Escrow Agreement among QuatRx Pharmaceuticals, Hormos Medical, Securityholder Representatives, and U.S. Bank, N.A.
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Summary
This agreement, dated May 25, 2005, is between QuatRx Pharmaceuticals, Hormos Medical, various institutional and individual shareholders of Hormos, and U.S. Bank as Escrow Agent. It sets up an escrow fund holding shares issued as part of QuatRx’s acquisition of Hormos. The escrowed shares secure the sellers’ indemnification obligations to QuatRx and serve as an “earn out” based on certain milestones. The agreement details how the escrow is managed, when shares may be released, and the roles of the parties involved.
EX-2.2 3 v16003exv2w2.txt EX-2.2: ESCROW AGREEMENT EXHIBIT 2.2 ESCROW AGREEMENT This Escrow Agreement (the "Agreement") is entered into as of May 25, 2005, by and among QuatRx Pharmaceuticals Company, a Delaware corporation ("QuatRx"), Hormos Medical Corporation, a Finnish corporation ("Hormos"), Bio Fund Ventures I LP, a Finnish company, Bio Fund Ventures II LP, a Finish company, Bio Fund Ventures II Follow-on Fund LP, a Finnish company, The Finnish National Fund for Research and Development, a Finnish entity, BI Biomedical Venture III Ltd. (P/S), a Danish corporation, H&B Capital LP, a Swedish corporation, Mr. Ari Jauho, as representative and on behalf of certain institutional selling shareholders of Hormos (the "Institutional Securityholder Representative"), Mr. Kauko Kurkela, as representative and on behalf of certain individual selling shareholders of Hormos who are natural persons (the "Individual Securityholder Representative", and, together with the Institutional Securityholder Representative, the "Securityholder Representatives") and U.S. Bank, National Association (the "Escrow Agent"). RECITALS QuatRx, Hormos and certain of the holders of the outstanding shares of Hormos (the "Sellers") have entered into an Exchange Agreement dated as of May 13, 2005 (the "Exchange Agreement"), pursuant to which QuatRx will acquire all of the outstanding shares of Hormos held by the Sellers in consideration of newly issued shares of Series D Preferred Stock, par value $0.01 per share ("QuatRx Series D Preferred Stock") and Series D-1 Preferred Stock, par value $0.01 per share, of QuatRx ("QuatRx Series D-1 Preferred Stock") and newly issued shares of common stock, par value $0.01 per share, of QuatRx ("QuatRx Common Stock" and, together with the QuatRx Series D Preferred Stock and QuatRx Series D-1 Preferred Stock, "QuatRx Stock"). The Exchange Agreement provides that QuatRx will deposit a portion of the shares of QuatRx Stock to which Sellers are entitled into escrow hereunder to (i) secure the indemnification obligations of Sellers to QuatRx and its affiliates, officers, directors, employees, representatives and agents under the Exchange Agreement and (ii) serve as an "earn out" under certain circumstances described herein. The parties desire to establish the terms and conditions pursuant to which such escrow fund will be established and maintained. AGREEMENT The parties agree as follows: 1. DEFINED TERMS. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings given them in the Exchange Agreement. 2. CONSENT OF SELLERS. (a) Sellers have consented to: (i) the establishment of the Escrow Fund (as defined below) to secure the indemnification obligations of Sellers and provide an "earn out" under Section 3.1 of the Exchange Agreement and (ii) all of the other terms, conditions and limitations set forth in this Agreement. (b) Certain Sellers ("Accredited Sellers"), namely Bio Fund Ventures I LP and II LP, Bio Fund Ventures II Follow-on Fund LP, The Finnish National Fund for Research and Development, BI Biomedical Venture III Ltd. (P/S) and H&B Capital LP shall represent themselves in connection with the transactions contemplated by this Agreement. (c) Each Seller, excluding the Accredited Sellers, (each a "Represented Seller") has consented to the appointment of either the Institutional Securityholder Representative or the Individual Securityholder Representative, as applicable, as its representative for purposes of this Agreement and as attorney-in-fact and agent for and on behalf of such Represented Seller with respect to the subject matter of this Agreement. 3. ESCROW; INDEMNIFICATION AND EARN OUT. (a) ESCROW FUND. As soon as practicable after the Closing Date, QuatRx shall deposit with the Escrow Agent: 321,415 shares of QuatRx Series D Preferred Stock, 1,277,995 shares of QuatRx Series D-1 Preferred Stock and 3,570,046 shares of QuatRx Common Stock registered in the name of U.S. Bank, National Association as Escrow Agent, which is equal to thirty percent (30%) of the shares of QuatRx Series D Preferred Stock, thirty percent (30%) of the shares of QuatRx Series D-1 Preferred Stock and thirty percent (30%) of the shares of QuatRx Common Stock that each Seller is entitled to receive in the Exchange, pursuant to Section 2.1 of the Exchange Agreement (the "Initial Escrow Shares"). In addition, from time to time thereafter, QuatRx shall deposit with Escrow Agent additional shares of QuatRx Stock or other equity securities or dividends issued or distributed by QuatRx (including shares issued upon a stock split) in respect of the Initial Escrow Shares (the "New Shares" and, together with the Initial Escrow Shares, the "Escrow Fund"). Exhibit A hereto sets forth the name of each Seller and the number of Escrow Shares contributed to the Escrow Fund on behalf of each such Seller pursuant to Section 3.1 of the Exchange Agreement. One-third of the Escrow Fund shall be allocable to indemnification claims under Section 3(b) below (the "Indemnification Fund"), and two-thirds of the Escrow Fund shall be allocable to an "earn out" under Section 3(c) below (the "Earn Out Fund"). The value of the Escrow Fund, as determined in accordance with Section 4(a)(iii) below, contributed by each Seller divided by the aggregate value of the Escrow Fund, as determined in accordance with Section 4(a)(iii) below, contributed by all Sellers to the Escrow Fund shall be each such Seller's "proportionate interest" in the Escrow Fund. The Escrow Fund shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any party hereto. Escrow Agent agrees to accept delivery of the Escrow Fund and to hold such Escrow Fund in escrow subject to the terms and conditions of this Agreement and Section 3 of the Exchange Agreement. (b) INDEMNIFICATION. Sellers have agreed in Section 11.2 of the Exchange Agreement to indemnify and hold harmless QuatRx and each of its affiliates, officers, directors, employees, representatives and agents (each of which is an "Indemnified Person" and collectively "Indemnified Persons") from and against Losses, as defined in Section 11.2 of the Exchange Agreement. The Indemnification Fund shall be security for this indemnity obligation of Sellers, subject to the limitations, and in the manner provided, in this Agreement and the Exchange Agreement. (c) EARN OUT. Sellers have agreed in Section 3.1(b) of the Exchange Agreement that the Earn Out Fund shall be released to Sellers if any of the following events shall occur, within ten (10) Business Days of the earliest to occur of such events (each an "Earn Out Event"): (i) the closing of a Qualified Public Offering of QuatRx (as defined in the Amended and Restated Certificate of Incorporation of QuatRx) occurring prior to an Ospemifene Discontinuance, as defined below, (ii) in the absence of a Regulatory Delay, as defined below, upon the earlier of (a) dosing of the first patient in the second Phase III clinical trial of ospemifene conducted by QuatRx or its licensee, (b) submission by QuatRx or its licensee and acceptance for filing by the FDA of a New Drug Approval seeking marketing approval of ospemifene or, (c) twelve (12) months after the receipt by QuatRx of the final report for the first phase III clinical study of ospemifene conducted by QuatRx or its licensee, unless the Ospemifene Discontinuance occurs prior to such dosing and before the end of such twelve (12) month period, and (iii) in the event of a Regulatory Delay, upon the earlier of (a) dosing of the first patient in the second Phase III clinical trial of ospemifene by QuatRx or its licensee or (b) twenty-four (24) months after the receipt by QuatRx of the final report for the first phase III clinical study of ospemifene conducted by QuatRx or its licensee, unless the Ospemifene Discontinuance occurs prior to such dosing and before the end of such twenty-four (24) month period. If the Ospemifene Discontinuance occurs at any time prior to the occurrence of an Earn Out Event, then the Earn Out Shares shall be released to QuatRx and the shares of capital stock of QuatRx so released shall be cancelled. The term "Ospemifene Discontinuance" shall mean the termination of development of ospemifene by QuatRx and/or its licensee, as evidenced by a resolution of the Board of Directors of QuatRx to completely discontinue all further development and commercialization work on ospemifene by QuatRx and/or its licensee provided that such decision to discontinue is approved pursuant to the standards set forth in section 5(c) below. The term "Regulatory Delay" shall mean an action by the FDA which (i) prevents QuatRx from commencing the second Phase III clinical trial of ospemifene, and (iii) lasts beyond the twelve (12) month anniversary of QuatRx' receipt of such final report. 4. INDEMNIFICATION FUND. (a) DELIVERIES OUT OF INDEMNIFICATION FUND. Upon receipt by Escrow Agent at any time on or before the last day of the Indemnity Escrow Period (as defined in Section 4(d)) of a certificate signed by any officer of QuatRx (an "Officer's Certificate"): (i) stating that QuatRx or any other Indemnified Person has paid or reasonably anticipates that it will have to pay or incur Losses which on a cumulative basis with all prior Damages exceed US $150,000.00; (ii) specifying in reasonable detail the individual items of Losses included in the amount so stated, the date each such item was paid or incurred, or the basis for such anticipated liability, and the nature of the misrepresentation, breach of warranty or claim to which such item is related, and (iii) stating the proposed number and type of Delivered Shares (as defined below) determined in accordance with the next two sentences of this Section 4(a) and the value thereof determined in accordance with Section 4(a)(iv). Escrow Agent shall, subject to the provisions of Section 4(b) below, deliver to QuatRx out of the Indemnification Fund, as promptly as practicable, Escrow Shares or other assets held in the Indemnification Fund (the "Delivered Shares") in an amount equal to such Losses. The number of shares of QuatRx Series D Preferred Stock, QuatRx Series D-1 Preferred Stock and QuatRx Common Stock comprising the Delivered Shares shall be proportionate to the total number of shares of QuatRx Series D Preferred Stock, QuatRx Series D-1 Preferred Stock and QuatRx Common Stock, respectively, then held in the Indemnification Fund. (iv) For the purposes of determining the number of Escrow Shares to be delivered to QuatRx out of the Indemnification Fund pursuant to Section 4(a), the shares of QuatRx Stock shall be valued at US $1.40 per share, provided that, if shares of QuatRx Stock are then traded on a securities exchange or through the Nasdaq National Market, the shares of QuatRx Stock shall be valued at the greater of US $1.40 per share and the average of the closing prices of the shares of QuatRx Stock on such quotation system over the ten (10) trading days ending three (3) days prior to the delivery of the Officer's Certificate. It is acknowledged and understood that $1.40 per share of QuatRx Stock is not reflective of the fair market value of the Common Stock and the valuation thereof for the purposes of this Agreement has been determined solely for purposes of convenience. In no event shall the number of Escrow Shares released to QuatRx pursuant to this Section 4(a) exceed the amount of Escrow Shares then allocable to the Indemnification Fund. (b) OBJECTIONS TO CLAIMS. At the time of delivery of any Officer's Certificate to Escrow Agent, QuatRx shall deliver a duplicate copy of such certificate to the Accredited Sellers and Securityholder Representatives and for a period of 30 days after receipt of the Officer's Certificate, Escrow Agent shall make no delivery to QuatRx from the Indemnification Fund pursuant to Section 4(a) hereof unless Escrow Agent shall have received written authorization from the Accredited Sellers and/or the Securityholder Representatives, together representing at least thirty (30) percent of the shares of QuatRx Stock in the Indemnification Fund and including at least one (1) Accredited Seller, as set forth in such written authorization and upon which the Escrow Agent may rely, to make such delivery. After the expiration of such 30 day period, Escrow Agent shall make delivery from the Indemnification Fund in accordance with Section 4(a) hereof, provided that no such payment or delivery may be made if the Escrow Agent and QuatRx shall receive, prior to the expiration of such 30 day period, a jointly executed written statement of the Accredited Sellers and/or the Securityholder Representative(s), together representing at least thirty (30) percent of the shares of QuatRx Stock in the Indemnification Fund and including at least one (1) Accredited Seller, as set forth in such written statement and upon which the Escrow Agent may rely, objecting to the claim made in the Officer's Certificate. (c) RESOLUTION OF CONFLICTS; ARBITRATION. (i) In case the Accredited Sellers and/or the Securityholder Representative(s), together representing at least thirty (30) percent of the shares of QuatRx Stock in the Indemnification Fund and including at least one (1) Accredited Seller, shall object in writing pursuant to Section 4(b) above, to any claim or claims made in any Officer's Certificate, such Accredited Sellers, Securityholder Representatives and QuatRx shall attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims within 45 days after Escrow Agent's receipt of the Accredited Sellers' and/or Securityholder Representatives' written objection to the claim pursuant to Section 4(b) (the "Negotiation Period"). If Accredited Sellers, Securityholder Representatives and QuatRx should so agree during the Negotiation Period, a memorandum setting forth such agreement shall be prepared and jointly signed by such parties and shall be furnished to Escrow Agent. Escrow Agent shall be entitled to rely on any such memorandum and distribute the Escrow Shares and/or other property from the Indemnification Fund in accordance with the terms thereof. (ii) If no such agreement has been reached by the end of the Negotiation Period, QuatRx, any Accredited Sellers or any Securityholder Representative may demand arbitration of the matter unless the amount of the Losses is at issue in pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained by settlement or a non-appealable decision of a court of competent jurisdiction or the respective parties agree to arbitration; and in either such event the matter shall be settled by arbitration conducted in accordance with Section 12.8 of the Exchange Agreement. (d) RELEASE OF INDEMNIFICATION FUND. Subject to the following requirements, the Indemnification Fund shall remain in existence from the Closing Date until the twelve month anniversary of the Closing Date (the "Indemnity Escrow Period"). Upon the expiration of the Indemnity Escrow Period, the Escrow Fund shall terminate with respect to all Escrow Shares then remaining in the Indemnification Fund, and all such Escrow Shares shall be delivered to Sellers; provided, however, that a number of Escrow Shares, which, in the good faith judgment of QuatRx, is necessary to satisfy any unsatisfied claims specified in any Officer's Certificate (setting forth the basis of such liability, the nature of the misrepresentation, breach of warranty and/or claim to which such item is related) delivered to Escrow Agent prior to the expiration of such Indemnity Escrow Period with respect to facts and circumstances existing on or prior to the end of the Indemnity Escrow Period shall remain in the Indemnification Fund (and the Indemnification Fund shall remain in existence) until such claims have been resolved; provided further, that QuatRx agrees to notify Escrow Agent in writing of the expiration of the Indemnity Escrow Period (which notification shall be made immediately after the expiration of the Indemnity Escrow Period, and, in case of non-receipt of such notification by the Escrow Agent within five (5) days from the end of the Indemnity Escrow Period, it shall then be deemed to have been received by the Escrow Agent). As soon as all such claims have been resolved, Escrow Agent shall deliver to Sellers all Escrow Shares and other property then remaining in the Indemnification Fund and not required to satisfy such claims. Deliveries of Escrow Shares and other property to Sellers pursuant to this Section 4(d) shall be made in accordance with each Seller's proportionate interest in the Indemnification Fund. 5. EARN OUT FUND. (a) DELIVERIES OUT OF EARN OUT FUND. Upon receipt by Escrow Agent at any time of an Officer's Certificate, which shall be delivered by QuatRx forthwith after the occurrence of an Earn Out Event and shall not, in any case, be unreasonably withheld or delayed, stating that an Earn Out Event has occurred, Escrow Agent shall release to the Sellers, as promptly as practicable, all Escrow Shares or other assets held in the Earn Out Fund. Deliveries of Escrow Shares and other property to Sellers pursuant to this Section 5(a) shall be made in accordance with each Seller's proportionate interest in the Earn Out Fund. (b) RELEASE OF EARN OUT FUND TO QUATRX. Upon receipt by Escrow Agent at any time of an Officer's Certificate stating that the Ospemifene Discontinuance has occurred, Escrow Agent shall release to QuatRx, as promptly as practicable, all Escrow Shares or other assets then held in the Earn Out Fund for cancellation. (c) DECISION MAKING RELATING TO OSPEMIFENE DISCONTINUANCE. The resolution of the Board of Directors of QuatRx on the Ospemifene Discontinuance shall be based on objective facts and results of the (first) Phase III Clinical Study and the regulatory and commercial implications of such results, all as determined in the sole and complete discretion of the Board of Directors of QuatRx. A decision of Ospemifene Discontinuance shall be supported by at least two thirds (2/3) of all members of QuatRx Board of Directors. 6. SECURITYHOLDER REPRESENTATIVES. A Securityholder Representative may be changed by the Represented Sellers that designated such Securityholder Representative from time to time upon not less than 10 days' prior written notice to QuatRx (with a copy of such notice of change immediately provided to the Escrow Agent); provided that a Securityholder Representative may not be removed unless a majority of Represented Sellers that designated such Securityholder Representative agree to such removal and to the identity of the substituted agent. No bond shall be required of Securityholder Representatives, and Securityholder Representatives shall not receive compensation for their services. Notices or communications to or from the applicable Securityholder Representative shall constitute notice to or from each of the Represented Sellers that designated such Securityholder Representative. 7. ESCROW AGENT'S DUTIES. (a) Escrow Agent shall hold and safeguard the Escrow Fund until it is released in its entirety in accordance with the terms of this Agreement, shall treat such fund as a trust fund in accordance with the terms of this Agreement and the Exchange Agreement and not as the property of QuatRx and shall hold and dispose of the Escrow Fund only in accordance with the terms hereof. QuatRx, Accredited Sellers and Securityholder Representatives acknowledge and agree that Escrow Agent (i) shall not be responsible for any of the agreements referred to herein but shall be obligated only for the performance of such duties as are specifically set forth in this Agreement and as set forth in any additional written escrow instructions which Escrow Agent may receive after the date of this Agreement that are jointly signed by an officer of QuatRx, all of the Accredited Sellers and all of the Securityholder Representatives; (ii) shall not be obligated to take any legal or other action hereunder which might in its reasonable judgment involve expense or liability unless it shall have been furnished with indemnity reasonably acceptable to it; and (iii) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, instrument, statement, request or document furnished to it hereunder and reasonably believed by it to be genuine and to have been signed or presented by the proper person, and shall have no responsibility for determining the accuracy thereof. (b) Escrow Agent is hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person, excepting only orders or process of courts of competent jurisdiction or written decision of arbitrators pursuant to Section 4(c), and is hereby expressly authorized to comply with and obey orders, judgments or decrees of any court of competent jurisdiction or written decision of arbitrators. In case Escrow Agent obeys or complies with any such order, judgment or decree of any court or written decision of arbitrators, Escrow Agent shall not be liable to any of the parties hereto or to any other person by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction. (c) Escrow Agent shall not be liable in any respect on account of the identity, authority or rights of the parties executing or delivering or purporting to execute or deliver this Agreement or any documents or papers deposited or called for hereunder. (d) Escrow Agent shall not be liable for the expiration of any rights under any statute of limitations with respect to this Agreement or any documents deposited with Escrow Agent. (e) Neither Escrow Agent nor any of its directors, officers or employees shall be liable to anyone for any action taken or omitted to be taken by it or any of its directors, officers or employees hereunder except in the case of gross negligence, bad faith or willful misconduct. Subject to Section 7(g) below, QuatRx and Sellers (collectively, the "Indemnifying Parties") covenant and agree to jointly and severally indemnify Escrow Agent and hold it harmless from and against any fee, loss, liability or expense (including reasonable attorney's fees and expenses of counsel selected by the Escrow Agent) (a "Loss") incurred by Escrow Agent arising out of or in connection with the performance of its obligations in accordance with the provisions of this Agreement or with the administration of its duties hereunder, unless such Loss shall arise out of or be caused by Escrow Agent's gross negligence, bad faith or willful misconduct; provided, however, that indemnification for Escrow Agent's standard fees and expenses set forth on the fee schedule attached hereto as Exhibit B shall be borne exclusively by QuatRx, and provided further that the indemnity agreement contained in this Section 7(e) shall not apply to amounts paid in settlement of any Loss if such settlement is effected without the consent of QuatRx, Accredited Sellers and Securityholder Representatives. (f) To the extent that Escrow Agent becomes liable for the payment of any taxes in respect of income derived from the investment of funds held or payments made hereunder, Escrow Agent shall satisfy such liability to the extent possible from the Escrow Fund. If cash is not available in the Escrow Fund to satisfy such taxes, if any, then QuatRx shall provide sufficient funds to be added to the Escrow Fund to satisfy such liability. Subject to Section 7(g) below, Indemnifying Parties agree to jointly and severally indemnify and hold Escrow Agent harmless from and against any taxes, additions for late payment, interest, penalties and other expenses, that may be assessed against Escrow Agent on any payment or other activities under this Agreement unless any such tax, addition for late payment, interest, penalty or other expense shall arise out of or be caused by the actions of, or a failure to act by, Escrow Agent. No distributions will be made to Sellers unless Escrow Agent is supplied with an original, signed IRS Form W-8, W-9 or its equivalent prior to distribution. (g) Notwithstanding the joint and several nature of the obligations of Indemnifying Parties under Section 7(e) and 7(f), Sellers' total collective share of the liability for indemnification of Escrow Agent under Sections 7(e) and 7(f) hereof (the "Indemnification Liability") shall in no event exceed the value of the Escrow Fund then available to pay such liability. Any and all amounts to be paid by Sellers for their share of the Indemnification Liability shall be payable only out of the Escrow Fund including up to all such Indemnification Liability in the case of any tax liability arising from failure to provide correct information with respect to any taxes pursuant to Section 7(f) above. Except as otherwise provided in Section 7(e), one half of the total Indemnification Liability shall be paid out of the Escrow Fund and allocated pro rata among each of the Sellers according to their respective percentage ownership of the Escrow Fund, and one half of the total Indemnification Liability shall be paid by QuatRx. In the event that payment of an Indemnification Liability is to be paid pursuant to this Section 7(g), the Escrow Agent shall deliver to QuatRx out of the Escrow Fund a number of shares of QuatRx Stock equal to the value of such Indemnification Liability in accordance with Section 4(a)(iii) hereof, and QuatRx shall pay to the Escrow Agent an amount of cash equal to the value of such QuatRx Stock so delivered, pursuant to written payment instructions provided by the Escrow Agent. (h) Escrow Agent may resign at any time upon giving at least 30 days' written notice to QuatRx, Accredited Sellers and Securityholder Representatives; provided, however, that no such resignation shall become effective until the appointment of a successor escrow agent, which shall be accomplished as follows: QuatRx, Accredited Sellers and Securityholder Representatives shall use their best efforts to agree upon a successor agent within 30 days after receiving such notice. If the respective parties fail to agree upon a successor escrow agent within such time, Accredited Sellers and Securityholder Representatives with the consent of QuatRx, which shall not be unreasonably withheld, shall have the right to appoint a successor escrow agent authorized to do business in New York. The successor escrow agent selected in the preceding manner shall execute and deliver an instrument accepting such appointment and it shall thereupon be deemed Escrow Agent hereunder and it shall without further acts be vested with all the estates, properties, rights, powers, and duties of the predecessor Escrow Agent as if originally named as Escrow Agent. If no successor escrow agent is named, Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor escrow agent. Thereafter, the predecessor Escrow Agent shall be discharged from any further duties and liabilities under this Agreement. The provisions of paragraphs 8(e) and 8(f) shall survive the resignation or removal of Escrow Agent or the termination of this Agreement. 8. FEES, EXPENSES AND TAXES. QuatRx agrees to pay or reimburse Escrow Agent for its normal services hereunder in accordance with the fee schedule attached hereto as Exhibit B. The Escrow Agent shall be entitled to reimbursement upon 30 days' written notice for all expenses incurred in connection with Sections 7(e) and 7(f) above, and payment of any legal fees and expenses incurred by the Escrow Agent in connection with the resolution of any claim by any party hereunder. Taxes incurred with respect to the earnings of the Escrow Fund and payments made hereunder shall be borne by the party to whom such earnings are distributed (or to be distributed) or to whom such payment is made. 9. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended or waived with the written consent of the parties or their respective successors and assigns. Any amendment or waiver effected in accordance with this Section 9(a) shall be binding upon the parties and their respective successors and assigns. (b) SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. (c) GOVERNING LAW; JURISDICTION. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York, without giving effect to principles of conflicts of law. Each of the parties to this Agreement consents to the exclusive jurisdiction and venue of the courts of the state and federal courts of New York. (d) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. (e) 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. (f) NOTICES. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the regular mail as certified or registered mail (airmail if sent internationally and in case of international airmail, copy to be sent by facsimile) with postage prepaid, if such notice is addressed to the party to be notified at such party's address or facsimile number as set forth below, or as subsequently modified by written notice. If to QuatRx: QuatRx Pharmaceuticals Company 777 East Eisenhower Parkway Suite 100 Ann Arbor, MI 48108 Telephone No.: 734 ###-###-#### Telecopier No.: 734 ###-###-#### Attention: Chief Executive Officer With a copy to: Heller Ehrman White & McAuliffe LLP 120 West 45th Street New York, NY 10036 Telephone No.: (212) 763-7600 Telecopier No.: (212) 847-8798 Attention: Stephen M. Davis, Esq. If to Bio Fund Ventures I LP: Bio Fund Ventures I LP c/o Bio Fund Management Ltd PO Box 164 FIN-00101 Helsinki, Finland Telephone No.: +358 9 2514 460 Telecopier No.: +358 9 2514 4620 If to Bio Fund Ventures II LP: Bio Fund Ventures II LP c/o Bio Fund Management Ltd PO Box 164 FIN-00101 Helsinki, Finland Telephone No.: +358 9 2514 460 Telecopier No.: +358 9 2514 4620 If to Bio Fund Ventures II Follow-on Fund LP: Bio Fund Ventures II Follow-on Fund LP c/o Bio Fund Management Ltd PO Box 164 FIN-00101 Helsinki, Finland Telephone No.: +358 9 2514 460 Telecopier No.: +358 9 2514 4620 If to the Finnish National Fund for Research and Development: Finnish National Fund for Research and Development PO Box 160 FIN-00181 Helsinki, Finland Telephone No.: +358 9 618 991 Telecopier No.: +358 9 645 072 If to BI Biomedical Venture III Ltd. (P/S): PO Box 2672 DK-2100 Copenhagen, Denmark Telephone No.: 45 7730 9043 Telecopier No.: 45 3348 9188 If to H&B Capital LP: Kleinwort Benson House, P.O. Box 76 Wests Centre, St Helier, Jersey JE4 8PQ, Channel Islands Telephone No.: 46.8.545.680.60 Telecopier No.: 46.8.545.680.70 If to the Institutional Securityholder Representative: Mr. Ari Jauho Kristianinkatu 11-13 C 55 FI-00170 Helsinki, Finland Telephone No.: +358 9 6962 7210 Telecopier No.: +358 9 6962 7222 If to the Individual Securityholder Representative Mr. Kauko Kurkela Aapontie 11 B 1 FI-02180 Espoo, Finland Telephone No.: +358 2 ###-###-#### Telecopier No.: +358 2 ###-###-#### If to the Escrow Agent: U.S. Bank, National Association One California Street Suite 2100 San Francisco, CA 94111 Telephone No.: (415) 273-4563 Telecopier No.: (415) 273-4591 Attention: Michael P. Susnow, Vice President (g) SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach an agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms. (h) ENTIRE AGREEMENT. Except as set forth in the Exchange Agreement, this Agreement is the product of all of the parties hereto, and constitutes the entire agreement between such parties pertaining to the subject matter hereof, and merges all prior negotiations and drafts of the parties with regard to the transactions contemplated herein. Any and all other written or oral agreements existing between the parties hereto regarding such transactions are expressly canceled. (i) ADVICE OF LEGAL COUNSEL. Each party acknowledges and represents that, in executing this Agreement, it has had the opportunity to seek advice as to its legal rights from legal counsel and that the person signing on its behalf has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any party by reason of the drafting or preparation thereof. The parties have executed this Agreement as of the date first above written. QUATRX PHARMACEUTICALS COMPANY By: /s/ Robert L. Zerbe -------------------- Name: Robert L. Zerbe (print) Title:CEO ESCROW AGENT U.S. BANK, NATIONAL ASSOCIATION By: /s/ Michael P. Susnow -------------------- Name: Michael P. Susnow Title: Vice President SIGNATURE PAGE TO ESCROW AGREEMENT INSTITUTIONAL SECURITYHOLDER REPRESENTATIVE By: /s/ Ari Jauho ----------------------- Name: Ari Jauho Title: Investment Director INDIVIDUAL SECURITYHOLDER REPRESENTATIVE By: /s/ Kauko Kurkela ----------------------- Name: Kauko Kurkela Title: ____________________________________ Biofund Ventures I LP By: /s/ Kalevi Kurkijarvi ----------------------- Name: Kalevi Kurkijarvi Title: General Partner, Chairman and CEO Biofund Ventures II LP By: /s/ Kalevi Kurkijarvi ----------------------- Name: Kalevi Kurkijarvi Title: General Partner, Chairman and CEO SIGNATURE PAGE TO ESCROW AGREEMENT BIO FUND VENTURES II ANNEX FUND LP By: /s/ Kalevi Kurkijarvi ----------------------- Name: Kalevi Kurkijarvi Title: General Partner, Chairman and CEO THE FINNISH NATIONAL FUND FOR RESEARCH AND DEVELOPMENT By: /s/ Magnus Sjoblom -------------------- Name: Magnus Sjoblom Title: Director of Finance and Corporate Funding BANKINVEST BIOMEDICAL VENTURE III By: /s/ Boarne Thorup /s/ Thomas Tscherning ----------------- --------------------- Name: Boarne Thorup Thomas Tscherning Title: Group CIO Deputy Man. Dir. H&B CAPITAL LP By: /s/ Lars Gatenbeck ---------------------- Name: Lars Gatenbeck Title: General Partner SIGNATURE PAGE TO ESCROW AGREEMENT HORMOS MEDICAL CORPORATION By: /s/ Risto Lammintausta ---------------------- Name: Risto Lammintausta Title: CEO SIGNATURE PAGE TO ESCROW AGREEMENT EXHIBIT A SELLERS AND ESCROW SHARES
EXHIBIT B FEE SCHEDULE [US BANK LOGO] Corporate Trust Services FEE SCHEDULE FOR ESCROW SCHEDULE OF FEES FOR SERVICES AS ESCROW AGENT FOR QUATRX Customer Name / Series
[US BANK LOGO] Corporate Trust Services
Account approval is subject to review and qualification. Fees are subject to change at our discretion and upon written notice. FEES PAID IN ADVANCE WILL NOT BE PRORATED. The fees set forth above and any subsequent modifications thereof are part of your agreement. Finalization of the transaction constitutes agreement to the above fee schedule, including agreement to any subsequent changes upon proper written notice. In the event your transaction is not finalized, any related out-of-pocket expenses will be billed to you directly. Absent your written instructions to sweep or otherwise invest, all sums in your account will remain uninvested and no accrued interest or other compensation will be credited to the account. Payment of fees constitutes acceptance of the terms and conditions set forth. DATED: MAY 23, 2005
