Memorandum of Understanding
Exhibit
10.5
This
Memorandum of Understanding (this “Memorandum”) is entered into
by and among Viral Genetics, Inc., a Delaware corporation
(“Viral Genetics”), and V-Clip Pharmaceuticals,
Inc., a California corporation
(“V-Clip”), and solely with respect to Section 10 and
Exhibit A(ii)-(iii) below, University License Equity
Holdings, Inc., a Colorado nonprofit corporation
(“ULEHI”), this __ day of November 2007 (the “Effective
Date”).
This
Memorandum is an outline of the general understanding of an agreement to merge
V-Clip with and into Viral Genetics and shall be deemed a valid and binding
agreement of the parties hereto. ULEHI is a party hereto for purposes
of Section 10 and Exhibit A(ii)-(iii) below only.
1. Viral
Genetics shall perform work to be done by an independent laboratory to determine
the viability of the Licensed Process(es) and/or Licensed Product(s) covered
by
the License Agreement between V-Clip and The Regents of the University of
Colorado entered into contemporaneously with this Memorandum (the
“License Agreement”). The value of such work shall
be equivalent to at least Six Hundred Thousand Dollars ($600,000), which amount
may include the in-kind value of work directed to the viability of the Licensed
Processes (as defined in the License Agreement) or Licensed Products (as defined
in the License Agreement) including, without limitation, work sponsored by
the
NIH or similar entities. Xx. Xxxxx Xxxxxx, inventor of
the licensed technology, will collaborate with Viral Genetics on the
experimental design and research site selection and will have the unrestricted
right to use the data developed in the course of such work in her research
at
the University of Colorado.
2. Viral
Genetics shall have the option to require V-Clip to merge with and into Viral
Genetics in accordance with all applicable laws, rules and regulations (the
“Merger”) by delivering to V-Clip written notice of Viral
Genetics’ exercise of such option at any time on or before the date that is the
one-year anniversary of the Effective Date. In exchange for their
stock of V-Clip in connection with the Merger, V-Clip’s stockholders
(“V-Clip Stockholders”) shall receive securities issued by Viral
Genetics as set forth in Exhibit A attached hereto (the
“Merger Securities”). Viral Genetics and V-Clip
acknowledge and agree that the terms of the Merger and the consideration in
the
form of the Merger Securities (the “Merger Consideration”) have
been negotiated between V-Clip and Viral Genetics on an arms-length
basis.
3. Promptly,
but no later than fifteen (15) days subsequent to the date of the closing of
the
Merger (the “Closing”), Viral Genetics shall issue to each
V-Clip Stockholder stock certificates, option agreements, warrant agreements
and
any other certificates or agreements representing the Merger Consideration
as
set forth in Exhibit A attached hereto.
1
4. Viral
Genetics hereby represents and warrants to V-Clip that Viral Genetics has
250,000,000 authorized shares of Common Stock, $.0001 par value (“Common
Stock”), of which 155,532,013 shares are issued and outstanding, and
20,000,000 authorized shares of Preferred Stock, par value $.0001, of which
no
shares are issued and outstanding. All issued and outstanding shares of Common
Stock: (i) have been duly authorized and validly issued, and (ii) are fully
paid
and non-assessable. There are no other authorized or outstanding
equity securities of any class, kind, or character, and there are no outstanding
subscriptions, options, warrants, debt or other agreements, or commitments
obligating Viral Genetics to issue any additional shares of its capital stock
of
any class, or any options or rights with respect thereto, or any securities
convertible into, or exchangeable or exercisable for any shares of capital
stock
of any class as of the date hereof, except as set forth in Exhibit B
attached hereto and pursuant to the terms of this
Memorandum. When issued in compliance with the provisions of this
Memorandum, the shares of Common Stock issued as Merger Consideration will
be
validly issued, fully paid and non-assessable. When issued in
compliance with the provisions of this Memorandum and the option agreements
and
warrant agreements constituting Merger Consideration, the shares of Common
Stock
underlying such options and warrants will be validly issued, fully paid and
non-assessable. When issued in compliance with the provisions of this
Memorandum and any relevant agreements constituting Merger Consideration, the
shares of Common Stock underlying any such other Merger Securities will be
validly issued, fully paid and non-assessable.
5. All
corporate action on the part of Viral Genetics and V-Clip, and their respective
officers, directors and stockholders, necessary for the authorization of this
Memorandum has been taken, and with respect to the Merger has been taken or
will
have been taken at the time of the Closing.
6. The
execution of this Memorandum and the consummation of the Merger will not result
in any breach of any of the terms, conditions, or provisions of, or constitute
a
default under, or result in the creation of any lien, charge, or encumbrance
on,
any property or assets of Viral Genetics pursuant to any indenture, mortgage,
deed of trust, agreement, corporate charter, bylaws, contract, or other
instrument to which Viral Genetics is a party or by which Viral Genetics may
be
bound or any law, rule, regulation, qualification, license, order or judgment
applicable to Viral Genetics or any of its property.
7. Viral
Genetics has, and as of the Closing will have, filed all reports and made all
other filings required to be filed by it under the Securities Act of 1933,
as
amended (the “Securities Act”), and the Securities Exchange Act
of 1934, as amended (collectively with the Securities Act, the
“Securities Laws”), and subsequent to the Effective Date will
use its best efforts to file all reports and other filings required to be filed
by it under the Securities Laws. Subsequent to the Merger, Viral
Genetics will take any actions required from time to time to enable the V-Clip
Stockholders to sell any securities constituting Merger Consideration pursuant
to Rule 144 under the Securities Act. Viral Genetics shall take any and all
actions and make any necessary filings with any governmental agency necessary
to
cause the issuance of the Merger Securities and any securities
underlying the Merger Securities exempt from the registration requirements
of
the Securities Act and any applicable state securities
laws.
2
8. No
V-Clip Stockholder shall be granted or otherwise receive any rights or benefits
with respect to the Merger Consideration that is not otherwise granted on
identical terms to all V-Clip Stockholders, including without limitation
registration rights and rights with respect to the transfer of
securities.
9. This
Memorandum may be executed in counterparts, and photocopy, facsimile, electronic
or other copies shall have the same effect for all purposes as an ink-signed
original.
10. ULEHI
shall be deemed a third party beneficiary of all of the provisions of this
Memorandum.
* * * * *
3
IN
WITNESS WHEREOF, the undersigned have executed this Memorandum of Understanding
as of the Effective Date.
| Viral Genetics, Inc. | |||
|
|
By:
|
||
| Title: | |||
| V-Clip Pharmaceuticals, Inc. | |||
|
By:
|
|||
| Title: | |||
| For purposes of Section 10 and Exhibit A(ii)-(iii) only: | |||
| University License Equity Holding, Inc. | |||
|
By:
|
|||
| Title: | |||
4
EXHIBIT
A
Merger
Securities to be Issued to V-Clip Stockholders
(i)
V-Clip Stockholders other than ULEHI
|
V-Clip
Stockholder
|
Number
of Shares
of
Common
Stock
|
Number
of
Options* |
Number
of
Options** |
Number
of
Warrants*** |
|
Viral
Genetics
|
16,306,327
|
16,306,327
|
4,423,900
|
6,952,495
|
|
M.
Xxxxx Xxxxxx
|
8,153,163
|
8,153,163
|
2,211,950
|
3,476,247
|
|
Xxxxxx
Xxxxxxxx
|
8,153,163
|
8,153,163
|
2,211,950
|
3,476,247
|
|
Xxxx
Xxxxxx
|
1,852,991
|
1,852,991
|
502,716
|
790,056
|
|
Xxxxxx
Xxxxxxxx
|
370,598
|
370,598
|
100,543
|
158,011
|
|
*
|
Options
to acquire shares of Common Stock at an exercise price of $0.03,
expiring
on the date that is the tenth (10th)
anniversary
of the date of the Closing and containing a cashless exercise
provision.
|
|
**
|
Options
to acquire shares of Common Stock at an exercise price of $0.315,
expiring
on May 30, 2011 and on the same option agreement form as the Viral
Genetic
options set forth on Exhibit B attached
hereto.
|
|
***
|
Warrants
to acquire shares of Common Stock at an exercise price of $0.39,
expiring
on February 28, 2010 and on the same warrant agreement form as the
Viral
Genetic warrants set forth on Exhibit B attached
hereto.
|
All
Merger Securities shall be fully vested upon the Closing.
In
the
event of a forward stock split of the outstanding shares of Common Stock or
a
stock dividend of shares of Common Stock prior to the Closing, the number of
Merger Securities described above (i) shall be proportionately increased, and
(ii) the exercise price of the options and warrants included in the Merger
Securities described above shall be proportionately decreased. As an example,
and for the sake of greater clarity, if, prior to the Closing, Viral Genetics
effects a ten-for-one (10:1) forward stock split of its outstanding of shares
of
Common Stock, then the number of Merger Securities shall be increased by
multiplying such number by ten (10) and the exercise prices of the options
and
warrants included in the Merger Securities described above shall be decreased
by
dividing such exercise prices by ten (10).
Similarly,
in the event of a reverse stock split of the outstanding shares of Common Stock
prior to the Closing, the number of Merger Securities described above (i) shall
be proportionately decreased, and (ii) the exercise price of the options and
warrants included in the Merger Securities described above shall be
proportionately increased. As an example, and for the sake of greater clarity,
if, prior to the Closing, Viral Genetics effects a
one-for-ten (1:10) reverse stock split of its outstanding shares of Common
Stock, then the number of Merger Securities shall be decreased by dividing
such
number by ten (10) and the exercise prices of the options and warrants included
in the Merger Securities described above shall be increased by multiplying
such
exercise prices by ten (10).
5
(ii)
ULEHI
|
Class
of Merger
Security |
Exercise
Price
|
Expiration
Date |
Number
Issuable
|
|||
|
Common
Stock
|
N/A
|
N/A
|
Total
number of shares of Common Stock issued and outstanding immediately
prior
to the Closing, which shall also be deemed to include all shares
of Common
Stock into which any issued and outstanding convertible debt of Viral
Genetics as of the Closing is ultimately convertible, multiplied
by 20%,
and multiplied by the Investor Ownership Interest.
|
|||
|
Options
to Acquire Common Stock*
|
$0.03**
|
The
date that is the tenth (10th)
anniversary
of the date of the Closing.
|
Total
number of shares of Common Stock issued and outstanding immediately
prior
to the Closing, which shall also be deemed to include all shares
of Common
Stock into which any issued and outstanding convertible debt of Viral
Genetics as of the Closing is ultimately convertible, multiplied
by 20%,
and multiplied by the Investor Ownership Interest.
|
|||
|
Options
to Acquire Common Stock***
|
Weighted
average exercise price of all issued and outstanding Viral Genetics
options immediately prior to the Closing.
|
Weighted
average expiration date of all issued and outstanding Viral Genetics
options immediately prior to the Closing.
|
Total
number of Viral Genetics options issued and outstanding immediately
prior
to the Closing, multiplied by 40%, and multiplied by the Investor
Ownership Interest.
|
6
|
Warrants
to Acquire Common Stock***
|
Weighted
average exercise price of all issued and outstanding Viral Genetics
warrants immediately prior to the Closing.
|
Weighted
average expiration date of all issued and outstanding Viral Genetics
warrants immediately prior to the Closing.
|
Total
number of Viral Genetics warrants issued and outstanding immediately
prior
to the Closing, multiplied by 40%, and multiplied by the Investor
Ownership Interest.
|
|||
|
Any
other securities convertible, exchangeable or exercisable for capital
stock of Viral Genetics (other than convertible debt described above)
issued and outstanding as of the Closing.****
|
Weighted
average conversion rate, exercise price or exchange ratio of all
similar
issued and outstanding Viral Genetics securities
immediately
prior to the Closing.
|
Weighted
average expiration date of all similar issued and outstanding Viral
Genetics securities immediately prior to the Closing.
|
Total
number of similar Viral Genetics securities issued and outstanding
immediately prior to the Closing, multiplied by 40%, and multiplied
by the
Investor Ownership Interest.
|
|
*
|
The
option agreements representing such options shall contain a cashless
exercise provision.
|
|
**
|
The
exercise price shall be subject to a proportionate adjustment for
forward
or reverse stock splits and stock
dividends.
|
|
***
|
The
option agreements and warrant agreements representing such options
and
warrants, respectively, shall contain terms identical to the option
agreements and warrant agreements, respectively, issued and outstanding
immediately prior to the Closing.
|
|
****
|
The
form of such securities shall contain terms identical to the securities
issued and outstanding immediately prior to the
Closing.
|
As
used
in this Exhibit A(ii), the term “Investor Ownership Interest” shall have the
same meaning as set forth in the Subscription Agreement between ULEHI
and V-Clip of even date herewith and shall be subject to modification as set
forth therein.
7
All
Merger Securities shall be fully vested upon the Closing.
(iii) All
V-Clip Stockholders
Following
the Closing, all Viral Genetics securities held by V-Clip Stockholders,
including those set forth in this Exhibit A, shall be treated identically to
all
other holders of similar Viral Genetics securities.
8
EXHIBIT
B
Fully
Diluted Capitalization of Viral Genetics
|
Class
of Securities
|
Number
of
Securities
Issued
and
Outstanding
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Days
to
Expiration
|
|
Common
Stock
|
155,532,013
|
N/A
|
N/A
|
|
Options
to Acquire Common Stock
|
25,135,800*
|
$0.315
|
[1294]
|
|
Warrants
to Acquire Common Stock
|
39,502,819*
|
$0.390
|
[838]
|
|
Convertible
Debt
|
29,767,160*
|
N/A
|
N/A
|
|
*
|
Shares
of Common Stock issuable upon conversion, exercise or exchange of
such
securities.
|
9
