Exhibit 10.31
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is entered into and made
effective as of March 30, 2005, by and between ACCESS PHARMACEUTICALS, INC.,
a Delaware corporation (the "Company"), and the BUYER(S) listed on Schedule I
attached to the Securities Purchase Agreement dated the date hereof (the
"Secured Party").
WHEREAS, the Company shall issue and sell to the Secured Party, as
provided in the Securities Purchase Agreement dated the date hereof, and
the Secured Party shall purchase up to Two Million Six Hundred Thirty
Three Thousand Dollars ($2,633,000) of seven percent (7%) secured
convertible debentures (the "Convertible Debentures"), which shall be
convertible into shares of the Company's common stock, par value $0.01
(the "Common Stock") (as converted, the "Conversion Shares") in the
respective amounts set forth opposite each Buyer(s) name on Schedule I
attached to the Securities Purchase Agreement;
WHEREAS, to induce the Secured Party to enter into the transaction
contemplated by the Securities Purchase Agreement, the Convertible
Debentures, the Investor Registration Rights Agreement, the Pledge and
Escrow Agreement, and the Escrow Agreement (collectively referred to as
the "Transaction Documents"), the Company hereby grants to the Secured
Party a security interest in and to the pledged property identified on Exhibit
A hereto (collectively referred to as the "Pledged Property"), subject to a
security interest on certain specific equipment granted to Agilent Financial
Services, Inc., until the satisfaction of the Obligations, as defined herein
below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration,
the adequacy and receipt of which are hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
Section 1.1. Recitals.
The above recitals are true and correct and are incorporated herein, in their
entirety, by this reference.
Section 1.2. Interpretations.
Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right, remedy or
claim under or by reason hereof.
Section 1.3. Obligations Secured.
The obligations secured hereby are any and all obligations of the Company
now existing or hereinafter incurred to the Secured Party, arising from, on
or after the date hereof including, without limitation, those obligations of
the Company to the Secured Party under the Securities Purchase
Agreement, the Secured Convertible Debenture, the Investor Registration
Rights Agreement and Irrevocable Transfer Agent Instructions, and any
other amounts now or hereafter owed to the Secured Party by the Company
thereunder or hereunder (collectively, the "Obligations").
ARTICLE 2.
PLEDGED COLLATERAL, ADMINISTRATION OF COLLATERAL
AND TERMINATION OF SECURITY INTEREST
Section 2.1. Pledged Property.
(a) Company hereby pledges to the Secured Party, and creates in the
Secured Party for its benefit, a security interest for such time until the
Obligations are paid in full, in and to all of the property of the Company
as set forth in Exhibit "A" attached hereto (collectively, the "Pledged
Property"):
The Pledged Property, as set forth in Exhibit "A" attached hereto, and the
products thereof and the proceeds of all such items are hereinafter
collectively referred to as the "Pledged Collateral."
(b) Simultaneously with the execution and delivery of this Agreement, the
Company shall make, execute, acknowledge, file, record and deliver to the
Secured Party any documents reasonably requested by the Secured Party to
perfect its security interest in the Pledged Property. Simultaneously with the
execution and delivery of this Agreement, the Company shall make,
execute, acknowledge and deliver to the Secured Party such documents and
instruments, including, without limitation, financing statements, certificates,
affidavits and forms as may, in the Secured Party's reasonable judgment,
be necessary to effectuate, complete or perfect, or to continue and preserve,
the security interest of the Secured Party in the Pledged Property, and the
Secured Party shall hold such documents and instruments as secured party,
subject to the terms and conditions contained herein.
Section 2.2. Rights; Interests; Etc.
(a) So long as no Event of Default (as hereinafter defined) shall have
occurred and be continuing:
(i) the Company shall be entitled to exercise any and all rights pertaining
to the Pledged Property or any part thereof for any purpose not inconsistent
with the terms hereof; and
(ii) the Company shall be entitled to receive and retain any and all payments
paid or made in respect of the Pledged Property.
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) All rights of the Company to exercise the rights which it would
otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and to
receive payments which it would otherwise be authorized to receive and
retain pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such
rights shall thereupon become vested in the Secured Party who shall
thereupon have the sole right to exercise such rights and to receive and hold
as Pledged Collateral such payments; provided, however, that if the Secured
Party shall become entitled and shall elect to exercise its right to realize on
the Pledged Collateral pursuant to Article 5 hereof, then all cash sums
received by the Secured Party, or held by Company for the benefit of the
Secured Party and paid over pursuant to Section 2.2(b)(ii) hereof, shall be
applied against any outstanding Obligations; and
(ii) All interest, dividends, income and other payments and distributions
which are received by the Company contrary to the provisions of
Section 2.2(b)(i) hereof shall be received in trust for the benefit of the
Secured Party, shall be segregated from other property of the Company and
shall be forthwith paid over to the Secured Party; or
(iii) The Secured Party in its sole discretion shall be authorized to sell any
or all of the Pledged Property at public or private sale in order to recoup
all of the outstanding principal plus accrued interest owed pursuant to the
Convertible Debenture as described herein
(c) Each of the following events shall constitute a default under this
Agreement (each an "Event of Default"):
(i) any default, whether in whole or in part, shall occur in the payment to
the Secured Party of principal, interest or other item comprising the
Obligations as and when due or with respect to any other debt or obligation
of the Company to a party other than the Secured Party;
(ii) any default, whether in whole or in part, shall occur in the due
observance or performance of any obligations or other covenants, terms or
provisions to be performed under this Agreement or the Transaction
Documents;
(iii) the Company shall: (1) make a general assignment for the benefit of
its creditors; (2) apply for or consent to the appointment of a receiver,
trustee, assignee, custodian, sequestrator, liquidator or similar official for
itself or any of its assets and properties; (3) commence a voluntary case for
relief as a debtor under the United States Bankruptcy Code; (4) file with or
otherwise submit to any governmental authority any petition, answer or
other document seeking: (A) reorganization, (B) an arrangement with
creditors or (C) to take advantage of any other present or future applicable
law respecting bankruptcy, reorganization, insolvency, readjustment of
debts, relief of debtors, dissolution or liquidation; (5) file or otherwise
submit any answer or other document admitting or failing to contest the
material allegations of a petition or other document filed or otherwise
submitted against it in any proceeding under any such applicable law, or
(6) be adjudicated a bankrupt or insolvent by a court of competent
jurisdiction; or
(iv) any case, proceeding or other action shall be commenced against the
Company for the purpose of effecting, or an order, judgment or decree
shall be entered by any court of competent jurisdiction approving (in whole
or in part) anything specified in Section 2.2(c)(iii) hereof, or any receiver,
trustee, assignee, custodian, sequestrator, liquidator or other official shall
be appointed with respect to the Company, or shall be appointed to take or
shall otherwise acquire possession or control of all or a substantial part of
the assets and properties of the Company, and any of the foregoing shall
continue unstayed and in effect for any period of thirty (30) days.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1. Secured Party Appointed Attorney-In-Fact.
Upon the occurrence of an Event of Default, the Company hereby appoints
the Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from
time to time in the Secured Party's discretion to take any action and to
execute any instrument which the Secured Party may reasonably deem
necessary to accomplish the purposes of this Agreement, including, without
limitation, to receive and collect all instruments made payable to the
Company representing any payments in respect of the Pledged Collateral or
any part thereof and to give full discharge for the same. The Secured Party
may demand, collect, receipt for, settle, compromise, adjust, xxx for,
foreclose, or realize on the Pledged Property as and when the Secured Party
may determine. To facilitate collection, the Secured Party may notify
account debtors and obligors on any Pledged Property or Pledged Collateral
to make payments directly to the Secured Party.
Section 3.2. Secured Party May Perform.
If the Company fails to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause performance of,
such agreement, and the expenses of the Secured Party incurred in
connection therewith shall be included in the Obligations secured hereby
and payable by the Company under Section 8.3.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Authorization; Enforceability.
Each of the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and performance of
this Agreement and the transactions contemplated hereby; and upon
execution and delivery, this Agreement shall constitute a valid and binding
obligation of the respective party, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights or by the principles governing the availability of equitable remedies.
Section 4.2. Ownership of Pledged Property.
The Company warrants and represents that it is the legal and beneficial
owner of the Pledged Property free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest
created by this Agreement and a security interest on certain specific
equipment granted to Agilent Financial Services, Inc.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
Section 5.1. Default and Remedies.
(a) If an Event of Default described in Section 2.2(c)(i) and (ii) occurs, then
in each such case the Secured Party may declare the Obligations to be due
and payable immediately, by a notice in writing to the Company, and upon
any such declaration, the Obligations shall become immediately due and
payable. If an Event of Default described in Sections 2.2(c)(iii) or
(iv) occurs and is continuing for the period set forth therein, then the
Obligations shall automatically become immediately due and payable
without declaration or other act on the part of the Secured Party.
(b) Upon the occurrence of an Event of Default, the Secured Party shall:
(i) be entitled to receive all distributions with respect to the Pledged
Collateral, (ii) to cause the Pledged Property to be transferred into the name
of the Secured Party or its nominee, (iii) to dispose of the Pledged
Property, and (iv) to realize upon any and all rights in the Pledged Property
then held by the Secured Party.
(c) Notwithstanding the provisions of this Section 5 or the Agreement, the
Secured Party agrees not to take any action under this Agreement prior to
exhausting its remedies for a default or an Event of Default under the
Pledge and Escrow Agreement; provided that if the Secured Party could not
sell or dispose of all the Pledged Shares within 90 days of an Event of
Default as determined by the Secured Party in its sole discretion, then the
Secured Party may proceed against any collateral without the need to
exhaust its remedies under the Pledge and Escrow Agreement.
Section 5.2. Method of Realizing Upon the Pledged Property: Other
Remedies.
Subject to the provisions of 5.1(c), upon the occurrence of an Event of
Default, in addition to any rights and remedies available at law or in equity,
the following provisions shall govern the Secured Party's right to realize
upon the Pledged Property:
(a) Any item of the Pledged Property may be sold for cash or other value
in any number of lots at brokers board, public auction or private sale and
may be sold without demand, advertisement or notice (except that the
Secured Party shall give the Company ten (10) days' prior written notice of
the time and place or of the time after which a private sale may be made
(the "Sale Notice")), which notice period is hereby agreed to be
commercially reasonable. At any sale or sales of the Pledged Property, the
Company may bid for and purchase the whole or any part of the Pledged
Property and, upon compliance with the terms of such sale, may hold,
exploit and dispose of the same without further accountability to the
Secured Party. The Company will execute and deliver, or cause to be
executed and delivered, such instruments, documents, assignments, waivers,
certificates, and affidavits and supply or cause to be supplied such further
information and take such further action as the Secured Party reasonably
shall require in connection with any such sale.
(b) Any cash being held by the Secured Party as Pledged Collateral and all
cash proceeds received by the Secured Party in respect of, sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral shall be applied as follows:
(i) to the payment of all amounts due the Secured Party for the expenses
reimbursable to it hereunder or owed to it pursuant to Section 8.3 hereof;
(ii) to the payment of the Obligations then due and unpaid.
(iii) the balance, if any, to the person or persons entitled thereto, including,
without limitation, the Company.
(c) In addition to all of the rights and remedies which the Secured Party
may have pursuant to this Agreement, the Secured Party shall have all of
the rights and remedies provided by law, including, without limitation,
those under the Uniform Commercial Code.
(i) If the Company fails to pay such amounts due upon the occurrence of an
Event of Default which is continuing, then the Secured Party may institute
a judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the
same against the Company and collect the monies adjudged or decreed to
be payable in the manner provided by law out of the property of Company,
wherever situated.
(ii) The Company agrees that it shall be liable for any reasonable fees,
expenses and costs incurred by the Secured Party in connection with
enforcement, collection and preservation of the Transaction Documents,
including, without limitation, reasonable legal fees and expenses, and such
amounts shall be deemed included as Obligations secured hereby and
payable as set forth in Section 8.3 hereof.
Section 5.3. Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relating to the Company or the property of the Company
or of such other obligor or its creditors, the Secured Party (irrespective of
whether the Obligations shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Secured Party
shall have made any demand on the Company for the payment of the
Obligations), subject to the rights of Previous Security Holders, shall be
entitled and empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of the Obligations and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Secured Party (including any claim for the
reasonable legal fees and expenses and other expenses paid or incurred by
the Secured Party permitted hereunder and of the Secured Party allowed in
such judicial proceeding), and
(ii) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by the
Secured Party to make such payments to the Secured Party and, in the event
that the Secured Party shall consent to the making of such payments
directed to the Secured Party, to pay to the Secured Party any amounts for
expenses due it hereunder.
Section 5.4. Duties Regarding Pledged Collateral.
The Secured Party shall have no duty as to the collection or protection of
the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of
any of the Pledged Property actually in the Secured Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party
shall consent otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1. Existence, Properties, Etc.
(a) The Company shall do, or cause to be done, all things, or proceed with
due diligence with any actions or courses of action, that may be reasonably
necessary (i) to maintain Company's due organization, valid existence and
good standing under the laws of its state of incorporation, and (ii) to
preserve and keep in full force and effect all qualifications, licenses and
registrations in those jurisdictions in which the failure to do so could have
a Material Adverse Effect (as defined below); and (b) the Company shall
not do, or cause to be done, any act impairing the Company's corporate
power or authority (i) to carry on the Company's business as now
conducted, and (ii) to execute or deliver this Agreement or any other
document delivered in connection herewith, including, without limitation,
any UCC-1 Financing Statements required by the Secured Party to which
it is or will be a party, or perform any of its obligations hereunder or
thereunder. For purpose of this Agreement, the term "Material Adverse
Effect" shall mean any material and adverse affect as determined by
Secured Party in its sole discretion, whether individually or in the
aggregate, upon (a) the Company's assets, business, operations, properties
or condition, financial or otherwise; (b) the Company's to make payment
as and when due of all or any part of the Obligations; or (c) the Pledged
Property.
Section 6.2. Financial Statements and Reports.
The Company shall furnish to the Secured Party within a reasonable time
such financial data as the Secured Party may reasonably request, including,
without limitation, the following financial data:
a) The balance sheet of the Company as of the close of each fiscal year, the
statement of earnings and retained earnings of the Company as of the close
of such fiscal year, and statement of cash flows for the Company for such
fiscal year, all in reasonable detail, prepared in accordance with generally
accepted accounting principles consistently applied, certified by the chief
executive and chief financial officers of the Company as being true and
correct and accompanied by a certificate of the chief executive and chief
financial officers of the Company, stating that the Company has kept,
observed, performed and fulfilled each covenant, term and condition of this
Agreement during such fiscal year and that no Event of Default hereunder
has occurred and is continuing, or if an Event of Default has occurred and
is continuing, specifying the nature of same, the period of existence of same
and the action the Company proposes to take in connection therewith;
b) A balance sheet of the Company as of the close of each month, and
statement of earnings and retained earnings of the Company as of the close
of such month, all in reasonable detail, and prepared substantially in
accordance with generally accepted accounting principles consistently
applied, certified by the chief executive and chief financial officers of the
Company as being true and correct; and
c) Copies of all accountants' reports and accompanying financial reports
submitted to the Company by independent accountants in connection with
each annual examination of the Company.
Section 6.3. Accounts and Reports.
The Company shall maintain a standard system of accounting in accordance
with generally accepted accounting principles consistently applied and
provide, at its sole expense, to the Secured Party the following:
(a) as soon as available, a copy of any notice or other communication
alleging any nonpayment or other material breach or default, or any
foreclosure or other action respecting any material portion of its assets and
properties, received respecting any of the indebtedness of the Company in
excess of $15,000 (other than the Obligations), or any demand or other
request for payment under any guaranty, assumption, purchase agreement
or similar agreement or arrangement respecting the indebtedness or
obligations of others in excess of $15,000, including any received from any
person acting on behalf of the Secured Party or beneficiary thereof; and
(b) within fifteen (15) days after the making of each submission or filing,
a copy of any report, financial statement, notice or other document,
whether periodic or otherwise, submitted to the shareholders of the
Company, or submitted to or filed by the Company with any governmental
authority involving or affecting (i) the Company that could have a Material
Adverse Effect; (ii) the Obligations; (iii) any part of the Pledged Collateral;
or (iv) any of the transactions contemplated in this Agreement or the Loan
Instruments.
Section 6.4. Maintenance of Books and Records; Inspection.
The Company shall maintain its books, accounts and records in accordance
with generally accepted accounting principles consistently applied, and
permit the Secured Party, its officers and employees and any professionals
designated by the Secured Party in writing, at any time to visit and inspect
any of its properties (including but not limited to the collateral security
described in the Transaction Documents and/or the Loan Instruments),
corporate books and financial records, and to discuss its accounts, affairs
and finances with any employee, officer or director thereof.
Section 6.5. Maintenance and Insurance.
(a) The Company shall maintain or cause to be maintained, at its own
expense, all of its assets and properties in good working order and
condition, making all necessary repairs thereto and renewals and
replacements thereof.
(b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles),
which the Company deems reasonably necessary to the Company's
business, (i) adequate to insure all assets and properties of the Company,
which assets and properties are of a character usually insured by persons
engaged in the same or similar business against loss or damage resulting
from fire or other risks included in an extended coverage policy; (ii) against
public liability and other tort claims that may be incurred by the Company;
(iii) as may be required by the Transaction Documents and/or applicable
law and (iv) as may be reasonably requested by Secured Party, all with
adequate, financially sound and reputable insurers.
Section 6.6. Contracts and Other Collateral.
The Company shall perform all of its obligations under or with respect to
each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Company is now or hereafter will be party
on a timely basis and in the manner therein required, including, without
limitation, this Agreement.
Section 6.7. Defense of Collateral, Etc.
The Company shall defend and enforce its right, title and interest in and to
any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss could have a
Material Adverse Effect, the Company shall defend the Secured Party's
right, title and interest in and to each and every part of the Pledged
Property, each against all manner of claims and demands on a timely basis
to the full extent permitted by applicable law.
Section 6.8. Payment of Debts, Taxes, Etc.
The Company shall pay, or cause to be paid, all of its indebtedness and
other liabilities and perform, or cause to be performed, all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or
cause to be paid or discharged, all taxes, assessments and other
governmental charges and levies imposed upon it, upon any of its assets and
properties on or before the last day on which the same may be paid without
penalty, as well as pay all other lawful claims (whether for services, labor,
materials, supplies or otherwise) as and when due
Section 6.9. Taxes and Assessments; Tax Indemnity.
The Company shall (a) file all tax returns and appropriate schedules thereto
that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits
or upon any properties belonging to it, prior to the date on which penalties
attach thereto, and (c) pay all taxes, assessments and governmental charges
or levies that, if unpaid, might become a lien or charge upon any of its
properties; provided, however, that the Company in good faith may contest
any such tax, assessment, governmental charge or levy described in the
foregoing clauses (b) and (c) so long as appropriate reserves are maintained
with respect thereto.
Section 6.10. Compliance with Law and Other Agreements.
The Company shall maintain its business operations and property owned or
used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all
agreements, licenses, franchises, indentures and mortgages to which the
Company is a party or by which the Company or any of its properties is
bound. Without limiting the foregoing, the Company shall pay all of its
indebtedness promptly in accordance with the terms thereof.
Section 6.11. Notice of Default.
The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement, the
Transaction Documents or any other Loan Instrument or any other
agreement of Company for the payment of money, promptly upon the
occurrence thereof.
Section 6.12. Notice of Litigation.
The Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Company, or affecting any
of the assets of the Company, and (b) any dispute, not resolved within
fifteen (15) days of the commencement thereof, between the Company on
the one hand and any governmental or regulatory body on the other hand,
which might reasonably be expected to have a Material Adverse Effect on
the business operations or financial condition of the Company.
ARTICLE 7.
NEGATIVE COVENANTS
The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not,
unless the Secured Party shall consent otherwise in writing:
Section 7.1. Indebtedness.
The Company shall not directly or indirectly permit, create, incur, assume,
permit to exist, increase, renew or extend on or after the date hereof any
indebtedness on its part, including commitments, contingencies and credit
availabilities, or apply for or offer or agree to do any of the foregoing other
than the extension of or amendment of the Company's currently outstanding
convertible subordinated notes or in connection with a transaction whereby
the Convertible Debentures will be retired.
Section 7.2. Liens and Encumbrances.
The Company shall not directly or indirectly make, create, incur, assume
or permit to exist any assignment, transfer, pledge, mortgage, security
interest or other lien or encumbrance of any nature in, to or against any
part of the Pledged Property or of the Company's capital stock, or offer or
agree to do so, or own or acquire or agree to acquire any asset or property
of any character subject to any of the foregoing encumbrances (including
any conditional sale contract or other title retention agreement), or assign,
pledge or in any way transfer or encumber its right to receive any income
or other distribution or proceeds from any part of the Pledged Property or
the Company's capital stock; or enter into any sale-leaseback financing
respecting any part of the Pledged Property as lessee, or cause or assist the
inception or continuation of any of the foregoing other than in connection
with its currently outstanding lease lines of credit.
Section 7.3. Management, Ownership.
The Company shall not materially change its ownership, executive staff or
management without the prior written consent of the Secured Party. The
ownership, executive staff and management of the Company are material
factors in the Secured Party's willingness to institute and maintain a lending
relationship with the Company.
Section 7.4. Dividends, Etc.
The Company shall not declare or pay any dividend of any kind, in cash or
in property, on any class of its capital stock, nor purchase, redeem, retire
or otherwise acquire for value any shares of such stock, nor make any
distribution of any kind in respect thereof, nor make any return of capital
to shareholders, nor make any payments in respect of any pension, profit
sharing (other than standard 401(k) matching) or retirement plan (except as
required or permitted hereunder), without the prior written consent of the
Secured Party.
Section 7.5. Guaranties; Loans.
The Company shall not guarantee nor be liable in any manner, whether
directly or indirectly, or become contingently liable after the date of this
Agreement in connection with the obligations or indebtedness of any person
or persons, except for (i) the indebtedness currently secured by the liens
identified on the Pledged Property identified on Exhibit A hereto and (ii)
the endorsement of negotiable instruments payable to the Company for
deposit or collection in the ordinary course of business. The Company
shall not make any loan, advance or extension of credit to any person other
than in the normal course of its business.
Section 7.6. Debt.
The Company shall not create, incur, assume or suffer to exist any
additional indebtedness of any description whatsoever in an aggregate
amount in excess of $25,000 (excluding any indebtedness of the Company
to the Secured Party, trade accounts payable and accrued expenses incurred
in the ordinary course of business and the endorsement of negotiable
instruments payable to the Company, respectively for deposit or collection
in the ordinary course of business).
Section 7.7. Conduct of Business.
The Company will continue to engage, in an efficient and economical
manner, in a business of the same general type as conducted by it on the
date of this Agreement.
Section 7.8. Places of Business.
The location of the Company's chief place of business is 0000 Xxxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxx XX 00000. The Company shall not change the
location of its chief place of business, chief executive office or any place
of business disclosed to the Secured Party or move any of the Pledged
Property from its current location without thirty (30) days' prior written
notice to the Secured Party in each instance.
ARTICLE 8.
MISCELLANEOUS
Section 8.1. Notices.
All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as
duly given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:
If to the Secured Party: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx-Xxxxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxx Xxxxx, Esq.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And if to the Company: Access Pharmaceuticals, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx X. Grey
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxx XxXxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change its address by giving notice to the other party stating
its new address. Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for
the purpose of all notices or other communications required or permitted to
be given pursuant to this Agreement.
Section 8.2. Severability.
If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried
out as if any such invalid or unenforceable provision were not contained
herein.
Section 8.3. Expenses.
In the event of an Event of Default, the Company will pay to the Secured
Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Secured Party may
incur in connection with: (i) the custody or preservation of, or the sale,
collection from, or other realization upon, any of the Pledged Property;
(ii) the exercise or enforcement of any of the rights of the Secured Party
hereunder or (iii) the failure by the Company to perform or observe any of
the provisions hereof.
Section 8.4. Waivers, Amendments, Etc.
The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured
Party under this Agreement to demand strict compliance and performance
herewith. Any waiver by the Secured Party of any Event of Default shall
not waive or affect any other Event of Default, whether such Event of
Default is prior or subsequent thereto and whether of the same or a
different type. None of the undertakings, agreements and covenants of the
Company contained in this Agreement, and no Event of Default, shall be
deemed to have been waived by the Secured Party, nor may this Agreement
be amended, changed or modified, unless such waiver, amendment, change
or modification is evidenced by an instrument in writing specifying such
waiver, amendment, change or modification and signed by the Secured
Party.
Section 8.5. Continuing Security Interest.
This Agreement shall create a continuing security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full
of the Obligations; and (ii) be binding upon the Company and its successors
and heirs and (iii) inure to the benefit of the Secured Party and its
successors and assigns. Upon the payment or satisfaction in full of the
Obligations, the Company shall be entitled to the return, at its expense, of
such of the Pledged Property as shall not have been sold in accordance with
Section 5.2 hereof or otherwise applied pursuant to the terms hereof.
Section 8.6. Independent Representation.
Each party hereto acknowledges and agrees that it has received or has had
the opportunity to receive independent legal counsel of its own choice and
that it has been sufficiently apprised of its rights and responsibilities with
regard to the substance of this Agreement.
Section 8.7. Applicable Law: Jurisdiction.
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey without regard to the principles of conflict
of laws. The parties further agree that any action between them shall be
heard in Xxxxxx County, New Jersey, and expressly consent to the
jurisdiction and venue of the Superior Court of New Jersey, sitting in
Xxxxxx County and the United States District Court for the District of New
Jersey sitting in Newark, New Jersey for the adjudication of any civil action
asserted pursuant to this Paragraph.
Section 8.8. Waiver of Jury Trial.
AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY
TO THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS
TRANSACTION.
Section 8.9. Entire Agreement.
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect
to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By:/s/ Xxxx Xxxxxx
--------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
HIGHGATE HOUSE FUNDS, LTD
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
--------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
ACCESS PHARMACEUTICAL, INC.
By: /s/ Xxxxx X. Xxxx
----------------------
Name:Xxxxx X. Xxxx
Title: President and Chief Executive Officer
ESCROW AGENT
By: /s/ Xxxxx Xxxxxxxx
--------------------------
Name: Xxxxx Xxxxxxxx, Esq.
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
For the purpose of securing prompt and complete payment and performance
by the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest
in and to, and lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation, machinery,
equipment, furniture, furnishings, fixtures, signs, lights, tools, parts,
supplies and motor vehicles of every kind and description, now or hereafter
owned by the Company or in which the Company may have or may
hereafter acquire any interest, and all replacements, additions, accessions,
substitutions and proceeds thereof, arising from the sale or disposition
thereof, and where applicable, the proceeds of insurance and of any tort
claims involving any of the foregoing;
(b) all inventory of the Company, including, but not limited to, all goods,
wares, merchandise, parts, supplies, finished products, other tangible
personal property, including such inventory as is temporarily out of
Company's custody or possession and including any returns upon any
accounts or other proceeds, including insurance proceeds, resulting from the
sale or disposition of any of the foregoing;
(c) all contract rights and general intangibles of the Company, including,
without limitation, goodwill, trademarks, trade styles, trade names,
leasehold interests, partnership or joint venture interests, patents and patent
applications, copyrights, deposit accounts whether now owned or hereafter
created;
(d) all documents, warehouse receipts, instruments and chattel paper of the
Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other forms of
obligations and rights to payment of the Company (herein collectively
referred to as "Accounts"), together with the proceeds thereof, all goods
represented by such Accounts and all such goods that may be returned by
the Company's customers, and all proceeds of any insurance thereon, and
all guarantees, securities and liens which the Company may hold for the
payment of any such Accounts including, without limitation, all rights of
stoppage in transit, replevin and reclamation and as an unpaid vendor
and/or lienor, all of which the Company represents and warrants will be
bona fide and existing obligations of its respective customers, arising out
of the sale of goods by the Company in the ordinary course of business;
(f) to the extent assignable, all of the Company's rights under all present
and future authorizations, permits, licenses and franchises issued or granted
in connection with the operations of any of its facilities;
(g) all products and proceeds (including, without limitation, insurance
proceeds) from the above-described Pledged Property.
