WARRANT AND COMMON STOCK PURCHASE AGREEMENT
EXHIBIT
4.5
This
WARRANT AND COMMON STOCK PURCHASE AGREEMENT is dated effective as of December
22, 2005 (the “Effective
Date”)
by and
between Protalex, Inc., a Delaware corporation with its principal office at
000
Xxxxx Xxxxxx Xxxxx, Xxx Xxxx, XX 00000 (the “Company”),
and
the several purchasers identified from timer to time in the attached
Exhibit A
(individually, a “Purchaser”
and
collectively, the “Purchasers”).
NOW,
THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, the parties hereto agree as
follows:
1. Definitions.
As used
in this Agreement, the following terms shall have the following respective
meanings:
(a) “Affiliate”
of
a
party means any corporation or other business entity controlled by, controlling
or under common control with such party. For this purpose “control”
shall
mean direct or indirect beneficial ownership of fifty percent (50%) or more
of the voting or income interest in such corporation or other business
entity.
(b) “Agreement”
means
this Warrant and Common Stock Purchase Agreement.
(c) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.
(d) “Closing
Date”
means
the date of the sale and purchase of the Warrants and Common Stock acquired
hereunder.
(e) “Majority
Purchasers”
shall
mean Purchasers which, at any given time, hold greater than fifty
percent (50%) of the outstanding Securities (as defined in Section 2.3
below) that have not been resold pursuant to an effective registration statement
under the Securities Act or Rule 144 under the Securities Act.
(f) “Operative
Agreements”
shall
mean the Registration Rights Agreement and Warrants together with this
Agreement.
(g) “Registration
Rights Agreement”
shall
mean that certain Registration Rights Agreement, dated as of the date hereof,
among the Company and the Purchasers.
(h) “SEC”
shall
mean the Securities and Exchange Commission.
(i) “Securities
Act”
shall
mean the Securities Act of 1933, as amended, and all of the rules and
regulations promulgated thereunder.
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2. Purchase
and Sale of Shares.
2.1 Purchase
and Sale.
Subject
to and upon the terms and conditions set forth in this Agreement, the Company
agrees to issue and sell to each Purchaser, and each Purchaser, severally,
hereby agrees to purchase from the Company, at the Closing (as defined below),
the number of shares of Common Stock set forth opposite the name of such
Purchaser under the heading “Number
of Shares to be Purchased”
on
Exhibit A
hereto,
at a purchase price of $2.25 per share. The total purchase price payable by
each
Purchaser for the number of shares of Common Stock that such Purchaser is hereby
agreeing to purchase is set forth opposite the name of such Purchaser under
the
heading “Purchase
Price”
on
Exhibit A
hereto.
2.2 In
addition, subject to the terms and conditions of this Agreement, each Purchaser
agrees, severally, to purchase and the Company agrees to sell and issue to
each
Investor, a five-year cashless exercise Warrant in form and substance attached
hereto as Exhibit
B
to
acquire one (1) share of the Company’s Common Stock at an exercise price equal
to the ten (10) trading day volume weighted average closing price of the
Company’s Common Stock on the OTCBB immediately preceding the Closing Date (the
“Exercise Price”) for each four (4) shares of Common Stock acquired pursuant to
Section 2.1 above (the “Warrant”). No fractional shares shall be issued under
the Warrants (any fractional shares shall be rounded down to the nearest whole
number).
2.3 The
shares of Common Stock sold to the Purchasers pursuant to this Agreement are
hereinafter referred to as the “Shares.”
The
Warrants to purchase Common Stock sold hereunder are hereinafter referred to
as
the “Warrants.”
The
total amount of Common Stock and other securities issuable upon conversion
of
the Warrants are hereinafter referred to as the “Conversion
Stock.”
The
Shares, the Warrants and the Conversion Stock are hereinafter collectively
referred to as the “Securities.”
2.4 Closing.
The
initial purchase and sale of the Shares and Warrants shall take place at the
offices of Xxxx Xxxxx, LLP Two Embarcadero, 00xx
Xxxxx,
Xxx Xxxxxxxxx, XX 00000 at 10:00 A.M., effective as of the Effective Date,
or at
such other time and place as the Company and the Purchasers acquiring at the
Closing in the aggregate more than half of such Shares sold pursuant to Section
2.1 mutually agree upon, but in no event later than December 30, 2005 (which
time and place are designated as the “Closing”).
Within
five (5) business days after the Closing, the Company shall deliver to each
Purchaser purchasing Shares and Warrants at the Closing a certificate
representing the Shares and a corresponding Warrant, registered in the name
of
such Purchaser, or in such nominee’s or nominees’ name(s) as designated by such
Purchaser in writing in the form of the Investor Questionnaire attached hereto
as Appendix
I,
which
such Purchaser is purchasing against delivery to the Company by such Purchaser
of a cashiers check or wire transfer in the aggregate amount of the Purchase
Price therefor payable to the Company’s order as identified on Exhibit
A.
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3. Representations
and Warranties of the Company.
Except
as otherwise described in the SEC Documents (as defined below), including any
documents incorporated by reference therein or exhibits referenced or attached
thereto, the Company hereby represents and warrants to each of the Purchasers
as
follows immediately prior to the Closing:
3.1 Incorporation.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and
is
qualified to do business and is in good standing in each jurisdiction in which
the character of its properties or the nature of its business requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the business, condition (financial or otherwise) or prospects
of the Company (“Material
Adverse Effect”).
The
Company does not have any material subsidiaries other than those identified
in
the SEC Documents (as defined below). Except for short-term investments and
investments that are not material to the Company, the Company does not own
any
shares of stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm, partnership, limited
liability company, joint venture, association or other entity. Complete and
correct copies of the certificate of incorporation (the “Certificate
of Incorporation”)
and
bylaws (the “Bylaws”)
of the
Company as in effect on the Effective Date have been filed by the Company with
the SEC. The Company has all requisite corporate power and authority to carry
on
its business as now conducted.
3.2 Capitalization.
The
authorized capital stock of the Company consists of (i) 100,000,000 shares
of Common Stock, of which 19,443,221 shares are outstanding on the date hereof.
The outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, have been issued in
material compliance with all federal and state securities laws, and were not
issued in violation of any preemptive or similar rights to subscribe for or
purchase securities. Except for (i) options to purchase up to 3,888,805 shares
of Common Stock or other equity awards issued to employees and consultants
of
the Company pursuant to the employee benefits plans disclosed in the SEC
Documents and (ii) warrants to purchase up to 4,169,716 shares of Common Stock,
there are no existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character obligating the Company to issue, transfer or sell, or cause to be
issued, transferred or sold, any shares of the capital stock of the Company
or
other equity interests in the Company or any securities convertible into or
exchangeable for such shares of capital stock or other equity interests, and
there are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of its capital stock or other equity
interests. Except for that certain First Amended and Restated Shareholder
Agreement dated May 25, 2005, there are no voting agreements or other similar
arrangements with respect to the Common Stock to which the Company is a party.
The Company has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change
in
control of the Company. The Company does not maintain any pension benefit plan,
or other retirement plan, subject to the Employee Retirement Income Security
Act.
3.3 Authorization.
All
corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution, delivery and
performance of the Operative Agreements and the consummation of the transactions
contemplated therein has been taken. When executed and delivered by the Company,
each of the Operative Agreements shall constitute the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors’ rights generally and by
general equitable principles. The Company has all requisite corporate power
to
enter into the Operative Agreements and to carry out and perform its obligations
under the terms of the Operative Agreements.
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3.4 Valid
Issuance of the Shares.
The
Shares being purchased by the Purchasers hereunder and the Conversion Stock
upon
exercise of the Warrants will, upon issuance pursuant to the terms hereof and
thereof, be duly authorized and validly issued, fully paid and nonassessable.
No
preemptive rights or other rights to subscribe for or purchase the Company’s
capital stock exist with respect to the issuance and sale of the Securities
by
the Company pursuant to this Agreement, except for any such right disclosed
in
the SEC Documents. As of the Effective Date, no further approval or authority
of
the stockholders or the Board of Directors of the Company shall be required
for
the issuance and sale of the Securities by the Company, or the filing of the
Registration Statement by the Company, as contemplated in the Operative
Agreements. The Shares, Warrants and Conversion Stock issuable upon exercise
of
the Warrants will, upon issuance pursuant to the terms hereof and thereof,
be
free and clear from any security interest, pledge, mortgage, lien (statutory
or
other), charge, option to purchase, lease or otherwise acquire any interest
or
any claim, restriction or covenant, title defect, hypothecation, assignment,
deposit arrangement or other encumbrance of any kind or any preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement).
3.5 Financial
Statements.
As of
their respective dates, the financial statements of the Company included in
the
SEC Documents (as defined in Section 3.6 below) complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as permitted
pursuant to Regulation G promulgated under the Exchange Act, or (ii) in the
case
of unaudited interim financial statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year end audit
adjustments). Except as set forth in the subset of SEC Documents filed and
publicly available beginning with the Company’s Annual Report on Form 10-KSB for
the fiscal year ended May 31, 2005 and prior to the date hereof, since August
31, 2005, (a) there has been no event, occurrence or development that has had
or
could result in a Material Adverse Effect, (b) the Company has not incurred
any
liabilities (contingent or otherwise) other than (x) liabilities incurred in
the
ordinary course of business consistent with past practice and (y) liabilities
not required to be reflected in the Company’s financial statements pursuant to
generally accepted accounting principals or required to be disclosed in filings
made with the SEC, (c) the Company has not altered its method of accounting
or
the identity of its auditors and (d) the Company has not declared or made any
payment or distribution of cash or other property to its stockholders or
officers or directors (other than in compliance with existing Company stock
option plans) with respect to its capital stock, or purchased, redeemed (or
made
any agreements to purchase or redeem) any shares of its capital stock. As of
November 30, 2005 the Company’s cash and cash equivalents was equal to
approximately $6,761,000.
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3.6 SEC
Documents.
The
Company has filed all reports, schedules, forms, statements (collectively,
and
in each case including all exhibits, financial statements and schedules thereto
and documents incorporated by reference therein and including all registration
statements and prospectuses filed with the SEC) required to be filed by it
with
the SEC through the Closing Date, and the Company will file, on a timely basis,
all similar documents with the SEC during the period commencing on the date
hereof and ending on the Closing Date (all of the foregoing being hereinafter
referred to as the “SEC Documents”). As of their respective dates, the SEC
Documents complied or will comply in all material respects with the requirements
of the Securities Act, the Exchange Act and the rules and regulations of the
SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, contained or will contain any untrue statement of a material fact
or
omitted or will omit to state a material fact required to be stated therein
or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, as of their respective
filing dates.
3.7 Consents.
All
consents, approvals, orders and authorizations required on the part of the
Company in connection with the execution, delivery or performance of the
Operative Agreements and the consummation of the transactions contemplated
therein have been obtained and will be effective as of the Closing
Date.
3.8 No
Conflict.
The
execution and delivery the Operative Agreements by the Company and the
consummation of the transactions contemplated thereby will not conflict with
or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit under
(i) any provision of the Certificate of Incorporation or Bylaws of the
Company, (ii) any material bond, debenture, note or other evidence of
indebtedness, or any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture, franchise, license or other agreement
or
instrument to which the Company is a party or by which it or its property is
bound or (iii) any judgment, order, statute, law, ordinance, rule or
regulations, applicable to the Company or its respective properties or
assets.
3.9 Brokers
or Finders.
Except
as disclosed on Schedule 3.9 attached hereto, the Company has not dealt with
any
broker or finder in connection with the transactions contemplated by this
Agreement or incurred any liability for any brokerage or finders’ fees or agents
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.10 Nasdaq
Stock Market.
The
Common Stock is registered pursuant to Section 12(g) of the Exchange Act and
is
quoted on the Nasdaq Stock Market Over-the-Counter Bulletin Board (“OTCBB”)
under
the ticker symbol “PRTX.OB.” The Company has taken no action designed to remove,
or which, to the Company’s knowledge, is likely to have the effect of,
suspending or terminating the quotation of the Common Stock on the OTCBB. The
Company shall comply with all requirements, if any, of the National Association
of Securities Dealers, Inc. (the “NASD”)
with
respect to the issuance of the Shares and Conversion Stock and the quoting
of
the Shares and Conversion Stock (when issued) on the OTCBB.
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3.11 Absence
of Litigation.
There
is no action, suit or proceeding or, to the Company’s knowledge, any
investigation, pending, or to the Company’s knowledge, threatened by or before
any court, governmental body or regulatory agency against the Company that
is
required to be disclosed in the SEC Documents and is not so disclosed. The
Company has not received any written or oral notification of, or request for
information in connection with, any formal or informal inquiry, investigation
or
proceeding from the SEC or the NASD. The foregoing includes, without limitation,
any such action, suit, proceeding or investigation that questions this Agreement
or the Registration Rights Agreement or the right of the Company to execute,
deliver and perform under same.
3.12 Intellectual
Property.
(a) To
the
knowledge of the Company, the Company has ownership of or license or legal
right
to use all patents, copyrights, trade secrets, trademarks, domain names,
customer lists, designs, manufacturing or other processes, computer software,
systems, data compilations, research results and other intellectual property
or
proprietary rights (collectively, “Intellectual
Property”)
used
in the business of the Company and material to the Company. The Company knows
of
no reason why its patent applications do not or would not comply with any
statutory or legal requirements or would not issue into valid and enforceable
patents.
(b) To
the
Company’s knowledge, there is no material default by the Company under any
material licenses or other material agreements under which (i) the Company
is
granted rights in Intellectual Property or (ii) the Company has granted rights
to others in Intellectual Property owned or licensed by the Company. There
are
no outstanding or threatened claims, disputes or disagreements with respect
to
any such licenses or agreements.
(c) To
the
knowledge of the Company, the present business, activities and products of
the
Company do not infringe or misappropriate any Intellectual Property of any
third
party. The Company has not been notified that any proceeding charging the
Company with infringement or misappropriation of any Intellectual Property
held
by any third party has been filed. To the Company’s knowledge, there exists no
patent held by any third party which includes claims that would be infringed
by
the Company in the conduct of its business as currently conducted where such
infringement would have a Material Adverse Effect. To the knowledge of the
Company, the Company is not making unauthorized use of any confidential
information or trade secrets of any third party. Neither the Company nor, to
the
knowledge of the Company, any of its employees have any agreements or
arrangements with any persons other than the Company restricting the Company’s
or any such employee’s engagement in business activities that are material
aspects of the Company’s business as currently conducted.
(d) None
of
the Intellectual Property owned or, to the Company’s knowledge, licensed by the
Company that is used in the business of the Company and material to the Company,
is subject to any outstanding judgment or order, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand is
pending or, to the knowledge of the Company, threatened, which challenges the
validity, enforceability, scope, use, or ownership of, or otherwise relates
to,
any such Intellectual Property anywhere in the world. No Patent has been or
is
now involved in any interference, reissue, reexamination, opposition, or other
proceeding.
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(e) Each
employee of the Company has executed a confidential information and invention
assignment agreement in the form made available to Purchasers. No such employee
has excluded works or inventions made prior to his or her employment with the
Company from his or her assignment of inventions pursuant to such employee’s
confidential information and invention assignment agreement, which works or
inventions are necessary to the business of the Company as it is proposed to
be
conducted. Each consultant to the Company has entered into an agreement
containing appropriate confidentiality and invention assignment provisions,
in
the form acceptable to Purchasers. The Company does not believe it is or will
be
necessary to utilize any inventions, trade secrets or proprietary information
of
any of its employees made prior to their employment by the Company, except
for
inventions, trade secrets or proprietary information that have been assigned
to
the Company.
3.13 Offering.
The
Company has not in the past nor will it hereafter take any action to sell,
offer
for sale or solicit offers to buy any securities of the Company which would
require the offer, issuance or sale of the Securities, as contemplated by this
Agreement, to be registered under Section 5 of the Securities Act.
3.14 Investment
Company.
The
Company is not and, after giving effect to the offering and sale of the Shares
and the Warrants, will not be required to register as, an “investment company”
as such term is defined in the Investment Company Act of 1940, as
amended.
3.15 No
Manipulation of Stock.
The
Company has not taken and will not, in violation of applicable law, take, any
action designed to or that might reasonably be expected to cause or result
in
unlawful manipulation of the price of the Common Stock.
3.16 No
Violations.
The
Company is not in violation of its Certificate of Incorporation, Bylaws or
other
organizational documents, or in violation of any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company, which violation, individually or in the
aggregate, would be reasonably expected to have a Material Adverse Effect,
or is
not in default (and there exists no condition which, with the passage of time
or
otherwise, would constitute a default) in the performance of any material bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company is a party or by which the Company is bound or by which the property
of the Company is bound, which would be reasonably expected to have a Material
Adverse Effect.
3.17 Accountants.
Xxxxx
Xxxxxxxx, LLP, who issued their report with respect to the financial statements
to be incorporated by reference from the Company’s Annual Report on Form 10-KSB
for the year ended May 31, 2005 into the Registration Statement and the
prospectus which forms a part thereof, are an independent registered public
accounting firm as required by the Securities Act.
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3.18 Taxes.
The
Company has filed all necessary federal, state and foreign income and franchise
tax returns and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been or might be asserted
or threatened against it which would have a Material Adverse
Effect.
3.19 Title.
The
Company has good and marketable title to all real property and good and
marketable title to all personal property owned by it which is material to
the
business of the Company, in each case free and clear of all encumbrances and
defects, except such as do not have a Material Adverse Effect. Any facilities
and items of equipment held under lease by the Company are held by it under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such
facilities and items of equipment by the Company. The Company is in compliance
with all material terms of each lease to which it is a party or is otherwise
bound.
3.20 Foreign
Corrupt Practices.
To the
knowledge of the Company, neither the Company, nor any director, officer, agent,
employee or other person acting on behalf of the Company, has in the course
of
its actions for, or on behalf of, the Company, used any corporate funds for
any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
3.21 Employee
Relations.
The
Company is not involved in any union labor dispute, nor, to the knowledge of
the
Company, is any such dispute threatened. The Company is not a party to a
collective bargaining agreement, and the Company believes that its relations
with its employees are good. No executive officer (as defined in Rule 501(1)
of
the Securities Act) of the Company has notified the Company that such officer
intends to leave the employ of the Company or otherwise terminate such officer’s
employment with the Company. To the knowledge of the Company, no employee of
the
Company, as a consequence of his employment by the Company is, or is now
expected to be, in violation of any material term of any agreement, covenant
or
contract (including any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant with any previous employer),
and the continued employment of each such employee by the Company will not
subject the Company to any liability with respect to any of the foregoing
matters.
3.22 Internal
Accounting Controls.
The
Company maintains a system of internal accounting controls (as such term is
defined in Rule 13a-14 and 15d-14 under the Exchange Act) sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
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3.23 Disclosure
Controls.
The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-14 and 15d-14 under the Exchange Act); such
disclosure controls and procedures are designed to ensure that material
information relating to the Company, including its consolidated subsidiaries,
if
any, is made known to the Company’s Chief Executive Officer and its Chief
Financial Officer by others within those entities, and such disclosure controls
and procedures are effective to perform the functions for which they were
established; the Company’s auditors and the Audit Committee of the Board of
Directors have been advised of: (i) any significant deficiencies in the design
or operation of internal controls which could adversely affect the Company’s
ability to record, process, summarize, and report financial data; and (ii)
any
fraud, whether or not material, that involves management or other employees
who
have a role in the Company’s internal controls; any material weaknesses in
internal controls have been identified for the Company’s auditors; since the
date of the most recent evaluation of such disclosure controls and procedures,
there have been no significant changes in internal controls or in other factors
that could significantly affect internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses; the
principal executive officers (or their equivalents) and principal financial
officers (or their equivalents) of the Company have made all certifications
required by the Sarbanes Oxley Act of 2002 (the “Sarbanes Oxley Act”) and any
related rules and regulations promulgated by the Commission, and the statements
contained in any such certification are complete and correct; and the Company
is
otherwise in compliance in all material respects with all applicable effective
provisions of the Sarbanes Oxley Act.
3.24 Disclosure.
Neither
the Operative Agreements, any of the schedules or exhibits hereto or thereto,
nor any other document or certificate provided by the Company to the Purchasers
in connection herewith or therewith contains any untrue statement of a material
fact or, when considered as a whole, omits a material fact necessary to make
the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
3.25 Real
Property Holding Corporation.
The
Company is not a real property holding corporation within the meaning of Section
897(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) and any
regulations promulgated thereunder.
4. Representations
and Warranties of the Purchasers.
Each
Purchaser severally for itself, and not jointly with the other Purchasers,
represents and warrants to the Company as follows:
4.1 Authorization.
All
action on the part of such Purchaser and, if applicable, its officers, directors
and shareholders necessary for the authorization, execution, delivery and
performance of the Operative Agreements and the consummation of the transactions
contemplated therein has been taken. When executed and delivered by the Company
and such Purchaser, each of the Operative Agreements will constitute the legal,
valid and binding obligation of such Purchaser, enforceable against such
Purchaser in accordance with its terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights
generally and by general equitable principles. Such Purchaser has all requisite
power to enter into each of the Operative Agreements and to carry out and
perform its obligations under the terms of the Operative Agreements. Such
Purchaser has the knowledge and experience in financial and business matters
as
to be capable of evaluating the merits and risks of an investment in the
Securities and has the ability to bear the economic risks of an investment
in
the Securities for an indefinite period of time. Furthermore, the Purchaser
acknowledges that the Company has made no representations or warranties except
as set for in this Agreement or the Registration Rights Agreement.
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4.2 Purchase
Entirely for Own Account.
Except
for permitted transfers pursuant to Section 8.13, such Purchaser is acquiring
the Securities being purchased by it hereunder for investment, for its own
account, and not for resale or with a view to distribution thereof in violation
of the Securities Act. Such Purchaser has not entered into an agreement or
understanding with any other party to resell or distribute such Securities.
4.3 Investor
Status; Etc.
Such
Purchaser certifies and represents to the Company that it is an “Accredited
Investor” as defined in Rule 501 of Regulation D promulgated under the
Securities Act and was not organized for the purpose of acquiring the
Securities. Such Purchaser’s financial condition is such that it is able to bear
the risk of holding the Securities for an indefinite period of time and the
risk
of loss of its entire investment. Subject to the truth and accuracy of the
representations and warranties of the Company set forth in Section 3 of this
Agreement (as modified by the Company Disclosure Schedule), such Purchaser
has
received, reviewed and considered all information it deems necessary in making
an informed decision to make an investment in the Securities and has been
afforded the opportunity to ask questions of and receive answers from the
management of the Company concerning this investment and has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company’s stage of development so as to be able to evaluate the
risks and merits of its investment in the Company.
4.4 Confidential
Information.
Each
Purchaser understands that any information, other than the SEC Documents,
provided to such Purchaser by the Company, including, without limitation, the
existence and nature of all discussions and presentations, if any, regarding
this offering and the Operative Agreements, is strictly confidential and
proprietary to the Company and is being submitted to the Purchaser solely for
such Purchaser’s confidential use in connection with its investment decision
regarding the Securities. Such Purchaser agrees to use such information for
the
sole purpose of evaluating a possible investment in the Securities and such
Purchaser hereby acknowledges that it is prohibited from reproducing or
distributing such information, the Operative Agreements, or any other offering
materials, in whole or in part, or divulging or discussing any of their contents
except for use internally and by its legal counsel and except as required by
law
or legal process. Such Purchaser understands that the federal securities laws
prohibit any person who possesses material nonpublic information about a company
from trading in securities of such company.
4.5 Securities
Not Registered.
Such
Purchaser understands that the Securities have not been registered under the
Securities Act, by reason of their issuance by the Company in a transaction
exempt from the registration requirements of the Securities Act, and that the
Securities must continue to be held by such Purchaser unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration. The Purchaser understands that the exemptions from
registration afforded by Rule 144 (the provisions of which are known to it)
promulgated under the Securities Act depend on the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for sales
only in limited amounts.
-10-
4.6 No
Conflict.
The
execution and delivery of the Operative Agreements by such Purchaser and the
consummation of the transactions contemplated thereby will not conflict with
or
result in any violation of or default by such Purchaser (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) any provision of the organizational documents of such
Purchaser, (ii) any material agreement or instrument, permit, franchise, or
license or (iii) any judgment, order, statute, law, ordinance, rule or
regulations, applicable to such Purchaser or its respective properties or
assets.
4.7 Brokers.
Such
Purchaser has not retained, utilized or been represented by any broker or finder
in connection with the transactions contemplated by this Agreement.
4.8 Consents.
All
consents, approvals, orders and authorizations required on the part of such
Purchaser in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated herein have
been
obtained and are effective as of the Closing Date.
4.9 No
Intent to Effect a Change of Control.
Such
Purchaser has no present intent to change or influence the control of the
Company within the meaning of Rule 13d-1 of the Exchange Act.
5. Conditions
Precedent.
5.1 Conditions
to the Obligation of the Purchasers to Consummate the Closing.
The
obligation of each Purchaser to consummate the Closing and to purchase and
pay
for the Securities being purchased by it pursuant to this Agreement is subject
to the satisfaction of the following conditions precedent:
(a) The
representations and warranties of the Company contained herein shall be true
and
correct on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date (it being understood and agreed by each
Purchaser that, in the case of any representation and warranty of the Company
contained herein which is not hereinabove qualified by application thereto
of a
materiality standard, such representation and warranty need be true and correct
only in all material respects in order to satisfy as to such representation
or
warranty the condition precedent set forth in the foregoing provisions of this
Section 5.1(a)).
(b) The
Registration Rights Agreement and respective Warrant shall have been executed
and delivered by the Company.
(c) The
Company shall not have been adversely affected in any material way prior to
the
Closing Date; and the Company shall have performed all obligations and
conditions herein required to be performed or observed by the Company on or
prior to the Closing Date.
(d) No
proceeding challenging this Agreement or the transactions contemplated hereby,
or seeking to prohibit, alter, prevent or materially delay the Closing, shall
have been instituted before any court, arbitrator or governmental body, agency
or official and shall be pending.
-11-
(e) The
purchase of and payment for the Securities by the Purchasers shall not be
prohibited by any law or governmental order or regulation. All necessary
consents, approvals, licenses, permits, orders and authorizations of, or
registrations, declarations and filings with, any governmental or administrative
agency or of any other person with respect to any of the transactions
contemplated hereby shall have been duly obtained or made and shall be in full
force and effect.
(f) All
instruments and corporate proceedings in connection with the transactions
contemplated by this Agreement to be consummated at the Closing shall be
satisfactory in form and substance to such Purchaser. Such Purchaser shall
have
received such certificates of the Company’s officers as such Purchaser may have
reasonably requested in connection with such transactions.
(g) The
Company has received executed Subscription Agreements representing an aggregate
Purchase Price of at least $5,000,000, provided that the Purchasers may waive
this condition 5.1(g) by unanimous written consent.
5.2 Conditions
to the Obligation of the Company to Consummate the Closing.
The
obligation of the Company to consummate the Closing and to issue and sell to
each of the Purchasers the Securities to be purchased by it at the Closing
is
subject to the satisfaction of the following conditions precedent:
(a) The
representations and warranties contained herein of such Purchaser shall be
true
and correct on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date (it being understood and agreed by
the
Company that, in the case of any representation and warranty of each Purchaser
contained herein which is not hereinabove qualified by application thereto
of a
materiality standard, such representation and warranty need be true and correct
only in all material respects in order to satisfy as to such representation
or
warranty the condition precedent set forth in the foregoing provisions of this
Section 5.2(a)).
(b) The
Registration Rights Agreement and respective Warrant shall have been executed
and delivered by each Purchaser.
(c) Each
Purchaser shall have performed all obligations and conditions herein required
to
be performed or observed by such Purchaser on or prior to the Closing
Date.
(d) No
proceeding challenging this Agreement or the transactions contemplated hereby,
or seeking to prohibit, alter, prevent or materially delay the Closing, shall
have been instituted before any court, arbitrator or governmental body, agency
or official and shall be pending.
(e) The
sale
of the Securities by the Company shall not be prohibited by any law or
governmental order or regulation. All necessary consents, approvals, licenses,
permits, orders and authorizations of, or registrations, declarations and
filings with, any governmental or administrative agency or of any other person
with respect to any of the transactions contemplated hereby shall have been
duly
obtained or made and shall be in full force and effect.
-12-
(f) Each
such
Purchaser shall have executed and delivered to the Company an Investor
Questionnaire, in the form attached hereto as Appendix
I,
pursuant to which such Purchaser shall provide information necessary to confirm
each such Purchaser’s status as an “accredited investor” (as such term is
defined in Rule 501 promulgated under the Securities Act) and to enable the
Company to comply with the Registration Rights Agreement.
(g) All
instruments and corporate proceedings in connection with the transactions
contemplated by this Agreement to be consummated at the Closing shall be
satisfactory in form and substance to the Company, and the Company shall have
received counterpart originals, or certified or other copies of all documents,
including without limitation records of corporate or other proceedings, which
it
may have reasonably requested in connection therewith.
6. Transfer,
Legends.
6.1 Securities
Law Transfer Restrictions.
(a) Each
Purchaser acknowledges that the Securities are subject to the transfer
restrictions set forth in Section 2 of the Registration Rights Agreement and
that the certificates or instruments representing such securities shall bear
such legends as are set forth in Section 2.2 of the Registration Rights
Agreement.
(b) Each
Purchaser understands that the Securities have not been registered under the
Securities Act or any state securities laws. In that connection, such Purchaser
is aware of Rule 144 under the Securities Act and the restrictions imposed
thereby. Such Purchaser will not engage in hedging or other similar transactions
which would include, without limitation, effecting any short sale or having
in
effect any short position (whether or not such sale or position is against
the
box and regardless of when such position was entered into) or any purchase,
sale
or grant of any right (including, without limitation, any put or call option)
with respect to the Securities or with respect to any security (other than
a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from the Common Stock of the Company.
(c) Each
Purchaser acknowledges that no action has been or will be taken in any
jurisdiction outside the United States by the Company that would permit an
offering of the Securities, or possession or distribution of offering materials
in connection with the issue of Securities, in any jurisdiction outside of
the
United States where action for that purpose is required. Each Purchaser outside
the United States will comply with all applicable laws and regulations in each
foreign jurisdiction in which it purchases, offers, sells or delivers Securities
or has in its possession or distributes any offering material, in all cases
at
its own expense.
-13-
Notwithstanding
the foregoing, following the effective date of the Registration Statement,
the
legend referenced above and below in Section 6.2 may, at the request of the
Purchaser, be removed from the certificates evidencing such Shares and the
Conversion Stock prior to the resale thereof and the Company will rescind any
stop transfer orders with respect to such shares given to the Company’s transfer
agent, provided that such Purchaser represents and covenants to the Company
in
writing (in a form reasonably acceptable to the Company and its counsel) that
(1) the Purchaser will sell such shares only pursuant to and in the manner
contemplated by the Registration Statement, including the Plan of Distribution
section contained therein (in substantially the form attached hereto as Exhibit
C), and otherwise in compliance with the Securities Act, including the
prospectus delivery requirements of such act, (2) the Purchaser will indemnify
the Company for any damages or losses resulting to the Company for the
Purchaser’s breach of its representation and covenant described in the foregoing
clause (1), and (3) such other agreements or covenants as the Company or its
counsel may reasonably request. Subject to the foregoing, at such time and
to
the extent a legend is no longer required for the Shares or Conversion Stock,
the Company will use its best efforts to no later than three (3) trading days
following the delivery by a Purchaser to the Company or the Company’s transfer
agent of a legended certificate representing such Shares or Warrant Shares
(together with such accompanying documentation or representations as reasonably
required by counsel to the Company), deliver or cause to be delivered a
certificate representing such Shares or Conversion Stock that is free from
the
legend described above and below in Section 6.2.
6.2 Legends.
Each
certificate requesting any of the Securities shall be endorsed with the legends
set forth below, and each Purchaser covenants that, except to the extent such
restrictions are waived by the Company, it shall not transfer the securities
represented by any such certificate without complying with the restrictions
on
transfer described in this Agreement and the legends endorsed on such
certificate:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION
OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
EXEMPT FROM SAID ACT.”.
7. Termination;
Liabilities Consequent Thereon.
This
Agreement may be terminated and the transactions contemplated hereunder
abandoned at any time prior to the Closing only as follows:
(a) at
any
time by mutual agreement of the Company and the Majority Purchasers;
or
(b) by
the
Majority Purchasers, if there has been any breach of any representation or
warranty or any material breach of any covenant of the Company contained herein
and the same has not been cured within 15 days after notice thereof (it being
understood and agreed by each Purchaser that, in the case of any representation
or warranty of the Company contained herein which is not hereinabove qualified
by application thereto of a materiality standard, such representation or
warranty will be deemed to have been breached for purposes of this Section
7.1(b) only if such representation or warranty was not true and correct in
all
material respects at the time such representation or warranty was made by the
Company); or
-14-
(c) by
the
Company with respect to a certain purchaser, if there has been any breach of
any
representation, warranty or any material breach of any covenant of such
Purchaser contained herein and the same has not been cured within 15 days after
notice thereof (it being understood and agreed by the Company that, in the
case
of any representation and warranty of such Purchaser contained herein which
is
not hereinabove qualified by application thereto of a materiality standard,
such
representation or warranty will be deemed to have been breached for purposes
of
this Section 7.1(c) only if such representation or warranty was not true and
correct in all material respects at the time such representation or warranty
was
made by such Purchaser).
Any
termination pursuant to this Section 7 shall be without liability on the part
of
any party, unless such termination is the result of a material breach of this
Agreement by a party to this Agreement in which case such breaching party shall
remain liable for such breach notwithstanding any termination of this
Agreement.
8. Miscellaneous
Provisions.
8.1 Public
Statements or Releases.
None of
the Purchasers to this Agreement shall make, issue, or release any announcement,
whether to the public generally, or to any of its suppliers or customers, with
respect to this Agreement or the transactions provided for herein, or make
any
statement or acknowledgment of the existence of, or reveal the status of, this
Agreement or the transactions provided for herein, without the prior consent
of
the Majority Purchasers, which shall not be unreasonably withheld or delayed,
provided,
that
nothing in this Section 8.1 shall prevent any of the Purchasers hereto from
making such public announcements as it may consider necessary in order to
satisfy its legal obligations, but to the extent not inconsistent with such
obligations, it shall provide the other Purchasers and the Company with an
opportunity to review and comment on any proposed public announcement before
it
is made.
8.2 Further
Assurances.
Each
party agrees to cooperate fully with the other party and to execute such further
instruments, documents and agreements and to give such further written
assurances, as may be reasonably requested by the other party to better evidence
and reflect the transactions described herein and contemplated hereby, and
to
carry into effect the intents and purposes of this Agreement.
8.3 Rights
Cumulative.
Each
and all of the various rights, powers and remedies of the parties shall be
considered to be cumulative with and in addition to any other rights, powers
and
remedies which such parties may have at law or in equity in the event of the
breach of any of the terms of this Agreement. The exercise or partial exercise
of any right, power or remedy shall neither constitute the exclusive election
thereof nor the waiver of any other right, power or remedy available to such
party.
-15-
8.4 Pronouns.
All
pronouns or any variation thereof shall be deemed to refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person, persons,
entity or entities may require.
8.5 Notices.
Any
notices, reports or other correspondence (hereinafter collectively referred
to
as “correspondence”) required or permitted to be given hereunder shall be in
writing and shall be sent by postage prepaid first class mail, courier or
telecopy or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder, and shall be deemed sufficient
upon
receipt when delivered personally or by courier, overnight delivery service
or
confirmed facsimile, or three (3) business days after being deposited in the
regular mail as certified or registered mail (airmail if sent internationally)
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:
(a) All
correspondence to the Company shall be addressed as follows:
Protalex,
Inc.
000
Xxxxx
Xxxxxx Xxxxx,
Xxx
Xxxx,
XX 00000
Attention:
__________________
__________________________
Facsimile: (___) _____________
with
a
copy to:
Xxxx
Xxxxx LLP
Xxx
Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, XX 00000
Attention:
Xxxxxx
X.
Xxxxxx, Esq.
Facsimile: (000) 000.0000
(b) All
correspondence to any Purchaser shall be sent to such Purchaser at the address
set forth in Exhibit A.
(c) Any
entity may change the address to which correspondence to it is to be addressed
by written notification as provided for herein.
8.6 Captions.
The
captions and paragraph headings of this Agreement are solely for the convenience
of reference and shall not affect its interpretation.
8.7 Severability.
Should
any part or provision of this Agreement be held unenforceable or in conflict
with the applicable laws or regulations of any jurisdiction, the invalid or
unenforceable part or provisions shall be replaced with a provision which
accomplishes, to the extent possible, the original business purpose of such
part
or provision in a valid and enforceable manner, and the remainder of this
Agreement shall remain binding upon the parties hereto.
-16-
8.8 Governing
Law; Injunctive Relief.
(a) This
Agreement shall be governed by and construed in accordance with the internal
and
substantive laws of the State of Delaware and without regard to any conflicts
of
laws concepts which would apply the substantive law of some other jurisdiction.
Venue for all purposes hereunder shall be in the applicable state or federal
court located within the State of Delaware.
(b) Each
of
the parties hereto acknowledges and agrees that damages will not be an adequate
remedy for any material breach or violation of this Agreement if such material
breach or violation would cause immediate and irreparable harm (an “Irreparable
Breach”).
Accordingly, in the event of a threatened or ongoing Irreparable Breach, each
party hereto shall be entitled to seek, equitable relief of a kind appropriate
in light of the nature of the ongoing or threatened Irreparable Breach, which
relief may include, without limitation, specific performance or injunctive
relief; provided,
however,
that if
the party bringing such action is unsuccessful in obtaining the relief sought,
the moving party shall pay the non-moving party’s reasonable costs, including
attorney’s fees, incurred in connection with defending such action. Such
remedies shall not be the parties’ exclusive remedies, but shall be in addition
to all other remedies provided in this Agreement.
8.9 Amendments.
This
Agreement may be amended or modified only pursuant to an instrument in writing
signed by the Company and the Majority Purchasers.
8.10 Exculpation.
Each
Purchaser acknowledges that it is not relying upon any person, entity or
corporation, other than the Company and its officers and directors, in making
its investment or decision to invest in the Company. The obligations of each
Purchaser hereunder are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance
of the obligations of any other Purchaser hereunder. Nothing contained herein,
and no action taken by any Purchaser pursuant hereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture
or
any other kind of entity, or create a presumption that the Purchasers are in
any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights hereunder, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of this Agreement. The
Company has elected to provide all Purchasers with the same terms and forms
of
Operative Agreements for the convenience of the Company and not because it
was
required or requested to do so by the Purchasers. Each Purchaser agrees that
no
Purchaser nor the respective controlling persons, officers, directors, partners,
agents, or employees of any Purchaser shall be liable to any other Purchaser
for
any action heretofore or hereafter taken or omitted to be taken by any of them
in connection with the Securities or the Operative Agreements.
8.11 Waiver.
No
waiver of any term, provision or condition of this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or be
construed as, a further or continuing waiver of any such term, provision or
condition or as a waiver of any other term, provision or condition of this
Agreement.
-17-
8.12 Expenses.
Each
party will bear its own costs and expenses in connection with this Agreement.
8.13 Assignment.
The
rights and obligations of the parties hereto shall inure to the benefit of
and
shall be binding upon the authorized successors and permitted assigns of each
party. Neither party may assign its rights or obligations under this Agreement
or designate another person (i) to perform all or part of its obligations under
this Agreement or (ii) to have all or part of its rights and benefits under
this
Agreement, in each case without the prior written consent of the other party,
provided, however, that a Purchaser may assign its rights hereunder with respect
to any Securities transferred in accordance with Section 2.3 of the Registration
Rights Agreement. In the event of any assignment in accordance with the terms
of
this Agreement, the assignee shall specifically assume and be bound by the
provisions of the Agreement by executing and agreeing to an assumption agreement
reasonably acceptable to the other party.
8.14 Survival.
The
respective representations and warranties given by the parties hereto, and
the
other covenants and agreements contained herein, shall survive the Closing
Date
and the consummation of the transactions contemplated herein for a period of
two
years, without regard to any investigation made by any party.
8.15 Counterpart.
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.
8.16 Entire
Agreement.
This
Agreement, the Warrants and the Registration Rights Agreement constitute the
entire agreement between the parties hereto respecting the subject matter hereof
and supersede all prior agreements, negotiations, understandings,
representations and statements respecting the subject matter hereof, whether
written or oral. No modification, alteration, waiver or change in any of the
terms of this Agreement shall be valid or binding upon the parties hereto unless
made in writing and duly executed by the Company and the Majority Purchasers.
[Signature
Page to Follow]
-18-
IN
WITNESS WHEREOF, the parties hereto have executed this Warrant and Common Stock
Purchase Agreement as of the day and year first above written.
PROTALEX,
INC.
By:
/s/
Xxxxxx X. Xxxx
Name:
Xxxxxx X. Xxxx
Title:
President and Chief Executive Officer
THE
PURCHASER’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED AS OF THE CLOSING
SHALL CONSTITUTE THE PURCHASER’S SIGNATURE TO THIS WARRANT AND COMMON STOCK
PURCHASE AGREEMENT.
-19-
Exhibit
A
SCHEDULE
OF PURCHASERS
|
Purchaser
Name and Address
|
Number
of Shares to be Purchased
|
Aggregate
Purchase Price
|
-20-
Exhibit
B
FORM
OF
WARRANT
-21-
Exhibit
C
PROPOSED
PLAN OF DISTRIBUTION
The
selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
o ordinary
brokerage transactions and transactions in which the broker-dealer solicits
the
purchaser;
o block
trades in which the broker-dealer will attempt to sell the shares as agent
but
may position and resell a portion of the block as principal to facilitate the
transaction;
o purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
o an
exchange distribution in accordance with the rules of the applicable
exchange;
o privately
negotiated transactions;
o broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share;
o a
combination of any such methods of sale; and
o any
other method permitted pursuant to applicable law.
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
The
selling stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged
shares.
The
selling stockholders may pledge their shares of common stock to their brokers
under the margin provisions of customer agreements. If a selling stockholder
defaults on a margin loan, the broker may, from time to time, offer and sell
the
pledged shares.
Broker-dealers
engaged by the selling stockholders may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
Each
selling stockholder may be deemed to be an “underwriter” within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
We
are required to pay all fees and expenses incident to the registration of the
shares, but excluding brokerage commissions or underwriter discounts. We and
the
selling stockholders have agreed to indemnify each other against certain losses,
claims, damages and liabilities, including liabilities under the Securities
Act.
-22-
Appendix
I
INVESTOR
QUESTIONNAIRE
-23-
SCHEDULE
3.9
Xxxxxxx
Securities, Inc. and Mufson Xxxx Xxxxxx & Partners LLC (collectively, the
“Placement Agents”) have been engaged by the Company to act as its placement
agents in connection with the sale of the Securities. The Company may pay the
Placements Agents collectively up to 6.0% of the aggregate offering proceeds
received by the Company from the Securities sold to the Purchasers hereunder.
In
addition, the Company may collectively issue to the Placement Agents warrants
to
purchase that number of shares of the Company’s Common Stock equal to 7% of the
number of common share equivalents of the Securities sold hereunder. The
warrants and shares issuable upon exercise of the warrants issued to the
Placement Agents will be in form and substance substantially identical to the
Warrants and Conversion Stock issued to the Purchasers hereunder. The Placement
Agents may transfer all or part of the warrants issued to the Placement Agents
to their officers, employees or principals provided that (1) the transfers
are
in compliance with applicable state and federal securities laws and (2) upon
request by the Company, the Placement Agents will deliver a legal opinion in
form and substance satisfactory to the Company, addressed to the Company, to
the
effect that the proposed transfer of warrants may be effected without
registration under the Securities Act.
The
Company is also obligated to include the warrants and shares issuable upon
exercise of the warrants issued to the Placement Agents in the Registration
Statement to be filed with the SEC covering the Securities.
|
-24-
|
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