PREFERRED STOCK PURCHASE AGREEMENT By and Between THE AMACORE GROUP, INC. and VICIS CAPITAL MASTER FUND January 15, 2008
Exhibit
1.1
|
By
and Between
and
VICIS
CAPITAL MASTER FUND
January
15, 2008
|
This
PREFERRED STOCK PURCHASE AGREEMENT
(the “Agreement”), dated this 15th day of January, 2008, is made by and between
THE AMACORE GROUP, INC., a Delaware corporation (the “Company”), and VICIS
CAPITAL MASTER FUND (the “Purchaser”).
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, and the Purchaser wishes to acquire from the Company: (a) 300 shares
(the “Acquired Shares”) of the Company’s Series G Convertible Preferred Stock,
par value $.001 per share (the “Series G Preferred Stock”).
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 Acquired Shares for $3,000,000 in cash
(the “Purchase Price”).
1.2
Closing. The
Closing shall be deemed to occur at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ at 5:00 p.m. CST on January __,
2008
or at such other place, date or time as mutually agreeable to the parties (the
“Closing Date).
1.3
Closing
Matters. On the Closing Date, 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.
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 Subsidiary (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 three subsidiaries: LBI Brokerage, Inc.; JRM Benefits Consultants,
LLC; and Lifeguard Benefit Services, Inc. (collectively, the
"Subsidiary").
2.3
No
Violation. Neither the Company nor its 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
139,853,182
shares are currently outstanding and 794,766,850 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 1,588.6 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;
(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;
2
(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 Acquired Shares;
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 to be issued hereunder are duly authorized and, upon payment
and issuance in accordance with the terms hereof, shall be free from all taxes,
Liens and charges with respect to the issuance thereof. As of the Closing,
the
Company has authorized and reserved for issuance out of the Company’s Class A
Common Stock, par value $.001 per share (the “Class A Common Stock”) 600,000
shares (the “Conversion Shares”), to be issued to the Purchaser upon conversion
of the Acquired Shares. All actions by the Board, the Company and its
stockholders necessary for the valid issuance of the Acquired Shares and the
Conversion Shares pursuant to the terms of the Series G Preferred Stock has
been
taken.
(b)
The Conversion Shares, when issued and paid for upon conversion of the Acquired
Shares, 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 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 delivered pursuant to Section 4.4(a) hereof,
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 and
Conversion 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, 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.
3
2.7
Dilutive
Effect. The Company understands and acknowledges that its obligation to
issue the Conversion Shares upon conversion of the Acquired Shares 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) 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 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, 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 Acquired Shares.
2.11
No Integrated
Offering. None of the Company, its Subsidiary, 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 Acquired Shares under
the
Securities Act or cause this offering of the Acquired Shares to be integrated
with prior offerings by the Company for purposes of the Securities Act or any
applicable stockholder approval provisions.
4
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 Subsidiary, 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.
5
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.
2.16
Absence of Certain
Changes. Except as disclosed in the SEC Documents or on Schedule 2.16,
since December 31, 2005, 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, 2005, 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.
6
2.17
Foreign Corrupt
Practices. Neither the Company nor its Subsidiary, nor any
director, officer, agent, employee or other Person acting on behalf of the
Company 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 its 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 its 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 its 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 its 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 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.
7
2.21
Title. Each
of the Company and its Subsidiary has good and marketable title to all personal
property owned by it which is material to its 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 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 Subsidiary's 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 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 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 Subsidiary (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 Subsidiary (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.
8
2.25
▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act. 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.
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.
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 unaudited consolidated balance sheet of
the
Company as of March 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.
9
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.
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 the Acquired Shares are first registered under the
Securities Act and under 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.
10
ARTICLE
IV
CONDITIONS
TO CLOSING OF THE PURCHASERS
The
obligation of the Purchaser to
purchase the Acquired Shares 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.
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
(b)
The Registration Rights Agreement in the form of Exhibit A 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;
11
(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.
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 Amended
Certificate of Designations for the Series G Preferred Stock in form attached
hereto as Exhibit
B, with the Secretary of State of Delaware.
ARTICLE
V
CONDITIONS
TO CLOSING OF THE COMPANY
The
Company’s obligation to sell the Acquired Shares 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.
12
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.
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.
13
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:
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇.
▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Chief Executive Officer
(b)
if to a Purchaser:
Vicis
Capital Master Fund
▇▇▇▇▇
▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇
▇.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇ ▇▇▇▇▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇
& ▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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.
14
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
[Intentionally Omitted].
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 IN 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.
15
IN
WITNESS WHEREOF, the parties hereto
have duly executed this Preferred Stock Purchase, as of the day and year first
above written.
|
COMPANY:
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇. ▇▇▇▇▇▇
Chief
Executive Officer
PURCHASER:
VICIS CAPITAL MASTER FUND By:
Vicis Capital LLC
/s/▇▇▇▇▇
▇▇▇▇▇▇
Name: ▇▇▇▇▇
▇▇▇▇▇▇
Title: CFO
|
EXHIBIT
A
FORM
OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT
B
FORM
OF AMENDED AND RESTATED CERTIFICATE OF DESIGNATIONS
FOR
THE SERIES G PREFERRED STOCK