EXHIBIT 10.1

 

COMMON STOCK AND WARRANT PURCHASE AGREEMENT

 

THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT, dated as of December 8, 2004
(this “Agreement”), is entered into by and between Sontra Medical Corporation, a
Minnesota corporation (the “Company”), and the investors listed on Schedule 1
hereto (each, an “Investor” and, collectively, the “Investors”).

 

RECITALS

 

WHEREAS, the Investors desire to purchase from the Company, and the Company
desires to issue and sell to the Investors, an aggregate of 2,636,000 shares
(the “Shares”) of common stock, par value $.01 per share (the “Common Stock”),
of the Company at a per share purchase price of $1.70, and warrants to purchase
shares of Common Stock in the form attached hereto as Exhibit A (the
“Warrants”), exercisable to purchase up to an aggregate of 1,054,400 shares of
Common Stock at an exercise price of $2.45 per share of Common Stock, on the
terms and subject to the conditions contained herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:

 

ARTICLE I

PURCHASE AND SALE OF THE COMMON STOCK AND THE WARRANTS

 

1.1 Purchase and Sale of the Common Stock and Warrants. Subject to the terms and
conditions hereof, the Company hereby issues and sells to the Investors, and
each Investor hereby purchases from the Company, severally and not jointly, the
number of Shares and Warrants set forth opposite such Investor’s name in
Schedule 1, for the aggregate purchase price set forth opposite such Investor’s
name in Schedule 1 (the “Purchase Price”). Upon satisfaction of the conditions
set forth in Section 1.2, the closing of the purchase and sale of the Shares and
the Warrants (the “Closing”) shall occur at the offices of Browne Rosedale &
Lanouette LLP, or such other location as the parties shall mutually agree.
Notwithstanding the foregoing, up to an aggregate of 171,287 Shares and 68,514
Warrants may be issued and sold by the Company to one or more additional
purchasers who shall execute and become a party to this Agreement at any time on
or before December 17, 2004.

 

1.2 Closing.

 

(a) At the Closing, the Company shall deliver or cause to be delivered to each
Investor:

 

(i) this Agreement duly executed by the Company;

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(ii) a certificate evidencing the Shares purchased by the Investor, registered
in the name of such Investor;

 

(iii) the Warrant purchased by the Investor, registered in the name of such
Investor;

 

(iv) a legal opinion of Browne Rosedale & Lanouette LLP, in the form of Exhibit
B attached hereto; and

 

(v) a copy of the Company’s Notification Form: Listing of Additional Shares, as
filed with The Nasdaq Stock Market, Inc. (“Nasdaq”) in connection with the
transactions contemplated hereby.

 

(b) At the Closing, each Investor shall deliver or cause to be delivered to the
Company the following:

 

(i) this Agreement duly executed by such Investor;

 

(ii) the Purchase Price for the Shares and Warrants purchased by the Investor,
payable by certified or bank check or by wire transfer of immediately available
funds to the account of the Company; and

 

(iii) a properly completed and executed copy of the Investor’s Accredited
Investor Questionnaire, in the form attached hereto as Exhibit C.

 

ARTICLE II

REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY

 

The Company represents and warrants to, and agrees with, the Investors as
follows:

 

2.1 Organization, etc. The Company has been duly formed, is validly existing as
a corporation in good standing under the laws of the State of Minnesota, and is
qualified to do business as a foreign corporation in each jurisdiction in which
the failure to be so qualified could reasonably be expected to have a material
adverse effect on the assets, liabilities, financial condition, business or
results of operations of the Company (a “Material Adverse Effect”). The Company
has the requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as presently conducted and to enter into,
execute, deliver and perform all of its duties and obligations under this
Agreement and to consummate the transactions contemplated hereby.

 

2.2 Authorization. The execution, delivery and performance of this Agreement and
the issuance of the Shares, the Warrants and the shares of Common Stock issuable
upon exercise of the Warrants (the “Warrant Shares”) have been duly authorized
by all necessary corporate action on the part of the Company.

 

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2.3 Validity; Enforceability. This Agreement has been duly executed and
delivered by the Company, and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by, or subject to, any
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and subject to general principles of
equity.

 

2.4 Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of 40,000,000 shares of Common Stock and 10,000,000 shares of
preferred stock, $0.01 par value per share, of which 7,000,000 shares have been
designated Series A Convertible Preferred Stock. Without giving effect to the
transactions contemplated by this Agreement, the issued and outstanding capital
stock of the Company as of December 3, 2004 consists of 19,199,732 shares of
Common Stock, and 73,334 shares of Series A Convertible Preferred Stock. All
such shares of the Company have been duly authorized and are fully paid and
non-assessable. Except as set forth on Schedule 2.4 hereto or as otherwise
contemplated by this Agreement, there are no outstanding options, warrants or
other equity securities that are convertible into, or exercisable for, shares of
the Company’s capital stock.

 

2.5 Governmental Consents. The execution and delivery by the Company of this
Agreement and the performance by the Company of the transactions contemplated
hereby, do not and will not require the Company to effectuate or obtain any
registration with, consent or approval of, or notice to any federal, state or
other governmental authority or regulatory body, other than (i) periodic and
other filings under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), (ii) filings that may be required to be made with Nasdaq, (iii)
filings that may be required under federal securities laws, including Regulation
G under the Securities Act of 1933, as amended (the “Securities Act”), and state
securities or “blue sky” laws, and (iv) as otherwise required to comply with the
obligations of the Company under Section 4.1 hereof. The parties hereto agree
and acknowledge that, in making the representations and warranties in the
foregoing sentence of this Section 2.5, the Company is relying on the
representations and warranties made by the Investors in Section 3.4.

 

2.6 No Violation. Assuming the representations and warranties of the Investors
in Section 3 are true, accurate and correct, the execution and delivery of this
Agreement and the performance by the Company of the transactions contemplated
hereby will not (i) conflict with or result in a breach of any provision of the
articles of incorporation or by-laws of the Company, (ii) result in a default or
breach of, or, except as set forth on Schedule 2.6 hereto, require any consent,
approval, authorization or permit of, or filing or notification to, any person,
company or entity under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, loan, factoring arrangement, license, agreement,
lease or other instrument or obligation to which the Company is a party or by
which the Company or any of its assets may be bound, or (iii) violate any law,
judgment, order, writ, injunction, decree, statute, rule or regulation of any
court, administrative agency, bureau, board, commission, office, authority,
department or other governmental entity applicable to the Company, except, in
the case of clause (ii) or (iii) above, any such event that could not reasonably
be expected to have a Material Adverse Effect or materially impair the
transactions contemplated hereby.

 

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2.7 Issuances of Securities. Upon payment therefor in accordance with the terms
hereof, the Shares and the Warrants will be validly issued, fully paid and
non-assessable. Upon the exercise of the Warrants in accordance with the terms
thereof, the Warrant Shares will be validly issued, fully paid and
non-assessable. The offering, issuance, sale and delivery of the Shares and the
Warrants as contemplated by this Agreement are exempt from the registration and
prospectus delivery requirements of the Securities Act are being made in
compliance with all applicable federal and (except for any violation or
non-compliance that could not reasonably be expected to have a Material Adverse
Effect) state laws and regulations concerning the offer, issuance and sale of
securities, and are not being issued in violation of any preemptive or other
rights of any stockholder of the Company. The parties hereto agree and
acknowledge that, in making the representations and warranties in the foregoing
sentence of this Section 2.7, the Company is relying on the representations and
warranties made by the Investors in Section 3.4.

 

2.8 Commission Filings. The Company has filed all required forms, reports and
other documents with the Securities and Exchange Commission (the “Commission”)
for periods from and after January 1, 2003 (collectively, the “Commission
Filings”), each of which has complied in all material respects with all
applicable requirements of the Securities Act and/or the Exchange Act (as
applicable). The Company has heretofore made available to the Investors all of
the Commission Filings, including the Company’s Annual Report on Form 10-KSB for
the year ended December 31, 2003 and the Company’s Quarterly Reports on Form
10-QSB for the quarterly periods ended March 31, 2004, June 30, 2004 and
September 30, 2004. As of their respective dates, the Commission Filings did not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading. The audited financial statements and
unaudited interim financial statements of the Company included or incorporated
by reference in such Commission Filings have been prepared in accordance with
GAAP (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-QSB), complied as of their
respective dates in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, and fairly present, in all material respects, the financial
position of the Company as of the dates thereof and the results of operations
for the periods then ended (subject, in the case of any unaudited interim
financial statements, to the absence of footnotes required by GAAP and normal
year-end adjustments). Since January 1, 2004, and except as set forth on
Schedule 2.8 hereto, there has been no Material Adverse Effect not disclosed in
the Commission Filings.

 

2.9 Intellectual Property. To the knowledge of the Company, the Company owns, or
has rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses necessary to
conduct its

 

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business and which the failure to so own or have would result in a Material
Adverse Effect (collectively, the “Intellectual Property Rights”). Since January
1, 2004, the Company has not received any written notice that the Intellectual
Property Rights used by the Company violates or infringes the rights of any
other party.

 

2.10 No Actions or Proceedings. There is no pending or, to the knowledge of the
Company, threatened action, suit, proceeding inquiry, notice of violation, or
investigation before any court, governmental or administrative agency or
regulatory body (federal, state, county, local or foreign), or arbitrator having
jurisdiction over the Company, that, if adversely determined, would have a
Material Adverse Effect on the Company, or would challenge the legality,
validity or enforceability of this Agreement or the transactions contemplated
hereby.

 

2.11 No Defaults. The Company is not: (i) in violation of its articles of
incorporation or by-laws, which violation would have a Material Adverse Effect,
(ii) in default under or in violation of any other material agreement or
instrument to which it is a party or by which it or any of its properties are
bound or affected, which default or violation would have a Material Adverse
Effect; or (iii) to its knowledge in violation of any statute, rule or
regulation of any governmental authority which violation would have a Material
Adverse Effect.

 

2.12 Nasdaq SmallCap Market. The Common Stock is listed for trading on the
Nasdaq SmallCap Market.

 

2.13 No Undisclosed Liabilities. The Company has no liabilities or obligations
which are material, individually or in the aggregate, which are not disclosed in
the Commission Filings or on Schedule 2.13 hereto, other than those incurred in
the ordinary course of the Company’s business since September 30, 2004 and
which, individually or in the aggregate, would not have a Material Adverse
Effect.

 

2.14 Title to Assets. Except as disclosed in the Commission Filings, the Company
owns and has good title to all assets of the Company that are material to the
business of the Company, free and clear of all liens, charges, security
interests, encumbrances, rights of first refusal or other restrictions
(collectively “Liens”), except for (i) Liens of materialmen, carriers, landlords
and like persons, (ii) Liens for taxes not yet delinquent, and (iii) Liens as do
not materially affect the value of such assets and do not materially interfere
with the use made and proposed to be made of such assets by the Company.

 

2.15 Brokers. Except for Starboard Capital Markets, LLC, neither the Company,
nor any of its officers, directors or employees, has employed any broker or
finder, or incurred any liability for any brokerage fees, commissions, finder’s
or other similar fees or expenses in connection with the transactions
contemplated hereby.

 

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ARTICLE III

REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE INVESTORS

 

Each Investor represents and warrants to, and agrees with, the Company,
severally but not jointly, as follows:

 

3.1 Organization, etc. Such Investor has been duly formed and is validly
existing and in good standing under the laws of its jurisdiction of
organization. Such Investor has the requisite organizational power and authority
to enter into, execute, deliver and perform all of its duties and obligations
under this Agreement and to consummate the transactions contemplated hereby.

 

3.2 Authorization. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary organizational or other action on the
part of such Investor.

 

3.3 Validity; Enforceability. This Agreement has been duly executed and
delivered by such Investor, and constitutes the legal, valid and binding
obligation of such Investor, enforceable against such Investor in accordance
with its terms, except as such enforceability may be limited by, or subject to,
any bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and subject to general principles
of equity.

 

3.4 Investment Representations.

 

(a) Such Investor acknowledges that the offer and sale of the Shares and the
Warrants to such Investor have not been registered under the Securities Act, or
the securities laws of any state or regulatory body and are being offered and
sold in reliance upon exemptions from the registration requirements of the
Securities Act and such laws and may not be transferred or resold without
registration under such laws unless an exemption is available. The Shares, the
Warrants, and the Warrant Shares will be imprinted with a legend in
substantially the following form:

 

“THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER
SUCH ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS UNLESS, IN THE OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND STATE SECURITIES LAWS IS AVAILABLE.”

 

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(b) Such Investor is acquiring the Shares, the Warrants and the Warrant Shares
for investment and not with a view to the resale or distribution thereof and is
acquiring such securities for its own account. Such Investor is able (i) to bear
the economic risk of the Investor’s investment in the Shares, the Warrants and
the Warrant Shares; (ii) to hold the Shares, the Warrants and the Warrant Shares
for an indefinite period of time and understands that such securities cannot be
resold unless subsequently registered under the Securities Act or unless an
exemption from such registration is available, as established by an opinion of
counsel satisfactory to the Company; and (iii) currently, and based on existing
conditions, hereafter will be able to afford a complete loss of such investment.

 

(c) Such Investor is an “accredited investor” (as that term is defined in Rule
501 of Regulation D promulgated under the Securities Act), is sophisticated in
financial matters and is familiar with the business of the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Such Investor has had the
opportunity to investigate on its own the Company’s business, management and
financial affairs and has had the opportunity to review the Company’s operations
and facilities and to ask questions and obtain whatever other information
concerning the Company as such Investor has deemed relevant in making its
investment decision.

 

(d) Such Investor has established and applies anti-money laundering policies and
procedures pursuant to the requirements of the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001. Neither such Investor, nor, to Investor’s knowledge, any of its
investors is included on the most recent control list of Specially Designated
Nationals and Blocked Persons maintained by the United States Office of Foreign
Assets Control.

 

(e) No representations or warranties have been made to such Investor by the
Company or any director, officer, employee, agent or affiliate of the Company,
other than the representations and warranties of the Company set forth herein,
and the decision of such Investor to purchase the Shares and the Warrant is
based on the information contained herein, the Commission Filings and such
Investor’s own independent investigation of the Company.

 

(f) Such Investor has completed and executed an Accredited Investor
Questionnaire, in the form attached hereto as Exhibit C, and all information
provided by such Investor therein is true, accurate and complete.

 

3.5 Governmental Consents. The execution and delivery by such Investor of this
Agreement and the performance by such Investor of the transactions contemplated
hereby, do not and will not require such Investor to effectuate or obtain any
registration with, consent or approval of, or notice to any federal state or
other governmental authority or regulatory body.

 

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3.6 No Violation. The execution and delivery of this Agreement and the
performance by such Investor of the transactions contemplated hereby, will not
(i) conflict with or result in a breach of any provision of the articles of
incorporation, by-laws or similar organizational documents of such Investor or
(ii) violate any law, judgment, order, writ, injunction, decree, statute, rule
or regulation of any court, administrative agency, bureau, board, commission,
office, authority, department or other governmental entity applicable to such
Investor, except any such violation that could not reasonably be expected to
materially impair the transactions contemplated hereby.

 

3.7 Brokers. Except for Starboard Capital Markets, LLC, neither such Investor,
nor any of its officers, directors or employees, has employed any broker or
finder, or incurred any liability for any brokerage fees, commissions, finder’s
or other similar fees or expenses in connection with the transactions
contemplated hereby.

 

ARTICLE IV

REGISTRATION RIGHTS AND OTHER AGREEMENTS

 

4.1 Registration Rights.

 

(a) The Company shall use its reasonable best efforts: (i) to prepare and file
with the Commission a registration statement under the Securities Act (as the
same may be amended or supplemented from time to time, the “Registration
Statement”) with respect to the offer and sale by the Investors of the Shares
and the Warrant Shares within 30 business days of the date hereof; (ii) to cause
the Registration Statement to be declared effective by the Commission as soon as
practicable following receipt of notice from the Commission that it has no
further comments on the Registration Statement; and (iii) to register or qualify
the Shares and Warrant Shares included in the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the Investor
reasonably requests in writing and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Investor to consummate
the disposition in such jurisdictions of the Shares and Warrant Shares to be
sold by the Investor (provided that the Company will not be required to qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph, subject itself to taxation in any
such jurisdiction, or consent to general service of process in any such
jurisdiction). Notwithstanding the foregoing, if the Registration Statement is
not filed within 30 business days of the date hereof, or if the Registration
Statement is not declared effective by the Commission within 90 business days of
the date hereof (or 120 business days if the Commission shall review the
Registration Statement), then the Company shall pay to each Investor in cash,
within five business days of the end of each full month the Company is in
violation of the forgoing, liquidated damages equal to 1% of the Purchase Price
for the Shares and Warrants purchased by such Investor. The Company shall use
its reasonable best efforts to maintain the effectiveness of such Registration
Statement until the earliest to occur of the following: (i) all of the Shares
and the Warrant Shares have been disposed of by the Investors pursuant to the
Registration Statement or otherwise transferred (or in the case of the Warrant
Shares, all of the Warrants pursuant to which such Warrant Shares are issuable
have expired); (ii) the

 

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second anniversary of the date hereof; or (iii) the Shares and the Warrant
Shares can be resold pursuant to Rule 144, promulgated under the Securities Act,
or any similar provisions then in effect.

 

(b) The Investors will furnish to the Company in writing all information
reasonably requested by the Company for use in connection with the preparation
of the Registration Statement and obtaining the effectiveness thereof. Each
Investor hereby represents and warrants, severally but not jointly, that all
such information furnished by it shall be true, accurate and complete.

 

(c) If at any time or from time to time after the date of effectiveness of the
Registration Statement, the Company notifies the Investors in writing of the
existence of a Potential Material Event (as defined below), no Investor shall
offer or sell any of the Shares or the Warrant Shares, or engage in any other
transaction involving or relating to the Shares or the Warrant Shares, from the
time of the giving of notice with respect to a Potential Material Event until
such Investor receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event. As used herein, “Potential Material Event” means any
of the following: (i) the possession by the Company of material information not
ripe for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company that
disclosure of such information in the registration statement would be
detrimental to the business and affairs of the Company; or (ii) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.

 

(d) All registration and filing fees, fees and expenses of compliance with
securities laws, printing expenses and all independent certified public
accountants fees and expenses of counsel to the Company and other persons
retained by the Company will be borne by the Company. The Company shall have no
obligation to pay any fees or expenses of brokers, underwriters, counsel or
others retained by any of the Investors in connection with the sale, or
potential sale, of the Shares or Warrant Shares.

 

(e) The Company agrees to indemnify, to the fullest extent permitted by law, the
Investors and their respective officers, directors, partners, employees,
advisors and agents against any and all Loss (as hereinafter defined) arising
out of or based upon any untrue, or alleged untrue, statement of a material fact
contained in the Registration Statement or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except (i) insofar as the same are caused by or contained in any information
furnished by an Investor pursuant to clause (b) or (ii) insofar as the same are
caused by a failure by an Investor to deliver an updated prospectus that has
been filed with the Commission and made available to such Investor or its
representatives for

 

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delivery to a purchaser. Each Investor agrees to indemnify, to the fullest
extent permitted by law, the Company, the other Investors and their respective
officers, directors, partners, employees, advisors and agents against any and
all Loss arising out of or based upon any untrue, or alleged untrue statement of
a material fact contained in the Registration Statement or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) insofar as the same are caused by or contained in any information
furnished by indemnifying Investor pursuant to clause (b) or (ii) insofar as the
same are caused by a failure by the indemnifying Investor to deliver an updated
prospectus that has been filed with the Commission and made available to such
Investor or its representatives for delivery to a purchaser. Any indemnity
obligation arising under this Section 4.1 shall be governed by the provisions of
Section 5.3.

 

(f) The Company will advise the Investors promptly after it receives any notice
of issuance by the Commission, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or suspending
any offering of the Shares or Warrant Shares by the Investors, or of the
suspension of the qualification of the Common Stock of the Company for offering
or sale in any jurisdiction, or the initiation of any proceeding for any such
purpose.

 

4.2 Legend Removal. Certificates evidencing the Shares and the Warrant Shares
shall not be required to contain any restrictive legend (including the legend
set forth in Section 3.4(a) of this Agreement): (i) while a registration
statement (including the Registration Statement) covering the resale of such
securities is effective under the Securities Act, provided that the holder
thereof covenants that in connection with each sale of such securities, a copy
of the final prospectus that forms a part of such registration statement will be
delivered in accordance with the provisions of Section 5(b)(2) of the Securities
Act, and the rules and regulations promulgated thereunder; (ii) following any
sale of such securities pursuant to Rule 144 under the Securities Act in the
opinion of counsel to the Company; (iii) if such securities are eligible for
sale under Rule 144(k) under the Securities Act in the opinion of counsel to the
Company; or (iv) if such legend is not required under applicable law, or, in the
opinion of the Company’s counsel, in accordance with Rule 502(d) under the
Securities Act, or other interpretations and pronouncements of the Commission.
Upon request of the holder, the Company shall cause its counsel to issue a legal
opinion to the Company’s transfer agent promptly to effect the removal of such
legend pursuant to the foregoing sentence. If all or a portion of the Warrant is
exercised at a time when there is an effective registration statement (including
the Registration Statement) covering the resale of the Warrant Shares under the
Securities Act, the certificate evidencing such Warrant Shares shall be issued
free of all restrictive legends, provided that the holder thereof covenants that
in connection with each sale of such securities, a copy of the final prospectus
that forms a part of such registration statement will be delivered in accordance
with the provisions of Section 5(b)(2) of the Securities Act, and the rules and
regulations promulgated thereunder. The Company agrees that at such time as such
restrictive legend is not required as provided in this Section 4.2, it will, as
soon as practicable following the delivery by the holder to the Company’s
transfer agent of a certificate representing the Shares or Warrant Shares, as

 

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the case may be, deliver or cause to be delivered to such holder a certificate
representing such securities that is free from all restrictive legends. Unless
otherwise required by law or judicial order, the Company shall not make any
notation on its records or give any instructions to its transfer agent that
enlarge the restrictions on transfer set forth in this Agreement.

 

ARTICLE V

SURVIVAL; INDEMNIFICATION

 

5.1 Survival. The representations and warranties contained in Articles II and
III hereof shall survive until the first anniversary of the date hereof.

 

5.2 Indemnification. Each Investor (including its officers, directors,
employees, affiliates, agents, successors and assigns (each, an “Indemnified
Party”)) shall be indemnified and held harmless by the Company for any and all
liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, reasonable attorneys’
fees and expenses) actually suffered or incurred by them (hereinafter a “Loss”),
arising out of or resulting from the breach of any representation, warranty,
agreement or covenant made by the Company contained in this Agreement.
Notwithstanding the foregoing, the aggregate liability of the Company under this
Article V shall in no event exceed the purchase price paid by the Investors for
the Shares and the Warrants.

 

5.3 Indemnification Procedure. The obligations and liabilities of the Company
under this Article V with respect to Losses arising from claims of any third
party which are subject to the indemnification provided for in this Article V
(“Third Party Claims”) shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnified Party shall receive notice of
any Third Party Claim, the Indemnified Party shall give the Company notice of
such Third Party Claim promptly after the receipt by the Indemnified Party of
such notice (which notice shall include the amount of the Loss, if known, and
method of computation thereof, and containing a reference to the provisions of
this Agreement in respect of which such right of indemnification is claimed or
arises); provided, however, that the failure to provide such notice shall not
release the Company from any of its obligations under this Article V except to
the extent the Company is materially prejudiced by such failure and shall not
relieve the Company from any other obligation or liability that it may have to
any Indemnified Party otherwise than under this Article V. Upon written notice
to the Indemnified Party within five (5) days of the receipt of such notice, the
Company shall be entitled to assume and control the defense of such Third Party
Claim at its expense and through counsel of its choice; provided, however, that,
if there exists or is reasonably likely to exist a conflict of interest that
would make it inappropriate in the reasonable judgment of such counsel for the
same counsel to represent both the Indemnified Party and the Company, then the
Indemnified Party shall be entitled to retain its or his own counsel in each
jurisdiction for which the Indemnified Party reasonably determines counsel is
required, at the expense of the Company. In the event the Company exercises the
right to undertake any such defense against any such Third Party Claim as
provided

 

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above, the Indemnified Party shall cooperate with the Company in such defense
and make available to the Company, at the Company’s expense, all witnesses,
pertinent records, materials and information in the Indemnified Party’s
possession or under the Indemnified Party’s control relating thereto as is
reasonably required by the Company. Similarly, in the event the Indemnified
Party is, directly or indirectly, conducting the defense against any such Third
Party Claim, the Company shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the Company’s expense,
all such witnesses (including himself), records, materials and information in
the Company’s possession or under the Company’s control relating thereto as is
reasonably required by the Indemnified Party. No such Third Party Claim may be
settled by the Company on behalf of the Indemnified Party without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld); provided, however, in the event that the Indemnified
Party does not consent to any such settlement that would provide it with a full
release from indemnified Losses and would not require it to take, or refrain
from taking, any action, the Company’s liability for indemnification shall not
exceed the amount of such proposed settlement. The Indemnified Party will
refrain from any act or omission that is inconsistent with the position taken by
the Company in the defense of a Third Party Claim unless the Indemnified Party
determines that such act or omission is reasonably necessary to protect its own
interest.

 

ARTICLE VI

MISCELLANEOUS

 

6.1 Expenses. All costs and expenses, including, without limitation, fees and
disbursements of counsel, incurred in connection with the negotiation, execution
and delivery of this Agreement and its related documents shall be paid by the
party incurring such costs and expenses.

 

6.2 Publicity. Except as may be required by applicable law or the rules of any
securities exchange or market on which securities of the Company are traded, no
party hereto shall issue a press release or public announcement or otherwise
make any disclosure concerning this Agreement and the transactions contemplated
hereby, without prior approval of the others; provided, however, that nothing in
this Agreement shall restrict the Company or any Investor from disclosing such
information (a) that is already publicly available, (b) that may be required or
appropriate in response to any summons or subpoena (provided that the disclosing
party will use commercially reasonable efforts to notify the other parties in
advance of such disclosure under this clause (b) so as to permit the
non-disclosing parties to seek a protective order or otherwise contest such
disclosure, and the disclosing party will use commercially reasonable efforts to
cooperate, at the expense of the non-disclosing parties, in pursuing any such
protective order) or (c) in connection with any litigation involving disputes as
to the parties’ respective rights and obligations hereunder. Notwithstanding the
foregoing, (i) by 9:30 a.m. on the first business day following the Closing, the
Company shall issue a press release regarding this Agreement and the
transactions contemplated hereby, (ii) within one business day following the
Closing, the Company shall file a Current Report on Form 8-K with the

 

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Commission regarding this Agreement and the transactions contemplated hereby,
and (iii) promptly following the Closing shall make all other necessary filings
with the Commission, Nasdaq and any other governmental authority or regulatory
body.

 

6.3 Entire Agreement. This Agreement and any other agreement or instrument to be
delivered expressly pursuant to the terms hereof constitute the entire Agreement
between the parties hereto with respect to the subject matter hereof and
supersede all previous negotiations, commitments and writings with respect to
such subject matter.

 

6.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing herein, express or
implied, is intended to or shall confer upon any person not a party hereto any
right, benefit or remedy of any nature whatsoever under or by reason hereof,
except as otherwise provided herein.

 

6.5 Amendments. This Agreement may not be amended or modified except by an
instrument in writing signed by, or on behalf of, the parties against whom such
amendment or modification is sought to be enforced.

 

6.6 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience of reference only and do not constitute a part of and
shall not be utilized in interpreting this Agreement.

 

6.7 Notices and Addresses. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service, if personally served or sent by
facsimile; on the business day after notice is delivered to a courier or mailed
by express mail, if sent by courier delivery service or express mail for next
day delivery; and on the fifth business day after mailing, if mailed to the
party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid and addressed as follows:

 

To Company:

   Sontra Medical Corporation      10 Forge Parkway      Franklin, MA 02038     
Fax: (508) 553-8760      Attn: Sean F. Moran

With a copy to:

   Browne Rosedale & Lanouette LLP      31 St. James Avenue      Boston, MA
02116      Fax: (617) 399-6930      Attn: Kevin P. Lanouette, Esq.

To the Investors:

   To the address set forth on Schedule 1.

 

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6.8 Severability. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.

 

6.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts, without
regard to conflicts of law principles.

 

6.10 Counterparts; Facsimile Signatures. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart. This Agreement
may be executed by facsimile, and a facsimile signature shall have the same
force and effect as an original signature on this Agreement.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed on the date first set
forth above.

 

SONTRA MEDICAL CORPORATION

By:

 

/s/ Sean Moran

--------------------------------------------------------------------------------

Name:

  Sean Moran

Title:

  Chief Financial Officer

 

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COUNTERPART INVESTOR SIGNATURE PAGE

 

IN WITNESS WHEREOF, this Agreement has been duly executed on the date first set
forth above.

 

[                    ]

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

 

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