EXHIBIT 10.3
ASSET PURCHASE AND SALE AGREEMENT
THE SECURITIES ISSUED AS PART OF THE PURCHASE PRICE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS IN RELIANCE ON ONE OR MORE EXEMPTIONS THEREUNDER AND MAY
NOT BE SOLD OR TRANSFERRED EXCEPT IN TRANSACTIONS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT THEREUNDER.
This Asset Purchase and Sale Agreement (together with all Exhibits and
Schedules hereto, the "Agreement") is entered into as of the 30th day of
December, 2003 by and among HEALTH DISCOVERY CORPORATION (fka DIRECT WIRELESS
COMMUNICATIONS, INC.), a Texas public corporation with its principal place of
business and company headquarters at 0000 Xxxxx Xxx Xxxxxx Xxxx, Xxxxxx, Xxxxx
00000 (together with its successors and permitted assigns, "Buyer"), FRACTAL
GENOMICS, LLC, a California limited liability company with its principal place
of business and company headquarters at 000 Xxxxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000 ("Company") and XXXXX XXXX ("Xxxx") (Company and Xxxx are
hereinafter sometimes referred to collectively as the "Sellers" and individually
as a "Seller"). (Buyer, Company and Seller are hereinafter sometimes referred to
collectively as the "Parties" and individually as a "Party").
WHEREAS, Xxxx is the owner of 51% of the issued and outstanding
membership units of the Company and has the required and necessary authority to
enter into this Agreement on behalf of the Company; and
WHEREAS, the Company is engaged in the business (the "Business") of
development of Fractal Genomics Technology (as defined on Schedule 1.3 hereto);
and
WHEREAS, Buyer is a publicly traded company engaged in, among other
things, the acquisition of companies involved in medical technology and
development; and
WHEREAS, Buyer and the Company entered into that certain binding letter
agreement (the "Letter Agreement") dated August 29, 2003 pursuant to which Buyer
purchased and Company is to sell Company Assets as defined herein and therein;
and
WHEREAS, pursuant to such Letter Agreement, the parties now desire to
enter into this definitive Agreement as contemplated under the terms of the
Letter Agreement.
NOW, THEREFORE, in consideration of the premises, the provisions and
the respective covenants and agreements set forth in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE 1. PURCHASE AND SALE OF COMPANY ASSETS; SELLER'S RETAINED ASSETS;
DELIVERIES.
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1.1. Sale and Purchase of Company Assets. Upon the terms and subject to
the representations, warranties, covenants and conditions set forth herein, and
effective on the date hereof (the "Effective Date"), Seller hereby sells,
grants, conveys, assigns, transfers and delivers
to Buyer, and Buyer purchases and acquires from Seller, all right, title and
interest of Seller in and to the Company Assets, free and clear of all claims,
security interests, liens and encumbrances, restrictions, rights of others of
any kind or character, for the consideration described and payable as set forth
in Section 1.2 hereof.
1.2 Purchase Price.
1.2.1 Purchase Price. Upon the terms and subject to the conditions set
forth herein, in consideration for the sale, grant, conveyance, assignment,
transfer and delivery of the Company Assets, Buyer agrees to pay and deliver to
Sellers 7,500,000 unregistered shares of the common stock of Buyer and the sum
of $500,000 in accordance with the payment schedule set forth in paragraph 1.2.3
("Purchase Price").
1.2.2 Delivery. The parties stipulate and agree that the 3,825,000
shares comprising a portion of the Purchase Price have been transferred and
delivered to Xxxx, and that no additional shares shall be issued for the reasons
set forth in that certain Agreement and Memorandum between the Parties and
certain other individuals of even date herewith.
1.2.3 Payment Schedule. The cash portion of the Purchase Price shall be
payable as follows: Eight equal installments of $62,500 plus interest at the
rate of six percent (6%) per annum with the initial payment due and payable on
or before January 2, 2004 and thereafter on the following dates: April 1, 2004,
July 1, 2004, October 1, 2004, January 1, 2005, April 1, 2005, July 1, 2005 and
October 1, 2005. In the event that any payment of principal and interest is not
made within 15 days after the due date thereof, then all of the then unpaid
principal and relevant accrued interest shall become immediately due and
payable.
1.2.4 Security for Performance. Buyer, to secure the prompt and
faithful payment of the cash portion of the Purchase Price and to secure the
rights of Seller described in Section 1.2.5 below, agrees to and does hereby
grant to Seller a security interest in and to the Company Assets. In this
respect the Seller or Buyer shall execute such financing statements or UCC-1's
as may be necessary to properly perfect the security interest granted herein.
1.2.5 Default in Payment. From and after January 1, 2005, in the event
that any portion of the cash payment (whether payable before or after January 1,
2005) is not paid when due and continues to be in arrears without cure for a
period of sixty (60) days after notice from Seller or Xxxx, the Company Assets
assigned hereunder shall revert to Xxxx as if such assignment had not been made.
1.3. Company Assets. The Company Assets purchased hereunder are all of
the assets of the Company (other than Seller's Retained Assets) including
without limitation all patents and patent rights, trademarks and trademark
rights, trade names and trade name rights, domain names, service marks and
service xxxx rights, service names and service name rights, brand names,
inventions, processes, methods, designs, devices, tools, specifications,
techniques, algorithms, formulae, improvements, copyrights and copyright rights,
trade dress, business and product names, logos, slogans, trade secrets,
industrial models, computer programs, software (whether in source or object
code) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights as relate
to the Fractal Genomics Technology and the Business relating thereto (as defined
in Schedule 1.3).
1.4. Seller's Retained Assets. The "Seller's Retained Assets" are all
cash and cash equivalents and the membership units in Company owned by Xxxx.
1.5 No Assumed Liabilities. Buyer shall not assume by virtue of this
Agreement or the transactions contemplated hereby, and shall have no liability
for, any liabilities of Seller (including, without limitation, those related to
the Business) of any kind, character or description whatsoever, whether accrued,
absolute or contingent, whether known or unknown, whether disclosed or
undisclosed and regardless of when asserted (the "Retained Liabilities"). Seller
shall discharge in a timely manner or shall make adequate provision for all of
the Retained Liabilities.
1.6 License Agreement for Non-Medical Uses. Upon completion of the
transaction contemplated hereby, Buyer will grant to Seller, under the terms and
conditions of a license agreement (the "License Agreement"), the right and
license to use and employ the Fractal Genomics Technology in non-medical
applications. For the purpose of this Agreement, the term "non-medical
applications" will mean all uses other than those applications involving,
directly or indirectly, human diagnostic and treatment applications,
pharmaceutical manufacture and development, plant, animal or human medical
research and other applications which are generally referred to or known as
"medical applications". Such License Agreement shall provide, at a minimum, the
specific exclusions set forth herein, term, and royalty payable to Buyer
hereunder (which royalty shall be four percent (4%) of the gross revenues
attributable to such non-medical applications of the Fractal Genomics
Technology).
1.7 Other Deliveries by Seller to Buyer. As of the Effective Date,
Seller has delivered or caused to be delivered to Buyer:
(a) A Xxxx of Sale executed by each of the Sellers;
(b) Such other assignments and documents and instruments of sale,
assignment, conveyance and transfer, as Buyer or its counsel may deem reasonably
necessary or desirable to effect the transfer of the Company Assets to Buyer;
(c) A certificate, dated the Effective Date and executed by the Manager
of the Company, in form and substance reasonably satisfactory to Buyer, as to
the authenticity of the actions of the Managers and Members authorizing the
transactions contemplated herein. A copy of the Company's Operating Agreement
shall be attached to the certificate;
(d) The Xxxxx Xxxx Employment Agreement executed by Xxxxx Xxxx; and
(e) Such other instruments and documents as are required by any other
provisions of this Agreement to be delivered on the Effective Date by Seller to
Buyer.
1.8 Deliveries by Buyer to Seller. As of the Effective Date, Buyer has
delivered or caused to be delivered to Seller and the Company.
(a) The Purchase Price in accordance with Section 1.2.1;
(b) A certificate, dated the Effective Date and executed by the
Secretary of Buyer, in form and substance reasonably satisfactory to Seller, as
to the authenticity of the actions of the Board of Directors of Buyer
authorizing the transactions contemplated herein;
(c) The Xxxxx Xxxx Employment Agreement executed by Buyer;
(d) Such other instruments and documents as are required by any other
provisions of this Agreement to be delivered on the Effective Date by Buyer to
Seller or Company.
1.9. Directors and Officers of the Buyer After Effective Date After the
Effective Date, the following persons shall become officers and directors of
Buyer until such time as they may be replaced in accordance with the Bylaws of
the Company:
Officers: Xxxxxxx X. Xxxxxxxx M.D. Chairman & CEO
Xxxxx Xxxxxx President
Xxxxxx X. Xxxxxxxx, XX Chief Administrative Officer/
Secretary & Treasurer
Xxxxx Xxxx Vice President/Fractal Technology
Directors: Xxxxxxx X. Xxxxxxxx M.D.
Xxxxxx X. Xxxxxxxx, XX
Xxxxx Xxxxxx
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby jointly and
severally represent and warrant to Buyer as follows, which representations and
warranties shall survive the Closing:
2.1 Ownership of the Company Assets. Seller is the sole owner,
beneficially and of record, of all of the Company Assets, free and clear of any
pledge, lien, security interest, encumbrance or claim of any kind. Upon delivery
of the Company Assets to Buyer pursuant to this Agreement, Buyer will receive
good and marketable title thereto, free and clear of any pledge, lien, security
interest, encumbrance or claim of any kind.
2.2 Authorization, Validity and Effect of Agreements.
(a) The Company has the requisite power and authority necessary to
execute and deliver this Agreement and the agreements contemplated hereby, and
to perform its obligations hereunder and thereunder. The execution and delivery
of this Agreement and all agreements and documents contemplated hereby by the
Company, and the consummation by the Company of the transactions contemplated
hereby, have been duly authorized and approved by all requisite action on the
part of the Company.
(b) This Agreement constitutes, and all agreements and documents
contemplated hereby, when executed and delivered pursuant hereto, will
constitute, the valid and legally binding obligations of Xxxx and the Company
enforceable in accordance with their terms, except that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws of
general application now or hereafter in effect relating to the enforcement of
creditors' rights generally and by general principles of equity (whether in a
proceeding at law or in equity).
(c) The execution and delivery of this Agreement by Xxxx and the
Company does not, and the consummation of the transactions contemplated hereby
by Xxxx and the Company will not (i) require the consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority or any third party; (ii) result in the breach of any
term or provision of, or constitute a default under, or result in the
acceleration of or
entitle any party to accelerate (whether after the giving of notice or the lapse
of time or both) any obligation under, or result in the creation or imposition
of any lien, charge, pledge, security interest or other encumbrance upon any
part of the property of the Company pursuant to any provision of, any indenture,
mortgage, lease, license, franchise, permit, authorization, lien, trust, or
other agreement or instrument to which Xxxx or the Company is bound; (iii)
violate or conflict with any provision of the Company's organizational
documents, as amended to the date hereof; (iv) result in the violation of any
statute, rule, regulation, ordinance, code, order, judgment, writ, injunction,
decree, or arbitration award, or an event which with notice, lapse of time or
both, would result in any such violation.
(d) Company is a limited liability company duly organized, validly
existing and in good standing under the laws of California and is duly qualified
in each jurisdiction where either the conduct of its business or ownership of
its properties requires qualification to do business, and has full corporate
power and authority to conduct the Business as and to the extent now conducted
and to own, use and lease its assets and properties used in the Business.
2.3 No Undisclosed Liabilities. On the Effective Date, the Company
Assets will not be subject to any liens, encumbrances, liabilities or claims.
Additionally, there are no facts, conditions or circumstances, known to Xxxx or
the Company, that will or may reasonably be expected to cause, either presently
or with the passage of time, a "material adverse change" in the condition
(financial or otherwise), of the Company Assets.
2.4 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority or other
entity is required to be obtained or made by Xxxx or the Company in connection
with the execution and delivery of this Agreement or the performance of the
obligations hereunder.
2.5 Broker's or Consultant's Fees. Each of Seller and the Company
represents and warrants that each has dealt with no broker, finder or similar
consultant in connection with the transaction contemplated by this Agreement,
and, consequently, that no commission or finder's fee is due or payable in
connection herewith.
2.6 No Untrue Statement. No representation or warranty of either Seller
contained herein nor any written information, exhibits, schedules or agreements
furnished by or on behalf of either Seller pursuant to this Agreement or in
connection with the transaction contemplated herein contains or shall contain
any untrue statement of a material fact, or omit or shall omit to state a
material fact necessary to make the statements and facts contained therein not
misleading. Except as set forth on Schedule 2.6, there is no fact known to
either Seller which materially adversely affects, or in the future may
materially adversely affect, individually or in the aggregate, the condition
(financial or otherwise), assets, liabilities, business, operations or prospects
of the Company, that has not been set forth herein or heretofore communicated to
Buyer in writing.
2.7. Legal Proceedings; Compliance with Laws. There are no lawsuits,
proceeding, arbitrations or governmental investigations or audits pending or, to
the knowledge of Sellers, threatened against, relating to or affecting any
Seller with respect to the Business or any of the Company Assets. Sellers are
not, nor have they at any time within the last three years been, in violation of
or in default under any law applicable to the Business or the Company Assets,
which violation is material to the ordinary conduct of its business.
2.8 Contracts. There are no material contracts to which either Seller
is a party that are related to the Business or by which any of the Company
Assets is bound.
2.9 Intellectual Property.
(a) Seller owns all technology required to conduct the Business as it
is conducted by Seller as of the Effective Date (including without limitation
all products, tools, computer programs, specifications, source code, object
code, graphics, devices, techniques, algorithms, methods, processes, procedures,
packaging, trade dress, formulae, drawings, designs, improvements, discoveries,
concepts, user interfaces, software, "look and feel," development and other
tools, content, inventions (whether or not patentable or copyrightable and
whether or not reduced to practice), designs, logos, know-how and concepts).
(b) Seller has not received any notice or claim (whether written, oral
or otherwise) challenging Seller's ownership or rights in the Company Assets or
claiming that any other person or entity has any legal or beneficial ownership
with respect thereto or challenging the validity or enforceability of the
Company Assets. To the Seller's knowledge, no other person or entity is
infringing or misappropriating the Company Assets.
(c) The Company Assets do not infringe, violate or interfere with or
constitute a misappropriation of any right, title or interest (including,
without limitation, any patent, copyright, trademark or trade secret right) held
by any other person or entity, and there have been no claims made with respect
thereto and (ii) Seller has not received any notice or claim (whether written,
oral or otherwise) regarding any infringement, misappropriation, misuse, abuse
or other interference with any third party intellectual property or proprietary
rights (including, without limitation, infringement of any patent, copyright,
trademark or trade secret right of any third party) by Seller or the Company
Assets, or claiming that any other entity has any claim of infringement with
respect thereto.
For purposes of this Section 2.9, it is understood that (i) no
improvements on the Fractal Genomics Technology, nor any other or new
technology, created by Buyer (with or without Xxxx'x assistance) shall be deemed
an infringement or other violation of the foregoing representations and (ii)
nothing contained herein shall be construed to assure the ultimate outcome of
the patent applications or any of the claims therein (regardless of whether any
or all of said claims are allowed or disallowed).
2.10 Entire Business. The sale of the Company Assets by Seller to Buyer
pursuant to this Agreement will effectively convey to Buyer the entire Business
and all of the tangible and intangible assets and property used by Seller
(whether owned, leased or held under license by Seller, by any of Seller's
affiliates or by others) in connection with the conduct of the Business as
heretofore conducted by Seller. The Company Assets listed on Schedule 1.3
constitute all of the assets necessary to conduct the Business as currently
conducted and as proposed to be conducted.
2.11 Securities Law Matters.
(a) Company will acquire the Buyer common stock for its own account for
the purpose of investment and not with a view to or for sale in connection with
any distribution thereof, and Company has no present intention or plan to effect
any distribution thereof (other than to its members in connection with the
dissolution of Company).
(b) Company is capable of evaluating the merits and risks of its
investment in Buyer and has the capacity to protect its own interests. Company
is aware that the acquisition of Buyer stock involves substantial risk and that
its financial condition and investments are such that it is in a financial
position to hold such securities for an indefinite period of time and to bear
the economic risk of and withstand a complete loss of such investment.
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(c) Company acknowledges that the Buyer stock must be held indefinitely
unless subsequently registered under the Securities Act or an exemption from
such registration is available. Company is aware of the provisions of Rule 144
promulgated under the Securities Act which permit the limited resale of
securities issued in a private placement subject to the satisfaction of certain
conditions.
(d) Company has had an opportunity to ask questions of management
concerning Buyer and its business and to conduct its own independent due
diligence investigation of Buyer.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER
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As an inducement to Seller to enter into and perform this Agreement,
and in consideration of the covenants of Seller contained herein, Buyer
represents and warrants to Seller, which representations and warranties shall
survive the Closing, as follows:
3.1 Existence; Good Standing. Buyer is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of Texas and
in each jurisdiction where either the conduct of its business or ownership of
its properties requires qualification to do business.
3.2 Authority. The Buyer has the requisite power and authority
necessary to execute and deliver this Agreement, and the agreements contemplated
hereby, and to perform its obligations hereunder and thereunder. The execution
and delivery of this Agreement and all other documents contemplated hereby by
Buyer, and the consummation by it of the transactions contemplated hereby, have
been duly authorized by all requisite corporate action.
3.3 Enforceability. This Agreement, together with the documents
contemplated hereby, and the Xxxx Employment Agreement, each when executed and
delivered, constitute, the valid and legally binding obligations of Buyer
enforceable in accordance with their terms, except that enforceability may be
limited by applicable bankruptcy, insolvency, or other similar laws of general
application now or hereafter in effect relating to the enforcement of creditors'
rights generally and by principles of equity (whether in a proceeding at law or
in equity).
3.4 No Consents or Breaches. The execution and delivery of this
Agreement by Buyer does not, and the consummation of the transactions
contemplated hereby by Buyer will not (i) require the consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority (except for filings required under applicable federal
and state securities laws and stock exchange or NASDAQ rules); (ii) result in
the breach of any material term or provision of, or constitute a material
default under, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or the lapse of time or both) any
material obligation under, or result in the creation or imposition of any lien,
charge, pledge, security interest or other encumbrance upon any part of the
property of the Company pursuant to any provision of, any indenture, mortgage,
lease, license, franchise, permit, authorization, lien, trust, or other
agreement or instrument to which Seller or the Company is bound; (iii) violate
or conflict with any provision of Buyer's organizational documents, as amended
to the date hereof; or (iv) result in the violation of any statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction, decree, or
arbitration award, or an event which with notice, lapse of time or both, would
result in any such violation.
3.5 Broker's or Consultant's Fees. Buyer represents and warrants that
it has dealt with no broker, finder or similar consultant in connection with the
transaction contemplated by this Agreement, and, consequently, that no
commission or finder's fee is due or payable in connection herewith.
3.6 No Untrue Statement. No representation or warranty of Buyer
contained herein nor any written information, exhibits, schedules or agreements
furnished by or on behalf of Buyer pursuant to this Agreement or in connection
with the transaction contemplated herein contains or shall contain any untrue
statement of a material fact, or omit or shall omit to state a material fact
necessary to make the statements and facts contained therein not misleading.
There is no fact known to Buyer which materially adversely affects, or in the
future may materially adversely affect, individually or in the aggregate, the
condition (financial or otherwise), assets, liabilities, business, operations or
prospects of Buyer, that has not been set forth herein or heretofore
communicated to Buyer in writing.
3.7 Capitalization. The authorized capital stock of the Buyer consists
of 200,000,000 shares of no par value common stock, of which 59,751,128 shares
are issued and outstanding as of October 1, 2003. Except as set forth on
Schedule 3.7: (i) no options, warrants, subscriptions, puts, calls or other
rights, commitments, undertakings or understandings granted by the Buyer to
acquire, dispose of or restrict the transfer of, any of the Buyer's capital
stock or other securities of any kind or class or rights, obligations or
undertakings convertible into securities of any kind or class of the Buyer are
authorized or outstanding; (ii) the Buyer is not subject to any obligation to
purchase, redeem or otherwise acquire any of its capital stock or securities (or
of any options or rights or obligations described in the preceding clause (i))
upon the occurrence of a specified event (and assuming that specified time
periods have passed and appropriate notices have been given) or otherwise and
(iii) no other kind or class of capital stock except as described in this
Section 3.7 is authorized or outstanding. The shares of Buyer common stock
issued and delivered to the Company as described in Section 1.2, and upon
delivery of the Company Assets as provided in this Agreement, are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Buyer's Articles of Incorporation or
bylaws or any agreement to which Buyer is a party or is bound.
3.8 Financial Statements. The financial statements of Buyer contained
in its public filings made with the Securities and Exchange Commission (i) have
been prepared from and in accordance with the books and records of Buyer and in
conformity with United States generally accepted accounting principles,
consistently applied, in effect at the date of such financial statement ("GAAP")
and (ii) such financial statements present fairly in accordance with GAAP the
consolidated financial position and results of operations and cash flows of
Buyer as of their respective dates and for the respective periods covered
thereby.
3.9 Absences of Undisclosed Liabilities. Except as and to the extent
reflected in or reserved against in the Buyer's financial statements, the Buyer
has no other liabilities of any nature (whether accrued, absolute, contingent,
changing, known, unknown, determinable, indeterminable, liquidated, unliquidated
or otherwise and whether due or to become due) relating to any existing or prior
act, omission, condition or state of facts, other than (a) liabilities incurred
in the ordinary course of business or (b) liabilities which in the aggregate are
not material to the condition of the Buyer's business.
3.10 Litigation. The Buyer (a) is not (and since December 31, 2002 has
not been) engaged in, a party to, subject to or, to its knowledge, threatened
with any claim, controversy, legal or equitable action or other proceeding
(whether as plaintiff, defendant or otherwise); and (b) is not (and since
December 31, 2002 has not been) a party to or subject to any judgment, order,
decree or restriction against it.
3.11 Compliance with Laws. The Buyer is in compliance with all
applicable law, including that involving antitrust, unfair competition, trade
regulation, securities antipollution, environmental, employment and plant
downsizing, relocation, closing or safety (except for instances of
non-compliance that could not, in the aggregate, be reasonably expected to have
a material adverse effect on the assets owned, leased or currently used by the
Buyer or on the Buyer's business, financial condition or results of operations).
The Buyer is not (and since December 31, 2002 has not been) either charged with,
in receipt of any notice of, or, to its knowledge, under investigation with
respect to any material failure or alleged material failure to comply with any
provision of any applicable law that has had or that could be reasonably
expected to have a material adverse effect on the assets owned, leased or
currently used by the Buyer or on the Buyer's business, financial condition or
results of operations.
3.12 Change in Control Provisions. Except as disclosed on Schedule
3.12, the Buyer is not a party nor subject to any agreement that contains any
provisions that become effective or are accelerated or contingent upon a change
in control of the Buyer or otherwise require any payment or performance by the
Buyer or any officer, director or shareholder thereof, now or in the future, in
connection with or as a result of any of the transactions contemplated by this
Agreement.
ARTICLE 4. [INTENTIONALLY OMITTED.]
ARTICLE 5. [INTENTIONALLY OMITTED.]
ARTICLE 6. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
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6.1 Survival of Representations and Warranties and Indemnity
Obligations. Notwithstanding any right of Buyer (whether or not exercised) to
investigate the Business or any right of any party (whether or not exercised) to
investigate the accuracy of the representations and warranties of the other
party contained in this Agreement, Buyer has the right to rely fully upon the
representations and warranties of Sellers contained in this Agreement. All
representations and warranties made by the Parties in this Agreement and the
indemnification obligations contained in this Article 6 shall survive the
execution hereof and the Effective Date, and shall survive until the expiration
of a period of one year after the date of this Agreement, except that any
representation or warranty that would otherwise terminate will continue to
survive if an indemnification notice shall have been timely given under on or
prior to such termination date, until the related claim for indemnification has
been satisfied or otherwise resolved.
6.2 Losses. "Losses" shall mean, for purposes of this Article 6, with
respect to any person or party, any loss, liability, obligation, damage
(including, without limitation, consequential, punitive, special or otherwise),
deficiency, lien, claim, suit, cause of action, judgment, cost or expense
(including, without limitation, reasonable attorneys' and accountants' fees and
expenses and court costs of any kind, nature or description (regardless of
whether the claim or threat of lawsuit matures into a lawsuit)).
6.3 Indemnification by Seller. Subject to the provisions of this
Article 6, Seller, jointly and severally, shall indemnify, defend, protect, save
and hold harmless Buyer and its officers, directors, employees and agents
("Seller Indemnified Parties") against, and will
reimburse Buyer and/or any of the aforementioned indemnitees on demand for, any
and all Losses made or incurred by or asserted against any of the Seller
Indemnified Parties, at any time after the Effective Date, directly or
indirectly, arising out of, related to, caused by, or resulting from any of the
following ("Seller Indemnified Claims"):
(a) any inaccuracy or misrepresentation in, omission from, or breach or
nonfulfillment of, any representation, warranty, term, provision, or covenant by
any Seller contained in this Agreement, or in any Schedule or Exhibit hereto.
6.4 Indemnification by Buyer. Subject to the provisions of this Article
6, Buyer shall indemnify, defend, protect, save and hold harmless each Seller
and their officers, directors, employees and agents ("Buyer Indemnified Parties"
and with the Seller Indemnified Parties, the "Indemnified Parties") against, and
will reimburse such Buyer Indemnified Parties on demand for, any and all Losses
made or incurred by or asserted against any of the Buyer Indemnified Parties, at
any time after the Effective Date, directly or indirectly, arising out of,
related to, caused by, or resulting from any of the following ("Buyer
Indemnified Claims"):
(a) any inaccuracy, omission, misrepresentation in, omission from, or
breach of nonfulfillment of any representation, warranty, term, provision,
covenant or agreement on the part of Buyer contained in this Agreement or in any
Schedule or Exhibit hereto.
6.5 Limitation on Liability. Notwithstanding the forgoing, the
Indemnifying Party's obligations to indemnify the Indemnified Party against any
Loss shall be subject to the following limitations:
(a) Threshold. No indemnification shall be made under Section 6.3 or
6.4 until the aggregate amount of Loss exceeds $25,000.00 (the "Threshold"), but
if the aggregate amount of Loss thereunder exceeds $25,000.00, then
indemnification shall be made by the Indemnifying Party thereunder for only such
amounts as may exceed the $25,000.00 Threshold.
(b) Ceiling. Neither Company's nor Buyer's aggregate indemnification
obligations under Section 6.3 or Section 6.4 shall exceed $500,000.00. Xxxx'x
indemnification obligations under Section 6.3, whether arising directly or
indirectly as a derivative claim through the Company, shall be limited to 51% of
any Losses claimed and/or required and, in the aggregate, shall not exceed
$255,000 (51% of $500,000).
6.6 Fraud; Intentional Misrepresentation, etc. The limitations set
forth in Section 6.5 shall not apply to any Loss arising out of (i) fraud, (ii)
the breach of any representation or warranty contained herein or pursuant hereto
if such representation or warranty was made with actual knowledge that it
contained an untrue statement of a fact or omitted to state a fact necessary to
make the statements of facts contained therein not misleading, (iii) the breach
of any representation or warranty contained in Section 2.10 or (iv) any failure
by Sellers to timely pay, perform and discharge the Retained Liabilities.
6.7 Tax Adjustments. If a party's indemnification obligation under
Section 6.3 or Section 6.4 arises in respect of any indemnifiable event (a) for
which an Indemnified Party receives indemnification and (b) which results in any
tax benefit to such Indemnified Party for any taxable period (or portion
thereof) which would not, but for such indemnifiable event, be available, such
Indemnified Party shall pay, or shall cause to be paid, to the indemnifying
party an amount equal to the actual tax saving produced by such tax benefit
reduced by the amount of any tax detriment to such Indemnified Party as a result
of the receipt of such indemnification.
Tax benefits and detriments shall be taken into account as and when actually
realized. The amount of any such tax saving for any taxable period shall be the
amount of the reduction in taxes payable to a tax authority by such Seller Party
with respect to such tax period (net of any tax detriment resulting from the
receipt of the indemnity payment) as compared to the taxes that would have been
payable to a tax authority by such Indemnified Party with respect to such tax
period in the absence of such tax benefit.
6.8 No Right of Offset. Notwithstanding any other provision hereof,
until an arbitral award or court decision is rendered with respect to any
disputed claims for indemnification hereunder, no offset or withholding shall be
made or permitted with respect to any payments to be made to Sellers hereunder
or with respect to any salaries or other compensation to be paid for services by
Xxxxx Xxxx.
6.9 No Right of Indemnification or Contribution. Notwithstanding
anything contained herein to the contrary, under no circumstances shall either
Seller have any right of indemnification or contribution against Buyer or
Xxxxxxx X. Xxxxxxxx, M.D., in their respective capacities as members of Company.
In the event of any conflict between this Section 6.9 and the Company's
Operating Agreement, this Section 6.9 shall control.
Article 7. Miscellaneous.
7.1 Notices. Any notice, consent, approval, request, demand,
declaration or other communication required hereunder shall be in and shall be
given and shall be deemed to have been received if (i) delivered in person with
receipt acknowledged, (ii) telecopied and electronically confirmed during
regular business hours of recipient at recipient's place of business, and if
sent outside of regular business hours, such notice is deemed given on the next
business day, (iii) delivered by a nationally recognized overnight courier for
next business day delivery with receipt acknowledged, or (iv) four days after
being placed in the federal mail, postage prepaid, certified or registered mail,
return receipt requested.
7.2 Binding Effect; Benefits. This Agreement shall be binding upon and
shall inure to the benefit of the Parties, the Indemnified Parties, and their
respective successors and permitted assigns. Notwithstanding anything contained
herein to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person (other than the Parties, the Indemnified
Parties, or their respective successors and permitted assigns) any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
7.3 No Third-party Beneficiaries. No person or entity not a Party to
this Agreement (other than the Indemnified Parties) shall be deemed to be a
third-party beneficiary hereunder or entitled to any rights hereunder.
7.4 Entire Agreement; Amendment. This Agreement, together with the
Exhibits, Schedules and other agreements and documents contemplated hereby,
constitute the final written expression of all agreements between the Parties,
and is a complete and exclusive statement of those terms. Except as specifically
included or referred herein, this Agreement and the Exhibits, Schedules and
other agreements and documents contemplated hereby supersede all prior
understandings, negotiations and agreements concerning the matters specified
herein, including without limitation the Letter Agreement, dated August 29,
2003, between Seller and Buyer. Any representations, promises, warranties or
statements made by any Party that differ in any way from the terms of this
written Agreement, and the Exhibits, Schedules and other agreements and
documents contemplated hereby, shall be given no force or effect (except as
specifically included
or referred to herein). The Parties specifically represent, each to the others,
that there are no additional or supplemental agreements between them related in
any way to the matters herein contained unless specifically included or referred
to herein. No addition to or modification of any provision hereof shall be
binding upon any Party unless made in writing and signed by all Parties.
7.5 Governing Law. THIS AGREEMENT, AND ALL QUESTIONS RELATING TO ITS
VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT (INCLUDING, WITHOUT
LIMITATION, PROVISIONS CONCERNING LIMITATIONS OF ACTION), SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF
THE CONFLICT OF LAW PROVISIONS THEREOF) APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
7.6 Venue; Binding Arbitration. PURSUANT TO THE FEDERAL ARBITRATION
ACT, ALL DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT, INCLUDING BUT NOT
LIMITED TO DISPUTES REGARDING THE VALIDITY OF THIS PROVISION, SHALL BE SUBMITTED
EXCLUSIVELY TO BINDING ARBITRATION, AT A LOCATION TO BE DETERMINED BY THE
AMERICAN ARBITRATION ASSOCIATION PURSUANT TO THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION, PROVIDED HOWEVER THAT A PARTY SHALL BE
ENTITLED TO SEEK INJUNCTIVE RELIEF FROM A COURT OF JURISDICTION AGAINST BREACH
HEREOF OR IN AID OF ARBITRATION. THE PARTIES UNDERSTAND THAT THE AGREEMENT TO
ARBITRATE CONSTITUTES A WAIVER OF TRIAL BY JURY. THE PREVAILING PARTY IN ANY
ARBITRATION SHALL BE ENTITLED TO ENFORCEMENT OF THE ARBITRAL AWARD IN ANY COURT
OF COMPETENT JURISDICTION.
7.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
7.8 Headings. Headings of the Sections and Articles of this Agreement
are for the convenience of reference only, and shall be given no substantive or
interpretive effect whatsoever.
7.9 Waivers. No wavier of any provision of this Agreement shall be
valid or binding unless it is in writing, dated subsequent to the date hereof
and signed by all Parties. No waiver of any breach, term or condition of this
Agreement by any Party shall constitute a subsequent waiver of the same or any
other breach, term or condition.
7.10 Severability. If for any reason whatsoever, any one or more of the
provisions hereof shall be held or deemed to be illegal, inoperative,
unenforceable or invalid, such determination shall not render any of the other
provisions hereof illegal, inoperative, unenforceable or invalid, but this
Agreement shall be construed as if such illegal, inoperative, unenforceable or
invalid provisions had never been contained herein.
7.11 Assignability. Neither this Agreement nor any of the Parties'
rights hereunder may be assigned by any Party without the prior written consent
of the other Parties.
7.12 Construction. The Parties acknowledge that their respective
attorneys have participated jointly in the drafting of this Agreement and that
it has not been written solely by counsel for one Party. The Parties agree that
the rule of construction to the effect that any ambiguities are to be or may be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement to favor any Party against another.
7.13 Attorneys' Fees. The prevailing Party in any dispute between or
among the Parties arising out of the interpretation, application or enforcement
of any provision hereof shall be entitled to recover its reasonable attorneys'
fees and costs whether suit be filed or not, including without limitation costs
and attorneys' fees related to or arising out of any, trial or appellate
proceedings.
7.14 Expenses. Except as specifically provided herein, each Party shall
pay all of its own costs and expenses incurred or to be incurred in negotiating
and preparing this Agreement and in effecting and carrying out the transactions
contemplated hereby.
7.15 Further Actions. At any time and from time to time after the
Effective Date, each Party hereto agrees, at its own expense (except as
otherwise provided herein), to take such actions and to execute, acknowledge and
deliver such documents as may be reasonably requested by another Party to
effectuate the purposes of this Agreement.
ARTICLE 8. RESTRICTIVE COVENANTS.
8.1 Covenants of Sellers. In order to induce Buyer to enter into this
Agreement and consummate the transactions contemplated hereby, each Seller
agrees that neither it nor any of its respective affiliates shall, for a period
to and including December 31, 2005, without the prior written consent of Buyer,
directly or indirectly, for or on behalf of any person or entity, except for the
benefit of the Buyer or its affiliates:
(a) engage or invest in, or own, control, manage or participate in the
ownership, control or management of, or render services or advice to, any
business engaged, or which it reasonably knows is undertaking to become engaged,
in the development of Fractal Genomics Technology (more specifically, the
business based upon and relating to the assets transferred hereunder) in the
United States (the "Restricted Territory"); provided, that, Xxxx shall not be
prohibited by this subsection (a) from seeking or obtaining employment with any
public or private company with annual sales in excess of $100 million or any
non-profit corporation;
(b) solicit, or assist in the solicitation of, any person employed by
the Buyer (as an employee, independent contractor or otherwise) within the
Restricted Territory, to terminate such employment, whether or not such
employment is pursuant to a contract and whether or not such employment is at
will; or
(c) use, disclose or reveal to any person or entity, any Confidential
Information (as defined below); provided, however, that the obligations of this
clause (c) shall continue indefinitely with respect to any business information
that constitutes a trade secret under applicable law. "Confidential Information"
means all information of the Buyer related to the Business which derives value,
economic or otherwise, from not being generally known to the public, but
excluding any information that comes into the public domain through no fault of
Sellers. The foregoing, however, shall not apply to any information which is
required to be disclosed pursuant to law or by a legal process.
8.2 Equitable Relief. Notwithstanding anything contained in this
Agreement to the contrary, Sellers acknowledge and agree that Buyer's remedy at
law for a breach or threatened breach of any of the provisions of Section 8.1
would be inadequate and, in recognition of that fact, in the event of a breach
or threatened breach by Seller of the provisions of Sections 8.1, it is agreed
that, in addition to its remedies at law, Buyer shall be entitled to equitable
relief in the form of specific performance, temporary restraining order,
temporary, preliminary, or permanent injunction, or any other equitable remedy
which may then be available, including but not limited to an equitable
accounting of all earnings, profits and other benefits arising from or in
connection with such violation. Sellers agree not to oppose Buyer's request for
any of the above relief on the grounds that Buyer has not been irreparably
injured or that Buyer has an adequate remedy at law or that such equitable
relief is inappropriate. Nothing set forth in this Section 8.2 shall be
construed as prohibiting Buyer from pursuing any other rights and remedies
available to it for such breach or threatened breach.
8.3 Definition of Affiliate. As used herein, the term "Affiliate" means
any person or entity that directly, or indirectly through one of more
intermediaries, controls or is controlled by or is under common control with the
person or entity specified. For purposes of this definition, control of a person
or entity means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person or entity whether by contract or
otherwise and, in any event and without limitation of the previous sentence, any
person or entity owning ten percent (10%) or more of the voting securities of
another person or entity shall be deemed to control that person or entity.
8.4 Termination. All of the foregoing covenants under this Article 8
will terminate as of January 1, 2006 or, earlier, in the event of a notice of
reversion given pursuant to and in compliance with the terms of Section 1.2.5
herein.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the Effective Date.
BUYER:
HEALTH DISCOVERY CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------
Xxxxxxx X. Xxxxxxxx M.D.
Chief Executive Officer
COMPANY:
FRACTAL GENOMICS, LLC,
A California limited Liability Company
By: /s/ Xxxxx Xxxx
--------------
Xxxxx Xxxx
Manager
XXXX:
/s/ Xxxxx Xxxx
--------------
Xxxxx Xxxx
SCHEDULE 1.3
ASSETS
All of the assets of Fractal Genomics, LLC (other than Seller's Retained Assets,
as defined in Section 1.4), and as sold and transferred hereunder, consist of:
1. USPTO Patent Application serial no. 09/766,247 entitled "A Method for
the Manipulation, Storage, Modeling, Visualization and Quantification
of Datasets" filed January 19, 2001.
2. USPTO application serial no. 60/486,233, entitled "A Method for Pathway
Conjecture and Diagnosis Using Fractal Modeling," filed July 10, 2003.
3. USPTO application serial no. 60/499,630 entitled "A Method for
Identifying Fundamental Pathways Involved in Cellular Chronomics,"
filed September 2, 2003.
4. To the extent relating to the foregoing patent applications and rights
and/or to the subject business to be conducted in connection with them,
all written materials, web-based materials, software, including all
source, object, and executable code in any form, and other intellectual
and intangible property, and including (to the extent such so relate to
said business):
(i) "Universal Modeling of Complex Networks", 2002.
(i) "Inverse Modeling of Complex Networks Using Complex Logistic
Maps", 2002.
(iii) "Evidence of Scale-Free Topology and Dynamics in Gene
Regulatory Networks", 2002. (Published in Proceedings of the
ISCA 12th International Conference, Intelligent and Adaptive
Systems and Software Engineering, pp. 37-40, 2003.)
(iv) "Fractal Modeling of Information Transmission within a Gene
Regulatory Network: A New Approach to Pathway Conjecture and
Diagnosis", 2003.
(v) All trade name and trademark rights in the name "Fractal
Genomics" and all rights in the domain name
"xxxxxxxxxxxxxxx.xxx".
For purposes of this Agreement, the term "Fractal Genomics Technology" means all
of the technology and proprietary rights as set forth above, and the term
"Business" means the business and business activities conducted (and to be
conducted) in relation to said Fractal Genomics Technology.
SCHEDULE 2.6
Fractal Genomics, LLC is a high-risk, startup venture with no revenue. It
intends to operate in a highly competitive market and compete against companies
with greater financial and other resources. Initially, it will have negative
operating income and may never become profitable. As a result, any financial
projections are inherently uncertain and unreliable.
SCHEDULE 3.7
CAPITALIZATION
------------------------------------------------------
NO. OF SHARES SUBJECT TO
NAME OPTION/WARRANT GRANT
------------------------------------------------------
Xxxxx Xxxxxx 2,400,000
------------------------------------------------------
Xxxxx Xxxxxx 600,000
------------------------------------------------------
Xxx Xxxxxxx 1,900,000
------------------------------------------------------
Xxx Xxxxxxx 600,000
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