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13. SETTLEMENT OF LEGAL MATTERS | 12 Months Ended
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Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract] |
13. SETTLEMENT OF LEGAL MATTERS | A Settlement Agreement, signed in May 2011, between the Company and thirteen hedge funds (the “plaintiffs”) resolved all claims arising from a lawsuit initiated by the plaintiffs in October 2009. As previously disclosed by the Company in its public filings, in August 2006 the plaintiffs (or their predecessors) purchased from the Company Series K notes convertible into the Company’s common stock and Series K warrants to purchase the Company’s common stock under agreements which provided the Series K notes and warrants with anti-dilution protection if the Company sold additional shares of common stock, or securities convertible into common stock, at a price below the then applicable conversion price of the notes or the exercise price of the warrants. In their lawsuit, the plaintiffs alleged that a March 2009 drug marketing and distribution agreement in which the Company sold units of common stock and warrants to an unrelated third party triggered these anti-dilution provisions, and that the Company failed to give effect to these provisions. The plaintiffs sought $30 million in actual damages, $90 million in punitive damages, the issuance of additional shares of common stock and warrants, and a reduction in the conversion price of the Series K notes and the exercise price of the Series K warrants. The Company denied the plaintiffs’ allegations in the lawsuit and asserted that the 2009 agreement was a strategic transaction which did not trigger the anti-dilution provisions of the 2006 financing agreements. Although the Company believed the plaintiffs’ claims were without merit, the Company was of the opinion that a settlement of the lawsuit was in the best interests of its shareholders. The settlement was entered into to avoid the substantial costs of further litigation and the risk and uncertainty that litigation entails. By ending this dispute, and ending the significant demands on the time and attention of the Company’s management necessary to respond to the litigation, the Company was better able to focus on executing its ongoing Phase III clinical trial with its investigational cancer drug Multikine. Under the terms of the Settlement Agreement and related agreements, the plaintiffs and the Company terminated the pending litigation and released each other from all claims each may have had against the other, with certain customary exceptions. The Company agreed to make a $3 million cash payment and issue convertible promissory notes with an aggregate principal amount of $4.95 million and 4,050 shares of redeemable Series A Preferred Stock. The total settlement cost of $12 million was recorded as other expense in fiscal year 2011. The preferred shares were fully redeemed during the year ended September 30, 2011. All convertible notes had been paid as of March 1, 2012.

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