UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported): April 10, 2007
VioQuest
Pharmaceuticals, Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware
(State
or other jurisdiction of incorporation)
|
000-16686
(Commission
File Number)
|
58-1486040
(IRS
Employer
Identification
No.)
|
180
Mt. Airy Road, Suite 102
Basking
Ridge, NJ 07920
(Address
of principal executive offices)
(908)
766-4400
(Registrant's
telephone number, including area code)
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement
communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item
1.01. Entry into a Material Definitive Agreement
On
April
10, 2007, VioQuest Pharmaceuticals, Inc. (“VioQuest”) and Chiral Quest
Acquisition Corp. (the “Purchaser”) entered into a stock purchase and sale
agreement (the “Purchase Agreement”) pursuant to which VioQuest agreed to sell
to the Purchaser all of the capital stock of its subsidiary, Chiral Quest,
Inc.
Completion of the sale is predicated upon the approval of the Purchase Agreement
by VioQuest’s shareholders at the upcoming annual meeting, as well as other
customary closing conditions.
The
Purchaser is a newly-formed, privately-held Delaware corporation. The Purchaser
is, or at the time of closing will be, principally owned by Dr. Xumu Zhang
and a
Chinese-based venture capital fund. Dr. Zhang co-founded Chiral Quest and has
been a director of VioQuest and Chief Technology Officer of Chiral Quest since
February 2003. Following completion of the sale, the Purchaser plans to continue
operating Chiral Quest’s business in substantially the same manner as VioQuest
has operated the business. Because of Dr. Zhang’s interest in the transaction,
he recused himself from all discussions of VioQuest’s Board of Directors
concerning the proposed transaction.
Under
the
terms of the Purchase Agreement, in exchange for all of the outstanding capital
stock of Chiral Quest, the Purchaser will pay VioQuest the cash sum of
$1,700,000, plus assume liabilities of Chiral Quest in an amount up to
$1,300,000. To the extent Chiral Quest’s liabilities exceed $1,300,000 as of the
closing of the transaction, VioQuest would be required to pay such excess amount
to the Purchaser.
The
Purchase
Agreement contains customary representations and warranties made by VioQuest
in
favor of the Purchaser
that
relate to a variety of matters, including without limitation: (i) the
organization and good standing of Chiral Quest, including its subsidiaries;
(ii)
the capitalization of Chiral Quest and its subsidiaries; (iii) the absence
of
any breach, violation or conflict with any agreement, instrument, judgment
or
law to which VioQuest or Chiral Quest are subject; (iv) the accuracy of Chiral
Quest’s financial statements and their preparation in accordance with generally
accepted accounting principles; (v) the absence of certain undisclosed
liabilities; (vi) the rights in Chiral Quest’s intellectual property; and (vii)
certain material contracts to which Chiral Quest is a party and the absence
of
breaches or defaults with respect to such contracts.
The
Purchase Agreement also contains various covenants and other agreements made
by
VioQuest and the Purchaser relating to, among other things: (i) VioQuest’s
agreement to allow reasonable access by the Purchaser and its representatives
to
Chiral Quest’s properties and records, subject to certain limitations described
in the Purchase Agreement; (ii) VioQuest’s ability to solicit or encourage
offers from, or otherwise engage in discussions with, third parties relating
to
the sale of Chiral Quest; (iii) VioQuest’s agreement to maintain the corporate
existence, good standing, adequate insurance of Chiral Quest and to otherwise
continue to conduct Chiral Quest’s business in the ordinary course; and (iv)
Purchaser’s agreement to assume the real estate lease for VioQuest’s Monmouth
Junction, New Jersey facility, from which Chiral Quest operates.
Subject
to and following the closing, VioQuest has agreed not to engage for a period
of
10 years, directly or indirectly, in any business that engages in the design,
development, marketing, manufacture and/or sale of any product which is the
same
or directly competitive with any product manufactured, marketed or sold by
Chiral Quest as of the closing date. VioQuest further agrees that for a period
of 5 years following the closing, VioQuest will not solicit the customers or
employees of Chiral Quest with respect to a business that competes with Chiral
Quest’s business.
The
Purchase Agreement may be terminated prior to the closing, as follows: (i)
by
the mutual consent of the parties; (ii) by either party in the event the
transaction is not completed prior to the close of business on the day that
is
10 days following the date on which VioQuest’s shareholders approve the
transaction, which is referred to as the Expiration Date; (iii) by either
Purchaser or VioQuest if there has been a material breach by the other of a
representation, warranty or covenant contained in the Purchase Agreement that
has not been cured by the breaching party; and (iv) by either Purchaser or
VioQuest if, as a result of an event outside either’s reasonable control,
certain closing conditions are incapable of being satisfied.
In
addition to the Purchase Agreement, on March 27, 2007, VioQuest also entered
into an escrow agreement with Purchaser and Wells Fargo Bank, N.A., as escrow
agent. Under the terms of the escrow agreement, Purchaser deposited the cash
sum
of $500,000 with the escrow agent. The escrow agreement provides that these
escrowed funds will be disbursed to VioQuest in the event the sale of Chiral
Quest to Purchaser is not completed as a result of an event that is deemed
to be
caused by Purchaser or to be Purchaser’s fault. Among other things, if Purchaser
fails to satisfy a condition precedent to VioQuest’s obligation to close the
transaction by the Expiration Date, then such failure is deemed to be caused
by
or the fault of Purchaser.
VioQuest
agreed to indemnify Purchaser after the closing for damages from claims
resulting from or arising out of a breach of a representation, warranty or
covenant made by VioQuest in the Purchase Agreement. VioQuest will be obligated
to indemnify Purchaser with respect a claim for damages resulting from
VioQuest’s breach of a representation or warranty only if Purchaser provided
VioQuest with written notice of such claim within 6 months following the
closing. Additionally, VioQuest has no obligation to indemnify Purchaser until
the aggregate amount of damages from claims exceeds the aggregate total of
$75,000, and then only by such excess. Further, the maximum amount for which
VioQuest will be obligated to indemnify Purchaser is $1.7 million, which
represents the cash portion of the purchase price. However, the $75,000 floor
and $1.7 million cap do not apply to claims based on a breach of VioQuest’s
representations concerning the capitalization, stock ownership or tax liability
of Chiral Quest.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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VioQuest
Pharmaceuticals, Inc. |
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| Date:
April 16, 2007 |
By: |
/s/
Brian Lenz |
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Brian
Lenz |
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Chief
Financial Officer |