SECURITIES OPTION AND RIGHT OF FIRST REFUSAL AGREEMENT
EXHIBIT
A
This
SECURITIES OPTION AND RIGHT OF FIRST REFUSAL AGREEMENT (the “Agreement”), dated
January 5, 2011 (the “Effective Date”), is
by and between Vicis Capital Master Fund, a sub-trust of Vicis Capital Series
Master Trust, a unit trust organized and existing under the laws of the Cayman
Islands (“Vicis”), with a
mailing address care of Vicis Capital, LLC, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual maintaining a
mailing address at ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
“Optionee”).
BACKGROUND
INFORMATION
Vicis
owns common stock and preferred stock issued by Deer Valley Corporation, a
Florida corporation (the “Company”). The Optionee
wishes to obtain an option and limited right of first refusal to acquire such
securities. Vicis is willing to grant the Optionee such option and
limited right of first refusal, but only upon the terms and conditions set forth
therein. Accordingly, in consideration of the covenants herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
OPERATIVE
PROVISIONS
1. Definition
of Securities. The term “Securities” as used
in this Agreement shall mean all
of the securities set forth on Exhibit
“A” to this Agreement, together with, in
each case, all securities issued in substitution of or exchange for, or on
account of, any such Securities, including, but not limited to, securities
issued upon a conversion, stock dividend, stock split, reverse stock split,
recapitalization, reclassification, merger, consolidation, combination of
shares, spinoff or otherwise.
2. Grant and
Vesting of Option. Vicis hereby grants to the Optionee an
option (the “Option”) to purchase
from Vicis all (but not a portion of) the Securities of the
Company. The Option to acquire the Securities shall become
immediately exercisable upon the execution of this Agreement.
3. Option
Purchase Price. The purchase
price for this Option (the “Option Purchase
Price”) shall be one hundred dollars ($100), and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged. The Option Purchase Price is payable, in cash, upon
execution and deliver of this Agreement.
4. Securities
Purchase Price. Upon exercise of the Option, the purchase
price for the Securities (the “Securities Purchase
Price”) shall be twelve million dollars ($12,000,000) cash.
5. Term;
Termination. The term of the Option shall be for a period that
commences on the Effective Date and expires on March 31, 2012, unless sooner
terminated by mutual written agreement of Vicis and the Optionee (the “Termination
Date”). The Option is not intended to be an “incentive stock
option” within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.
6. Exercise
Procedure; Closing. The Optionee may exercise the Option by
delivering written notice to Vicis, at any time prior to the Termination Date,
of the Optionee’s intent to exercise the Option (the “Exercise
Notice”). The
closing of the sale and
purchase of the Securities shall take place at a time and date
mutually agreeable to Vicis and the Optionee, which shall be no later than
thirty (30) days after the date that the Exercise Notice is given to Vicis (the
“Closing”), which, it being understood that such
date for Closing may be after the Termination Date. The Closing shall
occur at the offices of legal counsel for Vicis, or at such other location
(which may include the waiver of any physical closing and the exchange of executed
documentation by facsimile or electronic transmission or otherwise), as may be
agreed to by Vicis and the Optionee. If the parties do not mutually
agree to a time and date for the Closing, the Closing shall occur at 10:00 a.m.,
Eastern Prevailing Time, on the thirtieth (30th) day after the date that the Exercise
Notice is given to Vicis. At the Closing, (a) Vicis and the
Optionee shall execute a purchase agreement (the “Purchase Agreement”)
in the form attached hereto as Exhibit
“B”, (b) Vicis shall deliver to Optionee the certificates or instruments
evidencing the Securities
in negotiable form or accompanied by an executed stock power or instrument of
transfer in a form acceptable to Optionee, and (c) Optionee shall deliver
to Vicis payment of the Securities Purchase Price. Following such
delivery, the parties shall thereupon take such action within their respective
reasonable powers to cause the Company to register such issuance and ownership
in its transfer records.
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7. Representations
and Warranties of Vicis. In order to induce the
Optionee to enter into this Agreement and to consummate the transactions
contemplated hereby, Vicis represents and warrants to Optionee
that:
(a) Authorization. When executed and delivered
by Vicis, this Agreement will constitute the valid and binding obligation of
Vicis, enforceable in accordance with its terms except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws generally affecting the rights of creditors and
subject to general equity principles.
(b) Consent. No consent, approval or
authorization of or registration, qualification, designation, declaration or
filing with any governmental authority or private person or entity on the part
of Vicis is required in connection with the execution and delivery of this
Agreement or the consummation of any other transaction contemplated
hereby, except as may be
required pursuant to the Securities Exchange Act of 1934, as amended, and the
rules and regulations
thereunder.
(c) No
Contractual Violation. Neither the execution,
delivery nor performance of this Agreement by Vicis, including the consummation
by Vicis of the transactions contemplated hereby, will constitute a violation of
or a default under, or conflict with, any term or provision of any contract,
commitment, indenture or other agreement, or of any other private restriction of
any kind, to which Vicis is a party or by which it is otherwise
bound.
(d) Title
to Securities. Vicis has good and
marketable title to the Securities free and clear of all liens, claims,
encumbrances and restrictions, legal or equitable, of every kind, except for
certain restrictions on transfer imposed by federal and state securities
laws. Vicis has full and unrestricted legal right, power and
authority to sell, assign and transfer such Securities to the Optionee without
obtaining the consent or approval of any other person or governmental
authority.
8. Representations
and Warranties of the Optionee. The Optionee represents and
warrants to Vicis that:
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(a) Authorization. When executed and delivered
by the Optionee, this Agreement will constitute the valid and binding obligation
of the Optionee, enforceable in accordance with its terms, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting the rights of
creditors and subject to general equity principles.
(b) Consent. No consent, approval or
authorization of or registration, qualification, designation, declaration or
filing with any governmental authority or private person or entity on the part
of the Optionee is required in connection with the execution and delivery of
this Agreement or the consummation of any other transaction contemplated hereby,
except as shall have been duly taken or effected prior to the
Closing.
(c) No
Contractual Violation. Neither the execution, delivery nor
performance of this Agreement by the Optionee, including the consummation by the
Optionee of the transactions contemplated hereby, will constitute a violation of
or a default under, or conflict with, any term or provision of any contract,
commitment, indenture or other agreement, or of any other private restriction of
any kind, to which the Optionee is a party or by which it is otherwise
bound.
(d) Sophistication. Optionee
is a sophisticated investor and is experienced in matters relating to the
valuation and the purchase and sale of securities, and, by reason of Optionee’s knowledge
and experience in financial and business matters and access to the existing
information about the Company, is capable of evaluating and has evaluated the
merits of the transactions contemplated hereby.
9. Covenants
of Vicis. Vicis covenants as follows:
(a) Sale In
Excess of $12,000,000.
(i) If,
prior to the Termination Date, Vicis sells, in a bona-fide arms length
transaction, all of the Securities for a purchase price per security that exceeds Twelve
Million Dollars ($12,000,000), then [A] Vicis hereby agrees to pay
to the Optionee, at the closing
of such sale, an amount equal to Eighty Percent (80%) of the difference
between (1) the purchase
price of such securities,
and (2) Twelve Million Dollars
($12,000,000), and [B]
upon receipt of such payment, this Agreement, inclusive of the Option set
forth in Section 2 above and the Right of First Refusal set forth in Section
9(b) below, shall be deemed terminated. If the purchase price is
payable partially in cash and partially in securities, a promissory note or
other deferred purchase price, then the Optionee’s participation payment under
this Section 9(a) shall be pro-rated accordingly. By
way of example, if Vicis decides to sell all of the Securities for a cash
purchase price of $13,000,000, then Vicis shall pay the Optionee $800,000,
payable in cash at the closing. By way of further example, if Vicis decides to
sell all of the Securities for a purchase price of $13,000,000, payable at the
closing by (i) $7,000,000 in cash, (ii) the issuance of securities valued at
$5,000,000, and (iii) the issuance of a note for $1,000,000, then Vicis shall
pay the Optionee $800,0000, payable at the closing (i) $430,769.23 in cash, (ii)
the transfer of the securities issued at the closing having a value of
$307,692.30, and (iii) an assignment of the principal of the promissory note
equal to $61,538.47.
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(b) Sale for $12,000,000 or
Less; Right of First Refusal. If Vicis intends to sell, prior to the
Termination Date, in a bona-fide arms length transaction, all of the Securities
for a purchase price equal to or less than Twelve Million Dollars ($12,000,000),
then Vicis shall follow the procedures set forth in this Section 9(b) below
before effecting such sale.
(i) Right of First
Refusal. Vicis shall submit a written offer to sell the Securities (the
“Offer”) to
Optionee, which document shall contain the terms of the Offer, including the
purchase price, the terms for payment of the purchase price, and the proposed
closing date.
(ii) Acceptance of Offer by
Offeree. Optionee may, within thirty (30) calendar days after having been
furnished the Offer, accept the Offer by giving written notice to
Vicis.
(iii) Permitted Sale. If
Optionee does not exercise his Right of First Refusal within the thirty (30)
calendar days following the Offer, then Vicis shall have the right to sell the
Securities on the same terms and conditions set forth in the Offer (a “Permitted Sale”),
free and clear of Optionee’s rights under this Agreement (including this Right
of First Refusal and the Option set forth in Section 2 above); provided, however, if Vicis does not
sell all of the Securities within ninety (90) calendar days after having
furnished the Offer to the Optionee, on the same terms and conditions set forth
in the Offer, then Vicis shall not
thereafter sell the Securities, without first again offering such securities to
the Optionee in the manner provided in this Section 9(b). Upon a Permitted Sale
pursuant to this Section 9(b), this Agreement shall be deemed terminated,
subject to Section 9(b)(iv) below.
(iv) Mixed
Consideration. If the purchase
price is payable partially in cash and partially by delivery of a promissory
note, then Optionee shall have the right to pay the purchase price on the same
terms and conditions. If the purchase price is payable partially in cash and
partially in securities, then the Optionee may exercise the right of first
refusal by paying a cash payment equal to the fair value of the securities and
cash payment set forth in the Offer.
(c) Without
the written consent of Optionee, which Optionee may grant or withhold at
Optionee's sole discretion, Vicis shall not effect any sale of some, but not
all, of the Securities during the two-year period following the closing of the
Purchase Agreement governing the purchase of such Securities. For the
avoidance of doubt, Vicis shall be deemed to have sold Securities in the event
that Vics sells any security of the Company of the same class as any of the
Securities during such two-year period. By way of example, any sale
of shares of Common Stock by Vicis shall be deemed a sale of the shares of the
Common Stock included among the Securities, regardless of whether such shares of
Common Stock were actually acquired in conjunction with an acquisition of the
Securities or otherwise.
10. Covenants
of Optionee. Optionee covenants as
follows:
(a) If
Optionee has acquired the Securities for Twelve Million Dollars ($12,000,000)
pursuant to the Option set forth in Section 2 (but not pursuant to the Right of
First Refusal set forth in Section 9(b) above), and if during the
two-year period following the closing of the Purchase Agreement governing the
purchase of such Securities, Optionee sells all of the Securities for a purchase
price per security that exceeds Twelve Million Dollars ($12,000,000), then
Optionee hereby agrees to pay to Vicis, at the closing of such sale, an amount
equal to Twenty Percent (20%) of the difference between [A] the purchase price
of such securities, and [B] Twelve Million Dollars ($12,000,000). If
the purchase price is payable partially in cash and partially in securities, a
promissory note or other deferred purchase price, then Vicis’s participation
payment under this Section 10(a) shall be pro-rated accordingly. By
way of example, if Optionee decides to sell all of the Securities for a cash
purchase price of $13,000,000, then Optionee shall pay Vicis $200,000, payable
in cash at the closing. By way of further example, if Optionee decides to sell
all of the Securities for a purchase price of $13,000,000, payable at the
closing by (i) $7,000,000 in cash, (ii) the issuance of securities valued at
$5,000,000, and (iii) the issuance of a note for $1,000,000, then Optionee shall
pay Vicis $200,0000, payable at the closing (i) $107,692.31 in cash, (ii) the
transfer of the securities issued at the closing having a value of $76,923.08,
and (iii) an assignment of the principal of the promissory note equal
to $15,384.61.
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(b) Without the written consent of Vicis,
which Vicis may grant or withhold at Vicis's sole discretion, Optionee shall not
effect any sale of some, but not all, of the Securities during the two-year
period following the closing of the Purchase Agreement governing the purchase of
such Securities. For the avoidance of doubt, Optionee shall be deemed
to have sold Securities in the event that Optionee sells any security of the
Company of the same class as any of the Securities during such two-year
period. By way of example, any sale of shares of Common Stock by
Optionee shall be deemed a sale of the shares of the Common Stock included among
the Securities, regardless of whether such shares of Common Stock were actually
acquired in conjunction with an acquisition of the Securities or
otherwise.
11. No Rights
as a Shareholder. Nothing in this Agreement shall convey upon
the Optionee any rights of a shareholder of the Company prior to the exercise of
the Option and the transfer of the Securities pursuant to the terms and
conditions set forth herein.
12. Investment
Purpose. This Agreement is executed on the express condition
that the purchase of the Securities shall be made for investment purposes only
and not with a view to their resale or further distribution unless (a) such
Securities, at the time of their issuance and delivery, are registered under the
Securities Act of 1933, as amended (the “Act”), or (b) after
the date of such issuance the resale of such Securities is determined by counsel
for the Company to be exempt from the registration requirements of the Act and
of any other applicable law, regulation or ruling.
13. Non-Public
Information. Optionee acknowledges that Vicis may be in
possession of material non-public information about the Company and that
Optionee wishes to proceed with the transaction notwithstanding such
possibility. Optionee acknowledges that he has requested that Vicis
not share any such material non-public information with
Optionee. Optionee acknowledges that he has reached his own
investment decision with respect to the transactions contemplated herebyand
waives any claims he may have against Vicis for nondisclosure of any material
nonpublic information.
14. Miscellaneous
Provisions. All notices required to be given pursuant to this
Agreement shall be in writing and shall be hand delivered or sent via overnight
delivery services to the applicable address set forth in the preamble of this
Agreement, or to such other address as any such party may have designated by
like notice forwarded to the other party hereto. This Agreement, and
any other document referenced herein, constitute the entire understanding of the
parties hereto with respect to the subject matter hereof, and no amendment,
modification or alteration of the terms hereof shall be binding unless the same
be in writing, dated subsequent to the date hereof and duly approved and
executed by each of the parties hereto. Each party hereby covenants
and agrees with the other party that at any time and from time to time it will
promptly execute and deliver to such other party such further assurances,
instruments and documents and take such further action as such other party may
reasonably request in order to carry out the full intent and purpose of this
Agreement. This Agreement, and the application or interpretation thereof, shall
be governed exclusively by its terms and by the laws of the State of New
York. Venue for all purposes shall be deemed to lie within New York,
New York. The parties agree that, irrespective of any wording that
might be construed to be in conflict with this paragraph, this Agreement is one
for performance in New York. The parties to this Agreement agree that they waive
any objection, constitutional, statutory or otherwise, to a New York court’s
taking jurisdiction of any dispute between them. By entering into this
Agreement, the parties, and each of them understand that they might be called
upon to answer a claim asserted in a New York court. If a legal
action is initiated by any party to this Agreement against another, arising out
of or relating to the alleged performance or non-performance of any right or
obligation established hereunder, or any dispute concerning the same, any and
all fees, costs and expenses reasonably incurred by each successful party or its
legal counsel in investigating, preparing for, prosecuting, defending against,
or providing evidence, producing documents or taking any other action in respect
of, such action shall be the joint and several obligation of and shall be paid
or reimbursed by the unsuccessful party or parties. EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
RIGHT TO TRIAL BY JURY IN ANY SUCH LEGAL PROCEEDING. All
representations and warranties contained in this Agreement shall survive the
closing and the consummation of the transactions contemplated
hereby. This Agreement may not be assigned by any party without the
prior written consent of the other party. This Agreement shall be binding upon
the parties hereto and the successors and assigns of each party
hereto. This Agreement may be executed in any one or more
counterparts, all of which shall be considered one and the same agreement. The
headings in this Agreement are inserted for convenience only and shall not
constitute a part of this Agreement.
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IN WITNESS WHEREOF, this
Agreement has been executed as of the date first above written.
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OPTIONEE:
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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VICIS:
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VICIS
CAPITAL MASTER FUND
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By:
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SCHEDULE
A
by and
among
Vicis
Capital Master Fund and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Purchaser
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Seller
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Issuer
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Type
of Security
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Security
No.
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No.
of
Securities
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▇. ▇▇▇▇▇▇▇
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Vicis
Capital Master Fund
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Deer
Valley Corporation
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Series
C Convertible Preferred Stock
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22,463 shares convertible into
2,246,300 shares of common
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▇. ▇▇▇▇▇▇▇
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Vicis
Capital Master Fund
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Deer
Valley Corporation
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Series
E Convertible Preferred Stock
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1,000,000 shares convertible into
1,000,000 shares of common
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▇. ▇▇▇▇▇▇▇
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Vicis
Capital Master Fund
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Deer
Valley Corporation
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Common
Stock
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13,406,749
shares of common
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Schedule
A, Page 1