February 11, 2010
February
11, 2010
00000
Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attn: Xx.
Xxxx Xxxxxxxx, Chief Executive Officer
Dear Xx.
Xxxxxxxx:
This
letter agreement (this “Agreement”) confirms the agreement between Inovachem,
Inc. (the “Company”) and certain existing investors in the Company set forth on
Exhibit A attached hereto (the “Investors”) concerning the potential purchase of
Class A Preferred Stock of the Company (the “Preferred Stock”) subject to and in
accordance with the terms and conditions set forth in this
Agreement. The undersigned is acting as agent of the Investors for
purposes of this Agreement; provided however that: (i) the rights and
obligations of each Investor hereunder are several and not joint; (ii) no action
taken by any Investor hereunder shall be deemed to constitute the Investors as a
partnership, group or joint venture or as acting in concert with one another;
and (iii) each Investor shall be entitled to enforce its rights hereunder
without regard to any other Investor.
The
Company shall permit the Investors, their agents and their designated
representatives reasonable access during xxxxx business hours and upon
reasonable notice full and complete access to inspect, review and appraise the
Company and its technology for a period of seventy-five days from the date of
this Agreement. The Company shall arrange for the Investors, their agents and
their designated representatives to discuss with appropriate directors,
officers, employees, customers and representatives of the Company such matters
relative to the Company and its technologies including review of patents,
know-how and other intellectual property of the Company, financial data, and
other business matters as the Investors may reasonably request. If requested by
the Company, as a condition hereof the Investors agree to execute and deliver to
the Company its standard confidentiality agreement.
Upon the
earlier of (i) the effectiveness of the Form S-1 Registration Statement filed by
the Company during the period in which this Agreement is in effect (the
“Registration Statement”) or (ii) the one hundred eightieth (180) day after the
date hereof, each Investor shall have the pro rata right (but not the
obligation) to purchase shares of Preferred Stock of the Company at a price per
share of $0.15 in an aggregate amount of no less than $500,000.00 to a
maximum amount of $700,000.00, pro rata or as otherwise agreed by the
Investors, with such additional rights and privileges as set forth on Exhibit B
attached hereto and on such additional terms and conditions set forth on Exhibit
B. Such pro rata right shall be based on such Investor’s ownership of common
stock of the Company relative to the total amount held by all Investors, as
determined on the date hereof. If the Registration Statement is not
declared effective by the Securities and Exchange Commission (the “SEC”) within
180 days from the date of this Agreement, the Investors may exercise the
purchase right at such time. The parties shall enter into such additional
documentation to evidence the purchase of the Preferred Stock as is customary in
transactions of this nature. This purchase right shall commence immediately
after the effectiveness of the Registration Statement and shall expire one
hundred eighty days after the date of this Agreement (“the Term”). The Investors
shall have the right to extend the Term for an additional sixty (60) days if the
Registration Statement has not been declared effective upon conclusion of the
Term. The Company shall provide Investors and their agent a written notice
immediately upon being informed by the SEC that the Registration Statement has
been declared effective.
The
number of shares of Preferred Stock to be purchased hereunder and the price at
which they are purchasable shall be subject to equitable adjustment in the event
of any stock split, stock dividend or other similar distribution on capital
stock in capital stock of the Company.
The
Company shall execute and deliver such instruments, certificates and other
documents and take such other action from time to time following the date hereof
and without further consideration as the other parties hereto may reasonably
require in order to effectuate the terms and provisions of this Agreement and
the transactions contemplated hereby. In no event shall any party
hereto be obligated to take any action in violation of any regulation or law to
which it is subject.
Please
execute where indicated below to evidence your intent to be legally bound by the
terms hereof.
|
Very
truly yours,
|
||
|
/s/ Uzi Halevy
|
||
|
UZI
HALEVY, on behalf of the Investors
|
Accepted
and agreed to on this 11 day of February, 2010.
|
By:
|
/s/ Xxxxx Toh
|
Name:
Xxxxx Toh
Title:
Vice Chairman
2
EXHIBIT
A
(INTENTIONALLY
OMITTED)
3
EXHIBIT-B
Summary
of terms of the investment in Preferred Stock of Inovachem, Inc (“Inovachem” or
the “Company”)
1. Inovachem
shall issue the Investors Class A Preferred Stock, at $0.15/share, convertible
to shares of Common Stock at the ratio of 1 to 1, subject to standard
adjustments. The Investors will have the right to invest in a minimum
of $500,000.00 of Preferred Stock up to a maximum of $700,000.00.
2. Anti-Dilution. If
the Company issues new securities to third parties at a price per
share lower than the price per share applicable to this
investment ($0.15/per share), the purchase price of each
of the shares of Preferred Stock purchased by the Investors, shall be adjusted
according to a “full ratchet” adjustment formula and the Company shall issue,
free of charge to each Investor, such additional shares of Preferred Stock so
that the total number of shares held by the Investors equals that number that
would have been issued at the lower price. This full ratchet
adjustment shall be valid for 18 months from the date of closing. Subsequent to
the 18 month period, the anti-dilution provision for price adjustment shall be
based on the “weighted average” method. The foregoing
antidilution shall not apply to:
(i) the
issuance to employees and consultants of common stock or options to purchase
common stock pursuant to an approved share option plan within a Board approved
option pool; or
(ii) the
issuance of shares to one or more strategic investors; provided however that:
(A) such strategic investor shall invest a minimum of $5 million individually or
$7.5 million in the aggregate with other strategic investors, (B) such
investment shall be at a price per share of not lower than $0.13, (C) the
strategic transaction is in the best interests of the Company, and (D) the
strategic transaction is approved by at least 2/3 of the entire Board of
Directors of the Company.
4. Pre-Emptive
Rights: So long as the Investors shall hold at least 5% in the aggregate of the
outstanding share capital of the Company (including common stock and preferred
stock) they shall have the right to maintain their percentage ownership in the
Company by purchasing a pro rata portion of any further issuance of securities
by the Company at the offering price, subject to customary exceptions (existing
options; shares or options to employees under a Board approved ESOP
pool).
5. Rights
Granted to Significant Shareholders. Where the current or future
By-Laws or Certificate of Incorporation of the Company grant certain rights and
privileges to shareholders holding a certain prescribed percentage
of the total issued capital stock of the Company, the Investors shall
be entitled to cumulate their shareholding for the purpose of calculating the
percentage holdings entitled to such rights and or privileges. The Investors
shall be entitled to any such rights and privileges if the aggregate ownership
percentage held by the Investors exceeds the requisite amount for an individual
shareholder to be entitled to such rights and privileges.
6. Independent
Nature of Each Investor’s Obligations and Rights. The obligations
of each Investor under this Agreement or any other transaction document are
several and not joint with the obligations of any other Investor,
and no Investor shall be responsible in any way for the performance of the
obligations of any other Investor under any transaction document
contemplated hereby. Nothing contained herein or in this Agreement or any
other transaction document, and no action taken by any Investor pursuant
hereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by this
Agreement or any other transaction document, and the Company acknowledges that
the Investors are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by Agreement and any other
transaction document. Each Investor shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement or out of any other transaction document, and it
shall not be necessary for any other Investor to be joined as an additional
party in any proceeding for such purpose.
7. Board
Representation. The Investors shall be entitled to an additional seat
on the Board of the Company upon closing of the purchase of the Preferred Stock
for so long as they hold the Preferred Stock.
8. The
Investors shall be entitled to a grant of equity of the Company equal to 10% of
the total value of the investment in the Preferred Stock, based on a share value
of $0.15/share. The parties shall determine the form of such issuance (i.e.
warrants or options with nominal exercise price or other form to be determined)
prior to closing of the investment in the Preferred Stock. If, at the
time of the closing of the investment in the Preferred Stock, the Investors have
not already received an equity grant similar to the foregoing in connection with
their investment in the common stock of the Company on the date hereof, the fee
hereunder shall be increased based on the aggregate value of the investment in
the common stock and the Preferred Stock.
9. The
Investors shall be entitled to enter into an option agreement with Xxxx Xxxxxxxx
on identical terms as those provided to the investors in the Company’s private
placement of common stock in January 2010 covering the Preferred Stock; provided
that the term of the option agreement shall commence on the date of the closing
of the investment in the Preferred Stock.
10. The
Preferred Stock shall include such additional terms, rights and privileges as
are commonly found in securities of this nature. The Company shall
provide such documentation, enter into agreements and execute such instruments
as are reasonably requested by the Investors to consummate the transactions
contemplated hereby.
2
