SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT

dated January 15, 2009

among

CITIGROUP INC., as Issuer,

UNITED STATES DEPARTMENT OF THE TREASURY

and

FEDERAL DEPOSIT INSURANCE CORPORATION

TABLE OF CONTENTS

LIST OF ANNEXES

 

 

LIST OF SCHEDULES

 

 

INDEX OF DEFINED TERMS

Term		Location of Definition
Affiliate		5.7(b)
Agreement		Preamble
Appraisal Procedure		4.9(c)(i)
Appropriate Federal Banking Agency		2.2(s)
Bank Holding Company		4.11
Bankruptcy Exceptions		2.2(d)
Benefit Plans		1.2(d)(iv)
Board of Directors		2.2(f)
Business Combination		5.8
business day		1.3
Capitalization Date		2.2(b)
Certificate of Designations		1.2(d)(iii)
Charter		1.2(d)(iii)
Closing		1.2(a)
Closing Date		1.2(a)
Code		2.2(n)
Common Stock		Recitals
Company		Preamble
Company Financial Statements		2.2(h)
Company Material Adverse Effect		2.1(a)
Company Reports		2.2(i)(i)
Company Subsidiary; Company Subsidiaries		2.2(i)(i)
control; controlled by; under common control with		5.7(b)
Controlled Group		2.2(n)
Designated Preferred Stock		Recitals
EESA		1.2(d)(iv)
ERISA		2.2(n)
Exchange Act		2.1(b)
Fair Market Value		4.9(c)(ii)
FDIC		Preamble
Federal Reserve		4.11
GAAP		2.1(a)
Governmental Entities		1.2(c)
Holder		4.5(k)(i)
Holders’ Counsel		4.5(k)(ii)
Indemnitee		4.5(g)(i)
Information		3.5(d)
Investors		Preamble
Junior Stock		4.8(c)
knowledge of the Company; Company’s knowledge		5.7(c)
Last Fiscal Year		2.1(b)
Master Agreement		Recitals

officers		5.7(c)
Original Purchase Agreement		4.10
Parity Stock		4.8(c)
Pending Underwritten Offering		4.5(l)
Permitted Repurchases		4.8(a)(ii)
Piggyback Registration		4.5(a)(iv)
Plan		2.2(n)
Preferred Shares		Recitals
Preferred Stock		2.2(c)
Previously Disclosed		2.1(b)
Proprietary Rights		2.2(u)
register; registered; registration		4.5(k)(iii)
Registrable Securities		4.5(k)(iv)
Registration Expenses		4.5(k)(v)
Regulatory Agreement		2.2(s)
Rule 144; Rule 144A; Rule 159A; Rule 405; Rule 415		4.5(k)(vi)
Schedules		Recitals
SEC		2.1(b)
Securities		Recitals
Securities Act		2.2(a)
Selling Expenses		4.5(k)(vii)
Share Dilution Amount		4.8(a)(ii)
Shelf Registration Statement		4.5(a)(ii)
Signing Date		2.1(a)
Special Registration		4.5(i)
subsidiary		5.8(a)
Tax; Taxes		2.2(o)
Transfer		4.4
UST		Preamble
Warrant		Recitals
Warrant Shares		2.2(d)

SECURITIES PURCHASE AGREEMENT , dated January 15, 2009 (this “ Agreement ”), between Citigroup Inc., a Delaware corporation (the “ Company ”), the United States Department of the Treasury (the “ UST ”) and the Federal Deposit Insurance Corporation (the “ FDIC ” and, together with the UST, the “ Investors ”).

Recitals:

WHEREAS, the Company agrees to expand the flow of credit to U.S. consumers and businesses on competitive terms to promote the sustained growth and vitality of the U.S. economy;

WHEREAS, the Company agrees to work diligently, under existing programs, to modify the terms of residential mortgages as appropriate to strengthen the health of the U.S. housing market; and

WHEREAS, pursuant to the terms of that certain Master Agreement, dated as of the date hereof, by and among the Company and certain of its Affiliates, the Investors and the Federal Reserve Bank of New York (the “ Master Agreement ”), and as consideration for the loss protection to be provided by the Investors to the Company and certain of its affiliates under the Master Agreement, the Company intends to issue to the Investors in a private placement 7,059 shares of its preferred stock (the “ Designated Preferred Stock ”) designated as “Fixed Rate Cumulative Perpetual Preferred Stock Series G” (together with any additional shares of Designated Preferred Stock issued pursuant to the Master Agreement, the “ Preferred Shares ”) and a warrant to purchase 66,531,728 shares of its Common Stock (“ Common Stock ”) (together with any additional warrants to purchase shares of Common Stock issued pursuant to the Master Agreement, the “ Warrant ” and, together with the   Preferred Shares, the “ Securities ”).

NOW, THEREFORE , in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties agree as follows:

Article I

Issuance; Closing

1.1             Issuance .  On the terms and subject to the conditions set forth in this Agreement and the Master Agreement, and for the consideration set forth in the Master Agreement, the Company shall issue (a) 4,034 shares of the Designated Preferred Stock and the Warrant to the UST, (b) 3,025 shares of the Designated Preferred Stock to the FDIC and (c) such additional shares of Designated Preferred Stock and warrants to purchase shares of Common Stock as the Company may be required to issue under Section 5.2(e) of the Master Agreement.

1.2             Closing .

(a)            On the terms and subject to the conditions set forth in this Agreement, the closing of the issuance (the “ Closing ”) will take place at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017, at 9:00 a.m., New York time, on January 15, 2009 or as soon as practicable thereafter, or at such other place, time and date as shall be agreed among the Company and the Investors. The time and date on which the Closing occurs is referred to in this Agreement as the “ Closing Date ”.

(b)            Subject to the fulfillment or waiver of the conditions to the Closing in this Section 1.2, at the Closing the Company will deliver (i) 4,034 shares of the Designated Preferred Stock and the Warrant to the UST and (ii) 3,025 shares of the Designated Preferred Stock to the FDIC, in each case as evidenced by one or more certificates dated the Closing Date and bearing appropriate legends as hereinafter provided for.

(c)            The respective obligations of each of the Investors, on the one hand, and the Company, on the other hand, to consummate the issuance of the Securities are subject to the fulfillment (or waiver by the Investors and the Company, as applicable) prior to the Closing of the conditions that (i) any approvals or authorizations of all United States and other governmental, regulatory or judicial authorities (collectively, “ Governmental Entities ”) required for the consummation of the issuance of the Securities shall have been obtained or made in form and substance reasonably satisfactory to each party and shall be in full force and effect and all waiting periods required by United States and other applicable law, if any, shall have expired and (ii) no provision of any applicable United States or other law and no judgment, injunction, order or decree of any Governmental Entity shall prohibit the issuance of the Securities as contemplated by this Agreement.

(d)            The obligation of the Investors to consummate transactions contemplated hereby is also subject to the fulfillment (or waiver by the Investors) at or prior to the Closing of each of the following conditions:

 

1.3             Interpretation .  When a reference is made in this Agreement to “Recitals,” “Articles,” “Sections,” “Annexes” or “Schedules” such reference shall be to a Recital, Article or Section of, or Annex or Schedule to, this Agreement, unless otherwise indicated. The terms defined in the singular have a comparable meaning when used in the plural, and vice versa. References to “herein”, “hereof”, “hereunder” and the like refer to this Agreement as a whole and not to any particular section or provision, unless the context requires otherwise. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. Whenever the words “include,” "includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.” No rule of construction against the draftsperson shall be applied in connection with the interpretation or enforcement of this Agreement, as this Agreement is the product of negotiation between sophisticated parties advised by counsel. All references to “$” or “dollars” mean the lawful currency of the United States of America. Except as expressly stated in this Agreement, all references to any statute, rule or regulation are to the statute, rule or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and to any section of any statute, rule or regulation include any successor to the section. References to a “ business day ” shall mean any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close .

Article II

Representations and Warranties

2.1             Disclosure .

(a)            “ Company Material Adverse Effect ” means a material adverse effect on (i) the business, results of operation or financial condition of the Company and its consolidated subsidiaries taken as a whole; provided , however , that Company Material Adverse Effect shall not be deemed to include the effects of (A) changes after the date of this Agreement (the “ Signing Date ”) in general business, economic or market conditions (including changes generally in prevailing interest rates, credit availability and liquidity, currency exchange rates and price levels or trading volumes in the United States or foreign securities or credit markets), or any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, in each case generally affecting the industries in which the Company and its subsidiaries operate, (B) changes or proposed changes after the Signing Date in generally accepted accounting principles in the United States (“ GAAP ”) or regulatory accounting requirements, or authoritative interpretations thereof, (C) changes or proposed changes after the Signing Date in securities, banking and other laws of general applicability or related policies or interpretations of Governmental Entities (in the case of each of these clauses (A), (B) and (C), other than changes or occurrences to the extent that such changes or occurrences have or would reasonably be expected to have a materially disproportionate adverse effect on the Company and its consolidated subsidiaries taken as a whole relative to comparable U.S. banking or financial services organizations), or (D) changes in the market price or trading volume of the Common Stock or any other equity, equity-related or debt securities of the Company or its consolidated subsidiaries (it being understood and agreed that the exception set forth in this clause (D) does not apply to the underlying reason giving rise to or contributing to any such change); or (ii) the ability of the Company to consummate the issuance of the Securities and the other transactions contemplated by this Agreement and the Warrant and perform its obligations hereunder or thereunder on a timely basis.

(b)            “ Previously Disclosed ” means information set forth or incorporated in the Company’s Annual Report on Form 10-K for the most recently completed fiscal year of the Company filed with the Securities and Exchange Commission (the “ SEC ”) prior to the Signing Date (the “ Last Fiscal Year ”) or in its other reports and forms filed with or furnished to the SEC under Sections 13(a), 14(a) or 15(d) of the Securities Exchange Act of 1934 (the “ Exchange Act ”) on or after the last day of the Last Fiscal Year and prior to the Signing Date.

2.2             Representations and Warranties of the Company .  Except as Previously Disclosed, the Company represents and warrants to the Investors that as of the Signing Date and as of the Closing Date (or such other date specified herein):

(a)             Organization, Authority and Significant Subsidiaries . The Company has been duly incorporated and is validly existing and in good standing under the laws of its jurisdiction of organization, with the necessary power and authority to own its properties and conduct its business in all material respects as currently conducted, and except as has not, individually or in the aggregate, had and would not reasonably be expected to have a Company Material Adverse Effect, has been duly qualified as a foreign corporation for the transaction of business and is in

 

 

good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification; each subsidiary of the Company that is a “significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act of 1933 (the “ Securities Act ”) has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization.  The Charter and bylaws of the Company, copies of which have been provided to the Investors prior to the Signing Date, are true, complete and correct copies of such documents as in full force and effect as of the Signing Date.

(b)             Capitalization . The authorized capital stock of the Company, and the outstanding capital stock of the Company (including securities convertible into, or exercisable or exchangeable for, capital stock of the Company) as of the most recent fiscal month-end preceding the Signing Date (the “ Capitalization Date ”) is set forth on Schedule A .  The outstanding shares of capital stock of the Company have been duly authorized and are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights). Except as provided in the Warrant, as of the Signing Date, the Company does not have outstanding any securities or other obligations providing the holder the right to acquire Common Stock that is not reserved for issuance as specified on Schedule A , and the Company has not made any other commitment to authorize, issue or sell any Common Stock.  Since the Capitalization Date, the Company has not issued any shares of Common Stock, other than (i) shares issued upon the exercise of stock options or delivered under other equity-based awards or other convertible securities or warrants which were issued and outstanding on the Capitalization Date and disclosed on Schedule A and (ii) shares disclosed on Schedule A .

(c)             Preferred Shares . The Preferred Shares have been duly and validly authorized, and, when issued and delivered pursuant to this Agreement and the Master Agreement, such Preferred Shares will be duly and validly issued and fully paid and non-assessable, will not be issued in violation of any preemptive rights, and will rank pari passu with or senior to all other series or classes of preferred stock of the Company (“ Preferred Stock ”), whether or not issued or outstanding, with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Company.

(d)             The Warrant and Warrant Shares . The Warrant has been duly authorized and, when executed and delivered as contemplated hereby and by the Master Agreement, will constitute a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity (“ Bankruptcy Exceptions ”). The shares of Common Stock issuable upon exercise of the Warrant (the “ Warrant Shares ”) have been duly authorized and reserved for issuance upon exercise of the Warrant and when so issued in accordance with the terms of the Warrant will be validly issued, fully paid and non-assessable.

(e)             Authorization, Enforceability .

(f)             Anti-takeover Provisions and Rights Plan .  The Board of Directors of the Company (the “ Board of Directors ”) has taken all necessary action to ensure that the transactions contemplated by this Agreement and the Warrant and the consummation of the transactions

 

 

contemplated hereby and thereby, including the exercise of the Warrant in accordance with its terms, will be exempt from any anti-takeover or similar provisions of the Company’s Charter and bylaws, and any other provisions of any applicable “moratorium”, “control share”, “fair price”, “interested stockholder” or other anti-takeover laws and regulations of any jurisdiction.  The Company has taken all actions necessary to render any stockholders’ rights plan of the Company inapplicable to this Agreement and the Warrant and the consummation of the transactions contemplated hereby and thereby, including the exercise of the Warrant by the UST in accordance with its terms.

(g)             No Company Material Adverse Effect .  Since September 30, 2008, no fact, circumstance, event, change, occurrence, condition or development has occurred that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.

(h)             Company Financial Statements .  Each of the consolidated financial statements of the Company and its consolidated subsidiaries (collectively the “ Company Financial Statements ”) included or incorporated by reference in the Company Reports filed with the SEC since December 31, 2006, present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated therein (or if amended prior to the Signing Date, as of the date of such amendment) and the consolidated results of their operations for the periods specified therein; and except as stated therein, such financial statements (A) were prepared in conformity with GAAP applied on a consistent basis (except as may be noted therein), (B) have been prepared from, and are in accordance with, the books and records of the Company and the Company Subsidiaries and (C) complied as to form, as of their respective dates of filing with the SEC, in all material respects with the applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto.

(i)             Reports .

 

(j)             No Undisclosed Liabilities .  Neither the Company nor any of the Company Subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) which are not properly reflected or reserved against in the Company Financial Statements to the extent required to be so reflected or reserved against in accordance with GAAP, except for (A) liabilities that have arisen since the last fiscal year end in the ordinary and usual course of business and consistent with past practice and (B) liabilities that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(k)             Offering of Securities .  Neither the Company nor any person acting on its behalf has taken any action (including any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of any of the Securities under the Securities Act, and the rules and regulations of the SEC promulgated thereunder), which might subject the offering, issuance or sale of any of the Securities to the Investors pursuant to this Agreement to the registration requirements of the Securities Act.

(l)             Litigation and Other Proceedings .  Except (i) as set forth on Schedule B or (ii) as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, there is no (A) pending or, to the knowledge of the Company, threatened, claim, action, suit, investigation or proceeding, against the Company or any Company Subsidiary or to which any of their assets are subject nor is the Company or any Company Subsidiary subject to any order, judgment or decree or (B) unresolved violation, criticism or exception by any

 

 

Governmental Entity with respect to any report or relating to any examinations or inspections of the Company or any Company Subsidiaries.

(m)             Compliance with Laws.   Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries have all permits, licenses, franchises, authorizations, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities that are required in order to permit them to own or lease their properties and assets and to carry on their business as presently conducted and that are material to the business of the Company or such Company Subsidiary.  Except as set forth on Schedule C , the Company and the Company Subsidiaries have complied in all respects and are not in default or violation of, and none of them is, to the knowledge of the Company, under investigation with respect to or, to the knowledge of the Company, have been threatened to be charged with or given notice of any violation of, any applicable domestic (federal, state or local) or foreign law, statute, ordinance, license, rule, regulation, policy or guideline, order, demand, writ, injunction, decree or judgment of any Governmental Entity, other than such noncompliance, defaults or violations that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  Except for statutory or regulatory restrictions of general application or as set forth on Schedule C , no Governmental Entity has placed any restriction on the business or properties of the Company or any Company Subsidiary that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(n)             Employee Benefit Matters .  Except as would not reasonably be expected to have, either individually or in the aggregate, a Company Material Adverse Effect: (A) each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) providing benefits to any current or former employee, officer or director of the Company or any member of its “ Controlled Group ” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “ Code ”)) that is sponsored, maintained or contributed to by the Company or any member of its Controlled Group and for which the Company or any member of its Controlled Group would have any liability, whether actual or contingent (each, a “ Plan ”) has been maintained in compliance with its terms and with the requirements of all applicable statutes, rules and regulations, including ERISA and the Code; (B) with respect to each Plan subject to Title IV of ERISA (including, for purposes of this clause (B), any plan subject to Title IV of ERISA that the Company or any member of its Controlled Group previously maintained or contributed to in the six years prior to the Signing Date), (1) no “reportable event” (within the meaning of Section 4043(c) of ERISA),  other than a reportable event for which the notice period referred to in Section 4043(c) of ERISA has been waived, has occurred in the three years prior to the Signing Date or is reasonably expected to occur, (2) no “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived, has occurred in the three years prior to the Signing Date or is reasonably expected to occur, (3) the fair market value of the assets under each Plan exceeds the present value of all benefits accrued under such Plan (determined based on the assumptions used to fund such Plan) and (4) neither the Company nor any member of its Controlled Group has incurred in the six years prior to the Signing Date, or reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the PBGC

 

 

in the ordinary course and without default) in respect of a Plan (including any Plan that is a “multiemployer plan”, within the meaning of Section 4001(c)(3) of ERISA); and (C) each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service with respect to its qualified status that has not been revoked, or such a determination letter has been timely applied for but not received by the Signing Date, and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss, revocation or denial of such qualified status or favorable determination letter.

(o)             Taxes .  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) the Company and the Company Subsidiaries have filed all federal, state, local and foreign income and franchise Tax returns required to be filed through the Signing Date, subject to permitted extensions, and have paid all Taxes due thereon, and (ii) no Tax deficiency has been determined adversely to the Company or any of the Company Subsidiaries, nor does the Company have any knowledge of any Tax deficiencies.  “ Tax ” or “ Taxes ” means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Entity.

(p)             Properties and Leases .  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances, claims and defects that would affect the value thereof or interfere with the use made or to be made thereof by them.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries hold all leased real or personal property under valid and enforceable leases with no exceptions that would interfere with the use made or to be made thereof by them.

(q)             Environmental Liability .  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect:

(r)             Risk Management Instruments .  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, all derivative instruments, including, swaps, caps, floors and option agreements, whether entered into for the Company’s own account, or for the account of one or more of the Company Subsidiaries or its or their customers, were entered into (i) only in the ordinary course of business, (ii) in accordance with prudent practices and in all material respects with all applicable laws, rules, regulations and regulatory policies and (iii) with counterparties believed to be financially responsible at the time; and each of such instruments constitutes the valid and legally binding obligation of the Company or one of the Company Subsidiaries, enforceable in accordance with its terms, except as may be limited by the Bankruptcy Exceptions.  Neither the Company or the Company Subsidiaries, nor, to the knowledge of the Company, any other party thereto, is in breach of any of its obligations under any such agreement or arrangement other than such breaches that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(s)             Agreements with Regulatory Agencies .  Except as set forth on Schedule D , neither the Company nor any Company Subsidiary is subject to any material cease-and-desist or other similar order or enforcement action issued by, or is a party to any material written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or since December 31, 2006, has adopted any board resolutions at the request of, any Governmental Entity (other than the Appropriate Federal Banking Agencies with jurisdiction over the Company and the Company Subsidiaries) that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies or procedures, its internal controls, its management or its operations or business (each item in this sentence, a “ Regulatory Agreement ”), nor has the Company or any Company Subsidiary been advised since December 31, 2006 by any such Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Regulatory Agreement.  The Company and each Company Subsidiary are in compliance in all material respects with each Regulatory Agreement to which it is party or subject, and neither the Company nor any Company Subsidiary has received any notice from any Governmental Entity indicating that either the Company or any Company Subsidiary is not in compliance in all material respects with any such Regulatory Agreement.  " Appropriate Federal Banking Agency " means the “appropriate Federal banking agency” with respect to the Company or such Company Subsidiaries, as applicable, as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)).

(t)             Insurance .  The Company and the Company Subsidiaries are insured with reputable insurers against such risks and in such amounts as the management of the Company reasonably has determined to be prudent and consistent with industry practice.  The Company and the Company Subsidiaries are in material compliance with their insurance policies and are not in default under any of the material terms thereof, each such policy is outstanding and in

 

 

full force and effect, all premiums and other payments due under any material policy have been paid, and all claims thereunder have been filed in due and timely fashion, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(u)             Intellectual Property .  Except as would not, individually or in the aggregate,  reasonably be expected to have a Company Material Adverse Effect, (i) the Company and each Company Subsidiary owns or otherwise has the right to use, all intellectual property rights, including all trademarks, trade dress, trade names, service marks, domain names, patents, inventions, trade secrets, know-how, works of authorship and copyrights therein, that are used in the conduct of their existing businesses and all rights relating to the plans, design and specifications of any of its branch facilities (“ Proprietary Rights ”) free and clear of all liens and any claims of ownership by current or former employees, contractors, designers or others and (ii) neither the Company nor any of the Company Subsidiaries is materially infringing, diluting, misappropriating or violating, nor has the Company or any or the Company Subsidiaries received any written (or, to the knowledge of the Company, oral) communications alleging that any of them has materially infringed, diluted, misappropriated or violated, any of the Proprietary Rights owned by any other person.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, to the Company’s knowledge, no other person is infringing, diluting, misappropriating or violating, nor has the Company or any or the Company Subsidiaries sent any written communications since January 1, 2006 alleging that any person has infringed, diluted, misappropriated or violated, any of the Proprietary Rights owned by the Company and the Company Subsidiaries.

(v)             Brokers and Finders .  No broker, finder or investment banker is entitled to any financial advisory, brokerage, finder's or other fee or commission in connection with this Agreement or the Warrant or the transactions contemplated hereby or thereby based upon arrangements made by or on behalf of the Company or any Company Subsidiary for which the Investors could have any liability.

Article III

Covenants

3.1             Commercially Reasonable Efforts .  Subject to the terms and conditions of this Agreement, each of the parties will use its commercially reasonable efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation of the issuance of the Securities as promptly as practicable and otherwise to enable consummation of the transactions contemplated hereby and shall use commercially reasonable efforts to cooperate with the other party to that end.

3.2             Expenses .  Unless otherwise provided in this Agreement or the Warrant, each of the parties hereto will bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated under this Agreement and the Warrant, including fees and expenses of its own financial or other consultants, investment bankers, accountants and counsel.

3.3             Sufficiency of Authorized Common Stock; Exchange Listing .

(a)            During the period from the Closing Date until the date on which the Warrant has been fully exercised, the Company shall at all times have reserved for issuance, free of preemptive or similar rights, a sufficient number of authorized and unissued Warrant Shares to effectuate such exercise. Nothing in this Section 3.3 shall preclude the Company from satisfying its obligations in respect of the exercise of the Warrant by delivery of shares of Common Stock which are held in the treasury of the Company. As soon as reasonably practicable following the Closing, the Company shall, at its expense, cause the Warrant Shares to be listed on the same national securities exchange on which the Common Stock is listed, subject to official notice of issuance, and shall maintain such listing for so long as any Common Stock is listed on such exchange.

(b)            If requested by any Investor, the Company shall promptly use its reasonable best efforts to cause the Preferred Shares to be approved for listing on a national securities exchange as promptly as practicable following such request.

3.4             Certain Notifications Until Closing .  From the Signing Date until the Closing, the Company shall promptly notify the Investors of (i) any fact, event or circumstance o