CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT by and among Access Pharmaceuticals, Inc. and the parties named herein on Schedule 1, as Purchasers February 16, 2006
EXHIBIT
10.19
by
and
among
Access
Pharmaceuticals, Inc.
and
the
parties named herein on Schedule 1, as Purchasers
February
16,
2006
This
CONVERTIBLE
NOTE AND WARRANT PURCHASE AGREEMENT
(this “Agreement”)
is dated as of February 16,
2006, among Access Pharmaceuticals, Inc., a Delaware corporation (the
“Company”),
and the purchasers identified on Schedule
1
hereto (each a “Purchaser”
and collectively the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act (as defined below), and Rule 506 promulgated
thereunder, the Company desires to issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, desire to purchase from the Company
(i)
up to an aggregate original principal amount of $5,000,000 of Secured
Convertible Promissory Notes (the “Notes”)
and (ii) Common Stock Purchase Warrants (the “Warrants”)
entitling the holders thereof to purchase up to 17,045,456 shares
of the Company’s Common Stock as more fully set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as
follows:
ARTICLE
I
DEFINITIONS
AND TERMS OF NOTES AND WARRANTS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms have the meanings indicated in this Section
1.1:
“Action”
shall have the meaning ascribed to such term in Section
3.1(j).
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
Person, as such terms are used in and construed under Rule 144. With respect
to
a Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser.
“Agreement”
shall have the meaning ascribed to such term in the Preamble.
“Business
Day”
means any day except Saturday, Sunday and any day which shall be a federal
legal
holiday or a day on which banking institutions in the State of Texas are
authorized or required by law or other governmental action to
close.
“Closing”
shall have the meaning ascribed to such term in Section 2.1(a).
“Closing
Date”
shall have the meaning ascribed to such term in Section 2.1(a).
“Commission”
means the Securities and Exchange Commission.
“Common
Stock”
means the common stock of the Company, $0.01 par value per share, and any
securities into which such common stock may hereafter be reclassified.
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“Common
Stock Equivalents”
means any securities of the Company or the Subsidiaries which would entitle
the
holder thereof to acquire at any time Common Stock, including without
limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
“Company”
shall have the meaning ascribed to such term in the Preamble.
“Conversion
Shares”
means the shares of Common Stock issuable upon conversion of the
Notes.
“Disclosure
Schedules”
means the Disclosure Schedules concurrently delivered herewith.
“Effective
Date”
means the date that the Registration Statement is first declared effective
by
the Commission.
“Environmental
Laws”
shall have the meaning ascribed to such term in Section 3.1(y).
“Exchange
Act”
means the Securities Exchange Act of 1934, as amended.
“FDC
Act”
shall have the meaning ascribed to such term in Section 3.1(m).
“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).
“Governmental
Authorizations”
shall have the meaning ascribed to such term in Section 3.1(m).
“Hazardous
Substances”
shall have the meaning ascribed to such term in Section 3.1(y).
“Indemnified
Party”
shall have the meaning ascribed to such term in Section 5.3.
“Indemnifying
Party”
shall have the meaning ascribed to such term in Section 5.3.
“Intellectual
Property”
shall have the meaning ascribed to such term in Section 3.1(o).
“Investor
Rights Agreement”
means the Investor Rights Agreement, dated as of the date of this Agreement,
between the Company and each of the Purchasers, in the form of Exhibit
A
hereto.
“Lien”
means a lien, charge, security interest, encumbrance, right of first refusal
or
other restriction, except for a lien for current taxes not yet due and payable
and a minor imperfection of title, if any, not material in nature or amount
and
not materially detracting from the value or impairing the use of the property
subject thereto or impairing the operations or proposed operations of the
Company.
“Material
Adverse Effect”
shall have the meaning ascribed to such term in Section 3.1(b).
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“Notes”
shall have the meaning ascribed to such term in the recitals
hereto.
“Person”
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
“Placement
Agent Warrants”
shall mean the common stock purchase warrants to be issued to SCO Securities
LLC
and/or its designees as compensation for services rendered in connection with
the transaction set forth herein as provided on Schedule
1
attached hereto, which warrants shall be in the form of Exhibit
D
hereto.
“Premises”
shall have the meaning ascribed to such term in Section 3.1(y).
“Purchaser”
shall have the meaning ascribed to such term in the Preamble.
“Registration
Statement”
means a registration statement meeting the requirements set forth in the
Investor Rights Agreement and covering the resale by the Purchasers of the
Conversion Shares and the Warrant Shares.
“Rights”
shall have the meaning ascribed to such term in Section 3.1(o).
“Rule
144”
means Rule 144 promulgated by the Commission pursuant to the Securities Act,
as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“SEC
Reports”
shall have the meaning ascribed to such term in Section 3.1(h).
“Securities”
means the Notes, the Conversion Shares, the Warrants and the Warrant
Shares.
“Securities
Act”
means the Securities Act of 1933, as amended.
“Security
Agreement”
means the Security Agreement, dated as of the date of this Agreement, between
the Company and each of the Purchasers, in the form of Exhibit
B
hereto.
“Subscription
Amount”
means, as to each Purchaser, the amount set forth beside such Purchaser's name
on Schedule
1
hereto, in United States dollars and in immediately available
funds.
“Subsidiary”
means, with respect to any entity, any corporation or other organization of
which securities or other ownership interest having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions, are directly or indirectly owned by such entity or of which such
entity is a partner or is, directly or indirectly, the beneficial owner of
50%
or more of any class of equity securities or equivalent profit participation
interests.
“Trading
Day”
means (i) a day on which the Common Stock is traded on a Trading Market, or
(ii)
if the Common Stock is not listed on a Trading Market, a day on which the Common
Stock is traded on the over-the-counter market, as reported by the OTC Bulletin
Board,
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or
(iii) if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as reported
by
Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
“Trading
Market”
means the following markets or exchanges on which the Common Stock is listed
or
quoted for trading on the date in question: the American Stock Exchange, the
New
York Stock Exchange, the Nasdaq National Market or the Nasdaq Capital
Market.
“Transaction
Documents”
means this Agreement, the Notes, the Security Agreement, the Investor Rights
Agreement, the Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
“Warrants”
shall have the meaning ascribed to such term in the recitals hereto. The
Placement Agent Warrants shall also constitute “Warrants” for all purposes
hereunder and SCO Securities LLC and/or its designees and such other persons
or
entities shall constitute “Purchasers” for all purposes hereunder.
“Warrant
Shares”
means the shares of Common Stock issuable upon exercise of the
Warrants.
1.2 Terms
of the Notes and Warrants.
The terms and provisions of the Notes are set forth in the form of Secured
Convertible Promissory Note, attached hereto as Exhibit
C.
The terms and provisions of the Warrants are more fully set forth in the form
of
Warrant, attached hereto as Exhibit
D.
ARTICLE
II
PURCHASE
AND SALE
2.1 Closing.
(a) The
closing of the transactions contemplated under this Agreement (the “Closing”)
will take place upon the execution of this Agreement by the Company and the
Purchasers immediately following satisfaction or waiver of the conditions set
forth in Sections 2.2 and 2.3 (other than those conditions which by their terms
are not to be satisfied or waived until the Closing), at the offices of ▇▇▇▇▇▇
and ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (or remotely via exchange
of documents and signatures) or at such other place or day as may be mutually
acceptable to the Purchasers and the Company. The date on which the Closing
occurs is the “Closing
Date”.
(b) At
the Closing, the Purchasers shall purchase, severally and not jointly, and
the
Company shall issue and sell, (i) up to an aggregate original principal amount
of $5,000,000 of Notes and (ii) Warrants to purchase up to 17,045,456 shares
of Common Stock. Each Purchaser shall purchase from the Company, and the Company
shall issue and sell to each Purchaser, a Note in such principal amount and
a
Warrant to purchase such number of Warrant Shares, in each case, as is set
forth
next to such Purchaser’s name on Schedule
1.
The Subscription Amount paid by each Purchaser shall be placed in escrow pending
the Closing pursuant to a
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Closing
Escrow Agreement among the Company, SCO Securities LLC and ▇▇▇▇▇▇ and ▇▇▇▇
LLP
(the “Escrow
Agent”),
which agreement shall be in the form attached hereto as Exhibit
E
(the “Closing
Escrow Agreement”).
2.2 Conditions
to Obligations of Purchasers to Effect the Closing.
The
obligations of each Purchaser to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, by such Purchaser:
(a) At
the Closing (unless otherwise specified below) the Company shall deliver or
cause to be delivered to each Purchaser the following:
(i)
this Agreement, duly executed by the Company;
(ii)
an original Note for such Purchaser in the principal amount that is set forth
on
Schedule
1
hereto next to such Purchaser’s name;
(iii)
an original Warrant, registered in the name of such Purchaser, pursuant to
which
such Purchaser shall have the right to acquire up to the number of shares of
Common Stock, as set forth next to such Purchaser’s name on Schedule
1
hereto;
(iv)
the Investor Rights Agreement, duly executed by the Company;
(v)
the Security Agreement, duly executed by the Company;
(vi)
a legal opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, counsel
to the Company, in the form of Exhibit
F
hereto;
(vii)
a certificate of the Secretary of the Company (the “Secretary’s
Certificate”),
attaching a true copy of the Certificate of Incorporation and Bylaws of the
Company, as amended to the Closing Date, and attaching true and complete copies
of the resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement and the other Transaction
Documents; and
(viii)
Evidence satisfactory to the Purchasers that the Board of Directors of the
Company has approved the 1 for 5 Split to become effective as soon as
practicable following receipt of stockholder approval thereof.
(b) All
representations and warranties of the Company contained herein shall remain
true
and correct in all material respects as of the Closing Date as though such
representations and warranties were made on such date (except those
representations and warranties that address matters only as of a particular
date
will remain true and correct as of such date).
(c) As
of the Closing Date, there shall have been no Material Adverse Effect with
respect to the Company since the date hereof.
(d) From
the date hereof to the Closing Date, trading in the Common Stock shall not
have
been suspended by the Commission (except for any suspension of trading of
limited
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duration
agreed to by the Company, which suspension shall be terminated prior to the
Closing), and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading Market,
nor shall a banking moratorium have been declared either by the United States
or
New York State authorities.
(e) The
Company shall have de-listed the Common Stock from the American Stock Exchange
and shall have provided evidence satisfactory to the Purchasers to such
effect.
2.3. Conditions
to Obligations of the Company to Effect the Closing.
(a) The
obligations of the Company to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, by the Company. At the Closing, each Purchaser shall deliver or
cause to be delivered to the Company the following:
(i)
this Agreement, duly executed by such Purchaser;
(ii)
such Purchaser's Subscription Amount, by wire transfer of immediately available
funds as provided in the Closing Escrow Agreement;
(iii)
the Investor Rights Agreement, duly executed by such Purchaser; and
(iv)
the Security Agreement, duly executed by such Purchaser.
(b) All
representations and warranties of each of the Purchasers contained herein shall
remain true and correct as of the Closing Date as though such representations
and warranties were made on such date.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
Except
as set forth under the corresponding section of the Disclosure Schedules
delivered concurrently herewith and except as provided in the SEC Reports,
the
Company hereby makes the following representations and warranties as of the
date
hereof and as of the Closing Date to each Purchaser:
(a)
Subsidiaries.
Except as listed in Schedule 3.1(a), the Company has no direct or indirect
Subsidiaries.
(b)
Organization
and Qualification.
Each of the Company and the Subsidiaries is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of
the
jurisdiction of its incorporation or organization (as applicable), with the
requisite corporate power and authority to own and use its properties and assets
and to carry on its business as currently conducted. Neither the Company nor
any
Subsidiary is in violation of any
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of
the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and
the
Subsidiaries is duly qualified to conduct business and is in good standing
as a
foreign corporation or other entity in each jurisdiction in which the nature
of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing,
as
the case may be, would not have or result in (i) a material adverse effect
on
the legality, validity or enforceability of any Transaction Document, (ii)
a
material adverse effect on the business or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse effect
on
the Company's ability to perform in any material respect on a timely basis
its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material
Adverse Effect”).
(c)
Authorization;
Enforceability.
The Company has the requisite corporate power and authority to enter into and
to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company
in
accordance with its terms, subject to laws of general application relating
to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and rules of law governing specific
performance, injunctive relief, or other equitable remedies.
(d)
No
Conflicts.
The execution, delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of the
Company's or any Subsidiary's certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding
to
which the Company or any Subsidiary is a party or by which any property or
asset
of the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree
or
other restriction of any court or governmental authority to which the Company
or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected, except, in the cases of clause (ii), where such conflict,
default or violation would not have or result in a Material Adverse
Effect.
(e)
Filings,
Consents and Approvals.
The Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of
the
Transaction Documents, other than (a) the filing with the Commission of the
Registration Statement, the application(s) to each Trading Market for the
listing of the Conversion Shares and Warrant Shares for trading thereon in
the
time and manner required thereby, Form D and applicable Blue
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Sky
filings and (b) such as have already been obtained or such exemptive filings
as
are required to be made under applicable securities laws.
(f)
Issuance
of the Securities.
The Securities are duly authorized and, when issued and paid for in accordance
with the Transaction Documents, will be duly and validly issued, fully paid
and
nonassessable, free and clear of all Liens, other than any Liens created by
or
imposed on the holders thereof through no action of the Company. The Company
has
reserved from its duly authorized capital stock the maximum number of shares
of
Common Stock issuable upon conversion of the Notes and exercise of the
Warrants.
(g)
Capitalization.
(i) The
authorized and outstanding capitalization of the Company is set forth on
Schedule 3.1(g) hereto. All shares of the Company’s issued and outstanding
capital stock have been duly authorized, are validly issued and outstanding,
and
are fully paid and nonassessable. No securities issued by the Company from
March
1, 2002 to the date hereof were issued in violation of any statutory or common
law preemptive rights. There are no dividends which have accrued or been
declared but are unpaid on the capital stock of the Company. All taxes required
to be paid by the Company in connection with the issuance and any transfers
of
the Company’s capital stock have been paid. The holders of the Company’s Common
Stock have certain rights under the company’s Rights Agreement dated as of
October 31, 2001 by and between the Company and American Stock Transfer as
Rights Agent. All outstanding securities of the Company have been issued in
all
material respects in accordance with the provisions of all applicable securities
and other laws.
(ii) No
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as a result of the purchase and sale of the
Securities and except for employee and director stock options under the
Company's equity compensation plans and as set forth on Schedule 3.1(h)(ii)
hereto, there are no outstanding options, warrants, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.
(h) SEC
Reports; Financial Statements; Liabilities.
(i) The
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) of the
Exchange Act, for the 12 months preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively referred to herein
as the “SEC
Reports”)
on a timely basis or has received a valid extension of such time of filing
and
has filed any such SEC Reports prior to
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the
expiration of any such extension. As of their respective filing dates, the
SEC
Reports complied
in all material respects with the requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations of the
Commission promulgated thereunder, as applicable, and none of the SEC Reports,
as of their respective filing dates, 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.
(ii) The
Company’s (A) audited financial statements for the fiscal years ended December
31, 2004 and 2003 included in the Company’s annual reports on Form 10-K filed
with the Commission and (B) the financial statements included in the Company’s
quarterly reports on Form 10-Q filed with the Commission for the first three
fiscal quarters of 2005 comply with applicable accounting requirements and
the
rules and regulations of the Commission with respect thereto as in effect at
the
time of filing of such reports. Such financial statements have been prepared
in
accordance with generally accepted accounting principles in the United States,
applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, subject to normal year-end audit adjustments. Such
financial statements fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries, if any, as of and
for
the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal year-end
audit adjustments.
(iii) Except
as set forth in the SEC Reports, and except for liabilities and obligations
incurred since September 30, 2005 in the ordinary course of business, consistent
with past practice, as of the date hereof: (i) the Company and its Subsidiaries
do not have any material liabilities or obligations (absolute, accrued,
contingent or otherwise) and (ii) there has not been any aspect of the prior
or
current conduct of the business of the Company or its Subsidiaries which may
form the basis for any material claim by any third party which if asserted
could
result in a Material Adverse Effect.
(i)
Material
Changes.
Except as set forth in the SEC Reports or on Schedule 3.1(i), since September
30, 2005, the Company has conducted its business only in the ordinary course,
consistent with past practice, and since such date there has not
occurred:
(i) any
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect on the Company or any of its
Subsidiaries;
(ii) any
amendments or changes in the charter documents of the Company and its
Subsidiaries;
(iii) any:
(A)
incurrence, assumption or guarantee by the Company or its Subsidiaries of any
debt for borrowed money other than (i) equipment leases made in the ordinary
course of business, consistent with past practice and (ii) any such incurrence,
assumption or guarantee with respect to an amount of $25,000 or less that has
been disclosed in the SEC Reports;
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(B)
other than as set forth on Schedule 3.1(i)(iii)(A) hereto, issuance or sale
of
any securities convertible into or exchangeable for securities of the Company
other than to directors, employees and consultants pursuant to existing equity
compensation or stock purchase plans of the Company;
(C)
issuance or sale of options or other rights to acquire from the Company or
its
Subsidiaries, directly or indirectly, securities of the Company or any
securities convertible into or exchangeable for any such securities, other
than
options issued to directors, employees and consultants in the ordinary course
of
business, consistent with past practice;
(D)
issuance or sale of any stock, bond or other corporate security other than
to
directors, employees and consultants pursuant to existing equity compensation
or
stock purchase plans of the Company;
(E)
discharge or satisfaction of any material Lien;
(F)
declaration or making any payment or distribution to stockholders or purchase
or
redemption of any share of its capital stock or other security other than to
directors, officers and employees of the Company or its Subsidiaries as
compensation for services rendered to the Company or its Subsidiary (as
applicable) or for reimbursement of expenses incurred on behalf of the Company
or its Subsidiary (as applicable);
(G)
sale, assignment or transfer of any of its intangible assets except in the
ordinary course of business, consistent with past practice, or cancellation
of
any debt or claim except in the ordinary course of business, consistent with
past practice;
(H)
waiver of any right of substantial value whether or not in the ordinary course
of business;
(I)
material change in officer compensation, except in the ordinary course of
business and consistent with past practice; or
(J)
other commitment (contingent or otherwise) to do any of the
foregoing.
(iv) other
than as set forth on Schedule 3(i)(iv) hereto, any creation, sufferance or
assumption by the Company or any of its Subsidiaries of any Lien on any asset
or
any making of any loan, advance or capital contribution to or investment in
any
Person, in an aggregate amount which exceeds $25,000 outstanding at any
time;
(v) any
entry into, amendment of, relinquishment, termination or non-renewal by the
Company or its Subsidiaries of any material contract, license, lease,
transaction, commitment or other right or obligation, other than in the ordinary
course of business, consistent with past practice; or
(vi)
other than as set forth on Schedule 3(i)(vi) hereto, any transfer or grant
of a
right with respect to the patents, trademarks, trade names, service marks,
trade
secrets, copyrights or other intellectual property rights owned or licensed
by
the Company or its Subsidiaries, except as among the Company and its
Subsidiaries.
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(j)
Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or, to the
knowledge of the Company, investigation pending nor, to the knowledge of the
Company, is any of the above threatened against the Company, any Subsidiary
or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, have or result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor, to the knowledge
of
the Company, any director or officer thereof, is or has been the subject of
any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty within the past five
(5)
years. To the knowledge of the Company, there has not been and there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act within the past eight
(8) years.
(k)
Labor
Relations.
No material labor dispute exists or, to the knowledge of the Company, is
imminent with respect to any of the employees of the Company which could have
or
result in a Material Adverse Effect.
(l)
Compliance.
Neither the Company nor any Subsidiary (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of
a
claim that it is currently in default under or that it is in violation of,
any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether
or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been
in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business, except in the case of clauses (i) and (iii) as
would
not have or reasonably be expected to result in a Material Adverse
Effect.
(m)
Licenses;
Compliance With FDA and Other Regulatory Requirements.
(i)
The
Company holds all material authorizations, consents, approvals, franchises,
licenses and permits required under applicable law or regulation for the
operation of the business of the Company and its Subsidiaries as presently
operated (the “Governmental
Authorizations”).
All the Governmental Authorizations have been duly issued or obtained and are
in
full force and effect, and the Company and its Subsidiaries are in material
compliance with the terms of all the Governmental Authorizations. The Company
and its Subsidiaries have not engaged in any activity that, to their knowledge,
would cause revocation or suspension of any such Governmental Authorizations.
Neither the execution, delivery nor performance of this Agreement shall
adversely affect the status of any of the Governmental
Authorizations.
(ii) Without
limiting the generality of the representations and warranties made in
sub-paragraph (i) above, the Company represents and warrants that (i) the
Company and each of its Subsidiaries is in material compliance with all
applicable provisions of the United States
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12 -
Federal
Food, Drug, and Cosmetic Act and the rules and regulations promulgated
thereunder (the “FDC
Act”)
and equivalent laws, rules and regulations in jurisdictions outside the United
States in
which the Company or its Subsidiaries do business, (ii) its products and those
of each of its Subsidiaries that are in the Company’s control are not
adulterated or misbranded and are in lawful distribution, (iii) all of the
products marketed by and within the control of the Company comply in all
material respects with any conditions of approval and the terms of the
application by the Company to the appropriate Regulatory Authorities, (iv)
no
Regulatory Authority has initiated legal action with respect to the
manufacturing of the Company’s products, such as seizures or required recalls,
and the Company is in compliance with applicable good manufacturing practice
regulations, (v) its products are labeled and promoted by the Company and its
representatives in substantial compliance with the applicable terms of the
marketing applications submitted by the Company to the Regulatory Authorities
and the provisions of the FDC Act and foreign equivalents, (vi) all adverse
events that were known to and required to be reported by Company to the
Regulatory Authorities have been reported to the Regulatory Authorities in
a
timely manner, (vii) neither the Company nor any of its Subsidiaries is, to
their knowledge, employing or utilizing the services of any individual who
has
been debarred under the FDC Act or foreign equivalents, (viii) all stability
studies required to be performed for products distributed by the Company or
any
of its Subsidiaries have been completed or are ongoing in material compliance
with the applicable Regulatory Authority requirements, (ix) any products
exported by the Company or any of its Subsidiaries have been exported in
compliance with the FDC Act and (x) the Company and its Subsidiaries are in
compliance in all material respects with all applicable provisions of the
Controlled Substances Act. For purposes of this Section 3.1(m), “Regulatory
Authority”
means any governmental authority in a country or region that regulates the
manufacture or sale of Company’s products, including, but not limited to, the
United States Food and Drug Administration.
(n)
Title
to Assets.
The Company and the Subsidiaries do not own any real property, and have good
and
marketable title to all personal property owned by them that is material to
the
business of the Company and the Subsidiaries, taken as a whole, in each case
free and clear of all Liens, except those, if any, reflected in the Company’s
financial statements or incurred in the ordinary course of business consistent
with past practice or which would not cause a Material Adverse Effect. Any
real
property and facilities held under lease by the Company and the Subsidiaries
are
held by them under valid, subsisting and enforceable leases (subject to laws
of
general application relating to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’ rights generally and rules
of law governing specific performance, injunctive relief, or other equitable
remedies) with which the Company and the Subsidiaries are in material
compliance.
(o) Intellectual
Property.
(i) The
Company or a Subsidiary thereof has the right to use or is the sole and
exclusive owner of all right, title and interest in and to all material foreign
and domestic patents, patent rights, trademarks, service marks, trade names,
brands and copyrights (whether or not registered and, if applicable, including
pending applications for registration) owned, used or controlled by the Company
and its Subsidiaries (collectively, the “Rights”)
and in and to each material invention, software, trade secret, technology,
product, composition, formula and method of process used by the Company or
its
Subsidiaries (the Rights and such other items, the “Intellectual
Property”),
and, to the Company’s knowledge, has the right to use the same, free
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13 -
and
clear of any claim or conflict with the rights of others (subject to the
provisions of any applicable license agreement) except as would not cause a
Material Adverse Effect;
(ii) other
than as set forth in the SEC Reports and except as in the ordinary course of
business, no royalties or fees (license or otherwise) are payable by the Company
or its Subsidiaries to any Person by reason of the ownership or use of any
of
the Intellectual Property;
(iii) there
have been no written claims made against the Company or its Subsidiaries
asserting the invalidity, abuse, misuse, or unenforceability of any of the
Intellectual Property, and, to the best of the Company’s knowledge, there are no
reasonable grounds for any such claims which would cause a Material Adverse
Effect;
(iv) neither
the Company nor its Subsidiaries have made any claim of any violation or
infringement by others of its rights in the Intellectual Property, and to the
best of the Company’s knowledge, no reasonable grounds for such claims exist;
and
(v) neither
the Company nor its Subsidiaries have received written notice that it is in
conflict with or infringing upon the asserted rights of others in connection
with the Intellectual Property which would cause a Material Adverse
Effect.
(p) Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged. All of the insurance policies of the Company and its Subsidiaries
are
in full force and effect and are valid and enforceable in accordance with their
terms, and the Company and its Subsidiaries have complied with all material
terms and conditions thereof. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(q) Transactions
With Affiliates and Employees.
Except as provided in the SEC Reports, none of the officers or directors of
the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (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 the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, other than (a) for payment of
salary or consulting fees for services rendered, (b) reimbursement for expenses
incurred on behalf of the Company and (c) for other employee benefits, including
stock option agreements and other stock awards under any equity compensation
plan of the Company.
(r)
Internal
Accounting Controls.
The Company and each of the Subsidiaries maintains a system of internal
accounting controls sufficient in the judgment of the Company’s management to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset
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14 -
accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets
is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that the Company is able to collect the information that it is
required to disclose in the reports it files with the Commission and to process,
summarize and disclose this information in the time periods specified in the
Commission’s rules. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of September 30,
2005.
The Company presented in its Form 10-Q for the quarter ended September 30,
2005,
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of September
30, 2005. Since September 30, 2005, there have been no significant changes
in
the Company's internal control over financial reporting (as such term is defined
in Exchange Act Rule 13a-15) or, to the Company's knowledge, in other factors
that could significantly affect the Company's internal controls.
(s)
Certain
Fees.
Except for fees payable to SCO Securities LLC, no brokerage or finder's fees
or
commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or
other
Person with respect to the transactions contemplated by this Agreement. The
Purchasers shall have no obligation with respect to any fees or with respect
to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(t)
Private
Placement; Integrated Offering.
Assuming the accuracy of the Purchasers representations and warranties set
forth
in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the Trading Market. Neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of the Securities Act and would as a result require registration
under the Securities Act or trigger any applicable shareholder approval
provisions, including, without limitation, under the rules and regulations
of
any exchange or automated quotation system on which any of the securities of
the
Company are listed or designated.
(u)
Charter,
Bylaws and Corporate Records.
The minute books of the Company and its Subsidiaries contain in all material
respects complete and accurate records of all meetings and other corporate
actions of the board of directors, committees of the board of directors,
incorporators and stockholders of the Company and its Subsidiaries from the
date
of incorporation of each such entity to the date hereof. All material corporate
decisions and actions have been validly made or taken. All corporate books,
including without limitation the share transfer register, comply in all material
respects with applicable laws and regulations and have been regularly
updated.
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15 -
(v)
Registration
Rights.
Except as set forth in Schedule 3.1(v), no Person has any right to cause the
Company to effect the registration under the Securities Act of any securities
of
the Company.
(w)
Listing
and Maintenance Requirements.
Except as set forth on Schedule 3(w), the Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market on which
the
Common Stock is or has been listed or quoted to the effect that the Company
is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(x) Taxes.
All
tax returns and tax reports required to be filed with respect to the income,
operations, business or assets of the Company and its Subsidiaries have been
timely filed (or appropriate extensions have been obtained) with the appropriate
governmental agencies in all jurisdictions in which such returns and reports
are
required to be filed, and all of the foregoing as filed are, in all material
respects, correct and complete and, in all material respects, reflect accurately
all liability for taxes of the Company and its Subsidiaries for the periods
to
which such returns relate, and all amounts shown as owing thereon have been
paid. All income, profits, franchise, sales, use, value added, occupancy,
property, excise, payroll, withholding, FICA, FUTA and other taxes (including
interest and penalties), if any, collectible or payable by the Company and
its
Subsidiaries or relating to or chargeable against any of its material assets,
revenues or income or relating to any employee, independent contractor,
creditor, stockholder or other third party through the Closing Date, were fully
collected and paid by such date if due by such date or provided for by adequate
reserves in the financial statements contained in the SEC Reports as of and
for
the periods ended September 30, 2005 (other than taxes accruing after such
date)
and all similar items due through the Closing Date will have been fully paid
by
that date or provided for by adequate reserves, whether or not any such taxes
were reported or reflected in any tax returns or filings. No taxation authority
has sought to audit the records of the Company or any of its Subsidiaries for
the purpose of verifying or disputing any tax returns, reports or related
information and disclosures provided to such taxation authority, or for the
Company’s or any of its Subsidiaries’ alleged failure to provide any such tax
returns, reports or related information and disclosure. No material claims
or
deficiencies have been asserted against or inquiries raised with the Company
or
any of its Subsidiaries with respect to any taxes or other governmental charges
or levies which have not been paid or otherwise satisfied, including claims
that, or inquiries whether, the Company or any of its Subsidiaries has not
filed
a tax return that it was required to file, and, to the best of the Company’s
knowledge, there exists no reasonable basis for the making of any such claims
or
inquiries. Neither the Company nor any of its Subsidiaries has waived any
restrictions on assessment or collection of taxes or consented to the extension
of any statute of limitations relating to taxation.
(y) Environmental
Matters. None
of the premises or any properties owned, occupied or leased by the Company
or
its Subsidiaries (the “Premises”)
has been used by the Company or the Subsidiaries or, to the Company’s knowledge,
by any other Person, to manufacture, treat, store, or dispose of any substance
that has been designated to be a “hazardous substance” under applicable
Environmental Laws (hereinafter defined) (“Hazardous
Substances”)
in violation of any applicable Environmental Laws. To its knowledge, the Company
has not disposed of, discharged, emitted or released any Hazardous Substances
which would require, under applicable Environmental Laws, remediation,
investigation or similar
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16 -
response
activity. No Hazardous Substances are present as a result of the actions of
the
Company or, to the Company’s knowledge, any other Person, in, on or under the
Premises which would give rise to any liability or clean-up obligations of
the
Company under applicable Environmental Laws. The Company and, to the Company’s
knowledge, any other Person for whose conduct it may be responsible pursuant
to
an agreement or by operation of law, are in compliance with all laws,
regulations and other federal, state or local governmental requirements, and
all
applicable judgments, orders, writs, notices, decrees, permits, licenses,
approvals, consents or injunctions in effect on the date of this Agreement
relating to the generation, management, handling, transportation, treatment,
disposal, storage, delivery, discharge, release or emission of any Hazardous
Substance (the “Environmental
Laws”).
Neither the Company nor, to the Company’s knowledge, any other Person for whose
conduct it may be responsible pursuant to an agreement or by operation of law
has received any written complaint, notice, order, or citation of any actual,
threatened or alleged noncompliance with any of the Environmental Laws, and
there is no proceeding, suit or investigation pending or, to the Company’s
knowledge, threatened against the Company or, to the Company’s knowledge, any
such Person with respect to any violation or alleged violation of the
Environmental Laws, and, to the knowledge of the Company, there is no basis
for
the institution of any such proceeding, suit or investigation.
(z)
Disclosure.
The Company confirms that neither the Company nor any other Person acting on
its
behalf and at the direction of the Company, has provided any of the Purchasers
or their agents or counsel with any information that in the Company’s reasonable
judgment, at the time such information was furnished, constitutes material,
non-public information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished by
or on
behalf of the Company are true and correct in all material respects and do
not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(aa) No
Additional Representations.
Each Purchaser acknowledges and agrees that the Company does not make and has
not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
3.1
or in any Transaction Document.
(bb)
Poison Pill.
The Company and its Board of Directors have taken all necessary action, if
any,
in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under this Agreement and the Transaction Documents, including
without limitation the Company's issuance of the Securities and the Purchasers’
ownership of the Securities.
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17 -
3.2
Representations
and Warranties of the Purchasers.
Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as
follows:
(a)
Organization;
Authority; Enforceability.
Such Purchaser (other than individuals) is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution, delivery and performance by
such
Purchaser of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights
generally and rules of law governing specific performance, injunctive relief,
or
other equitable remedies.
(b)
General
Solicitation.
Such Purchaser is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(c)
No
Public Sale or Distribution.
Such Purchaser is (i) acquiring the Notes and Warrants and (ii) upon conversion
of the Notes or exercise of the Warrants will acquire the Conversion Shares
or
Warrant Shares, as applicable, for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution thereof;
provided,
however,
that by making the representations herein, such Purchaser 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 Securities Act. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business. Such Purchaser does not have any agreement or understanding, directly
or indirectly, with any Person to distribute any of the Securities.
(d)
Accredited
Investor Status.
Such Purchaser is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D.
(e)
Residency. Such
Purchaser is a resident of the jurisdiction set forth below such Purchaser’s
name on Schedule
1
attached hereto.
(f)
Reliance
on Exemptions.
Such Purchaser understands that the Notes and Warrants are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and that the Company is
relying in part upon the truth and accuracy of, and such Purchaser's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire
the Common Stock and Warrants.
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18 -
(g)
Information.
Such Purchaser and its advisors, if any, have been furnished with all publicly
available materials (or such materials have been made available to such
Purchaser) relating to the business, finances and operations of the Company
and
such other publicly available materials relating to the offer and sale of the
Notes and Warrants as have been requested by such Purchaser, including without
limitation the Company’s Form 10-K for the period ended December 31, 2004, Forms
10-Q for the periods ended March 31, 2005, June 30, 2005 and September 30,
2005
and Forms 8-K filed by the Company since January 1, 2005. Each Purchaser
acknowledges that it has read and understands the risk factors set forth in
such
Form 10-K, Forms 10-Q and Forms 8-K. Neither such review nor any other due
diligence investigations conducted by such Purchaser or its advisors, if any,
or
its representatives shall modify, amend or affect such Purchaser's right to
rely
on the Company's representations and warranties contained herein. Such Purchaser
understands that its investment in the Notes and Warrants involves a high degree
of risk.
(h)
No
Governmental Review.
Such Purchaser understands that no United States federal or state agency or
any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Notes and Warrants or the fairness or suitability of
the
investment in the Notes and Warrants, nor have such authorities passed upon
or
endorsed the merits of the offering of the Notes and Warrants.
(i)
Experience
of Such Purchaser.
Such Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters,
including investing in companies engaged in the business in which the Company
is
engaged, so as to be capable of evaluating the merits and risks of the
prospective investment in the Notes and Warrants, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Notes and Warrants and, at the present time, is
able to afford a complete loss of such investment.
The
Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
3.2.
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement, to the Company, to an Affiliate
of a Purchaser (who is an accredited investor and executes a customary
representation letter) or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide to the Company
an opinion of counsel selected by the transferor and reasonably satisfactory
to
the Company (it being understood that ▇▇▇▇▇▇ and ▇▇▇▇ LLP is reasonably
satisfactory), the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities
Act,
provided, however,
that in the case of a transfer pursuant to Rule 144, no opinion shall
be
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19 -
required
if the transferor provides the Company with a customary seller’s representation
letter, and if such sale is not pursuant to subsection (k) of Rule 144, a
customary broker’s representation letter and a Form 144.
Any such transferee that agrees in writing to be bound by the terms of this
Agreement and the Investor Rights Agreement shall have the rights of a Purchaser
under this Agreement and the Investor Rights Agreement. Except as required
by
federal securities laws and the securities law of any state or other
jurisdiction within the United States, the Securities may be transferred, in
whole or in part, by any of the Purchasers at any time. The Company shall
reissue certificates evidencing the Securities upon surrender of certificates
evidencing the Securities being transferred in accordance with this Section
4.1(a).
(b) The
Purchasers agree to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in substantially the following
form:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, SUCH COUNSEL AND THE SUBSTANCE OF SUCH OPINION SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. UNLESS PROHIBITED BY APPLICABLE LAW, RULE OR
REGULATION, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED
INVESTOR”
AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
The
Company acknowledges and agrees that, unless prohibited by applicable law,
rule
or regulation, a Purchaser may from time to time pledge pursuant to a bona
fide
margin agreement with a registered broker-dealer or grant a security interest
in
some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and, if required
under the terms of such arrangement, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of legal
counsel of the pledgee, secured party or pledgor shall be required in connection
therewith; provided, however, that such Purchaser shall provide the Company
with
such documentation as is reasonably requested by the Company to ensure that
the
pledge is pursuant to a bona fide margin agreement with a registered
broker-dealer or a security interest in some or all of the Securities to a
financial institution that is an “accredited investor” as defined in Rule 501(a)
under the Securities Act. The Company will execute and deliver such
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities, including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders
thereunder.
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20 -
(c) Certificates
evidencing the Conversion Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) following any sale
of
such Conversion Shares or Warrant Shares pursuant to Rule 144, or (ii) if such
Conversion Shares or Warrant Shares are eligible for sale under Rule 144(k)
(and
the holder of such Conversion Shares or Warrant Shares has submitted a written
request for removal of the legend indicating that the holder has complied with
the applicable provisions of Rule 144), or (iii) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission) (and
the holder of such Conversion Shares or Warrant Shares has submitted a written
request for removal of the legend indicating that the holder has complied with
the applicable provisions of Rule 144). The Company shall cause its counsel
to
issue a legal opinion to the Company's transfer agent promptly upon the
occurrence of any of the events in clauses (i), (ii) or (iii) above to effect
the removal of the legend hereunder and shall also cause its counsel to issue
a
“blanket” legal opinion to the Company's transfer agent promptly after the
Effective Date, if required by the Company's transfer agent, to allow sales
pursuant to an effective Registration Statement. The Company agrees that at
such
time as such legend is no longer required under this Section 4.1(c), it will,
no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing Conversion
Shares or Warrant Shares, as the case may be, issued with a restrictive legend,
deliver or cause to be delivered to such Purchaser a certificate representing
such Securities that is free from all restrictive and other legends; provided
that the holder of such Conversion Shares or Warrant Shares has submitted a
written request for removal of the legend indicating that the holder has
complied with the applicable provisions of Rule 144. The Company may not make
any notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this
Section.
(d) Each
Purchaser, severally and not jointly, agrees that the removal of the restrictive
legend from certificates representing Securities as set forth in this Section
4.1 is predicated upon the Company's reliance on, and the Purchaser's agreement
that, and each Purchaser hereby agrees that, the Purchaser will not sell any
Securities except pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an
exemption therefrom.
4.2
Furnishing
of Information.
As
long as any Purchaser owns Securities, the Company covenants to timely file
(or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. Upon the request of any such holder of Securities,
the Company shall deliver to such holder a written certification of a duly
authorized officer as to whether it has complied with the preceding sentence.
As
long as any Purchaser owns Securities, if the Company is not required to file
reports pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c), such
information as is required for the Purchasers to sell the Securities under
Rule
144. The Company further covenants that it will take such further action as
any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.
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4.3 Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Purchasers or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market.
4.4 Limitation
on Future Financing.
From
the date hereof until the earlier of 60 calendar days after the Closing Date
or
15 calendar days after the Effective Date, the Company shall not effect an
issuance of its Common Stock or Common Stock Equivalents. Notwithstanding
anything to the contrary herein, this Section 4.4 shall not apply to the
following: (a) the granting of options or other equity compensation awards
or
the issuance of Common Stock or Common Stock Equivalents to employees,
independent contractors, officers and directors of the Company pursuant to
any
equity compensation plan duly adopted by a majority of the non-employee members
of the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose (and the
exercise of such options or Common Stock Equivalents), or (b) the exercise
of
any security issued by the Company in connection with the offer and sale of
the
Company's securities pursuant to this Agreement, or (c) the exercise of or
conversion of any convertible securities, options, warrants or rights issued
and
outstanding on the date hereof, or (d) the issuance of Common Stock or Common
Stock Equivalents in connection with acquisitions or strategic investments,
partnerships, business relationship or joint venture, the primary purpose of
which is not to raise capital, or (e) the issuance of securities pursuant to
a
stock split or stock dividend or similar capital modification, or (f) the
issuance of securities upon the authorization of the Company’s Board of
Directors in connection with business conducted by the Company with vendors,
lessors or financial institutions in connection with financing
transactions.
4.5 Publicity.
The
Company shall, within two Business Days following the Closing Date, file a
Current Report on Form 8-K, disclosing the transactions contemplated hereby
and
make such other filings and notices in the manner and time required by the
Commission. The Company and SCO Securities LLC shall consult with each other
in
issuing any press releases with respect to the transactions contemplated hereby,
and neither the Company nor any Purchaser nor SCO Securities LLC shall issue
any
such press release or otherwise make any such public statement without the
prior
consent of the Company, with respect to any press release of any Purchaser
or
SCO Securities LLC, or without the prior consent of SCO Securities LLC, with
respect to any press release of the Company, except if such disclosure is
required by applicable law, rule or regulation, in which case the disclosing
party shall promptly provide the other party with prior notice of such public
statement or communication.
4.6 Non-Public
Information.
The
Company covenants and agrees that neither it nor any other Person acting on
its
behalf will provide any Purchaser or its agents or counsel with any information
that the
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22 -
Company
believes constitutes material non-public information, unless prior thereto
such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
4.7 Use
of Proceeds.
The
Company covenants and agrees that the proceeds from the sale of the Common
Stock
and Warrants shall be used by the Company for working capital and general
corporate purposes; under no circumstances shall any portion of the proceeds
be
applied to:
(i) accelerated
repayment of debt existing on the date hereof (other than payment of trade
payables in the ordinary course of the Company’s business and consistent with
prior practices;
(ii) the
payment of dividends or other distributions on any capital stock of the Company;
(iii) the
purchase of debt or equity securities of any Person for cash, including the
Company and its Subsidiaries, except in connection with investment of excess
cash in high quality (A1/P1 or better) money market instruments having
maturities of one year or less;
(iv) any
expenditure not directly related to the business of the Company; or
(v) the
redemption of any Company equity or equity-equivalent securities.
4.8 Reservation
of Common Stock.
As
of the date hereof, the Company has reserved and the Company shall continue
to
reserve and keep available at all times, free of preemptive rights, a sufficient
number of shares of Common Stock for the purpose of enabling the Company to
issue the maximum number of Conversion Shares issuable upon conversion of the
Notes and Warrant Shares issuable upon exercise of the Warrants.
4.9 Listing
of Common Stock.
The
Company hereby agrees that, from time to time, if the Company applies to have
the Common Stock traded on any Trading Market, it will include in such
application the Conversion Shares and the Warrant Shares, and will take such
other action as is necessary to cause the Conversion Shares and Warrant Shares
to be listed on such Trading Market as promptly as possible.
4.10 Business
Operations.
Until the earlier of: (i) the third year anniversary of the Closing Date and
(ii) the date that the Purchasers own less than 50% of the Notes originally
issued pursuant to this Agreement or Conversion Shares issuable upon conversion
thereof, the Company shall comply with the following covenants:
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23 -
(a) Insurance.
The Company and its Subsidiaries shall maintain insurance policies such that
the
representations contained in the first sentence of Section 3.1(p) hereof
continue to be true and correct and shall, from time to time upon the written
request of the Purchasers, promptly furnish or cause to be furnished to the
Purchasers evidence, in form and substance reasonably satisfactory to the
Purchasers, of the maintenance of all insurance maintained by it.
(b) Corporate
Existence; Licenses.
The Company shall preserve and maintain and cause its Subsidiaries to preserve
and maintain their corporate existence and good standing in the jurisdiction
of
their incorporation and the rights, privileges and franchises of the Company
and
its Subsidiaries (except, in each case, in the event of a merger or
consolidation in which the Company or its Subsidiaries, as applicable, is not
the surviving entity) in each case where the failure to so preserve or maintain
could have a Material Adverse Effect on the financial condition, business or
operations of the Company and its Subsidiaries taken as a whole. The Company
shall, and shall cause its Subsidiaries to, maintain at all times all material
licenses or permits necessary to the conduct of its business and as required
by
any governmental agency or instrumentality thereof, including without limitation
all Food and Drug Administration clearances and approvals.
(c) Taxes
and Claims.
The Company and its Subsidiaries shall duly pay and discharge (a) all taxes,
assessments and governmental charges upon or against the Company or its
properties or assets prior to the date on which penalties attach thereto, unless
and to the extent that such taxes are being diligently contested in good faith
and by appropriate proceedings, and appropriate reserves therefor have been
established, and (b) all lawful claims, whether for labor, materials, supplies,
services or anything else which might or could, if unpaid, become a lien or
charge upon the properties or assets of the Company or its Subsidiaries, unless
and to the extent only that the same are being contested in good faith and
by
appropriate proceedings and appropriate reserves therefor have been
established.
(d) Affiliate
Transactions.
Except for transactions approved by the Company’s Audit Committee or a majority
of the disinterested members of the board of directors of the Company, neither
the Company nor any of its Subsidiaries shall enter into any transaction with
any (i) director, officer, employee or holder of more than 5% of the outstanding
capital stock of any class or series of capital stock of the Company or any
of
its Subsidiaries, (ii) member of the immediate family of any such person, or
(iii) corporation, partnership, trust or other entity in which any such person,
or member of the immediate family of any such person, is a director, officer,
trustee, partner or holder of more than 5% of the outstanding capital stock
thereof.
4.11 Securities
Law Compliance.
(a) Securities
Act.
The Company shall timely prepare and file with the Securities and Exchange
Commission the form of notice of the sale of securities pursuant to the
requirements of Regulation D regarding the sale of the Common Stock and Warrants
under this Agreement.
(b) State
Securities Law Compliance -- Sale.
The Company shall timely prepare and file such applications, consents to service
of process (but not including a general consent to service of process) and
similar documents and take such other steps and perform such further acts as
shall be required by the state securities law requirements of each jurisdiction
where a
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24 -
Purchaser
resides, as indicated on Schedule
1,
with respect to the sale of the Common Stock and Warrants under this Agreement.
(c) State
Securities Law Compliance --Resale.
Beginning no later than 30 days following any date, from time to time, on which
the Common Stock is no longer a “covered security” under Section 18(b)(1)(A) of
the Securities Act and continuing until either (i) the Purchasers have sold
all
of their Conversion Shares and Warrant Shares under a registration statement
pursuant to the Investor Rights Agreement or (ii) the Common Stock becomes
a
“covered security” under Section 18(b)(1)(A) of the Securities Act, the Company
shall maintain within either ▇▇▇▇▇’▇ Industrial Manual or Standard and Poor’s
Standard Corporation Descriptions (or any successors to these manuals which
are
similarly qualified as “recognized securities manuals” under state Blue Sky
laws) an updated listing containing (i) the names of the officers and directors
of the Company, (ii) a balance sheet of the Company as of a date that is at
no
time older than eighteen months and (iii) a profit and loss statement of the
Company for either the preceding fiscal year or the most recent year of
operations.
4.12 Reverse
Stock Split.
The
Company shall use its best efforts to obtain stockholder approval for a 1 for
5
reverse stock split with respect to its Common Stock (the “1
for 5 Split”)
and to effect such 1 for 5 Split, in each case, as promptly as practicable
following the Closing Date. The number of authorized shares of Common Stock
of
the Company shall not be reduced in connection with the 1 for 5
Split.
4.13
Poison
Pill.
From time to time, for as long as any Purchaser holds any Securities, the
Company and its Board of Directors shall take all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under this Agreement and the Transaction Documents, including
without limitation the Company's issuance of the Securities and the Purchasers’
ownership of the Securities.
4.14 Director
Designees.
For
as long as the Notes issued pursuant to this Agreement remain outstanding,
(a)
SCO Capital Partners LLC shall have the right, from time to time, to designate
two individuals, in the sole discretion of SCO Capital Partners LLC, to serve
as
directors of the Company (the “SCO
Director Designees”),
(b) the Company shall use its best efforts to cause the number of directors
to
be fixed at a
sufficient number such that at least two positions
shall be
available for
the SCO Director Designees (the “SCO
Board Seats”),
(c) the Company shall use its best efforts to cause the SCO Director Designees
to be nominated and elected for service as directors of the Company at each
meeting of the Company’s shareholders held for the purpose of electing directors
and (d) if at any time, or from time to time, one or more of the SCO Board
Seats
is or becomes vacant for any reason prior to the next annual meeting of
shareholders, the Company shall use its best efforts to cause such vacancy
to be
filled with an SCO Director Designee.
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ARTICLE
V
INDEMNIFICATION,
TERMINATION AND DAMAGES
5.1 Survival
of Representations.
Except
as otherwise provided herein, the representations and warranties of the Company
and the Purchasers contained in or made pursuant to this Agreement shall survive
the execution and delivery of this Agreement and the Closing Date and shall
continue in full force and effect for a period of one (1) year from the Closing
Date. The Company’s and the Purchasers’ warranties and representations shall in
no way be affected or diminished in any way by any investigation of (or failure
to investigate) the subject matter thereof made by or on behalf of the Company
or the Purchasers.
5.2 Indemnification.
(a) The
Company agrees to indemnify and hold harmless the Purchasers, their Affiliates,
each of their officers, directors, employees and agents and their respective
successors and assigns, from and against any losses, damages, or expenses which
are caused by or arise out of (i) any breach or default in the performance
by
the Company of any covenant or agreement made by the Company in this Agreement
or in any of the Transaction Documents; (ii) any breach of warranty or
representation made by the Company in this Agreement or in any of the
Transaction Documents; and/or (iii) any and all third party actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal fees and expenses) incident to any of the
foregoing.
(b) The
Purchasers, severally and not jointly, agree to indemnify and hold harmless
the
Company, its Affiliates, each of their officers, directors, employees and agents
and their respective successors and assigns, from and against any losses,
damages, or expenses which are caused by or arise out of (A) any breach or
default in the performance by the Purchasers of any covenant or agreement made
by the Purchasers in this Agreement or in any of the Transaction Documents;
(B)
any breach of warranty or representation made by the Purchasers in this
Agreement or in any of the Transaction Documents; and (C) any and all third
party actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees and expenses) incident to any of
the
foregoing; provided,
however,
that a Purchaser’s liability under this Section 5.2(b) shall not exceed the
Purchase Price paid by such Purchaser hereunder.
5.3 Indemnity
Procedure.
A
party or parties hereto agreeing to be responsible for or to indemnify against
any matter pursuant to this Agreement is referred to herein as the “Indemnifying
Party”
and the other party or parties claiming indemnity is referred to as the
“Indemnified
Party”.
An Indemnified Party under this Agreement shall, with respect to claims asserted
against such party by any third party, give written notice to the Indemnifying
Party of any liability which might give rise to a claim for indemnity under
this
Agreement within sixty (60) Business Days of the receipt of any written claim
from any such third party, but not later than twenty (20) days prior to the
date
any answer or responsive pleading is due, and with respect to other matters
for
which
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26 -
the
Indemnified Party may seek indemnification, give prompt written notice to the
Indemnifying Party of any liability which might give rise to a claim for
indemnity; provided,
however,
that any failure to give such notice will not waive any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party
are
materially prejudiced.
The
Indemnifying Party shall have the right, at its election, to take over the
defense or settlement of such claim by giving written notice to the Indemnified
Party at least fifteen (15) days prior to the time when an answer or other
responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such
claim
through counsel of its choosing (subject to the Indemnified Party’s approval of
such counsel, which approval shall not be unreasonably withheld or delayed),
shall be solely responsible for the expenses of such defense and shall be bound
by the results of its defense or settlement of the claim. The Indemnifying
Party
shall not settle any such claim without prior notice to and consultation with
the Indemnified Party, and no such settlement involving any equitable relief
or
which might have an adverse effect on the Indemnified Party may be agreed to
without the written consent of the Indemnified Party (which consent shall not
be
unreasonably withheld or delayed). So long as the Indemnifying Party is
diligently contesting any such claim in good faith, the Indemnified Party may
pay or settle such claim only at its own expense and the Indemnifying Party
will
not be responsible for the fees of separate legal counsel to the Indemnified
Party, unless the named parties to any proceeding include both parties or
representation of both parties by the same counsel would be inappropriate in
the
reasonable opinion of counsel to the Indemnified Party, due to conflicts of
interest or otherwise. If the Indemnifying Party does not make such election,
or
having made such election does not, in the reasonable opinion of the Indemnified
Party proceed diligently to defend such claim, then the Indemnified Party may
(after written notice to the Indemnifying Party), at the expense of the
Indemnifying Party, elect to take over the defense of and proceed to handle
such
claim in its discretion and the Indemnifying Party shall be bound by any defense
or settlement that the Indemnified Party may make in good faith with respect
to
such claim. In connection therewith, the Indemnifying Party will fully cooperate
with the Indemnified Party should the Indemnified Party elect to take over
the
defense of any such claim. The parties agree to cooperate in defending such
third party claims and the Indemnified Party shall provide such cooperation
and
such access to its books, records and properties (subject to the execution
of
appropriate non-disclosure agreements) as the Indemnifying Party shall
reasonably request with respect to any matter for which indemnification is
sought hereunder; and the parties hereto agree to cooperate with each other
in
order to ensure the proper and adequate defense thereof.
With
regard to claims of third parties for which indemnification is payable
hereunder, such indemnification shall be paid by the Indemnifying Party upon
the
earlier to occur of: (i) the entry of a judgment against the Indemnified Party
and the expiration of any applicable appeal period, or if earlier, five (5)
days
prior to the date that the judgment creditor has the right to execute the
judgment; (ii) the entry of an unappealable judgment or final appellate decision
against the Indemnified Party; or (iii) a settlement of the claim.
Notwithstanding the foregoing, the reasonable expenses of counsel to the
Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party. With regard to other claims for which indemnification is payable
hereunder, such indemnification shall be paid promptly by the Indemnifying
Party
upon demand by the Indemnified Party.
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27 -
ARTICLE
VI
MISCELLANEOUS
6.1 Fees
and Expenses.
The
Company shall be responsible for the payment of the Purchasers’ reasonable and
documented legal fees and other third-party expenses relating to the
preparation, negotiation and execution of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated
herein.
6.2 Entire
Agreement.
The
Transaction Documents, together with the exhibits and schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
6.3 Notices.
Any
and all notices or other communications or deliveries required or permitted
to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified
on
the signature pages attached hereto prior to 5:00 p.m. (New York City time)
on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
on
the signature pages attached hereto on a day that is not a Trading Day or later
than 5:00 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice
is
required to be given. The address for such notices and communications shall
be
as follows:
If
to the Purchasers, at each Purchaser’s address set forth under its name on
Schedule
1
attached hereto, or with respect to the Company, addressed to:
Access
Pharmaceuticals, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
President
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
or
to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-
▇▇ -
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Copies
of notices to any Purchaser shall be sent to the addresses, if any, listed
on
Schedule
1
attached hereto.
6.4 Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and each
Purchaser or, in the case of a waiver, by the party against whom enforcement
of
any such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be
a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
6.5 Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
6.6 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser. Any Purchaser may assign any or all of its rights
under this Agreement to any Person, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the Purchasers.
6.7 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Article V.
6.8 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced
in
accordance with the internal laws of the State of New York, without regard
to
the principles of conflicts of law thereof.
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29 -
6.9
Jurisdiction;
Venue; Service of Process.
This
Agreement shall be subject to the exclusive jurisdiction of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of New York and if such court does not have proper
jurisdiction, the State Courts of New York County, New York. The parties to
this
Agreement agree that any breach of any term or condition of this Agreement
shall
be deemed to be a breach occurring in the State of New York by virtue of a
failure to perform an act required to be performed in the State of New York
and
irrevocably and expressly agree to submit to the jurisdiction of the ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of New York and if such court does not have
proper jurisdiction, the State Courts of New York County, New York for the
purpose of resolving any disputes among the parties relating to this Agreement
or the transactions contemplated hereby. The parties irrevocably waive, to
the
fullest extent permitted by law, any objection which they may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of
or
relating to this Agreement, or any judgment entered by any court in respect
hereof brought in New York County, New York, and further irrevocably waive
any
claim that any suit, action or proceeding brought in ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of New York and if such court does not have proper
jurisdiction, the State Courts of New York County, New York has been brought
in
an inconvenient forum. Each of the parties hereto consents to process being
served in any such suit, action or proceeding, by mailing a copy thereof to
such
party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing in this Section 6.9 shall affect or limit any right
to
serve process in any other manner permitted by law.
6.10
Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
6.11
Severability.
If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
6.12 Replacement
of Securities.
If
any certificate or instrument evidencing any of the Securities is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof, or in lieu of
and
substitution therefor, a new certificate or instrument, but only upon receipt
of
evidence reasonably satisfactory to the Company of such loss, theft or
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destruction
and customary and reasonable indemnity (but no bond shall be required), if
requested by the Company.
6.13
Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Purchasers and the Company
will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
6.14 Payment
Set Aside.
To
the extent that the Company makes a payment or payments to any Purchaser
pursuant to any Transaction Document or a Purchaser enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation
or
part thereof originally intended to be satisfied shall, to the extent
permissible under applicable law, be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
6.15 Independent
Nature of Purchasers' Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several and
not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out
of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through ▇▇▇▇▇▇ and ▇▇▇▇ LLP, but such
counsel does not represent any of the Purchasers in this transaction other
than
SCO Securities LLC. The Company has elected to provide all Purchasers with
the
same terms and Transaction Documents for the convenience of the Company and
not
because it was required or requested to do so by the Purchasers.
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31 -
6.16 Waiver
of Trial by Jury.
THE
PARTIES HERETO IRREVOCABLY WAIVE TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
6.17 Further
Assurances.
Each
party agrees to cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give such further written
assurances as may be reasonably requested by any other party to better evidence
and reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement, and further agrees
to take promptly, or cause to be taken, all actions, and to do promptly, or
cause to be done, all things necessary, proper or advisable under applicable
law
to consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals, to effect all necessary
registrations and filings, and to remove any injunctions or other impediments
or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to
the
parties hereto the benefits contemplated by this Agreement.
[Signature
pages follow.]
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32 -
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
COMPANY:
ACCESS
PHARMACEUTICALS, INC.
By:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
Vice President, CFO
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33 -
PURCHASERS:
|
Print Exact
|
Name:
|
SCO
Capital Partners LLC
|
|||||
|
|
|
||||||
|
|
By: | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||||
|
Name:
|
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | ||||||
| Title | Chairman | ||||||
| Address: | ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ | ||||||
| ▇▇▇▇ ▇▇▇▇▇ | |||||||
| ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ | |||||||
|
Telephone:
|
▇▇▇-▇▇▇-▇▇▇▇ | ||||||
| Facsimile | ▇▇▇-▇▇▇-▇▇▇▇ | ||||||
|
SSN/EIN
|
▇▇-▇▇▇▇▇▇▇ | ||||||
|
Amount of
|
Investment $
|
4,000,000.00
|
|||||
[Omnibus
Access Pharmaceuticals, Inc. Convertible Note and Warrant Purchase Agreement
Signature Page]
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34 -
PURCHASERS:
|
Print Exact
|
Name:
|
Lake
End Capial LLC
|
|||||
|
|
|
||||||
|
|
By: | /s/ ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇ | |||||
|
Name:
|
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | ||||||
| Title | Chairman | ||||||
| Address: | ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ | ||||||
| ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ | |||||||
|
Telephone:
|
▇▇▇-▇▇▇-▇▇▇▇ | ||||||
|
Facsimile
|
▇▇▇-▇▇▇-▇▇▇▇
|
||||||
|
|
Email
|
|
|||||
|
SSN/EIN
|
▇▇-▇▇▇▇▇▇▇ | ||||||
|
Amount of
|
Investment $
|
500,000.00
|
|||||
[Omnibus
Access Pharmaceuticals, Inc. Convertible Note and Warrant Purchase Agreement
Signature Page]
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34 -
PURCHASERS:
|
Print Exact
|
Name:
|
Beach
Capital LLC
|
|||||
|
|
|
||||||
|
|
By: | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||||
|
Name:
|
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | ||||||
| Title | Chairman | ||||||
| Address: | ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ | ||||||
| ▇▇▇▇ ▇▇▇▇▇ | |||||||
| ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ | |||||||
|
Telephone:
|
▇▇▇-▇▇▇-▇▇▇▇ | ||||||
| Facsimile | ▇▇▇-▇▇▇-▇▇▇▇ | ||||||
|
SSN/EIN
|
▇▇-▇▇▇▇▇▇▇ | ||||||
|
Amount of
|
Investment $
|
500,000.00
|
|||||
[Omnibus
Access Pharmaceuticals, Inc. Convertible Note and Warrant Purchase Agreement
Signature Page]
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34 -