SECURITIES PURCHASE AGREEMENT By and Between THE AMACORE GROUP, INC. and VICIS CAPITAL MASTER FUND January 13, 2009
EXHIBIT
10.1
By
and Between
and
VICIS
CAPITAL MASTER FUND
January
13, 2009
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), effective as of this 13th day
of January, 2009, 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
Series I Convertible Preferred Stock, par value $.001 per share (the “Series I
Preferred Stock”); 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 A (the “Warrant” and, together with the
Acquired Shares, the “Securities”).
NOW,
THEREFORE, the Company
and the Purchaser hereby agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF THE SECURITIES
1.1 Purchase and Sale of the
Securities. On the Closing Date, at the closing of the
transactions contemplated hereby (the “Closing”), subject to the terms and
conditions hereof and in reliance on the representations and warranties
contained herein, the following actions shall be taken:
(a) The
Company, against delivery of payment of the Purchase Price in accordance with
Section 1.1(b), will deliver to the Purchaser the documents set forth in
Section 4.4 hereof.
(b) The
Purchaser shall deliver to the Company the documents set forth in
Section 5.2 hereof and Four Million Dollars ($4,000,000) (the “Purchase
Price”) in immediately available funds by wire transfer of immediately available
funds in accordance with the instructions of the Company and will deliver to the
Company the documents set forth in Section 5.2 hereof. The
Company hereby confirms that the Purchase Price was previously paid by the
Purchaser.
1.2 Closing. The
Closing shall be deemed to have occurred at the offices of ▇▇▇▇▇▇▇ &
▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ at 5:00 p.m. CST on
January 13, 2009 (the “Closing Date).
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)
1,480,000,000 shares of Common Stock, par value $.001 per share, of which 1,009,006,919 shares are
currently outstanding and 292,452,717 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) 20,000,000 shares of Preferred Stock, par
value $.001 per share, of which 3,005 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”):
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(i)
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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;
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(ii)
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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)
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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;
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(iv)
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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”);
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(v)
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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;
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(vi)
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there
are no securities or instruments containing antidilution or similar
provisions that will be triggered by the issuance of the Securities;
and
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(vii)
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the
Company does not have any stock appreciation rights or “phantom stock”
plans or agreements or any similar plan or
agreement.
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2.5 Issuance of the
Securities.
(a) The
Securities 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
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 Securities, the Conversion Shares and the Warrant Shares
pursuant to the terms of the Series I 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 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 Securities is exempt from registration under
the Securities Act.
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, 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 Securities, 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 Securities, 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 or 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.
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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.
2.10 No General
Solicitation. Neither the Company, nor any of its
Subsidiaries, 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.
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2.12 Placement Agent’s
Fees. 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. Except
as disclosed in the SEC documents, 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. Except as set forth in Schedule 2.15 hereto, 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. Except as set forth in Schedule
2.15 hereto, 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. Except as set
forth in Schedule 2.15 hereto, 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).
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. 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.
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2.18 Transactions With
Affiliates. Except as set forth in the SEC Documents or on
Schedule 2.18, 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.
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.
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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.
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 ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act. Except as set forth in Schedule 2.25, the Company is in
compliance with any and all requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ 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.
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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, to the
Company’s knowledge, 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.
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. 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.
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3.2 Authorization. Purchaser
has the requisite power and authority to enter into and perform its obligations
under this Agreement and the other Transaction Documents. The
execution and delivery of the Transaction Documents by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby have been duly authorized by the trustee of the Purchaser, which
delegated authority to enter into the Transaction Documents to the investment
advisor to the Purchaser pursuant to an investment management agreement, and no
further consent or authorization is required by the Purchaser, its trustee or
its
beneficiaries. This Agreement and the other Transaction Documents
have been duly executed and delivered by the Purchaser, and constitute the
legal, valid and binding obligations of the Purchaser enforceable against the
Purchaser 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.
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
Securities 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 Securities. The Purchaser, in making the
decision to acquire the Securities, 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.
3.5 No
Distribution. The Purchaser is and will be acquiring the
Securities for its own account, and not with a view to any resale or
distribution of any of the Securities 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 Securities 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 Securities purchased hereunder have not been, and
may never be, registered under the Securities Act and that the Securities cannot
be sold or transferred unless 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 Securities and any securities issued upon exercise or
conversion thereof 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 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 the Purchaser set
forth herein for purposes of qualifying for exemptions from registration under
the Securities Act, and applicable state securities laws.
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ARTICLE
IV
CONDITIONS
TO CLOSING OF THE PURCHASER
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 Securities. At the time of
the Closing, the purchase of the Securities 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.
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 A attached hereto.
(b) The
Registration Rights Agreement in the form of Exhibit B attached
hereto;
(c) A
certificate of good standing with respect to the Company from the Secretary of
State of Delaware;
(d) 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;
(e) 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:
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(i)
|
any
currently effective right of first refusal to acquire the Acquired Shares;
or
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(ii)
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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 Securities; and
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(f) 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.
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.
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 Performance. All
covenants, agreements and conditions contained in this Agreement to be performed
or complied with by the Purchaser on or prior to the Closing Date shall have
been performed or complied with by the Purchaser in all material
respects.
5.3 Other Agreements and
Documents. Purchaser shall have executed and delivered the
Registration Rights Agreement and the Waiver of Anti-Dilution Rights in the form
of Exhibit C attached hereto.
5.4 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 Securities. At the time of
the Closing, the purchase of the Securities 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.
5.5 Payment of Purchase
Price. The Company shall have received the Purchase
Price.
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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.
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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:
if
to the Company:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇.
▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Chief Executive Officer
if to a
Purchaser:
Vicis
Capital Master Fund
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇ ▇▇▇▇▇▇▇▇
with a
copy to:
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇
& ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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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 and, except as set forth in this Section 7.9, the Purchaser shall
each 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.
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.
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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.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties hereto have duly executed this Securities Purchase
Agreement, as of the day and year first above written.
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COMPANY:
/s/
▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇
Chief
Executive Officer
PURCHASER:
VICIS
CAPITAL MASTER FUND
By:
Vicis Capital LLC
/s/
▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇
Managing
Director |
-18-
EXHIBIT
A
FORM
OF WARRANT
-19-
EXHIBIT
B
FORM
OF REGISTRATION RIGHTS AGREEMENT
-20-
EXHIBIT
C
FORM
OF WAIVER OF ANTI-DILUTION RIGHTS
-21-
SCHEDULES
Schedule
2.15 – At various times the Company has failed to comply with its obligations
under Section 14 of the Securities Exchange Act of 1934, as
amended. On December 18, 2008 the Company filed a Current Report on
Form 8-K stating that its financial statements for the quarterly periods ended
March 31, 2008 and June 30, 2008 must be restated (the “Restatement
8-K”). See the Restatement 8-K for additional
information.
Schedule
2.16 – Prior to an infusion of capital from Purchaser, the Company was
experiencing severe liquidity issues.
Schedule
2.18 – ▇▇▇ ▇▇▇▇▇▇, President and Chief Executive Officer loaned the Company
$800,000.
Schedule
2.25 – Due to recent resignations of certain directors, the Company may not be
full compliance with respect to requirements relating to having an audit
committee comprised of independent directors.
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