EXHIBIT 10.1
EXECUTION COPY
--------------------
INVESTMENT AGREEMENT
--------------------
Between
QUANTRX BIOMEDICAL CORPORATION
and
FLUOROPHARMA, INC.
Dated as of February 17, 2006
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms ..........................................1
SECTION 1.02. Definitions ....................................................2
SECTION 1.03. Interpretation and Rules of Construction .......................2
ARTICLE II
ISSUANCE OF STOCK
SECTION 2.01. Issuance of Common Stock ........................................2
SECTION 2.02. Payment of Payment Amount........................................2
SECTION 2.03. Closing .........................................................2
SECTION 2.04. Use of Proceeds .................................................2
SECTION 2.05. Closing Deliveries by the Company ...............................2
SECTION 2.06. Closing Deliveries by the Investor ..............................2
SECTION 2.07. Stage 2 Investment ..............................................2
SECTION 2.08. Stage 3 Investment ..............................................2
SECTION 2.09. Stage 4 Investment ..............................................2
SECTION 2.10. Acceleration of Investments .....................................2
SECTION 2.11. Issuance of Options .............................................2
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 3.01. Organization, Authority and Qualification of the Company .......2
SECTION 3.02. Capitalization .................................................2
SECTION 3.03. No Conflict ....................................................2
SECTION 3.04. Governmental Consents and Approvals ............................2
SECTION 3.05. Financial Information; Books and Records .......................2
SECTION 3.06. Litigation .....................................................2
SECTION 3.07. Tax Matters ....................................................2
SECTION 3.08. Title to Properties ............................................2
SECTION 3.09. Intellectual Property ..........................................2
SECTION 3.10. Material Contracts .............................................2
SECTION 3.11. Governmental Approvals; Compliance with Laws ...................2
SECTION 3.12. Insurance Coverage .............................................2
SECTION 3.13. Employee Benefit Matters .......................................2
SECTION 3.14. No Brokers or Finders ..........................................2
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SECTION 3.15. Transactions with Affiliates ...................................2
SECTION 3.16. Corporate Records ..............................................2
SECTION 3.17. Disclosures ....................................................2
SECTION 3.18. Certain Payments ...............................................2
SECTION 3.19. Environmental...................................................2
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE INVESTOR
SECTION 4.01. Authorization ..................................................2
SECTION 4.02. Purchase Entirely for Own Account ..............................2
SECTION 4.03. Disclosure of Information ......................................2
SECTION 4.04. Investment Experience ..........................................2
SECTION 4.05. Restricted Securities ..........................................2
SECTION 4.06. Brokers' Fees ..................................................2
SECTION 4.07. No Public Market ...............................................2
SECTION 4.08. Securities Filings .............................................2
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Access to Information ..........................................2
SECTION 5.02. Notice of Developments .........................................2
SECTION 5.03. Right of First Refusal with Respect to Additional Financing.....2
SECTION 5.04. Further Action .................................................2
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Company .......................2
SECTION 6.02. Conditions to Obligations of the Investor ......................2
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties .....................2
SECTION 7.02. Indemnification by the Company .................................2
SECTION 7.03. Notice of Loss; Third Party Claims .............................2
SECTION 7.04. Survival of Covenants and Agreements ...........................2
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ARTICLE VIII
TERMINATION
SECTION 8.01. Termination ....................................................2
SECTION 8.02. Effect of Termination ..........................................2
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Expenses .......................................................2
SECTION 9.02. Notices ........................................................2
SECTION 9.03. Public Announcements ...........................................2
SECTION 9.04. Severability ...................................................2
SECTION 9.05. Entire Agreement ...............................................2
SECTION 9.06. Assignment .....................................................2
SECTION 9.07. Amendment ......................................................2
SECTION 9.08. Waiver .........................................................2
SECTION 9.09. No Third Party Beneficiaries ...................................2
SECTION 9.10. Specific Performance ...........................................2
SECTION 9.11. Governing Law ..................................................2
SECTION 9.12. WAIVER OF JURY TRIAL ...........................................2
SECTION 9.13. Counterparts ...................................................2
EXHIBITS
A Amended and Restated Investors' Rights Agreement
B Option Agreement
C Consulting Agreement
D Pro Forma Capitalization Table
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THIS INVESTMENT AGREEMENT (this "Agreement"), dated as of February
17, 2006, between QuantRx Biomedical Corporation, a Nevada corporation (the
"Investor") and FluoroPharma, Inc., a Delaware corporation (the "Company").
WHEREAS, the Company is a molecular imaging company headquartered
in Boston, Massachusetts, and is engaged in the discovery, development and
commercialization of proprietary products for the positron emission tomography;
WHEREAS, the Investor is a healthcare technology company with
broadly enabling technologies in point of use diagnostics;
WHEREAS, the Company has agreed to issue to the Investor (i)
1,050,000 shares (the "Shares") of the Company's Common Stock, $0.001 par value
(the "Common Stock"), and (ii) an option to purchase 230,000 shares of Common
Stock at an exercise price of $0.75 (the "QuantRx Option"), in exchange for a
capital contribution in the aggregate amount of $1,500,000 (the "Payment
Amount"); and
WHEREAS, the Investor and the Company intend for the Investor to
acquire a majority interest in the Company through a series of staged
investments, which will take the form of cash investments by the Investor in the
Company at increasing valuations, with the Investor's participation in each
staged investment being at the Investor's sole discretion;
NOW, THEREFORE, in consideration of the promises and the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound, the Investor and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. For purposes of this
Agreement:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
'Amended and Restated Investors' Rights Agreement" means an
amended and restated Investors' Rights Agreement substantially in the form
attached hereto Exhibit A.
"Business Day" means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by Law to be closed in The
City of New York.
"Board" means the Board of Directors of the Company.
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"Code" means the Internal Revenue Code of 1986, as amended through
the date hereof.
"Company Affiliate" means any other Person under common control
with the Company within the meaning of Sections 414(b), (c), (m) and (o) of the
Code, and the regulations issued thereunder.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee, personal
representative or executor, of the power to direct or cause the direction of the
affairs or management of a Person, whether through the ownership of voting
securities, as trustee, personal representative or executor, by contract, credit
arrangement or otherwise.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto, dated as of the date hereof, delivered by the Company to the Investor in
connection with this Agreement.
"Encumbrance" means any security interest, pledge, hypothecation,
mortgage, lien (including environmental and tax liens), violation, charge,
lease, license, encumbrance, servient easement, adverse claim, reversion,
reverter, preferential arrangement, restrictive covenant, condition or
restriction of any kind, including any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"Environmental Claim" means any claim, action, cause of action,
investigation of which the Company is aware, or notice by any Person to the
Company alleging potential liability (including potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any location owned,
leased, used or operated by the Company, or (b) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all Federal, state, local, and foreign
statute, law, regulation, ordinance, rule, judgment, order, decree or other
governmental requirement or restriction relating to pollution or protection of
human health or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata and natural resources), including laws
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
"GAAP" means United States generally accepted accounting
principles and practices in effect from time to time applied consistently
throughout the periods involved.
"Governmental Authority" means any federal, national,
supranational, state, provincial, local, or similar government, governmental,
regulatory or administrative authority, agency or commission or any court,
tribunal, or judicial or arbitral body having actual legal jurisdiction over the
person, place or transaction in question.
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"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Knowledge of the Company" means the actual knowledge of Xxxx X.
Xxxxxx and Xx. Xxxxx X. Xxxxxxx with respect to the Company's corporate, legal
and financial affairs, after due inquiry.
"Law" means any applicable federal, national, supranational,
state, provincial, local or similar statute, law, ordinance, regulation, rule,
code, order, requirement or rule of law (including common law).
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable, including those arising under any Law
(including any Environmental Law), Action or Governmental Order and those
arising under any contract, agreement, arrangement, commitment or undertaking.
"Material Adverse Effect" means a material adverse effect on the
assets (including intangible assets), liabilities, condition (financial or
other), business, properties, results of operations or prospects of the Company
taken as a whole.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials, lead or lead-based paints or
materials, PCBs, or radon.
"Person" means an individual, a corporation, an association, a
joint venture, a partnership, a limited liability company, an estate, a trust,
an unincorporated organization and any other entity or organization,
governmental or otherwise.
"Payment Amount Bank Account" means a bank account in the United
States to be designated by the Company in a written notice to the Investor at
least five Business Days before the Closing.
"Stock Option Plan" means the Company's Equity Incentive Plan
adopted on January 1, 2004, as amended.
"Transaction Documents" means, collectively, this Agreement, the
Amended and Restated Investors' Rights Agreement and the Option Agreement.
SECTION 1.02. Definitions. The following terms have the meanings
set forth in the Sections set forth below:
Definition Location
---------- --------
"Additional Financing" ...................5.03(a)
"Agreement" ..............................Preamble
"Benefit Plan" ...........................3.13(a)
"Closing" ................................2.03
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Definition Location
---------- --------
"Closing Date" ...........................2.03
"Common Stock" ...........................Recitals
"Company" ................................Preamble
"Company Employees" ......................3.13(c)
"Compensation Agreements" ................3.13(c)
"Compound" ...............................2.07
"ERISA" ..................................3.13(a)
"Financial Statements" ...................3.05(a)
"IP License Agreements" ..................3.09(e)
"Indemnified Party" ......................7.02(a)
"Indemnifying Party" .....................7.02(a)
"Intellectual Property" ..................3.09(a)
"Loss" ...................................7.02(a)
"Material Contracts" .....................3.10(a)
"Investor" ...............................Preamble
"Offer Notice" ...........................5.03(b)
"Options" ................................2.11
"Payment Amount" .........................Recitals
"Option Agreement" .......................2.05(b)
"Preferred Stock" ........................3.02(a)
"QuantRx Option" .........................Recitals
"Securities Act" .........................2.12
"Shares" .................................Recitals
"SEC" ....................................3.11(b)(iii)
"Stage 2 Investment" .....................2.07
"Stage 3 Investment" .....................2.08
"Stage 4 Investment" .....................2.09
"Staged Investment .......................2.10
"Strategic Partner" ......................5.03(a)
"Taxes" ..................................3.07(a)
"Taxing Authority" .......................3.07(e)
"Tax Returns" ............................3.07(c)
""Third Party Claim" .....................7.05(b)
""Title Company" .........................6.02(g)
SECTION 1.03. Interpretation and Rules of Construction. In this
Agreement, except to the extent otherwise provided or that the context otherwise
requires:
(a) when a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference is to an Article
or Section of, or a Schedule or Exhibit to, this Agreement unless
otherwise indicated;
(b) the table of contents and headings for this Agreement
are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement;
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(c) whenever the words "include," "includes" or "including"
are used in this Agreement, they are deemed to be followed by the
words "without limitation";
(d) the words "hereof," "herein" and "hereunder" and words
of similar import, when used in this Agreement, refer to this
Agreement as a whole and not to any particular provision of this
Agreement;
(e) all terms defined in this Agreement have the defined
meanings when used in any certificate or other document made or
delivered pursuant hereto, unless otherwise defined therein;
(f) the definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms;
(g) any Law defined or referred to herein or in any
agreement or instrument that is referred to herein means such Law or
statute as from time to time amended, modified or supplemented,
including by succession of comparable successor Laws;
(h) references to a Person are also to its successors and
permitted assigns; and
(i) the use of "or" is not intended to be exclusive unless
expressly indicated otherwise.
ARTICLE II
ISSUANCE OF STOCK
SECTION 2.01. Issuance of Common Stock. Upon the terms and subject
to the conditions of this Agreement and in reliance on the representations,
warranties and covenants herein set forth, the Company shall issue the Shares
and the QuantRx Option to the Investor in exchange for the contribution to the
Company of the Payment Amount as set forth herein.
SECTION 2.02. Payment of Payment Amount. The Payment Amount shall
be paid to the Company as follows: (i) the Company shall credit an amount equal
to $250,000 that it has already received in cash from the Investor toward
payment of the Payment Amount, (ii) the Investor shall pay at the Closing an
amount equal to $750,000 in cash by wire transfer and (iii) the Investor shall
pay, within 120 days after the Closing Date, an amount equal to $500,000 in cash
by wire transfer. In the event that the Investor does not make the foregoing
$500,000 payment, then the QuantRx Option shall terminate and the Investor shall
lose its rights with respect to Board participation (which rights are set forth
in the Amended and Restated Investors' Rights Agreement). Immediately upon, and
in no event later than two Business Days after, the Investor makes the $500,000
payment as described in (iii) above, the Company shall deliver or cause to be
delivered to the Investor a stock certificate representing 350,000 shares of
Common Stock duly endorsed in blank, or accompanied by stock powers duly
executed in blank, in form satisfactory to the Investor and with all required
stock transfer tax stamps affixed. If the Investor fails to make all of the
payments set forth in this Section 2.02, the Investor will lose all rights (x)
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to make future investments in the Company as described in Sections 2.07, 2.08
and 2.09, (y) all rights under the Option and (z) to Board representation and
all other rights under this Agreement and the Amended and Restated Investors'
Rights Agreement, excluding those rights that accrue to the Investor by virtue
of its ownership of shares of Common Stock on the same basis as any other
stockholder of the Company and those rights with respect to representations,
warranties and indemnifications under this Agreement.
SECTION 2.03. Closing. Subject to the satisfaction or waiver of
the conditions set forth herein, the purchase and sale of the Shares shall be
made at a closing to be held at the offices of Xxxxxxxxx Xxxxxxx, LLP, 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m. New York time on the later to occur of
(a) February 28, 2005 or (b) the next Business Day following the satisfaction or
waiver of all conditions to the obligations of the parties set forth in Article
VI or at such other place or at such other time or on such other date as the
Investor and the Company may mutually agree upon in writing (the "Closing"). The
date on which the Closing occurs shall be referred to herein as the "Closing
Date."
SECTION 2.04. Use of Proceeds. The Company shall use the proceeds
received upon the sale of the Shares as set forth in Section 2.04 of the
Disclosure Schedule.
SECTION 2.05. Closing Deliveries by the Company. At the Closing,
the Company shall deliver or cause to be delivered to the Investor:
(a) a stock certificate representing 700,000 shares of
Common Stock duly endorsed in blank, or accompanied by stock powers
duly executed in blank, in form satisfactory to the Investor and with
all required stock transfer tax stamps affixed;
(b) the QuantRx Option, substantially in the form of
Exhibit B (the "Option Agreement");
(c) an executed counterpart of the Amended and Restated
Investors' Rights Agreement;
(d) a copy of the consulting agreement, executed by Xx.
Xxxxxxx and the Company, substantially in the form attached hereto as
Exhibit C;
(e) a true and complete copy, certified by the Secretary or
an Assistant Secretary of the Company, of the resolutions duly and
validly adopted by the Board of Directors of the Company evidencing
its authorization of the execution and delivery of each of the
Transaction Documents and the consummation of the transactions
contemplated hereby and thereby;
(f) a certificate of a duly authorized officer of the
Company certifying as to the matters set forth in Section 6.02;
(g) a copy of (i) the Certificate of Incorporation, as
amended (or similar organizational documents), of the Company,
certified by the Secretary of State of the State of Delaware, as of a
date not earlier than five Business Days prior to the Closing and
accompanied by a certificate of the Secretary or Assistant Secretary
the
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Company, dated as of each Closing, stating that no amendments have
been made to such Certificate of Incorporation (or similar
organizational documents) since such date, and (ii) the By-laws
(or similar organizational documents) of the Company certified by
the Secretary or Assistant Secretary of the Company; and
(h) good standing certificates for the Company from the
Secretary of State of the State of Delaware and from the Secretary
of State in each other jurisdiction in which the properties owned
or leased by the Company, or the operation of its business in such
jurisdiction, requires the Company to qualify to do business as a
foreign corporation, in each case dated as of a date not earlier
than five Business Days prior to the Closing.
SECTION 2.06. Closing Deliveries by the Investor. At the Closing,
the Investor shall deliver to the Company:
(a) $750,000 by wire transfer in immediately available funds
to the Payment Amount Bank Account;
(b) an executed counterpart of the Amended and Restated
Investors' Rights Agreement;
(c) a true and complete copy, certified by the Secretary or
an Assistant Secretary of the Investor, of the resolutions duly and validly
adopted by the Board of Directors of the Investor evidencing its authorization
of the execution and delivery of each of the Transaction Documents to which the
Investor is a party and the consummation of the transactions contemplated hereby
and thereby;
(d) a certificate of a duly authorized officer of the
Investor certifying as to the matters set forth in Section 6.01;
(e) a copy of (i) the Certificate of Incorporation, as
amended (or similar organizational documents), of the Investor, certified by the
Secretary of State of the State of Nevada, as of a date not earlier than five
Business Days prior to the Closing and accompanied by a certificate of the
Secretary or Assistant Secretary the Investor, dated as of each Closing, stating
that no amendments have been made to such Certificate of Incorporation (or
similar organizational documents) since such date, and (ii) the By-laws (or
similar organizational documents) of the Investor certified by the Secretary or
Assistant Secretary of the Investor; and
(f) a good standing certificate for the Investor from the
Secretary of State of the State of Nevada and from each state in which the
properties owned or leased by the Investor, or the operation of its business,
require the Investor to qualify to do business as a foreign corporation, dated
as of a date not earlier than five Business Days prior to the Closing.
(g) the convertible promissory note issued by the Company in
favor of the Investor, in the principal amount of $250,000, marked "CANCELLED."
SECTION 2.07. Stage 2 Investment. Upon receipt by the Investor
of notification from the Company that the Company has completed a Phase I Trial
for not less than 12 subjects
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for a compound being developed by the Company (each a "Phase I Trial"), the
Investor shall have the option, in its sole discretion, to invest in such
compound for which the Phase I Trial has been completed (a "Compound"). Any
investment by the Investor in a Compound shall be referred to herein as a "Stage
2 Investment". Stage 2 Investments shall be structured as follows (the
percentages referred to in this section are set forth in the Pro Forma
Capitalization Table attached as Exhibit D as the same may be revised pursuant
hereto (the "Pro Forma Table")): (1) First, upon the Successful Completion of a
Phase I Trial for any Compound, the Investor shall be entitled to receive, for
an investment of $1,250,000, that number of shares of Common Stock that
constitutes one-third of the percentage set forth as the "Investors 2nd Round"
investment share percentage of the issued and outstanding capital stock of the
Company on a fully diluted and as converted basis as set forth in the Pro Forma
Table (the "2nd Round Percentage"); (2) Second, upon the completion of a Phase I
Trial for a second Compound, the Investor shall be entitled to receive, for an
investment of $1,250,000, that number of shares of Common Stock that constitutes
one-third of the 2nd Round Percentage; and (3) Third, upon the completion of a
Phase I Trial for a third Compound, the Investor shall be entitled to receive,
for an investment of $1,250,000, that number of shares of Common Stock that
constitutes one-third of the 2nd Round Percentage. The Investor may, at its
option and in its sole discretion, invest in any Compound as set forth in this
Section 2.07; however, the Investor is not obligated to invest in all the
Compounds. The Company shall provide notification to the Investor immediately
after it has Successfully Completed a Phase I Trial for any Compound. Any
investment by the Investor made pursuant to this Section 2.07 shall be completed
within 90 days after the Company provides such notification. Each Stage 2
Investment shall be consummated pursuant to, and in accordance with, a
definitive agreement, which shall contain the terms and conditions set forth in
this Section 2.07 and shall be substantially similar to this Agreement. If the
Investor declines to invest in a Compound as set forth in this Section 2.07, the
Investor shall lose its rights in the future to invest in such Compound under
Section 2.08 below, but notwithstanding anything to the contrary set forth in
this Agreement, shall not lose any other rights under any Transaction Document.
SECTION 2.08. Stage 3 Investment. Upon receipt by the Investor
of notification from the Company that the Company has completed a Phase II Trial
for not less than 15 subjects for a Compound being developed by the Company
(each a "Phase II Trial"), the Investor shall have the option, in its sole
discretion, to invest in such Compound for which the Phase II Trial has been
completed. Any investment by the Investor in a Compound shall be referred to
herein as a "Stage 3 Investment". Stage 3 Investments shall be structured as
follows: (1) First, upon the completion of a Phase II Trial for any Compound,
the Investor shall be entitled to receive, for an investment of $1,250,000, ,
that number of shares of Common Stock that constitutes one-third of the
percentage set forth as the "Investors 3rd Round" investment share percentage of
the issued and outstanding capital stock of the Company on a fully diluted and
as converted basis as set forth in the Pro Forma Table (the "3rd Round
Percentage"); (2) Second, upon the completion of a Phase II Trial for a second
Compound, the Investor shall be entitled to receive, for an investment of
$1,250,000, that number of shares of Common Stock that constitutes one-third of
the 3rd Round Percentage; and (3) Third, upon the completion of a Phase II Trial
for a third Compound, the Investor shall be entitled to receive, for an
investment of $1,250,000, that number of shares of Common Stock that constitutes
one-third of the 3rd Round Percentage. The Investor may, at its option and in
its sole discretion, invest in any Compound as set forth in this Section 2.08;
however, the Investor is not obligated to invest in all the Compounds. The
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Company shall provide notification to the Investor immediately after it has
completed a Phase II Trial for any Compound. Any Stage 3 Investment made
pursuant to this Section 2.08 shall be completed within 90 days after the
Company provides such notification. Each Stage 3 Investment shall be consummated
pursuant to, and in accordance with, a definitive agreement, which shall contain
the terms and conditions set forth in this Section 2.08 and shall be
substantially similar to this Agreement. Notwithstanding anything to the
contrary set forth in this Agreement, if the Investor declines to invest in a
Compound as set forth in this Section 2.08, the Investor shall not lose any
rights under any Transaction Document.
SECTION 2.09. Stage 4 Investment. After the Investor has invested
at least $9,000,000 in the Company, the Investor shall have the right to
purchase all of the shares of Common Stock of the Company as set forth in
Article VIII of the Amended and Restated Investors' Rights Agreement (the "Stage
4 Investment"). The Stage 4 Investment shall be consummated pursuant to, and in
accordance with, a definitive agreement, which shall contain the terms and
conditions set forth in such Article VIII and shall be consistent with this
Agreement.
SECTION 2.10. Acceleration of Investments. The Investor shall have
the right, in its sole discretion, to accelerate the timing of any of its
investments described in Sections 2.07, and 2.08 so that at any time during the
term of this Agreement, the Investor may purchase from the Company the shares of
Common Stock described in such sections for the investment amounts also set
forth in such sections (the acceleration of the Investor's investment under
Sections 2.07 and 2.08 may entitle the Investor to make the Stage 4 Investment
as provided in the Amended and Restated Investors' Rights Agreement).
SECTION 2.11. Issuance of Options. Prior to consummation of a
Stage 2 Investment (the "Initial Period"), the Company shall be permitted to
issue options to purchase shares of Common Stock to employees, consultants,
advisors and directors under the Stock Option Plan ("Options"); provided,
however, that during the Initial Period, the Company shall only be permitted to
issue Options to purchase that number of shares of Common Stock that equals 1.5%
of the issued and outstanding shares of capital stock of the Company on a fully
diluted and as converted basis. After consummation of a Stage 2 Investment and
prior to consummation of a Stage 3 Investment (the "Stage 2 Period"), the
Company shall be permitted to issue Options; provided, however, that during the
Stage 2 Period, the Company shall only be permitted to issue Options to purchase
that number of shares of Common Stock that equals 0.5% of the issued and
outstanding shares of capital stock of the Company on a fully diluted and as
converted basis for each $1,250,00 investment by the Investor in a Compound.
After consummation of a Stage 3 Investment and prior to consummation of a Stage
4 Investment (the "Stage 3 Period"), the Company shall be permitted to issue
Options; provided, however, that during the Stage 3 Period, the Company shall
only be permitted to issue Options to purchase that number of shares of Common
Stock that equals 0.5% of the issued and outstanding shares of capital stock of
the Company on a fully diluted and as converted basis for each $1,250,000
investment by the Investor in a Compound. The Company shall not issue Options
except in accordance with this Section 2.11 and no Options issued pursuant to
this Section 2.11 shall be issued with an exercise price that is less than $1.43
without the consent of the Investor; provided, however, that the Company shall
be permitted to issue additional options as an incentive to
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certain new employees, consultants, advisors and directors that are mutually
agreed to by the Investor and the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
As an inducement to the Investor to enter into this Agreement, the
Company hereby represents and warrants to the Investor as follows:
SECTION 3.01. Organization, Authority and Qualification of the
Company. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all necessary
power and authority to enter into each Transaction Document, to carry out its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The Company is duly licensed or qualified to do
business and is in good standing in each jurisdiction which the properties owned
or leased by it or the operation of its business makes such licensing or
qualification necessary. The execution and delivery of each Transaction Document
by the Company, the performance by the Company of its obligations hereunder and
thereunder and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all requisite action on the part
of the Company. This Agreement has been, and upon its execution the other
Transaction Documents shall have been, duly executed and delivered by the
Company, and (assuming due authorization, execution and delivery by the
Investor) this Agreement constitutes, and upon its execution the other
Transaction Documents shall constitute, legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms.
SECTION 3.02. Capitalization. The authorized capital stock of the
Company consists of 10,700,000 shares, consisting of (i) 10,000,000 shares of
Common Stock and (ii) 700,000 shares of Preferred Stock of the Company, $0.001
par value (the "Preferred Stock"). As of the date hereof, (i) 1,797,500 shares
of Common Stock are issued and outstanding, all of which are validly issued,
fully paid and nonassessable, (ii) 932,000 shares of Common Stock are available
for issuance pursuant to employee stock options granted pursuant to the Stock
Option Plan and (iii) 287,500 shares of Preferred Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable.
Immediately prior to the consummation of the transactions contemplated hereby,
the outstanding shares of capital stock of the Company will be held beneficially
and of record by the Persons identified in Section 3.02 of the Disclosure
Schedule in the amounts indicated thereon. Except as set forth in Section 3.02
of the Disclosure Schedule, there are no outstanding subscriptions, options,
warrants, phantom rights, commitments, agreements, arrangements or
understandings of any kind for or relating to the issuance, or sale or purchase
of, any shares of capital stock of any class or series or other equity interests
of the Company, or outstanding securities convertible thereinto or exchangeable
therefor. The Company has no obligation to purchase, redeem, or otherwise
acquire any of its capital stock or any interests therein. As of the Closing,
the Company shall have reserved and available 932,000 shares of Common Stock for
issuance under or pursuant to the Stock Option Plan. None of the Company's stock
purchase agreements or stock option documents contains a
10
provision for acceleration of vesting (or lapse or repurchase right) upon the
occurrence of any event or combination of events. The Company has never adjusted
or amended the exercise price of any stock options previously awarded, whether
through amendment, cancellation, replacement grant, repricing or any other
means. After giving effect to the transactions contemplated hereby, all of the
outstanding shares of capital stock of the Company, including without limitation
the Shares, will have been duly and validly authorized and issued and will be
fully paid and non assessable and free of Encumbrances other than restrictions
on transfer under the Amended and Restated Investors' Rights Agreement or
applicable state and federal securities laws. Subject in part to the truth and
accuracy of the Investors' representations set forth in Article IV below, the
offer, issuance, sale and delivery of the Shares as contemplated by this
Agreement are or will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and the qualification
or registration provisions of applicable state securities laws. Neither the
Company nor its authorized agents will take any action that would cause the loss
of such exemption. Except as set forth in Section 3.02 of the Disclosure
Schedule and the Transaction Documents, there are no preemptive rights, rights
of first refusal, put or call rights or obligations or anti dilution rights with
respect to the issuance, sale or redemption of the Company's capital stock.
Except as set forth in Section 3.02 of the Disclosure Schedule and the
Transaction Documents, there are no rights to have the Company's capital stock
registered for sale to the public pursuant to the laws of any jurisdiction, and
there are no agreements of which the Company is aware, other than the Amended
and Restated Investors' Rights Agreement, relating to the voting of the
Company's voting securities or restrictions on the transfer of the Company's
capital stock. The Company's issuance of the Shares shall not trigger any
adjustments to the conversion prices or exercise prices of any of the Company's
outstanding securities.
SECTION 3.03. No Conflict. The execution, delivery and performance
of each Transaction Document by the Company do not and will not (a) violate,
conflict with or result in the breach of any provision of the certificate of
incorporation or by-laws of the Company, or (b) to the Knowledge of the Company,
conflict with or violate (or cause an event which could have a Material Adverse
Effect as a result of) any Law or Governmental Order applicable to the Company,
or any of its assets, properties or businesses or conflict with, result in any
breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the Shares pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which the Company or is a party or by which
any of the Shares or any of such assets or properties is bound or affected.
SECTION 3.04. Governmental Consents and Approvals. To the
Knowledge of the Company, the execution, delivery and performance of each
Transaction Document by the Company do not and will not require any consent,
approval, authorization or other order of, action by, filing with or
notification to, any Governmental Authority. The Company knows of no reason why
all the consents, approvals and authorizations necessary for the consummation of
the transactions contemplated by this Agreement will not be received.
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SECTION 3.05. Financial Information; Books and Records.
(a) The Company has furnished copies of the Company's
unaudited balance sheet as of December 31, 2005 and related unaudited statements
of operations and statements of cash flows for the period then ended (the
"Financial Statements"), and such Financial Statements (a) have been prepared in
good faith in accordance with the books and records of the Company, (b) fairly
present the financial condition and operating results of the Company as of such
dates and the financial results of the Company for such periods and (c) were
prepared in accordance with GAAP consistently applied during the periods covered
thereby, except that they do not contain all of the footnotes required by GAAP
and they remain subject to year-end adjustments, consisting of normally
recurring adjustments.
(b) Except as set forth in the Financial Statements, the
Company has no material liabilities or obligations, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to December 31, 2005 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in the Financial Statements, which, in both cases,
individually and in the aggregate would not have, or be reasonably likely to
have, a Material Adverse Effect.
(c) To the Knowledge of the Company, since December 31,
2005, there has been (i) no material adverse change in the condition (financial
or otherwise) of the Company or in the assets (including intangible assets),
liabilities, condition (financial or other), business, property, results of
operations or prospects or contractual rights of the Company and (ii) no events,
circumstances or occurrences of any kind that, individually and in the
aggregate, have had or could reasonably be likely to have a Material Adverse
Effect.
(d) The Company maintains and will continue to 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 GAAP 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 3.06. Litigation. There is no action, suit or
proceeding or governmental proceeding, inquiry or investigation pending or, to
the knowledge of the Company, threatened, by or against the Company or affecting
any of the Company's properties or assets, or against any director, officer or
stockholder of the Company in his, her or its capacity as such, nor, to the
knowledge of the Company, has there occurred any event nor does there exist any
condition on the basis of which any litigation, proceeding or investigation
might reasonably be instituted. Neither the Company nor any director, officer
or, to the Knowledge of the Company, a stockholder in his, her or its capacity
as such is a party to or in default with respect to any order, writ, injunction,
decree, ruling or decision of any court, commission, board or other government
agency.
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SECTION 3.07. Tax Matters.
(a) The Company has paid all federal, state, local, foreign
or other taxes, including, without limitation, income taxes, estimated taxes,
excise taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes,
employment and payroll related taxes, withholding taxes, stamp taxes, transfer
and property taxes, or other tax of any kind whatsoever, whether or not measured
in whole or in part by net income, including any interest, penalty, or addition
thereto, whether disputed or not (collectively, "Taxes") required to be paid by
it through the date hereof.
(b) All Taxes and other assessments and levies which the
Company is required to withhold or collect have been withheld and collected and
have been paid over to the proper governmental authorities when due.
(c) The Company has, in accordance with applicable law,
timely and properly filed all federal, state, local and foreign tax returns,
declarations, reports, claims for refund, information returns or statements
relating to Taxes (collectively, "Tax Returns") required to be filed by it
through the date hereof. To the Knowledge of the Company, all such Tax Returns
were correct and complete in all respects. The Company is not currently the
beneficiary of any extension of time within which to file any Tax Return.
(d) The Company has not entered into any Reportable
Transactions or Listed Transactions, as defined in Section 6707A of the Code.
(e) No issue relating to Taxes has been raised by a federal,
state, local or foreign taxing authority during any pending audit or
examination, and no issue relating to Taxes was raised by a taxing authority in
any completed audit or examination, that reasonably can be expected to recur in
a later taxable period.
(f) There are no Encumbrances on any of the assets of Company
that arose in connection with any failure (or alleged failure) to pay any Tax,
except for Encumbrances for Taxes not yet due.
(g) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
SECTION 3.08. Title to Properties. The Company does not own
any real property. The Company has a valid and enforceable leasehold interest in
all of its leased real property, free and clear of any material Encumbrances.
The Company has good title to or a valid and enforceable leasehold interest in
all personal property used in or necessary to the business of the Company, free
and clear of any material Encumbrances, and the same is in good condition and
repair (ordinary wear and tear excepted). The Company is not in violation of any
zoning, building or safety ordinance, regulation or requirement or other law or
regulation applicable to the operation of its owned or leased properties, nor
has the Company received written notice of any violation with which it has not
complied in all material respects.
13
SECTION 3.09. Intellectual Property.
(a) The Company owns, or possesses a license or other
sufficient legal right to use, all trademarks, service marks, tradenames,
copyrights, trade secrets, licenses, customer lists, computer programs and
patents, and other technical data, concepts and know-how that is reasonably
necessary or desirable to the conduct of its business as conducted and as
proposed to be conducted (collectively the "Intellectual Property") without, to
the Knowledge of the Company, any conflict with or infringement of the valid
rights of others. Section 3.09 of the of the Disclosure Schedule sets forth a
list and brief description of all domestic and foreign patents, trademarks,
service marks, trade names and copyrights, and all applications therefor, that
are owned by or registered in the name of the Company, or of which the Company
is a licensor or licensee or in which the Company has any right, and in each
case a brief description of the nature of such right.
(b) The Company has taken commercially reasonable
precautions to (i) protect its rights in the Intellectual Property and (ii)
maintain the confidentiality of its trade secrets, know-how and other
confidential Intellectual Property. To the Knowledge of the Company, there have
been no acts or omissions by any officer, director, stockholder or employee of,
or consultant to, the Company the result of which would be to materially
compromise the rights of the Company to apply for or enforce appropriate legal
protection of any Intellectual Property. To the Knowledge of the Company, it
will not be necessary to use any inventions of any of its employees (or persons
it currently intends to hire) made prior to their employment by the Company.
Each employee has assigned to the Company all intellectual property rights such
employee owns that are related to the Company's business as now conducted.
(c) The Company has the right to use the Intellectual
Property free and clear of any Encumbrances. No written claim has been received
by the Company or, to the Knowledge of the Company, threatened to the effect
that the use of any Intellectual Property by the Company could infringe upon or
conflict with the rights of any other Person and, to the Knowledge of the
Company, there is no basis for any such claim. No written claim has been
received by the Company or, to the Knowledge of the Company, threatened to the
effect that any Intellectual Property owned or licensed by the Company, or which
the Company otherwise has the right to use, is invalid or unenforceable by the
Company, and, to the Knowledge of the Company, there is no basis for any such
claim.
(d) Each officer of the Company and each employee and
consultant with access to Company confidential information or trade secrets has
executed an agreement with the Company regarding confidentiality and proprietary
information substantially in the form delivered to counsel for the Investors.
(e) Section 3.09(e) of the Disclosure Schedule lists all
material agreements (whether written or oral and whether with the Company or
third parties, including license agreements, research agreements, development
agreements, publishing agreements, distribution agreements, settlement
agreements, consent to use agreements and covenants not to xxx, other than
licenses for personal computer software that are generally available on
nondiscriminatory pricing terms and have an individual acquisition cost of $50
or less per annual license fee),
14
including any track or mechanical license, to which the Company is a party or
otherwise bound, granting any right to use, exploit or practice any Intellectual
Property, or restricting the right of the Company to use or enforce any
Intellectual Property (the "IP License Agreements"), specifying the name of the
parties thereto and whether such IP License Agreement is an inbound license, an
outbound license or a cross-license and specifying the product(s) to which such
agreement relates. Each IP License Agreement is valid and binding on the Company
and, to the Knowledge of the Company, all other parties thereto and is
enforceable against the Company in accordance with its terms. Except as set
forth in Section 3.09(e), none of the IP License Agreements grants any third
party exclusive rights to or under any Intellectual Property or the right to
sublicense any Intellectual Property. The Company is in material compliance
with, and has not breached any term of, such IP License Agreements, and all
other parties to such IP License Agreements are in material compliance with, and
have not breached any term of, such IP License Agreements.
SECTION 3.10. Material Contracts.
(a) Section 3.10(a) of the Disclosure Schedule lists each of
the following contracts and agreements (including oral agreements) of the
Company (the "Material Contracts"):
(i) each contract, agreement, invoice, purchase order
and other arrangement, for the purchase of personal property, with any
supplier or for the furnishing of services to the Company or otherwise
related to the business of the Company under the terms of which the
Company: (A) is likely to pay or otherwise give consideration of more
than $50,000 in the aggregate during the calendar year ended December
31, 2006, (B) is likely to pay or otherwise give consideration of more
than $50,000 in the aggregate over the remaining term of such contract
or (C) cannot be cancelled by the Company without penalty or further
payment and without more than 30 days' notice;
(ii) each contract, agreement, invoice, sales order
and other arrangement, for the sale of personal property, or for the
furnishing of services by the Company which: (A) is likely to involve
consideration of more than $50,000 in the aggregate during the
calendar year ended December 31, 2006, (B) is likely to involve
consideration of more than $50,000 in the aggregate over the remaining
term of the contract or (C) cannot be cancelled by the Company without
penalty or further payment and without more than 30 days' notice;
(iii) all contracts or agreements relating to the
licensing, distribution, development, purchase, sale or servicing of
its products or services except in the ordinary course of business
consistent with past practices;
(iv) all indentures, mortgages, promissory notes, loan
agreements, guaranties or other agreements or commitments for
borrowing or any pledge or security arrangement;
15
(v) all employment contracts, noncompetition
agreements or other agreements with present or former officers,
directors, employees or stockholders of the Company or Persons related
to or affiliated with such Persons;
(vi) all stock redemption or purchase agreements or
other agreements affecting or relating to the capital stock of the
Company, including, without limitation, any agreement with any
stockholder of the Company which includes anti dilution rights,
registration rights, voting arrangements, operating covenants or
similar provisions;
(vii) all pension, profit sharing, bonus, retirement,
severance, stock option plans or other similar plans;
(viii) all royalty, dividend or similar arrangements
based on the revenues or profits of the Company or any contract or
agreement involving fixed price or fixed volume arrangements;
(ix) all joint venture, partnership, manufacturer,
development or supply agreements;
(x) all acquisition, merger or similar agreements;
(xi) all broker, distributor, dealer, agency, sales
promotion, market research, marketing, consulting and advertising
contracts and agreements to which the Company is a party;
(xii) all management contracts and contracts with
independent contractors or consultants (or similar arrangements) to
which the Company is a party and which are not cancelable without
penalty or further payment and without more than 30 days' notice;
(xiii) all contracts and agreements with any
governmental authority to which the Company is a party;
(xiv) all contracts and agreements that limit or
purport to limit the ability of the Company to compete in any line of
business or with any Person or in any geographic area or during any
period of time;
(xv) all contracts and agreements between or among the
Company and any of its Affiliates or an officer, director or
stockholder of any of them;
(xvi) all other contracts and agreements, whether or
not made in the ordinary course of business, which are material to the
Company or the conduct of the business of the Company, the absence of
which, individually or in the aggregate, could reasonably be likely to
have a Material Adverse Effect.
(b) To the Knowledge of the Company, all contracts,
agreements, leases and instruments set forth on Section 3.10(a) of the
Disclosure Schedule are valid and are in full force
16
and effect in all material respects and constitute legal, valid and binding
obligations of the Company, as applicable, and, to the Knowledge of the Company,
of the other parties, and are enforceable in accordance with their respective
terms, except (A) as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws, from time to time in
effect, which affect enforcement of creditors' rights generally, (B) as limited
by laws relating to the availability of specific performance, injunctive relief,
or general principles of equity or other equitable remedies and (C) to the
extent the indemnification provisions contained therein may further be limited
by applicable laws and principles of public policy. The Company has not received
any written notice and has no knowledge of any other notice or overt threat to
terminate any such contracts, agreements, leases or instruments. The Company is
not, nor to the Knowledge of the Company, any other party, is not in material
default in complying with any provisions of any such contract, agreement, lease
or instrument, and to the Knowledge of the Company, no condition or event or
fact exists which, with notice, lapse of time or both, would constitute a
material default thereunder on the part of the Company.
(c) The Company has made available to the Investor true and
complete copies of all Material Contracts.
SECTION 3.11. Governmental Approvals; Compliance with Laws.
(a) To the Knowledge of the Company, the Company is in
compliance in all material respects with all applicable laws and regulations.
The Company has all of the material permits, licenses, orders, franchises and
other rights and privileges of all federal, state, local or foreign governmental
or regulatory bodies reasonably necessary for the Company to conduct its
business as presently conducted and as contemplated to be conducted. All such
permits, licenses, orders, franchises and other rights and privileges are in
full force and effect and, to the Knowledge of the Company, no suspension or
cancellation of any of them is threatened, and none of such permits, licenses,
orders, franchises or other rights and privileges will be affected by the
consummation of the transactions contemplated by a Transaction Document. The
Company has never entered into or been subject to any judgment, consent decree,
compliance order or administrative order with respect to any material aspect of
the business, affairs, properties or assets of the Company or received any
request for information, notice, demand letter, administrative inquiry or formal
or informal complaint or claim from any regulatory agency with respect to any
aspect of the business, affairs, properties or assets of the Company.
(b) Neither the Company, nor the Company's officers, nor to
the Knowledge of the Company, its directors, have ever:
(i) Filed a petition under the federal bankruptcy
laws or any state insolvency law or had a filing against, or had a
receiver, fiscal agent or similar officer appointed by a court for the
business or property of such Person, or any partnership in which he or
it was a general partner;
(ii) Been convicted of a crime or been a named subject
of a pending criminal proceeding (excluding traffic violations and
other minor offenses);
17
(iii) Been found by a court of competent jurisdiction
in a civil action or by the Securities and Exchange Commission (the
"SEC") or any other regulatory authority to have violated any federal
or state securities law, banking law or any federal commodities law
and the judgment in such civil action or finding has not been
subsequently reversed, suspended, or vacated; or
(iv) Been subject to any order, judgment or decree of
any court of competent jurisdiction permanently or temporarily
enjoining him, her or it from engaging or otherwise imposing
limits or conditions on his, her or its engagement in any
securities, banking, insurance, investment advisory or other
type of business or acting as an officer or director of a
public company.
SECTION 3.12. Insurance Coverage. Section 3.12 of the Disclosure
Schedule provides a complete list of the Company's insurance policies currently
in effect. The Company has insurance coverage in types and amounts customary for
similarly situated companies and as otherwise required by law.
SECTION 3.13. Employee Benefit Matters.
(a) Section 3.13(a) of the Disclosure Schedule contains a
list as of the date hereof, complete and accurate in all material respects, of
any plan, program, policy, practice, contract, agreement or other arrangement
providing for compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind, whether written, unwritten or
otherwise, funded or unfunded, including, without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (whether or not ERISA is
applicable to such plan), that is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Company Affiliate for the
benefit of any employee of the Company, or with respect to which the Company or
any Company Affiliate has or may have any liability or obligation, other than a
Compensation Agreement (as defined below) (the `Benefit Plan"). As of the date
hereof, the Company has not committed to establish or enter into any new Benefit
Plan, or to modify any Benefit Plan (except to the extent required by law or to
conform any such Benefit Plan to the requirements of any applicable law). All
Benefit Plans and any related material documents have been made available to the
Investors.
(b) The Company and all Company Affiliates have performed
all material obligations required to be performed by them under, are not in
default or violation of, and have no knowledge of any default or violation by
any other party to, the material terms of any Benefit Plan, and each Benefit
Plan has been established and maintained in all material respects in accordance
with its terms and in compliance with applicable laws. There are no claims,
suits or actions pending, or to the Knowledge of the Company, threatened (other
than routine claims for benefits), against any the Benefit Plan or against the
assets of any the Benefit Plan. To the Knowledge of the Company, there are no
audits, inquiries or proceedings pending or threatened by the Internal Revenue
Service, the United States Department of Labor or any other governmental
authority with respect to any the Benefit Plan. To the Knowledge of the
18
Company, the Company and all the Company Affiliates have made all contributions
and other payments required by and due under the terms of each the Benefit Plan.
(c) Section 3.13(c) of the Disclosure Schedule contains a
list as of the date hereof, complete and accurate in all material respects, of
each management, employment, severance, consulting, relocation, repatriation,
expatriation, or other agreement, or contract between the Company or any Company
Affiliate and any employee, consultant, director, advisor or independent
contractor of the Company (the "Company Employees") (such agreements, the
"Compensation Agreements"), excluding any such agreement or contract that, by
its terms, in all circumstances, the Company's obligation is less than $50,000
per annum. Except as set forth in Section 3.13(c) of the Disclosure Schedule, to
the Knowledge of the Company, the Company and all of the Company Affiliates: (i)
are in material compliance with all applicable laws with respect to employment,
employment practices, discrimination, withholding, employment taxes, reporting
and payment of any compensation, harassment, terms and conditions of employment,
classification of employees and consultants and wages and hours; (ii) have no
agreements with the Company Employees that provide for severance payments or
benefits or payments contingent upon a change in control or ownership of the
Company; (iii) do not have and have not had any organizational activity or labor
dispute, and no application for certification of a collective bargaining
agreement is pending or, to the Knowledge of the Company, is threatened; (iv)
have no employees who are also employees of other entities or who have any
conflicting obligations or agreements for their services, and the relationship
of such employees with the Company has been fully disclosed to such entities.
Except as set forth in Section 3.13(c) of the Disclosure Schedule, to the
Knowledge of the Company, there are no pending, threatened, or reasonably
anticipated claims or actions against the Company or any Company Affiliate under
any Compensation Agreement or workers' compensation policy or long-term
disability policy.
SECTION 3.14. No Brokers or Finders. No Person has or will have,
as a result of the transactions contemplated by this Agreement, any right,
interest or claim against or upon the Company for any commission, fee or other
compensation as a finder or broker because of any act or omission by the Company
or its stockholders or its Affiliates.
SECTION 3.15. Transactions with Affiliates. There are no loans,
leases or other continuing arrangements between the Company on one hand, and any
officer, director or stockholder of the Company or any respective family member
or Affiliate of such officer, director or stockholder, on the other hand.
SECTION 3.16. Corporate Records. The corporate record books of the
Company accurately record all material corporate action taken by its
stockholders and board of directors and committees. The copies of the corporate
records of the Company, as made available to the Investors for review, are true
and complete copies of the originals of such documents.
SECTION 3.17. Disclosures. Neither this Agreement nor any other
Transaction Document, nor any other agreement, document or written statement
made by the Company and furnished by the Company to the Investors in connection
with the transactions contemplated hereby, taken as a whole, contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements contained herein or therein, collectively or taken as a
whole, not misleading in the light of the circumstances in which they were made;
it being
19
understood that with respect to any information provided by the Company based
upon or constituting a forecast or projection, the Company represents only that
(a) it acted in good faith and utilized reasonable assumptions in light of
conditions existing at the time of delivery of such information and (b) it
exercised due care in the preparation of such information. There is no material
fact directly relating to the business, operations, condition or prospects of
the Company (including any competitive developments, but other than facts which
relate to general economic or industry trends or conditions) that, individually
or in the aggregate, has had or could reasonably be likely to have a Material
Adverse Effect that has not been set forth in this Agreement or in any Schedule
hereto.
SECTION 3.18. Certain Payments. The Company has not, nor to the
Knowledge of the Company, any director, officer, agent, employee, or other
Person acting on behalf of any of them, has not directly or indirectly (a) made
any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or
other payment to any Person, private or public, regardless of form, whether in
money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Company or any Affiliate of the Company, or (iv) in violation
of any Federal, state, local, or foreign statute, law, regulation, ordinance,
rule, judgment, order, decree or other governmental requirement, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
SECTION 3.19. Environmental.
(a) The Company is in compliance with all Environmental
Laws, except where such non-compliance, individually or in the aggregate, has
not had or would not reasonably be likely to have a Material Adverse Effect.
(b) Company has not received any notice that alleges that
the Company is not in compliance with any Environmental Laws. There is no
Environmental Claim pending, or to the Knowledge of the Company, threatened
against the Company with respect to the operations or business of the Company,
or against any Person whose liability for any Environmental Claim the Company
has retained or assumed either contractually or by operation of law, and to the
Knowledge of the Company, there are no circumstances that could form the basis
of any such Environmental Claim in the future.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE INVESTOR
As an inducement to the Company to enter into this Agreement,
the Investor hereby represents and warrants to the Company as follows:
SECTION 4.01. Authorization. The Investor has all requisite
corporate power and authority to enter into each Transaction Document, and,
assuming the due authorization, execution and delivery by the other parties
thereto, each such agreement when executed and
20
delivered by the Investor will constitute its valid and binding obligation,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Investor.
SECTION 4.02. Purchase Entirely for Own Account. This Agreement is
made with the Investor in reliance upon the Investor's representation to the
Company, which by the Investor's execution of this Agreement the Investor hereby
confirms, that Shares to be received by such by the Investor will be acquired
for investment for the Investor's own account (or the account of its respective
Affiliates), not as a nominee or agent, for the purpose of investment and not
with a view to the resale or distribution of any part thereof in violation of
any applicable law, and that such Investor has no present intention of selling,
granting any participation in or otherwise distributing the same to any other
Person in violation of any applicable law. By executing this Agreement, the
Investor further represents that it does not have any contract, undertaking,
agreement or arrangement with any Person to sell, transfer or grant
participation to such Person or to any third Person, with respect to any of the
Shares. The Investor understands that the offer and sale of the Shares has not
been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the Investor's investment intent and the accuracy of the Investor's
representations as expressed herein.
SECTION 4.03. Disclosure of Information. The Investor represents
that it has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Shares and the
business, properties, prospects and financial condition of the Company. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Article III of this Agreement or the right of the Investor to
rely thereon.
SECTION 4.04. Investment Experience. The Investor acknowledges
that it is able to fend for itself, can bear the economic risk of its
investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares. The Investor further represents that it has not been organized
for the sole purpose of acquiring the Shares. The Investor can bear the economic
risk of its investment and is able, without impairing the Investor's financial
condition, to hold the Shares for an indefinite period of time and to suffer a
complete loss of the Investor's investment.
SECTION 4.05. Restricted Securities. The Investor understands that
the Shares it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such Shares may be resold without registration under the
Securities Act only in certain limited circumstances. In the absence of any
effective registration statement covering the Shares or an available exemption
from registration under the Securities Act, the Shares must be held
indefinitely. In this connection, such Investor represents that it is familiar
with Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act, including without limitation the Rule
144 condition that current information about the Company be available to the
public. Such Investor
21
understands and agrees that, except as provided herein and in the Amended and
Restated Investors' Rights Agreement, the Company is not under any obligation to
register the Shares under the Securities Act or to comply with Regulation A or
any other exemption and that Rule 144 is not currently available for sales of
the Shares.
SECTION 4.06. Brokers' Fees. The Investor has taken no action
which would give rise to any claim by any other Person for any brokerage
commissions, finders' fees or the like relating to the sale of the Shares to the
Investor.
SECTION 4.07. No Public Market. The Investor understands and
acknowledges that no public market now exists for any of the securities issued
by the Company and that the Company has made no assurances that a public market
will ever exist for the Company's securities.
SECTION 4.08. Securities Filings. To the knowledge of the
Investor, all disclosures required to be made by the Investor under federal and
state securities laws have been made and are true, accurate and complete in all
material respects.
ARTICLE V
ADDITIONAL AGREEMENTS
The Company hereby covenants and agrees to effect and perform the
following covenants, agreements and obligations from and after the Closing until
this Agreement is terminated under Section 8.01:
SECTION 5.01. Access to Information. Upon reasonable written
notice, the Company shall cause its officers, directors and employees and shall
cause the Company and each of the Company's officers, directors and employees
to, subject to the prior acknowledgement of such party to maintain the
confidential nature of disclosed items: (i) afford the officers, employees,
agents, accountants, counsel, financing sources and representatives of the
Investor reasonable access, during normal business hours, to the offices,
properties, plants, other facilities, books and records of the Company and to
those officers, directors, employees, agents, accountants and counsel of the
Company who have any knowledge relating to the Company, and (ii) furnish to the
officers, employees, agents, accountants, counsel, financing sources and
representatives of the Investor such additional financial and operating data and
other information regarding the assets, properties, liabilities and goodwill of
the Company (or legible copies thereof) as the Investor may from time to time
reasonably request. This section shall not apply to materials that the Company
cannot disclose because of restrictions under applicable Law.
SECTION 5.02. Notice of Developments. The Company shall promptly
notify the Investor in writing of (i) all material events, circumstances, facts
and occurrences arising subsequent to the date of this Agreement which could
result in any material breach of a representation or warranty or covenant of the
Company in this Agreement or which could have the effect of making any
representation or warranty of the Company in this Agreement untrue or incorrect
in any material respect and (ii) all other material developments affecting the
assets, Liabilities, business, financial condition, operations, results of
operations, customer or supplier relations, employee relations, projections or
prospects of the Company; provided, however, that
22
such notification by the Company shall not be required if the Investor has
already been given notice through the Investor's representation on the Board.
SECTION 5.03. Right of First Refusal with Respect to Additional
Financing.
(a) If at any time after the date hereof the Company seeks
capital other than pursuant to Sections 2.07 or 2.08, the Company shall not seek
any amount of capital that is less than $1,000,000 ("Additional Financing"). If
the Company shall seek Additional Financing, it shall do so using the following
process:
(i) The Company shall give notice to the Investor
that the Company is seeking Additional Financing (the "Additional
Financing Notice"). Such notice shall specify the amount of Additional
Financing that is being sought and the price per share at which the
Company intends to sell Common Stock to raise such Additional
Financing. The Investor shall have 30 days within which to commit to
fund such Additional Financing requirement, and 60 days thereafter
within which to close on such Additional Financing. If the Investor
shall close on such Additional Financing, the Company shall issue
shares of Common Stock at the offered price. In connection with such
closing, the Pro Forma Table shall be revised to include such shares
of Common Stock in the capitalization of the Company; provided,
however, that the per share price at which the Investor shall be
entitled to purchase shares thereafter under Section 2.07 and Section
08, as applicable, shall not be changed on account of such revision.
(ii) As an alternative to providing Additional
Financing on the terms offered by the Company, the Investor shall have
the right to invest on an accelerated basis any uininvested portion of
the $7,500,000 that the Investor may invest under Section 2.07 and
Section 2.08. If the amount of the Additional Financing sought by the
Company is less than or equal to the uninvested portion of the
$7,500,000, the Company shall accept the amount tendered by the
Investor at the per share prices applicable under Section 2.07 or
Section 2.08, as applicable. Any portion of the Additional Financing
not funded by the Investor as described above may be offered to other
investors ("Other Investors"), but not at a price that shall be
lower than the price at which the Investor
acquired its shares of Common Stock.
(iii) If the Investor shall fail to provide Additional
Financing as set forth above, the Company shall have the right to seek
Additional Financing from Other Investors on the same terms and
conditions as offered to the Investor. If Other Investors shall agree
to invest the Additional Financing at the price offered by the
Company, the Company shall be entitled to accept all of the Additional
Financing from the Other Investors. Following the closing for the
Additional Financing, the Pro Forma Table shall be revised to include
the shares issued for Additional Financing in the capitalization of
the Company; provided, however, that the per share price at which the
Investor shall be entitled to purchase shares of Common Stock
thereafter under Section 2.07 and Section 2.08 shall not be changed.
(b) Notwithstanding anything to the contrary contained in
this Section 5.03, the restrictions under this Section 5.03(a) shall not apply
to (i) a QPO (as such term is defined in
23
the Amended and Restated Investors' Rights Agreement) or, (ii) any transaction
with a potential strategic partner in the pharmaceutical or medical industries
that has securities traded on a nationally recognized securities exchange or
inter-dealer quotation system with a market capitalization of at least
$100,000,000 (a "Strategic Partner"). Prior to the consummation of the events or
transactions contemplated by (i) and (ii) above, the Investor shall be permitted
to accelerate any of its Staged Investments in accordance with Section 2.10.
(c) If the Company enters into any Additional Financing on
terms more favorable than the terms of the Shares and the QuantRx Option, then
the Investor in its sole discretion may exchange the Shares and the QuantRx
Option, valued at their stated value, for the securities issued or to be issued
in such Additional Financing.
SECTION 5.04. Further Action. Each of the Investor and the Company
hereto shall use all reasonable efforts to take, or cause to be taken, all
appropriate action, do or cause to be done all things necessary, proper or
advisable under applicable Law, and to execute and deliver such documents and
other papers, as may be required to carry out the provisions of the Transaction
Documents and consummate and make effective the transactions contemplated hereby
and thereby.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Company. The
obligations of the Company to consummate the sale of the Shares and the QuantRx
Option shall be subject to the fulfillment or written waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Investor contained in this Agreement (x)
that are not qualified by "materiality" or "Material Adverse Effect" shall have
been true and correct in all material respects when made and shall be true and
correct in all material respects as of each Closing with the same force and
effect as if made as of each Closing and (y) that are qualified by "materiality"
or Material Adverse Effect" shall have been true and correct when made and shall
be true and correct as of each Closing with the same force and effect as if made
as of each Closing, except to the extent such representations and warranties are
as of another date, in which case, such representations and warranties shall be
true and correct as of that date with the same force and effect as if made as of
each Closing, and except in the case of clause (y) above for such failure of
such representations and warranties to be true and correct that would not have,
individually or in the aggregate, a Material Adverse Effect, and (ii) the
covenants and agreements contained in this Agreement to be complied with by the
Investor on or before each Closing shall have been complied with in all material
respects;
(b) No Proceeding or Litigation. No action shall have been
commenced by or before any Governmental Authority against either the Company or
the Investor, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good faith
determination of the Company, is likely to render it impossible or unlawful to
consummate such transactions or which could have a Material Adverse Effect;
24
provided, however, that the provisions of this Section 6.01(b) shall not apply
if the Company has directly or indirectly solicited or encouraged any such
Action;
(c) Consents and Approvals. The Investor and the Company
shall have received, each in form and substance reasonably satisfactory to the
Company, all authorizations, consents, orders and approvals of all Governmental
Authorities and officials and all third party consents and estoppel certificates
which the Company reasonably deems necessary or desirable for the consummation
of the transactions contemplated by the Transaction Documents except where such
failure to obtain such consent could not reasonably be expected to have a
Material Adverse Effect; and
SECTION 6.02. Conditions to Obligations of the Investor. The
obligations of the Investor to consummate the purchase of the Shares and the
QuantRx Option shall be subject to the fulfillment or written waiver, at or
prior to each Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of the Company contained in this Agreement (x)
that are not qualified by "materiality" or "Material Adverse Effect" shall have
been true and correct in all material respects when made and shall be true and
correct in all material respects as of each Closing with the same force and
effect as if made as of each Closing and (y) that are qualified by "materiality"
or Material Adverse Effect" shall have been true and correct when made and shall
be true and correct as of each Closing with the same force and effect as if made
as of each Closing, except to the extent such representations and warranties are
as of another date, in which case, such representations and warranties shall be
true and correct as of that date with the same force and effect as if made as of
each Closing, and except in the case of clause (y) above for such failure of
such representations and warranties to be true and correct that would not have,
individually or in the aggregate, a Material Adverse Effect, and (ii) the
covenants and agreements contained in this Agreement to be complied with by the
Company on or before each Closing shall have been complied with in all material
respects;
(b) Conversion of Preferred Shares. At or prior to the
Closing, the Company shall cause to be converted all of the issued and
outstanding shares of Preferred Stock into shares of Common Stock;
(c) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against either
the Company or the Investor, seeking to restrain or materially and adversely
alter the transactions contemplated by this Agreement which, in the reasonable,
good faith determination of the Investor, is likely to render it impossible or
unlawful to consummate such transactions or which could have a Material Adverse
Effect or otherwise render inadvisable, in the sole discretion of the Investor,
the consummation of the transactions contemplated by this Agreement;
(d) Consents and Approvals. The Investor and the Company
shall have received, each in form and substance reasonably satisfactory to the
Investor in its sole discretion, all authorizations, consents, orders and
approvals of all Governmental Authorities and officials and all third party
consents and estoppel certificates which the Investor in its sole discretion
deems necessary or desirable for the consummation of the transactions
contemplated by the
25
Transaction Documents except where such failure to obtain such consent could not
reasonably be expected to have a Material Adverse Effect;
(e) Due Diligence. The Investor shall have completed all its
business, legal and accounting due diligence with respect to the Company and
shall, in its sole judgment, be satisfied with the results thereof;
(f) No Material Adverse Effect. No event or events shall
have occurred, or be reasonably likely to occur, which, individually or in the
aggregate, have, or could have, a Material Adverse Effect; and
(g) Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties. The
representations and warranties of the Company contained in this Agreement shall
survive until the 18th month after the Closing; provided, however, that the
representations and warranties contained in Sections 3.01, 3.02, 3.07, 3.13 and
3.19 shall survive until the expiration of the relevant statute of limitations.
Neither the period of survival nor the liability of the Company for breaches of
representations and warranties shall be reduced by any investigation made at any
time by or on behalf of the Investor pursuant to any provisions of this
Agreement. If written notice of a claim has been given prior to the expiration
of the applicable survival period by an Investor to the Company, then the
relevant representations and warranties shall survive as to such claim, until
such claim has been finally resolved.
SECTION 7.02. Indemnification by the Company.
(a) The Investor and its Affiliates, and their respective
officers, directors, employees, managers, agents, successors and assigns (in
each case, on the date hereof, each an "Indemnified Party") shall be indemnified
and held harmless by the Company (the "Indemnifying Party") for and against any
and all liabilities, losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including reasonable attorneys' and
consultants' fees and expenses) actually suffered or incurred by them (including
in any action brought or otherwise initiated by any of them) (hereinafter a
"Loss"), arising out of or resulting from (i) the breach of any representation
or warranty made by the Company in this Agreement or (ii) the breach of any
covenant or agreement by the Company in this Agreement. Notwithstanding the
foregoing, the Indemnifying Party shall not be liable for any claim for
indemnification pursuant to this Section 7.02(a), unless and until the aggregate
amount of indemnifiable Losses which may be recovered from the Indemnifying
Party equals or exceeds $10,000, after which the Indemnifying Party shall be
liable for all Losses; provided, however, that the Indemnifying Party's total
indemnity obligation hereunder shall not exceed the Payment Amount.
26
(b) To the extent that the Company's undertakings set forth
in this Section 7.02 may be unenforceable, the Company shall contribute the
maximum amount that it is permitted to contribute under applicable law to the
payment and satisfaction of all Losses incurred by any Indemnified Party.
SECTION 7.03. Notice of Loss; Third Party Claims.
(a) During the period in which the indemnification
obligations under this Section VII are in effect, an Indemnified Party shall
give the Indemnifying Party written notice of any matter which an Indemnified
Party has reasonably determined has given or could give rise to a right of
indemnification under this Agreement, within sixty (60) days of such
determination, stating the estimated amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises; provided, however, that the failure to provide such notice shall not
release the Indemnifying Party from any of its obligations under this Section
VII except to the extent the Indemnifying Party shall be materially prejudiced
thereby.
(b) If an Indemnified Party shall receive notice of any
third party claim, action, suit, arbitration, inquiry, proceeding, investigation
audit, demand or assessment (each, a "Third Party Claim") against it or which
may give rise to a claim for Loss under this Section VII, within thirty (30)
days of the receipt of such notice, the Indemnified Party shall give the
Indemnifying Party written notice of such Third Party Claim; provided, however,
that the failure to provide such notice shall not release the Indemnifying Party
from any of its obligations under this Section VII except to the extent that the
Indemnifying Party is materially prejudiced by such failure, and shall not
relieve the Indemnifying Party from any other obligation or liability that it
may have to any Indemnified Party otherwise than under this Section VII. If the
Indemnifying Party acknowledges in writing its obligation to indemnify the
Indemnified Party hereunder against any Losses that may result from such Third
Party Claim, then the Indemnifying Party shall be entitled to assume and control
the defense of such Third Party Claim at its expense and through counsel of its
choice if it gives notice of its intention to do so to the Indemnified Party
within thirty (30) days of the receipt of such notice from the Indemnified
Party; provided, however, that if either: (x) the Indemnifying Party does not so
assume such defense or (y) there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the reasonable judgment
of the Indemnified Party for the same counsel to represent both the Indemnified
Party and the Indemnifying Party, then the Indemnified Party shall be entitled
to retain its own counsel (up to one counsel for all Indemnified Parties), at
the reasonable expense of the Indemnifying Party. In the event that the
Indemnifying Party exercises the right to undertake any such defense against any
such Third Party Claim as provided above, the Indemnified Party shall cooperate
with the Indemnifying Party in such defense and make available to the
Indemnifying Party, at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by the Indemnifying Party. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Indemnifying Party shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified Party,
at the Indemnifying Party's expense, all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the Indemnifying
Party's control relating thereto as is reasonably required by
27
the Indemnified Party. No such Third Party Claim may be settled by the
Indemnifying Party without the prior written consent of the Indemnified Party
(not to be unreasonably withheld), unless such settlement contains a full
release of such Indemnified Party.
SECTION 7.04. Survival of Covenants and Agreements. The
covenants and agreements of the parties contained in this Agreement shall
survive the Closing and will remain in full force and effect in accordance with
their terms.
ARTICLE VIII
TERMINATION
SECTION 8.01. Termination.
(a) This Agreement may be terminated at any time prior to
the Closing:
(i) by the Investor if, between the date hereof and
the Closing: (A) an event or condition occurs that has resulted in a
Material Adverse Effect, (B) any representations and warranties of the
Company contained in this Agreement (1) that are not qualified by
"materiality" or "Material Adverse Effect" shall not have been true
and correct in all material respects when made or (2) that are
qualified by "materiality" or "Material Adverse Effect" shall not have
been true and correct when made, (C) the Company shall not have
complied in all material respects with the covenants or agreements
contained in this Agreement to be complied with by it or (D) the
Company makes a general assignment for the benefit of creditors, or
any proceeding shall be instituted by or against the Company seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection,
relief or composition of its debts under any Law relating to
bankruptcy, insolvency or reorganization;
(ii) by the Company if, between the date hereof and
the Closing: (A) the Investor shall not have complied in all material
respects with the covenants or agreements contained in this Agreement
to be complied with by it or (B) the Investor makes a general
assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the Investor seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy,
insolvency or reorganization; or
(iii) by the Investor if the Closing shall not have
occurred by February 28, 2006.
(b) This Agreement may be terminated at any time after the
Closing:
(i) by the Investor if, in its sole discretion, it
notifies the Company that it will not make any Stage 2 Investments,
any Stage 3 Investments or the Stage 4 Investment in accordance with
Sections 2.07, 2.08 and 2.09, respectively;
28
(ii) by the Company, if the Investor notifies the
Company that it will not make any Stage 2 Investments, any Stage 3
Investments or the Stage 4 Investment that has not already been
funded, except that the Company shall not be permitted to terminate
this Agreement if the Investor invests in any Compound under Section
2.07 and also invests in any Compound under Section 2.08.
(iii) by the mutual written consent of the Company and
the Investor;
(iv) by the Company if the Investor fails to pay
$500,000 within 120 days of the Closing; or
(v) automatically upon a QPO (as such term in defined
in the Amended and Restated Investors' Rights Agreement).
SECTION 8.02. Effect of Termination. In the event of termination
of this Agreement as provided in Section 8.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except (a) as set forth in Section 9.01 and (b) that nothing herein shall
relieve either party hereto from liability for any breach of this Agreement.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be paid by the party
incurring such costs and expenses, whether or not any Closing shall have
occurred.
SECTION 9.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by an internationally recognized overnight courier service, by
facsimile or registered or certified mail (postage prepaid, return receipt
requested) or by electronic mail to the respective parties hereto at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.02):
(a) if to the Company:
FluoroPharma, Inc.
c/o Puretech Ventures, LLC 000
Xxxxxxx Xxxxxx Xxxxx 0000,
Xxxxxx, XX 00000
Telecopy:_____________________________
Telephone:____________________________
Attention:____________________________
29
with a copy to:
Xxxxx and Xxxxxxxx LLP
00 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy:_____________________________
Telephone:____________________________
Attention: Xxxxx X. Xxxxxxxx
(b) if to the Investor:
QuantRx Biomedical Corporation
Xxxxx 000, 000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Telecopy: 000-000-0000
Telephone: 000-000-0000
E-mail: xxxxxxxxxx@xxxxxxxxxxxxxxxxx.xxx
Attention: Xxxxxx Xxxxxxxxx, Chief Executive Officer
with a copy to:
Xxxxxxxxx Traurig, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
E-mail: xxxxxxx@xxxxx.xxx
Attention: Xxxxxxx X. Xxxxxx, Esq.
SECTION 9.03. Public Announcements. Neither party hereto shall
make, or cause to be made, any press release or public announcement in respect
of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without prior notification to the other party
unless otherwise required by Law or applicable stock exchange regulation, and
the parties hereto shall cooperate as to the timing and contents of any such
press release, public announcement or communication.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect for so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party hereto. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
30
SECTION 9.05. Entire Agreement. The Transaction Documents
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between the Company and the Investor with
respect to the subject matter hereof and thereof.
SECTION 9.06. Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of the Company
and the Investor (which consent may be granted or withheld in the sole
discretion of the Company or the Investor); provided, however, that the Investor
may assign this Agreement or any of its rights and obligations hereunder to one
or more Affiliates of the Investor without the consent of the Company.
SECTION 9.07. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
Company and the Investor or (b) by a waiver in accordance with Section 9.08.
SECTION 9.08. Waiver. Either party to this Agreement may (a)
extend the time for the performance of any of the obligations or other acts of
the other party, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered by
the other party pursuant hereto or (c) waive compliance with any of the
agreements of the other party or conditions to such party's obligations
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby. Any waiver
of any term or condition shall not be construed as a waiver of any subsequent
breach or a subsequent waiver of the same term or condition, or a waiver of any
other term or condition of this Agreement. The failure of either party hereto to
assert any of its rights hereunder shall not constitute a waiver of any of such
rights. All rights and remedies existing under this Agreement are cumulative to,
and not exclusive of, any rights or remedies otherwise available.
SECTION 9.09. No Third Party Beneficiaries. Except for the
provisions of Article VII relating to indemnified parties, this Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and their
respective successors and permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person, including any
union or any employee or former employee of the Company, any legal or equitable
right, benefit or remedy of any nature whatsoever, including any rights of
employment for any specified period, under or by reason of this Agreement.
SECTION 9.10. Specific Performance. The Company and Investor
acknowledge and agree that they would be irreparably damaged if any of the
provisions of this Agreement are not performed in accordance with their specific
terms and that any breach of this Agreement by the other party could not be
adequately compensated in all cases by monetary damages alone. Accordingly, in
addition to any other right or remedy to which the Company or the Investor may
be entitled, at law or in equity, they shall be entitled to enforce and
provision of this Agreement by a decree of specific performance and to
temporary, preliminary and permanent injunctive relief to prevent breaches or
threatened breaches of any of the provisions of this Agreement, without posting
any bond or other undertaking.
31
SECTION 9.11. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed in that State. All Actions arising
out of or relating to this Agreement shall be heard and determined exclusively
in any New York federal court sitting in the Borough of Manhattan of The City of
New York, provided, however, that if such federal court does not have
jurisdiction over such Action, such Action shall be heard and determined
exclusively in any New York state court sitting in the Borough of Manhattan of
The City of New York. Consistent with the preceding sentence, the parties hereto
hereby (a) submit to the exclusive jurisdiction of any federal or state court
sitting in the Borough of Manhattan of The City of New York for the purpose of
any Action arising out of or relating to this Agreement brought by any party
hereto and (b) irrevocably waive, and agree not to assert by way of motion,
defense, or otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the transactions contemplated by this Agreement may not be enforced
in or by any of the above-named courts.
SECTION 9.12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY WANES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.12.
SECTION 9.13. Counterparts. This Agreement maybe executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Company and the Investor have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
QUANTRX BIOMEDICAL CORPORATION
By:
/s/ Xxxxxx Xxxxxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Chief Executive Officer
FLUOROPHARMA, INC.
By:
/s/ Xxxxx Xxxxxxx
-----------------------------------------
Name:
Title:
33
