SECURITIES PURCHASE AGREEMENT

 

                                                                    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 7327 Oak Ridge Highway,   Suite A, Knoxville,   Tennessee

(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

 

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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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<PAGE>

 

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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<PAGE>

 

     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

 

                                       4

<PAGE>

 

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

 

                                       5

 

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

 

                                       6

 

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, pollut