Opinion ID: 618229
Heading Depth: 3
Heading Rank: 2

Heading: Alchemix Needs Further Investment

Text: In May 2002, Alchemix needed money. To that end, Alchemix entered into negotiations with the Alchemix Funding Group (“AFG”). AFG was an investment group independent of Alchemix, but the group included members of Alchemix’s Board. Horton claims that Weiss was a member of AFG, but Weiss denies this assertion. Throughout the month, AFG and Alchemix negotiated the terms of an agreement. AFG would loan Alchemix approximately $3 million, but it required certain terms on its loan. Those terms, however, conflicted with Strategic’s then-held rights. To get the loan from AFG, Alchemix (and AFG) would need Strategic to make concessions. Weiss testified that his goal was to see that Alchemix succeed, and he believed that securing this line of funding would help Alchemix. Weiss agreed to make certain concessions; however, not surprisingly, he sought to be compensated for them. He negotiated with Alchemix and AFG to find an acceptable outcome for all. The negotiations culminated in a June 5, 2002 letter from Strategic to Alchemix. In that letter, Weiss, on behalf of Strategic, wrote that he understood Alchemix was seeking funding from AFG in the amount of three million dollars. He indicated that he intended to be an investor in AFG and that his agreement to waive Strategic’s rights was “contingent upon my investment in [AFG].” Weiss then noted that he would agree to waive Strategic’s rights on certain terms. Specifically, he stood ready to waive anti-dilution provisions, increase the amount of capitalized shares, and release his security interests in Alchemix patents in exchange for a 20620 STRATEGIC DIVERSITY v. ALCHEMIX CORP. $250,000 investment in Alchemix (500,000 shares at $0.50 per share). As part of the proposed AFG loan agreement, AFG was to initially supply $1.5 million to Alchemix. A portion of that money, $560,000, was to be paid to Strategic in order to remove Strategic’s security interests in Alchemix property. Once collateral requirements were in order, AFG would supply another $1.8 million, bringing its total investment in Alchemix to $3.3 million.