EXHIBIT A
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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
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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 17,045,454 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.
"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
17,045,454 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
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
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
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.
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
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.
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.
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
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.
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.
21
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
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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(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
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 Moody's 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 at all times 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.
25
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 the
26
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.
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.
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
30
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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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.]
32
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
COMPANY:
ACCESS PHARMACEUTICALS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President, CFO
33
PURCHASERS:
Print Exact Name: SCO Capital Partners LLC
--------------------------------
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman
Address: 1285 Avenue of the Americas, 35th Floor
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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_________________________________________________
Telephone:_______________________________________
Facsimile:_______________________________________
Email:___________________________________________
SSN/EIN:_________________________________________
Amount of Investment:$ 4,000,000
----------------------------
[Omnibus Access Pharmaceuticals, Inc. Convertible Note and Warrant
Purchase Agreement Signature Page]
34
PURCHASERS:
Print Exact Name: Beach Capital LLC
--------------------------------
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Managing Member
Address: 1285 Avenue of the Americas, 35th Floor
-----------------------------------------
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
-------------------------------------------------
_________________________________________________
Telephone:_______________________________________
Facsimile:_______________________________________
Email:___________________________________________
SSN/EIN:_________________________________________
Amount of Investment:$ 500,000
----------------------------
[Omnibus Access Pharmaceuticals, Inc. Convertible Note and Warrant
Purchase Agreement Signature Page]
35
PURCHASERS:
Print Exact Name: Lake End Capital LLC
--------------------------------
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Member
Address: ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------------------
_________________________________________________
Telephone:_______________________________________
Facsimile:_______________________________________
Email:___________________________________________
SSN/EIN:_________________________________________
Amount of Investment:$ 500,000
----------------------------
[Omnibus Access Pharmaceuticals, Inc. Convertible Note and Warrant
Purchase Agreement Signature Page]
36
SCHEDULE 1
TO CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
PURCHASERS, PRINCIPAL AMOUNT OF NOTES AND WARRANTS
-----------------------------------------------------------------------------------------------------------------------------
Principal Common Stock
Name, Address and Fax Number Amount of Underlying
of Purchaser Copies of Notices to Notes Purchased Warrants Purchase Price
-----------------------------------------------------------------------------------------------------------------------------
SCO Capital Partners LLC ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
1285 Avenue of the Americas, 35th Floor ▇▇▇▇▇▇ and ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ $4,000,000 13,636,364 $4,000,000
T: ▇▇▇-▇▇▇-▇▇▇▇ Tel: ▇▇▇-▇▇▇-▇▇▇▇
F: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇ Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
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Beach Capital LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ $500,000 1,704,545 $500,000
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
contact: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
e-mail: ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
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37
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Principal Common Stock
Name, Address and Fax Number Amount of Underlying
of Purchaser Copies of Notices to Notes Purchased Warrants Purchase Price
-----------------------------------------------------------------------------------------------------------------------------
Lake End Capital LLC
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ $500,000 1,704,545 $500,000
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
T: (▇▇▇) ▇▇▇-▇▇▇▇
F: (▇▇▇) ▇▇▇-▇▇▇▇
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TOTALS: $5,000,000 17,045,454 $5,000,000
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38
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Common Stock
Underlying
Placement
Agent
PLACEMENT AGENT WARRANTS Copies of Notice to Warrants
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SCO Capital Parnters LLC ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
1285 Avenue of the Americas, 35th Floor ▇▇▇▇▇▇ and ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 1,363,635
T: ▇▇▇-▇▇▇-▇▇▇▇ Tel: ▇▇▇-▇▇▇-▇▇▇▇
F: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇ Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
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Lake End Capital LLC
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ 454,546
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
T: (▇▇▇) ▇▇▇-▇▇▇▇
F: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
SCO Securities LLC
1285 Avenue of the Americas, 35th Floor 227,273
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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39
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▇▇▇▇ ▇▇▇▇▇▇
c/o SCO Securities LLC
1285 Avenue of the Americas, 35th Floor 227,273
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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TOTALS: 2,272,727
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40