AMENDED AND RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT by and among Access Pharmaceuticals, Inc. and the parties named herein on Schedule 1, as Purchasers February 4, 2008
EXHIBIT
10.27
_____________________________________________________________________________
AMENDED
AND RESTATED
by
and
among
Access
Pharmaceuticals, Inc.
and
the
parties named herein on Schedule 1, as Purchasers
February
4, 2008
_____________________________________________________________________________
This
AMENDED
AND RESTATED PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is dated
as of
February 4, 2008, 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, in the
aggregate, (i) up to 4,000 shares of the Company’s Series A Cumulative
Convertible Preferred Stock, and (ii) Common Stock Purchase Warrants (the “Warrants”) entitling the
holders thereof to purchase up to 6,666,700 shares of the Company’s
Common Stock as more fully set forth herein.
WHEREAS,
the Company and certain
Purchasers (the “Original
Purchasers”) have entered into a Preferred Stock and Warrant Purchase
Agreement dated as of November 7, 2007 (the “Original Purchase Agreement”)
and consummated the Initial Closing (as defined below) on November 10, 2007
and
the Company, Original Purchasers holding not less than the requisite amount
of
Securities necessary to amend the Original Purchase Agreement wish to amend
and
restate the Original Purchase Agreement and certain additional Purchasers wish
to execute this Agreement in connection with the Additional Closing (as defined
below) as 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
PREFERRED STOCK AND WARRANTS
1.1 Certain
Definitions; Terms of Preferred Stock and Warrants.
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 termin Section 3.1(j).
“Additional
Closing” shall
have the meaning ascribed to such term in Section 2.1(c).
“Additional
Closing Escrow
Agreement” shall have the meaning ascribed to such term in Section
2.1(b).
“Additional
Purchasers” shall
have the meaning ascribed to such term in Section 2.1(c).
“Additional
Securities” shall
have the meaning ascribed to such term in Section 2.1(c).
“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.
1
“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.
“Certificate
of Designation”
shall have the meaning ascribed to such term in Section 1.2.
“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).
“Closing
Escrow Agreement”
shall have the meaning ascribed to such term in Section 2.1(b).
“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 or issued upon conversion of the Preferred
Stock.
“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).
2
“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.
“Initial
Closing” shall have
the meaning ascribed to such term in Section 2.1(a).
“Initial
Closing Date” shall
have the meaning ascribed to such term in Section 2.1(a).
“Intellectual
Property” shall
have the meaning ascribed to such term in Section 3.1(o).
“Investor
Rights Agreement”
means the Amended and Restated 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).
“Per
Share Purchase Price”
equals $10,000.
“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
Agents” means SCO
Securities LLC and Xxxxxx & Xxxxxxx, LLC.
“Placement
Agent Warrants”
shall mean the common stock purchase warrants to be issued to the Placement
Agents and/or their 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.
“Preferred
Shares” means the
shares of Preferred Stock issued to each Purchaser pursuant to this
Agreement.
“Preferred
Stock” means the
Company’s Series A Cumulative Convertible Preferred Stock, par value $0.01 per
share.
“Premises”
shall
have the
meaning ascribed to such term in Section 3.1(y).
3
“Promissory
Notes” shall have
shall have the meaning ascribed to such term in Section
2.1(c).
“Purchase
Price” means the
aggregate purchase price paid by each Purchaser for the shares of Preferred
Stock and Warrants purchased by such Purchaser hereunder.
“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.
“Required
Minimum” means, as
of any date, the maximum aggregate number of shares of Common Stock then issued
or potentially issuable in the future pursuant to the Transaction Documents,
including any Underlying Shares issuable upon exercise or conversion in full
of
all Warrants and shares of Preferred Stock, ignoring any conversion or exercise
limits set forth therein, and assuming that any previously unconverted shares
of
Preferred Stock are held until the fifth anniversary of the Closing Date and
all
dividends are paid in shares of Common Stock until such fifth
anniversary
“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
Preferred Shares, the Conversion Shares, the Warrants and the Warrant
Shares.
“Securities
Act” means the
Securities Act of 1933, as amended.
“Series
A Certificate of
Amendment” means the Certificate of Amendment to the Certificate of
Designations, Rights and Preferences of the Series A Cumulative Convertible
Preferred Stock of the Company, in the form attached hereto as Exhibit
G.
“Short
Sales” means all “short
sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but
shall not be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
“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 interests 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.
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“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,
or
(iii) if the Common Stock is not listed on a Trading Market or 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, the Nasdaq Capital Market or the OTC
Bulletin Board.
“Transaction
Documents” means
this Agreement, the Certificate of Designation, the Investor Rights Agreement,
the Warrants and any other documents or agreements executed in connection with
the transactions contemplated hereunder.
“Underlying
Shares” means the
shares of Common Stock issued and issuable upon conversion of the Preferred
Stock, upon exercise of the Warrants and issued and issuable in lieu of the
cash
payment of dividends on the Preferred Stock in accordance with the terms of
the
Certificate of Designation.
“VWAP”
means, for any date,
the price determined by the first of the following clauses that applies: (a)
if
the Common Stock is then listed or quoted on a Trading Market, the daily volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time); (v) if the Common Stock
is not then quoted for trading on any Trading Market and if prices for the
Common Stock are then reported in the “Pink Sheets” published by Pink Sheets,
LLC (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock
so
reported; or (d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith
by
the Purchasers of a majority in interest of the Securities then outstanding
and
reasonably acceptable to the Company.
“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
the Placement Agents and/or their 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.
5
1.2 Terms
of
the Preferred Stock and Warrants. The terms and
provisions of the Preferred Stock are set forth in the form of Certificate
of
Designations, Rights and Preferences Series A Cumulative Convertible Preferred
Stock, attached hereto as Exhibit B (the “Certificate
of
Designation”). The terms and provisions of the Warrants are as
set forth in the form of Common Stock Purchase Warrant, attached hereto as
Exhibit C (Exhibit
D in the case
of the Placement Agent Warrants and Exhibit H in case
of
Warrants to be issued in Additional Closings).
1.3 Purchases
and Sales. On the terms
and
subject to the conditions set forth in this Agreement, at the Initial Closing,
the Company sold and each of the Purchasers in the Initial Closing purchased
the
Preferred Stock in the amounts set forth on Schedule 1
hereto. In addition, the Company sold and each Purchaser purchased at
the Initial Closing Warrants to purchase the number of shares of Common Stock
set forth on Schedule
1 hereto. At the Additional Closings, the Company will sell
and each of the Additional Purchasers will purchase the Additional Securities
set forth next to the name of such Additional Purchaser on Schedule 1 as such
schedule is supplemented pursuant to Section 2.2(c).
ARTICLE
II
PURCHASE
AND
SALE
2.1 Closing.
(a) The
initial closing of the transactions contemplated under this Agreement (the
“Initial Closing”) took
place on November 10, 2007. The date on which the Initial Closing
occurred is the “Initial
Closing Date”. Any Additional Closing (as defined below) will take place
at the offices of Xxxxxx and Xxxx LLP, 000 Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000
(or remotely via exchange of documents and signatures) or at such other place
and on such date as may be mutually acceptable to the Purchasers in such
Additional Closing and the Company. The date on which the Additional
Closing occurs is the “Additional Closing
Date.” The term “Closing” shall refer
to the
Initial Closing and any Additional Closing, the term “Closing Date” shall refer to
the Initial Closing Date or the Additional Closing Date, as
applicable.
(b) At
the Initial Closing, the Purchasers purchased, severally and not jointly, and
the Company issued and sold, in the aggregate, 3,227.3617 shares of Preferred
Stock and Warrants to purchase 3,440,882 shares of Common Stock on the Initial
Closing Date. At the Initial Closing and any Additional Closing, each Purchaser
has purchased or shall purchase (as the case may be) from the Company, and
the
Company has issued and sold or shall issue and sell (as the case may be) to
each
Purchaser, a number of Preferred Shares equal to such Purchaser's Subscription
Amount divided by the Per Share Purchase Price and a Warrant to purchase 50%
of
the number of Conversion Shares into which the Preferred Shares purchased by
such Purchaser are initially convertible. Except to the extent paid in the
form
of surrender and cancellation of Promissory Notes (as defined below) pursuant
to
Section 2.1(e), the Subscription Amount paid by each Purchaser in the Initial
Closing was placed in escrow pending the Initial Closing pursuant to a Closing
Escrow Agreement among the Company, SCO Capital Partners LLC and Xxxxxx and
Xxxx
LLP (the “Escrow
Agent”), which agreement was in the form attached hereto as Exhibit E (the
“Closing
Escrow
Agreement”). Subscription Amounts paid by Purchasers in any
Additional Closing shall be placed in escrow pending such Additional Closing
pursuant to an escrow agreement in a form substantially similar to the Closing
Escrow Agreement and attached hereto as Exhibit I, with such
changes as may be necessary or appropriate to account for the Additional Closing
(the “Additional Closing
Escrow Agreement”).
6
(c) After
the Initial Closing, the Company may sell up to 772.6383 additional shares
of
Preferred Stock and additional Warrants to purchase up to 1,287,740 shares
of
Common Stock (subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common
Stock
that occur after the Initial Closing and prior to the applicable Additional
Closing) (the “Additional
Securities”), to one or more purchasers (the “Additional Purchasers”) as
are mutually agreed upon by the Company and SCO Capital Partners LLC, provided
that (i) all such subsequent sale(s) (each an “Additional Closing”) are
consummated prior to 30 days after the date hereof or at such later time as
mutually agreed to by the Company and SCO Capital Partners LLC and (ii) each
Additional Purchaser shall become a party to this Agreement and the Investor
Rights Agreement, by executing and delivering a counterpart signature page
hereto and thereto. Schedule 1 to this
Agreement shall be supplemented to reflect the number of Additional Securities
purchased at each such Additional Closing and to reflect the parties purchasing
such Additional Securities.
(d) The
Purchasers party to this Agreement hereby (i) irrevocably waive any preemptive
rights, rights of first offer, rights of first refusal, participation rights,
anti-dilution rights or other similar rights they may possess now or hereafter,
pursuant to the terms of any agreement with the Company or otherwise, with
respect to sales of Additional Securities made pursuant to this Agreement and
(ii) consent to the joinder of any Additional Purchasers to this
agreement.
(e) All
or a portion of the Subscription Amount payable by certain Purchasers for the
Preferred Stock and Warrants purchased pursuant to this Agreement shall be
payable by the surrender and cancellation of promissory notes of the Company
held by such Purchasers, representing an aggregate principal amount of
$10,015,000 plus accrued and unpaid interest thereon and described next to
such
Purchaser’s name in Schedule 1 hereto
(the “Promissory
Notes”), with the value of such Promissory Notes toward such Purchaser’s
Subscription Amount also described in Schedule
1. The value of each Promissory Note toward the Subscription
Amount shall be determined according to whether the Promissory Note is an “A”
Promissory Note (a “Category A
Note”) or a “B” Promissory Note (a “Category B Note”), in each
case, as set forth on Schedule 1 under the
heading “Promissory Note Category”. Category A Notes shall be valued
toward each applicable Purchaser’s Subscription Amount at a dollar amount equal
to (i) the number of shares of Common Stock into which such Category A Note
is
convertible immediately prior to the Closing (without giving effect to any
limitations on beneficial ownership contained therein) multiplied by (ii) the
Conversion Value (as defined in the Certificate of Designation); provided that,
notwithstanding any other provision of this Agreement, the Warrants issuable
to
the Category A Note holders in respect of Category A Notes exchanged by them
shall be exercisable for a number of shares of Common Stock determined as if
the
principal and interest on such Category A Notes were exchanged on a
dollar-for-dollar basis and as set forth next to the name of such Category
A
Note holder on Schedule
1. Category B Notes shall be valued toward each applicable
Purchaser’s Subscription Amount at a dollar amount equal to the outstanding
principal amount of such Category B Note plus all accrued and unpaid interest
thereon. Each Purchaser surrendering Promissory Notes for
cancellation in payment of any portion of such Purchaser’s Subscription Amount
hereby agrees that such Promissory Notes shall be cancelled and that all liens
held by such Purchaser in connection with such Promissory Notes shall be
terminated, in each case, as of the Closing.
7
2.2 Conditions
to Obligations of Purchasers to Effect the Closing.
The
obligations of each Purchaser to
effect any Closing and the transactions contemplated by this Agreement shall
be
subject to the satisfaction at or prior to such 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)
a certificate evidencing a
number of Preferred Shares equal to such Purchaser's Subscription Amount divided
by the Per Share Purchase Price as set forth on Schedule 1 hereto,
registered in the name of such Purchaser;
(iii)
a 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 equal to 50% of the shares
of
Common Stock initially issuable upon conversion of the Preferred Shares to
be
issued to such Purchaser at such Closing (except with respect to Warrants issued
upon exchange of Category A Notes, the number of which shall be determined
in
accordance with Section 2.1(e)), as set forth on Schedule 1
hereto;
(iv)
the Investor Rights Agreement,
duly executed by the Company;
(v)
a legal opinion of Xxxxxxx
XxXxxxxxx LLP, counsel to the Company,
in the form of Exhibit
F hereto;
(vi)
a certificate of the Secretary
of the Company (the “Secretary’s Certificate”), as
of the date of the applicable Closing, attaching a true copy of the Certificate
of Incorporation and Bylaws of the Company, as amended to such applicable
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
(vii) evidence
satisfactory to the Purchasers that the Certificate of Designation was duly
filed with, and accepted by, the Secretary of State of the State of
Delaware.
(b) The
Company shall have entered into the Closing Escrow Agreement, or the Additional
Closing Escrow Agreement, as applicable.
(c) All
representations and warranties of the Company contained herein shall remain
true
and correct as of such applicable 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).
8
(d) In
connection with the Initial Closing, all of the Promissory Notes referenced
in
Schedule 1 hereto shall have been surrendered for cancellation in partial or
complete payment, as applicable, of the Subscription Amount for the Purchasers
holding such notes;
(e) As
of the applicable Closing Date, there shall have been no Material Adverse Effect
with respect to the Company since the date hereof.
(f) From
the date hereof to the applicable Closing Date, trading in the Common Stock
shall not have been suspended by the Commission (except for any suspension
of
trading of limited duration agreed to by the Company, which suspension shall
be
terminated prior to the Closing), and, at any time prior to such applicable
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.
(g) In
connection with the Initial Closing, all Purchasers surrendering Promissory
Notes for cancellation in payment of any portion of their Subscription Amount
shall have executed this Agreement (which shall be deemed to have taken place
by
virtue of such Purchasers’ execution of the Original Purchase
Agreement).
(h) In
connection with the Initial Closing, the minimum aggregate cash Subscription
Amount hereunder shall be $7,500,000.
(i) Prior
to any Additional Closing, the Company shall have provided evidence satisfactory
to the Additional Purchasers that the Board of Directors of the Company has
approved the Series A Certificate of Amendment to become effective as soon
as
practicable following receipt of stockholder approval thereof.
2.3. Conditions
to Obligations of the Company to Effect the Closing.
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.
(a)
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, as applicable, (A) by wire transfer of immediately available funds
as
provided in the Closing Escrow Agreement or Additional Closing Escrow Agreement
(as applicable) and/or (B) in the case of Purchasers paying all or a portion
of
their Subscription Amount by the cancellation of the Promissory Notes held
by
them, by the cancellation of such Promissory Notes pursuant to Section 2.1(e);
and
(iii)
the Investor Rights Agreement,
duly executed by such Purchaser.
9
(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.
(c) The
Certificate of Designation shall have been duly filed with, and accepted by,
the
Secretary of State of the State of Delaware.
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, 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 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 (including, but
not
limited to, the sale and delivery of the Preferred Stock and Warrants) have
been
duly authorized by all necessary corporate action on the part of the Company
and
no further corporate action is required by the Company in connection therewith,
except that the Series A Certificate of Amendment must be duly approved by
the
Company’s shareholders and the necessary filings must be made with the
Commission in connection with such approval and with the Secretary of State
of
the State of Delaware. The issuance and delivery of the Conversion
Shares upon conversion of the Preferred Stock and the Warrant Shares upon
exercise of the Warrants 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.
10
(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
(i) 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 Sky filings, (ii) such as have already been obtained
or such exemptive filings as are required to be made under applicable securities
laws, (iii) the filing of appropriate documents with the Commission in
connection with the shareholder approval of the Series A Certificate of
Amendment and (iv) the filing of the Series A Certificate of Amendment with
the
Secretary of State of the State of Delaware.
(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 (i) the maximum
number of shares of Preferred Stock issuable pursuant to this Agreement and
(ii)
the maximum number of shares of Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants.
11
(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 that has not been either complied with or waived. 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 other than the Purchasers 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 24 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 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.
12
(ii) The
Company’s (A) audited financial statements for the fiscal years ended December
31, 2006 and 2005 included in the Company’s annual reports on Form 10-KSB and
Form 10-K, respectively, filed with the Commission and (B) the financial
statements included in the Company’s quarterly reports on Form 10-QSB filed with
the Commission for the first three fiscal quarters of 2007 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
for liabilities and obligations incurred since June 30, 2007 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 for the transactions contemplated by this
Agreement and except as set forth on Schedule 3.1(i),
since June 30, 2007, 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;
(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;
13
(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.
14
(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.
(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.
15
(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 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 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 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;
16
(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,
including, but not limited to, directors and officers insurance coverage in
the
amount set forth on Schedule 3.1(p)
attached hereto. 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, or as
contemplated by this Agreement, 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 is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act of 2002 which are applicable to it as of the Closing Date. 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 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 June 30, 2007 (such date, the “Evaluation
Date”). The Company presented in its Form 10-QSB for the
quarter ended June 30, 2007, the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date,
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.
17
(s) Certain
Fees. Except for fees
payable to the Placement Agents, 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.
(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.
18
(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 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.
19
(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 Purchaser or its agents or
counsel with any information that in the Company’s reasonable judgment, at the
time such information was furnished, constitutes or might constitute material,
non-public information, other than information relating to the fact that the
Company was considering and engaged in the transactions contemplated by the
Transaction Documents and unless prior thereto such Purchaser shall have
consented in writing to the receipt of such 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.
(cc) Solvency. Based
on
the consolidated financial condition of the Company as of the Closing Date
after
giving effect to the receipt by the Company of the proceeds from the sale of
the
Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii)
the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account
all
anticipated uses of the cash, would be sufficient to pay all amounts on or
in
respect of its liabilities when such amounts are required to be
paid. The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts
of
cash to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(cc) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary
has
commitments. For the purposes of this Agreement, “Indebtedness” means
(a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
20
(dd) Accountants. The
Company’s accounting firm is set forth on Schedule 3.1(dd) of
the Disclosure Schedule. To the knowledge and belief of the Company,
such accounting firm (i) is a registered public accounting firm as required
by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the year
ending December 31, 2007.
(ee) Seniority. Except
as set forth on Schedule 3.1(ee) as of the Closing Date, no Indebtedness or
other claim against the Company is senior to the Preferred Stock in right of
payment, whether with respect to interest or upon liquidation or dissolution,
or
otherwise, other than indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby) and capital
lease
obligations (which is senior only as to the property covered
thereby).
(ff) No
Disagreements with Accountants and
Lawyers. There are no disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise, between the Company
and the accountants and lawyers formerly or presently employed by the Company
and the Company is current with respect to any fees owed to its accountants
and
lawyers which could affect the Company’s ability to perform any of its
obligations under any of the Transaction Documents.
(gg) Acknowledgment
Regarding Purchasers’
Purchase of Securities. The Company acknowledges and agrees
that each of the Purchasers is acting solely in the capacity of an arm’s length
purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or
in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or
any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to
the
Purchasers’ purchase of the Securities. The Company further
represents to each Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
21
(hh) Acknowledgement
Regarding Purchasers’
Trading Activity. Notwithstanding anything in this Agreement
or elsewhere herein to the contrary, it is understood and acknowledged by the
Company that (i) none of the Purchasers has been asked to agree by the Company,
nor has any Purchaser agreed, to desist from purchasing or selling, long and/or
short, securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified term, (ii)
past or future open market or other transactions by any Purchaser, specifically
including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities,
(iii) any Purchaser, and counter-parties in “derivative” transactions to which
any such Purchaser is a party, directly or indirectly, may presently have a
“short” position in the Common Stock; and (iv) each Purchaser shall not be
deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction. The Company further
understands and acknowledges that (a) one or more Purchasers may engage in
hedging activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value
of
the Underlying Shares deliverable with respect to Securities are being
determined, and (b) such hedging activities (if any) could reduce the value
of
the existing stockholders' equity interests in the Company at and after the
time
that the hedging activities are being conducted. The Company acknowledges
that such aforementioned hedging activities do not constitute a breach of any
of
the Transaction Documents.
(ii) Regulation
M Compliance.
The Company has not, and to its knowledge no one acting on its behalf
has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
securities of the Company, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid
to
the Company’s placement agent in connection with the placement of the
Securities.
(jj) No
General
Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form
of
general solicitation or general advertising. The Company has offered
the Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.
(kk) Investment
Company. The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act of 1940, as
amended.
22
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 Initial Closing Date or the Additional Closing Date, as applicable, 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 Preferred Shares and
Warrants and (ii) upon conversion of the Preferred Stock will acquire the
Conversion Shares and upon exercise of the Warrants will acquire the 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.
23
(f) Reliance
on Exemptions. Such
Purchaser understands that the Preferred Shares 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 Preferred Shares and Warrants.
(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 Preferred
Shares and Warrants as have been requested by such Purchaser, including without
limitation the Company’s Form 10-KSB for the period ended December 31, 2006,
Forms 10-QSB for the periods ended March 31, 2007, June 30, 2007, and September
30, 2007, and Forms 8-K filed by the Company since January 1,
2007. Each Purchaser acknowledges that it has read and understands
the risk factors set forth in such Form 10-KSB, Forms 10-QSB 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 Preferred Shares 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 Preferred Shares and Warrants or the fairness or suitability
of the investment in the Preferred Shares and Warrants, nor have such
authorities passed upon or endorsed the merits of the offering of the Preferred
Shares 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 Preferred Shares 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 Preferred Shares 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.
24
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 Xxxxxx and Xxxx 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 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.
25
(c) Certificates
evidencing the Conversion Shares and the Warrant Shares shall not contain any
legend (including the legend set forth in Section 4.1(b) hereof): (i) while
a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, or (ii) following
any sale of such Underlying Shares pursuant to Rule 144, or (iii) if such
Underlying Shares are eligible for sale under Rule 144(k), or (iv) 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). The Company shall cause its counsel to issue a legal opinion
to
the Transfer Agent promptly after the Effective Date if required by the Transfer
Agent to effect the removal of the legend hereunder. If all or any shares of
Preferred Stock or any portion of a Warrant is converted or exercised (as
applicable) at a time when there is an effective registration statement to
cover
the resale of the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144(k) or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) then such Underlying
Shares shall be issued free of all legends. The Company agrees that
following the Effective Date or 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 Transfer Agent
of a
certificate representing Underlying Shares, as applicable, issued with a
restrictive legend (such third Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer
set
forth in this Section. Certificates for Underlying Shares subject to
legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser.
(d) In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on
the
date such Securities are submitted to the Transfer Agent) delivered for removal
of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day 5 Trading Days after such damages have begun
to accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered without a legend. Nothing herein shall limit
such Purchaser’s right to pursue actual damages for the Company’s failure to
deliver certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree
of
specific performance and/or injunctive relief.
(e) 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.
26
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.
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 Publicity.
The
Company shall, by 8:30 a.m. (New
York City time) on the Trading Day immediately following the date of each
Closing, issue a press release disclosing the material terms of the transactions
contemplated hereby, and within two Business Days following such 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 the Placement Agents 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 any of the
Placement Agents 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 any of the Placement Agents, or without the
prior consent of the Placement Agents, 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.
27
4.5 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 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 covenant in effecting transactions in securities
of
the Company.
4.6 Use
of
Proceeds.
The
Company covenants and agrees that
the proceeds from the sale of the Preferred 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.
|
4.7 Reservation
of Preferred
Stock and 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 (a) Preferred
Stock for the purpose of enabling the Company to issue Preferred Shares pursuant
to this Agreement and (b) Common Stock for the purpose of enabling the Company
to issue Conversion Shares issuable upon conversion of the Preferred Stock
and
Warrant Shares issuable upon exercise of the Warrants. If, on any
date, the number of authorized but unissued (and otherwise unreserved) shares
of
Common Stock plus the number of shares of authorized but unissued Common Stock
reserved for issuance upon conversion of the Preferred Stock and exercise of
the
Warrants is less than 130% of (i) the Required Minimum on such date, minus
(ii) the number of shares of Common Stock previously issued pursuant to the
Transaction Documents, then the Board of Directors shall use commercially
reasonable efforts to amend the Company’s certificate or articles of
incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time (minus the number of shares
of Common Stock previously issued pursuant to the Transaction Documents), as
soon as possible and in any event not later than the 75th day after such date;
provided that the Company will not be required at any time to authorize a number
of shares of Common Stock greater than the maximum remaining number of shares
of
Common Stock that could possibly be issued after such time pursuant to the
Transaction Documents.
28
4.8 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.
4.9 Business
Operations. Until
the earlier of: (i) the third anniversary of the Closing Date and
(ii) the date that the Purchasers own less than 10% of the Preferred Shares
originally issued pursuant to this Agreement or Conversion Shares issuable
upon
conversion thereof, the Company shall comply with the following
covenants:
(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.
29
(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.
4.10 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 Preferred 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 Purchaser resides, as indicated on
Schedule 1,
with respect to the sale of the Preferred 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 Xxxxx’x 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.
4.11
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.
30
4.12
Surrender
of Promissory Notes. Each Purchaser
surrendering Promissory Notes for cancellation in payment of any portion of
such
Purchaser’s Subscription Amount that does not deliver such original Promissory
Notes to the Company prior to the Closing, hereby covenants to deliver such
original Promissory Notes to the Company as soon as practicable following the
Closing Date.
4.13 Subsequent
Equity
Sales.
(a) Other
than the issuance of Securities in Additional Closings pursuant to the terms
of
this Agreement, or the issuance of any equity securities issued in connection
with the Agreement and Plan of Merger by and among Access, Somanta Acquisition
Corporation, Somanta Pharmaceuticals, Inc., Somanta Incorporated and Somanta
Limited dated as of April 18, 2007, from the date hereof until 45 days after
the
Effective Date, neither the Company nor any Subsidiary shall issue shares of
Common Stock or Common Stock Equivalents; provided, however, the 45 day period
set forth in this Section 4.13 shall be extended for the number of Trading
Days
during such period in which (i) trading in the Common Stock is suspended by
any
Trading Market, or (ii) following the Effective Date, the Registration Statement
is not effective or the prospectus included in the Registration Statement may
not be used by the Purchasers for the resale of the Underlying
Shares.
(b) Other
than the issuance of Securities in Additional Closings pursuant to the terms
of
this Agreement, from the date hereof until such time as no Purchaser holds
any
of the Securities, the Company shall be prohibited from effecting or entering
into an agreement to effect any Subsequent Financing involving a Variable Rate
Transaction. “Variable
Rate Transaction” means a transaction in which the Company issues or
sells (i) any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price
that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt
or
equity securities, or (B) with a conversion, exercise or exchange price that
is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market
for
the Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may sell securities at a
future determined price.
4.14 Equal
Treatment of Purchasers. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration
is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted
to
each Purchaser by the Company and negotiated separately by each Purchaser,
and
is intended for the Company to treat the Purchasers as a class and shall not
in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or
otherwise.
4.15 Amendment
to Series A Preferred Stock. The Company
shall use
its best efforts to obtain stockholder approval for the Series A Certificate
of
Amendment and to cause the amendments to the Certificate of Designation
contemplated thereby to become effective, in each case, as promptly as
practicable following the date hereof.
31
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 three (3) years 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.
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; (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; and/or(iv) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).
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 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.
32
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.
33
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.
0000
Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx,
Xxxxx 00000
Attention:
President
Facsimile
No.: (000) 000-0000
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:
Xxxxxxx
XxXxxxxxx LLP
000
Xxxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Attention: Xxxx
X. Xxxxxxxxx, III
Facsimile
No.: (000) 000-0000
Copies
of
notices to any Purchaser shall be sent to the addresses, if any, listed on
Schedule 1 attached
hereto.
34
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 the Purchasers holding 66% in interest of the
Securities then outstanding or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought; provided, however that any such
amendment or waiver that has a disproportionately adverse effect on any
Purchaser shall require the consent of such Purchaser. 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. Notwithstanding the
foregoing, this Agreement may be amended by the Company without the consent
of
the Purchasers (other than SCO Capital Partners LLC, which must agree pursuant
to Section 2.1(c)) by supplementing Schedule 1 with
respect to Purchasers in any Additional Closing and by adding any such
Purchasers as parties to this Agreement in accordance with Sections 2.1(c)
and
(d).
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.
35
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.
6.9 Jurisdiction;
Venue; Service
of Process.
This
Agreement shall be subject to
the exclusive jurisdiction of the Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx
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 Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx
Xxxxxxxx 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 Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx
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.
36
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 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 Xxxxxx and Xxxx LLP, but such counsel does not represent any
of
the Purchasers in this transaction other than SCO Capital Partners 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.
37
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.
6.18 Termination.
This
Agreement may be
terminated by any Purchaser, as to such Purchaser’s obligations hereunder only
and without any effect whatsoever on the obligations between the Company and
the
other Purchasers, by written notice to the other parties, if the applicable
Closing has not been consummated on or before the fifth business day following
the date hereof; provided, however, that such termination will not affect the
right of any party to xxx for any breach by the other party (or
parties).
[Signature
pages follow.]
38
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
COMPANY:
ACCESS
PHARMACEUTICALS, INC.
By: /s/
Xxxxxxx X.
Xxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxx
Title:
Vice President, Chief Financial Officer
39
Schedule G
ACCESS
PHARMACEUTICALS, INC.
CERTIFICATE
OF AMENDMENT
TO
CERTIFICATE
OF DESIGNATIONS, RIGHTS AND PREFERENCES
OF
SERIES
A CUMULATIVE CONVERTIBLE PREFERRED STOCK
Pursuant
to Section 242 of the
General
Corporation Law of the State of Delaware
Access
Pharmaceuticals, Inc., a
corporation organized and existing under the laws of the State of Delaware
(the
“Corporation”), hereby certifies that the following resolutions (a) were
duly adopted by the Board of Directors of the Corporation pursuant to authority
conferred upon the Board of Directors by the provisions of the Certificate
of
Incorporation of the Corporation, as amended (the “Certificate of
Incorporation”), which authorizes the issuance of up to 2,000,000 shares of
preferred stock, $0.01 par value per share, at a meeting of the Board of
Directors held on December 18, 2007, (b) was consented to by holders of more
than 66% of the outstanding shares of the Series A Cumulative Convertible
Preferred Stock, par value $0.01 per share, of the Corporation (the “Series A
Preferred Stock”) and (c) was consented to by holders of more than 50% of
the voting power of the common stock, par value $0.01 per share, of the
Corporation (the “Common Stock”).
RESOLVED,
that effective upon the filing of this Certificate of Amendment to
Certificate of Designations, Rights and Preferences of Series A Cumulative
Convertible Preferred Stock (this “Certificate of Amendment”), the
Certificate of Designations, Rights and Preferences of Series A Cumulative
Convertible Preferred Stock dated and filed with the Delaware Secretary of
State
on November 9, 2007 (the “Certificate of Designation”), be amended as
follows:
1. The
first paragraph of Section 4 of the Certificate of Designation is hereby deleted
in its entirety and replaced with the following:
“4. Actions
Requiring the Consent of Holders of Series A Preferred Stock. As long
as at least 20% of the shares of Series A Preferred Stock issued pursuant to
the
Purchase Agreement remain outstanding, the consent of the holders of at least
66% of the shares of Series A Preferred Stock at the time outstanding, given
in
accordance with the Certificate of Incorporation and Bylaws of the Corporation,
as amended from time to time, shall be necessary for effecting or validating
any
of the following transactions or acts, whether by merger, consolidation or
otherwise (for the avoidance of doubt, no such consent shall be required for
the
Corporation to amend the Certificate merely to increase the Corporation’s
authorized shares of Common Stock or undesignated preferred
stock):”
2. Existing
Section 4(h) of the Certificate of Designation is hereby re-numbered as Section
4(j) and the following new Sections 4(h) and 4(i) are inserted after existing
Section 4(g):
“(h)
any
Change of Control or any liquidation, winding up or dissolution of the
Corporation or any subsidiary thereof, whether in one transaction or a series
of
transactions, or adoption of any plan for the same;
(i)
in a
transaction or series of related transactions involving aggregate potential
consideration in excess of $20 million, any sale, transfer, license, sublicense,
encumbrance or other disposition of any of the Corporation’s intellectual
property, including, without limitation, patents, trademarks, service marks,
copyrights, trade secrets, technologies, compounds and trade names, whether
owned outright by the Corporation or licensed from another person or entity,
whether in registered or unregistered form, and whether or not an application
for registration has been filed; or”
3. Existing
Section 5(b) of the Certificate of Designation is hereby deleted in its entirety
(except that the existing defined terms “Conversion Triggering Event” and
“Registration Statement” contained in Section 5(b) are not deleted and remain in
full force and effect) and replaced with the following:
“(b) Mandatory
Conversion. With the prior written consent of holders of not less than a
majority of the Series A Preferred Stock at such time outstanding, if a
Conversion Triggering Event (as defined below) has occurred, and provided that
the Corporation has delivered a written notice to the holders of the Series
A
Preferred Stock (the “Notice”) that the Corporation intends to convert
all of the outstanding Series A Preferred Stock into Common Stock, then, subject
to the limitations set forth in Section 5(i) hereof, as of the date that is
sixty-five days following the date that such Notice is given (the “Mandatory
Conversion Date”), the Series A Preferred Stock shall be converted into such
number of fully paid and non-assessable shares of Common Stock as is determined
by dividing (i) the aggregate Liquidation Preference of the shares of Series
A
Preferred Stock to be converted plus accrued and unpaid dividends thereon by
(ii) the applicable Conversion Value (as hereinafter defined) then in effect
for
such Series A Preferred Stock (the “Mandatory
Conversion”). Nothing in this Section 5(b) shall be construed so
as to limit the right of a holder of Series A Preferred Stock to convert
pursuant to Section 5(a) at any time. The Corporation may not deliver a Notice,
and any Mandatory Conversion delivered by the Corporation shall not be
effective, unless all of the Equity Conditions have been met on each Trading
Day
during the twenty day period prior to and including the later of the Mandatory
Conversion Date and the Trading Day after the date that the Conversion Shares
issuable pursuant to such conversion are actually delivered to the Holders
pursuant to the Notice.”
4. Existing
Section 5(c)(iii) of the Certificate of Designation is hereby deleted in its
entirety and replaced with the following:
“(iii)
The
Corporation’s obligation to issue Common Stock upon conversion
of Series A Preferred Stock in accordance with this Certificate of Designation
shall be absolute, is independent of any covenant of any holder of Series A
Preferred Stock, and shall not be subject to: (A) any offset or
defense; or (B) any claims against the holders of Series A Preferred Stock
whether pursuant to this Certificate of Designation, the Preferred Stock and
Warrant Purchase Agreement entered into among the Corporation and the purchasers
of the Series A Preferred Stock on or about the Filing Date (as amended or
amended and restated from time to time, the “Purchase Agreement”), the Investor
Rights Agreement, the Warrants or otherwise.”
RESOLVED, that
the Certificate of Designation shall remain in full force and effect except
as
expressly amended hereby.
[Signature
page follows.]
THE
UNDERSIGNED, being a duly
authorized officer of the Corporation, does file this Certificate of Amendment
to Certificate of Designations, Rights and Preferences of Series A Cumulative
Convertible Preferred Stock, hereby declaring and certifying that the facts
herein stated are true and accordingly has hereunto set his hand this _____
day
of ________________, 2007.
ACCESS
PHARMACEUTICALS, INC.
By:___ ______
Name:
Title: