:
Michael
Brandofino
|
|
|
Title:
President
and CEO
|
EXHIBIT
I
GLOWPOINT,
INC.
CONVERSION
NOTICE
Reference
is made to the Certificate of Designations, Preferences and Rights of the Series
D Preferred Stock of Glowpoint, Inc. (the "Certificate of Designations"). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series D Preferred Stock,
par
value $0.0001 per share (the "Preferred Shares"), of Glowpoint, Inc., a Delaware
corporation (the "Company"), indicated below into shares of Common Stock, par
value $.0001 per share (the "Common Stock"), of the Company, by tendering the
stock certificate(s) representing the share(s) of Preferred Shares specified
below as of the date specified below.
Date
of
Conversion:
______________________________________________________________________
Number
of
Preferred Shares to be converted:
____________________________________________________
Stock
certificate no(s). of Preferred Shares to be converted:
_________________________________________
The
Common Stock have been sold pursuant to the Registration Statement (as defined
in the Registration Rights Agreement): YES ____ NO____
Please
confirm the following information:
_______________________________________________________
Conversion
Price:
_________________________________________________________________________
Number
of
shares of Common Stock to be issued:
_________________________________________________
Number
of
shares of Common Stock beneficially owned or deemed
____________________________________
beneficially
owned by the Holder on the Date of Conversion:
________________________________________
Please
issue the Common Stock into which the Preferred Shares are being converted
and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
Issue
to:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
Facsimile
Number:
________________________________________________________________________
Name
of
bank/broker due to receive the underlying Common Stock:
___________________________________
Bank/broker's
four digit "DTC" participant number
(obtained
from the receiving bank/broker):
______________________________________________________
Authorization:
_______________________________________________________________________
By:
Title:
Dated:
__________________
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF 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 THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
WARRANT
TO PURCHASE
SHARES
OF
COMMON STOCK
OF
GLOWPOINT,
INC.
Expires
September 20, 2012
|
No.:
W-PA-07- __
|
Number
of Shares: ___________
|
Date
of
Issuance: September 21, 2007
FOR
VALUE
RECEIVED, the undersigned, Glowpoint, Inc., a Delaware corporation (together
with its successors and assigns, the "
Issuer
"),
hereby certifies that _______________________________ or its registered assigns
is entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________________________________ (_____________) shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however,
to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 8 hereof.
1.
Term
.
The
term of this Warrant shall commence on September 21, 2007 and shall expire
at
5:00 p.m., Eastern Time, on September 20, 2012 (such period being the
"
Term
").
2.
Method
of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange
.
(a)
Time
of Exercise
.
The
purchase rights represented by this Warrant may be exercised in whole or in
part
during the Term.
(b)
Method
of Exercise
.
The
Holder hereof may exercise this Warrant, in whole or in part, by the surrender
of this Warrant (with the exercise form attached hereto duly executed) at the
principal office of the Issuer, and by the payment to the Issuer of an amount
of
consideration therefor equal to the Warrant Price in effect on the date of
such
exercise multiplied by the number of shares of Warrant Stock with respect to
which this Warrant is then being exercised, payable at such Holder's election
(i) by certified or official bank check or
by
wire
transfer to an account designated by the Issuer,
(ii) by
"cashless exercise" in accordance with the provisions of Section 2(c), or (iii)
by a combination of the foregoing methods of payment selected by the Holder
of
this Warrant.
(c)
Cashless
Exercise
.
Notwithstanding any provisions herein to the contrary if the Per Share Market
Value of one share of Common Stock is greater than the Warrant Price (at the
date of calculation as set forth below), in lieu of exercising this Warrant
by
payment of cash, the Holder may exercise this Warrant by a cashless exercise
and
shall receive the number of shares of Common Stock equal to an amount (as
determined below) by surrender of this Warrant at the principal office of the
Issuer together with the properly endorsed Notice of Exercise in which event
the
Issuer shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
X
= Y -
(A)(Y)
B
|
Where
|
X
=
|
the
number of shares of Common Stock to be issued to the
Holder.
|
|
|
Y
=
|
the
number of shares of Common Stock purchasable upon exercise of all
of the
Warrant or, if only a portion of the Warrant is being exercised,
the
portion of the Warrant being exercised.
|
|
|
B
=
|
the
Per Share Market Value of one share of Common
Stock.
|
(d)
Issuance
of Stock Certificates
.
In the
event of any exercise of this Warrant in accordance with and subject to the
terms and conditions hereof, (i) certificates for the shares of Warrant Stock
so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
the
exercise notice is delivered to the Issuer (the “
Delivery
Date
”)
or, at
the request of the Holder (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Stock is then in effect),
issued and delivered to the Depository Trust Company (“
DTC
”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“
DWAC
”)
within
a reasonable time, not exceeding three (3) Trading Days after such exercise,
and
the Holder hereof shall be deemed for all purposes to be the holder of the
shares of Warrant Stock so purchased as of the date of such exercise and (ii)
unless this Warrant has expired, a new Warrant representing the number of shares
of Warrant Stock, if any, with respect to which this Warrant shall not then
have
been exercised (less any amount thereof which shall have been canceled in
payment or partial payment of the Warrant Price as hereinabove provided) shall
also be issued to the Holder hereof at the Issuer's expense within such
time.
(e)
Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise
.
In
addition to any other rights available to the Holder, if the Issuer fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Stock pursuant to an exercise on or before the Delivery
Date, and if after such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Stock which the Holder
anticipated receiving upon such exercise (a “
Buy-In”
),
then
the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was
required to deliver to the Holder in connection with the exercise at issue
times
(B) the price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the portion
of the Warrant and equivalent number of shares of Warrant Stock for which such
exercise was not honored or deliver to the Holder the number of shares of Common
Stock that would have been issued had the Issuer timely complied with its
exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common Stock with
an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Issuer shall be required
to
pay the Holder $1,000. The Holder shall provide the Issuer written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by the
Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation,
a
decree of specific performance and/or injunctive relief with respect to the
Issuer’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of this Warrant as required pursuant to the terms
hereof.
(f)
Transferability
of Warrant
.
Subject
to Section 2(h) hereof, this Warrant may be transferred by a Holder without
the
consent of the Issuer. If transferred pursuant to this paragraph, this Warrant
may be transferred on the books of the Issuer by the Holder hereof in person
or
by duly authorized attorney, upon surrender of this Warrant at the principal
office of the Issuer, properly endorsed (by the Holder executing an assignment
in the form attached hereto) and upon payment of any necessary transfer tax
or
other governmental charge imposed upon such transfer. This Warrant is
exchangeable at the principal office of the Issuer for Warrants to purchase
the
same aggregate number of shares of Warrant Stock, each new Warrant to represent
the right to purchase such number of shares of Warrant Stock as the Holder
hereof shall designate at the time of such exchange. All Warrants issued on
transfers or exchanges shall be dated the Original Issue Date and shall be
identical with this Warrant except as to the number of shares of Warrant Stock
issuable pursuant thereto.
(g)
Continuing
Rights of Holder
.
The
Issuer will, at the time of or at any time after each exercise of this Warrant,
upon the request of the Holder hereof, acknowledge in writing the extent, if
any, of its continuing obligation to afford to such Holder all rights to which
such Holder shall continue to be entitled after such exercise in accordance
with
the terms of this Warrant,
provided
that if
any such Holder shall fail to make any such request, the failure shall not
affect the continuing obligation of the Issuer to afford such rights to such
Holder.
(h)
Compliance
with Securities Laws.
(i)
The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and
the shares of Warrant Stock to be issued upon exercise hereof are being acquired
solely for the Holder's own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement, or
an
exemption from registration, under the Securities Act and any applicable state
securities laws.
(ii)
Except
as
provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following
form:
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF 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 THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
(iii)
The
Issuer agrees to reissue this Warrant or certificates representing any of the
Warrant Stock, without the legend set forth above if at such time, prior to
making any transfer of any such securities, the Holder shall give written notice
to the Issuer describing the manner and terms of such transfer. Such proposed
transfer will not be effected until: (a) either (i) the Issuer has received
an
opinion of counsel reasonably satisfactory to the Issuer, to the effect that
the
registration of such securities 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 Issuer
with the Securities and Exchange Commission and has become effective under
the
Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under the
Securities Act and state securities laws are not required, or (iv) the Holder
provides the Issuer with reasonable assurances that such security can be sold
pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer
has
received an opinion of counsel reasonably satisfactory to the Issuer, 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 Issuer will
respond to any such notice from a holder within three (3) business days. In
the
case of any proposed transfer under this Section 2(h), the Issuer 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 Issuer.
The restrictions on transfer contained in this Section 2(h) shall be in addition
to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant. W
henever
a
certificate representing the Warrant Stock is required to be issued to a Holder
without a legend, in lieu of delivering physical certificates representing
the
Warrant Stock, provided the Issuer’s transfer agent is participating in the DTC
Fast Automated Securities Transfer program, the Issuer shall use its reasonable
best efforts to cause its transfer agent to electronically transmit the Warrant
Stock to the Holder by crediting the account of the Holder's Prime Broker with
DTC through its DWAC system (to the extent not inconsistent with any provisions
of this Warrant or the Purchase Agreement).
(i)
Accredited
Investor Status
.
In no
event may the Holder exercise this Warrant in whole or in part unless the Holder
is an “accredited investor” as defined in Regulation D under the Securities Act.
3.
Stock
Fully Paid; Reservation and Listing of Shares; Covenants
.
(a)
Stock
Fully Paid
.
The
Issuer represents, warrants, covenants and agrees that all shares of Warrant
Stock which may be issued upon the exercise of this Warrant or otherwise
hereunder will, when issued in accordance with the terms of this Warrant, be
duly authorized, validly issued, fully paid and nonassessable and free from
all
taxes, liens and charges created by or through the Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of issuance upon exercise of this Warrant a number of shares of Common
Stock equal to at least one hundred twenty percent (120%) of the aggregate
number of shares of Common Stock to provide for the exercise of this
Warrant.
(b)
Reservation
.
If any
shares of Common Stock required to be reserved for issuance upon exercise of
this Warrant or as otherwise provided hereunder require registration or
qualification with any governmental authority under any federal or state law
before such shares may be so issued, the Issuer will in good faith use its
best
efforts as expeditiously as possible at its expense to cause such shares to
be
duly registered or qualified. If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, maintain and increase when necessary such listing, of, all shares
of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder (provided that such Warrant Stock has been
registered pursuant to a registration statement under the Securities Act then
in
effect), and, to the extent permissible under the applicable securities exchange
rules, all unissued shares of Warrant Stock which are at any time issuable
hereunder, so long as any shares of Common Stock shall be so listed. The Issuer
will also so list on each securities exchange or market, and will maintain
such
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange or
market by the Issuer.
(c)
Covenants
.
The
Issuer shall not by any action including, without limitation, amending the
Certificate of Incorporation or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other action, avoid or seek to avoid the observance
or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against dilution (to the extent specifically provided herein) or
impairment. Without limiting the generality of the foregoing, the Issuer will
(i) not permit the par value, if any, of its Common Stock to exceed the then
effective Warrant Price, (ii) not amend or modify any provision of the
Certificate of Incorporation or by-laws of the Issuer in any manner that would
adversely affect the rights of the Holders of the Warrants, (iii) take all
such
action as may be reasonably necessary in order that the Issuer may validly
and
legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (iv) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this
Warrant.
(d)
Loss,
Theft, Destruction of Warrants
.
Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss,
theft, destruction or mutilation of any Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security satisfactory
to the Issuer or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Issuer will make and deliver, in lieu of
such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
representing the right to purchase the same number of shares of Common
Stock.
4.
Adjustment
of Warrant Price
.
The
price at which such shares of Warrant Stock may be purchased upon exercise
of
this Warrant shall be subject to adjustment from time to time as set forth
in
this Section 4. The Issuer shall give the Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 in accordance
with
the notice provisions set forth in Section 5.
(a)
Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale
.
(i)
In
case the Issuer after the Original Issue Date shall do any of the following
(each, a "
Triggering
Event
"):
(a)
consolidate or merge with or into any other Person and the Issuer shall not
be
the continuing or surviving corporation of such consolidation or merger, or
(b)
permit any other Person to consolidate with or merge into the Issuer and the
Issuer shall be the continuing or surviving Person but, in connection with
such
consolidation or merger, any Capital Stock of the Issuer shall be changed into
or exchanged for Securities of any other Person or cash or any other property,
or (c) transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or reclassification of
its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder of this Warrant shall be entitled upon
the
exercise hereof at any time after the consummation of such Triggering Event,
to
the extent this Warrant is not exercised prior to such Triggering Event, to
receive at the Warrant Price in effect at the time immediately prior to the
consummation of such Triggering Event in lieu of the Common Stock issuable
upon
such exercise of this Warrant prior to such Triggering Event, the Securities,
cash and property to which such Holder would have been entitled upon the
consummation of such Triggering Event if such Holder had exercised the rights
represented by this Warrant immediately prior thereto (including the right
of a
shareholder to elect the type of consideration it will receive upon a Triggering
Event), subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for elsewhere in this Section
4;
provided
,
however
,
in the
event that the Per Share Market Value is less than the Warrant Price at the
time
of such Triggering Event, the Holder shall receive an amount in cash equal
to
the value of this Warrant calculated in accordance with the Black-Scholes
formula. Notwithstanding the foregoing to the contrary, this Section 4(a)(i)
shall only apply if the surviving entity pursuant to any such Triggering Event
is a company that has a class of equity securities
registered
pursuant to the Securities Exchange Act of 1934, as amended, and its common
stock is listed or quoted on a national securities exchange, national automated
quotation system or the OTC Bulletin Board. In the event that
the
surviving entity pursuant to any such Triggering Event is not a public company
that
is
registered pursuant to the Securities Exchange Act of 1934, as amended, or
its
common stock is not listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board, then the Holder shall
have
the right to demand that the Issuer pay to the Holder an amount in cash equal
to
the value of this Warrant calculated in accordance with the Black-Scholes
formula.
(ii)
Notwithstanding
anything contained in this Warrant to the contrary and so long as the surviving
entity pursuant to any Triggering Event is a company that has a class of equity
securities
registered
pursuant to the Securities Exchange Act of 1934, as amended, and its common
stock is listed or quoted on a national securities exchange, national automated
quotation system or the OTC Bulletin Board
,
a
Triggering Event shall not be deemed to have occurred if, prior to the
consummation thereof, each Person (other than the Issuer) which may be required
to deliver any Securities, cash or property upon the exercise of this Warrant
as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a),
such Holder shall be entitled to receive, and such Person shall have similarly
delivered to such Holder an opinion of counsel for such Person, which counsel
shall be reasonably satisfactory to such Holder, or in the alternative, a
written acknowledgement executed by the President or Chief Financial Officer
of
the Issuer, stating that this Warrant shall thereafter continue in full force
and effect and the terms hereof (including, without limitation, all of the
provisions of this subsection (a)) shall be applicable to the Securities, cash
or property which such Person may be required to deliver upon any exercise
of
this Warrant or the exercise of any rights pursuant hereto.
(b)
Stock
Dividends, Subdivisions and Combinations
.
If at
any time the Issuer shall:
(i)
make
or
issue or set a record date for the holders of the Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution of,
shares of Common Stock,
(ii)
subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock, or
(iii)
combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock,
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the occurrence of such event would own or be entitled to receive after the
happening of such event, and (2) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Common Stock
for
which this Warrant is exercisable immediately after such
adjustment.
(c)
Certain
Other Distributions
.
If at
any time the Issuer shall make or issue or set a record date for the holders
of
the Common Stock for the purpose of entitling them to receive any dividend
or
other distribution of:
(i)
cash,
(ii)
any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common Stock
Equivalents or Additional Shares of Common Stock), or
(iii)
any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents
or
Additional Shares of Common Stock),
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
shall
be adjusted to equal the product of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Per Share
Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and
of
the fair value (as determined in good faith by the Board of Directors of the
Issuer) of any and all such evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights
so
distributable, and (2) the Warrant Price then in effect shall be adjusted to
equal (A) the Warrant Price then in effect multiplied by the number of shares
of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares of Common Stock for which this
Warrant is exercisable immediately after such adjustment. A reclassification
of
the Common Stock (other than a change in par value, or from par value to no
par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Issuer to
the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock
as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
(d)
Issuance
of Additional Shares of Common Stock
.
(i)
In
the
event the Issuer shall at any time following the Original Issue Date issue
any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less than
the Warrant Price then in effect or without consideration, then the Warrant
Price upon each such issuance shall be adjusted to that price determined by
multiplying the Warrant Price then in effect by a fraction:
(A)
the
numerator of which shall be equal to the sum of (x) the number of shares of
Outstanding Common Stock immediately prior to the issuance of such Additional
Shares of Common Stock
plus
(y) the
number of shares of Common Stock (rounded to the nearest whole share) which
the
aggregate consideration for the total number of such Additional Shares of Common
Stock so issued would purchase at a price per share equal to the Warrant Price
then in effect, and
(B)
the
denominator of which shall be equal to the number of shares of Outstanding
Common Stock immediately after the issuance of such Additional Shares of Common
Stock.
(ii)
No
adjustment of the number of shares of Common Stock for which this Warrant shall
be exercisable shall be made under paragraph (i) of Section 4(d) upon the
issuance of any Additional Shares of Common Stock which are issued pursuant
to
the exercise of any Common Stock Equivalents, if any such adjustment shall
previously have been made upon the issuance of such Common Stock Equivalents
(or
upon the issuance of any warrant or other rights therefor) pursuant to Section
4(e).
(e)
Issuance
of Common Stock Equivalents
.
If at
any time the Issuer shall issue or sell any Common Stock Equivalents, whether
or
not the rights to exchange or convert thereunder are immediately exercisable,
and the aggregate price per share for which Common Stock is issuable upon such
conversion or exchange plus the consideration received by the Issuer for
issuance of such Common Stock Equivalent divided by the number of shares of
Common Stock issuable pursuant to such Common Stock Equivalent (the
“
Aggregate
Per Common Share Price
”)
shall
be less than the Warrant Price then in effect, or if, after any such issuance
of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall make the Aggregate Per Common Share Price be less than
the
Warrant Price in effect at the time of such amendment or adjustment, then the
Warrant Price upon each such issuance or amendment shall be adjusted as provided
in Section 4(d). No further adjustment of the Warrant Price then in effect
shall
be made under this Section 4(e) upon the issuance of any Common Stock
Equivalents which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to this Section 4(e). No further adjustments of the Warrant Price
then
in effect shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Common Stock Equivalents.
(f)
Superseding
Adjustment
.
If, at
any time after any adjustment of the number of shares of Common Stock for which
this Warrant is exercisable and the Warrant Price then in effect shall have
been
made pursuant to Section 4(e) as the result of any issuance of Common Stock
Equivalents, and (i) such Common Stock Equivalents, or the right of conversion
or exchange in such Common Stock Equivalents, shall expire, and all or a portion
of such or the right of conversion or exchange with respect to all or a portion
of such Common Stock Equivalents, as the case may be, shall not have been
exercised, or (ii) the consideration per share for which shares of Common Stock
are issuable pursuant to such Common Stock Equivalents shall be increased,
then
such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Upon the occurrence of an event set forth in this Section 4(f), there shall
be a
recomputation made of the effect of such Common Stock Equivalents on the basis
of: (i) treating the number of Additional Shares of Common Stock theretofore
actually issued or issuable pursuant to the previous exercise of Common Stock
Equivalents or any such right of conversion or exchange, as having been issued
on the date or dates of any such exercise and for the consideration actually
received and receivable therefor, and (ii) treating any such Common Stock
Equivalents which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share
for
which Additional Shares of Common Stock are issuable under such Common Stock
Equivalents; whereupon a new adjustment of the number of shares of Common Stock
for which this Warrant is exercisable and the Warrant Price then in effect
shall
be made, which new adjustment shall supersede the previous adjustment so
rescinded and annulled.
(h)
Other
Provisions applicable to Adjustments under this Section
.
The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and
the
Warrant Price then in effect provided for in this Section 4:
(i)
Computation
of Consideration
.
To the
extent that any Additional Shares of Common Stock or any Common Stock
Equivalents (or any warrants or other rights therefor) shall be issued for
cash
consideration, the consideration received by the Issuer therefor shall be the
amount of the cash received by the Issuer therefor, or, if such Additional
Shares of Common Stock or Common Stock Equivalents are offered by the Issuer
for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Common Stock Equivalents are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering price
(in
any such case subtracting any amounts paid or receivable for accrued interest
or
accrued dividends and without taking into account any compensation, discounts
or
expenses paid or incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). In connection with any
merger or consolidation in which the Issuer is the surviving corporation (other
than any consolidation or merger in which the previously outstanding shares
of
Common Stock of the Issuer shall be changed to or exchanged for the stock or
other securities of another corporation), the amount of consideration therefore
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board, of such portion of the assets and business of the
nonsurviving corporation as the Board may determine to be attributable to such
shares of Common Stock or Common Stock Equivalents, as the case may be. The
consideration for any Additional Shares of Common Stock issuable pursuant to
any
warrants or other rights to subscribe for or purchase the same shall be the
consideration received by the Issuer for issuing such warrants or other rights
plus the additional consideration payable to the Issuer upon exercise of such
warrants or other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Common Stock Equivalents shall
be
the consideration received by the Issuer for issuing warrants or other rights
to
subscribe for or purchase such Common Stock Equivalents, plus the consideration
paid or payable to the Issuer in respect of the subscription for or purchase
of
such Common Stock Equivalents, plus the additional consideration, if any,
payable to the Issuer upon the exercise of the right of conversion or exchange
in such Common Stock Equivalents. In the event of any consolidation or merger
of
the Issuer in which the Issuer is not the surviving corporation or in which
the
previously outstanding shares of Common Stock of the Issuer shall be changed
into or exchanged for the stock or other securities of another corporation,
or
in the event of any sale of all or substantially all of the assets of the Issuer
for stock or other securities of any corporation, the Issuer shall be deemed
to
have issued a number of shares of its Common Stock for stock or securities
or
other property of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated, and for a consideration
equal to the fair market value on the date of such transaction of all such
stock
or securities or other property of the other corporation. In the event any
consideration received by the Issuer for any securities consists of property
other than cash, the fair market value thereof at the time of issuance or as
otherwise applicable shall be as determined in good faith by the Board. In
the
event Common Stock is issued with other shares or securities or other assets
of
the Issuer for consideration which covers both, the consideration computed
as
provided in this Section 4(h)(i) shall be allocated among such securities and
assets as determined in good faith by the Board.
(ii)
When
Adjustments to Be Made
.
The
adjustments required by this Section 4 shall be made whenever and as often
as
any specified event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except in the
case of a subdivision or combination of shares of the Common Stock, as provided
for in Section 4(b)) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than one percent (1%) of the shares of Common Stock for which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except
as
aforesaid) which is postponed shall be carried forward and made as soon as
such
adjustment, together with other adjustments required by this Section 4 and
not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its
occurrence.
(iii)
Fractional
Interests
.
In
computing adjustments under this Section 4, fractional interests in Common
Stock
shall be taken into account to the nearest one one-hundredth (1/100
th
)
of a
share.
(iv)
When
Adjustment Not Required
.
If the
Issuer shall take a record of the holders of its Common Stock for the purpose
of
entitling them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(i)
Form
of Warrant after Adjustments
.
The
form of this Warrant need not be changed because of any adjustments in the
Warrant Price or the number and kind of Securities purchasable upon the exercise
of this Warrant.
(j)
Escrow
of Warrant Stock
.
If
after any property becomes distributable pursuant to this Section 4 by reason
of
the taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, and the Holder exercises
this Warrant, any shares of Common Stock issuable upon exercise by reason of
such adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Issuer to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the current Warrant Price. Notwithstanding
any other provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares shall be
cancelled by the Issuer and escrowed property returned.
5.
Notice
of Adjustments; Dispute Resolution
.
Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
to
Section 4 hereof (for purposes of this Section 5, each an "
adjustment
"),
the
Issuer shall cause its Chief Financial Officer to prepare and execute a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made
any
determination hereunder), and the Warrant Price and Warrant Share Number after
giving effect to such adjustment, and shall cause copies of such certificate
to
be delivered to the Holder of this Warrant promptly after each adjustment.
Notwithstanding any dispute between the Issuer and the Holder of this Warrant
with respect to the matters set forth in such certificate, the Issuer shall
cause its transfer agent to promptly issue to the Holder the number of shares
of
Warrant Stock that is not disputed.
6.
Fractional
Shares
.
No
fractional shares of Warrant Stock will be issued in connection with any
exercise hereof, but in lieu of such fractional shares, the Issuer shall round
the number of shares to be issued upon exercise up to the nearest whole number
of shares.
7.
Ownership
Cap and Certain Exercise Restrictions.
(a)
Notwithstanding anything to the contrary set forth in this Warrant, at no time
may a Holder of this Warrant exercise this Warrant if the number of shares
of
Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock owned by such Holder at such
time, the number of shares of Common Stock which would result in such Holder
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 4.9% of the then issued
and
outstanding shares of Common Stock;
provided
,
however
,
that
upon a holder of this Warrant providing the Issuer with sixty-one (61) days
notice (pursuant to Section 12 hereof) (the "
Waiver
Notice
")
that
such Holder would like to waive this Section 7(a) with regard to any or all
shares of Common Stock issuable upon exercise of this Warrant, this Section
7(a)
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice;
provided
,
further
,
that
this provision shall be of no further force or effect during the sixty-one
(61)
days immediately preceding the expiration of the term of this
Warrant.
(b)
The
Holder may not exercise the Warrant hereunder to the extent such exercise would
result in the Holder beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.9%
of
the then issued and outstanding shares of Common Stock, including shares
issuable upon exercise of the Warrant held by the Holder after application
of
this Section;
provided
,
however
,
that
upon a holder of this Warrant providing the Issuer with a Waiver Notice that
such holder would like to waive this Section 7(b) with regard to any or all
shares of Common Stock issuable upon exercise of this Warrant, this Section
7(b)
shall be of no force or effect with regard to those shares of Warrant Stock
referenced in the Waiver Notice;
provided
,
further
,
that
this provision shall be of no further force or effect during the sixty-one
(61)
days immediately preceding the expiration of the term of this
Warrant.
8.
Definitions
.
For the
purposes of this Warrant, the following terms have the following
meanings:
"
2006
Purchase Agreements
"
means,
collectively each of the following, as the same may be amended from time to
time, (i) that certain Note and Warrant Purchase Agreement dated as of March
31,
2006, among the Issuer and the Purchasers, and (ii) that certain Note and
Warrant Purchase Agreement, dated as of April 12, 2006, by and among the Issuer
and the Purchasers.
"
Additional
Shares of Common Stock
"
means
all shares of Common Stock issued by the Issuer after the Original Issue Date,
and all shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) securities issued (other than for cash) in connection
with a merger, acquisition, or consolidation, (ii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date hereof (so long as the conversion or
exercise price in such securities are not amended to lower such price and/or
adversely affect the Holders)
or
issued
pursuant to the Purchase Agreements, (iii) securities issued pursuant to the
terms of that certain Exchange Agreement, dated as of September 21, 2007, by
and
among the Maker and the holders signatory thereto, (iv) the issuance of the
Notes and the Warrants, (v) the shares of Common Stock issuable upon the
conversion of the Notes, (vi) the Warrant Stock, (vii) securities issued in
connection with bona fide strategic license agreements or other partnering
arrangements so long as such issuances are not for the purpose of raising
capital, (viii) Common Stock issued or the issuance or grants of options to
purchase Common Stock pursuant to Issuer’s stock option plans and employee stock
purchase plans approved by the Issuer’s board of directors, so long as such
issuances in the aggregate do not exceed the number of shares of Common Stock
(or options to purchase such number of shares of Common Stock) issuable pursuant
to such plans as they exist on the Original Issue Date, (ix) any warrants issued
to the placement agent and its designees for the transactions contemplated
by
the Purchase Agreements, (x) the payment of any dividends on the Issuer’s Series
B convertible preferred stock, (xi) securities issued pursuant to a bona fide
firm underwritten public offering of the Issuer’s securities, (xii) the payment
of liquidated damages pursuant to the Registration Rights Agreement dated
February 17, 2004 between the Issuer and the parties listed therein and (xiii)
the issuance of Common Stock upon the exercise or conversion of any securities
described in clauses (i) through (xii) above.
“
Board
"
shall
mean the Board of Directors of the Issuer.
"
Capital
Stock
"
means
and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including,
without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"
Certificate
of Incorporation
"
means
the Certificate of Incorporation of the Issuer as in effect on the Original
Issue Date, and as hereafter from time to time amended, modified, supplemented
or restated in accordance with the terms hereof and thereof and pursuant to
applicable law.
"
Common
Stock
"
means
the Common Stock, $0.0001 par value per share, of the Issuer and any other
Capital Stock into which such stock may hereafter be changed.
"
Common
Stock Equivalent
"
means
any Convertible Security or warrant, option or other right to subscribe for
or
purchase any Additional Shares of Common Stock or any Convertible
Security.
"
Convertible
Securities
"
means
evidences of Indebtedness, shares of Capital Stock or other Securities which
are
or may be at any time convertible into or exchangeable for Additional Shares
of
Common Stock. The term "Convertible Security" means one of the Convertible
Securities.
"
Governmental
Authority
"
means
any governmental, regulatory or self-regulatory entity, department, body,
official, authority, commission, board, agency or instrumentality, whether
federal, state or local, and whether domestic or foreign.
"
Holders
"
mean
the Persons who shall from time to time own any Warrant. The term "Holder"
means
one of the Holders.
"
Independent
Appraiser
"
means a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may
be
the firm that regularly examines the financial statements of the Issuer) that
is
regularly engaged in the business of appraising the Capital Stock or assets
of
corporations or other entities as going concerns, and which is not affiliated
with either the Issuer or the Holder of any Warrant.
"
Issuer
"
means
Glowpoint, Inc., a Delaware corporation, and its successors.
"
Majority
Holders
"
means
at any time the Holders of Warrants exercisable for a majority of the shares
of
Warrant Stock issuable under the Warrants at the time outstanding.
"
Notes
"
shall
mean collectively, each of the following, as the same may be amended from time
to time: (1) the senior secured convertible promissory notes issued pursuant
to
the Purchase Agreements, and (2) any additional senior secured convertible
promissory notes issued from time to time as interest on the outstanding
principal balance of the foregoing promissory notes.
"
Original
Issue Date
"
means
September 21, 2007.
"
OTC
Bulletin Board
"
means
the over-the-counter electronic bulletin board.
"
Other
Common
"
means
any other Capital Stock of the Issuer of any class which shall be authorized
at
any time after the date of this Warrant (other than Common Stock) and which
shall have the right to participate in the distribution of earnings and assets
of the Issuer without limitation as to amount.
“
Outstanding
Common Stock
”
means,
at any given time, the aggregate amount of outstanding shares of Common Stock,
assuming full exercise, conversion or exchange (as applicable) of all options,
warrants and other Securities which are convertible into or exercisable or
exchangeable for, and any right to subscribe for, shares of Common Stock that
are outstanding at such time.
"
Person
"
means
an individual, corporation, limited liability company, partnership, joint stock
company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.
"
Per
Share Market Value
"
means
on any particular date (a) the last closing sale price per share of the Common
Stock on such date on the
OTC
Bulletin Board
or
another registered national stock exchange on which the Common Stock is then
listed, or if there is no such price on such date, then the closing sale price
on such exchange or quotation system on the date nearest preceding such date,
or
(b) if the Common Stock is not listed then on the OTC Bulletin Board or any
registered national stock exchange, the last closing sale price for a share
of
Common Stock in the over-the-counter market, as reported by the OTC Bulletin
Board or in the National Quotation Bureau Incorporated or similar organization
or agency succeeding to its functions of reporting prices) at the close of
business on such date, or (c) if the Common Stock is not then reported by the
OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), then
the average of the "Pink Sheet" quotes for the five (5) Trading Days preceding
such date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by an
Independent Appraiser selected in good faith by the Majority Holders;
provided
,
however
,
that
the Issuer, after receipt of the determination by such Independent Appraiser,
shall have the right to select an additional Independent Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Independent Appraiser; and
provided
,
further
that all
determinations of the Per Share Market Value shall be appropriately adjusted
for
any stock dividends, stock splits or other similar transactions during such
period. The determination of fair market value by an Independent Appraiser
shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding
on
all parties.
“
Purchase
Agreement
”
means
that certain Note and Warrant Purchase Agreement, dated as of September 21,
2007, among the Issuer and the Purchasers, as the same may be amended from
time
to time.
“
Purchase
Agreements
”
means,
collectively, the 2006 Purchase Agreements and the Purchase
Agreement.
"
Purchasers
"
means
the purchasers of the Notes and the Warrants issued by the Issuer pursuant
to
the Purchase Agreements.
"
Securities
"
means
any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities
or a
Security, and any option, warrant or other right to purchase or acquire any
Security. "Security" means one of the Securities.
"
Securities
Act
"
means
the Securities Act of 1933, as amended, or any similar federal statute then
in
effect.
"
Subsidiary
"
means
any corporation at least 50% of whose outstanding Voting Stock shall at the
time
be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.
"
Term
"
has the
meaning specified in Section 1 hereof.
"
Trading
Day
"
means
any day during which The New York Stock Exchange shall be open for
business.
"
Voting
Stock
"
means,
as applied to the Capital Stock of any corporation, Capital Stock of any class
or classes (however designated) having ordinary voting power for the election
of
a majority of the members of the Board of Directors (or other governing body)
of
such corporation, other than Capital Stock having such power only by reason
of
the happening of a contingency.
"
Warrants
"
shall
mean, collectively, each of the following, as the same may be amended from
time
to time: (A) the warrants to purchase shares of Common Stock issued pursuant
to
the Purchase Agreements (including, without limitation, this Warrant); (B)
the
warrants to purchase shares of Common Stock issued in connection with the
amendment of the senior secured convertible promissory notes issued pursuant
to
the 2006 Purchase Agreements; and (C) any other warrants of like tenor issued
in
substitution or exchange for any of the foregoing Warrants pursuant to the
provisions of Section 2(c), 2(d) or 2(e) thereof.
"
Warrant
Price
"
initially means [$0.55/$0.65], as such price may be adjusted from time to time
as shall result from the adjustments specified in this Warrant, including
Section 4 hereto.
"
Warrant
Share Number
"
means
at any time the aggregate number of shares of Warrant Stock which may at such
time be purchased upon exercise of this Warrant, after giving effect to all
prior adjustments and increases to such number made or required to be made
under
the terms hereof.
"
Warrant
Stock
"
means
Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
issuable pursuant to any Warrant or Warrants.
9.
Other
Notices
.
In case
at any time:
|
|
(A)
|
the
Issuer shall make any distributions to the holders of Common Stock;
or
|
|
|
(B)
|
the
Issuer shall authorize the granting to all holders of its Common
Stock of
rights to subscribe for or purchase any shares of Capital Stock of
any
class or other rights; or
|
|
|
(C)
|
there
shall be any reclassification of the Capital Stock of the Issuer;
or
|
|
|
(D)
|
there
shall be any capital reorganization by the Issuer;
or
|
|
|
(E)
|
there
shall be any (i) consolidation or merger involving the Issuer or
(ii)
sale, transfer or other disposition of all or substantially all of
the
Issuer's property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation
and
its shares of Capital Stock shall continue to be outstanding and
unchanged
and except a consolidation, merger, sale, transfer or other disposition
involving a wholly-owned Subsidiary);
or
|
|
|
(F)
|
there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Issuer or any partial liquidation of the Issuer or distribution
to
holders of Common Stock;
|
then,
in
each of such cases, the Issuer shall give written notice to the Holder of the
date on which (i) the books of the Issuer shall close or a record shall be
taken
for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock
for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days prior
to the record date or the date on which the Issuer's transfer books are closed
in respect thereto. Except as otherwise specifically provided herein, no holder,
as such, of this Warrant shall be entitled to vote or receive dividends or
be
deemed the holder of shares of the Issuer for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Issuer or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance
or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Warrant of
the
Warrant Shares which he or she is then entitled to receive upon the due exercise
of this Warrant. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to
the
holders of the Common Stock.
10.
Amendment
and Waiver
.
Any
term, covenant, agreement or condition in this Warrant may be amended, or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by a written instrument or written
instruments executed by the Issuer and the Majority Holders;
provided
,
however
,
that no
such amendment or waiver shall reduce the Warrant Share Number, increase the
Warrant Price, shorten the period during which this Warrant may be exercised
or
modify any provision of this Section 10 without the consent of the Holder of
this Warrant. No consideration shall be offered or paid to any person to amend
or consent to a waiver or modification of any provision of this Warrant unless
the same consideration is also offered to all holders of the
Warrants.
11.
Governing
Law; Jurisdiction
.
This
Warrant shall be governed by and construed in accordance with the internal
laws
of the State of New York, without giving effect to any of the conflicts of
law
principles which would result in the application of the substantive law of
another jurisdiction. This Warrant shall not be interpreted or construed with
any presumption against the party causing this Warrant to be drafted. The Issuer
and the Holder agree that venue for any dispute arising under this Warrant
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 Issuer and the Holder
irrevocably consent to personal jurisdiction in the state and federal courts
of
the state of New York. The Issuer and the Holder 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 Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 11 shall affect or limit any right to serve
process in any other manner permitted by law. The parties hereby waive all
rights to a trial by jury.
12.
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 Issuer:
|
Glowpoint,
Inc.
|
225
Long
Avenue
Hillside,
New Jersey 07205
Attention:
Chief Executive Officer
Tel.
No.:
(312) 235-3888 x2053
Fax
No.:
(973) 391-1904
and
General
Counsel
Glowpoint,
Inc.
225
Long
Avenue
Hillside,
New Jersey 07205
Tel.
No.:
(312) 235-3888 x 2087
Fax
No.:
(973) 556-1272
with
copies (which copies
shall
not
constitute notice
to
the
Issuer) to:
Gibbons
P.C.
One
Gateway Center
Newark,
New Jersey 07102
Attn:
Frank Cannone, Esq.
Tel.
No.:
(973) 596-4500
Fax
No.:
(973) 596-0545
|
If
to any Holder:
|
At
the address of such Holder set forth on
Exhibit
A
to
this Agreement, with copies to Holder’s counsel as set forth on
Exhibit
A
or
as specified in writing by such Holder with copies
to:
|
with
copies (which copies
shall
not
constitute notice)
|
to:
|
Kramer
Levin Naftalis & Frankel LLP
|
1177
Avenue of the Americas
New
York,
New York 10036
Attention:
Christopher S. Auguste
Tel.
No.:
(212) 715-9100
Fax
No.:
(212) 715-8000
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.
13.
Warrant
Agent
.
The
Issuer may, by written notice to each Holder of this Warrant, appoint an agent
having an office in New York, New York for the purpose of issuing shares of
Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of
Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section
2 hereof or replacing this Warrant pursuant to subsection (d) of Section 3
hereof, or any of the foregoing, and thereafter any such issuance, exchange
or
replacement, as the case may be, shall be made at such office by such
agent.
14.
Remedies
.
The
Issuer stipulates that the remedies at law of the Holder of this Warrant in
the
event of any default or threatened default by the Issuer in the performance
of
or compliance with any of the terms of this Warrant are not and will not be
adequate and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
15.
Successors
and Assigns
.
This
Warrant and the rights evidenced hereby shall inure to the benefit of and be
binding upon the successors and assigns of the Issuer, the Holder hereof and
(to
the extent provided herein) the Holders of Warrant Stock issued pursuant hereto,
and shall be enforceable by any such Holder or Holder of Warrant
Stock.
16.
Modification
and Severability
.
If, in
any action before any court or agency legally empowered to enforce any provision
contained herein, any provision hereof is found to be unenforceable, then such
provision shall be deemed modified to the extent necessary to make it
enforceable by such court or agency. If any such provision is not enforceable
as
set forth in the preceding sentence, the unenforceability of such provision
shall not affect the other provisions of this Warrant, but this Warrant shall
be
construed as if such unenforceable provision had never been contained
herein.
17.
Headings
.
The
headings of the Sections of this Warrant are for convenience of reference only
and shall not, for any purpose, be deemed a part of this Warrant.
18.
Registration
Rights
.
(a)
The
Warrant Stock shall be registered on the resale registration statement obligated
to be filed by the Issuer pursuant to the Purchase Agreement pursuant to the
terms of that certain Registration Rights Agreement, dated as of March 31,
2006,
by and among the Issuer and the purchasers party thereto.
(b)
If
the
Issuer shall determine to proceed with the preparation and filing of a
registration statement under the Securities Act in connection with the proposed
offer and sale of any of its securities by it or any of its security holders
(other than a registration statement on Form S-4, S-8 or other limited purpose
form, or any offering of securities solely to the Issuer’s existing stockholders
or pursuant to a dividend reinvestment plan or pursuant to a registration under
Rule 415 of the Securities Act for the account of the Company), then the Issuer
will give written notice of its determination to the Holder. Upon the written
request from the Holder, the Issuer will use its best efforts to cause all
shares of Common Stock issuable upon the exercise of this Warrant to be included
in such registration statement, on the same basis as the planned method of
distribution contemplated by the proposed registration, all to the extent
requisite to permit the resale by the Holder of such shares of Common Stock
issuable upon the exercise of this Warrant.
(c)
If
the
registration is for a registered public offering involving an underwriting,
the
Issuer shall so advise the Holder as a part of the written notice given pursuant
to clause (b) above. In such event, the right of the Holder to registration
shall be conditioned upon the Holder's participation in such underwriting and
the inclusion of the Holder's securities in the underwriting to the extent
provided herein. The Holder shall (together with the Issuer and the other
holders distributing their securities through such underwriting) enter into
an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Issuer. If the managing underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, the managing underwriter may limit the number of securities
to be included in the registration and underwriting. The number of securities
that may be included in the registration and underwriting shall be allocated
among all participating holders in proportion, as nearly as practicable, to
the
respective amounts of securities held by such holders (including the Holder)
at
the time of filing the registration statement.
IN
WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year
first above written.
|
|
GLOWPOINT,
INC.
|
|
|
|
|
|
|
|
|
|
|
|
By:________________________________________
|
|
|
Name:
|
|
|
Title:
|
EXERCISE
FORM
WARRANT
GLOWPOINT,
INC.
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of Glowpoint, Inc.
covered by the within Warrant.
|
Dated:
_________________
|
Signature
|
___________________________
|
|
|
|
|
|
|
Address
|
_____________________
|
|
|
|
_____________________
|
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
|
Dated:
_________________
|
Signature
|
___________________________
|
|
|
|
|
|
|
Address
|
_____________________
|
|
|
|
_____________________
|
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
|
Dated:
_________________
|
Signature
|
___________________________
|
|
|
|
|
|
|
Address
|
_____________________
|
|
|
|
_____________________
|
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
NOTE
AND WARRANT PURCHASE
AGREEMENT
Dated
as of September 21, 2007
by
and among
GLOWPOINT,
INC.
and
THE
PURCHASERS LISTED ON EXHIBIT A
|
|
|
Page
|
|
ARTICLE
I
Purchase
and Sale of Notes and Warrants
|
1
|
|
Section
1.1
|
Purchase
and Sale of Notes and Warrants.
|
1
|
|
Section
1.2
|
Purchase
Price and Closing
|
1
|
|
Section
1.3
|
Conversion
Shares / Warrant Shares
|
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
|
12
|
|
|
|
|
|
ARTICLE
III
Covenants
|
14
|
|
Section
3.1
|
Securities
Compliance
|
15
|
|
Section
3.2
|
Registration
and Listing
|
15
|
|
Section
3.3
|
Inspection
Rights
|
15
|
|
Section
3.4
|
Compliance
with Laws
|
16
|
|
Section
3.5
|
Keeping
of Records and Books of Account
|
15
|
|
Section
3.6
|
Reporting
Requirements
|
16
|
|
Section
3.7
|
Other
Agreements
|
16
|
|
Section
3.8
|
Use
of Proceeds
|
16
|
|
Section
3.9
|
Reporting
Status
|
16
|
|
Section
3.10
|
Disclosure
of Transaction
|
17
|
|
Section
3.11
|
Disclosure
of Material Information
|
17
|
|
Section
3.12
|
Pledge
of Securities
|
17
|
|
Section
3.13
|
Amendments
|
17
|
|
Section
3.14
|
Distributions
|
17
|
|
Section
3.15
|
Reservation
of Shares
|
18
|
|
Section
3.16
|
Transfer
Agent Instructions
|
18
|
|
Section
3.17
|
Disposition
of Assets
|
18
|
|
Section
3.18
|
Restrictions
on Certain Issuances of Securities
|
19
|
|
Section
3.19
|
Subsequent
Financings
|
19
|
|
|
|
|
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
|
19
|
|
ARTICLE
V
Certificate
Legend
|
21
|
|
Section
5.1
|
Legend
|
24
|
|
|
|
|
|
ARTICLE
VI
Indemnification
|
22
|
|
Section
6.1
|
General
Indemnity.
|
22
|
|
Section
6.2
|
Indemnification
Procedure
|
22
|
TABLE
OF
CONTENTS
(continued)
|
|
Page
|
|
ARTICLE
VII
Miscellaneous
|
23
|
|
Section
7.1
|
Fees
and Expenses
|
23
|
|
Section
7.2
|
Specific
Performance; Consent to Jurisdiction; Venue.
|
24
|
|
Section
7.3
|
Entire
Agreement; Amendment
|
24
|
|
Section
7.4
|
Notices
|
24
|
|
Section
7.5
|
Waivers
|
25
|
|
Section
7.6
|
Headings
|
26
|
|
Section
7.7
|
Successors
and Assigns
|
26
|
|
Section
7.8
|
No
Third Party Beneficiaries
|
26
|
|
Section
7.9
|
Governing
Law
|
26
|
|
Section
7.10
|
Survival
|
26
|
|
Section
7.11
|
Counterparts
|
26
|
|
Section
7.12
|
Publicity
|
26
|
|
Section
7.13
|
Severability
|
26
|
|
Section
7.14
|
Further
Assurances
|
27
|
NOTE
AND WARRANT PURCHASE AGREEMENT
This
NOTE
AND WARRANT PURCHASE AGREEMENT dated as of September 21, 2007 (this
“
Agreement
”)
by and
among Glowpoint, Inc., a Delaware corporation (the "
Company
"),
and
each of the purchasers of the senior secured convertible promissory notes of
the
Company whose names are set forth on
Exhibit
A
attached
hereto (each a "
Purchaser
"
and
collectively, the "
Purchasers
").
The
parties hereto agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF NOTES AND WARRANTS
Section
1.1
Purchase
and Sale of Notes 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, (i) senior
secured convertible promissory notes in the aggregate principal amount of up
to
Three Million Six Hundred Thousand Dollars ($3,600,000), convertible into shares
of the Company's common stock, par value $.0001 per share (the “
Common
Stock
”),
in
substantially the form attached hereto as
Exhibit
B
(the
"
Notes
").
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, each Purchaser shall be issued Series A-2
Warrants, in substantially the form attached hereto as
Exhibit
C
(the
"
Warrants
"),
to
purchase a number of shares of Common Stock equal to fifty percent (50%) of
the
number of Conversion Shares issuable upon conversion of such Purchaser’s Note at
an exercise price per share equal to $0.65 and a term of five (5) years
following issuance. The number of shares of Common Stock issuable upon exercise
of the Warrants issuable to each Purchaser is set forth opposite such
Purchaser’s name on
Exhibit
A
attached
hereto.
Section
1.2
Purchase
Price and Closing
.
Subject
to the terms and conditions hereof, 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 Notes and
Warrants for an aggregate purchase price of up to Three Million Dollars
($3,000,000) (the “
Purchase
Price
”).
The
closing of the purchase and sale of the Notes and Warrants to be acquired by
the
Purchasers from the Company under this Agreement shall take place at the offices
of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New
York, New York 10036 (the “
Closing
”)
at
10:00 a.m., New York time on September 21, 2007 or such other date as the
Purchasers and the Company may agree upon (the "
Closing
Date
");
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. Subject
to
the terms and conditions of this Agreement, at the Closing the Company shall
deliver or cause to be delivered to each Purchaser (x) its Notes for the
principal amount set forth opposite the name of such Purchaser on
Exhibit
A
hereto
and (y) a Warrant to purchase such number of shares of Common Stock as is set
forth opposite the name of such Purchaser on
Exhibit
A
attached
hereto. At the Closing, each Purchaser shall deliver its Purchase Price by
wire
transfer to an ac
count
designated by the Company.
Section
1.3
Conversion
Shares / 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,
a number of its authorized but unissued shares of Common Stock equal to one
hundred twenty percent (120%) of the aggregate number of shares of Common Stock
to effect the conversion of the Notes and any interest accrued and outstanding
thereon and exercise of the Warrants as of the Closing Date. Any shares of
Common Stock issuable upon conversion of the Notes and any interest accrued
and
outstanding on the Notes are herein referred to as the “
Conversion
Shares
”.
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
Notes, the Warrants, the Conversion Shares and the Warrant Shares are sometimes
collectively referred to herein as the
"
Securities
".
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES
Section
2.1
Representations
and Warranties of the Company
.
The
Company hereby represents and warrants to the Purchasers, 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),
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 (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 is duly qualified as a foreign entity
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 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 Notes, the Warrants, the Registration Rights
Agreement by and among the Company and the purchasers named therein, dated
as of
March 31, 2006, as amended as of the date hereof, a copy of which (together
with
the form of amendment) is attached hereto as
Exhibit
D
(the
“
Registration
Rights Agreement
”),
the
Security Agreement by and among the Company, on the one hand, and the secured
parties named therein, on the other hand, dated as of March 31, 2006, as amended
as of the date hereof, a copy of which (together with the form of amendment)
is
attached hereto as
Exhibit
E
(the
“
Security
Agreement
”),
and
the Escrow Agreement by and among the Company, the Purchasers and the escrow
agent, dated as of the date hereof, substantially in the form of
Exhibit
F
attached
hereto (the “
Escrow
Agreement
”)
(collectively, 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 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.
(c)
Capitalization
.
The
authorized capital stock and the issued and outstanding shares of capital stock
of the Company as of the date hereof 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 or 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)
hereto,
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
Notes and the Warrants to be issued at the Closing have been duly authorized
by
all necessary corporate action and, when paid for or issued in accordance with
the terms hereof, the Notes shall be validly issued and outstanding, free and
clear of all liens, encumbrances and rights of refusal of any kind. When the
Conversion Shares and Warrant Shares are issued and paid for in accordance
with
the terms of this Agreement and as set forth in the Notes and Warrants, such
shares will be duly authorized by all necessary corporate action and validly
issued and outstanding, fully paid and nonassessable, 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,
the performance by the Company of its obligations under the Notes and the
consummation by the Company of the transactions contemplated hereby and thereby,
and the issuance of the Securities as contemplated hereby, do not and will
not
(i) violate or conflict with 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, for such
conflicts, defaults, terminations, amendments, acceleration, cancellations
and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect (other than violations pursuant to clauses (i) or (iii) (with
respect to federal and state securities laws)).
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 or any registration provisions provided
in
the Registration Rights Agreement).
(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 set forth 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 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
").
E
xcept
as
set forth on
Schedule
2.1(f)
hereto,
a
t
the
times of their respective filings, the Form 10-K for the fiscal year ended
December 31, 2006 (the “
Form
10-K
”)
and
each subsequently filed Form 10-Q (collectively, the "
Form
10-Q
")
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.
Except
as
set forth on
Schedule
2.1(f)
hereto,
a
s
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. 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.
(h)
No
Material Adverse Change
.
Except
as set forth in the Commission Documents or on
Schedule
2.1(h)
hereto,
since December 31, 2006, the Company has not experienced or suffered any
Material Adverse Effect.
(i)
No
Undisclosed Liabilities
.
Except
as set forth in the Commission Documents, 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
December 31, 2006, 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
$100,000 (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, 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 that, individually or in the aggregate, do not cause a Material
Adverse Effect. Any 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 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. 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,
if
adversely determined, 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, could 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 for any
noncompliance therewith that, individually or in the aggregate, 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 except to the extent that
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
.
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. None of the federal income tax returns
of the Company or any Subsidiary have been audited by the Internal Revenue
Service.
Except
as
set forth on
Schedule
2.1(o)
hereto,
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 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
.
Except
for the transactions contemplated by this Agreement, the Company confirms that
neither it nor any other person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that constitutes
or
might constitute material, nonpublic information. 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
.
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)
Environmental
Compliance
.
To the
best knowledge of the Company, 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. “
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. To the best
of
the Company’s knowledge, the Company has all necessary governmental approvals
required under all Environmental Laws as necessary for the Company’s business or
the business of any of its subsidiaries. To the best of the Company’s knowledge,
the Company and each of its subsidiaries are also in 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, reasonably be expected
to 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 reasonably
be
expected to 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 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. Except as set forth in the Commission
Documents, the Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient, in the judgment of the Company's
management, 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.
(u)
Material
Agreements
.
Except
as set forth on
Schedule
2.1(u)
hereto
and except for the Transaction Documents (with respect to clause (i) of this
Section 2.1(u) only) 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.
(v)
Transactions
with Affiliates
.
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 at
least 5% of the outstanding 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.
(w)
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.
(x)
Employees
.
Neither
the Company nor any Subsidiary has any collective bargaining arrangements or
agreements covering any of its employees. 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.
Except
as
set forth on
Schedule
2.1(x)
hereto,
n
o
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.
(y)
Absence
of Certain Developments
.
Except
as set forth in the Commission Documents or on
Schedule
2.1(y)
hereto,
since December 31, 2006, 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 $100,000 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 $100,000 or paid any
obligation or liability (absolute or contingent) in excess of $100,000, 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, 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 $100,000, 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 $100,000, 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
$100,000;
(x)
entered
into any material transaction, whether or not in the ordinary course of
business;
(xi)
made
charitable contributions or pledges in excess of $10,000;
(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.
(z)
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.
(aa)
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(aa), 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.
(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 it 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 to do so by the
Purchasers. The Company acknowledges that such procedure with respect to the
Transaction Documents in no way creates a presumption that the Purchasers are
in
any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated hereby or thereby.
(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 and since February 1, 2007, the
Company has not offered or sold any of its equity securities or debt securities
convertible into shares of Common Stock.
(dd)
Sarbanes-Oxley
Act
.
Except
as
set forth on
Schedule
2.1(dd)
hereto,
t
he
Company is in 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 with other applicable provisions of the Sarbanes-Oxley Act, and the
rules and regulations promulgated thereunder, upon the effectiveness of such
provisions.
(ee)
Dilutive
Effect
.
The
Company understands and acknowledges that its obligation to issue Conversion
Shares upon conversion of the Notes in accordance with this Agreement and the
Notes and its obligations to issue the Warrant Shares upon the exercise of
the
Warrants in accordance with this Agreement and the Warrants, is, in each case,
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interest of other stockholders of the
Company.
(ff)
DTC
Status
.
The
Company’s transfer agent is a participant in and the Common Stock is eligible
for transfer pursuant to the Depository Trust Company Automated Securities
Transfer Program. The name, address, telephone number, fax number, contact
person and email address of the Company’s transfer agent is set forth on
Schedule
2.1(ff)
hereto.
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.
(d)
Acquisition
for Investment
.
Each
Purchaser is purchasing the Securities solely for its own account 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 Securities, nor a present
arrangement (whether or not legally binding) or intention to effect any
distribution of any of the Securities to or through any person or entity;
provided
,
however
,
that by
making the representations herein, such Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities 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 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.
(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
.
Except
as may be disclosed in any filings by a Purchaser with the Commission, 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 Purchaser 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 been 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.
(k)
Insider
Purchasers
.
Each
Insider Purchaser (as defined on Exhibit A hereto) acknowledges that he or
she
is subject to the Company’s insider trading policy, as the same may be amended
from time to time, and agrees not to sell, convert, or exercise the Notes or
the
Warrants, as applicable, in violation of such policy.
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 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. Upon
the
Company becoming eligible to quote its Common Stock on the OTC Bulletin Board,
the Company will take all action necessary once its Common Stock is eligible
for
quotation on the OTC Bulletin Board to continue the listing or trading of its
Common Stock on the OTC Bulletin Board or other exchange or market on which
the
Common Stock is trading. Subject to the terms of the Transaction Documents,
the
Company further covenants that it will take such further action as the
Purchasers may reasonably request, all to the extent required from time to
time
to enable the Purchasers to sell the Securities without registration under
the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act. Upon the request of the Purchasers, the
Company shall deliver to the Purchasers a written certification of a duly
authorized officer as to whether it has complied with such
requirements.
Section
3.3
Inspection
Rights
.
Provided
same would not be in violation of Regulation FD, 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 Notes or shall
beneficially own any Conversion Shares or Warrant Shares, for purposes
reasonably related to such Purchaser's interests as a stockholder, to examine
the publicly available, non-confidential 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 publicly available, non-confidential
affairs, finances and accounts of the Company and any Subsidiary with any of
its
officers, consultants, directors, and key employees.
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
Commission ceases making the Company’s 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 Securities:
(a)
Quarterly
Reports filed with the Commission on Form 10-Q as soon as practical after the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission;
(b)
Annual
Reports filed with the Commission on Form 10-K or Form 10-KSB as soon as
practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission;
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.
Section
3.8
Use
of
Proceeds
.
The net
proceeds from the sale of the Securities hereunder shall be used by the Company
for working capital and general corporate purposes and to fund its restructuring
plan and not to redeem any Common Stock or securities convertible, exercisable
or exchangeable into Common Stock or to settle any outstanding
litigation.
Section
3.9
Reporting
Status
.
Except
as
set forth on
Schedule
2.1(f)
hereto,
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.
Section
3.10
Disclosure
of Transaction
.
The
Company shall issue a press release describing the material terms of the
transactions contemplated hereby (the “
Press
Release
”)
on the
day of the Closing but in no event later than one hour after the Closing;
provided
,
however
,
that if
the 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
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 form of Note, the Registration
Rights Agreement, the Security Agreement, the form of Warrant and the Press
Release) as soon as practicable following the Closing Date but in no event
more
than two (2) Trading Days following the Closing Date, 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 New York Stock Exchange shall be open for
business.
Section
3.11
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
3.12
Pledge
of Securities
.
The
Company acknowledges 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
Securities. The pledge of Securities shall not be deemed to be a transfer,
sale
or assignment of the Securities hereunder, and no Purchaser effecting a pledge
of the Securities 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 Securities to such pledgee. At the
Purchasers' expense, the Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a
Purchaser.
Section
3.13
Amendments
.
The
Company shall not amend or waive any provision of the Certificate or Bylaws
of
the Company in any way that would adversely affect exercise rights, voting
rights, conversion rights, prepayment rights or redemption rights of the holder
of the Notes.
Section
3.14
Distributions
.
So long
as any Notes or Warrants remain outstanding, the Company agrees that it shall
not (i)
declare
or pay any dividends or make any distributions to any holder(s) of Common Stock
or (ii) purchase or otherwise acquire for value, directly or indirectly, any
Common Stock or other equity security of the Company.
Section
3.15
Reservation
of Shares
.
So long
as any of the Notes or Warrants remain outstanding, the Company shall take
all
action necessary to at all times have authorized and reserved for the purpose
of
issuance, one hundred twenty percent (120%) of the aggregate number of shares
of
Common Stock needed to provide for the issuance of the Conversion Shares and
the
Warrant Shares.
Section
3.16
Transfer
Agent Instructions
.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates, registered in the name of
each
Purchaser or its respective nominee(s), for the Conversion Shares and the
Warrant Shares in such amounts as specified from time to time by each Purchaser
to the Company upon conversion of the Notes or exercise of the Warrants in
the
form of
Exhibit
G
attached
hereto (the “
Irrevocable
Transfer Agent Instructions
”).
Prior
to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to
in this Section 3.16 will be given by the Company to its transfer agent and
that
the Conversion Shares and Warrant Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 3.16
shall affect in any way each Purchaser’s obligations and agreements set forth in
Section 5.1 to comply with all applicable prospectus delivery requirements,
if
any, upon resale of the Conversion Shares and the Warrant Shares. If a Purchaser
provides the Company with an opinion of counsel, in a generally acceptable
form,
to the effect that a public sale, assignment or transfer of the Conversion
Shares or Warrant Shares may be made without
registration
under the Securities Act or the Purchaser provides the Company with reasonable
assurances that the Conversion Shares or Warrant Shares can be sold pursuant
to
Rule 144 without any restriction as to the number of securities acquired as
of a
particular date that can then be immediately sold, the Company shall permit
the
transfer, and, in the case of the Conversion Shares and the Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Purchaser and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations under this Section 3.16 will cause irreparable harm to the
Purchasers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 3.16 will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 3.16, that the Purchasers shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
Section
3.17
Disposition
of Assets
.
So long
as the Notes remain outstanding, neither the Company nor any subsidiary shall
sell, transfer or otherwise dispose of any of its properties, assets and rights
including, without limitation, its software and intellectual property, to any
person except for sales of obsolete assets and sales to customers in the
ordinary course of business or with the prior written consent of the holders
of
a majority of the principal amount of the Notes then outstanding.
Section
3.18
Restrictions
on Certain Issuances of Securities
.
The
Company shall not issue any securities that rank pari passu or senior to the
Notes without the prior written consent of at least seventy-five percent (75%)
of the principal amount of the Notes outstanding at such time.
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 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 Securities 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 and, with respect to the Escrow Agreement, the escrow agent, 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, 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.
(a)
Accuracy
of the Company's Representations and Warranties
.
Each of
the representations and warranties of the Company in this Agreement and the
other Transaction Documents 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
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)
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.
(e)
Opinion
of Counsel
.
The
Purchasers shall have received an opinion of counsel to the Company, dated
the
date of the Closing, substantially in the form of
Exhibit
H
hereto,
with such exceptions and limitations as shall be reasonably acceptable to
counsel to the Purchasers.
(f)
Notes
and Warrants
.
At or
prior to the Closing, the Company shall have delivered to the Purchasers the
Notes (in such denominations as each Purchaser may request) and the Warrants
(in
such denominations as each Purchaser may request).
(g)
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.
(h)
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 this Section 4.2 as of the Closing
Date (provided that, with respect to the matters in paragraphs (c) and (d)
of
this Section 4.2, such confirmation shall be based on the knowledge of the
executive officer after due inquiry).
(i)
Registration
Rights Agreement
.
As of
the Closing Date, the Company shall have executed and delivered the Registration
Rights Agreement to each Purchaser.
(j)
Material
Adverse Effect
.
No
Material Adverse Effect shall have occurred at or before the Closing
Date.
(k)
Transfer
Agent Instructions
.
The
Irrevocable Transfer Agent Instructions, in the form of
Exhibit
G
attached
hereto, shall have been delivered to the Company’s transfer agent.
(l)
Escrow
Agreement
.
At the
Closing, the Company and the escrow agent shall have executed and delivered
the
Escrow Agreement to each Purchaser.
(m)
Security
Agreement
.
At the
Closing, the Company shall have executed and delivered the Security Agreement
to
each Purchaser.
(n)
UCC
Financing Statements
.
The
Company shall have filed all UCC financing statements in form and substance
satisfactory to the Purchasers at the appropriate offices to create a valid
and
perfected security interest in the Collateral (as defined in the Security
Agreement).
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 issue or reissue certificates representing any of the
Conversion Shares and the Warrant Shares, without the legend set forth above
if
at such time, prior to making any transfer of any such Conversion 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, and provided the conditions set forth in this paragraph
shall have been met. 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
Conversion 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 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, (ii) compliance with
applicable state securities or "blue sky" laws has been effected, or (iii)
the
holder provides the Company with reasonable assurances that a valid exemption
exists with respect thereto. The Company will respond to any such notice from
a
holder within three (3) 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. W
henever
a
certificate representing the Conversion Shares or Warrant Shares is required
to
be issued to a Purchaser without a legend, in lieu of delivering physical
certificates representing the Conversion 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 best efforts
to
cause its transfer agent to electronically transmit the Conversion 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
I
NDEMNIFICATION
Section
6.1
General
Indemnity
.
The
Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, managers, partners, members, shareholders,
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 matter 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
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
obligations to defend the indemnified party 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 shall 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.
No
indemnifying party will be liable to the indemnified party under this Agreement
to the extent, but only to the extent that a loss, claim, damage or liability
is
attributable to the indemnified party’s breach of any of the representations,
warranties or covenants made by such party in this Agreement or in the other
Transaction Documents.
ARTICLE
VII
M
ISCELLANEOUS
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 all actual attorneys' fees and expenses (including
disbursements and out-of-pocket expenses) incurred by the Purchasers in
connection with (i) the preparation, negotiation, execution and delivery of
the
Transaction Documents and the transactions contemplated thereunder, including
disbursements and out-of-pocket expenses, (ii) the review of the Registration
Statement in accordance with the Section 4(iv) of the Registration Rights
Agreement, and (iii) any amendments, modifications or waivers of this Agreement
or any of the other Transaction Documents. In addition, the Company shall pay
all reasonable fees and expenses incurred by the Purchasers in connection with
the enforcement of this Agreement or any of the other Transaction Documents,
including, without limitation, all reasonable attorneys' fees and expenses.
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 other Transaction
Documents, shall be entitled to reimbursement for reasonable legal fees from
the
non-prevailing party. The parties hereby waive all rights to a trial by jury.
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 the principal amount of the Notes 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.
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
Tel.
No.:
(312) 235-3888
Fax
No.:
(973) 391-1901
with
copies (which copies
shall
not
constitute notice
to
the
Company) to:
General
Counsel
Glowpoint,
Inc.
Hillside,
New Jersey 07205
Tel.
No.:
(312) 235-3888 x2087
Fax
No.:
(973) 565-1272
and
Gibbons
P.C.
One
Gateway Center
Newark,
New Jersey 07102
Attn:
Frank Cannone, Esq.
Tel.
No.:
(973) 596-4500
Fax
No.:
(973) 596-0545
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 with copies to:
Kramer
Levin Naftalis & Frankel LLP
1177
Avenue of the Americas
New
York,
New York 10036
Attention:
Christopher S. Auguste
Tel.
No.:
(212) 715-9100
Fax
No.:
(212) 715-8000
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.
No
consideration shall be offered or paid to any Purchaser 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. This provision constitutes a separate right granted
to
each Purchaser by the Company and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.
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.
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 any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction.
This
Agreement shall not be interpreted or construed with any presumption against
the
party causing this Agreement to be drafted.
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, including
without limitation any disclosure pursuant to the Registration Statement, 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 and the other Transaction Documents.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have caused this Note and Warrant Purchase
Agreement to be duly executed by their respective authorized officers as of
the
date first above written.
|
|
|
|
|
|
GLOWPOINT,
INC.
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
EXHIBIT
A
LIST
OF PURCHASERS
Purchasers
who are directors or officers of the Company at the time of the Closing (each
an
“Insider Purchaser”, and collectively, the “Insider Purchasers”; provided,
however, that for purposes of the Transaction Documents, such Purchasers shall
cease to be “Insider Purchasers” at any time they are no longer serving in the
capacity of a director or officer of the Company):
|
Names
and Addresses
|
|
Investment
Amount and
Number
of Warrants Purchased
|
|
|
|
|
Purchasers
other than Insider Purchasers:
|
Names
and Addresses
|
|
Investment
Amount and
Number
of Warrants Purchased
|
|
|
|
|
EXHIBIT
B
FORM
OF NOTE
EXHIBIT
C
FORM
OF SERIES A-2 WARRANT
EXHIBIT
D
FORM
OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT
E
FORM
OF SECURITY AGREEMENT
EXHIBIT
F
FORM
OF ESCROW AGREEMENT
EXHIBIT
G
FORM
OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
GLOWPOINT,
INC.
as
of
September
[
l
]
,
2007
[Name
and
address of Transfer Agent]
Attn:
_____________
Ladies
and Gentlemen:
Reference
is made to that certain Note and Warrant Purchase Agreement (the “
Purchase
Agreement
”),
dated
as of September
[
l
]
,
2007,
by and among Glowpoint, Inc., a Delaware corporation (the “
Company
”),
and
the purchasers named therein (collectively, the “
Purchasers
”)
pursuant to which the Company is issuing to the Purchasers senior secured
convertible promissory notes (the “
Notes
”)
and
warrants (the “
Warrants
”)
to
purchase shares of the Company’s common stock, par value $.0001 per share (the
“
Common
Stock
”).
This
letter shall serve as our irrevocable authorization and direction to you
(provided that you are the transfer agent of the Company at such time) to issue
shares of Common Stock upon conversion of the Notes (the “
Conversion
Shares
”)
and
exercise of the Warrants (the “
Warrant
Shares
”)
to or
upon the order of a Purchaser from time to time upon (i) surrender to you of
a
properly completed and duly executed Conversion Notice or Exercise Notice,
as
the case may be, in the form attached hereto as Exhibit I and Exhibit II,
respectively, (ii) in the case of the conversion of Notes, a copy of the Note
(with the original delivered to the Company) representing the Notes being
converted or, in the case of Warrants being exercised, a copy of the Warrants
(with the original Warrants delivered to the Company) being exercised (or,
in
each case, an indemnification undertaking with respect to such Notes or the
Warrants in the case of their loss, theft or destruction), and (iii) delivery
of
a treasury order or other appropriate order duly executed by a duly authorized
officer of the Company. So long as you have previously received (x) written
confirmation from counsel to the Company that a registration statement covering
resales of the Conversion Shares or Warrant Shares, as applicable, has been
declared effective by the Securities and Exchange Commission (the “
SEC
”)
under
the Securities Act of 1933, as amended (the “
1933
Act
”),
and
no subsequent notice by the Company or its counsel of the suspension or
termination of its effectiveness and (y) a copy of such registration statement,
and if the Purchaser represents that the Conversion Shares or the Warrant
Shares, as the case may be, were sold pursuant to the Registration Statement,
then certificates representing the Conversion Shares and the Warrant Shares,
as
the case may be, shall not bear any legend restricting transfer of the
Conversion Shares and the Warrant Shares, as the case may be, thereby and should
not be subject to any stop-transfer restriction. Provided, however, that if
you
have not previously received (i) written confirmation from counsel to the
Company that a registration statement covering resales of the Conversion Shares
or Warrant Shares, as applicable, has been declared effective by the SEC under
the 1933 Act, and (ii) a copy of such registration statement, then the
certificates for the Conversion Shares and the Warrant Shares shall bear the
following legend:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE 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 OR APPLICABLE STATE SECURITIES LAWS, OR
GLOWPOINT, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION
OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”
and,
provided further, that the Company may from time to time notify you to place
stop-transfer restrictions on the certificates for the Conversion Shares and
the
Warrant Shares in the event a registration statement covering the Conversion
Shares and the Warrant Shares is subject to amendment for events then
current.
A
form of
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares and the Warrant Shares has been
declared effective by the SEC under the 1933 Act is attached hereto as Exhibit
III.
Please
be
advised that the Purchasers are relying upon this letter as an inducement to
enter into the Purchase Agreement and, accordingly, each Purchaser is a third
party beneficiary to these instructions.
Please
execute this letter in the space indicated to acknowledge your agreement to
act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at ___________.
|
|
Very truly yours,
|
|
|
|
|
|
|
|
GLOWPOINT, INC.
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
Title:
|
|
|
|
|
|
|
ACKNOWLEDGED
AND AGREED:
[TRANSFER
AGENT]
EXHIBIT
I
GLOWPOINT,
INC.
CONVERSION
NOTICE
(To
be
Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of
GLOWPOINT, INC. (the “Maker”) according to the conditions hereof, as of the date
written below.
Date
of
Conversion
_________________________________________________________
Applicable
Conversion Price __________________________________________________
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _________________________
Name
of
bank/broker due to receive the underlying Common
Stock: _______________________
Bank/broker's
four digit "DTC" participant number
(obtained
from the receiving
bank/broker): __________________________________________
Signature___________________________________________________________________
[Name]
Address:__________________________________________________________________
_______________________________________________________________________
EXHIBIT
II
FORM
OF EXERCISE NOTICE
EXERCISE
FORM
GLOWPOINT,
INC.
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of Glowpoint, Inc.
covered by the within Warrant.
|
Dated: _________________
|
Signature
|
___________________________
|
|
|
Address
|
_____________________
|
|
|
|
_____________________
|
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
|
Dated: _________________
|
Signature
|
___________________________
|
|
|
Address
|
_____________________
|
|
|
|
_____________________
|
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
|
Dated: _________________
|
Signature
|
___________________________
|
|
|
Address
|
_____________________
|
|
|
|
_____________________
|
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
EXHIBIT
III
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
[Name
and
address of Transfer Agent]
Attn:
_____________
Re:
Glowpoint,
Inc.
Ladies
and Gentlemen:
We
are
counsel to Glowpoint, Inc., a Delaware corporation (the “
Company
”),
and
have represented the Company in connection with that certain Note and Warrant
Purchase Agreement (the “
Purchase
Agreement
”),
dated
as of September
[
l
]
,
2007,
by and among the Company and the purchasers named therein (collectively, the
“
Purchasers
”)
pursuant to which the Company issued to the Purchasers senior secured
convertible promissory notes (the “
Notes
”)
and
warrants (the “
Warrants
”)
to
purchase shares of the Company’s common stock, par value $.0001 per share (the
“
Common
Stock
”).
Pursuant to the Purchase Agreement, the Company has also entered into a
Registration Rights Agreement with the Purchasers (the “
Registration
Rights Agreement
”),
dated
as of September
[
l
]
,
2007,
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Notes
and
exercise of the Warrants, under the Securities Act of 1933, as amended (the
“
1933
Act
”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on ________________, 2007, the Company filed a Registration Statement
on Form S-1 (File No. 333-________) (the “
Registration
Statement
”)
with
the Securities and Exchange Commission (the “
SEC
”)
relating to the resale of the Registrable Securities which names each of the
present Purchasers as a selling stockholder thereunder.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at
[ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC
and
accordingly, the Registrable Securities are available for resale under the
1933
Act pursuant to the Registration Statement.
Very
truly yours,
[COMPANY
COUNSEL]
By:___________________________
cc:
[LIST
NAMES OF PURCHASERS]
EXHIBIT
H
FORM
OF OPINION
1.
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 carry on
its
business as presently conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the failure to so qualify would have a Material Adverse
Effect.
2.
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under the Transaction Documents and to issue the Notes,
the Warrants and the Common Stock issuable upon conversion of the Notes and
exercise of the Warrants. The execution, delivery and performance of each 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 no further consent or authorization of the
Company, its Board of Directors or its stockholders is required. Each of the
Transaction Documents have been duly executed and delivered, and the Notes
and
the Warrants have been duly executed, issued and delivered by the Company and
each of the Transaction Documents constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its
respective terms. The Common Stock issuable upon conversion of the Notes and
exercise of the Warrants are not subject to any preemptive rights under the
Certificate of Incorporation or the Bylaws.
3.
The
Notes
and the Warrants have been duly authorized and, when delivered against payment
in full as provided in the Purchase Agreement, will be validly issued, fully
paid and nonassessable. The shares of Common Stock issuable upon conversion
of
the Notes and exercise of the Warrants have been duly authorized and reserved
for issuance, and when delivered upon conversion or against payment in full
as
provided in the Notes and the Warrants, as applicable, will be validly issued,
fully paid and nonassessable.
4.
The
execution, delivery and performance of and compliance with the terms of the
Transaction Documents and the issuance of the Notes, the Warrants and the Common
Stock issuable upon conversion of the Notes and exercise of the Warrants do
not
(a) violate any provision of the Certificate of Incorporation or Bylaws,
(b) 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 material
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party and which
is
set forth on Schedule I, (c) create or impose a lien, charge or encumbrance
on
any property of the Company under any agreement or any commitment which is
set
forth on Schedule I 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
(d)
result in a violation of any Federal, state, local or foreign statute, rule,
regulation, order, judgment, injunction or decree (including Federal and state
securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected, except, in all cases
other than violations pursuant to clauses (a) and (d) above, for such conflicts,
default, terminations, amendments, acceleration, cancellations and violations
as
would not, individually or in the aggregate, have a Material Adverse
Effect.
5.
No
consent, approval or authorization of or designation, declaration or filing
with
any governmental authority on the part of the Company is required under Federal,
state or local law, rule or regulation in connection with the valid execution,
delivery and performance of the Transaction Documents, or the offer, sale or
issuance of the Notes, the Warrants and the Common Stock issuable upon
conversion of the Notes and exercise of the Warrants other than filings as
may
be required by applicable Federal and state securities laws and regulations
and
any applicable stock exchange rules and regulations.
6.
To
our
knowledge, there is no action, suit, claim, investigation or proceeding pending
or threatened against the Company which questions the validity of the Purchase
Agreement or the transactions contemplated thereby or any action taken or to
be
taken pursuant thereto. There is no action, suit, claim, investigation or
proceeding pending, or to our knowledge, threatened, against or involving the
Company or any of its properties or assets and which, if adversely determined,
is reasonably likely to result in a Material Adverse Effect. To our knowledge,
there are no outstanding orders, judgments, injunctions, awards or decrees
of
any court, arbitrator or governmental or regulatory body against the Company
or
any officers or directors of the Company in their capacities as
such.
7.
Assuming
that all of the Purchasers’ representations and warranties in the Purchase
Agreement are complete and accurate, the offer, issuance and sale of the Notes
and the Warrants and the offer, issuance and sale of the Common Stock issuable
upon conversion of the Notes and exercise of the Warrants are exempt from the
registration requirements of the Securities Act of 1933, as amended.
8.
The
Company is not, and as a result of and immediately upon 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.
9.
The
Security Agreement will create a valid security interest in favor of the
Purchasers in such assets of the Company that is subject to such Security
Agreement. Upon the filing of a UCC financing statement with the Secretary
of
State of the State of Delaware, the Purchasers will have a perfected security
interest in such assets of the Company that is subject to the Security
Agreement.
AMENDMENT
NO. 1
TO
REGISTRATION
RIGHTS AGREEMENT
THIS
AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT (this “Amendment”), dated as of
September 21, 2007, is made by and among Glowpoint, Inc., a Delaware corporation
(the “Company”) and the investors signatory hereto (the
“Investors”).
Preliminary
Statement
WHEREAS,
the parties hereto are parties to that certain Registration Rights Agreement,
dated as of March 31, 2006 (the “ Registration Rights Agreement”);
WHEREAS,
the Company and the Investors desire to amend certain provisions of the
Registration Rights Agreement as described herein;
WHEREAS,
Section 7(e) of the Registration Rights Agreement provides that the Registration
Rights Agreement may be amended on behalf of all parties thereto by the Company
and the Holders of three-fourths (3/4) of the Registrable Securities
outstanding; and
WHEREAS,
the Investors are the Holders of at least three-fourths (3/4) of the Registrable
Securities outstanding.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the parties, intending to be legally bound, hereby
agree as follows:
1.
Capitalized
Terms
.
Capitalized terms used, but not defined, herein, shall have the meanings
ascribed to such terms in the Registration Rights Agreement.
2.
Amendments
to Registration Rights Agreement
.
(a)
Effectiveness
Date
.
The
definition of “Effectiveness Date” in Section 1 of the Registration Rights
Agreement is hereby deleted in its entirety and the following new definition
shall be substituted in lieu thereof:
“
“
Effectiveness
Date
”
means,
subject to Section 2(b) hereof, with respect to the Registration Statement
the
earlier of (A) the ninetieth (90th) day following the Filing Date or (B) the
date which is within three (3) Business Days of the date on which the Commission
informs the Company that (i) the Commission will not review the Registration
Statement or (ii) the Company may request the acceleration of the effectiveness
of the Registration Statement and the Company makes such request; provided
that,
if the Effectiveness Date falls on a Saturday, Sunday or any other day which
shall be a legal holiday or a day on which the Commission is authorized or
required by law or other government actions to close, the Effectiveness Date
shall be the following Business Day.”
(b)
Filing
Date
.
Subject
to Section 2(b) of the Registration Rights Agreement, the Filing Date shall
be
extended to the date which is 30 days after the date of this Amendment; provided
that, if the Filing Date falls on a Saturday, Sunday or any other day which
shall be a legal holiday or a day on which the Commission is authorized or
required by law or other government actions to close, the Filing Date shall
be
the following Business Day.
(c)
Notes
.
The
definition of “Notes” in Section 1 of the Registration Rights Agreement is
hereby deleted in its entirety and the following new definition shall be
substituted in lieu thereof:
“
“
Notes
”
means,
collectively, each of the following, as the same may be amended from time to
time: (A) the senior secured convertible promissory notes issued to the
Purchasers pursuant to the Purchase Agreement, as amended, and (B) the
additional senior secured convertible promissory notes issued to the Purchasers
pursuant to that certain Note and Warrant Purchase Agreement, dated as of
September 21, 2007 (the “September Purchase Agreement”), by and between the
Company and the purchasers named therein, in the aggregate principal amount
of
up to $3,600,000 on or about September 21, 2007 (the “Additional
Notes”).”
(d)
Registrable
Securities
.
The
definition of “Registrable Securities” in Section 1 of the Registration Rights
Agreement is hereby deleted in its entirety and the following new definition
shall be substituted in lieu thereof:
“
“
Registrable
Securities
”
means
the shares of Common Stock issuable (A) upon conversion of the Notes, (B) upon
exercise of the Warrants, and (C) upon conversion of the Series C Preferred
Stock.”
(e)
Series
C Preferred Stock
.
The
following new definition of “Series C Preferred Stock” is hereby added to
Section 1 of the Registration Rights Agreement after the definition of
“Securities Act” and before the definition of “Special Counsel”:
“
“
Series
C Preferred Stock
”
means
the Company’s Series C Convertible Preferred Stock, par value $.0001 per
share.”
(f)
Warrants
.
The
definition of “Warrants” in Section 1 of the Registration Rights Agreement is
hereby deleted in its entirety and the following new definition shall be
substituted in lieu thereof:
“
“
Warrants
”
means,
collectively, each of the following, as the same may be amended from time to
time: (A) the warrants to purchase shares of Common Stock issued to the
Purchasers pursuant to the Purchase Agreement; (B) the warrants to purchase
shares of Common Stock issued to the Purchasers on or about September 21, 2007
as consideration for the amendment of the senior secured convertible promissory
notes issued to the Purchasers pursuant to the Purchase Agreement; and (C)
the
warrants to purchase shares of Common Stock issued to the Purchasers in
connection with the purchase of the Additional Notes.”
(g)
Resale
Registration
.
Section
2 of the Registration Rights Agreement is hereby deleted in its entirety and
the
following new section shall be substituted in lieu thereof:
“2.
Resale
Registration.
(a)
On
or
prior to the Filing Date the Company shall prepare and file with the Commission
a "resale" Registration Statement providing for the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-1 (except if the Company
is
not then eligible to register for resale the Registrable Securities on Form
S-1,
in which case such registration shall be on another appropriate form in
accordance with the Securities Act and the rules promulgated thereunder). The
Company shall (i) not permit any securities other than the Registrable
Securities and the securities to be listed on
Schedule
II
hereto
to be included in the Registration Statement and (ii) use its best efforts
to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as possible after the filing thereof, but in any event prior
to
the Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until such date as is the earlier of (x)
the
date when all Registrable Securities covered by such Registration Statement
have
been sold or (y) the date on which the Registrable Securities may be sold
without any restriction pursuant to Rule 144(k) as determined by the counsel
to
the Company pursuant to a written opinion letter, addressed to the Company's
transfer agent to such effect (the "
Effectiveness
Period
").
If at
any time and for any reason, an additional Registration Statement is required
to
be filed because at such time the actual number of shares of Common Stock into
which the Notes are convertible, the Warrants are exercisable plus the number
of
shares of Common Stock, and the shares of Common Stock into which the Series
C
Preferred Stock is convertible exceeds the number of shares of Registrable
Securities remaining under the Registration Statement, the Company shall have
fifteen (15) Business Days to file such additional Registration Statement,
and
the Company shall use its best efforts to cause such additional Registration
Statement to be declared effective by the Commission as soon as possible, but
in
no event later than sixty (60) days after filing.
(b)
Notwithstanding
anything to the contrary set forth in this Section 2, in the event the
Commission does not permit the Company to register all of the Registrable
Securities in the Registration Statement because of the Commission’s application
of Rule 415 or the Commission requires the Company to either exclude shares
held
by certain Holders or deem such Holders to be underwriters with respect to
their
Registrable Securities, the Company shall register in the Registration Statement
such number of Registrable Securities as is permitted by the Commission without
naming such Holder as an underwriter (unless such Holder agrees to be named
as
an underwriter),
provided
,
however
,
that
the number of Registrable Securities to be included in such Registration
Statement or any subsequent registration statement shall be determined in the
following order: (i) first, the shares of Common Stock issuable upon conversion
of the Notes shall be registered on a pro rata basis among the holders of the
Notes, (ii) second, the shares of Common Stock issuable upon conversion of
the
Series C Preferred Stock shall be registered on a pro rata basis among the
holders of the Series C Preferred Stock, and (iii) third, the shares of Common
Stock issuable upon exercise of (1) the Warrants, and (2) the securities listed
on Schedule II hereto, shall be registered on a pro rata basis among the holders
of the Warrants and such securities. In the event the Commission does not permit
the Company to register all of the Registrable Securities in the initial
Registration Statement, the Company shall use its commercially reasonable
efforts to file subsequent Registration Statements to register the Registrable
Securities that were not registered in the initial Registration Statement as
promptly as possible and in a manner permitted by the Commission. For purposes
of this Section 2(b), “
Filing
Date
”
means
with respect to each subsequent Registration Statement filed pursuant hereto,
the
later
of (i) sixty (60) days following the sale of substantially all of the
Registrable Securities included in the initial Registration Statement or any
subsequent Registration Statement and (ii) six (6) months following the
effective date of the initial Registration Statement or any subsequent
Registration Statement, as applicable, or such earlier or later date as
permitted or required by the Commission.
For
purposes of this Section 2(b), “
Effectiveness
Date
”
means
with respect to each subsequent Registration Statement filed pursuant hereto,
the earlier of
(A)
the
ninetieth (90
th
)
day
following the filing date of such Registration Statement (or in the event such
Registration Statement is reviewed by the Commission, the one hundred twentieth
(120
th
)
day
following such filing date) or (B) the date which is within three (3) Business
Days after the date on which the Commission informs the Company (i) that the
Commission will not review such Registration Statement or (ii)
that
the
Company may request the acceleration of the effectiveness of such Registration
Statement and the Company promptly makes such request;
provided
that
,
if the
Effectiveness Date falls on a Saturday, Sunday or any other day which shall
be a
legal holiday or a day on which the Commission is authorized or required by
law
or other government actions to close, the Effectiveness Date shall be the
following Business Day.”
(h)
Liquidated
Damages
.
(i)
Section
7(d) of the Registration Rights Agreement is hereby deleted in its entirety
and
the following new section shall be substituted in lieu thereof:
“(d)
Failure
to File Registration Statement and Other Events
.
The
Company and the Purchasers agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date
and
maintained in the manner contemplated herein during the Effectiveness Period
or
if certain other events occur. The Company and the Holders further agree that
it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or prior to
the
Filing Date, or (B) the Registration Statement is not declared effective by
the
Commission on or prior to the Effectiveness Date, or (C) the Company fails
to
file with the Commission a request for acceleration in accordance with Rule
461
promulgated under the Securities Act within three (3) Business Days of the
date
that the Company is notified (orally or in writing, whichever is earlier) by
the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (D) the Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as to all
Registrable Securities at any time prior to the expiration of the Effectiveness
Period, without being succeeded immediately by a subsequent Registration
Statement filed with and declared effective by the Commission, or (E) the
Company has breached Section 3(n), or (F) trading in the Common Stock shall
be
suspended or if, after initial quotation of the Common Stock on the OTC Bulletin
Board, the Common Stock is no longer quoted on the OTC Bulletin Board (or listed
on another principal exchange on which the Common Stock is traded) for any
reason for more than three (3) Business Days in the aggregate (any such failure
or breach being referred to as an "
Event
,"
and
for purposes of clauses (A), (B) and (E) the date on which such Event occurs,
or
for purposes of clause (C) the date on which such three (3) Business Day period
is exceeded, or for purposes of clause (D) after more than fifteen (15) Business
Days, or for purposes of clause (F) the date on which such three (3) Business
Day period is exceeded, being referred to as "
Event
Date
"),
the
Company shall pay an amount as liquidated damages to each Holder in cash equal
to (1) two percent (2.0%) for the first calendar month (prorated for a shorter
period) and (2) one percent (1.0%) for each calendar month after the first
calendar month (prorated for shorter periods) of the Holder’s initial investment
in the Notes and Series C Preferred Stock, from the Event Date until the
applicable Event is cured;
provided
,
however
,
that in
no event shall the amount of liquidated damages payable at any time and from
time to time to any Holder pursuant to this Section 7(d) exceed an aggregate
of
eighteen percent (18%) of the amount of the Holder’s initial investment in the
Notes and Series C Preferred Stock. The Company shall not be liable for
liquidated damages under this Agreement as to any Registrable Securities which
are not permitted by the Commission to be included in a Registration Statement
because of its application of Rule 415 until such time as the provisions of
this
Agreement as to the Registration Statements required to be filed pursuant to
Section 2(b) are triggered, in which case the provisions of this Section 7(d)
shall once again apply, if applicable. In such case, the liquidated damages
shall be calculated to only apply to the percentage of Registrable Securities
which are permitted by the Commission to be included in the Registration
Statement. Notwithstanding anything to the contrary in this Section 7(d), if
(i)
any of the Events described in clauses (A), (B), (C) or (D) shall have occurred,
(ii) on or prior to the applicable Event Date, the Company shall have exercised
its rights under Section 3(n) hereof and (iii) the postponement or suspension
permitted pursuant to such Section 3(n) shall remain effective as of such
applicable Event Date, then the applicable Event Date shall be deemed instead
to
occur on the second Business Day following the termination of such postponement
or suspension. Liquidated damages payable by the Company pursuant to this
Section 7(d) shall be payable on the first (1
st
)
business day of each thirty (30) day period following the Event Date.
Notwithstanding anything to the contrary contained herein, (i) in no event
shall
any liquidated damages be payable with respect to the Warrants or the Warrant
Shares; and (ii) this Section 7(d) shall not apply to, and shall have no force
or effect with respect to, any Holder that is an Insider Purchaser (as defined
in, and listed on, Exhibit A to the September Purchase Agreement).”
(ii)
Each
of
the Holders hereby waives any rights it may have to any liquidated damages
under
Section 7(d) of the Registration Rights Agreement accruing on or prior to the
date of this Amendment.
3.
Notices
to the Company
.
The
notices information for the Company in Section 7(f) of the Registration Rights
Agreement is hereby deleted in its entirety and the following new notices
information be substituted in lieu thereof:
“Glowpoint,
Inc.
225
Long
Avenue
Hillside,
New Jersey 07205
Attention:
Chief Executive Officer
Tel.
No.:
(312) 235-3888 x2053
Fax
No.:
(973) 391-1904
and
General
Counsel
Glowpoint,
Inc.
225
Long
Avenue
Hillside,
New Jersey 07205
Tel.
No.:
(312) 235-3888 x 2087
Fax
No.:
(973) 556-1272”
4.
Permitted
Securities
.
Schedule II of the Registration Rights Agreement is hereby amended by adding
the
following thereto:
“2.
Shares
of
Common Stock issuable upon the exercise of placement agent warrants issued
to
Burnham Hill Partners, its designees and assigns, prior to the date hereof
or in
connection with the transactions contemplated by the September Purchase
Agreement.”
5.
Ratification
.
Except
as expressly amended hereby, all of the terms, provisions and conditions of
the
Registration Rights Agreement are hereby ratified and confirmed in all respects
by each party hereto and, except as expressly amended hereby, are, and hereafter
shall continue, in full force and effect.
6.
Entire
Agreement
.
This
Amendment and the Registration Rights Agreement, as amended, constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements and understandings, both
written and oral, between the parties with respect thereto.
7.
Amendments
.
No
amendment, supplement, modification or waiver of this Amendment shall be binding
unless executed in writing by all parties hereto.
8.
Counterparts
.
This
Amendment may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same instrument. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
9.
Governing
Law
.
This
Amendment shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction.
10.
Successors
and Assigns
.
This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
IN
WITNESS WHEREOF, the parties have executed this Amendment as of the date first
above written.
|
|
|
|
|
|
GLOWPOINT,
INC.
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
Signature
Page to Amendment No. 1 to
Registration Rights Agreement
IN
WITNESS WHEREOF, the parties have executed this Amendment as of the date first
above written.
|
|
|
|
|
|
INVESTOR:
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
Signature
Page to Amendment No. 1 to
Registration Rights Agreement
AMENDMENT
NO. 1
TO
SECURITY
AGREEMENT
THIS
AMENDMENT NO. 1 TO SECURITY AGREEMENT (this “Amendment”), dated as of September
21, 2007, is made by and among Glowpoint, Inc., a Delaware corporation (the
“Company”) and the secured parties signatory hereto (the “Secured
Parties”).
Preliminary
Statement
WHEREAS,
the parties hereto are parties to that certain Security Agreement, dated as
of
March 31, 2006 (the “ Security Agreement”); and
WHEREAS,
the Company and the Secured Parties desire to amend certain provisions of the
Security Agreement as described herein.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the parties, intending to be legally bound, hereby
agree as follows:
1.
Capitalized
Terms
.
Capitalized terms used, but not defined, herein, shall have the meanings
ascribed to such terms in the Security Agreement.
2.
Amendments
to Security Agreement
.
(a)
Notes
.
(i)
The
first
recital of the Security Agreement is hereby deleted in its entirety and the
following new recital shall be substituted in lieu thereof:
“WHEREAS,
the Grantor has issued or will issue the Notes (as defined below) to the Secured
Parties; and”
(ii)
Notes
.
The
definition of “Notes” in Section 1.2 of the Security Agreement is hereby deleted
in its entirety and the following new definition shall be substituted in lieu
thereof:
“
Notes
”
means,
collectively, each of the following, as the same may be amended from time to
time: (A) the senior secured convertible promissory notes issued to the
Purchasers pursuant to each Purchase Agreement, and (B) any additional senior
secured convertible promissory notes issued from time to time as interest on
the
outstanding principal balance of the foregoing promissory notes.”
(b)
Purchase
Agreement
.
The
following definition of “Purchase Agreement” is hereby added to Section 1.2 of
the Security Agreement after the definition of “Permitted Liens” and before the
definition of “Registered Organization”:
“
Purchase
Agreement
”
means,
collectively, each of the following as the same may be amended from time to
time: (i) that certain Note and Warrant Purchase Agreement, dated as of March
31, 2006, by and among the Grantor and the Secured Parties, (ii) that certain
Note and Warrant Purchase Agreement, dated as of April 12, 2006, by and among
the Grantor and the Secured Parties, and (iii) that certain Note and Warrant
Purchase Agreement, dated as of September 21, 2007, by and among the Grantor
and
the Secured Parties.”
(c)
Pari
Passu Status of Notes
.
The
following sentence shall be added to the end of Section 3.3 of the Security
Agreement:
“Notwithstanding
anything contained herein to the contrary, all of the senior secured convertible
promissory notes issued pursuant to each Purchase Agreement shall rank on a
pari
passu basis.”
(d)
Permitted
Liens
.
(i)
The
following definition of “Permitted Liens” is hereby added to Section 1.2 of the
Security Agreement after the definition of “Obligations” and before the
definition of “Purchase Agreement”:
“
Permitted
Liens
”
means
(i) purchase money security interests on equipment purchased or leased by the
Grantor, and (ii) any liens on up to $1 million of the Grantor’s receivables in
connection with any line of credit, factoring arrangement or other similar
financing arrangement in connection with servicing the Grantor’s
receivables.”
(ii)
Clause
(b) of Section 3.3 of the Security Agreement is hereby amended by adding the
words “and Permitted Liens” immediately after the words “(“
Existing
Liens
”)”.
(iii)
The
last
sentence of Section 3.3 of the Security Agreement is hereby amended by adding
the words “or Permitted Lien” immediately after the words “Existing
Lien”.
(iv)
The
first
sentence of Section 3.4 of the Security Agreement is hereby amended by adding
the words “and Permitted Liens” at the end of such sentence.
(v)
The
first
sentence of Section 4.6 of the Security Agreement is hereby amended by adding
the words “and Permitted Liens” immediately after the words “Existing
Liens”.
(vi)
Section
4.7 of the Security Agreement is hereby deleted in its entirety and the
following new Section 4.7 shall be substituted in lieu thereof:
“Section
4.7.
Use
and Disposition of Collateral
.
Except
for, and in connection with, Permitted Liens, the Grantor shall not make or
permit to be made an assignment, pledge or hypothecation of any Collateral
or
shall grant any other Lien in respect of the Collateral without the prior
written consent of the Secured Parties. The Grantor shall not make or permit
to
be made any transfer of any Collateral other than with respect to Existing
Liens, Permitted Liens and other liens approved by the Secured Parties, and
the
Grantor shall remain at all times in possession of the Collateral owned by
it.”
(vii)
The
parenthetical clause in the first sentence of Section 6.1 of the Security
Agreement is hereby amended by adding the words “and Permitted Liens”
immediately after the words “Existing Liens”.
3.
Ratification
.
Except
as expressly amended hereby, all of the terms, provisions and conditions of
the
Security Agreement are hereby ratified and confirmed in all respects by each
party hereto and, except as expressly amended hereby, are, and hereafter shall
continue, in full force and effect.
4.
Entire
Agreement
.
This
Amendment and the Security Agreement, as amended, constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
all prior and contemporaneous agreements and understandings, both written and
oral, between the parties with respect thereto.
5.
Amendments
.
No
amendment, supplement, modification or waiver of this Amendment shall be binding
unless executed in writing by all parties hereto.
6.
Counterparts
.
This
Amendment may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute
but
one contract. Each party shall be entitled to rely on a facsimile signature
of
any other party hereunder as if it were an original.
7.
Governing
Law
.
This
Amendment shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction.
8.
Successors
and Assigns
.
This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
IN
WITNESS WHEREOF, the parties have executed this Amendment as of the date first
above written.
|
|
|
|
|
|
GLOWPOINT, INC.
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
Acknowledged
and agreed:
COLLATERAL
AGENT:
[BUSH
ROSS, P.A.]
By:
__________________________________
Name:
Title:
Signature
Page to Amendment No. 1 to Security
Agreement
IN
WITNESS WHEREOF, the parties have executed this Amendment as of the date first
above written.
|
|
|
|
|
|
SECURED PARTY:
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
Signature
Page to Amendment No. 1 to Security
Agreement
EXCHANGE
AGREEMENT
THIS
EXCHANGE AGREEMENT (this “Agreement”) is dated as of September 21, 2007, by and
among Glowpoint, Inc., a Delaware corporation (the “Company”), and the holders
of shares of the Company’s Series B Convertible Preferred Stock whose signatures
appear on the signature page attached hereto (each a “Holder” and collectively
the “Holders”).
Preliminary
Statement
WHEREAS,
each Holder currently holds shares of Series B Convertible Preferred Stock
of
the Company, par value $0.0001 per share and stated value $24,000 per share
(“Series B Preferred Stock”), convertible into shares of the Company’s common
stock, par value $0.0001 per share (“Common Stock”), at a conversion price of
$1.67 per share (the “Series B Preferred Shares”) issued pursuant to that
certain Exchange Agreement, dated as of January 22, 2004, by and among the
Company and the Holders (the “Series B Exchange Agreement”);
WHEREAS,
subject to the terms and conditions set forth herein, the Company and the
Holders desire to (i) cancel and retire the Series B Preferred Shares, to
forfeit any and all rights under the Series B Exchange Agreement and the
Certificate of Designations, Preferences and Rights of Series B Preferred Stock
filed with the Delaware Secretary of State on January 22, 2004 (including,
without limitation, the right to receive accrued but unpaid dividends on the
Series B Preferred Shares, which dividends shall be exchanged into Series C
Preferred Stock (as defined below) subject to and in accordance with the terms
of this Agreement), and (ii) surrender an aggregate of 1,525,000 shares of
Common Stock held by the Holders (the “Common Shares”), each in exchange for
shares of Series C Convertible Preferred Stock, par value $0.0001 per share,
stated value $10,000 per share (the “Series C Preferred Stock”). The Series C
Preferred Stock and the shares of Common Stock issuable upon conversion of
the
Series C Preferred Stock are sometimes collectively referred to herein as the
“Securities”.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby agreed and acknowledged, the parties hereby agree as
follows:
1.
Securities
Exchange
.
(a)
Upon
the
following terms and subject to the conditions contained herein, the Holders
agree to deliver to the Company the Series B Preferred Shares and the Common
Shares in exchange for the Series C Preferred Stock. In consideration of and
in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, (i) each Series B Preferred Share shall be
exchanged for 2.4 validly issued, fully paid and non-assessable shares of Series
C Preferred Stock; (ii) all accrued but unpaid dividends on the Series B
Preferred Shares shall be exchanged into that number of validly issued, fully
paid and non-assessable shares of Series C Preferred Stock as is determined
by
dividing the actual amount of such accrued but unpaid dividends by $10,000,
and
(iii) all of the Common Shares shall be exchanged for an aggregate of 76.25
validly issued, fully paid and non-assessable shares of Series C Preferred
Stock.
(b)
The
closing under this Agreement (the “Closing”) shall take place at the offices of
Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York,
NY 10036 upon the satisfaction of each of the conditions set forth in Sections
4
and 5 hereof (the “Closing Date”).
(c)
At
the
Closing, the Holders shall deliver to the Company for cancellation all
certificates evidencing the Series B Preferred Shares and the Common Shares,
or
an indemnification undertaking with respect to such certificates in the event
of
the loss, theft or destruction of such certificates. At the Closing, the Company
shall issue to the Holders the Series C Preferred Stock, each in the amounts
set
forth on Exhibit A attached hereto. At the Closing, the Series B Exchange
Agreement shall terminate and be of no further force and effect.
2.
Representations,
Warranties and Covenants of the Holders
.
Each of
the Holders hereby makes the following representations and warranties to the
Company, and covenants for the benefit of the Company, with respect solely
to
itself and not with respect to any other Holder:
(a)
If
a
Holder is an entity, such Holder 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)
This
Agreement has been duly authorized, validly executed and delivered by each
Holder and is a valid and binding agreement and obligation of each Holder
enforceable against such Holder in accordance with its terms, subject to
limitations on enforcement by general principles of equity and by bankruptcy
or
other laws affecting the enforcement of creditors’ rights generally, and each
Holder has full power and authority to execute and deliver the Agreement and
the
other agreements and documents contemplated hereby and to perform its
obligations hereunder and thereunder.
(c)
Each
Holder understands that the Securities are being offered and sold to it in
reliance on specific provisions of Federal and state securities laws and that
the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of each Holder set
forth herein for purposes of qualifying for exemptions from registration under
the Securities Act of 1933, as amended (the “Securities Act”) and applicable
state securities laws.
(d)
Each
Holder is an “accredited investor” as defined under Rule 501 of Regulation D
promulgated under the Securities Act.
(e)
Each
Holder is and will be acquiring the Securities for such Holder’s own account,
for investment purposes, and not with a view to any resale or distribution
in
whole or in part, in violation of the Securities Act or any applicable
securities laws;
provided
,
however
,
that by
making the representations herein, such Holder does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with Federal and state
securities laws applicable to such disposition.
(f)
The
offer
and sale of the Securities is intended to be exempt from registration under
the
Securities Act, by virtue of Section 3(a)(9) and/or 4(2) thereof. Each Holder
understands that the Securities purchased hereunder are “restricted securities,”
as that term is defined in the Securities Act and the rules thereunder, have
not
been registered under the Securities Act, and that none of the Securities can
be
sold or transferred unless they are first registered under the Securities Act
and such state and other securities laws as may be applicable or the Company
receives an opinion of counsel reasonably acceptable to the Company that an
exemption from registration under the Securities Act is available (and then
the
Securities may be sold or transferred only in compliance with such exemption
and
all applicable state and other securities laws).
(g)
Each
Holder owns and holds, beneficially and of record, the entire right, title,
and
interest in and to the Series B Preferred Shares and the Common Shares set
forth
opposite such Holder’s name on Exhibit A, free and clear of all rights and
Encumbrances (as defined below). Each Holder has full power and authority to
vote, transfer and dispose of the Series B Preferred Shares and Common Shares
set forth opposite such Holder’s name on Exhibit A, free and clear of any right
or Encumbrance other than restrictions under the Securities Act and applicable
state securities laws. Other than the transactions contemplated by this
Agreement, there is no outstanding vote, plan, pending proposal, or other right
of any person to acquire all or any of the Series B Preferred Shares or Common
Shares set forth opposite such Holder’s name on Exhibit A. “Encumbrances” shall
mean any security or other property interest or right, claim, lien, pledge,
option, charge, security interest, contingent or conditional sale, or other
title claim or retention agreement, interest or other right or claim of third
parties, whether perfected or not perfected, voluntarily incurred or arising
by
operation of law, and including any agreement (other than this Agreement) to
grant or submit to any of the foregoing in the future.
3.
Representations,
Warranties and Covenants of the Company
.
The
Company represents and warrants to each Holder, and covenants for the benefit
of
each Holder, as follows:
(a)
The
Company has been duly incorporated and is validly existing and in good standing
under the laws of the state of Delaware, with full corporate power and authority
to own, lease and operate its properties and to conduct its business as
currently conducted, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration
or
qualification, except where the failure to register or qualify would not have
a
Material Adverse Effect. For purposes of this Agreement, “Material Adverse
Effect” shall mean any material adverse effect on the business, operations,
properties, prospects, or financial condition of the Company and its
subsidiaries 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.
(b)
The
Securities have been duly authorized by all necessary corporate action and,
when
paid for or issued in accordance with the terms hereof, the Securities shall
be
validly issued and outstanding, fully paid and nonassessable, free and clear
of
all liens, encumbrances and rights of refusal of any kind.
(c)
This
Agreement has been duly authorized, validly executed and delivered on behalf
of
the Company and is a valid and binding agreement and obligation of the Company
enforceable against the Company in accordance with its terms, subject to
limitations on enforcement by general principles of equity and by bankruptcy
or
other laws affecting the enforcement of creditors’ rights generally, and the
Company has full power and authority to execute and deliver the Agreement and
the other agreements and documents contemplated hereby and to perform its
obligations hereunder and thereunder.
(d)
The
execution and delivery of the Agreement and the consummation of the transactions
contemplated by this Agreement by the Company, will not (i) conflict with or
result in a breach of or a default under any of the terms or provisions of,
(A)
the Company’s certificate of incorporation or by-laws, or (B) of any material
provision of any indenture, mortgage, deed of trust or other material agreement
or instrument to which the Company is a party or by which it or any of its
material properties or assets is bound, (ii) result in a violation of any
provision of any law, statute, rule, regulation, or any existing applicable
decree, judgment or order by any court, Federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over
the
Company, or any of its material properties or assets or (iii) result in the
creation or imposition of any material lien, charge or encumbrance upon any
material property or assets of the Company or any of its subsidiaries pursuant
to the terms of any agreement or instrument to which any of them is a party
or
by which any of them may be bound or to which any of their property or any
of
them is subject except in the case of clauses (i)(B), (ii) or (iii) for any
such
conflicts, breaches, or defaults or any liens, charges, or encumbrances which
would not have a Material Adverse Effect.
(e)
The
delivery and issuance of the Securities in accordance with the terms of and
in
reliance on the accuracy of each Holder’s representations and warranties set
forth in this Agreement will be exempt from the registration requirements of
the
Securities Act.
(f)
Except
for the filing of the Certificate of Designations, Preferences and Rights of
Series C Preferred Stock (the “Certificate of Designation”), no consent,
approval or authorization of or designation, declaration or filing with any
governmental authority on the part of the Company is required in connection
with
the valid execution and delivery of this Agreement or the offer, sale or
issuance of the Securities or the consummation of any other transaction
contemplated by this Agreement.
(g)
The
Company has complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and delivery 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 preliminary conversations or 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. 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.
(h)
The
Company represents that it has not paid, and shall not pay, any commissions
or
other remuneration, directly or indirectly, to any Holder or to any third party
for the solicitation of the exchange of the Series B Preferred Shares or Common
Shares pursuant to this Agreement.
(i)
The
Company covenants and agrees that promptly following the Closing Date, all
outstanding Series B Preferred Shares will be cancelled and retired by the
Company.
(j)
There
is
no action, suit, claim, investigation or proceeding pending or, to the knowledge
of the Company, threatened against the Company which questions the validity
of
this Agreement or the transactions contemplated hereby or any action taken
or to
be taken pursuant thereto. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened, against
or
involving the Company or any subsidiary, or any of their respective properties
or assets which, if adversely determined, is reasonably likely to result in
a
Material Adverse Effect.
(k)
The
authorized capital stock of the Company and the shares thereof issued and
outstanding as of September 21, 2007 are set forth on
Schedule
3(l)
attached
hereto. All of the outstanding shares of the Company’s Common Stock have been
duly and validly authorized, and are fully paid and non-assessable. Except
as
set forth in this Agreement or on
Schedule
3(l)
attached
hereto, as of December 31, 2006, no shares of Common Stock are entitled to
preemptive rights and there are no registration rights or 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. The Company is not a party to, and its executive
officers have no knowledge of, any agreement restricting the voting or transfer
of any shares of the capital stock of the Company. The Company has furnished
or
made available to the Holders true and correct copies of the Company’s
certificate of incorporation as in effect on the date hereof, and the Company’s
bylaws as in effect on the date hereof.
(l)
Prior
to
registration of the shares of Common Stock underlying the Series C Preferred
Stock under the Securities Act, all such certificates shall bear the restrictive
legend specified in Section 6 of this Agreement. Subject to any applicable
State
and Federal Securities laws, the Company warrants that the Securities shall
be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement. If a Holder provides the Company with an opinion
of
counsel, in form, substance and scope reasonably acceptable to the Company,
to
the effect that a public sale, assignment or transfer of the Securities may
be
made without registration under the Securities Act or the Holders provide the
Company with reasonable assurances that the Securities can be sold pursuant
to
Rule 144 without any restriction as to the number of securities acquired as
of a
particular date that can then be immediately sold, the Company shall permit
the
transfer and promptly instruct its transfer agent to issue
one
or
more certificates in such name and in such denominations as specified by the
Holders and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations under this Section 3(m) will cause irreparable
harm to the Holders by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy
at
law for a breach of its obligations under this Section 3(m) will be
inadequate and agrees, in the event of a breach or the Holders’ reasonable
perception of a threatened breach by the Company of the provisions of this
Section 3(m), that the Holders shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being
required.
4.
Conditions
Precedent to the Obligation of the Company to Issue the Series C Preferred
Stock
.
The
obligation hereunder of the Company to issue and deliver the Series C Preferred
Stock to each Holder 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 Company’s sole benefit and may be waived by the Company at any time in
its sole discretion.
(a)
Each
Holder shall have executed and delivered this Agreement.
(b)
Each
Holder 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 Holder at or prior to the Closing
Date.
(c)
The
representations and warranties of each Holder 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.
5.
Conditions
Precedent to the Obligation of the Holders to Accept the Series C Preferred
Stock
.
The
obligation hereunder of each Holder to accept the Series C Preferred Stock
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 each Holder’s sole
benefit and may be waived by each Holder at any time in its sole
discretion.
(a)
The
Company shall have executed and delivered this Agreement.
(b)
The
Company shall have filed the Certificate of Designation with the Delaware
Secretary of State, in substantially the form attached hereto as Exhibit
B.
(c)
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Agreement to
be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.
(d)
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 speak
as of a particular date, which shall be true and correct in all material
respects as of such date.
(e)
No
statute, 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 at or prior to the Closing
Date.
(f)
As
of the
Closing Date, no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, shall be pending against
or
affecting the Company, or any of its properties, which questions the validity
of
the Agreement or the transactions contemplated thereby or any action taken
or to
be taken pursuant thereto. As of the Closing Date, no action, suit, claim or
proceeding before or by any court or governmental agency or body, domestic
or
foreign, shall be pending against or affecting the Company, or any of its
properties, which, if adversely determined, is reasonably likely to result
in a
Material Adverse Effect.
(g)
No
Material Adverse Effect shall have occurred at or before the Closing
Date.
(h)
The
Company shall have delivered on the Closing Date to the Holders a secretary’s
certificate, dated as of the Closing Date, as to (i) the resolutions of the
board of directors of the Company authorizing the transactions contemplated
by
this Agreement, (ii) the Company’s certificate of incorporation, (iii) the
Company’s bylaws, each as in effect at the Closing, and (iv) the authority and
incumbency of the officers of the Company executing this Agreement.
6.
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 Securities,
without the legend set forth above if at such time, prior to making any transfer
of any such Securities, 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, and provided the conditions set forth in this
paragraph shall have been met. Such proposed transfer will not be effected
until: (a) the Company has either (i) received an opinion of counsel that the
registration of the Securities is not required in connection with such proposed
transfer; or (ii) filed a registration statement under the Securities Act
covering such proposed disposition has been filed by the Company with the
Securities and Exchange Commission, which registration statement has become
effective under the Securities Act; and (b) the Company has received an opinion
of counsel that either: (i) the 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. The Company will use reasonable efforts to
respond to any such notice from a Holder within five (5) business days. In
the
case of any proposed transfer under this Section 6, 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, in connection therewith, to
qualify to do business in any state where it is not then qualified or 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. The restrictions on transfer contained
in this Section 6 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.
7.
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 reasonable attorneys’ fees and expenses (exclusive of
disbursements and out-of-pocket expenses) incurred by the Holders in connection
with the preparation, negotiation, execution and delivery of this Agreement
and
the other transaction documents.
8.
Registration
Rights
.
The
Holders are entitled to the benefit of certain registration rights with respect
to the shares of Common Stock issuable upon conversion of the Series C Preferred
Stock pursuant to that certain Registration Rights Agreement, dated as of March
31, 2006, as amended on the date hereof, by and among the Company and persons
listed on Schedule I thereto.
9.
Indemnification
.
(a)
The
Company hereby agrees to indemnify and hold harmless each Holder and its
officers, directors, shareholders, members, managers, employees, agents and
attorneys against any and all losses, claims, damages, liabilities and
reasonable expenses (collectively “
Claims
”)
incurred by each such person in connection with defending or investigating
any
such Claims, whether or not resulting in any liability to such person, to which
any such indemnified party may become subject, insofar as such Claims arise
out
of or are based upon any breach of any representation or warranty or agreement
made by the Company in this Agreement.
(b)
Each
Holder hereby agrees to indemnify and hold harmless the Company and its
officers, directors, shareholders, members, managers, employees, agents and
attorneys against any and all Claims incurred by each such person in connection
with defending or investigating any such Claims, whether or not resulting in
any
liability to such person, to which any such indemnified party may become
subject, insofar as such Claims arise out of or are based upon any breach of
any
representation or warranty or agreement made by such Holder in this
Agreement.
10.
Governing
Law; Consent to Jurisdiction
.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New York without giving effect conflicts of law principles that
would result in the application of the substantive laws of another jurisdiction.
Each of the parties consents to the exclusive jurisdiction of the Federal courts
whose districts encompass any part of the County of New York located in the
City
of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. Each party waives its right to a trial by
jury. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered
or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any
other
manner permitted by law.
11.
Notices
.
All
notices and other communications provided for or permitted hereunder shall
be
made in writing by hand delivery, express overnight courier, registered first
class mail, or telecopier (provided that any notice sent by telecopier shall
be
confirmed by other means pursuant to this Section 11), initially to the address
set forth below, and thereafter at such other address, notice of which is given
in accordance with the provisions of this Section.
(a)
if
to the
Company:
Glowpoint,
Inc.
225
Long
Avenue
Hillside,
New Jersey 07205
Attention:
Chief Executive Officer
Tel.
No.:
(312) 235-3888 x2053
Fax
No.:
(973) 391-1904
and
General
Counsel
Glowpoint,
Inc.
225
Long
Avenue
Hillside,
New Jersey 07205
Tel.
No.:
(312) 235-3888 x 2087
Fax
No.:
(973) 556-1272
with
a
copy to:
Gibbons
P.C.
One
Gateway Center
Newark,
New Jersey 07102
Attn:
Frank Cannone, Esq.
Tel.
No.:
(973) 596-4500
Fax
No.:
(973) 596-0545
(b)
if
to the
Holders:
At
the
address of such Holder set forth on Exhibit A to this Agreement;
with
a
copy to:
Kramer
Levin Naftalis & Frankel LLP
1177
Avenue of the Americas
New
York,
New York 10036
Attention:
Christopher S. Auguste
Tel.
No.:
(212) 715-9100
Fax
No.:
(212) 715-8000
All
such
notices and communications shall be deemed to have been duly given: when
delivered by hand, if personally delivered; when receipt is acknowledged, if
telecopied; or when actually received or refused if sent by other
means.
12.
Confidentiality
.
Each
Holder acknowledges and agrees that the existence of this Agreement and the
information contained herein and in the Exhibits hereto is of a confidential
nature and shall not, without the prior written consent of the Company, be
disclosed by such Holder to any person or entity, other than such Holder’s
personal financial and legal advisors for the sole purpose of evaluating an
investment in the Company, and that it shall not, without the prior written
consent of the Company, directly or indirectly, make any statements, public
announcements or release to trade publications or the press with respect to
the
subject matter of this Agreement. Each Holder further acknowledges and agrees
that the information contained herein and in the other documents relating to
this transaction may be regarded as material non-public information under United
States federal securities laws, and that United States federal securities laws
prohibit any person who has received material non-public information relating
to
the Company from purchasing or selling securities of the Company, or from
communicating such information to any person under circumstances in which it
is
reasonably foreseeable that such person is likely to purchase or sell securities
of the Company. Accordingly, until such time as any such non-public information
has been adequately disseminated to the public, each Holder shall not purchase
or sell any securities of the Company, or communicate such information to any
other person.
13.
Entire
Agreement
.
This
Agreement constitutes the entire understanding and agreement of the parties
with
respect to the subject matter hereof and supersedes all prior and/or
contemporaneous oral or written proposals or agreements relating thereto all
of
which are merged herein. This Agreement may not be amended or any provision
hereof waived in whole or in part, except by a written amendment signed by
both
of the parties.
14.
Counterparts
.
This
Agreement may be executed by facsimile signature and in counterparts, each
of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN
WITNESS WHEREOF, this Agreement was duly executed on the date first written
above.
|
|
|
|
|
|
GLOWPOINT,
INC
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
Signature
Page to Exchange
Agreement
IN
WITNESS WHEREOF, this Agreement was duly executed on the date first written
above.
|
|
|
|
|
|
[HOLDER]
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
Signature
Page to Exchange
Agreement
EXHIBIT
A
|
Name
and Address of Holder
|
Number
of
Common
Shares
|
Number
of
Series
B
Preferred
Shares
|
Amount
of Accrued but Unpaid
Dividends
|
Number
of
Shares
of
Series
C
Preferred
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT
B
CERTIFICATE
OF DESIGNATION
FOR
IMMEDIATE RELEASE
Media
Inquiries:
Christopher
Welch
Glowpoint,
Inc.
(866)
456-9764, ext. 2002
pr@glowpoint.com
Glowpoint
Restructures Outstanding Debt, Raises Additional Capital
Company
Positioned
for Strong Growth
HILLSIDE,
N.J. - September 24, 2007 -
Glowpoint,
Inc. (OTC:GLOW.OB), announced today that it has completed a restructuring of
its
Senior Secured Convertible Notes, which, among other things, extended the
maturity date eighteen (18) months to March 31, 2009, and introduced a mandatory
conversion feature subject to certain terms and conditions. Glowpoint also
issued approximately $3.5 million of additional convertible notes (as amended)
to a combination of existing note holders, new investors and Company insiders,
which included members of the senior management team and directors.
In
connection with the above transactions, the Company also exchanged all of its
existing and outstanding shares of Series B Convertible Preferred Stock, with
a
stated value of approximately $2.9 million plus accrued dividends of
approximately $1.1 million, for shares of newly created Series C Convertible
Preferred Stock. In the aggregate, Glowpoint issued approximately 475 shares
of
Series C Convertible Preferred Stock, which included 76.25 shares issued in
exchange for 1,525,000 shares of common stock held by the Series B Preferred
Stockholders. The Series C Preferred Stock has a stated value of $10,000 per
share and does not pay dividends.
As
consideration for amending the Notes, existing note holders were issued Series
A-2 warrants to purchase an aggregate of 4,772,820 shares of common stock on
terms substantially similar to the warrants issued in the March 31, 2006
financing.
In
connection with the new convertible note financing, the Company sold
approximately $3,538,000 of additional notes, maturing on March 31, 2009. The
additional notes have a conversion price of $0.50, bear interest at 10% per
annum increasing to 12% on the one-year anniversary from the issuance date.
Purchasers of the additional notes were also issued Series A-2 warrants to
purchase an aggregate of 3,538,000 shares of common stock. The Series A-2
Warrants expire five years from issuance and have a $0.65 strike price. The
proceeds from the financing will be used primarily to fund growth through sales
and marketing efforts and retire aged payables.
“We
believe the extension of the maturity date and infusion of additional growth
capital represents a vote of confidence from our stakeholders and a clear
recognition of the milestones the Company has achieved over the last eighteen
months. We believe our improved balance sheet and stronger working capital
position provides Glowpoint with the resources and stability necessary to build
on its recent accomplishments, generate momentum, accelerate revenue growth
and
achieve near-term profitability,” said Michael Brandofino, Glowpoint's President
and Chief Executive Officer.
The
notes, warrants and other securities were issued to institutional investors
and
certain company insiders in reliance on Regulation D under the Securities Act
of
1933. Pursuant to the terms of the financing, the Company has agreed to file
a
registration statement with the Securities and Exchange Commission covering
the
resale of the shares of common stock underlying the notes, the warrants and
the
Series C preferred stock.
For
additional information, please refer to the Company's Form 8-K to be filed
with
the Securities and Exchange Commission with respect to this
transaction.
About
Glowpoint
Glowpoint,
Inc. (OTC:GLOW.OB) is a premiere broadcast-quality, IP-based managed video
services provider. Glowpoint offers video conferencing, bridging, technology
hosting, and IP-broadcasting services to a vast array of companies, from large
Fortune 100
®
enterprises to small and medium-sized businesses. Glowpoint’s managed-video
services are available bundled with Glowpoint’s quality-network offering or as a
value-added managed-video service across other networks. Glowpoint is
exclusively focused on high quality two-way video communications and has been
supporting millions of video calls since its launch in 2000. Glowpoint is
headquartered in Hillside, New Jersey. To learn more about Glowpoint, visit
www.glowpoint.com.
The
statements contained herein, other than historical information, are or may
be
deemed to be forward-looking statements and involve factors, risks, and
uncertainties that may cause actual results in future periods to differ
materially from such statements. These factors, risks, and uncertainties include
market acceptance and availability of new video communication services; the
nonexclusive and terminable-at-will nature of sales agent agreements; rapid
technological change affecting demand for our services; competition from other
video communications service providers; and the availability of sufficient
financial resources to enable us to expand our operations, as well as other
risks detailed from time to time in our filings with the Securities and Exchange
Commission.
#
# #
SECOND
AMENDMENT TO EMPLOYMENT AGREEMENT
This
Second Amendment to Employment Agreement (this "Amendment"), dated September
20,
2007, is by and between Glowpoint, Inc., a Delaware corporation (hereinafter
"Glowpoint"), and David W. Robinson (hereinafter "Employee"). Capitalized terms
used but not otherwise defined in this Amendment shall have the meanings set
forth in the Employment Agreement (as defined below).
WHEREAS
,
Employee and Glowpoint entered into an Employment Agreement on May 1, 2006
and
amended that agreement by an Employment Agreement Amendment on April 24, 2007
(as amended, the “Employment Agreement”); and
WHEREAS
,
the
Company and Employee desire to amend the employment terms;
NOW,
THEREFORE
,
in
consideration of the mutual covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1.
Severance
Upon
Termination
Without Cause;
Resignation for Good Reason or Death
.
Section
3.3 of the Employment Agreement is hereby amended to provide that Employee
will
be entitled to 12 months salary upon his t
ermination
without Cause, his resignation for
Good
Reason or his death. Therefore, the first sentence of Section 3.3 is amended
to
delete “six (6) months” and insert “twelve (12) months” in its place and shall
read as follows: “
If
Employee is terminated without Cause or if Employee resigns for Good Reason
(as
defined below) or dies,
Employee
shall be entitled to severance equal to twelve (12) months of his Base Salary,
at his then current rate of compensation.”
2.
Entire
Agreement
.
This
Amendment is the final, complete and exclusive agreement between the Parties
relating to the subject matter hereof, and supersedes all prior or
contemporaneous proposals, understandings, representations, warranties, promises
and other communications, whether oral or written, relating to such subject
matter. Unless specifically amended by this Amendment, all terms of the
Employment Agreement remain unchanged and are in full force and effect. If
any
provision of the Employment Agreement, as amended by this Amendment, is held
by
a court of competent jurisdiction to be unenforceable for any reason, the
remaining provisions hereof shall be unaffected and remain in full force and
effect.
In
Witness Whereof, the parties have duly executed this Agreement as of the date
first written above.
|
|
|
|
|
|
|
By:
|
/s/
Michael
Brandofino
|
|
|
/s/
David
W.
Robinson
|
|
|
Michael
Brandofino
|
|
|
David
W. Robinson
|
|
|
President
and CEO
|
|
|
|