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NOTE AND WARRANT PURCHASE
AGREEMENT
Dated as of September 21, 2007
by and among
GLOWPOINT, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
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Page
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ARTICLE
I
Purchase
and Sale of Notes and Warrants
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1
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Section
1.1
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Purchase
and Sale of Notes and Warrants.
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1
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Section
1.2
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Purchase
Price and Closing
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1
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Section
1.3
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Conversion
Shares / Warrant Shares
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2
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ARTICLE
II
Representations
and Warranties
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2
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Section
2.1
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Representations
and Warranties of the Company
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2
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Section
2.2
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Representations
and Warranties of the Purchasers
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12
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ARTICLE
III
Covenants
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14
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Section
3.1
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Securities
Compliance
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15
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Section
3.2
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Registration
and Listing
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15
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Section
3.3
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Inspection
Rights
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15
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Section
3.4
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Compliance
with Laws
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16
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Section
3.5
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Keeping
of Records and Books of Account
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15
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Section
3.6
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Reporting
Requirements
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16
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Section
3.7
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Other
Agreements
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16
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Section
3.8
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Use
of Proceeds
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16
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Section
3.9
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Reporting
Status
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16
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Section
3.10
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Disclosure
of Transaction
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17
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Section
3.11
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Disclosure
of Material Information
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17
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Section
3.12
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Pledge
of Securities
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17
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Section
3.13
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Amendments
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17
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Section
3.14
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Distributions
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17
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Section
3.15
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Reservation
of Shares
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18
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Section
3.16
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Transfer
Agent Instructions
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18
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Section
3.17
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Disposition
of Assets
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18
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Section
3.18
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Restrictions
on Certain Issuances of Securities
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19
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Section
3.19
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Subsequent
Financings
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19
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ARTICLE
IV
Conditions
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18
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Section
4.1
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Conditions
Precedent to the Obligation of the Company
to
Close and to Sell the Securities
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18
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Section
4.2
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Conditions
Precedent to the Obligation of the Purchasers to Close and
to
Purchase
the Securities
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19
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ARTICLE
V
Certificate
Legend
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21
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Section
5.1
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Legend
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24
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ARTICLE
VI
Indemnification
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22
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Section
6.1
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General
Indemnity.
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22
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Section
6.2
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Indemnification
Procedure
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22
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TABLE
OF CONTENTS
(continued)
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Page
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ARTICLE
VII
Miscellaneous
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23
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Section
7.1
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Fees
and Expenses
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23
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Section
7.2
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Specific
Performance; Consent to Jurisdiction; Venue.
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24
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Section
7.3
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Entire
Agreement; Amendment
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24
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Section
7.4
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Notices
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24
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Section
7.5
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Waivers
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25
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Section
7.6
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Headings
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26
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Section
7.7
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Successors
and Assigns
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26
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Section 7.8
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No
Third Party Beneficiaries
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26
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Section
7.9
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Governing
Law
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26
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Section
7.10
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Survival
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26
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Section
7.11
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Counterparts
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26
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Section
7.12
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Publicity
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26
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Section
7.13
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Severability
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26
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Section
7.14
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Further
Assurances
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27
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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.
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