STANDBY EQUITY DISTRIBUTION AGREEMENT

 

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 David Gonzalez

Attorney Trust Account is in receipt of the funds from the Investor and

David Gonzalez, 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 David Gonzalez, 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 David Gonzalez, 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 2.1.Investments.

 

(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 David Gonzalez, 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 Grant Thornton 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 3.11.Trading 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 it