Exhibit 10.3
NOTE EXCHANGE AGREEMENT
THIS NOTE EXCHANGE AGREEMENT (this
“Agreement”) is dated as of November 25, 2008, by and
among Glowpoint, Inc., a Delaware corporation (the
“Company”), and the holders of the Company’s
Senior Secured Convertible Promissory Notes whose signatures appear
on the signature page attached hereto (each a “Holder”
and collectively the “Holders”).
Preliminary Statement
WHEREAS, each Holder currently holds
Senior Secured Convertible Promissory Notes (the
“Notes”) issued by the Company, which are convertible
into shares of the Company’s common stock, par value $0.0001
per share (“Common Stock”), at a conversion price of
$0.50 per share;
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 result of (x) 1.875 times the outstanding principal balance
plus any accrued but unpaid interest under the Notes divided by (y)
0.75, times (ii) 0.5, substantially in the form of the Series A-3
warrants issued in connection with the Series A Convertible
Preferred Stock Purchase Agreement;
WHEREAS, in consideration for the Company
agreeing to exchange and consolidate, at the election of any holder
that is exchanging Notes, all warrants previously issued to such
holder into a single warrant per warrantholder in substantially the
form of Series A-3 warrant issued in connection with the Series A
Convertible Preferred Stock Purchase Agreement; and
WHEREAS, subject to the terms and
conditions set forth herein, the Company and the Holders desire to
cancel and retire the Notes and forfeit any and all rights
thereunder in exchange for shares of newly-created Series A
Convertible Preferred Stock, par value $0.0001 per share, stated
value $7,500 per share (the “Series A Preferred
Stock”). The Series A Preferred Stock and the shares of
Common Stock issuable upon conversion of the Series A Preferred
Stock are sometimes collectively referred to herein as the
“Securities”.
NOW, THEREFORE, in consideration of the
foregoing and for other 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 Notes in exchange for the Series A Preferred Stock.
In consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of
this Agreement, the delivered Notes shall be exchanged into that
number of validly issued, fully paid and non-assessable shares of
Series A Preferred Stock as is determined by dividing ( x )
the principal amount of such Notes together with all accrued and
unpaid interest through and including the Closing Date (as defined
below) by ( y ) $4,000.
(b)
Concurrently with the consummation of the
transactions contemplated by this Agreement, the Company is selling
additional shares of its Series A Preferred Stock pursuant to that
certain Series A Convertible Preferred Stock Purchase Agreement
dated on or about the date hereof (the “Series A Stock
Purchase Agreement”). After the Closing Date the Notes
listed on Exhibit B, which have an aggregate principal value
of approximately Five Million ($5,000,000) Dollars, will remain
outstanding (the “Retained Notes”). At or before
the Closing, the Retained Notes shall be amended per the terms of
the Amendment No. 2 to Senior Secured Notes, substantially in the
form of Exhibit C attached hereto (the “Note
Amendment”). Except for the Retained Notes, all Notes
shall be exchanged for Series A Preferred Stock pursuant to this
Agreement.
(c)
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”).
(d)
At the Closing, the Holders shall deliver
to the Company for cancellation the Notes, or an indemnification
undertaking with respect to such Notes in the event of the loss,
theft or destruction of such Notes. At the Closing, the
Company shall issue to the Holders the Series A Preferred Stock,
each in the amounts set forth on Exhibit A attached hereto.
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 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
any of the transactions contemplated by this Agreement.
(h)
Each Holder acknowledges that the
Securities were not offered to such Holder 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
Holder was invited by any of the foregoing means of communications.
Each Holder, in making the decision to purchase the
Securities, has relied upon independent investigation made by it
and the representations, warranties and agreements set forth in
this Agreement and the other transaction documents and has not
relied on any information or representations made by third
parties.
(i)
Each Holder owns and holds, beneficially
and of record, the entire right, title, and interest in and to the
Notes (including, without limitation, accrued and unpaid interest
thereon) 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 transfer
and dispose of the Notes (including, without limitation, accrued
and unpaid interest thereon) 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
Notes 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 A 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
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