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EXHIBIT 10.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 5th
day of December, 2000 by and between Interleukin Genetics, Inc., a Delaware
corporation (the "Company"), and the Investors set forth on the signature page
affixed hereto (each an "Investor" and collectively the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("Regulation D"), as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended;
B. The Investors wish to purchase, and the Company wishes to
sell and issue to the Investors, upon the terms and conditions stated in this
Agreement, that number of shares of the common stock of the Company, $0.001 par
value per share (the "Common Stock") and that number of warrants to purchase
Common Stock in the form attached hereto as EXHIBIT A (the "Warrants"), as are
set forth on the signature page attached hereto and executed by each such
Investor; and
C. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as EXHIBIT B (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended and the rules
and regulations promulgated thereunder, and applicable state securities laws;
In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere
in this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
1.1 "Affiliate" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person.
1.2 "Agreements" means this Agreement, the Registration Rights
Agreement, and the Warrants.
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1.3 "Closing" means the consummation of the transactions
contemplated by this Agreement, and "Closing Date" means the date of such
Closing.
1.4 "Control" means the possession , direct or indirect, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
1.5 "Exempt Issuances" means (i) sales of shares of Common
Stock by the Company upon conversion or exercise of any convertible securities,
options or warrants outstanding prior to the date hereof; (ii) securities issued
to employees, officers or directors of the Company pursuant to any stock option,
stock purchase or stock bonus plan, agreement or arrangement as existing on date
hereof or subsequently adopted upon approval of the shareholders of the Company;
(iii) securities issued to universities provided such securities are issued for
other than primarily equity financing purposes and is limited to an aggregate
value of no more than $5,000,000; (iv) up to $500,000 in the aggregate of the
Company's securities issued to consultants of the Company; (v) securities issued
to vendors, customers, suppliers, consultants, financial advisors or to other
persons in similar commercial situations with the Company if such issuance is
approved by the Board of Directors, provided such securities are issued for
other than primarily equity financing purposes and is limited to an aggregate
value of $500,000; and (vi) shares of Common Stock issued in one Closing
effected pursuant to the terms and conditions of this Agreement with additional
Investors (with no changes to the Agreement or any of the other Agreements
except for the date and name(s) of the Investors) so long as such Closing occurs
within two weeks of the original Closing hereunder with The Tail Wind Fund Ltd.
1.6 "Market Price" means the average of the 4:00 p.m. closing
bid prices of the Common Stock over the twenty (20) consecutive trading days
preceding a specified date.
1.7 "Material Adverse Effect" means a material adverse effect
on the condition (financial or otherwise), business, assets, or results of
operations of the Company as a whole.
1.8 "Person" means an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.9 "SEC Filings" has the meaning set forth in Section 4.6.
1.10 "Securities" means the Shares, the Warrants and the
Warrant Shares (defined below).
1.11 "Shares" means the shares of Common Stock being purchased
by the Investors hereunder.
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1.12 "Warrant Shares" means the shares of Common Stock
issuable upon exercise of or otherwise pursuant to the Warrants.
1.13 "1933 Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.14 "1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Shares and Warrants. Subject to the terms
and conditions of this Agreement, each of the Investors hereby severally, and
not jointly, agrees to purchase, and the Company hereby agrees to sell and issue
to the Investors, the number of Shares and Warrants to purchase the number of
shares of Common Stock set forth on such Investor's signature page attached
hereto. The number of Shares to be purchased by each Investor shall be
determined by dividing such Investor's aggregate purchase price (as such
aggregate purchase price is set forth on such Investor's signature page attached
hereto) by the least of the Market Price on the date of this Agreement, the
Common Stock's per share closing bid price of the Common Stock on the trading
day immediately preceding the date of this Agreement or $3.80 (the "Purchase
Price"). The number of shares of Common Stock purchasable by the Investors upon
exercise of the Warrants shall be as set forth on such Investor's signature page
attached hereto and the exercise price of the Warrants shall be 125% of the
Market Price measured as of the date of this Agreement.
3. Closing. The Company shall promptly deliver to Investors' counsel,
in trust, a certificate or certificates, registered in such name or names as the
Investors may designate, representing all of the Shares and all of the Warrants,
with instructions that such certificates are to be held for release to the
Investors only upon payment of the Purchase Price to the Company. Upon receipt
by counsel to the Investors of the certificates, each Investor shall promptly
cause a wire transfer in same day funds to be sent to the account of the Company
as instructed in writing by the Company, in an amount representing such
Investor's Purchase Price. On the date the Company receives such funds, the
certificates evidencing the Shares and the Warrants shall be released to the
Investors (and such date shall be deemed the "Closing Date").
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that:
4.1 Organization, Good Standing and Qualification. Each of the
Company and its subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and own its properties. Each of the Company and
its subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or licensing
necessary unless the failure to so qualify would not have a Material Adverse
Effect. The Company's subsidiaries are reflected on Schedule 4.1 hereto.
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4.2 Authorization. The Company has full power and authority
and has taken all requisite action on the part of the Company, its officers,
directors and stockholders necessary for (i) the authorization, execution and
delivery of the Agreements, (ii) authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Securities. The
Agreements constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors'
rights generally.
4.3 Capitalization. Set forth on Schedule 4.3 hereto is (a)
the authorized capital stock of the Company on the date hereof; (b) the number
of shares of capital stock issued and outstanding; (c) the number of shares of
capital stock issuable pursuant to the Company's stock plans; and (d) the number
of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock. All of the
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. Except as set forth on Schedule 4.3, no Person is entitled to
preemptive or similar statutory or contractual rights with respect to any
securities of the Company. Except as set forth on Schedule 4.3, there are no
outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
its subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor any
of its subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as set forth on Schedule 4.3, the Company has no
knowledge of any voting agreements, buy-sell agreements, option or right of
first purchase agreements or other agreements of any kind among any of the
securityholders of the Company relating to the securities of the Company held by
them. Except as set forth on Schedule 4.3, the Company has not granted any
Person the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the account
of any other Person.
4.4 Valid Issuance. The Company has reserved a sufficient
number of shares of Common Stock for the issuance of the Shares pursuant to this
Agreement and upon exercise of the Warrants. The Company will take such steps as
may be necessary to reserve sufficient shares for issuance pursuant to Section 7
below when such issuance is determinable. The Shares and Warrants are duly
authorized, and such Securities, along with the Warrant Shares when issued in
accordance herewith and with the terms of the Warrants, will be duly authorized,
validly issued, fully paid, non-assessable and free and clear of all
encumbrances and restrictions, except for restrictions on transfer imposed by
applicable securities laws.
4.5 Consents. The execution, delivery and performance by the
Company of the Agreements and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than
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filings that have been made pursuant to applicable state securities laws and
post-sale filings pursuant to applicable state and federal securities laws and
the requirements of the Nasdaq SmallCap Stock Market, which the Company
undertakes to file within the applicable time periods.
4.6 Delivery of SEC Filings; Business. The Company has
provided the Investors with copies of the Company's most recent Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, and all other reports
filed by the Company pursuant to the 1934 Act since the filing of the Annual
Report on Form 10-K and prior to the date hereof (collectively, the "SEC
Filings"); which the Company hereby represents and warrants are all filings
required of the Company pursuant to the 1934 Act for such period. The Company is
engaged only in the business described in the SEC Filings and the SEC Filings
contain a complete and accurate description of the business of the Company.
4.7 Use of Proceeds. The proceeds of the sale of the Common
Stock and the Warrants hereunder shall be used by the Company for working
capital and general corporate purposes.
4.8 No Material Adverse Change. Since the filing of the
Company's most recent Annual Report on Form 10-K or as otherwise identified and
described in subsequent reports filed by the Company pursuant to the 1934 Act or
as set forth on Schedule 4.8 hereto, there has not been:
(i) any change in the consolidated assets,
liabilities, financial condition or operating results of the Company from that
reflected in the financial statements included in the Company's most recent
Quarterly Report on Form 10-Q, except changes in the ordinary course of business
which have not had, in the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or
any authorization or payment of any distribution, on any of the capital stock of
the Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss,
whether or not covered by insurance to any assets or properties of the Company;
(iv) any waiver by the Company of a valuable right or
of a material debt owed to it not in the ordinary course of business;
(v) any satisfaction or discharge of any lien, claim
or encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company taken as a
whole (as such business is presently conducted and as it is proposed to be
conducted);
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(vi) any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or properties
is bound or subject;
(vii) any material labor difficulties or labor union
organizing activities with respect to employees of the Company;
(viii) any transaction entered into by the Company
other than in the ordinary course of business; or
(ix) any other event or condition of any character
that might have a Material Adverse Effect.
4.9 SEC Filings; Material Contracts.
(a) As of their respective dates, the SEC Filings
complied as to form in all material respects with the requirements of the 1934
Act and did not contain at the time they were filed any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) During the preceding one year, each registration
statement and any amendment thereto filed by the Company pursuant to the 1933
Act and the rules and regulations thereunder, as of the date such statement or
amendment became effective, complied as to form in all material respects with
the 1933 Act and did not contain any untrue statement of a material fact or omit
to state any 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; and each prospectus filed pursuant to Rule
424(b) under the 1933 Act, as of its issue date and as of the closing of any
sale of securities pursuant thereto did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(c) Except as set forth on Schedule 4.3 hereto, there
are no agreements or instruments currently in force and effect that constitute a
warrant, option, convertible security or other right, agreement or arrangement
of any character under which the Company is or may be obligated to issue any
material amounts of any equity security of any kind, or to transfer any material
amounts of any equity security of any kind.
4.10 Form S-3 Eligibility. The Company is currently eligible
to register the resale of its Common Stock on a registration statement on Form
S-3 under the 1933 Act.
4.11 No Conflict, Breach, Violation or Default. The execution,
delivery and performance of the Agreements by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (i) the
Company's Certificate of Incorporation or the Company's
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Bylaws, both as in effect on the date hereof (copies of which have been provided
to the Investors before the date hereof), or (ii) except where it would not have
a Material Adverse Effect, (a) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any of its properties, or (b) except as set
forth on Schedule 4.11, any agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the properties of the
Company is subject.
4.12 Tax Matters. The Company has timely prepared and filed
all tax returns required to have been filed by the Company with all appropriate
governmental agencies and timely paid all taxes owed by it. The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company nor, to the knowledge of the Company, any
basis for the assessment of any additional taxes, penalties or interest for any
fiscal period or audits by any federal, state or local taxing authority except
such as which are not material. All material taxes and other assessments and
levies that the Company is required to withhold or to collect for payment have
been duly withheld and collected and paid to the proper governmental entity or
third party when due. There are no tax liens or claims pending or threatened
against the Company or any of its respective assets or property. There are no
outstanding tax sharing agreements or other such arrangements between the
Company and any other corporation or entity.
4.13 Title to Properties. Except as disclosed in the SEC
Filings or Schedule 4.13, the Company has good and marketable title to all real
properties and all other properties and assets owned by it, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
holds any leased real or personal property under valid and enforceable leases
with no exceptions that would materially interfere with the use made or
currently planned to be made thereof by them.
4.14 Certificates, Authorities and Permits. The Company
possesses adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now operated
by it and has not received any notice of proceedings relating to the revocation
or modification of any such certificate, authority or permit that, if determined
adversely to the Company, would individually or in the aggregate have a Material
Adverse Effect.
4.15 No Labor Disputes. No material labor dispute with the
employees of the Company exists or, to the knowledge of the Company, is
imminent.
4.16 Intellectual Property. The Company has sufficient title
or adequate rights or licenses to the inventions, know-how, patents, copyrights,
trademarks, trade names, confidential information and other intellectual
property (collectively, "Intellectual Property Rights"), free and clear of any
material liens, security interests, charges, encumbrances, equities and other
adverse claims, necessary to conduct the business now operated by it, or
presently employed by it, and presently contemplated to be operated by it, and
except as set forth on
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Schedule 4.16 hereto, the Company has not received any notice of infringement of
or conflict with asserted rights of others with respect to any Intellectual
Property Rights. To the knowledge of the Company, the Company's patents and
other Intellectual Property Rights and the present activities of the Company do
not infringe any patent, copyright, trademark, trade name or other proprietary
rights of any third party.
4.17 Environmental Matters. The Company is not in violation of
any statute, rule, regulation, decision or order of any governmental agency or
body or any court, domestic or foreign, relating to the use, disposal or release
of hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "Environmental Laws"), does not own or operate any real property
contaminated with any substance that is subject to any Environmental Laws, is
not liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is not subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation that might lead to such a claim.
4.18 Litigation. Except as disclosed in the SEC Filings or on
Schedule 4.18 hereto, there are no pending actions, suits or proceedings against
or affecting the Company, its subsidiaries or any of its or their properties
that, if determined adversely to the Company or such subsidiary, would
individually or in the aggregate have a Material Adverse Effect or would
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement, or which are otherwise material in the context
of the sale of the Securities; and to the Company's knowledge, no such actions,
suits or proceedings are threatened or contemplated.
4.19 Financial Statements. The financial statements included
in each SEC Filing present fairly and accurately in all material respects the
consolidated financial position of the Company as of the dates shown and its
consolidated results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis. Except as set
forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof, to the best of the Company's knowledge, the
Company has no liabilities, contingent or otherwise, except those which
individually or in the aggregate would not have a Material Adverse Effect.
4.20 Insurance Coverage. The Company maintains in full force
and effect insurance coverage that is customary for comparably situated
companies for the business being conducted and properties owned or leased by the
Company, and the Company reasonably believes such insurance coverage to be
adequate against all liabilities, claims and risks against which it is customary
for comparably situated companies to insure.
4.21 Compliance with Nasdaq Continued Listing Requirements.
The Company is in compliance with all applicable Nasdaq SmallCap Market
continued listing requirements. There are no proceedings pending or to the
Company's knowledge threatened against the Company relating to the continued
listing of the Company's Common Stock on the Nasdaq Smallcap Market and, except
as set forth on Schedule 4.21, the Company has not received any
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notice of, nor to the knowledge of the Company is there any basis for, the
delisting of the Common Stock from the Nasdaq Smallcap Market.
4.22 Acknowledgement of Dilution. The number of shares of
Common Stock issuable pursuant to this Agreement may increase substantially. The
Company's executive officers and directors have studied and fully understand the
nature of the transactions being contemplated hereunder and recognize that they
have a potential dilutive effect.
4.23 Brokers and Finders. The Investors shall have no
liability or responsibility for the payment of any commission or finder's fee to
any third party in connection with or resulting from this agreement or the
transactions contemplated by this Agreement by reason of any agreement of or
action taken by the Company.
4.24 No Directed Selling Efforts or General Solicitation.
Neither the Company nor any Person acting on its behalf has conducted any
general solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of any of the Securities.
4.25 No Integrated Offering. Neither the Company nor any of
its Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would adversely affect reliance by
the Company on Section 4(2) for the exemption from registration for the
transactions contemplated hereby or would require registration of the Securities
under the 0000 Xxx.
4.26 Disclosures. No representation or warranty made under any
Section hereof contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein, in
light of the circumstances under which the statements were made, not misleading.
5. Representations and Warranties of the Investor. Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:
5.1 Organization and Existence. The Investor is a validly
existing corporation or limited liability company and has all requisite
corporate or limited liability company power and authority to invest in the
Securities pursuant to this Agreement.
5.2 Authorization. The execution, delivery and performance by
the Investor of the Agreements have been duly authorized and the Agreements will
each constitute the valid and legally binding obligation of the Investor,
enforceable against the Investor in accordance with their terms.
5.3 Purchase Entirely for Own Account. The Securities to be
received by the Investor hereunder will be acquired for the Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof, and the Investor has no present
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intention of selling, granting any participation in, or otherwise distributing
the same. The Investor is not a registered broker dealer or an entity engaged in
the business of being a broker dealer.
5.4 Investment Experience. The Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. The Investor has had an
opportunity to receive documents related to the Company and to ask questions of
and receive answers from the Company regarding the Company, its business and the
terms and conditions of the offering of the Securities. The Investor
acknowledges receipt of the SEC Filings and any other filings which it requested
be made by the Company with the SEC. Neither such inquiries nor any other due
diligence investigation conducted by the Investor shall modify, amend or affect
the Investor's right to rely on the Company's representations and warranties
contained in this Agreement.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, until registration for
resale pursuant to the Registration Rights Agreement or until resale under Rule
144(k) is available with respect to the Securities, certificates evidencing the
Securities may bear one or more restrictive legends, substantially as follows:
(a) "The shares represented by this certificate may
not be transferred without (i) the opinion of counsel satisfactory to the
corporation that such transfer may lawfully be made without registration under
the Securities Act of 1933 or qualification under applicable state securities
laws; or (ii) such registration or qualification."
(b) If required by the authorities of any state in
connection with the issuance of sale of the Securities, the legend required by
such state authority.
Upon registration for resale pursuant to the Registration
Rights Agreement or upon Rule 144(k) becoming available, the Company shall
promptly cause certificates evidencing the Shares previously issued hereunder
(including Shares issued pursuant to Section 7.1 below) to be replaced with
certificates which do not bear such restrictive legends, and all Warrant Shares
subsequently issued shall not bear such restrictive legends. The Investor hereby
covenants with the Company not to make any sale of the Securities under the
Registration Statement (as defined in the Registration Rights Agreement) without
effectively causing the prospectus delivery requirements under the 1933 Act to
be satisfied. When the Company is required to cause unlegended certificates to
replace previously issued legended certificates, if unlegended
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certificates are not delivered to an Investor within ten (10) business days of
submission by that Investor of legended stock certificate(s) to the Company's
transfer agent, the Company shall be liable to the Investor for a penalty equal
to 2% of the aggregate purchase price of the Shares evidenced by such
certificate(s) for each thirty day period (or portion thereof) beyond such ten
days that the unlegended certificates have not been so delivered.
5.8 Accredited Investor. The Investor is an accredited
investor as defined in Rule 501(a) of Regulation D, as amended, under the 0000
Xxx.
5.9 No General Solicitation. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
5.10 Brokers and Finders. The Investor represents and warrants
to the Company that it has made no commitment for payment of any commissions or
finders' fees to any third party in connection with the transactions
contemplated by this Agreement.
6. Registration Rights Agreement. The parties acknowledge and agree
that part of the inducement for the Investor to enter into this Agreement is the
Company's execution and delivery of the Registration Rights Agreement. The
parties acknowledge and agree that simultaneously with the execution hereof, the
Registration Rights Agreement is being duly executed and delivered by the
parties thereto.
7. Covenants and Agreements of the Company.
7.1 Purchase Price Adjustments.
(a) Required Adjustments. Subject to the exclusions
contained in Section 7.1(f) below, if during the MFN Period (defined below) the
Company issues or sells any shares of its Common Stock at a Per Share Selling
Price (as defined below) lower than the Purchase Price set forth in Section 2
hereof, the Purchase Price of the Shares sold to the Investors hereunder shall
be adjusted downward to equal such lower Per Share Selling Price and Investors
shall be entitled to receive the additional shares as provided by Section
7.1(c); provided, however, that in the event an Investor then owns less than 65%
of the Shares acquired by it hereunder, such Investor shall be entitled to
additional shares only with respect to the number of Shares then owned by such
Investor as provided in Section 7.1(c). The Company shall give to the Investors
written notice of any such sale within 24 hours of the closing of any such
issuance or sale. For so long as an Investor owns 65% or more of the Shares
originally acquired by such Investor hereunder, such Investor shall be entitled
to the full benefit of the Purchase Price adjustment required by this Section
7.1. The term "Shares" as used in this Agreement shall include shares issued to
the Investors pursuant to this Section 7.1.
(b) Definitions.
(i) For the purposes of this Section 7.1,
the term "Per Share Selling Price" as used in this Section 7.1 shall include the
amount actually paid by third
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parties for each share of Common Stock. In the event a fee is paid by the
Company in connection with such transaction, any such excess amount shall be
deducted from the selling price pro rata to all shares sold in the transaction
to arrive at the Per Share Selling Price. A sale of shares of Common Stock shall
include the sale or issuance of rights, options, warrants or convertible
securities under which the Company is or may become obligated to issue shares of
Common Stock, and in such circumstances the Per Share Selling Price of the
Common Stock covered thereby shall also include the exercise or conversion price
thereof (in addition to the consideration received by the Company upon such sale
or issuance less the excess fee amount as provided above). In case of any such
security issued within the MFN Period in a "Variable Rate Transaction" or an
"MFN Transaction" (each as defined below), the Per Share Selling Price shall be
deemed to be the lowest conversion or exercise price at which such securities
are converted or exercised or might have been converted or exercised in the case
of a Variable Rate Transaction, or the lowest adjustment price in the case of an
MFN Transaction, over the life of such securities. If shares are issued for a
consideration other than cash, the Per Share Selling Price shall be the fair
value of such consideration as determined in good faith by independent certified
public accountants mutually acceptable to the Company and the Investors.
(ii) The term "Variable Rate Transaction"
shall mean a transaction in which the Company issues or sells (a) 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 (x) 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 Common Stock at any time
after the initial issuance of such debt or equity securities, or (y) with a
fixed 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 (but
excluding standard stock split anti-dilution provisions), or (b) any securities
of the Company pursuant to an "equity line" structure which provides for the
sale, from time to time, of securities of the Company which are registered for
resale pursuant to the 1933 Act.
(iii) The term "MFN Transaction" shall mean
a transaction in which the Company issues or sells any securities in a capital
raising transaction or series of related transactions (the "New Offering") which
grants to the investor (the "New Investor") the right to receive additional
securities based upon future capital raising transactions of the Company on
terms more favorable than those granted to the New Investor in the New Offering.
(iv) The term "MFN Period" shall mean the
period ending twenty four (24) months following the first effective date of the
"registration statement" to be filed pursuant to the Registration Rights
Agreement.
(c) Adjustment Mechanism. If an adjustment of the
Purchase Price is required pursuant to Section 7.1(a), to effect such adjustment
the Company shall deliver to the Investors within twenty (20) calendar days of
the closing of the transaction giving rise to the adjustment ("Delivery Date")
each Investor's pro-rata share of such number of additional shares of Common
Stock
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equal to (i) the aggregate Purchase Price paid by the Investor divided by the
Per Share Selling Price as required under Section 7.1(a), minus (ii) the total
number of shares of Common Stock previously delivered to that Investor
hereunder; provided however, that the Company shall effect such adjustment in
cash, in whole or in part, to the extent required by Section 7.1(d). In the
event the Company fails to deliver the additional shares (or cash, as the case
may be) by the Delivery Date, the Company shall be liable to the Investors for a
penalty equal to 2% of the aggregate Purchase Price adjustment per month (in
each instance to such Investor pro rata in accordance with its participation in
this offering), payable in Common Stock or cash, at each Investor's election. If
at the time of any adjustment pursuant to Section 7.1(a) an Investor owns less
than 65% of the Shares acquired by it hereunder, then the number of additional
shares otherwise determined as deliverable hereunder shall be adjusted to
reflect the percentage of Shares originally acquired hereunder and then owned by
the Investor.
(d) Limitation on Number of Shares.
(i) If by way of any adjustment required by
this Section 7.1, an Investor would receive a number of shares of Common Stock
such that the total number of such shares held by the Investor as of the date of
such adjustment would be greater than 9.90% of the total outstanding Common
Stock of the Company, then the Company shall not effect the adjustment required
by this Section to the extent necessary to avoid causing the aforesaid
limitation to be exceeded and shall agree to effect such adjustment at the
earliest possible time when such adjustment would not exceed the aforementioned
limitation.
(ii) In the event that the Company would be
obligated to issue an amount of shares of Common Stock which, when aggregated
with all shares of Common Stock issued to an Investor, would constitute a breach
of the Company's obligations under the rules or regulations of Nasdaq as they
apply to the Company, or any other principal securities exchange or market upon
which the Common Stock is or becomes traded (the "Cap Regulations"), the Company
shall not be obligated to issue any such shares of Common Stock. Instead, the
Company shall promptly pay to the Investor at an amount equal to 110% of the
cash value of the adjustment with respect to such shares which would have
exceeded the Cap Regulations. Only shares acquired pursuant to this Agreement
will be included in determining whether the limitations would be exceeded for
purposes of this Section 7.1(d)(ii).
(e) Capital Adjustments. In case of any stock split
or reverse stock split, stock dividend, reclassification of the common stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of Section 7.1 shall be applied
in a fair, equitable and reasonable manner so as to give effect, as nearly as
may be, to the purposes hereof.
(f) Exclusions. Section 7.1(a) shall not apply to
Exempt Issuances.
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7.2 Limitation on Transactions.
(a) Until the date of effectiveness of the
Registration Statement covering the Shares as contemplated by the Registration
Rights Agreement, without the prior written consent of the Investors (which
consent may be withheld in the Investors' discretion), the Company shall not
issue or sell or agree to issue or sell for cash any securities in a capital
raising transaction. In addition, until the date of effectiveness of the
Registration Statement covering the Shares as contemplated by the Registration
Rights Agreement and the subsequent issuance by the Company to the Investors of
de-legended certificates as required by Section 5.6 above, the Company will
cause all of its directors and executive officers to refrain from making sales
of shares of Common Stock into the public market.
(b) Until the expiration of the MFN Period, without
the prior written consent of the Investors (which consent may be withheld in the
Investors' discretion), the Company shall not (i) issue or sell or agree to
issue or sell for cash any securities in a MFN Transaction; or (ii) issue or
sell, or agree to issue or sell, for cash any securities in a Variable Rate
Transaction, provided, however, that the foregoing limitation shall not apply to
Variable Rate Transactions involving the issuance of such securities having a
face value of less than $2,000,000 in the aggregate.
(c) Subject to any consent or approval rights of the
Investor hereunder, in the event the Company contemplates a private offering of
its equity or debt securities within six months of the date hereof, the Company
agrees that, upon the request of the Investors, the Company shall first disclose
the terms and conditions and other relevant facts of such proposed transaction
to Nasdaq and obtain from Nasdaq its assurance that such transaction will not be
integrated with the offering which is the subject of this Agreement for purposes
of the Nasdaq rules requiring shareholder approval of the issuance of 20% or
more of an issuer's outstanding common stock. In the event the Company fails to
seek or obtain such assurances, then, at the election of an Investor, the
Company shall redeem the Common Stock purchased by such Investor at a price per
share equal to 120% of the original Purchase Price paid by the Investor for all
Common Stock then held by such Investor.
(d) The provisions of Section 7.2(a) and (b) shall
not apply in the case of the offer and sale of Common Stock pursuant to the
terms and conditions of this Agreement with additional Investors (with no
changes to the Agreement or any of the other Agreements except for the date and
name(s) of the Investors) so long as such Closing occurs within two weeks of the
original Closing hereunder with The Tail Wind Fund Ltd.
7.3 Right of the Investors to Participate in Future
Transactions. Until the expiration of the MFN Period, the Investors will have a
right to participate in future capital raising transactions (which would not
include an Exempt Issuance) on the terms and conditions set forth in this
Section 7.3. During such period, the Company shall give seven (7) business days
advance written notice to the Investor prior to any non-public offer or sale of
any of the Company's equity securities or any securities convertible into or
exchangeable or exercisable for such securities by providing to the Investors a
comprehensive term sheet containing all significant business terms of such a
proposed transaction. The Investors shall have the right (pro
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rata in accordance with the Investors' participation in this offering) to
purchase such securities which are the subject of such a proposed transaction
for the same consideration and on the same terms and conditions as contemplated
for such third-party sale. The Investor(s)' rights hereunder must be exercised
in writing by the Investor(s) within five (5) business days following receipt of
the notice from the Company. If, subsequent to the Company giving notice to an
Investor hereunder but prior to the Investor exercising its right to participate
(or the expiration of the five-day period without response from the Investor),
the terms and conditions of the proposed third-party sale are changed from that
disclosed in the comprehensive term sheet provided to such Investor, the Company
shall be required to provide a new notice to the Investor hereunder and the
Investors shall have the right, which must be exercised within five (5) business
days of such new notice, to exercise their rights to purchase the securities on
such changed terms and conditions as provided hereunder. In the event the
Investors do not exercise their rights hereunder, or affirmatively decline to
engage in the proposed transaction with the Company, then the Company may
proceed with such proposed transaction on the same terms and conditions as
noticed to the Investors (assuming the Investors have consented to the
transaction, if required, pursuant to Section 7.2 of this Agreement). The rights
and obligations of this Section 7.3 shall in no way diminish the other rights of
the Investor pursuant to this Section 7.
7.4 Cash Maintenance. During the MFN Period, if the amount of
cash and cash equivalents held by the Company, net of all debt, on the last day
of any fiscal quarter shall be less than $3 million in the aggregate (after
disclosed publicly by the Company in its 10-Q for such quarter or earlier
pursuant to public announcement or SEC filings), then at the Investors' request
the Company shall use its best efforts to (1) within twenty (20) days of such
request, sell or agree to sell a sufficient amount of equity securities of the
Company, either publicly or in a private placement of Common Stock not
constituting a Variable Rate Transaction or MFN Transaction (as such terms are
defined herein), in order to increase the balance of the Company's cash and cash
equivalents to above $3 million net of all debt (or up to the highest amount
under $3 million as the Company is then capable of so raising funds), and (2)
within sixty (60) days of such request, consummate any such sale and issuance of
securities referred to in the preceding clause (1). The Company acknowledges
that, in using its best efforts to sell securities as provided in this
paragraph, it will be selling securities on terms based on then prevailing
market conditions, which may not be advantageous to the Company at such time,
and the Company nevertheless agrees to use its best efforts to sell securities
pursuant hereto notwithstanding such adverse market conditions. (For
clarification purposes, in no event shall the Company disclose to the Investor
any information regarding the Company's cash balances to the extent such
information is material and not yet disclosed to the public.) The foregoing
shall in no way limit or restrict the Company's ability to expend its cash and
cash equivalents (even if such expenditure would reduce such cash and cash
equivalents to below $3,000,000), it being understood and agreed that such
$3,000,000 threshold is intended by the parties hereto to be only a triggering
event to the Company's obligations hereunder to raise additional funds.
7.5 Opinion of Counsel. On or prior to the Closing Date, the
Company will deliver to the Investors the opinion of legal counsel to the
Company, in form and substance reasonably acceptable to the Investors,
addressing those legal matters set forth in Schedule 7.5 hereto.
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7.6 Reservation of Common Stock Pursuant to Section 7.1 and
Exercise of Warrants. The Company hereby agrees at all times to reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the exercise of the Warrants, such number of shares
of Common Stock as shall from time to time equal the number of shares sufficient
to permit the exercise of the Warrants in accordance with the terms of the
Warrants. In addition, as soon as such number is determinable, the Company
agrees to reserve such shares as may be necessary to permit the issuances to the
Investors required by Section 7.1.
7.7 Reports. For so long as the Investors beneficially own any
of the Securities, the Company will furnish to the Investors the following
reports, each of which shall be provided to the Investors by air mail (within
one week of filing with the SEC, in the case of SEC filings):
(a) Quarterly Reports. The Company's quarterly report
on Form 10-Q or, in the absence of such report, consolidated balance sheets of
the Company as at the end of such period and the related consolidated statements
of operations, stockholders' equity and cash flows for such period and for the
portion of the Company's fiscal year ended on the last day of such quarter, all
in reasonable detail and certified by a principal financial officer of the
Company to have been prepared in accordance with generally accepted accounting
principles, subject to year-end and audit adjustments.
(b) Annual Reports. The Company's Form 10-K or, in
the absence of a Form 10-K, consolidated balance sheets of the Company as of the
end of such year and the related consolidated statements of earnings,
stockholders' equity and cash flows for such year, all in reasonable detail and
accompanied by the report on such consolidated financial statements of an
independent certified public accountant selected by the Company and reasonably
satisfactory to the Investor.
(c) Securities Filings. Copies of (i) all notices,
proxy statements, financial statements, reports and documents as the Company
shall send or make available generally to its stockholders or to financial
analysts, promptly after providing same to the stockholders and (ii) all
periodic and special reports, documents and registration statements (other than
on Form S-8) which the Company furnishes to or files, or any officer or director
of the Company (in such person's capacity as such) furnishes to or files with
the SEC.
(d) Other Information. Such other information
relating to the Company as from time to time may reasonably be requested by the
Investors provided the Company produces such information in its ordinary course
of business, and further provided that the Company, solely in its own
discretion, determines that such information is not confidential in nature and
disclosure to the Investor would not be harmful to the Company.
7.8 Press Releases. Any press release or other publicity
concerning this Agreement or the transactions contemplated by this Agreement
shall be submitted to the
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Investors for comment at least two (2) business days prior to issuance, unless
the release is required to be issued within a shorter period of time by law or
pursuant to the rules of a national securities exchange.
7.9 No Conflicting Agreements. The Company will not take any
action, enter into any agreement or make any commitment that would conflict or
interfere in any material respect with the obligations to the Investors under
the Agreements.
7.10 Insurance. So long as the Investors beneficially own any
Securities, the Company shall not materially reduce the insurance coverages set
forth in Schedule 4.20.
7.11 Compliance with Laws. So long as the Investors
beneficially own any Securities, the Company will use reasonable efforts to
comply with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities, except to the extent non-compliance (in one instance
or in the aggregate) would not have a Material Adverse Effect.
7.12 Listing of Underlying Shares and Related Matters. The
Company hereby agrees, promptly following the Closing of the transactions
contemplated by this Agreement, to take such action to cause the Shares and the
Warrant Shares to be listed on the Nasdaq SmallCap Market as promptly as
possible but no later than the effective date of the registration contemplated
by the Registration Rights Agreement. The Company further agrees that if the
Company applies to have its Common Stock or other securities traded on any other
principal stock exchange or market, it will include in such application the
Warrant Shares and will take such other action as is necessary to cause such
Common Stock to be so listed. For so long as the Investors beneficially own any
of the Securities, the Company will take all action necessary to continue the
listing and trading of its Common Stock on the Nasdaq SmallCap Market and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of such exchange, as applicable, to ensure
the continued eligibility for trading of the Shares and the Warrant Shares
thereon.
7.13 Corporate Existence. So long as the Investors
beneficially own any of the Shares or Warrants, the Company shall maintain its
corporate existence, except in the event of a merger, consolidation or sale of
all or substantially all of the Company's assets, as long as the surviving or
successor entity in such transaction (a) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith, regardless of whether or not the Company would have had a sufficient
number of shares of Common Stock authorized and available for issuance in order
to fulfill its obligations hereunder and effect the exercise in full of all
Warrants outstanding as of the date of such transaction; (b) has no legal,
contractual or other restrictions on its ability to perform the obligations of
the Company hereunder and under the agreements and instruments entered into in
connection herewith; and (c) is a publicly traded corporation whose common stock
and the shares of capital stock issuable upon exercise of the Warrants are (or
would be upon issuance thereof) listed for trading on the Nasdaq National
Market, the Nasdaq SmallCap Market, the New York Stock Exchange or the American
Stock Exchange; provided, however, that in the event of a merger or other
transaction as a result of which the Company is not a surviving public company,
the
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Investor shall have the option to require the Company to repurchase all of the
shares of Common Stock (and Common Stock equivalents) then held by the Investor
at a price equal to 120% of the the adjusted Purchase Price for the shares.
8. Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof and shall survive the execution
and delivery of this Agreement for a period of three years from the date of this
Agreement; provided, however, that the provisions contained in Section 7 hereof
shall survive in accordance therewith.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned
by a party hereto without the prior written consent of the other party hereto,
except that without the prior written consent of the Company, but after notice
duly given, an Investor may assign its rights and delegate its duties hereunder
in whole or in part to an Affiliate or to a third party acquiring some portion
or all of its Shares in a private transaction, and without the prior written
consent of the Investors, but after notice duly given and in compliance with
this Agreement, the Company may assign its rights and delegate its duties
hereunder to any successor-in-interest corporation in the event of a merger or
consolidation of the Company with or into another corporation, or any merger or
consolidation of another corporation with or into the Company that results
directly or indirectly in an aggregate change in the ownership or control of
more than 50% of the voting rights of the equity securities of the Company, or
the sale of all or substantially all of the Company's assets. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
9.2 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.3 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given only upon delivery to each party to be notified by (i)
personal delivery, (ii) telex or telecopier, upon receipt of confirmation of
complete transmittal, or (iii) an internationally recognized overnight air
courier, addressed to the party to be notified at the address as follows, or at
such other address as such party may designate by ten days' advance written
notice to the other party:
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If to the Company:
Interleukin Genetics, Inc.
000 Xxxxxx Xxxxxx 0xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxx
Fax: 781/000-0000
If to the Investors, to the addresses set forth on
the signature pages hereto.
9.5 Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay to Tail Wind,
Inc. a sum equal to 1% of the aggregate Purchase Price paid by the Investors as
and for reimbursement for legal and due diligence expenses incurred in
connection herewith and such amount shall be paid at Closing from gross proceeds
of the offering.
9.6 Amendments and Waivers. Any term of this Agreement may be
amended 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 Tail Wind
Fund Ltd. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Securities purchased under this
Agreement at the time outstanding, each future holder of all such securities,
and the Company.
9.7 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
9.8 Entire Agreement. This Agreement, including the Exhibits
and Schedules hereto, and the Registration Rights Agreement constitute the
entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof.
9.9 Further Assurances. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.
9.10 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
The Company: INTERLEUKIN GENETICS, INC.
By:_______________________
Name:
Title:
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The Investor: [_________________________]
By:_______________________
Name:
Title:
By:_______________________
Name:
Title:
Aggregate Purchase Price: __________
Number of Shares of Common Stock: ____________
Number of Warrants: _______________
(25% of number of Shares purchased)
Effective per share Purchase Price of Shares: $________
Exercise price of Warrants: $________
Address for Notice:
[_________________________]
[_________________________]
[_________________________]
[_________________________]
[_________________________]
[_________________________]
with a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attn: XxXxxx Xxxxxx
Telephone: 202/000-0000
Facsimile: 202/508-6200
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The Investor: The Tail Wind Fund Ltd.
By:_______________________
Name:
Title:
By:_______________________
Name:
Title:
Aggregate Purchase Price: __________
Number of Shares of Common Stock: ____________
Number of Warrants: _______________
(25% of number of Shares purchased)
Effective per share Purchase Price of Shares: $_______
Exercise price of Warrants: $________
Address for Notice:
The Tail Wind Fund Ltd.
MeesPierson (Bahamas) Ltd.
Attn: ____________________
Windemere House, 000 Xxxx Xxx Xxxxxx
P.O. Box SS 5539, Nassau, Bahamas
Tel: 242/000-0000 Fax: 242/000-0000
with a copy to:
Xxxxx Xxxxx, Esq.
Tail Wind Inc.
x/x XXXX
0xx Xxxxx, Xx. 0 Xxxxxx Xxxxxx
Xxxxxx, XX0X 0XX XX
Telephone: 00-000-000-0000
Facsimile: 00-000-000-0000
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and with a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attn: XxXxxx Xxxxxx
Telephone: 202/000-0000
Facsimile: 202/508-6200
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