Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement (this "Agreement"), dated as of March 30,
2005, by and among Provectus Pharmaceuticals, Inc., a Nevada corporation, with
headquarters located at 0000 Xxx Xxxxx Xxxxxxx, Xxxxx X, Xxxxxxxxx, Xxxxxxxxx
(the "Company"), and each of the purchasers set forth on the signature pages
hereto (the "Buyers").
WHEREAS, the Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the rules and regulations as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
WHEREAS, the Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement (i) senior
secured convertible debentures of the Company, in the form attached hereto as
Exhibit "A", in the aggregate principal amount as set forth on the signature
pages hereto (together with any debenture(s) issued in replacement thereof or as
a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, the "Debentures"), convertible into shares of common stock,
$0.001 par value per share, of the Company (the "Common Stock"), upon the terms
and subject to the limitations and conditions set forth in such Debentures, (ii)
warrants, in the form attached hereto as Exhibit "B-1" to purchase shares of
Common Stock (the "Class A Warrants"), and (iii) warrants, in the form attached
hereto as Exhibit "B-2" to purchase shares of Common Stock (the "Class B
Warrants", which, along with the Class A Warrants are collectively referred to
herein as the "Warrants");
WHEREAS, each Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, such principal amount of Debentures and number of
Warrants as is set forth immediately below its name on the signature pages
hereto;
WHEREAS, contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit "C" (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder and applicable state securities laws;
WHEREAS, contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Security Agreement, in the
form attached hereto as Exhibit "D" (the "Security Agreement") pursuant to which
the Company has agreed to grant a security interest in the assets of the Company
to secure the obligations of the Company to the Buyers;
WHEREAS, contemporaneous with the execution and delivery of this Agreement,
each of Xantech Pharmaceuticals, Inc., a Tennessee corporation, Pure-ific
Corporation, a Nevada corporation, Provectus Biotech, Inc., a Tennessee
corporation, Provectus Devicetech, Inc., a Tennessee corporation and Provectus
Pharmatech, Inc., a Tennessee corporation, (each a "Company Subsidiary" and
collectively the "Company Subsidiaries") each a wholly-owned Subsidiary (as
defined herein) of the Company, is executing and delivering a Guaranty
Agreement, in the form attached hereto as Exhibit "E" (the "Guaranty
Agreement"), guaranteeing the obligations of the Company to the Buyers; and
WHEREAS, contemporaneous with the execution and delivery of this Agreement,
each Company Subsidiary and the Buyers are executing and delivering a Security
Agreement, in the form attached hereto as Exhibit "F" (the "Subsidiary Security
Agreement"), pursuant to which the Company Subsidiary has agreed to grant a
security interest in the assets of the Company Subsidiary to secure the
obligations of the Company Subsidiary to the Buyers.
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. Purchase and Sale of Debentures and Warrants.
a. Purchase of Debentures and Warrants. Subject to the terms and conditions
of this Agreement, on the Closing Date (as defined below), the Company shall
issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company such principal amount of Debentures and Warrants to purchase such
number of shares of Common Stock as is set forth immediately below such Buyer's
name on the signature pages hereto.
b. Form of Payment. On the Closing Date, (i) each Buyer shall pay the
purchase price for the Debentures and the Warrants to be issued and sold to it
at the Closing (as defined below) (the "Purchase Price") by wire transfer of
immediately available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of the Debentures in the principal
amount equal to the Purchase Price and the number of Warrants as is set forth
immediately below such Buyer's name on the signature pages hereto, and (ii) the
Company shall deliver such Debentures and Warrants duly executed on behalf of
the Company, to such Buyer, against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Sections 5 and 6 below, the date and time of the
issuance and sale of the Debentures and the Warrants pursuant to Section 1(a) of
this Agreement (the "Closing Date") shall be simultaneous with the execution and
delivery of this Agreement by the parties, or such other mutually agreed upon
time. The closing of the transactions contemplated by Section 1(a) of this
Agreement (the "Closing") shall occur on the Closing Date at such location as
may be agreed to by the parties.
2. Representations and Warranties of Each Buyer. Each Buyer severally (and
not jointly) represents and warrants to the Company solely as to such Buyer
that:
a. Investment Purpose. As of the date hereof and the Closing Date the Buyer
is purchasing the Debentures and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Debentures pursuant to this Agreement
(the "Conversion Shares") and the Warrants and the shares of Common Stock
issuable upon exercise thereof (the "Warrant Shares" and, collectively with the
Debentures, Warrants and Conversion Shares, the "Securities") for its own
account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the 1933 Act; provided, however, that by making the representations herein, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D (an "Accredited Investor").
c. Reliance on Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
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compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.
d. Information. The Buyer and its advisors, if any, have been furnished
with all information relating to the business, finances and operations of the
Company and information relating to the offer and sale of the Securities which
have been requested by the Buyer or its advisors; provided, however, that the
Buyer is relying on the Company's representation that all such information which
would otherwise constitute material nonpublic information has been disclosed to
the public prior to or promptly following such disclosure to the Buyer. Neither
such inquiries nor any other due diligence investigation conducted by the Buyer
or any of its advisors or representatives shall modify, amend or affect the
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. The Buyer understands that its investment in the Securities
involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the Securities.
f. Transfer or Re-sale. The Buyer understands that except as provided in
the Registration Rights Agreement, the sale or re-sale of the Securities has not
been and is not being registered under the 1933 Act or any applicable state
securities laws, and the Securities may not be transferred unless (i) the
Securities are sold pursuant to an effective registration statement under the
1933 Act, (ii) the Buyer shall have delivered to the Company an opinion of
counsel that shall be in form, substance and scope customary for opinions of
counsel in comparable transactions to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration, which opinion shall be reasonably acceptable to the Company, (iii)
the Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("Rule 144")) of the Buyer
who agrees to sell or otherwise transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited Investor, (iv) the Securities are
sold pursuant to Rule 144, or (v) the Securities are sold pursuant to Regulation
S under the 1933 Act (or a successor rule) ("Regulation S"). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may
be pledged as collateral in connection with a bona fide margin account or other
lending arrangement.
g. Legends. The Buyer understands that the Debentures and the Warrants
shall bear a restrictive legend in the form as set forth on Exhibit "A" and
Exhibits "B-1" and "B-2", respectively. The Buyer understands that, until such
time as the resale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 or Regulation S without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, the Conversion Shares and the Warrant Shares may bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates evidencing such
Securities):
"Neither the offer nor sale of the securities represented by this
certificate has been registered under the Securities Act of 1933, as
amended, (the "Act"). The securities may not be sold, transferred or
assigned in the absence of an effective registration statement for the
securities under the Act, or an opinion of counsel, in form, substance and
scope customary for opinions of counsel in comparable transactions, that
registration is not required under the Act or unless sold pursuant to Rule
144 or Regulation S under the Act."
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h. Authorization; Enforcement. This Agreement has been duly and validly
authorized by, and duly executed and delivered on behalf of, the Buyer, and this
Agreement constitutes the valid and binding agreement of the Buyer enforceable
in accordance with its terms.
i. Residency. The Buyer is a resident of the jurisdiction set forth
immediately below such Buyer's name on the signature pages hereto.
3. Representations and Warranties of the Company. Except as set forth in
the Company's Disclosure Schedule annexed hereto, the Company represents and
warrants to each Buyer that:
a. Organization and Qualification. The Company and each of its Subsidiaries
(as defined below), if any, is a corporation or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and conducted. The
Company and each of its Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business conducted by it makes
such qualification necessary except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
"Subsidiaries" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, a majority
of the equity or other ownership interest.
b. Authorization; Enforcement.
(i) The Company has all requisite corporate power and authority to enter
into and perform this Agreement, the Registration Rights Agreement, the
Debentures, the Warrants and the Security Agreement and to consummate the
transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof. The execution and delivery of this
Agreement, the Registration Rights Agreement, the Debentures, the Warrants and
the Security Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the
issuance of the Debentures and the Warrants and the issuance and reservation for
issuance of the Conversion Shares and Warrant Shares issuable upon conversion or
exercise thereof) have been duly authorized by the Company's Board of Directors
and no further consent or authorization of the Company, its Board of Directors,
or its stockholders is required. This Agreement has been duly executed and
delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign
this Agreement and the other documents executed in connection herewith and bind
the Company accordingly. This Agreement constitutes, and upon execution and
delivery by the Company of the Registration Rights Agreement, the Debentures,
the Warrants and the Security Agreement each of such instruments will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
(ii) Each Company Subsidiary has all requisite corporate power and
authority to enter into and perform the Guaranty Agreement and the Subsidiary
Security Agreement, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of the Guaranty Agreement and the Subsidiary
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Security Agreement by each Company Subsidiary and the consummation by it of the
transactions contemplated thereby have been duly authorized by such Company
Subsidiary's Board of Directors and no further consent or authorization of such
Company Subsidiary, its Board of Directors, or its stockholders is required.
This Agreement has been duly executed and delivered by each Company Subsidiary
by its authorized representative, and such authorized representative is the true
and official representative with authority to sign this Agreement and the other
documents executed in connection herewith and bind the Company Subsidiary
accordingly. This Agreement constitutes, and upon execution and delivery by a
Company Subsidiary of the Guaranty Agreement and the Subsidiary Security
Agreement, will constitute, a legal, valid and binding obligation of such
Company Subsidiary enforceable against such Company Subsidiary in accordance
with its terms.
c. Capitalization. The authorized capital stock of the Company is set forth
in the Company's Disclosure Schedule. The number of shares of Common Stock
issued and outstanding and the number of shares reserved for issuance pursuant
to securities (other than the Debentures and the Warrants) exercisable for, or
convertible into or exchangeable for shares of Common Stock are set forth in the
Company's Disclosure Schedule. The classes and series of preferred stock
designated and the number of such shares issued and outstanding are set forth in
the Company's Disclosure Schedule. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly issued, fully paid
and nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. As of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or rights of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, (ii) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of its or their securities under the 1933 Act (except the Registration
Rights Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the issuance of
the Debentures, the Warrants, the Conversion Shares or the Warrant Shares.
d. Issuance of Shares. The Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance and, upon conversion of the Debentures and
exercise of the Warrants in accordance with their respective terms, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of stockholders of the
Company and will not impose personal liability upon the holder thereof.
e. Acknowledgment of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares and Warrant Shares upon conversion of the Debentures or
exercise of the Warrants. The Company further acknowledges that its obligation
to issue Conversion Shares and Warrant Shares upon conversion of the Debentures
or exercise of the Warrants in accordance with this Agreement, the Debentures
and the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company.
f. No Conflicts. The execution, delivery and performance of this Agreement,
the Registration Rights Agreement, the Security Agreement, the Debentures and
the Warrants by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance of the Conversion Shares and Warrant
Shares), and the execution, delivery and performance of the Guaranty Agreement
and the Subsidiary Security Agreement by each Company Subsidiary and the
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consummation by each Company Subsidiary of the transactions contemplated
thereby, will not (i) conflict with or result in a violation of any provision of
the certificate of incorporation, as amended, (the "Certificate of
Incorporation") of the Company or any of its Subsidiaries or the by-laws, as
amended, (the "By-laws") of the Company or any of its Subsidiaries, or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which the Company or any of its Subsidiaries 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
and regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries, if any, are not being conducted in
violation of any law, ordinance or regulation of any governmental entity
material to the business of the Company and its Subsidiaries. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, neither the Company nor any Company
Subsidiary is required to obtain any consent, authorization or order of, or make
any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or any third party in order
for (i) the Company to execute, deliver or perform any of its obligations under
this Agreement, the Registration Rights Agreement, the Security Agreement, the
Debentures or the Warrants in accordance with the terms hereof or thereof or to
issue and sell the Debentures and the Warrants in accordance with the terms
hereof and to issue the Conversion Shares upon conversion of the Debentures and
the Warrant Shares upon exercise of the Warrants, or (ii) any Company Subsidiary
to execute, deliver or perform the Guaranty or the Subsidiary Security Agreement
in accordance with the terms thereof. All consents, authorizations, orders,
filings and registrations which either the Company or any Company Subsidiary is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of the
listing requirements of the Over-the-Counter Bulletin Board (the "OTCBB") and
does not reasonably anticipate that the Common Stock will be delisted by the
OTCBB in the foreseeable future. The Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing.
g. SEC Documents; Financial Statements. The Company has timely 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 Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). The Company has made available to each Buyer
true and complete copies of the SEC Documents, except for such exhibits and
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incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC (when
read together with any subsequent amendments), 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 light of the
circumstances under which they were made, not misleading. None of the statements
made in any such SEC Documents is, or has been, required to be amended or
updated under applicable law (except for such statements as have been amended or
updated in subsequent filings prior the date hereof). As of their respective
dates, the financial statements of the Company included in the 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 United
States 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 not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, of the type customarily reflected on
financial statements and the notes thereto, other than (i) liabilities incurred
in the ordinary course of business subsequent to December 31, 2003 and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
h. Absence of Certain Changes. Since December 31, 2003, there has been no
material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, results of
operations or prospects of the Company or any of its Subsidiaries.
i. Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of any
executive officer of the Company or any of its Subsidiaries, threatened against
or affecting the Company or any of its Subsidiaries, or their officers or
directors in their capacity as such, that could have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
j. Patents, Copyrights, etc.
(i) The Company and each of its Subsidiaries owns or possesses the
requisite licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights ("Intellectual
Property") necessary to enable it to conduct its business as now operated (and,
to the Company's knowledge, as presently contemplated to be operated in the
future); there is no claim or action by any person pertaining to, or proceeding
pending, or to the knowledge of any executive officer of the Company or any of
its Subsidiaries threatened, which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, to the knowledge of any executive
officer of the Company or any of its Subsidiaries, as presently contemplated to
be operated in the future); to the knowledge of any executive officer of the
Company or any of its Subsidiaries, neither the Company's nor its Subsidiaries'
current and intended products, services and processes infringe on any
Intellectual Property or other rights held by any person; and no executive
officer of the Company or any of its Subsidiaries has knowledge of any facts or
circumstances which might give rise to any of the foregoing.
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(ii) Neither the Company nor any of its Subsidiaries owns or possesses any
Copyrights, Patents, or Trademarks, each as defined herein. "Copyrights" shall
mean all copyrights, registrations and applications for registration, issued or
filed, including any reissues, extensions or renewals thereof, by or with the
United States Copyright Office or any similar office or agency of the United
States, any state thereof, or any other country or political subdivision
thereof, or otherwise, including, all rights in and to the material constituting
the subject matter thereof. "Patents" shall mean all letters patent of the
United States or any other country or any political subdivision thereof, and all
reissues and extensions thereof or all applications for letters patent of the
United States and all divisions, continuations and continuations-in-part thereof
or any other country or any political subdivision. "Trademarks" shall mean all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos and other source
or business identifiers, embodied in any registration or recording, or any
application in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state thereof or any other country or any political subdivision, thereof.
k. No Materially Adverse Contracts, Etc. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
l. Tax Status. The Company and each of its Subsidiaries has made or filed
all federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and 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 has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and none of the executive
officers of the Company or any of its Subsidiaries know of any basis for any
such claim. Neither the Company nor any of its Subsidiaries has executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. None of the Company's
tax returns is presently being audited by any taxing authority.
m. Certain Transactions. Except for arm's length transactions pursuant to
which the Company or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties, none of the officers, directors,
or employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and 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
officer, director or such employee or, to the knowledge of any executive officer
of the Company or any of its Subsidiaries, any corporation, partnership, trust
or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
n. Permits; Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "Company Permits"), and there is
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no action pending or, to the knowledge of any executive officer of the Company
or any of its Subsidiaries, threatened regarding suspension or cancellation of
any of the Company Permits. Neither the Company nor any of its Subsidiaries is
in conflict with, or in default or violation of, any of the Company Permits,
except for any such conflicts, defaults or violations which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Since December 31, 2003, neither the Company nor any of its Subsidiaries
has received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations would
not have a Material Adverse Effect.
o. Environmental Matters. There are, with respect to the Company or any of
its Subsidiaries, no past or present violations of Environmental Laws (as
defined below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or similar federal, state, local or foreign laws and
neither the Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to the knowledge
of any executive officer of the Company or any of its Subsidiaries, threatened
in connection with any of the foregoing. 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. Other
than those that are or were stored, used or disposed of in compliance with
applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business. There are no underground storage tanks on
or under any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
p. Title to Property. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as would not have a Material Adverse
Effect. 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 would not have a Material Adverse Effect.
q. Insurance. The Company and each of its Subsidiaries are 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 Subsidiaries are
engaged. No executive officer of the Company or any of its Subsidiaries has any
reason to believe that the Company and its Subsidiaries will not be able to
renew their existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
such businesses at a cost that would not have a Material Adverse Effect.
9
r. Internal Accounting Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has adopted and implemented written
procedures of internal control over financial reporting as required by Section
404 of the Xxxxxxxx-Xxxxx Act and the rules and regulations thereunder.
s. Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any current director or officer, nor, to the knowledge of any
executive officer of the Company or any of its Subsidiaries, any past director,
past officer, agent, employee or other person acting on behalf of the Company or
any Subsidiary has, in the course of his actions for, or on behalf of, the
Company or any of its Subsidiaries, (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
t. Solvency. The Company (after giving effect to the transactions
contemplated by this Agreement) is solvent (i.e., its assets have a fair market
value in excess of the amount required to pay its probable liabilities on its
existing debts as they become absolute and matured). The Company (after giving
effect to the transactions contemplated by this Agreement) has the ability to
pay its debts from time to time incurred in connection therewith as such debts
mature.
u. No Investment Company. The Company is not, and upon the issuance and
sale of the Securities as contemplated by this Agreement will not be an
"investment company" as defined under the Investment Company Act of 1940 (an
"Investment Company"). The Company is not controlled by an Investment Company.
v. Acknowledgment Regarding Buyers' Purchase of Securities. The Company
acknowledges and agrees that the Buyers are acting solely in the capacity of
arm's length purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that no Buyer is acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
statement made by any Buyer or any of their respective representatives or agents
in connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to such Buyer's purchase
of the Securities. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.
w. No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales in any security or solicited any offers to buy any security
under circumstances that would require registration under the 1933 Act of the
issuance of the Securities to the Buyers. The issuance of the Securities to the
Buyers will not be integrated with any other issuance of the Company's
securities (past, current or future) for purposes of any stockholder approval
provisions applicable to the Company or its securities.
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x. No Brokers. Except as provided in Section 4(e), the Company has taken no
action which would give rise to any claim by any person for brokerage
commissions, transaction fees or similar payments relating to this Agreement or
the transactions contemplated hereby.
y. Registration Rights. Except pursuant to the Registration Rights
Agreement, neither the Company nor any Subsidiary is currently subject to any
agreement providing any person or entity any rights (including piggyback
registration rights) to have any securities of the Company or any Subsidiary
registered under the 1933 Act or registered or qualified with any other
governmental authority.
z. General Solicitation. Neither the Company nor any other person or entity
authorized by the Company to act on its behalf has engaged in a general
solicitation or general advertising (within the meaning of Regulation D of the
0000 Xxx) of investors with respect to offers or sales of the Debentures or the
Warrants.
aa. Exchange Act Registration. The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and the Company has taken no action designed
to, or which, to the knowledge of the executive officers of the Company, is
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act.
bb. Application of Takeover Protections. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Buyers as a result of the Buyers and the Company
fulfilling their obligations or exercising their rights under this Agreement,
the Debentures, the Warrants, and the other documents entered into in connection
with this Agreement, including without limitation as a result of the Company's
issuance of the Securities and the Buyers' ownership of the Securities.
cc. Disclosure. All information relating to or concerning the Company or
any of its Subsidiaries set forth in this Agreement and provided to the Buyers
in connection with the transactions contemplated hereby is true and correct in
all material respects and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.
4. Covenants.
a. Best Efforts. The parties shall use their best efforts to satisfy timely
each of the conditions described in Sections 5 and 6 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof
to each Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for sale to the Buyers at the applicable
closing pursuant to this Agreement under applicable securities or "blue sky"
11
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to each
Buyer on or prior to the Closing Date.
c. Use of Proceeds. The Company shall use the proceeds from the sale of the
Debentures and the Warrants as set forth in the Company's Disclosure Schedule.
The Company shall not, directly or indirectly, use the proceeds from the sale of
the Debentures and the Warrants for any loan to or investment in any other
corporation, partnership, enterprise or other person (except in connection with
its currently existing direct or indirect Subsidiaries).
d. Legal Expenses. The Company shall reimburse, or pay directly, at the
Closing counsels' fees of one firm designated by DCOFI Master LDC (the "Lead
Buyer") incurred in connection with the negotiation, preparation, and closing of
this Agreement and the other agreements to be executed in connection herewith
(the "Documents"), which such fees shall not exceed Twenty-Five Thousand Dollars
($25,000), and such counsels' reasonable out of pocket expenses. When requested
by the Lead Buyer the Company shall pay these fees directly, otherwise the
Company must make immediate payment for reimbursement to the Lead Buyer for such
fees and expenses immediately upon written notice by the Lead Buyer or the
submission of an invoice by the Lead Buyer. If the Company fails to reimburse
the Lead Buyer in full within three (3) business days of the written notice or
submission of invoice by the Lead Buyer, the Company shall pay interest on the
total amount of fees to be reimbursed at a rate of eighteen percent (18%) per
annum. If the Lead Buyer shall employ counsel for advice or other representation
or shall incur legal or other costs and expenses in connection with (i) any
amendment or modification of and of the Documents, or (ii) any litigation,
contest, dispute, suit, proceeding or action instituted by the Buyers or any of
them, in respect to the enforcement of the Buyers' rights under this Agreement
and the other Documents, then, and in any such event, the counsel fees arising
from such services and all expenses, costs, charges and other fees of such
counsel incurred in connection with or related to any of the events or actions
described above shall be payable by the Company.
e. Structure and Due Diligence Fee. The Company shall pay DC Asset
Management LLC (i) a non-refundable fee for structuring the transactions
contemplated hereby in the amount of One Hundred Thousand Dollars ($100,000), of
which such amount shall be paid not later than the Closing Date, and (ii) a
non-refundable due diligence fee in the amount of Fifteen Thousand Dollars
($15,000), of which such amount shall be paid not later than the Closing Date.
The balance of the structuring fee and the due diligence fee may be paid of the
proceeds of the transactions contemplated hereby.
f. Financial Information. The Company agrees to send, or make available on
XXXXX, the following reports to each Buyer until such Buyer transfers, assigns,
or sells all of the Securities: (i) within ten (10) days after the filing with
the SEC, a copy of its Annual Report on Form 10-KSB, its Quarterly Reports on
Form 10-QSB and any Current Reports on Form 8-K; (ii) within one (1) day after
release, copies of all press releases issued by the Company or any of its
Subsidiaries; and (iii) contemporaneously with the making available or giving to
the shareholders of the Company, copies of any notices or other information the
Company makes available or gives to such shareholders.
g. Authorization and Reservation of Shares. The Company shall at all times
have authorized, and reserved for the purpose of issuance, a sufficient number
of shares of Common Stock to provide for the full conversion or exercise of the
outstanding Debentures and Warrants and issuance of the Conversion Shares and
Warrant Shares in connection therewith (based on the Conversion Price of the
Debentures or Exercise Price of the Warrants in effect from time to time) and as
otherwise required by the Debentures or the Warrants. Except in the case of
combinations of Common Stock (by any reverse stock split, recapitalization,
reorganization, reclassification or otherwise), the Company shall not reduce the
12
number of shares of Common Stock reserved for issuance upon conversion of
Debentures and exercise of the Warrants without the consent of each Buyer. The
Company shall at all times maintain the number of shares of Common Stock so
reserved for issuance at an amount (the "Reserved Amount") equal to no less than
the number of shares of Common Stock that is then actually issuable upon full
conversion of the Debentures and upon exercise of the Warrants (based on the
Conversion Price of the Debentures or the Exercise Price of the Warrants in
effect from time to time).
h. Listing. The Company shall promptly secure the listing of the Conversion
Shares and Warrant Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and, so long as any Debentures or
Warrants are outstanding, shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all the Conversion Shares and the
Warrant Shares from time to time issuable upon conversion of the Debentures or
exercise of the Warrants. The Company will obtain and, so long as any Debentures
or Warrants are outstanding, maintain the listing and trading of its Common
Stock on the OTCBB or any equivalent replacement exchange, the Nasdaq National
Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York
Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the National Association of Securities Dealers ("NASD")
and such exchanges, as applicable. The Company shall promptly provide to each
Buyer copies of any notices it receives from the OTCBB and any other exchanges
or quotation systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such exchanges and
quotation systems.
i. Corporate Existence. So long as any Debentures or Warrants are
outstanding, each of the Company and each of its Subsidiaries shall maintain its
corporate existence and shall not sell all or substantially all of its assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose Common Stock is listed for trading on the
Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
j. No Integration. The Company shall not make any offers or sales of any
security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
k. Additional Issuances; Registration Statements. Until the Company has
filed with the SEC a Registration Statement (the "Registration Statement")
registering the resale of the Registrable Securities (as such terms are defined
in the Registration Rights Agreement) in accordance with the Registration Rights
Agreement, and such Registration Statement has been declared effective by the
SEC, the Company shall not (i) issue any of its Common Stock, nor issue any
other security convertible or exchangeable for, or exercisable into, Common
Stock, nor enter into any agreement to do any of the foregoing, except for
issuances of capital stock upon exercise or conversion of securities outstanding
as of the date of this Agreement, or (ii) file with the SEC any registration
statement under 1933 Act (other than as required under the Registration Rights
Agreement).
l. Variable Priced Securities. For so long as any Debentures or Warrants
are outstanding, the Company will not enter into any equity line of credit or
similar agreement, nor issue or agree to issue any floating or variable priced
equity linked instruments nor any of the foregoing or equity with price reset
rights.
13
m. Reporting Company. So long as any Debentures or Warrants are
outstanding, the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall not terminate, or take
any action that would result in the termination of, the registration of its
Common Stock under Section 12 of the 1934 Act or otherwise terminate its status
as an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would permit such termination.
n. No Shorting. Each Buyer, individually and not jointly, agrees that, so
long as any of the Debentures remain outstanding, such Buyer will not enter into
or effect any "short sale" (as such term is defined in Rule 3b-3 of the 0000
Xxx) of the Common Stock. For purposes of clarification only, the Company hereby
specifically acknowledges that at any time any Buyer delivers a Notice of
Conversion (in accordance with such Buyer's Debenture) or an Exercise Agreement
(in accordance with such Buyer's Warrant), such Buyer (i) shall be deemed to be
the owner of the shares of Common Stock underlying the amount so converted or
exercised, and (ii) may sell up to such number of shares of Common Stock at any
time thereafter and shall not be deemed to be engaged in a "short sale" in
violation of this Section 4(n).
o. Inclusion of Securities in Registration Statement. The Company shall not
include for registration in the Registration Statement the sale or resale of any
additional securities other than as listed in the Company's Disclosure Schedule.
p. Standstill Agreements; Transfer Agent Instructions. The Company shall
not waive, modify or release (i) any person who is subject to a Standstill
Agreement, as such is required to be executed and delivered under Section 6(m)
hereof, except in accordance with the terms thereof, or (ii) the Transfer Agent
Instruction as such is required to be executed and delivered under Section 6(l)
hereof, except in accordance with the terms thereof.
q. Patent Assignments. As soon as practicable, but not later than April 29,
2005, the Company shall, and shall cause Xantech Pharmaceuticals, Inc. and each
other applicable subsidiary of the Company to, (i) file such notices and
assignments with the United States Patent and Trademark Office ("USPTO") to
correct the name(s) of the assignee of all patents (whether letter patents,
design patents, utility patents or otherwise) and pending applications thereof
(the "Patents") currently under the name Photogen, Inc., to its successor name
Xantech Pharmaceuticals, Inc., and (ii) simultaneously file with the USPTO
assignments for security for such Patents as necessary or desirable, in the
opinion of the Lead Buyer, to perfect the security interest granted in favor of
the Buyers (as required and described in the Security Agreement and the
respective Subsidiary Security Agreements) in and to such Patents, in each case,
as subject to the approval of the Lead Buyer.
14
5. Conditions to the Company's Obligation to Sell. The obligation of the
Company hereunder to issue and sell the Debentures and the Warrants to a Buyer
at the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion:
a. The applicable Buyer shall have executed this Agreement, the
Registration Rights Agreement, the Security Agreement and the Subsidiary
Security Agreement and delivered the same to the Company.
b. The applicable Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.
c. The representations and warranties of the applicable Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.
d. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
6. Conditions to Each Buyer's Obligation to Purchase. The obligation of
each Buyer hereunder to purchase the Debentures and the Warrants at the Closing
is subject to the satisfaction, at or before the Closing Date of each of the
following conditions, provided that these conditions are for such Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement, the Registration Rights
Agreement and the Security Agreement and delivered the same to such Buyer.
b. Each Company Subsidiary shall have executed the Guaranty Agreement and
the Subsidiary Security Agreement and delivered the same to such Buyer.
c. The Company shall have delivered to such Buyer duly executed Debentures
(in such denominations as such Buyer shall request) and Warrants in accordance
with Section 1(a) above.
d. The representations and warranties of the Company shall be true and
correct in all material respects (provided, however, that such qualification
shall only apply to representations or warranties not otherwise qualified by
materiality) as of the date when made and as of the Closing Date as though made
at such time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. Such Buyer shall have received a certificate or
certificates, executed by the principal executive officer of the Company, dated
15
as of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer including, but not limited to
certificates with respect to the Company's and each Company Subsidiary's
Certificate of Incorporation, By-laws and Board of Directors' resolutions
relating to the transactions contemplated hereby.
e. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
f. No event shall have occurred which could reasonably be expected to have
a Material Adverse Effect on the Company.
g. The Conversion Shares and Warrant Shares shall have been authorized for
quotation on the OTCBB and trading in the Common Stock on the OTCBB shall not
have been suspended by the SEC or the OTCBB.
h. The Buyer shall have received an opinion of the Company's counsel, dated
as of the Closing Date, in form, scope and substance reasonably satisfactory to
such Buyer and in substantially the same form as Exhibit "G" attached hereto.
i. A minimum of $3,000,000 (and a maximum of $3,500,000) in principal
amount of the Debentures shall be issued at the Closing in consideration of the
payment of cash.
j. The Company shall have received an executed payoff letter from Cornell
Capital Partners, L.P. (the "Lender"), in form and substance satisfactory to the
Buyers, relating to the payment of the Company's indebtedness to the Lender, and
the release of the Lender's liens on the Company's and any Subsidiaries' assets.
k. Gryffindor Capital Partners I LLC (the "Senior Lender"), the Company and
each Buyer shall have executed and delivered the Inter-Creditor Agreement in
form of which is annexed hereto as Exhibit "H".
l. The Company shall execute and deliver to its transfer agent, and such
transfer agent shall execute and acknowledge, the Transfer Agent Instruction
letter, (the "Transfer Agent Instruction") in form of which is annexed hereto as
Exhibit "I".
m. Each of the persons listed on Schedule 6(m) in the Company's Disclosure
Schedule shall execute and deliver to the Company, and the Company shall execute
and deliver to each such person, a Limited Standstill Agreement (the "Standstill
Agreement") in form of which is annexed hereto as Exhibit "J".
7. Right of First Offer.
a. General. Subject to the terms and conditions specified in this Section
7, and applicable securities laws, in the event the Company proposes to offer or
sell any New Securities (as defined herein) after the date of this Agreement,
the Company shall make an offering of such New Securities to each Buyer in
accordance with the following provisions of this Section 7(a). Each Buyer shall
be entitled to apportion the right of first offer hereby granted it among itself
and its partners, members and affiliates in such proportions as it deems
appropriate.
16
(i) The Company shall deliver a notice, in accordance with the provisions
of Section 9(f) hereof (the "Offer Notice"), to each Buyer stating (A) its bona
fide intention to offer such New Securities, (B) the number of such New
Securities to be offered, and (C) the price and terms, if any, upon which it
proposes to offer such New Securities.
(ii) By written notification received by the Company, within twenty (20)
calendar days after dissemination of the Offer Notice, each Buyer may elect to
purchase or obtain, at the price and on the terms specified in the Offer Notice,
up to fifty percent (50%) of that portion of such New Securities which equals
the proportion of such Buyer's original Purchase Price under Section 1(b)
divided by the aggregate of all Buyers' original Purchase Price under Section
1(b).. The Company shall promptly, in writing, inform each Buyer that elects to
purchase all the New Securities available to it (each, a "Fully-Exercising
Investor") of any other Buyer's failure to do likewise. During the seven (7) day
period commencing after receipt of such information, each Fully-Exercising
Investor shall be entitled to purchase that portion of the New Securities for
which Buyers were entitled to subscribe but which were not subscribed for by the
Buyers which is equal to the proportion that the number of New Securities that
such Fully-Exercising Investor was initially entitled to purchase pursuant to
this Section 7 bears to the total number of New Securities that all
Fully-Exercising Investors who wish to purchase such unsubscribed New Securities
were initially entitled to purchase pursuant to this Section 7.
(iii) If all New Securities referred to in the Offer Notice and available
for purchase by the Buyers in accordance with 7(a)(ii) are not elected to be
purchased or obtained as provided in Section 7(a)(ii) hereof, the Company may,
during the one hundred twenty (120) day period following the expiration of the
seven (7) day period (or the twenty (20) day period if there are no
Fully-Exercising Investors) provided in Section 7(a)(ii) hereof, offer both (A)
the remaining unsubscribed portion of such New Securities which were available
for purchase by the Buyers in accordance with Section 7(a)(ii) and (B) any New
Securities in excess of the Buyers' aggregate proportionate share of such New
Securities (as determined in accordance with Section 7(a)(ii)), to any person or
persons at a price not less than, and upon terms no more favorable to the
offeree than, those specified in the Offer Notice. If the Company does not enter
into a definitive agreement for the sale of the New Securities within such
period, or if such definitive agreement is not consummated within seventy-five
(75) days of the execution thereof, the right provided hereunder shall be deemed
to be revived and such New Securities shall not be offered unless the Buyers'
proportionate share of such New Securities is first reoffered to the Buyers in
accordance with this Section 7.
b. Exempt Issuances. The right of first offer in this Section 7 shall not
be applicable to: (i) the issuance of shares of Common Stock (as well as the
grant of options to purchase Common Stock) to employees or directors of, or
consultants to, the Company or any of its subsidiaries pursuant to a plan,
agreement or arrangement approved by the Board of Directors of the Company; (ii)
the issuance of securities pursuant to the conversion or exercise of convertible
or exercisable securities outstanding on the date hereof; (iii) securities
issued in connection with any stock split or stock dividend of the Company; (iv)
the issuance of shares of Common Stock (as well as the grant or issuance of
options or securities convertible or exchangeable into or exercisable for Common
Stock) to banks, equipment lessors or other financial institutions, or to real
property lessors, pursuant to a debt financing, equipment leasing or real
property leasing transaction approved by the Board of Directors of the Company;
(v) the issuance of securities in connection with a bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise; and (vi) the issuance of shares
of Common Stock (as well as the issuance of securities convertible or
exchangeable into or exercisable for Common Stock) in connection with other
strategic alliances approved by the Board of Directors.
17
c. Assignment. A Buyer may transfer or assign, in whole or from time to
time in part, to one or more Persons its rights under this Section 7 in
connection with the transfer of Debentures or Warrants or otherwise by such
Buyer to such Person, provided that such Person complies with all laws
applicable thereto and provides written notice of assignment to the Company
promptly after such assignment is effected.
d. Termination. The provisions of this Section 7 and the Company's
obligation to give any Offer Notice shall terminate one (1) year after the
earlier of (i) the date the Registration Statement required to be filed under
Section 2(a)(i) of the Registration Rights Agreement is declared effective by
the SEC or (ii) the date when all of the Registrable Securities (as defined in
the Registration Rights Agreement) may be resold pursuant to Rule 144(k) or any
other rule of similar effect; provided, however, rights shall survive with
respect to any Offer Notice outstanding prior to such termination.
e. Definitions. The term "New Securities" shall mean equity securities of
the Company, whether now authorized or not, or rights, options, or warrants to
purchase said equity securities, or securities of any type whatsoever that are,
or may become, convertible into or exchangeable into or exercisable for said
equity securities.
8. Indemnification.
a. Survival. All representations, warranties and covenants in this
Agreement and the Disclosure Schedule will survive the Closing. The right to
indemnification, payment of Damages (as defined below) or other remedy based on
such representations, warranties and covenants will not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty or covenant.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant, shall not
affect the right to indemnification, payment of Damages, or other remedy based
on such representations, warranties and covenants.
b. Indemnification. The Company will indemnify and hold harmless the
Buyers, each of their officers, partners, managers, and all persons who control
(as such term is defined under the 1933 Act or the 0000 Xxx) such Buyer (each an
"Indemnified Party" and collectively the "Indemnified Parties"), and will pay to
the Indemnified Parties the amount of, any loss, liability, claim, damage,
expense, including costs of investigation and defense and reasonable attorneys'
fees, (collectively, "Damages") arising, directly or indirectly, from or in
connection with (i) any breach of any representation or warranty made by the
Company in this Agreement or the Disclosure Schedule, the Debentures, the
Warrants, the Registration Rights Agreement or the Security Agreement, (ii) any
breach by the Company of any covenant or obligation of the Company in this
Agreement, the Debentures, the Warrants, the Registration Rights Agreement or
the Security Agreement, or (iii) any breach ore any representation or warranty
made by the Subsidiary in the Guaranty Agreement or the Subsidiary Security
Agreement, or (iv) any breach of by the Subsidiary of any covenant or obligation
of the Subsidiary under the Guaranty Agreement or the Subsidiary Security
Agreement.
c. Time Limitations. The Company shall have no liability (for
indemnification or otherwise) with respect to any breach of any representation
or warranty, unless on or before the date three (3) years from the Closing Date,
an Indemnified Party notifies the Company of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by such
Indemnified Party.
18
d. Procedure for Indemnification. If a claim is to be made against the
Company under Section 8(b), the Indemnified Party shall give notice to the
Company of such claim. In the event that the Company objects in writing to any
claim for Damages, the Indemnified Party and the Company shall attempt in good
faith to resolve the dispute. The remedies provided in this Section 8 will not
be exclusive of or limit any other remedies that may be available to the Buyers.
When determining Damages under this Section 8, all materiality qualifiers will
be disregarded.
9. Governing Law; Miscellaneous.
a. Governing Law. This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state, without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States federal courts and New York state
courts located in New York, New York with respect to any dispute arising under
this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby. The parties irrevocably waive the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The parties further agree that service of process upon a party mailed by first
class mail shall be deemed in every respect effective service of process upon
the party in any such suit or proceeding. Nothing herein shall affect any
party's right to serve process in any other manner permitted by law. The parties
agree that a final non-appealable judgment in any such suit or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner. The party which does not prevail in any
dispute arising under this Agreement shall be responsible for all fees and
expenses, including attorneys' fees, incurred by the prevailing party in
connection with such dispute.
b. Counterparts; Signatures by Facsimile. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party. This Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform to such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
19
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Provectus Pharmaceuticals, Inc.
0000 Xxx Xxxxx Xxxxxxx, Xxxxx X
Xxxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx X. Xxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copy to:
Xxxxx Xxxxxxxx Xxxxxxx Xxxxxxxx & Xxxxxxxxx, PC
000 Xxxxxxxxxxx Xxxx
Xxxxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a Buyer: To the address set forth immediately below such Buyer's name
on the signature pages hereto.
With copy to:
Xxxxxx Xxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each party shall provide notice to all of the other parties of any change
in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Neither the
Company nor any Buyer shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other. Notwithstanding the
foregoing, subject to Section 2(f), any Buyer may assign its rights hereunder to
any person that purchases Securities in a private transaction from a Buyer or to
any of its "affiliates," as that term is defined under the 1934 Act, without the
consent of the Company.
h. Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
i. Publicity. The Company and each of the Buyers shall have the right to
review a reasonable period of time before issuance of any press releases, SEC,
OTCBB (or other applicable trading market) or NASD filings, or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
of the Buyers, to make any press release or SEC, OTCBB (or other applicable
20
trading market) or NASD filings with respect to such transactions as is required
by applicable law and regulations (although each of the Buyers shall be
consulted by the Company in connection with any such press release prior to its
release and shall be provided with a copy thereof and be given an opportunity to
comment thereon). Subject to the foregoing, the Company shall file with the SEC
a Form 8-K within four (4) business days of the Closing Date disclosing this
transaction.
j. Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
k. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
l. Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the
Buyers shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the liquidated damages herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.
m. Nonliability of the Buyers. The relationship between the Company and the
Buyers is, and shall at all times remain, solely that of the Company with a
purchaser of its securities. The Buyers neither undertake nor assume any
responsibility or duty to the Company to review, inspect, supervise, pass
judgment upon, or inform the Company of any matter in connection with any phase
of the Company's business, operations, or condition, financial or otherwise. The
Company shall rely entirely upon its own judgment with respect to such matters,
and any review, inspection, supervision, exercise of judgment, or information
supplied to the Company by the Buyers, or any representative or agent of the
Buyers, in connection with any such matter is for the protection of the Buyers,
and neither the Company nor any third party is entitled to rely thereon.
n. Obligations Several Not Joint. The obligations of each Buyer under this
Agreement are several and not joint with the obligations of any other Buyer, and
no Buyer shall be responsible in any way for the performance of the obligations
of any other Buyer under this Agreement. Nothing contained herein, and no action
taken by any Buyer pursuant hereto, shall be deemed to constitute the Buyers as
a partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Buyers are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by this
Agreement. Each Buyer shall be entitled to independently protect and enforce its
rights, including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose. Each Buyer has been represented by, or
has had the opportunity to be represented by, its own separate legal counsel in
its review and negotiation of this Agreement, the Debentures, the Warrants, the
Registration Rights Agreement, the Security Agreement, the Guaranty Agreement,
the Subsidiary Security Agreement and any other documents contemplated by any of
21
the foregoing (collectively, the "Transaction Documents"). For reasons of
administrative convenience only, the Buyers and their respective counsel have
chosen to communicate with the Company through the law firm of Xxxxxx Xxxxxxx &
Xxxxxx LLP ("TKD"). TKD does not represent all of the Buyers but only DCOFI
Master LDC. The Company has elected to provide all the Buyers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Buyers.
[remainder of page intentionally left blank]
22
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.
COMPANY:
PROVECTUS PHARMACEUTICALS, INC.
By: /s/ Xx. Xxxxxxx X. Xxxxx
-------------------------------
Xx. Xxxxxxx X. Xxxxx
President
[signature page continues on next page]
23
BUYERS:
DCOFI MASTER LDC
By: /s/ Xxxxxxx X. Xxxx
--------------------------------------
Name: Xxxxxxx X. Xxxx
Title:
---------------------------------------
JURISDICTION: Cayman Islands
ADDRESS: 000 0xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
Telephone: 000-000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $ 1,000,000
Principal Amount of Debentures: Equal to Buyer's Purchase Price $ 1,000,000
Number of Class A Warrants: Equal to such Purchase Price divided by $0.75 1,333,333
Number of Class B Warrants: Equal to the Number of
Class A Warrants multiplied by 70% 933,333
[signature page continues on next page]
24
BUYERS (continued):
ALPHA CAPITAL AKTIENGESELLSCHAFT
By: /s/ Xxxxxx Xxxxxxxx
--------------------------
Name: Xxxxxx Xxxxxxxx
--------------------------
Title:
--------------------------
JURISDICTION: ________________________
ADDRESS: Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Xxxxx, Xxxxxxxxxxxx
Fax: 000-00-00000000
Phone: ________________
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $ 500,000
Principal Amount of Debentures: Equal to Buyer's Purchase Price $ 500,000
Number of Class A Warrants: Equal to such Purchase Price divided by $0.75 666,667
Number of Class B Warrants: Equal to the Number of
Class A Warrants multiplied by 70% 466,667
[signature page continues on next page]
25
BUYERS (continued):
/s/ Xxxxxxx X. Xxxx
-----------------------------------------------
(name of Buyer)
By: Xxxxxxx X. Xxxx
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
JURISDICTION:
-------------------------------
ADDRESS:
-------------------------------
-------------------------------
-------------------------------
Phone:
--------------------
Fax:
-------------------
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $ 1,000,000
Principal Amount of Debentures: Equal to Buyer's Purchase Price $ 1,000,000
Number of Class A Warrants: Equal to such Purchase Price divided by $0.75 1,333,333
Number of Class B Warrants: Equal to the Number of
Class A Warrants multiplied by 70% 933,333
BUYERS (continued):
/s/ Xxxx Xxxxxxxxxxx
-----------------------------------------------
(name of Buyer)
By: Xxxx Xxxxxxxxxxx
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
JURISDICTION:
-------------------------------
ADDRESS:
-------------------------------
-------------------------------
-------------------------------
Phone:
--------------------
Fax:
-------------------
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $ 150,000
Principal Amount of Debentures: Equal to Buyer's Purchase Price $ 150,000
Number of Class A Warrants: Equal to such Purchase Price divided by $0.75 200,000
Number of Class B Warrants: Equal to the Number of
Class A Warrants multiplied by 70% 140,000
27
BUYERS (continued):
/s/ Xxxxxx Xxxxx
-----------------------------------------------
(name of Buyer)
By: Xxxxxx Xxxxx
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
JURISDICTION:
-------------------------------
ADDRESS:
-------------------------------
-------------------------------
-------------------------------
Phone:
--------------------
Fax:
-------------------
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $ 450,000
Principal Amount of Debentures: Equal to Buyer's Purchase Price $ 450,000
Number of Class A Warrants: Equal to such Purchase Price divided by $0.75 533,333
Number of Class B Warrants: Equal to the Number of
Class A Warrants multiplied by 70% 373,333
28
BUYERS (continued):
/s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------------
(name of Buyer)
By: Xxxxx X. Xxxxxxxxx
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
JURISDICTION:
-------------------------------
ADDRESS:
-------------------------------
-------------------------------
-------------------------------
Phone:
--------------------
Fax:
-------------------
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price:
BUYERS (continued):
/s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------------
(name of Buyer)
By: Xxxxx X. Xxxxxxxxx
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
JURISDICTION:
-------------------------------
ADDRESS:
-------------------------------
-------------------------------
-------------------------------
Phone:
--------------------
Fax:
-------------------
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $ 50,000
Principal Amount of Debentures: Equal to Buyer's Purchase Price $ 50,000
Number of Class A Warrants: Equal to such Purchase Price divided by $0.75 66,667
Number of Class B Warrants: Equal to the Number of
Class A Warrants multiplied by 70% 46,667
29
BUYERS (continued):
/s/ Xxxxxxx Xxxx
-----------------------------------------------
(name of Buyer)
By: Xxxxxxx Xxxx
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
JURISDICTION:
-------------------------------
ADDRESS:
-------------------------------
-------------------------------
-------------------------------
Phone:
--------------------
Fax:
-------------------
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $ 50,000
Principal Amount of Debentures: Equal to Buyer's Purchase Price $ 50,000
Number of Class A Warrants: Equal to such Purchase Price divided by $0.75 66,667
Number of Class B Warrants: Equal to the Number of
Class A Warrants multiplied by 70% 46,667
29
