Exhibit 10.27
STANDBY EQUITY DISTRIBUTION AGREEMENT
THIS AGREEMENT dated as of the 30th day of March 2005 (the
"Agreement") between CORNELL CAPITAL PARTNERS, LP, a
Delaware limited partnership (the "Investor"), and ACCESS
PHARMACEUTICALS, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from
the Company up to Fifteen Million Dollars ($15,000,000) of the Company's
common stock, par value $0.01 per share (the Common Stock"); and
WHEREAS, such investments will be made in reliance upon the provisions
of Regulation D ("Regulation D") of the Securities Act of 1933, as amended,
and the regulations promulgated thereunder (the "Securities Act"), and or
upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the
investments to be made hereunder.
WHEREAS, the Company has engaged Newbridge Securities
Corporation (the "Placement Agent"), to act as the Company's exclusive
placement agent in connection with the sale of the Company's Common Stock
to the Investor hereunder pursuant to the Placement Agent Agreement dated
the date hereof by and among the Company, the Placement Agent and the
Investor (the "Placement Agent Agreement").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I.
Certain Definitions
Section 1.1."Advance" shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.
Section 1.2."Advance Date" shall mean the date the Xxxxx Xxxxxxxx
Attorney Trust Account is in receipt of the funds from the Investor and
Xxxxx Xxxxxxxx, Esq., is in possession of free trading shares from the
Company and therefore an Advance by the Investor to the Company can be
made and Xxxxx Xxxxxxxx, Esq. can release the free trading shares to the
Investor. The Advance Date shall be the first (1st) Trading Day after
expiration of the applicable Pricing Period for each Advance.
Section 1.3."Advance Notice" shall mean a written notice to the Investor
setting forth the Advance amount that the Company requests from the
Investor and the Advance Date.
Section 1.4."Advance Notice Date" shall mean each date the Company
delivers to the Investor an Advance Notice requiring the Investor to advance
funds to the Company, subject to the terms of this Agreement. No Advance
Notice Date shall be less than five (5) Trading Days after the prior Advance
Notice Date.
Section 1.5."Bid Price" shall mean, on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market
or if the Common Stock is not traded on a Principal Market, the highest
reported bid price for the Common Stock, as furnished by the National
Association of Securities Dealers, Inc.
Section 1.6."Closing" shall mean one of the closings of a purchase and sale
of Common Stock pursuant to Section 2.3.
Section 1.7."Commitment Amount" shall mean the aggregate amount of up
to Fifteen Million Dollars ($15,000,000) which the Investor has agreed to
provide to the Company in order to purchase the Company's Common Stock
pursuant to the terms and conditions of this Agreement, provided that the
Company shall not request an Advance if the issuance of the full number of
shares of Common Stock issuable in connection with such Advance would
result in a violation of the AMEX Listing Standards, Policies and
Requirements Section 713 (or any similar applicable section) unless the
necessary shareholder approval or consent has been received prior to such
request.
Section 1.8."Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on
the earliest to occur of (x) the date on which the Investor shall have made
payment of Advances pursuant to this Agreement in the aggregate amount of
Fifteen Million Dollars ($15,000,000), (y) the date this Agreement is
terminated pursuant to Section 2.4, or (z) the date occurring twenty-four (24)
months after the Effective Date.
Section 1.9."Common Stock" shall mean the Company's common stock, par
value $0.01 per share.
Section 1.10."Condition Satisfaction Date" shall have the meaning set forth
in Section 7.2.
Section 1.11."Damages" shall mean any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorney's fees and
disbursements and costs and expenses of expert witnesses and investigation).
Section 1.12."Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.13."Escrow Agreement" shall mean the escrow agreement among
the Company, the Investor, and Xxxxx Xxxxxxxx, Esq., dated the date hereof.
Section 1.14."Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.15."Material Adverse Effect" shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to enter into and perform any of its
obligations under this Agreement or the Registration Rights Agreement in any
material respect.
Section 1.16."Market Price" shall mean the lowest VWAP of the Common
Stock during the Pricing Period.
Section 1.17."Maximum Advance Amount" shall be One Million
Dollars ($1,000,000) per Advance Notice.
Section 1.18."NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.19."Person" shall mean an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
Section 1.20."Placement Agent" shall mean Newbridge Securities
Corporation, a registered broker-dealer.
Section 1.21."Pricing Period" shall mean the five (5) consecutive Trading
Days after the Advance Notice Date.
Section 1.22."Principal Market" shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange, the OTC Bulletin
Board or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.
Section 1.23."Purchase Price" shall be set at ninety eight percent (98%) of
the Market Price during the Pricing Period.
Section 1.24."Registrable Securities" shall mean the shares of Common Stock
to be issued hereunder (i) in respect of which the Registration Statement has
not been declared effective by the SEC, (ii) which have not been sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act (Rule 144"), (iii)
which have not been otherwise transferred to a holder who may trade such
shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such securities
not bearing a restrictive legend, or (iv) which are not immediately tradable
pursuant to Rule 144(k).
Section 1.25."Registration Rights Agreement" shall mean the Registration
Rights Agreement dated the date hereof, regarding the filing of the
Registration Statement for the resale of the Registrable Securities, entered
into between the Company and the Investor.
Section 1.26."Registration Statement" shall mean a registration statement on
Form S-3 or SB-2 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated
by the SEC for which the Company then qualifies and which counsel for the
Company shall deem appropriate, and which form shall be available for the
resale of the Registrable Securities to be registered thereunder in accordance
with the provisions of this Agreement and the Registration Rights Agreement,
and in accordance with the intended method of distribution of such
securities), for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.
Section 1.27."Regulation D" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.28."SEC" shall mean the Securities and Exchange Commission.
Section 1.29."Securities Act" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.30."SEC Documents" shall mean Annual Reports on Form 10-KSB
or 10-K, Quarterly Reports on Form 10-QSB or 10-Q, Current Reports on
Form 8-K and Proxy Statements of the Company as supplemented to the date
hereof, filed by the Company for a period of at least twelve (12) months
immediately preceding the date hereof or the Advance Date, as the case may
be, until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.31."Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.32."VWAP" shall mean the volume weighted average price of the
Company's Common Stock as quoted by Bloomberg, LP.
ARTICLE II.
Advances
Section 0.0.Xxxxxxxxxxx.
(a)Advances. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII hereof), on any Advance
Notice Date the Company may request an Advance by the Investor by the
delivery of an Advance Notice. The number of shares of Common Stock
that the Investor shall receive for each Advance shall be determined by
dividing the amount of the Advance by the Purchase Price. No fractional
shares shall be issued. Fractional shares shall be rounded to the next higher
whole number of shares. The aggregate maximum amount of all Advances
that the Investor shall be obligated to make under this Agreement shall not
exceed the Commitment Amount.
Section 2.2. Mechanics.
(a) Advance Notice. At any time during the Commitment Period, the
Company may deliver an Advance Notice to the Investor, subject to the
conditions set forth in Section 7.2; provided, however, the amount for each
Advance as designated by the Company in the applicable Advance Notice,
shall not be more than the Maximum Advance Amount. The aggregate
amount of the Advances pursuant to this Agreement shall not exceed the
Commitment Amount. The Company acknowledges that the Investor may
sell shares of the Company's Common Stock corresponding with a particular
Advance Notice on the day the Advance Notice is received by the Investor.
There shall be a minimum of five (5) Trading Days between each Advance
Notice Date.
(b) Date of Delivery of Advance Notice. An Advance Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon
Eastern Time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 12:00 noon Eastern Time on a
Trading Day or at any time on a day which is not a Trading Day. No
Advance Notice may be deemed delivered on a day that is not a Trading
Day.
Section 2.3. Closings. On each Advance Date, which shall be the first (1st)
Trading Day after expiration of the applicable Pricing Period for each
Advance, (i) the Company shall deliver to Xxxxx Xxxxxxxx, Esq. (the
"Escrow Agent") shares of the Company's Common Stock, representing the
amount of the Advance by the Investor pursuant to Section 2.1 herein,
registered in the name of the Investor which shall be delivered to the
Investor, or otherwise in accordance with the Escrow Agreement and (ii) the
Investor shall deliver to Escrow Agent the amount of the Advance specified
in the Advance Notice by wire transfer of immediately available funds which
shall be delivered to the Company, or otherwise in accordance with the
Escrow Agreement. In addition, on or prior to the Advance Date, each of
the Company and the Investor shall deliver to the other through the Investor's
counsel, all documents, instruments and writings required to be delivered by
either of them pursuant to this Agreement in order to implement and effect
the transactions contemplated herein. Payment of funds to the Company and
delivery of the Company's Common Stock to the Investor shall occur in
accordance with the conditions set forth above and those contained in the
Escrow Agreement; provided, however, that to the extent the Company has
not paid the fees, expenses, and disbursements of the Investor, the Investor's
counsel, or the Company's counsel in accordance with Section 12.4, the
amount of such fees, expenses, and disbursements may be deducted by the
Investor (and shall be paid to the relevant party) from the amount of the
Advance with no reduction in the amount of shares of the Company's
Common Stock to be delivered on such Advance Date.
Section 2.4. Termination of Investment. The obligation of the Investor to
make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of seventy-
five (75) Trading Days, other than due to the acts of the Investor, during the
Commitment Period, and (ii) the Company shall at any time fail materially
to comply with the requirements of Article VI and such failure is not cured
within thirty (30) days after receipt of written notice from the Investor,
provided, however, that this termination provision shall not apply to any
period commencing upon the filing of a post-effective amendment to such
Registration Statement and ending upon the date on which such post effective
amendment is declared effective by the SEC.
Section 2.5. Agreement to Advance Funds. The Investor agrees to advance
the amount specified in the Advance Notice to the Company after the
completion of each of the following conditions and the other conditions set
forth in this Agreement:
(a) the execution and delivery by the Company, and the Investor, of this
Agreement and the Exhibits hereto;
(b) The Escrow Agent shall have received the shares of Common Stock
applicable to the Advance in accordance with Section 2.3. Such shares shall
be free of restrictive legends.
(c) the Company's Registration Statement with respect to the resale of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement shall have been declared effective by the SEC;
(d) the Company shall have obtained all material permits and
qualifications required by any applicable state for the offer and sale of the
Registrable Securities, or shall have the availability of exemptions therefrom.
The sale and issuance of the Registrable Securities shall be legally permitted
by all laws and regulations to which the Company is subject;
(e) the Company shall have filed with the Commission in a timely manner
all reports, notices and other documents required of a "reporting company"
under the Exchange Act and applicable Commission regulations;
(f) the fees as set forth in Section 12.4 below shall have been paid or can
be withheld as provided in Section 2.3; and
(g) the conditions set forth in Section 7.2 shall have been satisfied.
(h) the Company shall have provided to the Investor an
acknowledgement, from Xxxxx Xxxxxxxx LLP as to its ability to provide all
consents required in order to file a registration statement in connection with
this transaction;
(i) The Company's transfer agent shall be DWAC eligible.
Section 2.6. Lock Up Period. On the date hereof, the Company shall
obtain from each officer and director a lock-up agreement, as defined below,
in the form annexed hereto as Schedule 2.6 agreeing to only sell in
compliance with the volume limitation of Rule 144.
Section 2.7. Hardship. In the event the Investor sells shares of the
Company's Common Stock after receipt of an Advance Notice and the
Company fails to perform its obligations as mandated in Section 2.3, and
specifically the Company fails to deliver to the Escrow Agent on the Advance
Date the shares of Common Stock corresponding to the applicable Advance,
the Company acknowledges that the Investor shall suffer financial hardship
and therefore shall be liable for any and all losses, commissions, fees, or
financial hardship caused to the Investor.
ARTICLE III.
Representations and Warranties of Investor
Investor hereby represents and warrants to, and agrees with, the Company
that the following are true and as of the date hereof and as of each Advance
Date:
Section 3.1. Organization and Authorization. The Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest
and the execution and delivery of this Agreement by such Investor, the
performance by such Investor of its obligations hereunder and the
consummation by such Investor of the transactions contemplated hereby have
been duly authorized and requires no other proceedings on the part of the
Investor. The undersigned has the right, power and authority to execute and
deliver this Agreement and all other instruments (including, without
limitations, the Registration Rights Agreement), on behalf of the Investor.
This Agreement has been duly executed and delivered by the Investor and,
assuming the execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding obligations of the
Investor, enforceable against the Investor in accordance with its terms.
Section 3.2. Evaluation of Risks. The Investor has such knowledge and
experience in financial tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction. It recognizes that its investment in the Company involves
a high degree of risk.
Section 3.3. No Legal Advice From the Company. The Investor
acknowledges that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. The Investor is relying solely on such
counsel and advisors and not on any statements or representations of the
Company or any of its representatives or agents for legal, tax or investment
advice with respect to this investment, the transactions contemplated by this
Agreement or the securities laws of any jurisdiction.
Section 3.4. Investment Purpose. The securities are being purchased by the
Investor for its own account, and for investment. The Investor agrees not to
assign or in any way transfer the Investor's rights to the securities or any
interest therein and acknowledges that the Company will not recognize any
purported assignment or transfer except in accordance with applicable Federal
and state securities laws. No other person has or will have a direct or
indirect beneficial interest in the securities. The Investor agrees not to
sell, hypothecate or otherwise transfer the Investor's securities unless the
securities are registered under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption
from such laws is available.
Section 3.5. Accredited Investor. The Investor is an "Accredited Investor"
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities
Act.
Section 3.6. Information. The Investor and its advisors (and its counsel),
if any, have been furnished with all materials relating to the business,
finances and operations of the Company and information it deemed material
to making an informed investment decision. The Investor and its advisors,
if any, have been afforded the opportunity to ask questions of the Company
and its management. Neither such inquiries nor any other due diligence
investigations conducted by such Investor or its advisors, if any, or its
representatives shall modify, amend or affect the Investor's right to rely on
the Company's representations and warranties contained in this Agreement.
The Investor understands that its investment involves a high degree of risk.
The Investor is in a position regarding the Company, which, based upon
employment, family relationship or economic bargaining power, enabled and
enables such Investor to obtain information from the Company in order to
evaluate the merits and risks of this investment. The Investor has sought
such accounting, legal and tax advice, as it has considered necessary to make
an informed investment decision with respect to this transaction.
Section 3.7. Receipt of Documents. The Investor and its counsel have
received and read in their entirety: (i) this Agreement and the Exhibits
annexed hereto; (ii) all due diligence and other information necessary to
verify the accuracy and completeness of such representations, warranties and
covenants; (iii) the Company's Form 10-K for the year ended December 31,
2003 and Form 10-Q for the period ended September 30, 2004; and
(iv) answers to all questions the Investor submitted to the Company regarding
an investment in the Company; and the Investor has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.
Section 3.8. Registration Rights Agreement and Escrow Agreement. The
parties have entered into the Registration Rights Agreement and the Escrow
Agreement, each dated the date hereof.
Section 3.9. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale
of the shares of Common Stock offered hereby.
Section 3.10.Not an Affiliate. The Investor is not an officer, director or a
person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company
or any "Affiliate" of the Company (as that term is defined in Rule 405 of the
Securities Act).
Section 0.00.Xxxxxxx Activities. The Investor's trading activities with
respect to the Company's Common Stock have been and shall be in
compliance with all applicable federal and state securities laws, rules and
regulations and the rules and regulations of the Principal Market on which
the Company's Common Stock is listed or traded. Neither the Investor nor
its affiliates has an open short position in the Common Stock of the
Company, the Investor agrees that it shall not, and that it will cause its
affiliates not to, engage in any short sales of or hedging transactions with
respect to the Common Stock, provided that the Company acknowledges and
agrees that upon receipt of an Advance Notice the Investor is permitted to
sell the shares to be issued to the Investor pursuant to the Advance Notice
during the applicable Pricing Period.
ARTICLE IV.
Representations and Warranties of the Company
Except as stated below, on the disclosure schedules attached hereto or in the
SEC Documents (as defined herein), the Company hereby represents and
warrants to, and covenants with, the Investor that the following are true and
correct as of the date hereof:
Section 4.1. Organization and Qualification. The Company is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite corporate power to own
its properties and to carry on its business as now being conducted. Each of
the Company and its subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
Section 4.2. Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Placement Agent Agreement and any
related agreements, in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement,
the Escrow Agreement, the Placement Agent Agreement and any related
agreements by the Company and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii) this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Placement Agent Agreement and any related agreements have been duly
executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Placement Agent
Agreement and assuming the execution and delivery thereof and acceptance
by the Investor and any related agreements constitute the valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
Section 4.3. Capitalization. As of the date hereof the authorized capital
stock of the Company consists of 50,000,000 shares of Common Stock, par
value $0.01 per share and 2,000,000 shares of Preferred Stock of which
15,524,734 shares of Common Stock and zero shares of Preferred Stock are
issued and outstanding. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. Except as disclosed in the SEC
Documents and in connection with the issuance of certain Debentures to the
Investor and its Affiliates, no shares of Common Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed in the SEC
Documents, as of the date hereof, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, (ii) there are no
outstanding debt securities (iii) there are no outstanding registration
statements other than on Form S-8 and Form S-3 resale registration
statements in connection with sales of common stock discussed in the SEC
Documents, and (iv) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of any
of their securities under the Securities Act (except pursuant to the
Registration Rights Agreement and Form S-3 resale registration statements
in connection with sales of common stock discussed in the SEC Documents).
There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by this Agreement or any related agreement
or the consummation of the transactions described herein or therein. The
Company has furnished to the Investor true and correct copies of the
Company's Certificate of Incorporation, as amended and as in effect on the
date hereof (the "Certificate of Incorporation"), and the Company's By-laws,
as in effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of
the holders thereof in respect thereto.
Section 4.4. No Conflict. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations of any outstanding
series of preferred stock of the Company or By-laws or (ii) conflict with or
constitute a default (or an event which 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 of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market on which the Common Stock is quoted)
applicable to the Company or any of its subsidiaries or by which any material
property or asset of the Company or any of its subsidiaries is bound or
affected and which would cause a Material Adverse Effect. Except as
disclosed in the SEC Documents, neither the Company nor its subsidiaries
is in violation of any term of or in default under its Articles of Incorporation
or By-laws or their organizational charter or by-laws, respectively, or any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its subsidiaries. The business of the Company and its
subsidiaries is not being conducted in violation of any material law,
ordinance, regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and
any applicable state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by this Agreement or
the Registration Rights Agreement in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof. The Company and
its subsidiaries are unaware of any fact or circumstance which might give rise
to any of the foregoing.
Section 4.5. SEC Documents; Financial Statements. Since January 1,
2003, the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC under of the
Exchange Act. The Company has delivered to the Investor or its
representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx, true and complete copies of the SEC Documents. As
of their respective dates, the financial statements of the Company disclosed
in the SEC Documents (the "Financial Statements") complied as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and, fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided in writing by or on behalf of the Company to the
Investor which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
Section 4.6. 10b-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light
of the circumstances under which they were made, not misleading.
Section 4.7. No Default. Except as disclosed in the SEC Documents, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which
it is a party or by which it is or its property is bound and neither the
execution, nor the delivery by the Company, nor the performance by the
Company of its obligations under this Agreement or any of the exhibits or
attachments hereto will conflict with or result in the breach or violation of
any of the terms or provisions of, or constitute a default or result in the
creation or imposition of any lien or charge on any assets or properties of the
Company under its Certificate of Incorporation, By-Laws, any material
indenture, mortgage, deed of trust or other material agreement applicable to
the Company or instrument to which the Company is a party or by which it
is bound, or any statute, or any decree, judgment, order, rules or regulation
of any court or governmental agency or body having jurisdiction over the
Company or its properties, in each case which default, lien or charge is
likely to cause a Material Adverse Effect on the Company's business or
financial condition.
Section 4.8. Absence of Events of Default. Except for matters described
in the SEC Documents and/or this Agreement, no Event of Default, as
defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (as so defined), has occurred and is continuing,
which would have a Material Adverse Effect on the Company's business,
properties, prospects, financial condition or results of operations.
Section 4.9. Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all material trademarks,
trade names, service marks, service xxxx registrations, service names,
patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct
their respective businesses as now conducted. The Company and its
subsidiaries do not have any knowledge of any infringement by the Company
or its subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service xxxx
registrations, trade secret or other similar rights of others, and, to the
knowledge of the Company, there is no claim, action or proceeding being
made or brought against, or to the Company's knowledge, being threatened
against, the Company or its subsidiaries regarding trademark, trade name,
patents, patent rights, invention, copyright, license, service names, service
marks, service xxxx registrations, trade secret or other infringement; and the
Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
Section 4.10.Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of
the Company's or its subsidiaries' employees is a member of a union and the
Company and its subsidiaries believe that their relations with their employees
are good.
Section 4.11.Environmental Laws. The Company and its subsidiaries are
(i) in compliance with any and all applicable material foreign, federal, state
and local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval.
Section 4.12.Title. Except as set forth in the SEC Documents, the
Company has good and marketable title to its properties and material assets
owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are not material
to the business of the Company. Any real property and facilities held under
lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
Section 0.00.Xxxxxxxxx. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has
been refused any insurance coverage sought or applied for and neither the
Company nor any such subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.
Section 4.14.Regulatory Permits. The Company and its subsidiaries possess
all material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit.
Section 4.15.Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system 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.
Section 0.00.Xx Material Adverse Breaches, etc. Except as set forth in the
SEC Documents, neither the Company nor any of its subsidiaries is subject
to any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the judgment of the Company's officers
has or is expected in the future to have a Material Adverse Effect on the
business, properties, operations, financial condition, results of operations or
prospects of the Company or its subsidiaries. Except as set forth in the SEC
Documents, neither the Company nor any of its subsidiaries is in breach of
any contract or agreement which breach, in the judgment of the Company's
officers, has or is expected to have a Material Adverse Effect on the
business, properties, operations, financial condition, results of operations or
prospects of the Company or its subsidiaries.
Section 4.17.Absence of Litigation. Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending against or affecting the Company, the Common
Stock or any of the Company's subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) have a Material Adverse Effect on the
transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated
herein, or (iii) except as expressly disclosed in the SEC Documents, have a
Material Adverse Effect on the business, operations, properties, financial
condition or results of operation of the Company and its subsidiaries taken
as a whole.
Section 4.18.Subsidiaries. Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly, any
interest in any other corporation, partnership, association or other business
entity.
Section 0.00.Xxx Status. Except as disclosed in the SEC Documents, the
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has
paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.
Section 4.20.Certain Transactions. Except as set forth in the SEC
Documents none of the officers, directors, or 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 corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
Section 4.21.Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or
other third parties.
Section 4.22.Use of Proceeds. The Company shall use the net proceeds
from this offering for general corporate purposes, including, without
limitation, the payment of loans incurred by the Company. However, in no
event shall the Company use the net proceeds from this offering for the
payment (or loan to any such person for the payment) of any judgment, or
other liability, incurred by any executive officer, officer, director or
employee of the Company, except for any liability owed to such person for
services rendered, or if any judgment or other liability is incurred by such
person originating from services rendered to the Company, or the Company
has indemnified such person from liability.
Section 4.23.Further Representation and Warranties of the Company. For
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that
it will maintain the listing of its Common Stock on the Principal Market.
Section 4.24.Opinion of Counsel. Investor shall receive an opinion letter
from counsel to the Company on the date hereof.
Section 4.25.Opinion of Counsel. The Company will obtain for the
Investor, at the Company's expense, any and all opinions of counsel which
may be reasonably required in order to sell the securities issuable hereunder
without restriction.
Section 4.26.Dilution. The Company is aware and acknowledges that
issuance of shares of the Company's Common Stock could cause dilution to
existing shareholders and could significantly increase the outstanding number
of shares of Common Stock.
ARTICLE V.
Indemnification
The Investor and the Company represent to the other the following with
respect to itself:
Section 5.1. Indemnification.
(a) In consideration of the Investor's execution and delivery of this
Agreement, and in addition to all of the Company's other obligations under
this Agreement, the Company shall defend, protect, indemnify and hold
harmless the Investor, and all of its officers, directors, partners, employees
and agents (including, without limitation, those retained in connection with
the transactions contemplated by this Agreement) (collectively, the "Investor
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses
in connection therewith (irrespective of whether any such Investor Indemnitee
is a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Investor Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or
document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made against such Investor Indemnitee not arising out of
any action or inaction of an Investor Indemnitee, and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed
pursuant hereto by any of the Investor Indemnitees. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Investor's other obligations under
this Agreement, the Investor shall defend, protect, indemnify and hold
harmless the Company and all of its officers, directors, shareholders,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Company Indemnitees") from and against any and all
Indemnified Liabilities incurred by the Company Indemnitees or any of them
as a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Investor in this
Agreement, the Registration Rights Agreement, or any instrument or
document contemplated hereby or thereby executed by the Investor, (b) any
breach of any covenant, agreement or obligation of the Investor(s) contained
in this Agreement, the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby executed
by the Investor, or (c) any cause of action, suit or claim brought or made
against such Company Indemnitee based on misrepresentations or due to a
breach by the Investor and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the
Company Indemnitees. To the extent that the foregoing undertaking by the
Investor may be unenforceable for any reason, the Investor shall make the
maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities, which is permissible under applicable law.
(c) The obligations of the parties to indemnify or make contribution under
this Section 5.1 shall survive termination.
ARTICLE VI.
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall
comply in all material respects with the terms thereof.
Section 6.2. Listing of Common Stock. The Company shall maintain the
Common Stock's authorization for listing on the American Stock
Exchange,the OTC Bulletin Board, Nasdaq National Market, or the Nasdaq
SmallCap Market .
Section 6.3. Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12(g) of the
Exchange Act, will file in a timely manner all reports and other documents
required of it as a reporting company under the Exchange Act and will not
take any action or file any document (whether or not permitted by Exchange
Act or the rules thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said Exchange
Act.
Section 6.4. Transfer Agent Instructions. Upon effectiveness of the
Registration Statement the Company shall deliver instructions to its transfer
agent to issue shares of Common Stock to the Investor free of restrictive
legends on or before each Advance Date
Section 6.5. Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.6. Notice of Certain Events Affecting Registration; Suspension
of Right to Make an Advance. The Company will immediately notify the
Investor upon its becoming aware of the occurrence of any of the following
events in respect of a registration statement or related prospectus relating to
an offering of Registrable Securities: (i) receipt of any request for additional
information by the SEC or any other Federal or state governmental authority
during the period of effectiveness of the Registration Statement for
amendments or supplements to the registration statement or related
prospectus; (ii) the issuance by the SEC or any other Federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the happening of any event that makes any
statement made in the Registration Statement or related prospectus of any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in
the Registration Statement, related prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and that
in the case of the related prospectus, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the
Company's reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate; and the Company will promptly
make available to the Investor any such supplement or amendment to the
related prospectus. The Company shall not deliver to the Investor any
Advance Notice during the continuation of any of the foregoing events.
Section 6.7. Restriction on Sale of Capital Stock. During the Commitment
Period, the Company shall not, without the prior written consent of the
Investor, (i) issue or sell any Common Stock or Preferred Stock without
consideration or for a consideration per share less than 20% of the bid price
of the Common Stock determined immediately prior to its issuance,
(excluding shares of Common Stock issuable upon the exercise of options,
warrants or conversion rights granted prior to the date hereof), (ii) issue or
sell any Preferred Stock, warrant, option, right, contract, call, or other
security or instrument granting the holder thereof the right to acquire
Common Stock without consideration or for a consideration per share less
than 20% of such Common Stock's Bid Price determined immediately prior
to its issuance or (iii) file any registration statement on Form S-8 except to
register up to 1,300,000 shares of the Common Stock to be issued under a
stock incentive plan.
Section 6.8. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with
or into, or a transfer of all or substantially all the assets of the Company to
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
Section 6.9. Issuance of the Company's Common Stock. The sale of the
shares of Common Stock shall be made in accordance with the provisions and
requirements of Regulation D and any applicable state securities law.
ARTICLE VII.
Conditions for Advance and Conditions to Closing
Section 7.1. Conditions Precedent to the Obligations of the Company. The
obligation hereunder of the Company to issue and sell the shares of Common
Stock to the Investor incident to each Closing is subject to the satisfaction,
or waiver by the Company, at or before each such Closing, of each of the
conditions set forth below.
(a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement and the Registration Rights Agreement
to be performed, satisfied or complied with by the Investor at or prior to
such Closing.
Section 7.2. Conditions Precedent to the Right of the Company to Deliver
an Advance Notice and the Obligation of the Investor to Purchase Shares of
Common Stock. The right of the Company to deliver an Advance Notice and
the obligation of the Investor hereunder to acquire and pay for shares of the
Company's Common Stock incident to a Closing is subject to the fulfillment
by the Company, on (i) the date of delivery of such Advance Notice and
(ii) the applicable Advance Date (each a "Condition Satisfaction Date"), of
each of the following conditions:
(a) Registration of the Common Stock with the SEC. The Company shall
have filed with the SEC a Registration Statement with respect to the resale
of the Registrable Securities in accordance with the terms of the Registration
Rights Agreement. As set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall
remain effective on each Condition Satisfaction Date and (i) neither the
Company nor the Investor shall have received notice that the SEC has issued
or intends to issue a stop order with respect to the Registration Statement or
that the SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC's concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist. The Registration Statement must have been declared
effective by the SEC prior to the first Advance Notice Date.
(b) Authority. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of
Common Stock, or shall have the availability of exemptions therefrom. The
sale and issuance of the shares of Common Stock shall be legally permitted
by all laws and regulations to which the Company is subject.
(c) Fundamental Changes. There shall not exist any fundamental changes
to the information set forth in the Registration Statement which would require
the Company to file a post-effective amendment to the Registration
Statement.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement (including, without limitation, the
conditions specified in Section 2.5 hereof) and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at
or prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
that prohibits or directly and adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely affecting any
of the transactions contemplated by this Agreement.
(f) No Suspension of Trading in or Delisting of Common Stock. The
trading of the Common Stock is not suspended by the SEC or the Principal
Market (if the Common Stock is traded on a Principal Market). The issuance
of shares of Common Stock with respect to the applicable Closing, if any,
shall not violate the shareholder approval requirements of the Principal
Market (if the Common Stock is traded on a Principal Market). The
Company shall not have received any notice threatening the continued listing
of the Common Stock on the Principal Market (if the Common Stock is
traded on a Principal Market).
(g) Maximum Advance Amount. The amount of an Advance requested
by the Company shall not exceed the Maximum Advance Amount. In
addition, in no event shall the number of shares issuable to the Investor
pursuant to an Advance cause the aggregate number of shares of Common
Stock beneficially owned by the Investor and its affiliates to exceed nine and
9/10 percent (9.9%) of the then outstanding Common Stock of the Company.
For the purposes of this section beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act.
(h) No Knowledge. The Company has no knowledge of any event which
would be more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective.
(i) Other. On each Condition Satisfaction Date, the Investor shall have
received the certificate executed by an officer of the Company in the form
of Exhibit A attached hereto.
ARTICLE VIII.
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1. Due Diligence Review. Prior to the filing of the Registration
Statement the Company shall make available for inspection and review by the
Investor, its advisors and representatives, and any underwriter participating
in any disposition of the Registrable Securities on behalf of the Investor
pursuant to the Registration Statement, any such registration statement or
amendment or supplement thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Documents and other filings with the
SEC, and all other corporate documents and properties of the Company as
may be reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such information
reasonably requested by the Investor or any such representative, advisor or
underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries reasonably
made or submitted by any of them), prior to and from time to time after the
filing and effectiveness of the Registration Statement for the sole purpose of
enabling the Investor and such representatives, advisors and underwriters and
their respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to the
Investor, its advisors, or its representatives, unless prior to disclosure of
such information the Company identifies such information as being non-public
information and provides the Investor, such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public
information hereunder, require the Investor's advisors and representatives to
enter into a confidentiality agreement in form reasonably satisfactory to the
Company and the Investor.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the
Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts, except under confidentiality
agreements, provided, however, that notwithstanding anything herein to the
contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically
or generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or
to omit a material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they were made,
not misleading. Nothing contained in this Section 8.2 shall be construed to
mean that such persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may not
obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent
any such persons or entities from notifying the Company of their opinion that
based on such due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of material fact or omits a material
fact required to be stated in the Registration Statement or necessary to make
the statements contained therein, in light of the circumstances in which they
were made, not misleading.
ARTICLE IX.
Choice of Law/Jurisdiction
Section 9.1. Governing Law. 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, New Jersey and the United States District
Court of New Jersey, sitting in Newark, New Jersey, for the adjudication of
any civil action asserted pursuant to this paragraph.
ARTICLE X.
Assignment; Termination
Section 10.1.Assignment. Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person except in
connection with a merger of the Company or sale of all or substantially all
of the stock or assets of the Company.
Section 10.2.Termination.
(a) The obligations of the Investor to make Advances under Article II hereof
shall terminate twenty-four (24) months after the Effective Date.
(b) The Company may terminate this Agreement upon thirty (30) days
written notice to the Investor provided that (i) there are no Advances
outstanding, and (ii) The Company has paid all amounts owed to the Buyers
pursuant to this Agreement or any other agreements between the Company
and the Buyers. Any termination of this Agreement pursuant to this Section
10.2 (b) shall not terminate the Registration Rights Agreement unless the
Investor has disposed of all the Investor Shares (as defined below) and all
shares issued to the Investor pursuant to Advances, or all such shares are
eligible for resale pursuant to Rule 144(k).
ARTICLE XI.
Notices
Section 11.1.Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile, provided a copy is mailed by U.S. certified mail, return receipt
requested; (iii) three (3) days after being sent by U.S. certified mail, return
receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company, to: Access Pharmaceuticals, inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
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
If to the Investor(s): Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 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
Each party shall provide five (5) days - prior written notice to the other party
of any change in address or facsimile number.
ARTICLE XII.
Miscellaneous
Section 12.1.Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which 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. In the event any
signature page is delivered by facsimile transmission, the party using such
means of delivery shall cause four (4) additional original executed signature
pages to be physically delivered to the other party within five (5) days of the
execution and delivery hereof, though failure to deliver such copies shall not
affect the validity of this Agreement.
Section 12.2.Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Investor, the
Company, their affiliates and persons acting on their behalf with respect to
the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
Section 12.3.Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of
the Common Stock on any given Trading Day for the purposes of this
Agreement shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Investor and the Company shall be required to employ
any other reporting entity.
Section 12.4.Fees and Expenses. The Company hereby agrees to pay the
following fees:
(a) Structuring Fees. Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or
others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company shall pay a
structuring fee of Ten Thousand Dollars ($10,000) to Yorkville Advisors
Management, LLC, which was paid on February 28, 2005. Subsequently on
each advance date, the Company will pay Yorkville Advisors Management,
LLC a structuring fee of Five Hundred Dollars ($500) directly out the
proceeds of any Advances hereunder.
(b) Due Diligence Fee. Company shall pay the Investor a non-refundable
due diligence fee of Two Thousand Five Hundred Dollars ($2,500) which
was paid on February 28, 2005.
(c) Commitment Fees.
(i) On each Advance Date the Company shall pay to the Investor,
directly from the gross proceeds held in escrow, an amount equal to three
and one half percent (3.5%) of the amount of each Advance. The Company
hereby agrees that if such payment, as is described above, is not made by the
Company on the Advance Date, such payment will be made at the direction
of the Investor as outlined and mandated by Section 2.3 of this Agreement.
(ii) The Company shall issue to the Investor one hundred forty six
thousand five hundred (146,500) shares of the Common Stock upon the
execution of this Agreement, and fifty thousand (50,000) shares of Common
Stock within ten (10) business days of the date that the Company exceeds
$10,000,000 in aggregate Advances (collectively, the "Investor's Shares").
(iii) Fully Earned. The Investor's Shares shall be deemed fully earned as
of the date hereof.
(iv) Registration Rights. The Investor's Shares will have "piggy-back"
registration rights.
Section 12.5.Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party.
The Company on the one hand, and the Investor, on the other hand, agree
to indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 12.6.Confidentiality. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties
hereto shall keep confidential any information obtained from any other party
(except information publicly available or in such party's domain prior to the
date hereof, and except as required by court order) and shall promptly return
to the other parties all schedules, documents, instruments, work papers or
other written information without retaining copies thereof, previously
furnished by it as a result of this Agreement or in connection herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Standby
Equity Distribution Agreement to be executed by the undersigned, thereunto
duly authorized, as of the date first set forth above.
COMPANY:
ACCESS PHARMACEUTICALS, INC.
By: /s/ Xxxxx X. Xxxx
Name: Xxxxx X. Xxxx
Title: President and Chief Executive Officer
INVESTOR:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Portfolio Manager
