Exhibit 10.2
STANDBY EQUITY DISTRIBUTION AGREEMENT
-------------------------------------
THIS STANDBY
EQUITY DISTRIBUTION
AGREEMENT (the
"Agreement") dated as
of
July 28, 2004 by and between CORNELL
CAPITAL PARTNERS,
LP, a Delaware
limited
partnership (the "Investor"), and PROVECTUS PHARMACEUTICALS, INC., a Nevada
corporation (the "Company").
WHEREAS,
the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell
to the Investor,
from time to time as provided herein, and the Investor shall purchase
from the
Company up to Twenty Million Dollars
$20,000,000 of the
Company's common stock,
par value $0.001 per share (the "Common
Stock"); and
WHEREAS,
such investments will be made in
reliance upon the provisions of
Regulation D ("Regulation D") of the
Securities Act of 1933, as amended, and the
regulations promulgated thereunder (the "Securities Act"), and or upon such
other exemption from the registration
requirements of the
Securities Act as may
be available with respect to any or all of
the investments to be made hereunder.
WHEREAS,
the Company has
engaged Newbridge
Securities
Corporation
(the
"Placement Agent"), to act as the Company's exclusive placement agent in
connection with the sale of the Company's
Common Stock to the Investor hereunder
pursuant to the Placement Agent Agreement
dated the date hereof by and among the
Company, the Placement Agent and the
Investor (the "Placement Agent Agreement").
NOW, THEREFORE,
the parties hereto agree as follows:
ARTICLE I.
Certain Definitions
Section
1.1. "Advance" shall mean the portion of the
Commitment
Amount
requested by the Company in the Advance
Notice.
Section 1.2.
"Advance Date" shall
mean the date Butler Gonzalez LLP Escrow
Account is in receipt of the funds from the
Investor and Butler Gonzalez LLP, as
the Investor's Counsel, is in possession of
free trading shares from the Company
and therefore an Advance by the Investor to the
Company can be made and Butler
Gonzalez LLP can release the free
trading shares to the Investor. No Advance
Date shall be more than one (1)
Trading Day after expiration of the Pricing
Period for the applicable Advance.
Section 1.3.
"Advance Notice" shall mean a written
notice to the Investor
setting forth the Advance amount that the
Company requests from the Investor and
the Advance Date.
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Section
1.4. "Advance Notice Date" shall mean each date the Company
delivers to the Investor an Advance Notice requiring the Investor to advance
funds to the Company, subject to the terms of this
Agreement. No Advance Notice
Date shall be less than five (5)
Trading Days after the prior Advance Notice
Date.
Section 1.5.
"Bid Price" shall mean, on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the
Principal Market or if
the Common Stock is not traded on a
Principal Market,
the highest reported
bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc.
Section
1.6. "Closing" shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section
2.3.
Section 1.7.
"Commitment
Amount" shall mean the
aggregate amount of up to
Twenty Million Dollars $20,000,000 that the Investor has agreed to
provide to
the Company in order to purchase
the Company's Common Stock pursuant to the
terms and conditions of this Agreement.
Section 1.8.
"Commitment
Period" shall mean the
period commencing on
the
earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which
the Investor shall
have made payment
of Advances pursuant to this Agreement in
the aggregate amount of Twenty Million
Dollars $20,000,000, (y) the date this Agreement is terminated pursuant to
Section 2.5, or (z) the date occurring twenty-four (24) months after the
Effective Date.
Section 1.9.
"Common Stock" shall mean the Company's
common stock, par
value $0.001 per share.
Section
1.10. "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.11.
"Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of
expert witnesses and investigation).
Section 1.12.
"Effective
Date" shall mean the
date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in
Section 7.2(a).
Section 1.13.
"Escrow Agreement"
shall mean the escrow agreement among the
Company, the Investor, and Butler Gonzalez
LLP, dated the date hereof.
Section
1.14. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and
regulations promulgated thereunder.
Section
1.15. "Material Adverse Effect" shall mean any condition,
circumstance, or situation that would
prohibit or otherwise materially interfere
with the ability of the Company to enter
into and perform any of its obligations
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under this Agreement or the Registration Rights Agreement in any material
respect.
Section 1.16.
"Market Price" shall mean the lowest VWAP of the Common Stock
during the Pricing Period.
Section 1.17.
"Maximum Advance
Amount" shall be Two Hundred Fifty Thousand
Dollars ($250,000) per Advance Notice.;
provided that the aggregated Advances in
any thirty (30) day period shall not exceed
One Million Dollars ($1,000,000)
Section
1.18 "NASD"
shall mean the
National Association of Securities
Dealers, Inc.
Section
1.19 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or
other entity or organization, including
a government or political subdivision or an
agency or instrumentality thereof.
Section 1.20
"Placement Agent" shall mean Newbridge Securities Corporation,
a registered broker-dealer.
Section 1.21
"Pricing Period" shall
mean the five (5) consecutive Trading
Days after the Advance Notice Date.
Section 1.22
"Principal Market"
shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange,
the OTC Bulletin Board
or
the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common
Stock.
Section 1.23 "Purchase Price"
shall be set at one hundred percent (100%) of
the Market Price during the Pricing
Period.
Section 1.24
"Registrable Securities" shall mean the shares of Common Stock
to be issued hereunder (i) in respect of which
the Registration
Statement has
not been declared effective by the SEC, (ii) which have not been sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the
Securities Act ("Rule 144") or (iii)
which have not been otherwise transferred to a holder who may
trade such shares
without restriction under the Securities Act, and the Company has delivered
a
new certificate or other evidence of
ownership for such securities not bearing a
restrictive legend.
Section 1.25
"Registration
Rights Agreement" shall mean the
Registration
Rights Agreement dated the date hereof,
regarding the filing of the Registration
Statement for the resale of the Registrable
Securities, entered into between the
Company and the Investor.
Section 1.26
"Registration
Statement" shall mean a registration statement
on Form S-1 or SB-2 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if
not, on such other form promulgated by
the SEC for which the Company then
qualifies and which counsel for the
Company
shall deem appropriate, and which form shall be available
for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and the Registration Rights Agreement, and in
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accordance with the intended method of
distribution of such securities), for the
registration of the resale by the Investor
of the Registrable
Securities under
the Securities Act.
Section
1.27 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.28
"SEC" shall mean the Securities and Exchange Commission.
Section
1.29 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section
1.30 "SEC Documents" shall mean Annual Reports on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the date hereof, filed by the
Company for a period of at least twelve
(12) months
immediately preceding
the
date hereof or the Advance Date, as the case may be, until such time as the
Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the
Registration Rights Agreement.
Section
1.31 "Trading Day" shall mean any day during which the Nasdaq
Market shall be open for business.
Section 1.32
"VWAP" shall mean the
volume weighted
average price of the
Company's Common Stock, as quoted by
Bloomberg, LP.
ARTICLE II.
Advances
Section 2.1.
Investments.
(a) Advances.
Upon the terms and
conditions set forth
herein (including,
without limitation, the provisions of
Article VII hereof), on any Advance Notice
Date the Company may request an Advance by the
Investor by the
delivery of an
Advance Notice. The number of shares of Common
Stock that the
Investor shall
receive for each Advance shall be determined by dividing the amount of the
Advance by the Purchase Price. No
fractional shares shall be issued. Fractional
shares shall be rounded to the next higher
whole number of shares. The aggregate
maximum amount of all Advances that the Investor shall be obligated to make
under this Agreement shall not exceed the
Commitment Amount.
Section 2.2.
Mechanics.
(a) Advance Notice. At any time
during the Commitment
Period, the
Company
may deliver an Advance Notice to the Investor,
subject to the
conditions
set
forth in Section 7.2; provided, however, the amount for each Advance as
designated by the Company in the applicable
Advance Notice, shall not be more
than the Maximum Advance Amount.
The aggregate amount
of the Advances
pursuant
to this Agreement shall not exceed the Commitment Amount. The Company
acknowledges that the Investor may sell shares of the
Company's Common Stock
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corresponding with a particular Advance Notice
on the day the Advance Notice is
received by the Investor. There shall be a minimum of five (5)
Trading Days
between each Advance Notice Date.
(b) Date of
Delivery of Advance
Notice. An Advance
Notice shall be deemed
delivered on (i) the Trading Day it is
received by facsimile or otherwise by the
Investor if such notice is received
prior to 12:00 noon
Eastern Time,
or (ii)
the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on
a Trading Day or at any time on a day
which is not a Trading Day. No Advance
Notice may be deemed
delivered on a day
that is not a Trading Day.
(c) Pre-Closing Share Delivery. Upon receipt of a copy of the
executed
Conversion Notice, the Company shall within
three (3) Trading Days following the
date of receipt of the Conversion Notice
issue and surrender to a common carrier
for overnight delivery to the address as
specified in the Conversion Notice, a
certificate, registered in the name of the
Buyer or its designee, for the number
of shares of Common Stock to which the Buyer
shall be entitled as
set forth in
the Conversion Notice. In no event shall the number of
shares issuable to
the
Investor pursuant to an Advance cause the
Investor to own in excess of nine and
9/10 percent (9.9%) of the then outstanding
Common Stock of the Company.
(d) Hardship.
In the event the
Investor sells the
Company's Common
Stock
pursuant to subsection (c) above and the Company fails to perform its
obligations as mandated in Section 2.5 and 2.2
(c), and specifically
fails to
provide the Investor with the shares of
Common Stock for the applicable Advance,
the Company acknowledges that the Investor
shall suffer financial
hardship and
therefore shall be liable for any and all losses, commissions, fees, or
financial hardship caused to the
Investor.
Section
2.3. Closings. On each Advance Date, which shall be the first
Trading Day after expiration of the Pricing
Period of an applicable Advance, (i)
the Company shall deliver to the Investor's
Counsel, as defined
pursuant to the
Escrow Agreement, shares of the Company's Common
Stock, representing the amount
of the Advance by the Investor pursuant to
Section 2.1 herein, registered in the
name of the Investor which shall be delivered to the
Investor, or otherwise
in
accordance with the Escrow Agreement and (ii) the Investor shall deliver to
Butler Gonzalez LLP (the "Escrow Agent")
the amount of the Advance specified in
the Advance Notice by wire transfer of
immediately available
funds which shall
be delivered to the Company, or otherwise in accordance with the Escrow
Agreement. In addition, on or prior to the
Advance Date, each of the Company and
the Investor shall deliver to the other
through the
Investor's
Counsel, all
documents, instruments and writings
required to be
delivered by either of them
pursuant to this Agreement in order to implement and effect the transactions
contemplated herein. Payment of funds to the Company and delivery of the
Company's Common Stock to the Investor shall occur in accordance with the
conditions set forth above and those contained in the Escrow Agreement;
provided, however, that to the extent the Company has not paid the fees,
expenses, and disbursements of the Investor or the Investor's counsel in
accordance with Section 12.4 hereof, the amount of such fees,
expenses, and
disbursements may be deducted by the
Investor (and shall be paid to the relevant
party) from the amount of the Advance
with no reduction in
the amount of shares
of the Company's Common Stock to be
delivered on such Advance Date.
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Section 2.4.
Termination of
Investment. The
obligation of the Investor to
make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall
occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of
fifty
(50) Trading Days, other than due to the acts of the
Investor, during the
Commitment Period, and (ii) the Company shall at any time fail
materially to
comply with the requirements of Article VI and
such failure is not cured within
thirty (30) days after receipt of written
notice from the
Investor, provided,
however, that this termination provision shall not apply to any period
commencing upon the filing of a
post-effective
amendment to such
Registration
Statement and ending upon the date on which
such post effective
amendment is
declared effective by the SEC.
Section 2.5.
Agreement to Advance Funds.
(a) The
Investor agrees to advance the amount specified in the Advance
Notice to the Company after the
completion of each of
the following
conditions
and the other conditions set forth in this
Agreement:
(i) the execution and
delivery by the Company, and the Investor, of
this Agreement
and the Exhibits hereto;
(ii) Investor's Counsel shall have received the shares of Common
Stock
applicable to
the Advance in accordance with Section 2.2(c) hereof;
(iii) the Company's
Registration Statement with respect to the resale
of the Registrable Securities in accordance with the terms of the
Registration
Rights Agreement shall have been declared
effective by the
SEC;
(iv) the Company shall have obtained all material permits and
qualifications
required by any
applicable state for
the offer and sale of
the Registrable
Securities,
or shall have the
availability of
exemptions
therefrom.
The sale and issuance
of the Registrable
Securities
shall be
legally
permitted by all laws and regulations to which the Company is
subject;
(v) the Company
shall have filed with the Commission in a timely
manner all
reports, notices and
other documents
required of a
"reporting
company" under
the Exchange Act and applicable Commission regulations;
(vi) the fees as set forth in Section 12.4 below shall have been
paid
or can be
withheld as provided in Section 2.3; and
(vii) the conditions set forth in Section 7.2 shall have been
satisfied.
(viii) The
Company shall have provided to the Investor an
acknowledgement,
from BDO Seidman LLP as to its ability to provide all
consents
required in order to
file a registration
statement in connection
with this transaction;
(ix) The Company's transfer agent shall be DWAC eligible.
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Section 2.6.
Lock Up Period.
During the
Commitment
Period, the Company
hereby grants to Investor the right of first refusal (the "Right of First
Refusal") to purchase New Securities (as
defined in the next paragraph) that the
Company may, from time to time and in one
or more transactions,
propose to sell
and issue. In connection with such right,
the Company
covenants and agrees
to
give Investor written notice (an "Offering
Notice") specifying,
in detail, the
terms and conditions of any bona fide
proposed sale of New
Securities and the
names and addresses of such persons and
entities prepared to
purchase such New
Securities, and any representatives,
brokers or dealers
proposing to effectuate
such sale, together with all compensation terms. The Investor shall have the
right, for a period expiring at 11:59 PM (Eastern Time) on the fifth (5th)
business day after the giving of the
Offering Notice (the "Exercise Period"), to
purchase or place the New Securities for the price and on
the general terms and
conditions specified in the Offering Notice.
Such exercise shall be affected by
the Investor giving written notice of such
exercise to the Company prior to the
expiration of the Exercise Period. The
Investor's failure to exercise such right
shall not result in the cancellation of
Investor's right of first refusal on any
other proposed financing by the Company
thereafter.
The term "New
Securities" as used in the preceding paragraph shall mean any
offering and issuance by the Company of
Common Stock or
securities
convertible
into, and/or other rights exercisable for the issuance of, Common Stock
to or
with any third party without consideration
or for a consideration per share less
than the Bid Price on the date of issuance of the New Securities; provided,
however, that the term "New Securities"
shall not include the
securities to be
issued pursuant to that certain
Securities
Purchase Agreement dated June 25,
2004 between the Company and certain
accredited investors;
and provided further
that the term "New Securities" shall not include securities issued in
conjunction with the closing of a contract,
sub-contract,
teaming
arrangement,
joint venture or strategic partnership but only to the extent
that such new
securities do not exceed 10% of the Company's
outstanding
Common Stock on
the
date of issuance. Except as may otherwise
be permitted pursuant to the forgoing,
during the Commitment Period, the Company shall not issue or
sell any warrant,
option, right, contract, call, or other security or instrument
granting the
holder thereof the right to acquire Common
Stock without
consideration or for a
consideration per share less than the Bid
Price on the date of issuance.
(i) On the date hereof, the Company shall obtain from each officer
and
director a
lock-up agreement, as
defined below, in the form annexed hereto
as Schedule 2.6 agreeing to only sell in compliance with the volume
limitation of
Rule 144.
ARTICLE III.
Representations and Warranties of Investor
Investor
hereby represents and warrants to, and agrees with,
the Company
that the following are true and as of the date
hereof and as of each
Advance
Date:
Section
3.1. Organization and Authorization. The Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable
hereunder. The
decision to invest and
the execution and delivery of this
Agreement by such Investor, the performance
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by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated hereby have been duly authorized
and
requires no other proceedings on the part of the
Investor. The
undersigned has
the right, power and authority to execute and deliver
this Agreement
and all
other instruments (including, without limitations, the Registration Rights
Agreement), on behalf of the Investor. This
Agreement has been duly executed and
delivered by the Investor and, assuming the execution and delivery
hereof and
acceptance thereof by the Company,
will constitute the
legal, valid and binding
obligations of the Investor, enforceable
against the Investor in accordance with
its terms.
Section 3.2.
Evaluation
of Risks. The Investor has such knowledge and
experience in financial tax and business
matters as to be
capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting
its interests in connection
with
this transaction. It recognizes that its investment
in the Company
involves a
high degree of risk.
Section 3.3. No
Legal Advice From the
Company. The Investor
acknowledges
that it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its
own legal counsel and investment
and tax advisors. The Investor is relying
solely on such counsel
and advisors
and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
Section 3.4.
Investment Purpose.
The securities are being purchased by the
Investor for its own account, for investment and without any view to the
distribution, assignment or resale to
others or fractionalization in whole or in
part. The Investor agrees not to assign or in any way
transfer the
Investor's
rights to the securities or any interest therein and acknowledges that the
Company will not recognize any purported assignment or transfer except in
accordance with applicable Federal and state securities laws. No other person
has or will have a direct or indirect
beneficial interest in the securities. The
Investor agrees not to sell, hypothecate or otherwise
transfer the
Investor's
securities unless the securities are registered under Federal and applicable
state securities laws or unless,
in the opinion of
counsel satisfactory
to the
Company, an exemption from such laws is
available.
Section 3.5.
Accredited Investor.
The Investor is an "Accredited Investor"
as that term is defined in Rule 501(a)(3)
of Regulation D of the Securities Act.
Section 3.6.
Information. The
Investor and its advisors (and its counsel),
if any, have been furnished with all materials relating to the business,
finances and operations of the Company and
information
it deemed material to
making an informed investment decision.
The Investor and its
advisors, if any,
have been afforded the opportunity to ask questions of the Company and its
management. Neither such inquiries nor any other due
diligence
investigations
conducted by such Investor or its advisors,
if any, or its representatives shall
modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in this Agreement. The Investor
understands that its investment
involves a high degree
of risk. The Investor is
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in a position regarding the Company, which, based upon employment, family
relationship or economic bargaining power,
enabled and enables
such Investor to
obtain information from the Company in
order to evaluate the merits and risks of
this investment. The Investor has sought
such accounting, legal
and tax advice,
as it has considered necessary to make an informed
investment
decision with
respect to this transaction.
Section
3.7. Receipt of Documents. The Investor and its counsel have
received and read in their entirety: (i)
this Agreement and the Exhibits annexed
hereto; (ii) all due diligence and other information necessary to verify the
accuracy and completeness of such representations, warranties and covenants;
(iii) the Company's Form 10-KSB for the year ended
year ended June 30, 2003 and
Form 10-QSB for the period ended March 31, 2004; and (iv) answers to all
questions the Investor submitted to the Company
regarding an
investment in the
Company; and the Investor has relied on the
information contained
therein and
has not been furnished any other documents, literature, memorandum or
prospectus.
Section
3.8. Registration Rights Agreement and Escrow Agreement. The
parties have entered into the Registration Rights Agreement and the Escrow
Agreement, each dated the date hereof.
Section 3.9. No
General Solicitation.
Neither the Company,
nor any of its
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 shares of Common Stock offered
hereby.
Section 3.10.
Not an Affiliate. The Investor is not an officer, director or
a person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under
common control with the Company or any
"Affiliate" of the Company (as that term is defined in Rule 405 of the
Securities Act). Neither the Investor nor its Affiliates has an open short
position in the Common Stock of the Company, and the Investor agrees that it
will not, and that it will cause its Affiliates not to, engage in any short
sales of or hedging transactions with
respect to the Common Stock, provided that
the Company acknowledges and agrees that upon receipt of an
Advance Notice the
Investor will sell the Shares to be issued to the Investor pursuant to the
Advance Notice, even if the Shares have not
been delivered to the Investor.
Section 3.11.
Trading Activities. The Investor's trading activities
with
respect to the Company's Common Stock shall
be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Company's Common Stock is
listed or traded. Neither the Investor nor its affiliates has an open short
position in the Common Stock of the Company
and, except as set forth below, the
Investor shall not and will cause its
affiliates not to engage in any short sale
as defined in any applicable SEC or
National Association
of Securities
Dealers
rules on any hedging transactions with respect to the Common Stock. Without
limiting the foregoing, the Investor agrees not to engage in any naked
short
transactions in excess of the amount of shares owned (or an offsetting long
position) during the Commitment
Period. The Investor shall be entitled to
sell
Common Stock during the applicable Pricing
Period.
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ARTICLE IV.
Representations and Warranties of the Company
Except as stated
below, on the disclosure schedules attached hereto or in
the SEC Documents (as defined herein), the Company hereby represents and
warrants to, and covenants with, the Investor that the following
are true and
correct as of the date hereof:
Section
4.1. Organization and Qualification. The Company is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority
corporate power to own its properties and to
carry on its business as now being
conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is
in good standing in every jurisdiction
in which 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 on the Company and its
subsidiaries taken as a whole.
Section 4.2.
Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter
into
and perform this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Placement Agent Agreement and any related agreements, in
accordance with the terms hereof and
thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Placement Agent Agreement and any related agreements by the Company and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by the Company's Board
of Directors and no further consent
or authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement, the Registration Rights Agreement, the
Escrow Agreement, the Placement Agent Agreement and
any related agreements have
been duly executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Placement Agent
Agreement and assuming the execution and
delivery thereof and
acceptance by the
Investor and any related agreements
constitute the valid and binding obligations
of the Company enforceable against the Company in accordance
with their terms,
except 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 creditors'
rights and remedies.
Section 4.3.
Capitalization. As of
the date hereof, the authorized capital
stock of the Company consists of 100,000,000
shares of Common
Stock, par value
$0.001 per share and 25,000,000
shares of Preferred
Stock. As of July 22, 2004,
there were 14,555,446 shares of Common Stock,
and no shares of
Preferred Stock
issued and outstanding. Except as disclosed in the SEC
Documents, no shares
of
Common Stock are subject to preemptive
rights or any other similar rights or any
liens or encumbrances suffered or permitted
by the Company. Except
as disclosed
in the SEC Documents and except for the
securities to be issued pursuant to that
certain Securities Purchase Agreement dated June 25, 2004
between the Company
and certain accredited investors, as of the date hereof, (i) there are no
10
<PAGE>
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments,
understandings 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 or
options, warrants, scrip, rights to subscribe to, calls or
commitments of any
character whatsoever relating to, or
securities or rights convertible into, any
shares of capital stock of the Company or any of its
subsidiaries,
(ii) there
are no outstanding debt securities
(iii) there are no
outstanding
registration
statements other than on Form S-8, except
for a Form S-2/A filed with the SEC on
April 7, 2004, which was subsequently withdrawn, and (iv) there are no
agreements or arrangements under which the
Company or any of its subsidiaries is
obligated to register the sale of any of
their securities
under the
Securities
Act (except pursuant to the Registration Rights Agreement and the
registration
rights agreements listed on Schedule 4.3 hereto).
There are no
securities or
instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related
agreement or the
consummation of the
transactions described herein or therein. The Company has furnished to the
Investor true and correct copies of the
Company's Articles of Incorporation, as
amended and as in effect on the date hereof
(the "Articles of
Incorporation"),
and the Company's By-laws, as in effect on
the date hereof (the "By-laws"), and
the terms of all securities convertible
into or exercisable for Common Stock and
the material rights of the holders thereof
in respect thereto.
Section 4.4. No
Conflict. The
execution, delivery
and performance of this
Agreement by the Company and the
consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Articles of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or By-laws 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
