EXHIBIT 4.3.1
SECURITIES PURCHASE AGREEMENT
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This Securities Purchase Agreement (this "Agreement") is dated as of
March 15, 2002 by and between Questcor Pharmaceuticals, Inc., a California
corporation (the "Company"), and SF Capital Partners Ltd., a British Virgin
Islands company (the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933 (the
"Securities Act"), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to Purchaser, and the Purchaser desires to purchase from the
Company, securities of the Company as more fully described in this Agreement.
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 the Purchaser agrees
as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in this
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Agreement: (a) capitalized terms that are not otherwise defined herein that are
defined in the Debenture shall have the meanings given to such terms in the
Debenture, and (b) the following terms have the meanings indicated in this
Section 1.1:
"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.
"Closing" means the closing of the purchase and sale of the Debenture
and Warrants pursuant to Section 2.1.
"Closing Date" means the date of the Closing.
"Closing Price" 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 an Eligible Market, the closing sale price per share of the Common
Stock for such date (or the nearest preceding date) on the primary Eligible
Market on which the Common Stock is then listed or quoted; (b) if the Common
Stock is not then listed or quoted on an Eligible Market and if prices for the
Common Stock are then quoted on the OTC Bulletin Board, the closing sale price
per share of the Common Stock for such date (or the nearest preceding date) on
the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on
the OTC Bulletin Board and if prices for the Common Stock are then reported in
the "Pink Sheets" published by the National Quotation Bureau Incorporated (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent sale price per share of the Common Stock so reported; or
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(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 Purchaser.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, no par value per
share, and any securities into which such common stock may hereafter be
reclassified.
"Company Counsel" means Xxxxxx & Xxxxxxx, San Diego, California.
"Debenture" means $2,000,000 in aggregate principal amount of the
Company's 8% Convertible Debentures issued to the Purchaser at the Closing, in
the form of Exhibit A.
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"Effective Date" means the date that an Underlying Shares Registration
Statement is first declared effective by the Commission.
"Effectiveness Date" means the date on which an Underlying Shares
Registration Statement is required to become effective pursuant to the
Registration Rights Agreement.
"Eligible Market" means any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
Market.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of preparation
and reasonable attorneys' fees.
"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.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition).
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Purchaser, in the form of Exhibit B.
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"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.
"Securities" means the Debenture, the Warrants and the Underlying
Shares.
"Securities Act" means the Securities Act of 1933, as amended.
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"Transaction Documents" means this Agreement, the Debenture, the
Warrants, the Transfer Agent Instructions, the Registration Rights Agreement and
any other documents or agreements executed in connection with the transactions
contemplated hereunder.
"Transfer Agent Instructions" means the Transfer Agent Instructions,
in the form of Exhibit D, executed by the Company and delivered to and
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acknowledged in writing by the Company's transfer agent.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Debenture and upon exercise of the Warrants.
"Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by the Purchaser.
"Warrants" means collectively the Common Stock purchase warrants, in
the form of Exhibit C delivered to the Purchaser at the Closing in accordance
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with Section 2.2.
ARTICLE II
PURCHASE AND SALE
2.1. Closing. The Closing shall take place via facsimile immediately
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following the execution hereof, or by such other method or at such location or
time as the parties may agree.
2.2. Closing Deliveries.
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(a) At the Closing, the Company shall deliver or cause to be
delivered to the Purchaser the following:
(i) The Debenture in the principal amount of $2,000,000,
registered in the name of the Purchaser;
(ii) a Warrant, registered in the name of the Purchaser,
pursuant to which the Purchaser shall have the right to acquire a
number of shares of Common Stock equal to 60% of the number of
Underlying Shares issuable upon conversion in full of the principal
amount of Debentures issued to the Purchaser at the Closing;
(iii) the legal opinion of Company Counsel, in agreed form;
(iv) the Transfer Agent Instructions; and
(v) the Registration Rights Agreement duly executed by the
Company.
(b) At the Closing, the Purchaser shall deliver or cause to be
delivered to the Company the following:
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(i) $2,000,000 in United States dollars, in immediately
available funds, by wire transfer to an account designated in writing
by the Company for such purpose; and
(ii) the Registration Rights Agreement duly executed by the
Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. The Company hereby
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makes the following representations and warranties to the Purchaser:
(a) Organization and Qualification. The Company is an entity duly
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incorporated or otherwise organized, validly existing and in good standing under
the laws of the State of California, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company is not in violation of any of the provisions
of its articles of incorporation or bylaws. The Company is duly qualified to do
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 reasonably be
expected to, individually or in the aggregate: (i) adversely affect the
legality, validity or enforceability of any Transaction Document, (ii) have or
result in a material adverse effect on the results of operations, assets,
business or condition (financial or otherwise) of the Company, or (iii)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a
"Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been (or upon delivery will be) 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.
(c) No Conflicts. The execution, delivery and performance of the
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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 articles of incorporation or bylaws, or
(ii) subject to obtaining the Required Approvals (as defined below), 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 debt or
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otherwise) or other understanding to which the Company is a party or by which
any property or asset of the Company 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 is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected; except in the
case of each of clauses (ii) and (iii), such as would not reasonably be expected
to, individually or in the aggregate, have or result in a Material Adverse
Effect.
(d) Filings, Consents and Approvals. To the Company's knowledge,
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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 filings required under Section 4.8,
(ii) the filing with the Commission of the Underlying Shares Registration
Statement, (iii) the application(s) to each applicable Trading Market for the
listing of the Underlying Shares for trading thereon in the time and manner
required thereby, and (iv) applicable Blue Sky filings (collectively, the
"Required Approvals").
(e) Issuance of the Securities. The Securities are duly
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authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, claims or encumbrances (other than
liens, claims or encumbrances granted by Purchaser) ("Liens"). The Company has
reserved from its duly authorized capital stock a sufficient number of
Underlying Shares to enable it to comply with its conversion and exercise
obligations under the Debenture and the Warrants, respectively.
(f) Capitalization. The number of shares and type of all
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authorized, issued and outstanding capital stock of the Company is set forth in
the Disclosure Materials (as defined below). No securities of the Company are
entitled to preemptive or similar rights, and no Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities and except as
disclosed in the Disclosure Materials, there are no outstanding options,
warrants, script 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 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 issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under such securities.
(g) SEC Reports; Financial Statements. The Company has filed all
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reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law to file such material)
(the foregoing materials being collectively referred to
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herein as the "SEC Reports" and, together with the Schedules to this Agreement
and the draft Form 10-K provided to Purchaser on March 13, 2002 (the "Draft Form
10-K"), the "Disclosure Materials") 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. The Company has delivered to the Purchasers a
copy of all SEC Reports filed within the ten (10) days preceding the date
hereof. As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder, and none of the SEC Reports, when
filed, 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. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles 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 fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries 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, immaterial, year-end audit adjustments.
(h) Material Changes. Since the date of the latest audited
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financial statements included within the SEC Reports, except as specifically
disclosed in the Disclosure Materials: (i) there has been no event, occurrence
or development that has had or that would reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) except as disclosed in the Disclosure Materials, the Company has
not issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock purchase and stock option plans.
(i) Litigation. To the Company's knowledge, there is no action,
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suit, inquiry, notice of violation, proceeding or investigation pending or
threatened against the Company or any of its 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)
would reasonably be expected to, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse Effect.
To the Company's knowledge and except as disclosed on Schedule 3.1(j), the
Company, including any director or officer thereof, is not and has not 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.
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(j) Compliance. To the Company's knowledge, it is not: (i) in
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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 under), nor has the Company received notice of a claim that it is 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) in violation of any order of any court,
arbitrator or governmental body, or (iii) in violation of any statute, rule or
regulation of any governmental authority, except in each case as would not
reasonably be expected to, individually or in the aggregate, have or result in a
Material Adverse Effect.
(k) Labor Relations. No material labor problem exists or, to the
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knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(l) Regulatory Permits. The Company possesses all certificates,
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authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct its business as described in
the Disclosure Materials, except where the failure to possess such permits would
not reasonably be expected to, individually or in the aggregate, have or result
in a Material Adverse Effect ("Material Permits"), and the Company has not
received any notice of proceedings relating to the revocation or modification of
any Material Permit.
(m) Title to Assets. The Company has good and marketable title in
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fee simple to all real property owned by it that is material to the business of
the Company and good and marketable title in all personal property owned by it
that is material to the business of the Company, in each case free and clear of
all Liens, except for Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company. Any real property and facilities held
under lease by the Company is held by it under valid, subsisting and enforceable
leases of which the Company is in compliance in all material respects.
(n) Patents and Trademarks. To the Company's knowledge, the
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Company has, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with its businesses as described in the Disclosure Materials and
which the failure to so have would reasonably be expected to have a Material
Adverse Effect (collectively, the "Intellectual Property Rights"). The Company
has not received a written notice or otherwise has reason to believe that the
Intellectual Property Rights used by the Company violates or infringes upon the
rights of any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.
(o) Insurance. The Company is insured by, to the Company's
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knowledge, 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 is engaged. The Company has no reason to believe that it will
not be able to renew its existing insurance
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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.
(p) Transactions With Affiliates and Employees. Except as set
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forth in Disclosure Materials, 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 (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.
(q) Internal Accounting Controls. The Company maintains a system
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of internal accounting controls sufficient 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 generally accepted
accounting principles 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.
(r) Certain Fees. Except for the fees described in Schedule
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3.1(s), all of which are payable by the Company to the registered broker-dealers
named therein, 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, and the Company has not taken any
action that would cause any Purchaser to be liable for any such fees or
commissions. The Company agrees that the Purchasers shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of
any Person for fees of the type contemplated by this Section in connection with
the transactions contemplated by this Agreement.
(s) Private Placement. Assuming the accuracy of the
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representations and warranties of the Purchasers set forth in Sections
3.2(b)-(f), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act.
(t) Form S-3 Eligibility. To the Company's knowledge, it is
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eligible to register its Common Stock for resale by the Purchasers under Form
S-3 promulgated under the Securities Act.
(u) Listing and Maintenance Requirements. The Company has not, in
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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. The issuance and sale of the
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Securities hereunder does not contravene the rules and regulations of the
Trading Market and no shareholder approval is required for the Company to
fulfill its obligations under the Transaction Documents.
(v) Registration Rights. Except as described in Schedule 3.1(w),
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the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
(w) Application of Takeover Protections. The Company and its
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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
would reasonably be expected to become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation as a
result of the Company's issuance of the Securities and the Purchasers' ownership
of the Securities.
(x) Seniority. Except as disclosed in the Debenture of even date
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herewith, as of the date of this Agreement, no indebtedness of the Company is
senior to the Debentures 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).
(y) Disclosure. To the Company's knowledge, neither it nor any
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other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that the Company believes constitutes,
material nonpublic information; except for the Draft Form 10-K, which Draft Form
10-K shall be filed no later than three (3) Trading Days following the Closing.
The Company understands and confirms that the Purchasers will rely on the
foregoing representations 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 Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
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. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2.
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(z) Investment Company. The Company is not, and is not an
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Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
3.2. Representations and Warranties of the Purchaser. The Purchaser
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hereby represents and warrants to the Company as follows:
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(a) Organization; Authority. The Purchaser is an entity duly
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organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
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 purchase by such Purchaser of the Securities to be
acquired by it has been duly authorized by all necessary action on the part of
such Purchaser. Each of this Agreement and the Registration Rights Agreement 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.
(b) Investment Intent. Such Purchaser is acquiring the Securities
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as principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser's right, subject to the provisions
of this Agreement, at all times to sell or otherwise dispose of all or any part
of such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. 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.
(c) Purchaser Status. At the time such Purchaser was offered the
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Securities, it was, and at the date hereof it is, and on each date on which it
exercises any Warrants or converts any Debentures, it will be an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Such Purchaser has
not been formed solely for the purpose of acquiring the Securities.
(d) Experience of such Purchaser. Such Purchaser, either alone or
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together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, 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 Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) Access to Information. Such Purchaser acknowledges that it
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has reviewed the Disclosure Materials and has been afforded: (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and its financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to
obtain such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment. Neither such inquiries nor
any other investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser's right
to
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rely on the truth, accuracy and completeness of the Disclosure Materials and the
Company's representations and warranties contained in the Transaction Documents.
(f) General Solicitation. Such Purchaser is not purchasing the
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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.
(g) Reliance. Such Purchaser understands and acknowledges that:
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(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that the Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1. Transfer Restrictions.
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(a) The Securities may only be disposed of by the Purchaser 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 or to a Person managed
or advised by the same Person as manager or adviser to such Purchaser 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, 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. As a condition of transfer, any such transferee shall restate the
representations and warranties of such Purchaser under Section 3.2 and agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any certificate
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evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE [EXERCISABLE] [CONVERTIBLE] HAVE 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
-11-
"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, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that the Purchaser may from time
to time pledge pursuant to a bona fide margin agreement or grant a security
interest in some or all of the Securities 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 the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the Purchaser's expense, the Company will execute
and deliver such reasonable 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) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
(c) Certificates evidencing Securities shall not contain any
legend (including the legend set forth in Section 4.1(b)): (i) following a sale
of such Securities pursuant to the Underlying Shares Registration Statement in
which the prospectus delivery requirement was satisfied, or (ii) following any
sale of such Securities pursuant to Rule 144, or (iii) if such Securities 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). If
all or any portion of a Debenture or Warrant is converted or exercised (as
applicable) at a time when the Underlying Shares are eligible for sale under
Rule 144(k), 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
Company's transfer agent of a certificate representing Securities issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser a
certificate representing such Securities that is free from all restrictive and
other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
-12-
4.2. Acknowledgment of Dilution. The Company acknowledges that the
--------------------------
issuance of the Securities will result in dilution of the outstanding shares of
Common Stock. The Company further acknowledges that its obligations under the
Transaction Documents, including without limitation its obligation to issue the
Underlying Shares pursuant to the Transaction Documents, are unconditional and
absolute and not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any claim that the
Company may have against any Purchaser.
4.3. 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 Purchaser, the Company shall deliver to
such Purchaser 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 such
laws, 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.
4.4. Integration. The Company shall not, and shall use commercially
-----------
reasonable efforts to ensure that no Affiliate of the Company shall, 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.
4.5. Reservation and Listing of Securities. The Company shall maintain
-------------------------------------
a reserve from its duly authorized shares of Common Stock to comply with its
conversion and exercise obligations under the Debentures and Warrants pursuant
to the Transaction Documents.
4.6. Conversion and Exercise Procedures. The form of Election to
----------------------------------
Purchase included in the Warrants and the forms of Conversion Notice included in
the Debentures set forth the totality of the procedures required in order to
exercise the Warrants or convert the Debentures. No additional legal opinion or
other information or instructions shall be necessary to enable the Purchasers to
exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.
4.7. Subsequent Placements.
---------------------
(a) From the Closing Date and for 180 days thereafter, the
Company shall not, directly or indirectly, offer, sell or grant any option to
purchase, or otherwise dispose of, or announce any offer, sale, grant or any
option to purchase or other disposition (collectively, a "Subsequent Placement")
of any of its Common Stock or other securities which entitle the holder thereof
to receive Common Stock, including without limitation any debt, preferred stock
-13-
or other instrument or security that is, at any time during its life and under
any circumstances, convertible into or exchangeable for Common Stock.
(b) The restrictions contained in Section 4.7(a) shall not apply
to: (i) the granting of options to, or the purchase of shares by, employees,
consultants, officers and directors of the Company pursuant to any stock option
plan or employee stock purchase plan duly adopted by the Company prior to the
date hereof or to the issuance of Common Stock upon exercise of such options, or
(ii) issuances of shares of Common Stock pursuant to a Strategic Transaction. A
"Strategic Transaction" shall mean a transaction or relationship in which the
Company issues Common Stock to a Person which is, itself or through its
subsidiaries, an operating company in a business related to the business of the
Company and in which the Company receives material benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.
(c) The restriction contained in Section 4.7(a) shall be extended
for any number of Trading Days during such period in which: (i) trading in the
Common Stock is suspended by any Trading Market, or (ii) the Underlying Shares
Registration Statement is not effective or (iii) the prospectus included in the
Underlying Shares Registration Statement may not be used by the Purchasers for
the resale of Registrable Securities thereunder.
4.8. Securities Laws Disclosure; Publicity. The Company shall, not
-------------------------------------
later than the Closing Date, issue a press release reasonably acceptable to the
Purchaser disclosing all material terms of the transactions contemplated hereby.
The Company and the Purchaser shall consult with each other in issuing any press
releases with respect to the transactions contemplated hereby. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any
Purchaser, or include the name of the Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall provide the
Purchaser with prior notice of such disclosure.
4.9. Non-Public Information. The Company covenants and agrees that
----------------------
neither it nor any other Person acting on its behalf has provided or will
provide the 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 representations
in effecting transactions in securities of the Company.
4.10. Use of Proceeds. The Company shall use the net proceeds from the
---------------
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables and accrued expenses in the ordinary course of the Company's business
and prior practices), to redeem any Company equity or equity-equivalent
securities or to settle any outstanding litigation.
-14-
4.11. Indemnification of Purchasers. The Company will indemnify and
-----------------------------
hold the Purchaser and its directors, officers, shareholders, partners,
employees and agents (each, a "Purchaser Party") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "Losses")
that any such Purchaser Party may suffer or incur as a result of or relating to:
(a) any misrepresentation, breach or inaccuracy, or any allegation by a third
party that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and arising solely
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability
pertaining to such Purchaser and not to the transactions contemplated by this
Agreement. The Company will reimburse such Purchaser for its reasonable legal
and other expenses (including the cost of any investigation, preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred.
4.12. Shareholders Rights Plan. In the event that a shareholders
------------------------
rights plan is adopted by the Company, no claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any such plan or in any way would reasonably be expected to be deemed to trigger
the provisions of such plan by virtue of receiving Securities under the
Transaction Documents.
ARTICLE V
MISCELLANEOUS
5.1. Fees and Expenses. The Company has agreed to pay $20,000 to the
-----------------
Purchaser as a contribution toward due diligence, legal and other fees and
expenses incurred in connection with the investigation and negotiation of the
transaction and the preparation and negotiation of the Transaction Documents. At
the Closing, the Company will pay $20,000 to Purchaser via wire transfer of
immediately available funds. Other than as specified above, each party shall pay
the fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the issuance of any Securities.
5.2. 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. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchaser such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
-15-
5.3. 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 in this Section prior to 6:30 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 specified in this Section on a day that is not a Trading Day or later
than 6:30 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 addresses for such notices and communications are
those set forth on the signature pages hereof, or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
5.4. 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 Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.5. 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.
5.6. 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 the Purchaser. Purchaser may assign its
rights under this Agreement and the Registration Rights Agreement to any Person
to whom such Purchaser assigns or transfers any Securities.
5.7. 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 Section 4.11.
5.8. Governing Law; Venue; Waiver of Jury Trial. All questions
------------------------------------------
concerning the construction, validity, enforcement and interpretation of this
Agreement 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. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such Proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) 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.
-16-
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
5.9. Survival. The representations, warranties, agreements and
--------
covenants contained herein shall survive for a period of eighteen (18) months
following the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable.
5.10. 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.
5.11. 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.
5.12. Rescission and Withdrawal Right. Notwithstanding anything to the
-------------------------------
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever the Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
5.13. Replacement of Securities. If any certificate or instrument
-------------------------
evidencing any 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, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.14. Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of damages, the Purchaser
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that
-17-
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.
5.15. Payment Set Aside. To the extent that the Company makes a
-----------------
payment or payments to the 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 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.
5.16. Usury. To the extent it may lawfully do so, the Company hereby
-----
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by the
Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate of interest
applicable to the Transaction Documents from the effective date forward, unless
such application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to the
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser's election.
5.17. Independent Nature of Purchaser's Obligations and Rights.
--------------------------------------------------------
Nothing contained herein or in any Transaction Document, and no action taken by
the Purchaser pursuant thereto shall constitute the Purchaser as a partnership,
an association, a joint venture or any other kind of entity with any other
party, or create a presumption that the Purchaser is in any way acting in
concert with respect to such obligations or the transactions contemplated
hereby.
* * * * *
-18-
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
QUESTCOR PHARMACEUTICALS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
-------------------------------
Title: Chief Financial Officer
------------------------------
Address for Notice:
------------------
Questcor Pharmaceuticals, Inc.
Attention: President
0000 Xxxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
With a copy to:
--------------
Xxxxx X. Xxxx, Esq.
Xxxxxx & Xxxxxxx
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
SF CAPITAL PARTNERS LTD.
By: /s/ Xxxxx Xxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxx
-------------------------------
Title: Authorized Signatory
------------------------------
Address for Notice:
------------------
SF Capital Partners Ltd.
Attention: Xxxxx X. Xxxxxxxx
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxx 00000
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