SECURITIES PURCHASE AGREEMENT By and Between THE AMACORE GROUP, INC. and VICIS CAPITAL MASTER FUND June 2, 2008
Exhibit
10.1
By
and Between
and
VICIS
CAPITAL MASTER FUND
June
2, 2008
This SECURITIES PURCHASE AGREEMENT (the
“Agreement”), effective as of this 2nd day of June, 2008, is made by and between
THE AMACORE GROUP, INC., a Delaware corporation (the “Company”), and VICIS
CAPITAL MASTER FUND (the “Purchaser”), a series of the Vicis Capital Master
Trust, a trust formed under the laws of the Cayman Islands.
R E C I T A L
S
WHEREAS, pursuant to the terms and
conditions of this Agreement, the Company wishes to issue and sell to the
Purchaser the following securities (collectively, the “Securities”):
(a) 400 shares (the “Acquired Shares”) of the Company’s newly
authorized Series H Convertible Preferred Stock, par value $.001 per share (the
“Series H Preferred Stock”), with such terms, rights and preferences as are set
forth in the Certificate of Designation for the Series H Preferred Stock set
forth on Exhibit
A attached hereto; and (b) a warrant to purchase an aggregate
of 45,000,000 shares of the Company’s Class A Common Stock, par value $.001 per
share (the “Class A Common Stock”), initially at an exercise price of $0.375 per
share in the form attached hereto as Exhibit B (the
“Warrant”).
NOW, THEREFORE, the Company and
the Purchaser hereby agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF THE ACQUIRED SHARES
1.1 Purchase and Sale of the
Acquired Shares. Subject to the terms and conditions hereof
and in reliance on the representations and warranties contained herein, or made
pursuant hereto, the Company will issue and sell to the Purchaser, and the
Purchaser will purchase from the Company at the closing of the transactions
contemplated hereby (the “Closing”), the Securities for $4,000,000 in cash (the
“Purchase Price”).
1.2 Closing. The
Closing shall be deemed to have occurred at the offices of Xxxxxxx & Xxxxx,
LLP, 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx at 5:00 p.m. CDT on June 2,
2008 (the “Closing Date).
1.3 Closing Matters. As
soon as reasonably practicable after Closing, subject to the terms and
conditions hereof, the Company will deliver to the Purchaser certificates,
registered in the name of the Purchaser, representing the Acquired Shares and
the Warrant.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The Company hereby represents and
warrants to the Purchaser as of the date of this Agreement as
follows:
2.1 Organization and
Qualification. The Company is a corporation duly organized and
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect”
means any material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company or its Subsidiaries (as defined below) or on the
transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as
hereinafter defined).
2.2 Subsidiaries. The
Company has seven subsidiaries: LBI Brokerage, Inc., JRM Benefits Consulting,
LLC, US Health Benefits Group, Inc., US Health Plans, Inc., On The Phone, Inc.,
Zurvita, Inc. and Lifeguard Benefit Services, Inc. (each a
“Subsidiary” and collectively, the “Subsidiaries”).
2.3 No
Violation. Neither the Company nor any Subsidiary is in
violation of: (a) any of the provisions of its certificate of
incorporation, bylaws or other organizational or charter documents; or
(b) any judgment, decree or order or any statute, ordinance, rule or
regulation applicable to the Company, except for possible violations which would
not, individually or in the aggregate, have a Material Adverse
Effect.
2.4 Capitalization.
(a) As
of the date hereof, the Company is currently authorized to issue up to (i) 1,480
million shares of Common Stock, par value $.001 per share, of which
140,315,559
shares are currently outstanding and 850,339,850 shares have been reserved for
issuance upon the exercise of all of the outstanding options, warrants and other
securities issued by the Company that are convertible into Common Stock. All of
such outstanding shares have been, or upon issuance will be, validly issued, are
fully paid and nonassessable; and (ii) 20 million shares of Preferred Stock, par
value $.001 per share, of which 2,188.6 shares are currently
outstanding.
(b) Except
as disclosed herein or in the Company’s reports, schedules, forms, statements
and other documents required to be filed by it with the Securities and Exchange
Commission (the “SEC”) pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), prior to the date hereof
(the “SEC Documents”):
(i) no
holder of shares of the Company’s capital stock has any preemptive rights or any
other similar rights or has been granted or holds any liens or encumbrances
suffered or permitted by the Company;
(ii) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or its Subsidiary, or contracts, commitments,
understandings or arrangements by which the Company or its Subsidiary are or may
become bound to issue additional shares of capital stock of the Company or its
Subsidiary or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or its Subsidiary;
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(iii) there
are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness (as
defined in Section 2.14 hereof) of the Company or its Subsidiary or by which the
Company or its Subsidiary are or may become bound;
(iv) there
are no agreements or arrangements under which the Company is obligated to
register the sale of any of their securities under the Securities Act of 1933,
as amended, (the “Securities Act”);
(v) there
are no outstanding securities or instruments of the Company that contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
redeem a security of the Company;
(vi) there
are no securities or instruments containing antidilution or similar provisions
that will be triggered by the issuance of the Securities; and
(vii) the
Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement.
2.5 Issuance of the Acquired
Shares.
(a) The
Acquired Shares and the Warrant to be issued hereunder are duly authorized and,
upon payment and issuance in accordance with the terms hereof and thereof, shall
be free from all taxes, Liens and charges with respect to the issuance thereof.
As of the Closing Date, the Company has authorized and has reserved free of
preemptive rights and other similar contractual rights of stockholders, a number
of its authorized but unissued shares of Class A Common Stock equal to one
hundred percent (100%) of the aggregate number of shares of Class A Common Stock
to effect the conversion of the Acquired Shares (the “Conversion Shares”) and
one hundred percent (100%) of the aggregate number of shares of Class A Common
Stock to effect the exercise of the Warrant (the “Warrant
Shares”). All actions by the Board, the Company and its stockholders
necessary for the valid issuance of the Acquired Shares and the Warrant, and the
Conversion Shares and the Warrant Shares pursuant to the terms of the Series H
Preferred Stock and the Warrant, respectively, has been taken.
(b) The
Conversion Shares and Warrant Shares, when issued and paid for upon conversion
of the Acquired Shares and Warrant, respectively, will be validly issued, fully
paid and nonassessable and free from all taxes, Liens and charges with respect
to the issue thereof, with the holders being entitled to all rights accorded to
a holder of Class A Common Stock. Assuming the accuracy of each of the
representations and warranties set forth in Article III hereof, the issuance by
the Company to the Purchaser of the Acquired Shares and the Warrant is exempt
from registration under the Securities Act.
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2.6 Authorization; Enforcement;
Validity. The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement delivered pursuant to Section 4.4(a) hereof, the Warrant, and
each of the other agreements or instruments entered into by the parties hereto
in connection with the transactions contemplated by this Agreement
(collectively, the “Transaction Documents”) and to issue the Acquired Shares,
the Warrant, the Conversion Shares and the Warrant Shares in accordance with the
terms hereof. The execution and delivery of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including, without limitation, and the issuance of the
Acquired Shares and Warrant, have been duly authorized by the board of directors
of the Company (the “Board”), and no further consent or authorization is
required by the Company, the Board or its stockholders. This Agreement and the
other Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except (i) as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies, or (ii) as any rights to indemnity or contribution hereunder may
be limited by federal and state securities laws and public policy
consideration.
2.7 Dilutive Effect. The
Company understands and acknowledges that its obligation to issue the Conversion
Shares and Warrant Shares upon conversion of the Acquired Shares or Warrant, as
the case may be, in accordance therewith is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
2.8 No Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance of the
Conversion Shares and Warrant Shares) will not (i) result in a violation of
any articles or certificate of incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock or bylaws of
the Company or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected, except in the case of clauses (ii)
and (iii), for such breaches or defaults as would not be reasonably expected to
have a Material Adverse Effect.
2.9 Governmental
Consents. Except for the filing of a Form D with the SEC and the
registration of the Conversion Shares and Warrant Shares under the Securities
Act for resale by the Purchaser, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency or any regulatory or self-regulatory agency or any
other Person (as hereinafter defined) in order for it to execute, deliver or
perform any of its obligations under or contemplated by the Transaction
Documents, in each case, in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain at or prior to the Closing pursuant to the preceding sentence
have been obtained or effected. The Company is unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any of
the foregoing.
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2.10 No General
Solicitation. Neither the Company, its Subsidiary, nor any of
their 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
the Securities.
2.11 No Integrated
Offering. None of the Company, its Subsidiaries, their affiliates, or any
Person acting on 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 require registration of the Securities under the
Securities Act or cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable stockholder approval provisions.
2.12 Placement Agent’s
Fees. Except as set forth on Schedule 2.12, no
brokerage or finder’s fee or commission are or will be payable to any Person
with respect to the transactions contemplated by this Agreement based upon
arrangements made by the Company or any of its affiliates. The
Company agrees that it shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for
persons engaged by Purchaser) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold the Purchaser harmless
against, any liability, loss or expense (including, without limitation,
attorney’s fees and out-of-pocket expenses) arising in connection with any claim
for any such fees or commissions.
2.13 Litigation. There
is no material action, suit, proceeding, inquiry or investigation before or by
any court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or its Subsidiaries, the transactions contemplated by the Transaction
Documents, the Class A Common Stock or any of the Company’s respective current
or former officers or directors in their capacities as such. To the knowledge of
the Company, there has not been within the past two (2) years, and there is not
pending, any investigation by the SEC involving the Company or any current or
former director or officer of the Company (in his or her capacity as such). The
SEC has not issued any stop order or other order suspending the effectiveness of
any registration statement filed by the Company under the Securities Act within
the past two (2) years.
2.14 Indebtedness and Other
Contracts. Except as disclosed in the SEC Documents, the Company (a) does
not have any outstanding Indebtedness (as defined below), (b) is not a
party to any contract, agreement or instrument, the violation of which, or
default under, by any other party to such contract, agreement or instrument
would result in a Material Adverse Effect, (c) is not in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (d) is
not a party to any contract, agreement or instrument relating to any
Indebtedness, the performance of which, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect. For
purposes of this Agreement: (x) ”Indebtedness” of any Person means, without
duplication (i) all indebtedness for borrowed money, (ii) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (iii) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments,
(iv) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the
acquisition of property, assets or businesses, (v) all indebtedness created
or arising under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property or assets
acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (vi) all monetary
obligations under any leasing or similar arrangement which, in connection with
generally accepted accounting principles, consistently applied for the periods
covered thereby, is classified as a capital lease, (vii) all indebtedness
referred to in clauses (i) through (vi) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any mortgage, lien, pledge, change, security interest or other
encumbrance upon or in any property or assets (including accounts and contract
rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness,
and (viii) all Contingent Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (i) through
(vii) above; (y) ”Contingent Obligation” means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) ”Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
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2.15 Financial Information; SEC
Documents. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of such SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in such
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, 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 exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Purchaser that is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not
misleading.
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2.16 Absence of Certain
Changes. Except as disclosed in the SEC Documents or on Schedule 2.16,
since December 31, 2007, there has been no material adverse change and no
material adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company or
its Subsidiary. Since December 31, 2007, the Company has not (i) declared
or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $50,000 outside of the ordinary course of business or
(iii) had capital expenditures, individually or in the aggregate, in excess
of $100,000. The Company has not taken any steps to seek protection pursuant to
any bankruptcy law nor does the Company have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
After giving effect to the transactions contemplated hereby to occur at the
Closing, the Company will not be Insolvent (as hereinafter defined). For
purposes of this Agreement, “Insolvent” means (i) the present fair saleable
value of the Company’s assets is less than the amount required to pay the
Company’s total indebtedness, contingent or otherwise, (ii) the Company is
unable to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured, (iii) the
Company intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) the Company has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be
conducted.
2.17 Foreign Corrupt
Practices. Neither the Company nor any Subsidiary, nor any
director, officer, agent, employee or other Person acting on behalf of the
Company or a Subsidiary has, in the course of its actions (a) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity, (b) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds, (c) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended or
(d) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
2.18 Transactions With
Affiliates. Except as set forth in the SEC Documents, none of
the officers, directors or employees of the Company or any Subsidiary is
presently a party to any transaction with the Company (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
2.19 Insurance. The
Company and each Subsidiary is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company and each such Subsidiary is engaged. The Company has not
been refused any insurance coverage sought or applied for and the Company has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
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2.20 Employee
Relations. Neither the Company nor any Subsidiary is a party
to any collective bargaining agreement or employs any member of a union. No
Executive Officer of the Company (as defined in Rule 501(f) of the Securities
Act) has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer’s employment with the Company. No Executive
Officer of the Company, to the knowledge of the Company, is, or is now, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company to any
liability with respect to any of the foregoing matters. The Company is in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
2.21 Title. Each
of the Company and its Subsidiaries has good and marketable title to all
personal property owned by it which is material to their respective business, in
each case free and clear of all liens, encumbrances and defects except such as
are described in the SEC Documents or such as do not materially affect the value
of such property and do not interfere with the use made and proposed to be made
of such property by the Company. Any real property and facilities held under
lease by the Company and its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company.
2.22 Intellectual Property
Rights. The Company’s and its Subsidiaries’ patents,
trademarks, trade names, service marks copyrights, and registrations and
applications therefor, trade secrets and any other intellectual property right
(collectively, “Intellectual Property Rights”), are, to the best of the
Company’s knowledge, fully valid and are in full force and
effect. The Company does not have any knowledge of any infringement
by the Company or any Subsidiary of Intellectual Property Rights of others.
There is no claim, action or proceeding being made or brought, or to the
knowledge of the Company, being threatened, against the Company or a Subsidiary
regarding its Intellectual Property Rights that could have a Material Adverse
Effect. The Company is unaware of any facts or circumstances which might give
rise to any of the foregoing infringements or claims, actions or proceedings.
The Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of its Intellectual Property Rights.
2.23 Environmental
Laws. Each of Company and its Subsidiaries (a) is in
compliance with any and all Environmental Laws (as hereinafter defined),
(b) has received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(c) is in compliance with all terms and conditions of any such permit,
license or approval where, in each of the foregoing clauses (a), (b) and (c),
the failure to so comply could be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
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2.24 Tax
Matters. Each of Company and its Subsidiaries (a) has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject,
(b) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and (c) has
set aside on its books reasonably adequate provision for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply, except where such failure would not have a Material Adverse
Effect. There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.
2.25 Xxxxxxxx-Xxxxx Act.
The Company is in compliance with any and all requirements of the Xxxxxxxx-Xxxxx
Act of 2002 that are effective as of the date hereof and applicable to it, and
any and all rules and regulations promulgated by the SEC thereunder that are
effective and applicable to it as of the date hereof, except where such
noncompliance would not have a Material Adverse Effect.
2.26 Investment Company
Status. The Company is not, and immediately after receipt of
payment for the Acquired Shares will not be, an “investment company,” an
“affiliated person” of, “promoter” for or “principal underwriter” for, or an
entity “controlled” by an “investment company,” within the meaning of the
Investment Company Act.
2.27 Material
Contracts. Each contract of the Company that involves
expenditures or receipts in excess of $100,000 (each an “Applicable Contract”)
is in full force and effect and is valid and enforceable in accordance with its
terms. The Company is and has been in full compliance with all applicable terms
and requirements of each Applicable Contract and no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with or result in a violation or breach of, or give the
Company or any other entity the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Applicable Contract. The Company has not given or
received from any other entity any notice or other communication (whether oral
or written) regarding any actual, alleged, possible or potential violation or
breach of, or default under, any Applicable Contract.
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2.28 Inventory. All
inventory of the Company consists of a quality and quantity usable and salable
in the ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been or will be written off or written
down to net realizable value on the audited consolidated balance sheet of the
Company as of December 31, 2007. The quantities of each type of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable and warranted in the present circumstances of the
Company.
2.29 Disclosure. The
Company confirms that neither it nor any other Person acting on its behalf has
provided the Purchaser or its agents or counsel with any information that
constitutes or might constitute material, nonpublic information that has not
been disclosed in the SEC Documents. The Company understands and confirms that
the Purchaser will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchaser regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and
warrants to the Company as of the date of this Agreement as
follows:
3.1 Organization. the
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.
3.2 Authorization. This
Agreement has been duly authorized, validly executed and delivered by the
Purchaser and is a valid and binding agreement and obligation of the Purchaser
enforceable against the Purchaser 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
Purchaser has full power and authority to execute and deliver this Agreement and
the other agreements and documents contemplated hereby and to perform its
obligations hereunder and thereunder.
3.3 Investment
Investigation. The Purchaser understands that no Federal,
state, local or foreign governmental body or regulatory authority has made any
finding or determination relating to the fairness of an investment in the
Acquired Shares and that no Federal, state, local or foreign governmental body
or regulatory authority has recommended or endorsed, or will recommend or
endorse, any investment in the Acquired Shares. The Purchaser, in making the
decision to purchase the Acquired Shares, has relied upon independent
investigation made by it and has not relied on any information or
representations made by third parties.
3.4 Accredited
Investor. The Purchaser is an “accredited investor” as defined
under Rule 501 of Regulation D promulgated under the Securities
Act.
10
3.5 No
Distribution. The Purchaser is and will be acquiring the
Acquired Shares for its own account, and not with a view to any resale or
distribution of the Acquired Shares in whole or in part, in violation of the
Securities Act or any applicable securities laws.
3.6 Resale. The
parties intend that the offer and sale of the Acquired Shares be exempt from
registration under the Securities Act, by virtue of Section 4(2) and/or Rule 506
of Regulation D promulgated under the Securities Act. The Purchaser understands
that the Acquired Shares purchased hereunder have not been, and may never be,
registered under the Securities Act and that the Acquired Shares cannot be sold
or transferred unless its is first registered under the Securities Act and such
state and other securities laws as may be applicable or in the opinion of
counsel for the Company an exemption from registration under the Securities Act
is available (and then the Acquired Shares may be sold or transferred only in
compliance with such exemption and all applicable state and other securities
laws).
3.7 Reliance. The
Purchaser understands that the Acquired Shares is 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 the Purchaser set
forth herein for purposes of qualifying for exemptions from registration under
the Securities Act, and applicable state securities laws.
ARTICLE
IV
CONDITIONS
TO CLOSING OF THE PURCHASERS
The obligation of the Purchaser to
purchase the Securities at the Closing is subject to the fulfillment to the
Purchaser’s satisfaction on or prior to the Closing Date of each of the
following conditions, any of which may be waived by the Purchaser:
4.1 Representations and
Warranties Correct. The representations
and warranties in Article II hereof shall be true and correct when
made, and shall be true and correct on the Closing Date with the same force and
effect as if they had been made on and as of the Closing Date.
4.2 Performance. All
covenants, agreements and conditions contained in this Agreement to be performed
or complied with by the Company on or prior to the Closing Date shall have been
performed or complied with by the Company in all material respects.
4.3 No
Impediments. Neither the Company nor any Purchaser shall be
subject to any order, decree or injunction of a court or administrative agency
of competent jurisdiction that prohibits the transactions contemplated hereby or
would impose any material limitation on the ability of such Purchaser to
exercise full rights of ownership of the Acquired Shares. At the time
of the Closing, the purchase of the Acquired Shares to be purchased by the
Purchaser hereunder shall be legally permitted by all laws and regulations to
which the Purchaser and the Company are subject.
11
4.4 Other Agreements and
Documents. Company shall have executed and delivered the
following agreements and documents:
(a) certificates,
registered in the name of the Purchaser, representing the Acquired Shares and
the Warrant in the form of Exhibit B attached
hereto.
(b) The
Registration Rights Agreement in the form of Exhibit C attached
hereto;
(c) A
certificate of good standing with respect to the Company from the Secretary of
State of Delaware;
(d) The
certificate of incorporation of the Company, as amended, certified by the
Secretary of State of Delaware;
(e) A
certificate of the Company’s Secretary, dated the Closing Date, certifying
(i) the fulfillment of the conditions specified in Sections 4.1 and 4.2 of
this Agreement, (ii) the Board resolutions approving this Agreement and the
transactions contemplated hereby, (iii) the Company’s certificate of
incorporation, and (iv) other matters as the Purchaser shall reasonably
request;
(f) A
written waiver, in form and substance satisfactory to the Purchaser, from each
person other than the Purchaser who has any of the following
rights:
(i) any
currently effective right of first refusal to acquire the Acquired Shares;
or
(ii) any
right to an anti-dilution adjustment of securities issued by the Company that
are held by such person that will be triggered as a result of the issuance of
the Acquired Shares;
(g) All
necessary consents or waivers, if any, from all parties to any other material
agreements to which the Company is a party or by which it is bound immediately
prior to the Closing in order that the transactions contemplated hereby may be
consummated and the business of the Company may be conducted by the Company
after the Closing without adversely affecting the Company; and.
4.5 Due Diligence
Investigation. No fact shall have been discovered, whether or
not reflected in the Schedules hereto, which in the Purchaser’s determination
would make the consummation of the transactions contemplated by this Agreement
not in the Purchaser’s best interests.
4.6 Certificate of
Designations. The Company shall have filed the Certificate of
Designation for the Series H Preferred Stock in form attached hereto as Exhibit
A, with the Secretary of State of Delaware.
12
ARTICLE
V
CONDITIONS
TO CLOSING OF THE COMPANY
The
Company’s obligation to sell the Securities at the Closing is subject to the
fulfillment to its satisfaction on or prior to the Closing Date of each of the
following conditions:
5.1 Representations. The
representations made by the Purchaser pursuant to Article III hereof shall
be true and correct when made and shall be true and correct on the Closing
Date.
5.2 No
Impediments. Neither the Company nor any Purchaser shall be
subject to any order, decree or injunction of a court or administrative agency
of competent jurisdiction that prohibits the transactions contemplated hereby or
would impose any material limitation on the ability of such Purchaser to
exercise full rights of ownership of the Acquired Shares. At the time
of the Closing, the purchase of the Acquired Shares to be purchased by the
Purchaser hereunder shall be legally permitted by all laws and regulations to
which the Purchaser and the Company are subject.
5.3 Payment of Purchase
Price. The Company shall have received the Purchase
Price.
ARTICLE
VI
INDEMNIFICATION
6.1 Indemnification by the
Company. The Company agrees to defend, indemnify and hold
harmless the Purchaser and shall reimburse the Purchaser for, from and against
each claim, loss, liability, cost and expense (including without limitation,
interest, penalties, costs of preparation and investigation, and the reasonable
fees, disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively, “Losses”) directly or indirectly relating
to, resulting from or arising out of any untrue representation,
misrepresentation, breach of warranty or non-fulfillment of any covenant,
agreement or other obligation by or of the Company contained herein or in any
certificate, document, or instrument delivered to the Purchaser pursuant
hereto.
6.2 Indemnification by the
Purchaser. The Purchaser agrees to defend, indemnify and hold
harmless the Company and shall reimburse the Company for, from and against all
Losses directly or indirectly relating to, resulting from or arising out of any
untrue representation, misrepresentation, breach of warranty or non-fulfillment
of any covenant, agreement or other obligation of the Purchaser contained herein
or in any certificate, document or instrument delivered to the Company pursuant
hereto.
6.3 Procedure. The
indemnified party shall promptly notify the indemnifying party of any claim,
demand, action or proceeding for which indemnification will be sought under
Sections 6.1 or 6.2 of this Agreement, and, if such claim, demand, action or
proceeding is a third party claim, demand, action or proceeding, the
indemnifying party will have the right at its expense to assume the defense
thereof using counsel reasonably acceptable to the indemnified
party. The indemnified party shall have the right to participate, at
its own expense, with respect to any such third party claim, demand, action or
proceeding. In connection with any such third party claim, demand,
action or proceeding, the Purchaser and the Company shall cooperate with each
other and provide each other with access to relevant books and records in their
possession. No such third party claim, demand, action or proceeding
shall be settled without the prior written consent of the indemnified party,
which shall not be unreasonably withheld. If a firm written offer is
made to settle any such third party claim, demand, action or proceeding and the
indemnifying party proposes to accept such settlement and the indemnified party
refuses to consent to such settlement, then: (i) the indemnifying party
shall be excused from, and the indemnified party shall be solely responsible
for, all further defense of such third party claim, demand, action or
proceeding; and (ii) the maximum liability of the indemnifying party
relating to such third party claim, demand, action or proceeding shall be the
amount of the proposed settlement if the amount thereafter recovered from the
indemnified party on such third party claim, demand, action or proceeding is
greater than the amount of the proposed settlement.
13
ARTICLE
VII
MISCELLANEOUS
7.1 Governing
Law. This Agreement and the rights of the parties hereunder
shall be governed in all respects by the laws of the State of New York wherein
the terms of this Agreement were negotiated, without regard to the conflicts of
laws thereof.
7.2 Survival. Except
as specifically provided herein, the representations, warranties, covenants and
agreements made herein shall survive the Closing.
7.3 Amendment. This
Agreement may not be amended, discharged or terminated (or any provision hereof
waived) without the written consent of the Company and the
Purchaser.
7.4 Successors and
Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon and
enforceable by and against, the successors, assigns, heirs, executors and
administrators of the parties hereto. The Purchaser may assign its
rights hereunder, and the Company may not assign its rights or obligations
hereunder without the consent of the Purchaser or any of its successors,
assigns, heirs, executors and administrators.
7.5 Entire
Agreement. This Agreement, the Transaction Documents and the
other documents delivered pursuant hereto and simultaneously herewith constitute
the full and entire understanding and agreement between the parties with regard
to the subject matter hereof and thereof.
7.6 Notices,
etc. All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if delivered
either personally or by a nationally recognized courier service marked for next
business day delivery or sent in a sealed envelope by first class mail, postage
prepaid and either registered or certified, addressed as follows:
(a)
if to the Company:
0000 Xxxxx Xxxxxxxxx
Xxxx.
Xxxxx,
Xxxxxxx 00000
Attn:
Chief Executive Officer
14
(b) if
to a Purchaser:
Vicis
Capital Master Fund
Xxxxx 00,
Xxxxx 000
000 X.
00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx,
XX 00000
Attn:
Xxxx Xxxxxxxx
with a
copy to:
Xxxxxx X.
Xxxxxx, Esq.
Xxxxxxx
& Xxxxx LLP
000 Xxxx
Xxxxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxxx 00000
7.7 Delays or
Omissions. No delay or omission to exercise any right, power
or remedy accruing to any holder of any Acquired Shares upon any breach or
default of the Company under this Agreement shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence, therein, or of or in any similar breach
or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any
kind or character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement must be, made in writing and shall be effective
only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
7.8 Severability. The
invalidity of any provision or portion of a provision of this Agreement shall
not affect the validity of any other provision of this Agreement or the
remaining portion of the applicable provision. It is the desire and
intent of the parties hereto that the provisions of this Agreement shall be
enforced to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular provision of this Agreement
shall be adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is
made.
7.9 Expenses. The
Company shall bear its own expenses and legal fees incurred on its behalf with
respect to the negotiation, execution and consummation of the transactions
contemplated by this Agreement and shall pay all documentary stamp or similar
taxes imposed by any authority upon the transactions contemplated by this
Agreement or any Transaction Document. The Company shall pay all reasonable,
documented third-party fees and expenses incurred by the Purchaser in connection
with the enforcement of this Agreement or any of the other Transaction
Documents, including, without limitation, all actual reasonable attorneys’ fees
and expenses.
15
7.10 Consent to Jurisdiction;
Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS LOCATED THE STATE AND COUNTY OF NEW YORK FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT
AND THE TRANSACTION DOCUMENTS. EACH OF THE PARTIES TO THIS AGREEMENT
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN ANY SUCH COURTS AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN ANY SUCH COURTS HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY SUCH LEGAL
PROCEEDING. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY CONSENTS TO
SERVICE OF PROCESS BY NOTICE IN THE MANNER SPECIFIED IN SECTION 7.6 AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION SUCH
PARTY MAY NOW OR HEREAFTER HAVE TO SERVICE OF PROCESS IN SUCH
MANNER.
7.11 Titles and
Subtitles. The titles of the articles, sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
7.12 Further
Assurances. The parties agree to execute and deliver all such
further documents, agreements and instruments and take such other and further
action as may be necessary or appropriate to carry out the purposes and intent
of this Agreement.
7.13 Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one
instrument.
7.14 Right to Partially
Repurchase Acquired Shares and Warrant. The Company shall have
a right to partially repurchase the Acquired Shares and Warrant as follows (the
"Repurchase Right"). At any time from time to time on and after the
date hereof until the Expiration Time (defined below), the Company may, in its
sole discretion, repurchase from the Purchaser up to 90% of the Acquired Shares
and up to the equal percentage of the Warrant for an aggregate purchase price in
cash equal to the Purchase Price paid hereunder (the “Repurchase
Price”). The Company may exercise the foregoing Repurchase Right by
providing the Purchaser five (5) days’ prior written notice of its intent to
exercise the Repurchase Right. The Repurchase Price shall be
wired to an account specified by Purchaser. The foregoing repurchase
right expires at 4:00 p.m. EDT on September 2, 2008 (the "Expiration
Time").
16
IN
WITNESS WHEREOF, the parties hereto have duly executed this Securities Purchase
Agreement, as of the day and year first above written.
|
COMPANY:
/s/Xxxxxxxx
Xxxxxxx
Xxxxxxxx
Xxxxxxx
Chief
Financial Officer
PURCHASER:
VICIS
CAPITAL MASTER FUND
By:
Vicis Capital LLC
/s/Xxxxx
Xxxxxx
Name:
Xxxxx Xxxxxx
Title:
Chief Financial Officer
|
17
EXHIBIT
A
FORM
OF CERTIFICATE OF DESIGNATION FOR THE SERIES H CONVERTIBLE PREFERRED
STOCK
EXHIBIT
B
FORM
OF WARRANT
EXHIBIT
C
FORM
OF REGISTRATION RIGHTS AGREEMENT
