LITIGATION SUPPORT FINANCING AGREEMENT
EXHIBIT
10.1
LITIGATION SUPPORT
FINANCING
AGREEMENT
This
Agreement is made as of the 14th day
of October, 2010 by and between DYVA Management AG, a company organized under
the laws of Switzerland (“DYVA”) and NuRx
Pharmaceuticals, Inc., a corporation organized under the laws of Nevada (“NuRx”) hereinafter
collectively referred to as the “Parties” and
individually referred to as a “Party”.
RECITALS
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WHEREAS,
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WHEREAS,
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DYVA
has agreed to fund the cost of all or part of the Delaware Action and the
Other Litigation (defined below) in exchange for the issuance by NuRx of a
convertible promissory note and warrants for the issuance of common stock
by NuRx; and
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WHEREAS,
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the
Parties seek to define their rights, powers and obligations with respect
to the litigation costs and other matters associated with the Delaware
Action and the Other Litigation (as defined
below).
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AGREEMENTS
NOW,
THEREFORE, for and in consideration of the mutual covenants and agreements
contained herein, the Parties agree as follows:
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1.
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Litigation
Funding. The Parties agree as follows with respect to the funding
of the Delaware Action and any other litigation (“Other
Litigation”) undertaken to enforce or protect NuRx’s rights with
respect to QN Diagnostics LLC (the “Joint
Venture”), a joint venture undertaken by NuRx with QuantRx
Biomedical Corporation. For avoidance of doubt, funding of the
Delaware Action and any Other Litigation shall include all legal fees,
expenses and advances incurred by any counsel of record with respect to
the Delaware Action or Other Litigation, the cost of any experts retained
by or on behalf of NuRx with respect to the Delaware Action or any Other
Litigation up to an amount that shall not cause the Advances (as defined
in Section 4(a)(i)) to exceed One Million Dollars ($1,000,000) but shall
not include the cost of any judgment against, or sanctions imposed upon,
NuRx.
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a.
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Initial
Funding. The initial financing of the Delaware Action
shall consist of a payment of $75,000 the (“Initial
Funding”) to counsel of record in the Delaware Action (the “Law
Firm”), which is currently Xxxxx, Xxxxxxxxxxx & Xxxxxx,
LLP. DYVA and NuRx shall each advance $37,500 with respect to
the Initial Funding.
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b.
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Additional
Funding.
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i.
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DYVA
shall, at the request of NuRx, advance additional funds to the Law Firm
(each such advance an “Additional
Funding”) in the amount requested by NuRx within five business days
of receipt of the request.
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ii.
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DYVA
shall provide Additional Funding to counsel of record with respect to any
Other Litigation, provided, however, that
DYVA has given its written consent that such Other Litigation shall be
subject to the terms of this Agreement.
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iii.
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DYVA shall
have the right to cease advancing Additional Funding in connection with
the Delaware Action or any Other Litigation in the event it in good faith
disagrees with the litigation strategy or actions approved by NuRx in
connection with such law
suits.
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2.
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Control of
Litigation; Appointment of
Litigation Manager.
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a.
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Control of
Litigation. NuRx shall control the litigation in its
sole and absolute discretion and shall be solely responsible for all
information submitted to any court with respect to the Delaware Action or
any Other Litigation.
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b.
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Appointment of
Litigation Manager. Notwithstanding Section 2(a), DYVA
is irrevocably appointed as the litigation manager with respect to the
Delaware Action and any Other Litigation subject to financing under this
Agreement (the “Litigation Manager”), provided, however,
that DYVA shall cease to be Litigation Manager in the event it elects to
cease providing Additional Funding pursuant to Section
1(b)(iii). NuRx agrees that it shall consult with DYVA on each
material decision with respect to the Delaware Action and the Other
Litigation.
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3.
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Commitment
Fee/Litigation Management Fee/Risk Premium. In
connection with the transactions contemplated herein, NuRx shall pay DYVA
the following fees, which in each case shall be added to the principal
balance of the Convertible Note (as defined in Section 4(a)
below):
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a.
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Commitment
Fee. In exchange for DYVA’s agreement to pay its share
of the Initial Funding and all of the Additional Fundings, NuRx agrees to
pay DYVA a one-time commitment fee in the amount of $25,000 (the “Commitment
Fee”).
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b.
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Litigation Management
Fee. NuRx agrees to pay DYVA a litigation management fee
(the “Litigation
Management Fee”) in the
amount of (1) $25,000, which is immediately due and payable, and (2)
$4,000 per month to be paid each month commencing on June 30, 2010, and on
the 30th
day of each month thereafter (or, in the case of February, the 28th
day) and ending upon the earlier of the settlement or entry of a final
judgment in the Delaware Action and any Other
Litigation.
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c.
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Risk
Premium. NuRx shall pay DYVA a risk premium equal to 25%
of DYVA’s share of the Initial Funding and 50% of each Additional Funding
made by DYVA (the “Risk
Premium”). The Risk Premium shall be due and payable on
each date that DYVA pays the Initial Funding and each Additional
Funding.
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4.
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Issuance of
Convertible Note and
Warrant.
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a.
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In
consideration for the financing of the Delaware Action and the Other
Litigation, NuRx agrees to issue to DYVA a convertible promissory note
(the “Convertible
Note”) in the form attached as Exhibit
A.
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i.
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The
principal amount of the Convertible Note (the “Principal”) shall be
comprised of Dvya’s share of the Initial Funding, each Additional Funding
made by DYVA, any accrued but unpaid Commitment Fee, any accrued but
unpaid Litigation Management Fee and any accrued but unpaid Risk Premium
(each an “Advance” and
collectively, the “Advances”),
which total Advances shall not exceed One Million Dollars
($1,000,000).
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ii.
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DYVA’s
obligation to pay an Additional Funding shall terminate and NuRx shall
repay to DYVA the outstanding Principal and all accrued unpaid Interest
under the Convertible Note on the earliest to occur of the following
events (the “Maturity
Date”): (i) the date upon which NuRx in its sole and absolute
discretion closes on the sale of NuRx securities which results in NuRx
receiving gross proceeds in excess of One Million Dollars ($1,000,000)
with serial issues or staged payments aggregated (an “Institutional
Placement”), subject to DYVA’s right to exercise its conversion
rights under the Convertible Note in connection with such Institutional
Placement; or (ii) the later to occur of (A) three years from the date
that the Convertible Note issued, (B) the settlement of the Delaware
Action and any and all Other Litigation, or (C) the entry of a final
judgment in the Delaware Action and any and all Other
Litigation.
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iii.
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NuRx
shall pay interest on the outstanding Principal of the Convertible Note
from the date of each Advance until paid in full at a rate equal to the
lesser of twelve percent (12%) per annum or the maximum rate permissible
under applicable law, due and payable on the Maturity Date (the “Interest”).
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iv.
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The
Convertible Note shall be executed and delivered to DYVA contemporaneously
with NuRx’s execution and delivery of this
Agreement.
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b.
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In
additional consideration for the financing of the Delaware Action and the
Other Litigation, NuRx agrees to issue to DYVA, on the Maturity Date of
the Convertible Note, warrants in the form attached as Exhibit B (the
“Warrant”) for
the purchase of common stock of NuRx at Ten Cents (.10¢) per share with
warrant coverage equal to 100% of the highest Principal amount of the
Convertible Note. The Warrant shall have an exercise period of
seven years from the date of issuance of the
Warrant.
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5.
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Representations and
Warranties of NuRx. NuRx
represents and warrants to DYVA as
follows:
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a.
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Due Incorporation,
Qualification, etc. NuRx is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. NuRx
(i) has the power and authority to own or lease its properties
and to carry on its business as now conducted, and (ii) is duly
qualified, licensed to do business and in good standing under the laws of
Nevada and as a foreign corporation in each jurisdiction in which the
failure to be so qualified or licensed could reasonably be expected to
have a material adverse effect on the business, financial condition or
results of operations of NuRx.
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b.
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Authority. The
execution, delivery and performance by NuRx of this Agreement, the
Convertible Note, the Warrant and the NuRx Guarantee, and the
consummation of the transactions contemplated thereby (i) are within
the power of NuRx and (ii) have been duly authorized by all necessary
corporate or company action on the part of
NuRx.
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c.
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Enforceability.
Each of this Agreement, the Convertible Note, the Warrant and the NuRx
Guarantee, has been, or will be, duly executed and delivered by NuRx and
constitutes, or will constitute, a legal, valid and binding obligation of
NuRx, enforceable against NuRx in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors’ rights generally
and general principles of equity.
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d.
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Non-Contravention.
The execution and delivery by NuRx of this Agreement, the Convertible
Note, the Warrant and the NuRx Guarantee and the performance and
consummation of the transactions contemplated hereby and thereby, do not
and will not: (i) violate NuRx’s certificate of incorporation or bylaws
(collectively, the “Organizational
Documents”) or any material judgment, order, writ, decree, statute,
rule or regulation applicable to NuRx; (ii) violate any provision of,
or result in the breach or the acceleration of, or entitle any other
person or entity to accelerate (whether after the giving of notice or
lapse of time or both), any material mortgage, indenture, agreement,
instrument or contract to which NuRx is a party or by which it is bound;
or (iii) result in the creation or imposition of any lien upon any
property, asset or revenue of NuRx or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization or approval applicable to NuRx, its business or operations,
or any of its assets or
properties.
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e.
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Approvals. No
consent, approval, order or authorization of, or registration, declaration
or filing with, any governmental authority or other person or entity
(including, without limitation, the stockholders of any person or entity)
is required in connection with the execution and delivery of this
Agreement, the Convertible Note, the Warrant or the NuRx Guarantee by NuRx
and the performance and consummation of the transactions contemplated by
any of such documents.
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f.
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No Violation or
Default. NuRx is in not violation of or in default with respect to:
(i) its Organizational Documents (in each case as currently in
effect) or any material judgment, order, writ, decree, statute, rule or
regulation applicable to NuRx; (ii) any material mortgage, indenture,
agreement, instrument or contract to which NuRx is a party or by which it
is bound; or (iii) any federal, state, local or foreign law,
ordinance or regulation or other requirement of any governmental or
regulatory body, court or arbitrator applicable to the business of NuRx
(nor is there any waiver in effect which, if not in effect, would result
in such a violation or default).
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g.
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Capitalization.
The authorized capital stock of NuRx consists solely of 1,800,000 shares
of preferred stock, par value $0.001 per share, none of which are issued
and outstanding, of which 1,000,000 shares have been designated as Series
A Preferred Stock, 500,000 of which have been designated as Series B
Preferred Stock and 300,000 of which have been designated as Series C
Preferred Stock, and 150,000,000 shares of common stock, par value $0.001
per share, of which, after giving effect to the transactions contemplated
by this Agreement (i.e., the issuance of the Convertible Note and the
Warrant) (i) 23,444,234 shares will be issued and outstanding; (ii) no
shares are held in treasury; (iii) 5,625,560 shares are reserved for
issuance upon the exercise of options and warrants outstanding (other than
shares reserved for issuance in connection with conversion of the
Convertible Note or upon exercise of the Warrant) (the “Option and Warrant
Shares”); (iv) 10,000,000 shares are reserved for issuance upon the
conversion of the principal amount and interest accrued on the Convertible
Note, (the “Conversion
Shares”); and (v) 10,000,000 shares are reserved for issuance upon
the exercise of the Warrant (the “Warrant
Shares”). All of the issued and outstanding shares of common stock
have been duly authorized and are validly issued, fully paid and
nonassessable. Except as set forth in this Agreement (including
the Convertible Note and the Warrant), and except for options and warrants
relating to the Option and Warrant Shares and for the Convertible Note
relating to the Conversion Shares, and the Warrant relating to the Warrant
Shares, there are no options, warrants, conversion privileges, preemptive
rights or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of capital stock or other
securities of NuRx, or any other written agreements of NuRx to issue any
such securities or rights.
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h.
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Absence of Undisclosed
Liabilities and Obligations. NuRx has no liability or obligation,
either accrued, absolute, direct, or to NuRx’s knowledge, contingent or
indirect, or otherwise, whether as principal, agent, partner, co-venturer,
guarantor or in any capacity whatsoever other than (i) obligations
and liabilities that are not individually or in the aggregate material,
(ii) obligations under contracts made in the ordinary course of
business, and (iii) obligations and liabilities described in the periodic
reports NuRx has filed with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as
amended.
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i.
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Disclosure. All
information furnished to DYVA by or on behalf of NuRx in connection with
the transactions contemplated by this agreement or any related document,
when taken as a whole, does not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements not misleading. There is no fact of which NuRx is aware that
has not been disclosed to DYVA and that is or could reasonably be expected
to be material and adverse to the properties, business, or condition
(financial or otherwise) of NuRx.
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6.
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Representations and
Warranties of DYVA. DYVA
represents and warrants to NuRx as
follows:
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a.
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Binding
Obligation. DYVA has full legal capacity, power and authority to
execute and deliver this Agreement and to perform DYVA’s obligations
hereunder. This Agreement is a valid and binding obligation of DYVA,
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or affecting
the enforcement of creditors’ rights generally and general principles of
equity.
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b.
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Securities Law
Compliance. DYVA has been advised that the Conversion Shares and
Warrant Shares have not been registered under the Securities Act, or any
state securities laws, and therefore cannot be resold unless they are
registered under the Securities Act and applicable state securities laws
or unless an exemption from such registration requirements is available.
DYVA is aware that NuRx is under no obligation to effect any such
registration with respect to the securities or to file for or comply with
any exemption from registration. DYVA is purchasing the securities for
DYVA’s own account for investment, not as a nominee or agent, and not with
a view to, or for resale in connection with, the distribution thereof.
DYVA has such knowledge and experience in financial and business matters
that DYVA is capable of evaluating the merits and risks of such
investment, is able to incur a complete loss of such investment and is
able to bear the economic risk of such investment for an indefinite period
of time. DYVA is an “accredited investor” as such term is defined in
Rule 501 of Regulation D under the Securities
Act.
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7.
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Guarantees.
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a.
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NuRx
Guarantee. Upon the execution and delivery of this
Agreement, NuRx shall issue to DYVA a guarantee in the form attached as
Exhibit C with respect to its obligations under this Agreement, the
Convertible Note and the Warrant (the “NuRx
Guarantee”).
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b.
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Joint Venture
Guarantee. Upon gaining control of the board of the
Joint Venture, NuRx shall cause the Joint Venture to issue a guarantee in
the form attached as Exhibit D with respect to the obligations of NuRx
under this Agreement, the Convertible Note and the Warrant (the “Joint Venture
Guarantee”).
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8.
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Covenants.
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a.
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Sale of Joint Venture
Interest. Prior to the issuance of the Joint Venture
Guarantee, NuRx shall not sell, or enter into any agreement for the sale
of its ownership interest in, the Joint
Venture.
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b.
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Institutional
Placement. In the event of an Institutional Placement,
NuRx shall pay in full all of the Principal and accrued but unpaid
Interest under the Convertible
Note.
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c.
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Reservation of Common
Shares. NuRx shall at all times reserve and keep
available, solely for issuance and delivery upon the conversion of the
Convertible Note and exercise or conversion of the Warrant, all such
shares of common stock as from time to time would be issuable upon the
conversion of the Convertible Note and exercise or conversion of the
Warrant. NuRx will not avoid or seek to avoid the observance or
performance of any of the terms of the Convertible Note or the Warrant,
but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of DYVA. In
addition, NuRx shall promptly take all commercially reasonable action as
may from time to time be required to permit the Purchaser to
convert the Convertible Note and exercise or convert the Warrant and to
duly and effectively issue shares of common stock pursuant
thereto.
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d.
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Notice of Issuance of
Securities. NuRx shall not issue any securities from the date of
this Agreement until the conversion of the Convertible Note, in its
entirety, and the exercise or conversion of the Warrant, in its entirety,
without providing ten business days’ prior written notice to DYVA; provided that, NuRx
shall not be required to provide any such notice in connection with (i)
any issuance of securities pursuant to the exercise or conversion of any
securities outstanding as of the date of this Agreement or (ii) the
issuance of any shares of common stock, or options or other rights to
purchase or acquire shares of common stock, or the issuance of any other
securities, to directors, employees, consultants or advisors to NuRx,
pursuant to a formal plan duly adopted by the board of directors of
NuRx.
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9.
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Miscellaneous.
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a.
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Waivers and
Amendments. Any provision of this Agreement may be amended,
waived or modified only upon the written consent of NuRx and
DYVA.
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b.
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Entire
Agreement. This Agreement, together with the Convertible
Note, the Warrant, the NuRx Guarantee and the Joint Venture Guarantee,
constitutes and contains the entire agreement among NuRx and DYVA and
supersedes any and all prior agreements, negotiations, correspondence,
understandings and communications between the parties, whether written or
oral, respecting the subject matter hereof. Each of the Parties
acknowledges that no other Party, nor any agent or attorney of any other
Party, has made any promise, representation, or warranty whatsoever,
express or implied, and not contained herein, concerning the subject
matter hereof to induce the Party to execute or authorize the execution of
this Agreement, and acknowledges that the Party has not executed or
authorized the execution of this instrument in reliance upon any such
promise, representation, or warranty not contained
herein.
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c.
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Third
Parties. Nothing expressed or implied in this Agreement
is intended, or shall be construed to confer upon or give any person or
entity other than the Parties hereto any rights or remedies under or by
reason of this Agreement.
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d.
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Governing Law.
This Agreement and all actions arising out of or in connection with
this Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware.
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e.
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Survival.
The representations, warranties, covenants and agreements in this
Agreement shall survive the execution and delivery of this
Agreement.
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f.
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Notices.
All notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall be in writing and
faxed, mailed or delivered to each party as
follows:
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i.
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If
to DYVA, to:
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DYVA
Management AG
Xxxxxxxxxxxxxx
00
X.X. Xxx
000
XX-0000
Xxx/Xxxxxxxxxxx
Attention: Xxxxxxx
Xxxx
Telephone: 00
00 000 00 00
Facsimile: 41
41 727 10 41
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ii.
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If
to NuRx, to:
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c/o
ProElite, Inc.
00000
Xxxxxxxx Xxxx.
Xxxxx 0000
Xxx
Xxxxxxx, XX 00000
Attention: Xxxxxx
X. Xxxxxxxx, CFO
Telephone:
(000) 000-0000
Facsimile: (000)
000-0000
With a
copy to:
K&L
Gates LLP
0000 Xxxx
Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000-0000
Attention: Xxxxxxx
X. Hedge, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
All such
notices and communications will be deemed effectively given the earlier of
(i) when received, (ii) when delivered personally, (iii) one
Business Day after being delivered by facsimile (with receipt of appropriate
confirmation), (iv) one Business Day after being deposited with an
overnight courier service of recognized standing or (v) four days after
being deposited in the U.S. mail, first class with postage prepaid.
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g.
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Severability of this
Agreement. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired
thereby.
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h.
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Titles and
Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing
or interpreting this Agreement.
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i.
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No Presumption Against
the Drafter. Each of the Parties participated in the
drafting of this Agreement and the interpretation of any ambiguity
contained in this Agreement will not be affected by the claim that a
particular party drafted any provision
hereof.
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j.
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Counterparts.
This Agreement may be executed in any number of counterparts
(including by way of electronic transmission), each of which shall be an
original, but all of which together shall be deemed to constitute one
instrument.
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k.
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U.S. Currency.
All
payments required to be made pursuant to this Agreement shall
be payable only in United States Dollars and shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in
or converted into any currency other than United States Dollars, or any
other realization in such other currency, whether as proceeds of set-off,
distributions or otherwise, except to the extent that such tender,
recovery or realization shall result in the effective receipt by the
Person to whom such payment was owed of the full amount of United States
Dollars due and payable
hereunder.
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[Signature
page follows]
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IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and
delivered by their proper and duly authorized officers as of the date and year
first written above.
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Nevada
corporation
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By:
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/S/ Xxxxx Xxxxx-Xxxxxx
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(SEAL)
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Name:
Xxxxx Xxxxx-Xxxxxx
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Title:
CEO
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DYVA MANAGEMENT AG, a
company
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organized
under the laws of Switzerland
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By:
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/S/ Xxxxxxx Xxxx
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(SEAL)
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Name: Xxxxxxx
Xxxx
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Title:
General Counsel
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