WARRANT AND COMMON STOCK PURCHASE AGREEMENT
This
WARRANT AND COMMON STOCK PURCHASE AGREEMENT is dated effective as of June 30,
2006 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 time 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"
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as such
terms are used in and construed under Rule 144 under the Securities
Act.
(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”
means
the closing of the purchase and sale of the Securities pursuant to Section
2.1.
(e) “Closing
Date”
means
the Trading Day when all of the Operative Agreements have been executed and
delivered by the applicable parties thereto, and all conditions precedent to
(i)
the Purchasers’ obligations to pay the Purchase Price and (ii) the Company’s
obligations to deliver the Securities have been satisfied or
waived.
(f) “Common
Stock”
means
the common stock of the Company, par value $0.00001 per share, and any other
class of securities into which such securities may hereafter be reclassified
or
changed into.
(g) “Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including, without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
(h) “Disclosure
Schedules”
means
the Disclosure Schedules of the Company delivered concurrently
herewith.
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(i) “Effective
Date”
means
the date that the initial Registration Statement filed by the Company pursuant
to the Registration Rights Agreement is first declared effective by the
SEC.
(j) “Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers
or
directors of the Company (or to consultants where with respect to consultants
only such annual issuances to consultants do not exceed 200,000 shares of Common
Stock or options to acquire 200,000 shares of Common Stock) pursuant to any
stock or option plan duly adopted by a majority of the non-employee members
of
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose, (b) securities
upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date
of
this Agreement to increase the number of such securities or to decrease the
exercise, exchange or conversion price of any such securities, and (c)
securities issued pursuant to acquisitions or strategic transactions approved
by
a majority of the disinterested directors, provided any such issuance shall
only
be to a Person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in which
the Company receives benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.
(k) “Force
Majeure”
shall
mean any act or omission that is beyond the direct control of the Company,
including, but not limited to, an act of god, an act of war, terrorism, natural
disaster, failure of communication or electrical services; provided,
however,
Force
Majeure shall not include any act or omission by the SEC, the Trading Market
or
the Company’s transfer agent.
(l) "Operative
Agreements"
shall
mean the Registration Rights Agreement and Warrants together with this
Agreement.
(m) “Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
(n) “Placement
Agent”
shall
mean Xxxxxxx
Securities, Inc.
(o) “Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
(p) “Purchaser
Consent”
shall
have the meaning set forth in Section 8.9.
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(q) “Qualified
Purchaser”
shall
have the meaning set forth in Section 6.3.
(r) "Registration
Rights Agreement"
shall
mean that certain Registration Rights Agreement, dated as of the date hereof,
among the Company and the Purchasers.
(s) “Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Purchasers of the Shares and
the
Warrant Shares.
(t) “Rule
144”
means
Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule
may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC having substantially the same effect as such
Rule.
(u) "SEC"
shall
mean the Securities and Exchange Commission.
(v) “SEC
Documents”
shall
have the meaning set forth in Section 3.6.
(w) “Securities”
means
the Shares, the Warrants and the Warrant Shares.
(x) "Securities
Act"
shall
mean the Securities Act of 1933, as amended, and all of the rules and
regulations promulgated thereunder.
(y) “Shares”
means
the shares of Common Stock issued or issuable to each Purchaser pursuant to
this
Agreement.
(z) “Short
Sales”
shall
include all “short sales” as defined in Rule 200 of Regulation SHO under the
Exchange Act (but
shall not be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
(aa) “Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
(bb) “Trading
Market”
means
the OTC Bulletin Board.
(cc) “VWAP”
means,
for any date, the price determined by the first of the following clauses that
applies: (a) the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market as reported
by
Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time); (b) if the Common Stock is not then
quoted for trading on the Trading Market and if prices for the Common Stock
are
then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (c) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company.
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(dd) “Warrants”
means
collectively the Common Stock purchase warrants, in the form of Exhibit
C
delivered to the Purchasers at the Closing in accordance with Section 2.2
hereof, which Warrants shall be exercisable immediately and have a term of
exercise equal to 5 years.
(ee) “Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
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 and
not jointly with the other Purchasers, 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 $2.50 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 As
additional consideration for the purchase of the Shares, subject to the terms
and conditions of this Agreement, each Purchaser agrees, severally and not
jointly with the other Purchasers, 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 $3.85 per share (subject to adjustment therein) for each four (4) shares
of
Common Stock acquired pursuant to Section 2.1 above. No fractional shares shall
be issued under the Warrants (any fractional shares shall be rounded up to
the
nearest whole number).
2.3 Closing.
The
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 June 30, 2006, or at
such
other time and place as the Company and each Qualified Purchaser mutually agree
upon, but in no event later than July 7, 2006. Within five (5) Trading Days
after the Closing, the Company shall deliver to each Purchaser 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.
3. Representations
and Warranties of the Company.
Except
as set forth under the corresponding section of the Disclosure Schedules which
Disclosure Schedules shall be deemed a part hereof and to qualify any
representation or warranty otherwise made herein to the extent of such
disclosure, the Company hereby represents and warrants to each of the Purchasers
as follows immediately prior to the Closing:
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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")
and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification. The Company does not have any direct or indirect subsidiaries.
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 Closing 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 22,389,951 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 3,823,876 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 4,685,913 shares of Common Stock,
which options and warrants are more fully described on Schedule
3.2
attached
hereto, 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. The issuance and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
any
of such securities. 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.
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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.
3.4 Valid
Issuance of the Shares.
The
Shares being purchased by the Purchasers hereunder and the Warrant Shares 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 as set forth on Schedule
3.4
attached
hereto. As of the date hereof, 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 Warrant Shares 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). The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants.
3.5 Financial
Statements.
As of
their respective dates, the financial statements of the Company included in
the
SEC Documents 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 February 28, 2006, (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
February 28, 2006, the Company’s cash and cash equivalents was equal to
approximately $10,816,904.
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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, except to the extent corrected
by a subsequently filed SEC Document.
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. The
Purchasers shall have no obligation with respect to any fees or with respect
to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
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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 Warrant Shares and the quoting of
the
Shares and Warrant Shares (when issued) on the OTCBB.
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. Neither
the Company, nor, to the Company’s knowledge, any current or former director or
officer of the Company, has 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. The SEC has not issued
any stop order or other order suspending the effectiveness of any registration
statement filed by the Company under the Securities Act.
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.
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(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.
(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.
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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, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action in the last 90 days designed to cause
or to result in the stabilization or manipulation of the price of any security
of the Company, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.
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. The Company expects such
accountants will express their opinion with respect to the financial statements
to be included in the Company’s Annual Report on Form 10-KSB for the year ending
May 31, 2006.
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.
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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.
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 SEC, 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.
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3.24 Disclosure.
Except
with respect to the material terms and conditions of the transactions
contemplated by the Operative Agreements and except with respect to those
Purchasers, set forth on Schedule
3.24,
that
have entered into Non-Disclosure or similar Confidentiality Agreements with
the
Company, the Company confirms that, neither it nor any other Person acting
on
its behalf has provided any of the Purchasers or their agents or counsel with
any information that it believes constitutes or might constitute material,
non-public information. The Company understands and confirms that the Purchasers
will rely on the foregoing representation in effecting transactions in
securities of the Company. 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.
The Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 4 hereof and as set
forth in the Investor Questionnaire.
3.25 Regulatory
Permits.
The
Company possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary
to
conduct their respective businesses as described in the SEC Documents, except
where the failure to possess such permits could not have or reasonably be
expected to result in a Material Adverse Effect (“Material
Permits”),
and
the Company has not received any notice of proceedings relating to the
revocation or modification of any Material Permit.
3.26 Insurance.
The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company is engaged, including, but not limited to,
directors and officers insurance coverage in the amount as set forth on
Schedule
3.26.
The
Company has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
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3.27 Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Documents, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company (other than
for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
knowledge of the Company, any entity in which any officer, director, or any
such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $50,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the
Company.
3.28 Registration
Rights.
Other
than each of the Purchasers and except as set forth on Schedule 3.28, no Person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
3.29 Application
of Takeover Protections.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) that is or could become applicable
to the Purchasers as a result of the Purchasers and the Company fulfilling
their
obligations or exercising their rights under the Operative Agreements, including
without limitation as a result of the Company’s issuance of the Securities and
the Purchasers’ ownership of the Securities.
3.30 Solvency.
Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of at least
$10 million of Securities hereunder, (i) the fair saleable value of the
Company’s assets exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business as now conducted
and as proposed to be conducted for the next 12 months including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company during such period, and projected capital requirements
and capital availability thereof during such period; and (iii) the current
cash
flow of the Company, together with the proceeds the Company would receive,
were
it to liquidate all of its assets, after taking into account all anticipated
uses of the cash, would be sufficient to pay all amounts on or in respect of
its
liabilities when such amounts are required to be paid. The Company does not
intend in the 12 months following the Closing Date to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). The Company has
no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date. The SEC
Documents set forth as of the dates thereof all outstanding secured and
unsecured Indebtedness of the Company, or for which the Company has commitments.
For the purposes of this Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $75,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of
any lease payments
in excess of $75,000 due under leases required to be capitalized in accordance
with GAAP.
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3.31 No
General Solicitation.
Neither
the Company nor any person acting on behalf of the Company has offered or sold
any of the Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to the
Purchasers and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.
3.32 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.
3.33 Acknowledgment
Regarding Purchasers’ Purchase of Securities.
The
Company acknowledges and agrees that each of the Purchasers is acting solely
in
the capacity of an arm’s length purchaser with respect to the Operative
Agreements and the transactions contemplated thereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of
the Company (or in any similar capacity) with respect to the Operative
Agreements and the transactions contemplated thereby and any advice given by
any
Purchaser or any of their respective representatives or agents in connection
with the Operative Agreements and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of the Securities. The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement and the other Operative Agreements has been based solely on
the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
3.34 Acknowledgement
Regarding Purchasers’ Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
it is understood and acknowledged by the Company (i) that none of the Purchasers
have been asked to agree by the Company, nor has any Purchaser agreed with
the
Company, to desist from purchasing or selling, long and/or short, securities
of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) that past or
future open market or other transactions by any Purchaser, including short
sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and (iv)
that each Purchaser shall not be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative” transaction.
The
Company further understands and acknowledges that (a) one or more Purchasers
may
engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value of the Warrant Shares deliverable with respect to Securities
are
being determined and (b) such hedging activities (if any) could reduce the
value
of the existing stockholders' equity interests in the Company at and after
the
time that the hedging activities are being conducted. The Company
acknowledges that such aforementioned hedging activities do not constitute
a
breach of any of the Operative Agreements.
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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.
4.2 Purchase
Entirely for Own Account.
Except
for permitted transfers pursuant to Section 8.11, such Purchaser is acquiring
the Securities being purchased by it hereunder for its own account, and not
for
resale or with a view to distribution thereof in violation of the Securities
Act
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities pursuant to a registration statement or otherwise in compliance
with applicable federal and state securities laws). 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.
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4.4 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.
4.5 Brokers.
Such
Purchaser has not retained, utilized or been represented by any broker or finder
in connection with the transactions contemplated by this Agreement.
4.6 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.
4.7 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.
4.8 Short
Sales and Confidentiality Prior To The Date Hereof.
Other than the transaction contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant
to
any understanding with such Purchaser, executed any disposition, including
Short
Sales, in the securities of the Company during the period commencing
from
the time
that such Purchaser first received a term sheet (written or oral) from the
Company or any other Person setting forth the material terms of the transactions
contemplated hereunder until the date hereof (“Discussion
Time”).
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser's assets and the portfolio managers have
no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser's assets, the representation set
forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons who are a party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction).
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4.9 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 as contemplated
under
this Agreement 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.
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.
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(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) A
legal
opinion from Xxxx Xxxxx LLP has been delivered to the Purchasers in the form
of
Exhibit
D
attached
hereto.
(h) The
aggregate Purchase Price shall not be less than $10,000,000 nor more than
$20,000,000.
(i) From
the
date hereof to the Closing Date, trading in the Common Stock shall not have
been
suspended by the SEC or the Trading Market (except for any suspension of trading
of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets
shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on
any
Trading Market, nor shall a banking moratorium have been declared either by
the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of each Purchaser, makes it impracticable or inadvisable to purchase
the Shares at the Closing.
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)).
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(b) The
Registration Rights Agreement 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.
(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.
6. Transfer,
Legends.
6.1 The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144 (so long as the
Company is furnished with satisfactory and customary evidence of compliance
with
Rule 144), to the Company or to an Affiliate of a Purchaser (so long as the
Company is furnished with satisfactory and customary evidence of compliance
with
Rule 144) or in connection with a pledge as permitted in Section 6.3, the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to the Company,
the form and substance of which opinion shall be reasonably satisfactory to
the
Company, to the effect that such transfer does not require registration of
such
transferred Securities under the Securities Act. As a condition of transfer,
any
such transferee shall agree in writing to be bound by the terms of this
Agreement and the Warrant (if applicable) and shall have the rights of a
Purchaser under this Agreement and the Registration Rights Agreement. Each
non-U.S. Purchaser shall 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.
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6.2 The
Purchasers agree to the imprinting, so long as is required by this Section
6.1,
of a legend on any of the Securities in the following form:
"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."
“THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE PURSUANT TO A PURCHASE AGREEMENT, A COPY OF WHICH
MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.”
6.3 The
Company acknowledges and agrees that any Purchaser, along with and aggregated
with its Affiliates, acquiring $2 million or more in Shares pursuant to this
Purchase Agreement (a “Qualified
Purchaser”)
may
from time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the
Securities to a financial institution that is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and who agrees to be bound
by
the provisions of this Agreement and the Registration Rights Agreement and,
if
required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such a pledge
or transfer would not be subject to approval of the Company and no legal opinion
of legal counsel of the pledgee, secured party or pledgor shall be required
in
connection therewith. Further, no notice shall be required of such pledge.
At
the appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to the
Registration Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of
Selling Stockholders thereunder.
6.4 Subject
to the conditions set forth in Section 6.6 below and the indemnification set
forth in the Registration Rights Agreement, certificates evidencing the Shares
and Warrant Shares shall not contain any legend (including the legend set forth
in Section 6.2), (i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Shares or Warrant Shares
pursuant to Rule 144, or (iii) if such Shares or Warrant Shares are eligible
for
sale under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the SEC). Subject to the conditions set
forth in Section 6.6 below and the indemnification set forth in the Registration
Rights Agreement, if all or any portion of a Warrant is exercised at a time
when
there is an effective registration statement to cover the resale of the Warrant
Shares, such Warrant Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such legend is
no
longer required under this Section 6, it will, no later than three Trading
Days
following the delivery by a Purchaser to the Company or the Company’s transfer
agent of a certificate representing Shares or Warrant Shares, as the case may
be, issued with a restrictive legend (such third Trading Day, the “Legend
Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends. The Company
may
not make any notation on its records or give instructions to any transfer agent
of the Company that enlarge the restrictions on transfer set forth in this
Section. Certificates for Securities subject to legend removal hereunder shall
be transmitted by the transfer agent of the Company to the Purchasers by
crediting the account of the Purchaser’s prime broker with the Depository Trust
Company System.
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6.5 In
addition to such Purchaser’s other available remedies, except for delays arising
from Force Majeure, the Company shall pay to a Purchaser, in cash, as partial
liquidated damages and not as a penalty, for each $2,000 of Shares or Warrant
Shares (based on the Closing Price of the Common Stock on the date such
Securities are submitted to the Company’s transfer agent) delivered for removal
of the restrictive legend and subject to Section 6.1, $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such damages
have
begun to accrue) for each Trading Day after the 2nd
Trading
Day following the Legend Removal Date until such certificate is delivered
without a legend. Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Company’s failure to deliver certificates representing
any Securities as required by the Operative Agreements, and such Purchaser
shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.
6.6 Each
Purchaser, severally and not jointly with the other Purchasers, agrees that
the
removal of the restrictive legend from certificates representing Securities
as
set forth in this Section is predicated upon the Purchaser not being an
Affiliate of the Company and the Company’s reliance that the Purchaser will sell
any Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an
exemption therefrom, and that if Securities are sold pursuant to a Registration
Statement, they will be sold in compliance with the plan of distribution set
forth therein. Each Purchaser, severally and not jointly with the other
Purchasers, acknowledges that the Company’s agreement hereunder to remove all
legend from Shares or Warrants Shares contemplated under this Section 6 is
not
an affirmative statement or representation that such Shares or Warrant Shares
are freely tradable.
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7. Additional
Covenants.
7.1 Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Purchasers.
7.2 Securities
Laws Disclosure; Publicity.
The
Company shall, by 8:30 a.m. Eastern time on the 4th
Trading
Day immediately following the date hereof, issue a Current Report on Form 8-K,
disclosing the material terms of the transactions contemplated hereby which
disclosure shall be subject to the approval of the Qualified Purchasers, and
shall attach the Operative Agreements thereto. The Company and each Qualified
Purchaser shall consult with each other in issuing any other press releases
with
respect to the transactions contemplated hereby, and neither the Company nor
any
Purchaser shall issue any such press release or otherwise make any such public
statement which references the other party without the prior consent of such
other party, which consent shall not unreasonably be withheld or delayed, except
if such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement
or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Qualified Purchaser, or include the name of any
Qualified Purchaser in any filing with the SEC or any regulatory agency or
Trading Market, without the prior written consent of such Qualified Purchaser,
except (i) as required by federal securities law in connection with (A) any
registration statement contemplated by the Registration Rights Agreement and
(B)
the filing of final Operative Agreements (including signature pages thereto)
with the SEC or (ii) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide each Qualified
Purchasers with prior notice of such disclosure permitted under this subclause
(ii).
7.3 Shareholder
Rights Plan.
No
claim will be made or enforced by the Company or, with the consent of the
Company, any other Person, that any Purchaser is an “Acquiring Person” under any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement,
solely by virtue of receiving Securities under the Operative
Agreements.
7.4 Non-Public
Information.
Except
with respect to the material terms and conditions of the transactions
contemplated by the Operative Agreements, the Company covenants and agrees
that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use
of
such information. The Company understands and confirms that each Purchaser
shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
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7.5 Use
of
Proceeds.
Except
as set forth on Schedule
7.6
attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and not for the satisfaction of any
portion of the Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior practices), to redeem any
Common Stock or Common Stock Equivalents or to settle any outstanding
litigation.
7.6 Indemnification
of Purchasers.
Subject
to the provisions of this Section 7.6, the Company will indemnify and hold
each
Purchaser and its directors, officers, shareholders, members, partners,
employees and agents (and any other Persons with a functionally equivalent
role
of a Person holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Purchaser (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, shareholders, agents, members, partners or employees (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result
of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Operative Agreements or (b) any action instituted against a Purchaser, or any
of
them or their respective Affiliates, by any stockholder of the Company who
is
not an Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Operative Agreements (unless such action is based upon
a
breach of such Purchaser’s representations, warranties or covenants under the
Operative Agreements or any agreements or understandings such Purchaser may
have
with any such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof
with
counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is,
in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate counsel. The
Company will not be liable to any Purchaser Party under this Agreement (i)
for
any settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by such Purchaser Party in this
Agreement or in the other Operative Agreements.
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7.7 Reservation
of Common Stock.
As of
the date hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, a sufficient
number of shares of Common Stock for the purpose of enabling the Company to
issue Shares pursuant to this Agreement and Warrant Shares pursuant to any
exercise of the Warrants.
7.8 Listing
of Common Stock.
The
Company hereby agrees to use best efforts to maintain the listing of the Common
Stock on a Trading Market. The Company further agrees, if the Company applies
to
have the Common Stock traded on any other market or exchange, it will include
in
such application all of the Shares and Warrant Shares, and will take such other
action as is necessary to cause all of the Shares and Warrant Shares to be
listed on such other market or exchange as promptly as possible. The Company
will take all action reasonably necessary to continue the listing and trading
of
its Common Stock on the Trading Market, market or exchange and will comply
in
all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Trading Market or if applicable, future market or
exchange.
7.9 Equal
Treatment of Purchasers.
No
consideration shall be offered or paid to any Person to amend or consent to
a
waiver or modification of any provision of any of the Operative Agreements
unless the same consideration is also offered to all of the parties to the
Operative Agreements. For clarification purposes, this provision constitutes
a
separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended to treat for the Company the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.
7.10 Short
Sales and Confidentiality After The Date Hereof.
Each
Purchaser severally and not jointly with the other Purchasers covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period commencing
at the Discussion Time and ending at the time that the transactions contemplated
by this Agreement are first publicly announced as described in Section 7.2.
Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 7.2, such Purchaser will
maintain the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any
other
Purchaser, that the SEC currently takes the position that coverage of short
sales of shares of the Common Stock “against the box” prior to the Effective
Date of the Registration Statement with the Securities is a violation of Section
5 of the Securities Act, as set forth in Item 65, Section A, of the Manual
of
Publicly Available Telephone Interpretations, dated July 1997, compiled by
the
Office of Chief Counsel, Division of Corporation Finance. Notwithstanding
the foregoing, no Purchaser makes any representation, warranty or covenant
hereby that it will not engage in Short Sales in the securities of the Company
after the time that the transactions contemplated by this Agreement are first
publicly announced as described in Section 7.2. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser's assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions
of
such Purchaser's assets, the covenant set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made
the
investment decision to purchase the Securities covered by this
Agreement
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7.11 Subsequent
Equity Sales.
(a) From
the
date hereof until 90 days after the Effective Date, neither the Company nor
any
Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
provided, however, the 90 day period set forth in this Section 7.11 shall be
extended for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, or (ii) following the
Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Purchasers for
the
resale of the Shares and Warrant Shares.
(b) From
the
date hereof until such time as no Qualified Purchaser holds any of the
Securities, the Company shall be prohibited from effecting or entering into
an
agreement to effect any Subsequent Financing involving a “Variable Rate
Transaction”. The term “Variable
Rate Transaction”
shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at
a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or
(B)
with a conversion, exercise or exchange price that is subject to being reset
at
some future date after the initial issuance of such debt or equity security
or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock or
(ii) enters into any agreement, including, but not limited to, an equity line
of
credit, whereby the Company may sell securities at a future determined price.
Any Purchaser shall be entitled to obtain injunctive relief against the Company
to preclude any such issuance, which remedy shall be in addition to any right
to
collect damages.
(c) Notwithstanding
the foregoing, this Section 7.11 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.
7.12 Form
D; Blue Sky Filings.
The
Company agrees to timely file a Form D with respect to the Securities as
required under Regulation D and to provide a copy thereof, promptly upon request
of any Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Purchasers at the Closing under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.
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25
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7.13 Capital
Changes.
Until
the one year anniversary of the Effective Date, the Company shall not undertake
a reverse or forward stock split or reclassification of the Common Stock without
the prior written consent of each Qualified Purchasers holding a majority in
interest of the Shares.
8. Miscellaneous
Provisions.
8.1 Termination.
This
Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations
hereunder only and without any effect whatsoever on the obligations between
the
Company and the other Purchasers, by written notice to the other parties, if
the
Closing has not been consummated on or before June 30, 2006; provided,
however,
that no
such termination will affect the right of any party to xxx for any breach by
the
other party (or parties).
8.2 Fees
and Expenses.
At the
Closing, the Company has agreed to reimburse Xxxxxx Brothers (“Xxxxxx”)
for
its legal fees and expenses. Accordingly, in lieu of the foregoing payments,
Xxxxxx shall have the right to reduce the aggregate amount that it is to pay
for
the Securities at the Closing by the amount of such fees and expenses in lieu
thereof. Except as expressly set forth in the Operative Agreements to the
contrary, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the delivery
of
any Securities to the Purchasers.
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.
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.
Except
as otherwise expressly provided under this Agreement, 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) Trading 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:
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(a) All
correspondence to the Company shall be addressed as follows:
Protalex,
Inc.
000
Xxxxx
Xxxxxx Xxxxx,
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx
Xxxx
Chief
Executive Officer
Facsimile: (000) 000-0000
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.
8.8 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of the Operative Agreements shall be governed by and construed and enforced
in
accordance with the internal laws of the State of New York, without regard
to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Operative Agreements
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect
to
the enforcement of any of the Operative Agreements), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for
such
proceeding. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. The parties hereby waive all rights to a trial by
jury.
If either party shall commence an action or proceeding to enforce any provisions
of the Operative Agreements, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
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8.9 Amendments.
Any
term of this Agreement may be amended or terminated and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Purchasers holding a majority in interest of
the
Securities then outstanding, so long as such consenting Purchasers include
each
Qualified Purchaser who then holds at least $250,000 of the Shares originally
purchased pursuant to this Agreement or Warrant Shares exercisable under such
Qualified Purchaser’s Warrant (or any combination thereof) (collectively, the
“Purchasers
Consent”).
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of a
Purchaser that does not directly or indirectly affect the rights of other
Purchasers may be given by such Purchaser to which such waiver or consent
relates without the consent of a majority in interest of the Securities then
outstanding and of the Purchasers Consent; provided,
however,
that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or
a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right.
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.
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8.11 Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser (other than by merger or sale of substantially all
of
its assets). Any Purchaser may assign any or all of its rights under this
Agreement (subject to any limitations set forth in the Registration Rights
Agreement) to any Person to whom such Purchaser assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of the Operative Agreements
that apply to the “Purchasers”.
8.12 Survival.
The
respective representations and warranties given by the parties hereto shall
survive the Closing Date and the consummation of the transactions contemplated
herein for a period of three years, without regard to any investigation made
by
any party.
8.13 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.
In
the event that any signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature
is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
8.14 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
Purchasers.
8.15 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 7.6.
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8.16 Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof (in the case of mutilation),
or
in lieu of and substitution therefor, a new certificate or instrument, but
only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction. The applicant for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement
Securities.
8.17 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Purchasers and the Company
will
be entitled to specific performance under the Operative Agreements. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the Operative
Agreements and hereby agrees to waive and not to assert in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
8.18 Liquidated
Damages.
The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Operative Agreements is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due
and
payable shall have been canceled.
8.19 Construction.
The
parties agree that each of them and/or their respective counsel has reviewed
and
had an opportunity to revise the Operative Agreements and, therefore, the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of the
Operative Agreements or any amendments hereto.
[Signature
Page to Follow]
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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:
_________________________
Name:
Title:
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.
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Exhibit
A
SCHEDULE
OF PURCHASERS
|
Purchaser
Name and Address
|
Number
of Shares to be Purchased
|
Aggregate
Purchase Price
|
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Exhibit
B
FORM
OF
WARRANT
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33
-
Exhibit
C
See
attachment to Subscription Agreement.
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Appendix
I
INVESTOR
QUESTIONNAIRE
See
attachment to Subscription Agreement.
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