Exhibit 10.5
--------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
-between-
[Purchaser]
-and-
HEALTH DISCOVERY CORPORATION
As Purchaser
---------------------------------------------------------
Dated as of July __, 2004
---------------------------------------------------------
E-18
--------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of July __, 2004 (this
"Agreement"), is made by [Purchaser] (the "Seller") and Health Discovery
Corporation, a Texas corporation (the "Purchaser").
RECITALS
WHEREAS, Seller and certain other senior secured lenders (with the
Seller, the "Lenders") to ▇▇▇▇▇▇▇▇ Genomics, Inc. and BIOWulf Technologies, LLC
(collectively the "Debtor"), and the Lenders held a first-priority security
interest in and to all of the Debtor's assets pursuant to those certain
Intellectual Property Security Agreements, dated October 11, 2001 and February
1, 2002, as well as under that certain Security Agreement, dated February 1,
2002, and that certain Senior Secured, Super-Priority, Debtor-In-Possession Loan
Agreement, dated March, 2002, (collectively, the "Security Agreements"), between
the Debtor and the Lenders, and under the Georgia Uniform Commercial Code
("UCC");
WHEREAS, the Debtor was in material payment and other default with
respect to the Debtor's financing from the Lenders, and on June 1, 2004, the
Lenders exercised their rights and remedies under the Security Agreements, and
under the UCC (the "Foreclosure");
WHEREAS, as a result of the Foreclosure the Lenders obtained rights in
certain assets of the Debtor; and
WHEREAS, the Purchaser now desires to acquire each Lender's rights in
such assets;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the Seller and the Purchaser hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF THE ASSETS
1.1. Purchase and Sale of the Assets.
(a) On the terms and subject to the conditions set forth in this
Agreement, the Seller agrees to sell, assign, transfer and deliver to the
Purchaser, and the Purchaser agrees to purchase free and clear of all Liens, all
of the Seller's interest in and to the Assets (as defined below), including all
associated goodwill of the Debtor and all claims of the Debtor (including all
rights of the Debtor to ▇▇▇ thereunder) against third parties for past, present
or future infringement or dilution of any of the Intellectual Property Rights
(as defined below) or for any injury to the goodwill of the Debtor associated
with any of the Intellectual Property Rights, in reliance upon the
representations and warranties of the Lenders contained herein and on the terms
and conditions herein set forth.
E-19
(b) As used in this Agreement, the Schedules and Exhibits attached
hereto and the Conveyancing Documents, the term "Assets" shall mean and include
all of the right, title and interest in the assets that were formerly owned by
the Debtor, including but not limited to:
(i) all of the patents, patent applications and patent rights
of the Debtor identified and described on Schedule 1.1(b)(i) and any
patents issuing from said applications, as well as any divisional,
continuation, continuation-in-part, reissue or reexamination patents
and any foreign counterparts or applications relating thereto
(collectively, the "Patents");
(ii) all of the trademarks and service marks and other similar
rights of the Debtor (collectively, the "Trademarks");
(iii) all of the copyrights of the Debtor and all other rights
of the Debtor in and to copyrightable works of the Debtor, and all of
the Intellectual Property Rights of the Debtor relating to such
copyrights and other rights including all original works subject to
protection by the Copyright Laws of the United States, such works being
in any medium now known or hereafter developed, including, but not
limited to all content, software, graphics, animation, know-how,
technical information and the like contained on the ▇▇▇▇▇▇▇.▇▇▇,
▇▇▇▇▇▇▇.▇▇▇/▇▇▇▇▇▇▇/ and related and associated websites;
(iv) all of the documentation of the Debtor relating to the
rights, assets and other property of the Debtor identified and
described in clauses (i) through (iii) of this Section 1.1(b);
(v) all of the business contracts of the Debtor;
(vi) all of the other assets listed on Schedule 1.1(b)(vi);
(vii) all of the Intellectual Property Rights, technical
information, Trade Secrets, know-how, formulations, specifications,
processes, techniques and data of the Debtor which are not readily
available to others through public means and which are not the subject
of an issued or pending patent claim of the Debtor in a county in which
any product, service process or part thereof, or use of a product or
part thereof, which is covered in whole or in part by at least one
unexpired claim of the Patents in the county in which any such product,
process or part thereof is made, used, or sold or service is rendered;
(viii) all claims of the Debtor, whether arising before or
after the Closing, to the extent such Claims relate to the Assets;
(ix) all books, records, ledgers, files, documents,
correspondence, lists, specifications, creative materials, advertising
and promotional materials, studies, reports, and other printed or
written materials formerly owned by the Debtor, and
(xi) without limitation, all other properties and assets owned
or held by the Lenders, which was previously owned by the Debtor,
whether tangible or intangible and whether or not of a type falling
within any of the categories of assets or properties described above.
(c) As used herein, the term "Intellectual Property Rights" shall mean,
collectively, United States and foreign patents; patent applications; patent
rights; names and tradenames; trademarks; service marks; trademark and service
▇▇▇▇ registrations; copyright registrations; copyrights (including those in
computer programs, drawings, documentation, and specifications); proprietary
rights in technical information, Trade Secrets, know-how, formulations,
specifications, processes, techniques and data which are not readily available
to others through public means and which are not the subject of an issued or
pending patent claim of the Debtor or Lenders in a country in which the product
of a Patent is manufactured, sold, employed or service provided; license rights
under the intellectual property rights of third parties; and all other
intellectual property rights, whether or not subject to statutory registration
or protection.
E-20
(d) As used herein, the term "Trade Secrets" shall mean materials,
composition and formulas, manufacturing methods, techniques and processes, lists
of potential customers and contacts, names of suppliers, market surveys, and
marketing information which (A) denies economic value, actual or potential, from
not being generally known to, and not readily ascertainable by proper means by,
other persons, and (B) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy;
1.2. Conveyancing Documents. The Seller shall execute and deliver to
the Purchaser upon Closing (as defined below) the following documents
(collectively, the "Conveyancing Documents"):
(a) an Assignment of Patents, in or substantially in the form of
Exhibit 1.2(a), covering all of the Patents;
(b) a General Assignment, ▇▇▇▇ of Sale and Transfer Statement in
substantially in the form of Exhibit 1.2(b), with regard to all of the Assets.
1.3. No Assumption of Liabilities. It is the express intention of the
Seller and the Purchaser that the Purchaser shall acquire all of the rights of
the Seller in the Assets. The Assets are being purchased by the Purchaser as
separate assets, apart from any liabilities or obligations of the Seller, the
other Lenders or the Debtor, none of which are being assumed by the Purchaser.
The Purchaser is not undertaking a continuation of the Debtor's business or any
obligations or liabilities of the Debtor relating thereto.
1.4. Closing. The consummation of the purchase and sale of the Assets
(the "Closing") shall upon the satisfaction or waiver of all conditions to the
obligations of the parties set forth in Article 4 (the "Closing Date").
1.5. Excluded Property; etc. Anything in any of the provisions of this
Agreement, any of the Schedules or Exhibits attached hereto or any of the
Conveyancing Documents express or implied to the contrary notwithstanding, the
term "Assets", as used in the Transaction Documents, shall not include or be
deemed to include any of the rights, title or interests of the Seller, whether
now owned or hereafter acquired, arising or existing, in and to all or any of
the property listed on Schedule 1.5 (all of such property and all of the
Seller's , the other Lenders' or the Debtor's rights, title and interests
therein and thereto being herein collectively called the "Excluded Property").
ARTICLE 2
PAYMENT OF PURCHASE PRICE; CLOSING
2.1. Purchase Price. The aggregate purchase price for the Assets will
be $_____, to be paid in accordance with Section 2.2 and Section 2.4.
E-21
2.2. Payment of Purchase Price. At Closing, the Purchaser shall deliver:
(a) a duly executed promissory note substantially in the form of
Exhibit 2.2(a) (the "Cash Note"), which Cash Note shall provide for the payment
of $____ within two business days of a court of competent jurisdiction entering
a final order granting all relief requested by the Lenders in confirming the
Foreclosure (the "Confirmation Proceeding"), as more fully described in the Cash
Note (the "Initial Payment"), and payments of $_____ due on the fourth, eighth,
twelfth and sixteenth month anniversary of the Initial Payment, plus
(b) a duly executed convertible promissory note substantially in the
form of Exhibit 2.2(b) (the "Convertible Note"), which Convertible Note shall be
in the principal amount of $_____, which will be convertible into _____ shares
of Purchaser common stock (the Cash Payment plus the Cash Note plus the
Convertible Promissory Note plus the Common Stock shall equal the "Purchase
Price").
2.3. Allocation of Purchase Price. The Purchase Price will be allocated
among the Assets for all purposes (including Tax and financial accounting
purposes) as the Parties may mutually agree. Each of the Parties hereto will not
take a position on any Tax Return, before any governmental or regulatory body
charged with the collection of any Tax, or in any Action or Proceeding, that is
in any way inconsistent with the Purchase Price Allocation and will cooperate
with each other in timely filing consistent with such allocation on Form 8594
with the Internal Revenue Service.
2.4. Making of Payments.
(a) All payments required to be made by the Purchaser to the Seller
hereunder shall be made by the Purchaser to the Seller by wire transfer of funds
in accordance with the following wire transfer instructions (the "Lenders'
Account"), unless written notice of a change in such instructions is provided to
the Purchaser pursuant to Section 8.2 of this Agreement by ▇▇▇ ▇▇▇▇▇▇▇▇, serving
as the collateral agent for the Lenders (the "Collateral Agent"):
Wire to:
Bank:
ABA#:
Credit Account Name:
Credit Account Number:
(b) Any deposit by Purchaser of an amount into the Lenders' Account
shall completely satisfy any Purchaser obligation to make payments of such
amount under this Agreement and the Conveyancing Documents regardless of how
such funds are ultimately disbursed from such account. The disbursement of any
deposited funds is the complete responsibility of the Collateral Agent.
E-22
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Each of the parties hereto represents and warrants to the other party
hereto that the following statements explicitly made by such party are true,
complete and correct as of the Closing Date:
3.1. Representations and Warranties of the Seller. The Seller
represents and warrants to the Purchaser that the following statements are true,
complete and correct as of the date hereof and will be true, complete, and
correct as of the Closing Date, except as otherwise set forth on the Schedules
attached hereto, as follows:
(a) Authority; Validity; No Conflict. Seller represents and warrants to
the Purchaser that Seller has the full legal right, capacity and power, and if
Seller is an entity, all requisite corporate and regulatory authority and
approval required, to enter into, execute, deliver and perform this Agreement
and to otherwise sell, transfer, convey and deliver to the Purchaser all of the
Seller's rights in the Assets and to transfer to the Purchaser pursuant to this
Agreement all of the Seller's rights in the Assets. Neither the execution and
delivery of this Agreement and the Conveyancing Documents by the Seller nor the
performance by the Seller of the transactions contemplated by this Agreement
will: (i) violate, conflict with, result in the acceleration of, or entitle any
party to accelerate the maturity or the cancellation of the performance of any
obligation under, or result in the creation or imposition of any lien in or upon
any of the Assets, or constitute a default (or an event which might, with the
passage of time or the giving of notice, or both, constitute a default) under
any lease, contract, loan or credit agreement, license or other instrument to
which Seller is a party or by which Seller may be bound or affected; (ii)
violate or conflict with any provision of any applicable law or judicial order
applicable to the Seller, the Lenders or the Assets; or (iii) require any
consent or approval of or filing or notice with any person, entity, or
governmental or regulatory body.
(b) Default by the Debtor. (i) The Debtor defaulted in material
respects in connection with material obligations of the Debtor to the Lenders
secured by the Assets; (ii) the Lenders exercised their post-default rights and
remedies as lenders with respect to the Assets; and (iii) the Lenders conducted
a commercially reasonable sale pursuant to a properly publicized notice of sale
and otherwise complied with applicable law in acquiring the Assets from Debtor.
(c) Sufficiency of Assets. The Assets constitute all of the assets,
tangible and intangible, of any nature whatsoever obtained from the Debtor by
the Lenders in the Foreclosure.
(d) Title. The Lenders collectively own outright and have good and
marketable title to all of the Assets, , in each case free and clear of any lien
or encumbrance. Seller has not transferred any of its interest in the Assets
that it acquired pursuant to the Foreclosure, and at the Closing, the Seller
will convey to Purchaser all of the Seller's interest in the Assets.
(e) Litigation; Compliance with Laws. Except as set forth on Schedule
3.1(e), there are no outstanding judicial orders or decrees by which the Seller
or to the knowledge of the Seller, the Debtors are bound, or any legal action or
proceeding pending or to the knowledge of the Seller, threatened, which relate
to or affect the Debtor or the Assets, nor to the knowledge of the Seller are
there any facts or circumstances which are likely to give rise to any such
action or proceeding. The Seller has not received any claim that its ownership
or use of the Assets is or was not in compliance in any respect with, or that it
is or was in violation of, any law or order applicable to the Assets or the
Seller.
E-23
(f) Intellectual Property Rights. The Lenders own or otherwise
possesses valid licenses to all Intellectual Property Rights.
(g) Brokers. No broker or agent has been employed or engaged by the
Seller in connection with the purchase and sale of Assets or any of the other
transactions contemplated by this Agreement or the Conveyancing Documents.
(h) Disclosure. Neither the Agreement, the Conveyancing Documents or
any other document furnished to Purchaser by or on behalf of the Seller pursuant
to the any such document or agreement, contains an untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein not misleading.
3.2. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller that the following statements are true,
complete and correct as of the date hereof, and will be true, complete, and
correct as of the Closing Date, as follows:
(a) Organization and Authority. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas, that the Purchaser has the full legal right, capacity and power, and all
requisite corporate power and lawful authority, to enter into the the Agreement
and the Conveyancing Documents and to perform its obligations thereunder, and
that the Purchaser has the full legal right and power and all authority and
approval required to enter into, execute, deliver and perform this Agreement.
This Agreement and the Conveyancing Documents required to be entered into
pursuant hereto by Purchaser have been duly executed and delivered by Purchaser
and constitute the valid and binding obligation of Purchaser enforceable against
Purchaser in accordance with their terms. Neither the execution and delivery of
the Agreement nor the Conveyancing Documents by Purchaser, nor the performance
by Purchaser of the transactions contemplated by this Agreement will: (i)
violate or conflict with any of the provisions of the Articles of Incorporation
and Bylaws of Purchaser; (ii) violate or conflict with any provisions of any law
or order applicable to Purchaser; or (iii) require any consent or approval by or
filing or notice with any person, entity or governmental or regulatory body
other than with respect to federal and state filings required in connection with
the issuance of Common Stock by Purchaser.
(b) Pending Litigation and Proceedings. No litigation is pending or, to
the knowledge of Purchaser, threatened against or affecting the Purchaser in
connection with any of the transactions contemplated by this Agreement. There is
presently no outstanding judgment, decree or order of any governmental body
against or affecting Purchaser in connection with the transactions contemplated
by this Agreement.
(c) Brokers. No broker or agent has been employed or engaged by the
Purchaser in connection with the purchase and sale of Assets or any of the other
transactions contemplated by the Transaction Documents.
E-24
(d) Share Issuance. All shares of Common Stock to be issued upon the
conversion of the Convertible Note have been duly authorized and when issued
will be fully paid and nonassessable.
(e) No Liens. Upon the Closing, the interest in the Assets will not be
subject to any lien or encumbrance of the Purchaser.
ARTICLE 4
CONDITIONS PRECEDENT TO THE CLOSING
4.1. Conditions Precedent to the Obligations of Purchaser to Complete
the Closing.
(a) Conditions Precedent. The obligations of Purchaser to enter into
and complete the Closing are subject to the fulfillment at or prior to the
Closing of the following conditions, any one or more of which may be waived in
writing by Purchaser:
(i) each of the representations and warranties of the Seller
contained in the Agreement and the Conveyancing Documents shall be true and
correct in all material respects as of the Closing without giving any effect to
any materiality qualifications contained in such representations or warranties;
(ii) the Seller shall have performed and complied with all of
the agreements, covenants and obligations required under the Agreement and the
Conveyancing Documents to be performed or complied with by the Seller prior to
or at the Closing;
(iii) all authorizations, consents, waivers and approvals as
may be required to be obtained by the Seller in connection with the consummation
of the transactions contemplated by this Agreement shall have been obtained;
(iv) all filings that are required to have been made by the
Parties with any governmental or regulatory body in order to carry out the
transactions contemplated by this Agreement shall have been made and all
authorizations, consents and approvals from any governmental or regulatory body
required to carry out the transactions contemplated by this Agreement shall have
been received and any applicable waiting periods shall have expired; and
(v) there shall be in force no order, action or proceeding by
or before any governmental or regulatory body restraining, restricting,
enjoining, prohibiting, invalidating or otherwise preventing (or seeking to
prevent) the consummation of the transactions contemplated by this Agreement.
(b) Conveyancing Documents. The Seller shall have executed and
delivered to Purchaser the Conveyancing Documents and such instruments and
documents as may be reasonably requested by Purchaser in order to complete the
transfer of the Assets to Purchaser.
(c) Other Items. The Lenders shall have delivered to Purchaser such
documents, instruments and assurances as Purchaser may reasonably request to
evidence or establish the accuracy of the representations and warranties of the
Lenders, the compliance by the Lenders with their covenants and agreements, and
the satisfaction of the conditions to Purchaser's obligations to complete the
Closing.
(f) Private Placement. Purchaser shall be satisfied that there shall be
a valid private placement of the Common Stock included in the Purchase Price to
be delivered pursuant to Section 2.2 hereof under the Securities Act and under
any applicable state securities laws, including representations or
questionnaires or both from Seller to the effect that he or she is an accredited
investor under the Securities Act and has such knowledge and experience in
financial and business matters that would permit him or her to be capable of
evaluating the merits and risks of an investment in the Common Stock.
E-25
(g) Investment Advisor. In the event that the Seller is not an
"accredited investor" or "qualified investor" pursuant to the Securities Act,
(i) the Seller may select and retain an investment advisor or representative of
their choosing to assist them at such Seller's sole cost and expense, or (ii)
the Seller may select an investment advisor or representative provided by
Purchaser, the fees and costs associated with the employment of such investment
advisor shall be paid by the Seller.
4.2. Conditions Precedent to the Obligations of the Seller to Complete
the Closing.
(a) Conditions Precedent. The obligations of the Seller to enter into
and complete the Closing are subject to the fulfillment at or prior to the
Closing, of the following conditions, any one or more of which may be waived in
writing by the Seller: (i) each of the representations and warranties of
Purchaser contained in this Agreement and the Conveyancing Documents shall be
true and correct in all material respects as of the Closing without giving any
effect to any materiality qualifications contained in such representations or
warranties; and (ii) Purchaser shall have performed and complied with all of the
agreements, covenants and obligations required under the Agreement, and the
Conveyancing Documents, to be performed or complied with by Purchaser prior to
or at the Closing.
(b) Conveyancing Documents. Purchaser shall have executed and delivered
to the Seller the Conveyancing Documents to which it is a party.
(c) Cash Note. Purchaser shall have executed and delivered to the
Seller the Cash Note.
(d) Convertible Note. Purchaser shall have executed and delivered to
the Seller the Convertible Note.
(e) Other Items. Purchaser shall have delivered to the Seller such
documents, instruments and assurances as the Seller may reasonably request to
evidence or establish the accuracy of the representations and warranties of
Purchaser, the compliance by Purchaser with its covenants and agreements, and
the satisfaction of the conditions to the Seller's obligations to complete the
Closing.
E-26
ARTICLE 5
POST-CLOSING COVENANTS
Each of the parties hereto hereby covenants and agrees with the other
party hereto as follows:
5.1. Additional Conveyancing Documents. At any time and from time to
time after the Closing, with reasonable promptness after request by the
Purchaser, and without further consideration, the Seller shall execute and
deliver to the Purchaser such other instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as the Purchaser may reasonably
deem necessary or desirable in order to sell, transfer, convey and assign more
effectively to the Purchaser the Assets, and to assist Purchaser in exercising
all rights with respect thereto. The Parties shall use their best efforts to
fulfill or obtain the fulfillment of the conditions to the Closing, including,
without limitation, the execution and delivery of any document or other papers,
the execution and delivery of which are conditions precedent to the Closing.
5.2 Conversion Shares. The Parties shall comply with and abide by the
covenants and restrictions contained in the Cash Note and the Convertible Note.
5.3 Best Efforts. The Seller agrees to use his or her best efforts to assist and
cooperate with Purchaser in doing, all things necessary and proper to consummate
the transactions contemplated by this Agreement.
5.5 Consents. The Seller agree to use his or her best efforts to obtain
any consent, approval or amendment which Purchaser reasonably determines is
required to convey, transfer and assign the Assets.
5.6 Publicity. The Seller shall not issue any press release or
otherwise make any announcements to the public with respect to this Agreement
without the prior written consent of the Purchaser, except as required by Law.
This Section shall expire on the tenth day after the Closing Date.
5.7 Payment of Maintenance Fees. From and after the Closing, Purchaser
shall make all commercially reasonable maintenance fees due on the Patents and
will take all commercially reasonable actions to prosecute the Patents.
5.8 Maintaining Public Company Status. From and after the Closing,
Purchaser shall maintain itself as a reporting company pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, and shall take
such action as is necessary to satisfy the requirements of Rule 144(c).
5.9 Drop Dead Date. If the Confirmation Proceeding is not completed by
December 31, 2004, Purchaser must either (a) waive the condition that the
Confirmation Proceeding occur and satisfy all of Purchaser's obligations under
this Agreement, the Cash Note and the Convertible Note or (b) return to Seller
all ownership rights in the Patents conveyed by Seller. If Purchaser makes the
election pursuant to subsection (b), Purchaser and Seller shall negotiate in
good faith for Purchaser's license of all of Seller's interest in the Patents.
5.10 Security Interest. Within three business days of Purchaser's
receipt of documents reasonably satisfactory to Purchaser that grant Seller a
first priority security interest in Seller's interest in the Assets, Purchaser
shall executes such documents and return them to Seller for filing as the Seller
deems appropriate.
E-27
5.11 Preemptive Rights. Until such time as the outstanding balances
under the Cash Note and Convertible Note have been paid in full or, in the case
of the Convertible Note, converted, Seller shall have preemptive rights to
participate in any future fundraising by Purchaser on the same terms and
conditions as Purchaser offers to third parties. Seller's right under this
Section 5.12 shall be in proportion to the number of shares to which Seller
would be entitled upon a full conversion of the Convertible Note.
ARTICLE 6
SURVIVAL; INDEMNIFICATION
6.1. Survival of Representations and Warranties. All representations
and warranties of the Lenders and the Purchaser contained in this Agreement will
survive the Closing indefinitely, subject to any applicable statute of
limitations. Any representation or warranty that would otherwise terminate in
accordance with this Section 6.1 will continue to survive if a notice of a claim
(a "Claim Notice") shall have been given under this Article 6 on or prior to
such termination date until the related claim for indemnification has been
satisfied or otherwise resolved as provided in this Article 6.
6.2. Indemnification of the Seller. Subject to the limitations
contained in this Article 6, the Purchaser agrees to indemnify, defend and hold
harmless the Seller and his or her successors and assigns from and against any
and all losses, liabilities, expenses (including costs of investigation and
defense and reasonable attorneys' fees), or diminution in value, whether or not
involving a third-party Claim (collectively, "Damages"), which, directly or
indirectly, arise out of, result from or relate to: (i) any breach of any
representation or warranty made by Purchaser in this Agreement, the Conveyancing
Documents, the Cash Note or the Convertible Note; (ii) any breach by Purchaser
of any covenant or obligation of Purchaser contained in this Agreement, the
Conveyancing Documents, the Cash Note or the Convertible Note; or (iii) any
Assets; or (iv) the Cash Note or the Convertible Note.
6.3. Indemnification of the Purchaser. Subject to the limitations
contained in this Article 6, the Seller agrees to indemnify, defend and hold
harmless Purchaser, its affiliates, and their respective officers, directors,
managers, employees, members, and shareholders, and their respective successors
and assigns, from and against any and all Damages which, directly or indirectly,
arise out of, result from or relate to: (i) any breach of any representation or
warranty made by the Seller in this Agreement, the Conveyancing Documents, the
Cash Note or the Convertible Note; (ii) any breach by the Seller of any covenant
or obligation of the Seller contained in this Agreement, the Conveyancing
Documents, the Cash Note or the Convertible Note; or (iii) any liability of the
Debtor asserted against Purchaser or its affiliates.
6.4. Indemnification Procedure. A Claim for indemnification for any
matter may be asserted by notice to the Party from whom indemnification is
sought by giving written notice to the Party describing in reasonable detail the
basis for the Claim.
E-28
6.5. Limitations on Indemnification.
(a) Cap. Subject to this Section 6.5, Purchaser shall not be obligated
to make indemnification payments pursuant to this Agreement, which exceed the
amount of the purchase price.
(b) Purchaser's Exclusive Remedies; Right of Set-Off. Subject to this
Section 6.5, Purchaser's exclusive remedies pursuant to a Claim for
indemnification pursuant to this Agreement are that (i) the Purchaser shall have
the right to set-off any Damages from any amounts otherwise payable by the
Purchaser to the Seller and (ii) the Purchaser shall have the right to cancel
shares issued to the Seller pursuant to the Convertible Note that remain subject
to transfer restrictions in an amount equal to the amount of the Claim divided
by the closing price of the Common Stock on the day preceding delivery of the
Claim notice to the Seller. Any claim of a set-off by the Purchaser shall be
made in writing and delivered to the Seller.
(c) Right to Compel Performance. Neither the foregoing provisions of
this Section 6.5 nor anything else in this Agreement shall limit the right of a
party to enforce the performance of this Agreement or any contract, document or
other instrument executed and delivered pursuant to this Agreement by any remedy
available to it in equity.
(d) Fraud; Intentional Misrepresentation. The limitation set forth in
this Article 6 shall not apply to any Damages suffered by a party arising out of
fraud or 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 a fact
necessary to make the statements of facts contained therein not misleading.
ARTICLE 7
TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date:
(a) at any time, by mutual written consent of the parties hereto;
(b) by either the Purchaser or the Lenders if a material breach of any
provision of this Agreement has been committed by the other party and such
breach has not been waived or cured within ten days of receipt of notice of such
breach;
(c) by Purchaser if any of the conditions in Section 4.1 have not been
satisfied as of the Closing Date and Purchaser has not waived such condition on
or before the Closing Date; or
(d) by the Lenders if any of the conditions in Section 4.2 have not
been satisfied as of the Closing Date and the Lenders have not waived such
condition on or before the Closing Date. ARTICLE 8
E-29
MISCELLANEOUS
8.1. Expenses. Each party to this Agreement shall, except as otherwise
expressly provided by this Agreement, pay all of the costs and expenses incurred
and sustained by such party in negotiating and performing this Agreement.
8.2. Notices. All notices hereunder shall be in writing and shall be
given personally, sent by facsimile transmission or sent by prepaid courier, by
certified, registered or express mail, postage prepaid, or by a nationally
recognized overnight courier as follows (telephone calls shall not constitute
notice):
If to the Seller:
------------------------
------------------------
------------------------
Facsimile: (___) ________
Telephone: (___) ________
With a copy (which shall not constitute notice) to:
Ellis, Painter, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser:
Health Discovery Corporation
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which shall not constitute notice) to:
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
E-30
8.3. Interpretation.
(a) This Agreement (including the Schedules and Exhibits) and the
agreements, certificates and other documents delivered pursuant to this
Agreement contain the entire agreement among the Parties with respect to the
transactions described herein, and supersede all prior agreements, written or
oral, with respect thereto.
(b) This Agreement may be amended, superseded, cancelled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the Parties or, in the case of a waiver, by the Party waiving
compliance.
(c) This Agreement may be executed by the Parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a number of copies hereof each signed by less
than all, but together signed by all, of the Parties hereto.
8.4. Choice of Law. This Agreement, the Conveyancing Documents, and the
Delivered Items shall be governed and construed in accordance with the laws of
the State of Georgia without regard to conflicts of laws principles thereof and
all questions concerning the validity and construction hereof shall be
determined in accordance with the laws of the State of Georgia. Each Party
hereby irrevocably submits to the non-exclusive jurisdiction of Chatham County,
State of Georgia, and if it or he can acquire jurisdiction, in the United States
District Court for the Southern District of Georgia in any action or proceeding
arising out of or relating to this Agreement and hereby irrevocably agrees, on
behalf of itself and himself, and on behalf of such party's successor's and
assigns, that all Claims in respect of such action or proceeding may be heard
and determined in any such court and irrevocably waives any objection such
person may now or hereafter have as to the venue of any such suit, action or
proceeding brought in such a court or that such court is an inconvenient forum.
8.5. No Third-Party Beneficiaries. This Agreement is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder, except the provisions of Article 6 relating to indemnities of the
Purchaser and Seller.
8.6. Assignment. This Agreement and all the rights and powers granted
hereby shall bind and inure to the benefit of the parties hereto and their
respective permitted successors and assigns. This Agreement and the rights,
interests and obligations hereunder may not be assigned by any party hereto
without the prior written consent of the other parties hereto, except that
Purchaser may make such assignments to any Affiliate of Purchaser provided that
Purchaser remains liable hereunder.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
E-31
IN WITNESS WHEREOF, the parties hereto have caused this ASSET PURCHASE
AGREEMENT to be duly executed and delivered as of July ___, 2004.
The Seller:
------------------------------------------
Name:
------------------------------------
The Purchaser:
HEALTH DISCOVERY CORPORATION
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
Chief Executive Officer
E-32