ex10_5.htm


    Exhibit
      10.5


    Memorandum
      of Understanding

    


    This
      Memorandum of Understanding (this “Memorandum”) is entered into
      by and among Viral Genetics, Inc., a Delaware corporation
      (“Viral Genetics”), and V-Clip Pharmaceuticals,
      Inc., a California corporation
      (“V-Clip”), and solely with respect to Section 10 and
Exhibit A(ii)-(iii) below, University License Equity
      Holdings, Inc., a Colorado nonprofit corporation
      (“ULEHI”), this __ day of November 2007 (the “Effective
      Date”).

    


    This
      Memorandum is an outline of the general understanding of an agreement to merge
      V-Clip with and into Viral Genetics and shall be deemed a valid and binding
      agreement of the parties hereto.  ULEHI is a party hereto for purposes
      of Section 10 and Exhibit A(ii)-(iii) below only.

    


    1.           Viral
      Genetics shall perform work to be done by an independent laboratory to determine
      the viability of the Licensed Process(es) and/or Licensed Product(s) covered
      by
      the License Agreement between V-Clip and The Regents of the University of
      Colorado entered into contemporaneously with this Memorandum (the
“License Agreement”).  The value of such work shall
      be equivalent to at least Six Hundred Thousand Dollars ($600,000), which amount
      may include the in-kind value of work directed to the viability of the Licensed
      Processes (as defined in the License Agreement) or Licensed Products (as defined
      in the License Agreement) including, without limitation, work sponsored by
      the
      NIH or similar entities.    Dr. Karen Newell, inventor of
      the licensed technology, will collaborate with Viral Genetics on the
      experimental design and research site selection and will have the unrestricted
      right to use the data developed in the course of such work in her research
      at
      the University of Colorado.

    


    2.           Viral
      Genetics shall have the option to require V-Clip to merge with and into Viral
      Genetics in accordance with all applicable laws, rules and regulations (the
      “Merger”) by delivering to V-Clip written notice of Viral
      Genetics’ exercise of such option at any time on or before the date that is the
      one-year anniversary of the Effective Date.  In exchange for their
      stock of V-Clip in connection with the Merger, V-Clip’s stockholders
      (“V-Clip Stockholders”) shall receive securities issued by Viral
      Genetics as set forth in Exhibit A attached hereto (the
“Merger Securities”).  Viral Genetics and V-Clip
      acknowledge and agree that the terms of the Merger and the consideration in
      the
      form of the Merger Securities (the “Merger Consideration”) have
      been negotiated between V-Clip and Viral Genetics on an arms-length
      basis.

    


    3.           Promptly,
      but no later than fifteen (15) days subsequent to the date of the closing of
      the
      Merger (the “Closing”), Viral Genetics shall issue to each
      V-Clip Stockholder stock certificates, option agreements, warrant agreements
      and
      any other certificates or agreements representing the Merger Consideration
      as
      set forth in Exhibit A attached hereto.


    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    


    4.           Viral
      Genetics hereby represents and warrants to V-Clip that Viral Genetics has
      250,000,000 authorized shares of Common Stock, $.0001 par value (“Common
      Stock”), of which 155,532,013 shares are issued and outstanding, and
      20,000,000 authorized shares of Preferred Stock, par value $.0001, of which
      no
      shares are issued and outstanding. All issued and outstanding shares of Common
      Stock: (i) have been duly authorized and validly issued, and (ii) are fully
      paid
      and non-assessable.  There are no other authorized or outstanding
      equity securities of any class, kind, or character, and there are no outstanding
      subscriptions, options, warrants, debt or other agreements, or commitments
      obligating Viral Genetics to issue any additional shares of its capital stock
      of
      any class, or any options or rights with respect thereto, or any securities
      convertible into, or exchangeable or exercisable for any shares of capital
      stock
      of any class as of the date hereof, except as set forth in Exhibit B
attached hereto and pursuant to the terms of this
      Memorandum.  When issued in compliance with the provisions of this
      Memorandum, the shares of Common Stock issued as Merger Consideration will
      be
      validly issued, fully paid and non-assessable.  When issued in
      compliance with the provisions of this Memorandum and the option agreements
      and
      warrant agreements constituting Merger Consideration, the shares of Common
      Stock
      underlying such options and warrants will be validly issued, fully paid and
      non-assessable.  When issued in compliance with the provisions of this
      Memorandum and any relevant agreements constituting Merger Consideration, the
      shares of Common Stock underlying any such other Merger Securities will be
      validly issued, fully paid and non-assessable.

    


    5.           All
      corporate action on the part of Viral Genetics and V-Clip, and their respective
      officers, directors and stockholders, necessary for the authorization of this
      Memorandum has been taken, and with respect to the Merger has been taken or
      will
      have been taken at the time of the Closing.

    


    6.           The
      execution of this Memorandum and the consummation of the Merger will not result
      in any breach of any of the terms, conditions, or provisions of, or constitute
      a
      default under, or result in the creation of any lien, charge, or encumbrance
      on,
      any property or assets of Viral Genetics pursuant to any indenture, mortgage,
      deed of trust, agreement, corporate charter, bylaws, contract, or other
      instrument to which Viral Genetics is a party or by which Viral Genetics may
      be
      bound or any law, rule, regulation, qualification, license, order or judgment
      applicable to Viral Genetics or any of its property.

    


    7.           Viral
      Genetics has, and as of the Closing will have, filed all reports and made all
      other filings required to be filed by it under the Securities Act of 1933,
      as
      amended (the “Securities Act”), and the Securities Exchange Act
      of 1934, as amended (collectively with the Securities Act, the
“Securities Laws”), and subsequent to the Effective Date will
      use its best efforts to file all reports and other filings required to be filed
      by it under the Securities Laws.  Subsequent to the Merger, Viral
      Genetics will take any actions required from time to time to enable the V-Clip
      Stockholders to sell any securities constituting Merger Consideration pursuant
      to Rule 144 under the Securities Act. Viral Genetics shall take any and all
      actions and make any necessary filings with any governmental agency necessary
      to
      cause the issuance of the Merger Securities and any securities
      underlying the Merger Securities exempt from the registration requirements
      of
      the Securities Act and any applicable state securities
      laws.


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    


    8.           No
      V-Clip Stockholder shall be granted or otherwise receive any rights or benefits
      with respect to the Merger Consideration that is not otherwise granted on
      identical terms to all V-Clip Stockholders, including without limitation
      registration rights and rights with respect to the transfer of
      securities.

    


    9.           This
      Memorandum may be executed in counterparts, and photocopy, facsimile, electronic
      or other copies shall have the same effect for all purposes as an ink-signed
      original.

    


    10.           ULEHI
      shall be deemed a third party beneficiary of all of the provisions of this
      Memorandum.

    


    


    *     *     *     *     *

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the undersigned have executed this Memorandum of Understanding
      as of the Effective Date.

     

    
      	 	Viral
              Genetics,
              Inc.	 
	 	 	 	 
	 	 	 	 
	
               

            	
              By:
                

            	 	 
	 	Title:	 	 
	 	 	 	 
	 	V-Clip
              Pharmaceuticals,
              Inc.	 
	 	 	 	 
	 	 	 	 
	 	
              By:
                

            	 	 
	 	Title:	 	 
	 	 	 	 
	 	 	 	 
	 	For
              purposes of Section 10 and Exhibit A(ii)-(iii) only:	 
	 	University
              License Equity Holding, Inc.	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
              By:
                

            	 	 
	 	Title:	 	 


    

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    


    Merger
      Securities to be Issued to V-Clip Stockholders

    


    


    (i)
      V-Clip Stockholders other than ULEHI

    


    
      	
              V-Clip
                Stockholder

            	
              Number
                of Shares

              of

              Common
                Stock

            	
              Number
                of 
Options*

            	
              Number
                of 
Options**

            	
              Number
                of 
Warrants***

            
	
              Viral
                Genetics

            	
              16,306,327

            	
              16,306,327

            	
              4,423,900

            	
              6,952,495

            
	
              M.
                Karen Newell

            	
              8,153,163

            	
              8,153,163

            	
              2,211,950

            	
              3,476,247

            
	
              Robert
                Berliner

            	
              8,153,163

            	
              8,153,163

            	
              2,211,950

            	
              3,476,247

            
	
              Evan
                Newell

            	
              1,852,991

            	
              1,852,991

            	
              502,716

            	
              790,056

            
	
              Robert
                Melamede

            	
              370,598

            	
              370,598

            	
              100,543

            	
              158,011

            


    

    


    
      	
              *

            	
              Options
                to acquire shares of Common Stock at an exercise price of $0.03,
                expiring
                on the date that is the tenth (10th)
                anniversary
                of the date of the Closing and containing a cashless exercise
                provision.

            


    

    


    
      	
              **

            	
              Options
                to acquire shares of Common Stock at an exercise price of $0.315,
                expiring
                on May 30, 2011 and on the same option agreement form as the Viral
                Genetic
                options set forth on Exhibit B attached
                hereto.

            


    

    


    
      	
              ***

            	
              Warrants
                to acquire shares of Common Stock at an exercise price of $0.39,
                expiring
                on February 28, 2010 and on the same warrant agreement form as the
                Viral
                Genetic warrants set forth on Exhibit B attached
                hereto.

            


    

    


    All
      Merger Securities shall be fully vested upon the Closing.

    


    In
      the
      event of a forward stock split of the outstanding shares of Common Stock or
      a
      stock dividend of shares of Common Stock prior to the Closing, the number of
      Merger Securities described above (i) shall be proportionately increased, and
      (ii) the exercise price of the options and warrants included in the Merger
      Securities described above shall be proportionately decreased. As an example,
      and for the sake of greater clarity, if, prior to the Closing, Viral Genetics
      effects a ten-for-one (10:1) forward stock split of its outstanding of shares
      of
      Common Stock, then the number of Merger Securities shall be increased by
      multiplying such number by ten (10) and the exercise prices of the options
      and
      warrants included in the Merger Securities described above shall be decreased
      by
      dividing such exercise prices by ten (10).

    


    Similarly,
      in the event of a reverse stock split of the outstanding shares of Common Stock
      prior to the Closing, the number of Merger Securities described above (i) shall
      be proportionately decreased, and (ii) the exercise price of the options and
      warrants included in the Merger Securities described above shall be
      proportionately increased. As an example, and for the sake of greater clarity,
      if, prior to the Closing, Viral Genetics effects a
      one-for-ten (1:10) reverse stock split of its outstanding shares of Common
      Stock, then the number of Merger Securities shall be decreased by dividing
      such
      number by ten (10) and the exercise prices of the options and warrants included
      in the Merger Securities described above shall be increased by multiplying
      such
      exercise prices by ten (10).


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     (ii)
      ULEHI

    


    
      	
              Class
                of Merger 
Security

            	 	
               

              Exercise
                Price

            	 	
              Expiration
                
Date

            	 	
              Number
                Issuable

            
	
              Common
                Stock

            	 	
              N/A

            	 	
              N/A

            	 	
              Total
                number of shares of Common Stock issued and outstanding immediately
                prior
                to the Closing, which shall also be deemed to include all shares
                of Common
                Stock into which any issued and outstanding convertible debt of Viral
                Genetics as of the Closing is ultimately convertible, multiplied
                by 20%,
                and multiplied by the Investor Ownership Interest.

            
	 	 	 	 	 	 	 
	
              Options
                to Acquire Common Stock*

            	 	
              $0.03**

            	 	
              The
                date that is the tenth (10th)
                anniversary
                of the date of the Closing.

            	 	
              Total
                number of shares of Common Stock issued and outstanding immediately
                prior
                to the Closing, which shall also be deemed to include all shares
                of Common
                Stock into which any issued and outstanding convertible debt of Viral
                Genetics as of the Closing is ultimately convertible, multiplied
                by 20%,
                and multiplied by the Investor Ownership Interest.

            
	 	 	 	 	 	 	 
	
              Options
                to Acquire Common Stock***

            	 	
              Weighted
                average exercise price of all issued and outstanding Viral Genetics
                options immediately prior to the Closing.

            	 	
              Weighted
                average expiration date of all issued and outstanding Viral Genetics
                options immediately prior to the Closing.

            	 	
              Total
                number of Viral Genetics options issued and outstanding immediately
                prior
                to the Closing, multiplied by 40%, and multiplied by the Investor
                Ownership Interest.

            


    


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    


    


    
      	
              Warrants
                to Acquire Common Stock***

            	 	
              Weighted
                average exercise price of all issued and outstanding Viral Genetics
                warrants immediately prior to the Closing.

            	 	
              Weighted
                average expiration date of all issued and outstanding Viral Genetics
                warrants immediately prior to the Closing.

            	 	
              Total
                number of Viral Genetics warrants issued and outstanding immediately
                prior
                to the Closing, multiplied by 40%, and multiplied by the Investor
                Ownership Interest.

            
	 	 	 	 	 	 	 
	
              Any
                other securities convertible, exchangeable or exercisable for capital
                stock of Viral Genetics (other than convertible debt described above)
                issued and outstanding as of the Closing.****

            	 	
              Weighted
                average conversion rate, exercise price or exchange ratio of all
                similar
                issued and outstanding Viral Genetics securities

              immediately
                prior to the Closing.

            	 	
              Weighted
                average expiration date of all similar issued and outstanding Viral
                Genetics securities immediately prior to the Closing.

            	 	
              Total
                number of similar Viral Genetics securities issued and outstanding
                immediately prior to the Closing, multiplied by 40%, and multiplied
                by the
                Investor Ownership Interest.

            


    

    


    
      	
              *

            	
              The
                option agreements representing such options shall contain a cashless
                exercise provision.

            


    

    


    
      	
              **

            	
              The
                exercise price shall be subject to a proportionate adjustment for
                forward
                or reverse stock splits and stock
                dividends.

            


    

    


    
      	
              ***

            	
              The
                option agreements and warrant agreements representing such options
                and
                warrants, respectively, shall contain terms identical to the option
                agreements and warrant agreements, respectively, issued and outstanding
                immediately prior to the Closing.

            


    

    


    
      	
              ****

            	
              The
                form of such securities shall contain terms identical to the securities
                issued and outstanding immediately prior to the
                Closing.

            


    

    


    As
      used
      in this Exhibit A(ii), the term “Investor Ownership Interest” shall have the
      same  meaning as set forth in the Subscription Agreement between ULEHI
      and V-Clip of even date herewith and shall be subject to modification as set
      forth therein.


    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    All
      Merger Securities shall be fully vested upon the Closing.

    


    (iii)           All
      V-Clip Stockholders

    


    Following
      the Closing, all Viral Genetics securities held by V-Clip Stockholders,
      including those set forth in this Exhibit A, shall be treated identically to
      all
      other holders of similar Viral Genetics securities.

     

     

     

     

    
 

    



    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


    EXHIBIT
      B

    


    Fully
      Diluted Capitalization of Viral Genetics

    


    


    
      	
               

               

               

              Class
                of Securities

            	
              Number
                of 

              Securities
                Issued

              and

              Outstanding

            	
               

               

              Weighted
                Average 

              Exercise
                Price

            	
               

              Weighted
                Average 

              Days
                to

              Expiration

            
	
              Common
                Stock

            	
              155,532,013

            	
              N/A

            	
              N/A

            
	
              Options
                to Acquire Common Stock

            	
               

              25,135,800*

            	
               

              $0.315

            	
               

              [1294]

            
	
              Warrants
                to Acquire Common Stock

            	
               

              39,502,819*

            	
               

              $0.390

            	
               

              [838]

            
	
              Convertible
                Debt

            	
              29,767,160*

            	
              N/A

            	
              N/A

            


    

    


    
      	
              *

            	
              Shares
                of Common Stock issuable upon conversion, exercise or exchange of
                such
                securities.

            


    

    


     

     

     

     

     

     

     

     

    9