Document:

ex4-1.htm

Exhibit 4.1

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES J CONVERTIBLE PREFERRED STOCK

OF

SPHERIX INCORPORATED

The undersigned, Chief Executive Officer of Spherix Incorporated, a Delaware corporation (the “Corporation”), DOES HEREBY CERTIFY that the following resolutions were duly adopted by the Board of Directors of the Corporation by unanimous written consent on May 28, 2014:

WHEREAS, the Board of Directors is authorized within the limitations and restrictions stated in the Amended and Restated Certificate of Incorporation of the Corporation, to provide by resolution or resolutions for the issuance of fifty million (50,000,000) shares of Preferred Stock, par value $0.0001 per share, of the Corporation, in such series and with such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions as the Corporation’s Board of Directors shall fix by resolution or resolutions providing for the issuance thereof duly adopted by the Board of Directors; and

 

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of Preferred Stock and the number of shares constituting such series.

 

NOW, THEREFORE, BE IT RESOLVED:

Section 1. Designation and Authorized Shares.  The Corporation shall be authorized to issue 20,000,000  shares of Series J Preferred Stock, par value $0.0001 per share (the “Series J Preferred Stock”).

Section 2. Stated Value.  Each share of Series J Preferred Stock shall have a stated value of $0.0001 per share (the “Stated Value”).

Section 3. Liquidation.

(a) Upon the liquidation, dissolution or winding up of the business of the Corporation, whether voluntary or involuntary, each holder of Series J Preferred Stock shall be entitled to receive, for each share thereof, out of assets of the Corporation legally available therefor, a preferential amount in cash equal to the greater of (i) the Stated Value or (ii) the amount the holder would receive as a holder of the Corporation’s common stock, par value $0.0001 per share (the “Common Stock”), if such holder had converted the Series J Preferred Stock immediately prior to such liquidation, dissolution or winding up (without regard to any limitations on conversion or beneficial ownership herein or elsewhere).  All preferential amounts to be paid to the holders of Series J Preferred Stock in connection with such liquidation, dissolution or winding up shall be paid before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Corporation to the holders of (i) any other class or series of capital stock whose terms expressly provide that the holders of Series J Preferred Stock should receive preferential payment with respect to such distribution (to the extent of such preference) and (ii) the Corporation’s Common Stock.  If upon any such distribution the assets of the Corporation shall be insufficient to pay the holders of the outstanding shares of Series J Preferred Stock (or the holders of any class or series of capital stock ranking on a parity with the  Series J Preferred Stock as to distributions in the event of a liquidation, dissolution or winding up of the Corporation) the full amounts to which they shall be entitled, such holders shall share ratably in any distribution of assets in accordance with the sums which would be payable on such distribution if all sums payable thereon were paid in full.

(b) Any distribution in connection with the liquidation, dissolution or winding up of the Corporation, or any bankruptcy or insolvency proceeding, shall be made in cash to the extent possible.  Whenever any such distribution shall be paid in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation.

  

  

  

 

            Section 4. Voting.  Except as otherwise expressly required by law, each holder of Series J Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Corporation and shall be entitled to the number of votes for each share of Series J Preferred Stock owned at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited, equal to the number of shares of Common Stock such shares of Series J Preferred Stock are convertible into at such time, taking into account the Beneficial Ownership Limitations set forth in Section 5 herein.  Except as otherwise required by law, the holders of shares of Series J Preferred Stock shall vote together with the holders of Common Stock on all matters and shall not vote as a separate class.

Section 5. Conversion.

(a) Conversion Right. Each holder of Series J Preferred Stock may, from time to time, convert any or all of such holder’s shares of Series J Preferred Stock into fully paid and non-assessable shares of Common Stock in an amount equal to one (1) share of the Corporation’s Common Stock for each one (1) share of Series J Preferred Stock surrendered, subject to the limitations set forth in this Section 5.

 

(b) Conversion Procedure. In order to exercise the conversion privilege under this Section 5, the holder of any shares of Series J Preferred Stock to be converted shall give written notice to the Corporation at its principal office that such holder elects to convert such shares of Series J Preferred Stock or a specified portion thereof into shares of Common Stock as set forth in such notice (the “Conversion Notice”, and such date of delivery of the Conversion Notice to the Corporation, the “Conversion Notice Delivery Date”).  The holder shall not be required to deliver the original certificate representing the Series J Preferred Stock (the “Series J Certificate”) in order to effect a conversion hereunder.  Execution and delivery of the Conversion Notice with respect to less than all of the shares of Common Stock issuable upon conversion of the Series J Preferred Stock shall have the same effect as cancellation of the original Series J Certificate and issuance of a new Series J Certificate evidencing the ownership of the remaining number of Series J Preferred Stock.  On or before the first (1st) Trading Day following the date on which the Company has received a Conversion Notice, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Conversion Notice to the holder and the Company’s transfer agent (the "Transfer Agent").  On or before the third (3rd) Trading Day following the date on which the Company has received such Conversion Notice (the “Share Delivery Date”), the Company shall, (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the holder, credit such aggregate number of shares of Common Stock to which the holder is entitled pursuant to such conversion to the holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Conversion Notice, a certificate, registered in the Company’s share register in the name of the holder or its designee, for the number of shares of Common Stock to which the holder is entitled pursuant to such conversion.  Upon delivery of the Conversion Notice, the holder shall be deemed for all corporate purposes to have become the holder of record of the shares of Common Stock with respect to which the shares of Series J Preferred Stock have been converted, irrespective of the date such shares of Common Stock are credited to the holder’s DTC account or the date of delivery of the certificates evidencing such shares of Common Stock, as the case may be.  If a Series J Certificate is submitted in connection with any conversion and the number of shares of Series J Preferred Stock represented by such certificate submitted for conversion is greater than the number of shares of Series J Preferred Stock being converted, then the Company shall as soon as practicable and in no event by no later than three (3) Trading Days after any conversion and at its own expense, issue a new Series J Certificate representing the number of shares of Series J Preferred Stock held by the holder immediately prior to submitting the Conversion Notice, less the number of shares of Series J Preferred Stock being converted..  The Company shall pay any and all transfer taxes which may be payable with respect to the issuance and delivery of shares of Common Stock upon conversion of the Series J Preferred Stock.  For purposes of this Certificate of Designation, (i) a “Trading Day” means (A) a day on which the Common Stock is traded on a Trading Market (as defined below), or (B) if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is traded on the over the counter market, as reported by the OTC Bulletin Board (the “Bulletin Board”), or (C) if the Common Stock is not quoted on the Bulletin Board, a day on which prices for the Common Stock are reported on the OTCQB published by OTC Market Group, LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed, quoted or reported as set forth in (A), (B) and (C) hereof, then Trading Day shall mean a business day and (ii) “Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the New York Stock Exchange or the NYSE MKT, LLC.

  

  

  

 

(c)           Maximum Conversion.

 

	
(i)  

	
Notwithstanding anything to the contrary set forth in this Certificate of Designation, at no time may all or a portion of shares of Series J Preferred Stock be converted if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, the number of shares of Common Stock which would result in such holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules thereunder) more than 9.99% of all of the Common Stock outstanding at such time (the “9.99% Beneficial Ownership Limitation”).

 

	
(ii)  

	
By written notice to the Corporation, a holder of Series J Preferred Stock may from time to time decrease the 9.99% Beneficial Ownership Limitation to any other percentage specified in such notice; provided however, that the Corporation acknowledges that, notwithstanding the foregoing, as of the date hereof, some holders of Series J Preferred Stock have elected to have the 9.99% Beneficial Ownership Limitation to initially be 4.99%.

	  	  
	
 (iii)  

	
For purposes of this Section 5, in determining the number of outstanding shares of Common Stock, a holder of Series J Preferred Stock may rely on the number of outstanding shares of Common Stock as reflected in (1) the Corporation’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q,  Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Corporation or (3) any other notice by the Corporation setting forth the number of shares of Common Stock outstanding.  For any reason at any time, upon the written or oral request of a holder of Series J Preferred Stock, the Corporation shall within one (1) business day confirm orally and in writing to such holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including shares of Series J Preferred Stock, held by such holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported, which in any event are convertible or exercisable, as the case may be, into shares of the Corporation’s Common Stock within 60 days’ of such calculation and which are not subject to a limitation on conversion or exercise analogous to the limitation contained herein.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 5 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.

 

(d) Buy-In.  If, by the Share Delivery Date, the Corporation fails for any reason to deliver the shares of Common Stock issuable upon conversion of the Series J Preferred Stock, as set forth in the Conversion Notice, and after such Share Delivery Date, the converting holder purchases, in an arm’s length open market transaction or otherwise, shares of Common Stock (the “Covering Shares”) in order to make delivery in satisfaction of a sale of Common Stock by the converting holder (the “Sold Shares”), which delivery such converting holder reasonably anticipated to make using the shares to be issued upon such conversion (a “Buy-In”), the converting holder shall have the right to require the Corporation to pay to the converting holder the Buy-In Adjustment Amount.  The Corporation shall pay the Buy-In Adjustment Amount to the converting holder in immediately available funds immediately upon demand by the converting holder. For purposes of this Certificate of Designation, the term “Buy-In Adjustment Amount” means the amount equal to the excess, if any, of (i) the converting holder’s total purchase price (including brokerage commissions, if any) for the Covering Shares associated with a Buy-In, over (ii) the net proceeds (after brokerage commissions, if any) received by the converting holder from the sale of the Sold Shares.  By way of illustration and not in limitation of the foregoing, if the converting holder purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover a Buy-In, with respect to shares of Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which the Corporation will be required to pay to the converting holder will be $1,000.  

  

  

  

 

Section 6. Other Provisions.

 

(a) Reservation of Common Stock.  The Corporation shall at all times reserve from its authorized Common Stock a sufficient number of shares of Common Stock to provide for conversion of all Series J Preferred Stock from time to time outstanding.

(b) Record Holders.  The Corporation and its transfer agent, if any, for the Series J Preferred Stock may deem and treat the record holder of any shares of Series J Preferred Stock as reflected on the books and records of the Corporation as the sole true and lawful owner thereof for all purposes, and neither the Corporation nor any such transfer agent shall be affected by any notice to the contrary.  Upon request, the Corporation will provide the total number of issued and outstanding shares of Series J Preferred Stock to any holder thereof.

Section 7. Restriction and Limitations.  Except as expressly provided herein or as required by law so long as any shares of Series J Preferred Stock remain outstanding, the Corporation shall not, without the vote or written consent of the holders of at least a majority of the then outstanding shares of the Series J Preferred Stock, take any action which would adversely and materially affect any of the preferences, limitations or relative rights of the Series J Preferred Stock.

Section 8. Certain Adjustments.

 

(a) Stock Dividends and Stock Splits.  If the Corporation, at any time while the Series J Preferred Stock is outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation pursuant to the Series J Preferred Stock), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the Corporation, each share of Series J Preferred Stock shall receive such consideration as if such number of shares of Series J Preferred had been, immediately prior to such foregoing dividend, distribution, subdivision, combination or reclassification, the holder of the number of shares of Common Stock into which it could convert at such time; provided, however, to the extent that a holder’s right to participate in any such dividend, distribution, subdivision, combination or reclassification would result in the holder exceeding the Maximum Percentage, if applicable, then the holder shall not be entitled to participate in such dividend, distribution, subdivision, combination or reclassification to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such dividend, distribution, subdivision, combination or reclassification to such extent) and the portion of such dividend, distribution, subdivision, combination or reclassification shall be held in abeyance for the benefit of the holder until such time, if ever, as its right thereto would not result in the holder exceeding the Maximum Percentage, at which time such holder shall be delivered such dividend, distribution, subdivision, combination or reclassification  to the extent as if there had been no such limitation).  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(b) Fundamental Transaction. If, at any time while the Series J Preferred Stock is outstanding, (A) the Corporation effects any merger or consolidation of the Corporation with or into another association, corporation, individual, partnership, limited liability company, trust or any other entity or organization (each, a “Person”), (B) the Corporation effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (C) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, (D) the Corporation consummates a transaction pursuant to which another Person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50% of the aggregate ordinary voting power represented by all of the Common Stock outstanding at such time, or (E) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Series J Preferred Stock,

  

  

  

each holder of Series J Preferred Stock shall have the right to receive, for each share of Common Stock that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of such shares of Common Stock (without regard to any limitations on conversion herein or elsewhere); provided, however, to the extent that a holder’s right to receive securities of the Successor Entity would result in the holder exceeding the Maximum Percentage, if applicable, then the holder shall not be entitled to receive such shares to such extent (or to beneficially own any shares of common stock (or their equivalent) of the Successor Entity as a result of such consideration to such extent) and the portion of such shares shall be held in abeyance for the benefit of the holder until such time, if ever, as its right thereto would not result in the holder exceeding the Maximum Percentage, at which time such holder shall be delivered such shares to the extent as if there had been no such limitation).  The provisions of this Section 8(b) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of the Series J Preferred Stock.

For purposes of this Certificate of Designation, “Successor Entity” means the Person, which may be the Corporation, formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been made, provided that if such Person is not a publicly traded entity whose common stock or equivalent equity security is quoted or listed for trading on the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the New York Stock Exchange, the NYSE MKT, LLC, the OTCBB or the OTCQB (each, an “Eligible Market”), Successor Entity shall mean such entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on the Eligible Market, or, if there is more than one such Person, the Person with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

Section 9. Equal Treatment of Holders.  No consideration (including any modification of this Certificate of Designation or related transaction document) shall be offered or paid to any person or entity to amend or consent to a waiver or modification of any provision of this Certificate of Designation or related transaction document unless the same consideration is also offered to all of holders of the outstanding shares of Series [J] Preferred Stock.  For clarification purposes, this provision constitutes a separate right granted to each holder by the Corporation and negotiated separately by each holder, and is intended for the Corporation to treat all holders of the Series J Preferred Stock as a class and shall not in any way be construed as such holders acting in concert or as a group with respect to the purchase, disposition or voting of the Series J Preferred Stock or otherwise

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate this 28th day of May, 2014.

 

By:   Anthony Hayes_______________________

Name:   Anthony Hayes

Title: Chief Executive Officerex10-1.htm

Exhibit 10.1

 

SUBSCRIPTION AGREEMENT

 

Spherix Incorporated

6430 Rockledge Drive, Suite 503

 

Bethesda, MD 20817

 

Gentlemen:

 

The undersigned (the “Investor”) hereby confirms its agreement with you as follows:

 

1. This Subscription Agreement (this “Agreement”) is made as of the date set forth below between Spherix Incorporated, a Delaware corporation (the “Company”) and the Investor.

 

2. The Company has authorized the sale and issuance to certain investors of up to an aggregate of 10,00,000 shares (the “Securities”) of its Series J Preferred Stock, par value $0.0001 per share, for a purchase price of $2.00 per Security (the “Purchase Price”).

 

3. The offering and sale of the Securities (the “Offering”) is being made pursuant to (1) an effective Registration Statement on Form S-3 (including the Prospectus contained therein (including any documents incorporated by reference therein, the “Base Prospectus”) and any documents incorporated by reference therein, the “Registration Statement”) filed by the Company with the Securities and Exchange Commission (the “Commission”), (2) if applicable, certain “free writing prospectuses” (as that term is defined in Rule 405 under the Securities Act of 1933, as amended), that have or will be filed with the Commission and delivered to the Investor on or prior to the date hereof and (3) a Final Prospectus Supplement (the “Final Prospectus Supplement,” and together the Base Prospectus, the “Final Prospectus”) containing the final terms of the Offering that has been delivered to the Investor and that will be filed with the Commission.

 

4. The Company and the Investor agree that the Investor will purchase from the Company and the Company will issue and sell to the Investor the Securities set forth below for the aggregate purchase price set forth below. The Securities shall be purchased pursuant to the Terms and Conditions for Purchase of Securities attached hereto as Annex I and incorporated herein by this reference as if fully set forth herein. The Investor acknowledges that the Offering is not being underwritten by the placement agents (the “Placement Agents”) named in the Final Prospectus and that there is no minimum offering amount.

 

5. The manner of settlement of the Securities purchased by the Investor shall be determined by such Investor as set forth below (check one). Notwithstanding the foregoing, in the event none of the below delivery options are available, all payments by the the Investor will be deposited by the Investor as soon as practicable with the Escrow Agent (as defined in Annex I) and the Company shall cause to be delivered, on the Closing Date, certificates representing the Securities registered in the Investor’s name and address as set forth below to such Investor.

  

  

  

 

 

[       ]      A. Delivery by electronic book-entry at The Depository Trust Company (“DTC”), registered in the Investor’s name and address as set forth below, and released by Equity Stock Transfer LLC, the Company’s transfer agent (the “Transfer Agent”), to the Investor at the Closing. NO LATER THAN ONE (1) BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY, THE INVESTOR SHALL:

 

	
(I)  

	
DIRECT THE BROKER-DEALER AT WHICH THE ACCOUNT OR ACCOUNTS TO BE CREDITED WITH THE SECURITIES ARE MAINTAINED TO SET UP A DEPOSIT/WITHDRAWAL AT CUSTODIAN (“DWAC”) INSTRUCTING THE TRANSFER AGENT TO CREDIT SUCH ACCOUNT OR ACCOUNTS WITH THE SECURITIES, AND

 

	
(II)  

	
REMIT BY WIRE TRANSFER THE AMOUNT OF IMMEDIATELY AVAILABLE FUNDS EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE SECURITIES BEING PURCHASED BY THE INVESTOR TO THE FOLLOWING ACCOUNT:

[_______] 

 

— OR —

 

[       ]      B. Delivery versus payment (“DVP”) through DTC (i.e., the Company shall deliver Securities registered in the Investor’s name and address as set forth below and released by the Transfer Agent to the Investor at the Closing directly to the account(s) at Laidlaw & Company (UK) Ltd. (“Laidlaw”) identified by the Investor and simultaneously therewith payment shall be made in immediately available funds from such account(s) to the Company through DTC). NO LATER THAN ONE (1) BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY, THE INVESTOR SHALL:

 

	
(I)  

	
NOTIFY LAIDLAW OF THE ACCOUNT OR ACCOUNTS AT LAIDLAW TO BE CREDITED WITH THE SECURITIES BEING PURCHASED BY SUCH INVESTOR, AND

 

	
(II)  

	
CONFIRM THAT THE ACCOUNT OR ACCOUNTS AT LAIDLAW TO BE CREDITED WITH THE SECURITIES BEING PURCHASED BY THE INVESTOR HAVE A MINIMUM BALANCE EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE SECURITIES BEING PURCHASED BY THE INVESTOR.

 

IT IS THE INVESTOR’S RESPONSIBILITY TO (A) MAKE THE NECESSARY WIRE  TRANSFER OR CONFIRM THE PROPER ACCOUNT BALANCE IN A TIMELY  MANNER AND (B) ARRANGE FOR SETTLEMENT BY WAY OF DWAC OR DVP IN  A TIMELY MANNER. IF THE INVESTOR DOES NOT DELIVER THE AGGREGATE

  

  

  

 

PURCHASE PRICE FOR THE SECURITIES IN IMMEDIATELY AVAILABLE FUNDS  OR DOES NOT MAKE PROPER ARRANGEMENTS FOR SETTLEMENT IN A  TIMELY MANNER, THE SECURITIES MAY NOT BE DELIVERED AT CLOSING TO  THE INVESTOR OR THE INVESTOR MAY BE EXCLUDED FROM THE CLOSING  ALTOGETHER, AT THE COMPANY’S DISCRETION.

 

6.           The Investor represents that, except as set forth below, (a) it has had no position,

 

office or other material relationship within the past three years with the Company or persons known to it to be affiliates of the Company, (b) it is not a FINRA member or an Associated Person (as such term is defined under the NASD Membership and Registration Rules Section 1011) as of the Closing, and (c) it, after giving effect to the transactions contemplated hereby and subject to any other voluntary limitations requested by the Investors, will not, either individually or with a group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), be the beneficial owner of 20% or more of the Company’s outstanding common stock. For purposes of this Section 6, beneficial ownership shall be determined pursuant to a Rule 13d-3 under the Exchange Act. Exceptions:

 

________________________________________________________________

(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)

 

7. The Investor represents that it has received (i) the final Base Prospectus, which is a part of the Company’s Registration Statement, (ii) the documents incorporated by reference therein (or otherwise made available to it by the filing by the Company of an electronic version thereof with the Commission) and (iii) any free writing prospectus (collectively, the “Disclosure Package”) prior to the execution by the Investor of this Agreement. The Investor understands that prior to delivery of this Agreement to the Company the Investor will receive the Final Prospectus.

 

8. No offer by the Investor to buy Securities will be accepted and no part of the Purchase Price will be delivered to the Company until the Investor has received the Final Prospectus and the Company has accepted such offer by countersigning a copy of this Agreement, and any such offer may be withdrawn or revoked by the Investor, without obligation or commitment of any kind, at any time prior to the Company (or a Placement Agents on behalf of the Company) sending (orally, in writing, or by electronic mail) notice of its acceptance of such offer. An indication of interest will involve no obligation or commitment of any kind until this Agreement is accepted and countersigned by or on behalf of the Company. The Investor understands and agrees that the Company, in its sole discretion, reserves the right to accept or reject this subscription for Securities, in whole or in part.

  

  

  

 

Number of Securities:_______________________________________

 

Purchase Price Per Securities: _________________________________

 

Aggregate Purchase Price: $ __________________________________

 

Election of 4.99% Beneficial Ownership Limitation (as defined in the Certificate of Designation of Preferences, Rights and Limitations of Series J Convertible Preferred Stock)__________

 

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose.

 

Dated as of: May 28, 2014

 

____________________

INVESTOR 

By:

Print Name: 

Title:

Address:

 

 

Agreed and Accepted 

this 28th day of May, 2014:

 

 

SPHERIX INCORPORATED

 

By: 

Title:

  

  

  

 

ANNEX I

 

TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES

 

1. Authorization and Sale of the Securities. Subject to the terms and conditions of this Agreement, the Company has authorized the sale of the Securities.

 

2. Agreement to Sell and Purchase the Securities; Placement Agents.

 

2.1           At the Closing (as defined in Section 3.1), the Company will sell to the Investor,

and the Investor will purchase from the Company, upon the terms and conditions set forth herein, the number of Securities set forth on the last page of the Agreement to which these Terms and Conditions for Purchase of Securities are attached as Annex I (the “Signature Page”) for the aggregate purchase price therefor set forth on the Signature Page.

 

2.2           The Company proposes to enter into substantially this same form of Subscription

Agreement with certain other investors (the “Other Investors”) and expects to complete sales of Securities to them. The Investor and the Other Investors are hereinafter sometimes collectively referred to as the “Investors,” and this Agreement and the Subscription Agreements executed by the Other Investors are hereinafter sometimes collectively referred to as the “Agreements.”

 

2.3           Investor acknowledges that the Company has agreed to pay Laidlaw & Company

(UK) Ltd. (the “Placement Agents”) a fee (the “Placement Fee”) in respect of the sale of Securities to the Investor.

 

2.4           The Company has entered into a Placement Agency Agreement, dated May 28,

2014 (the “Placement Agreement”), with the Placement Agents. Under Section 2 of the Placement Agreement, the Company has made representations and warranties to the Placement Agents and the Investors, which the Investors shall be entitled to rely upon as third party beneficiaries thereof.

 

3. Closings and Delivery of the Securities and Funds.

 

3.1           Closing. The completion of the purchase and sale of the Securities (the

“Closing”) shall occur at a place and time (the “Closing Date”) to be specified by the Company and the Representative (as defined in the Placement Agreement), and of which the Investors will be notified in advance by the Placement Agreement, in accordance with Rule 15c6-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). At the Closing, (a) the Company shall cause the Transfer Agent to deliver to the Investor the number of Securities set forth on the Signature Page registered in the name of the Investor or, if so indicated on the Investor Questionnaire attached hereto as Exhibit A, in the name of a nominee designated by the Investor and (b) the aggregate purchase price for the Securities being purchased by the Investor will be delivered by or on behalf of the Investor to the Company in immediately available funds.

 

3.2           Conditions to the Company’s Obligations. The Company’s obligation to issue

and sell the Securities to the Investor shall be subject to: (i) the receipt by the Company of the purchase price for the Securities being purchased hereunder in immediately available funds as set

  

  

  

 

forth on the Signature Page and (ii) the accuracy of the representations and warranties made by the Investor pursuant to this Agreement, including the Terms and Conditions for Purchase of Securities, and the fulfillment of those undertakings of the Investor to be fulfilled prior to the Closing Date pursuant to this Agreement, including the Terms and Conditions for Purchase of Securities.

 

3.3           Conditions to the Investor’s Obligations. The Investor’s obligation to purchase

 

the Securities will be subject to the accuracy of the representations and warranties made by the Company and the fulfillment of those undertakings of the Company to be fulfilled prior to the Closing Date pursuant to this Agreement and Section 7 of the Placement Agreement, and to the condition that the Placement Agents shall not have: (i) terminated the Placement Agreement pursuant to the terms thereof or (ii) determined that the conditions to the closing in the Placement Agreement have not been satisfied. The Investor’s obligations are expressly not conditioned on the purchase by any or all of the Other Investors of the Securities that they have agreed to purchase from the Company.

 

3.4           Delivery of Funds.

 

(a)           Delivery by Electronic Book-Entry at The Depository Trust Company. If

 

the Investor elects to settle the Securities purchased by such Investor through delivery by electronic book-entry at DTC, no later than one (1) business day after the execution of this  Agreement by the Investor and the Company, the Investor shall remit by wire transfer of immediately available funds the amount of funds equal to the aggregate purchase price for the Securities being purchased by the Investor to the following account designated by the Company and the Placement Agents pursuant to the terms of that certain Escrow Agreement (the “Escrow Agreement”) dated as of May 28, 2014, by and among the Company, the Placement Agents and Signature Bank (the “Escrow Agent”):

 

Signature Bank

261 Madison Avenue

New York, NY 10016

Account Name: Signature Bank as Escrow Agent for Spherix Incorporated

ABA Number: 026013576

SWIFT Code: SIGNUS33

A/C Number: 1502261750

FBO: Purchase Name, Social Security Number, Address

 

Such funds shall be held in escrow until the Closing and delivered by the Escrow Agent on behalf of each Investor to the Company upon the satisfaction, in the sole judgment of the Representative, of the conditions set forth in Section 3.3 hereof. The Representative shall have no rights in or to any of the escrowed funds, unless the Representative and the Escrow Agent are notified in writing by the Company in connection with the Closing that a portion of the escrowed funds shall be applied to the Placement Fee. The Company and the Investor agree to indemnify and hold the Escrow Agent harmless from and against any and all losses, costs, damages,

  

  

  

 

expenses and claims (including, without limitation, court costs and reasonable attorneys fees) (“Losses”) arising under this Section 3.4 or otherwise with respect to the funds held in escrow pursuant hereto or arising under the Escrow Agreement, unless it is finally determined that such Losses resulted directly from the bad faith, willful misconduct or gross negligence of the Escrow Agent. Anything in this Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be liable for any special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

Investor shall also furnish to the Representative a completed W-9 form (or, in the case of an Investor who is not a United States citizen or resident, a W-8 form).

 

(b)            Delivery Versus Payment through The Depository Trust Company. If the Investor elects to settle the Securities purchased by such Investor by delivery versus payment through DTC, no later than one (1) business day after the execution of this Agreement by  the Investor and the Company, the Investor shall confirm that the account or accounts at Laidlaw Capital LLC (“Laidlaw”) to be credited with the Securities being purchased by the Investor have a minimum balance in immediately available funds equal to the aggregate purchase price for the Securities being purchased by the Investor.

 

(c)            Physical Certificate Delivery. Notwithstanding anything herein to the contrary, in the event that the delivery options described in Sections 3.4(a) or 3.4(b) are unavailable, and the Company settles the Securities purchased by such Investor by delivery of physical certificates representing the Securities purchased, the Investor shall remit by wire transfer of immediately available funds the amount of funds equal to the aggregate purchase price for the Securities being purchased by the Investor to the Escrow Account in the same manner as set forth in Section 3.4(a) herein.

 

3.5           Delivery of Securities.

 

(a)            Delivery by Electronic Book-Entry at The Depository Trust Company. If the Investor elects to settle the Securities purchased by such Investor through delivery by electronic book-entry at DTC, no later than one (1) business day after the execution of this  Agreement by the Investor and the Company, the Investor shall direct the broker-dealer at which the account or accounts to be credited with the Securities being purchased by such Investor are maintained, which broker/dealer shall be a DTC participant, to set up a Deposit/Withdrawal at Custodian (“DWAC”) instructing Equity Stock Transfer LLC, the Company’s transfer agent, to credit such account or accounts with the Securities by means of an electronic book-entry delivery. Such DWAC shall indicate the settlement date for the deposit of the Securities, which date shall be provided to the Investor by the Representative. Simultaneously with the delivery to the Company by the Escrow Agent of the funds held in escrow pursuant to Section 3.4 above, the Company shall direct its transfer agent to credit the Investor’s account or accounts with the Securities pursuant to the information contained in the DWAC.

 

(b)            Delivery Versus Payment through The Depository Trust Company. If the Investor elects to settle the Securities purchased by such Investor by delivery versus payment

  

  

  

 

through DTC, no later than one (1) business day after the execution of this Agreement by  the Investor and the Company, the Investor shall notify Laidlaw of the account or accounts at Laidlaw to be credited with the Securities being purchased by such Investor. On the Closing Date, the Company shall deliver the Securities to the Investor directly to the account(s) at Laidlaw identified by Investor and simultaneously therewith payment shall be made in immediately available funds from such account(s) to the Company through DTC.

 

(c)           Physical Certificate Delivery. If the delivery options set forth in Sections

3.5(a) and 3.5(b) are unavailable and the Company settles the Securities purchased by such Investor by delivery of physical certificates representing the Securities purchased, the Investor shall remit by wire transfer of immediately available funds the amount of funds equal to the aggregate purchase price for the Securities being purchased by the Investor to the Escrow Account in the same manner as set forth in Section 3.4(a) herein and the Company shall cause to be delivered, on the Closing Date, certificates representing the Securities registered in the Investor’s name and address as set forth on the Signature Page to such Investor.

 

4.           Representations, Warranties and Covenants of the Investor.

 

The Investor represents and warrants to, and agrees with, the Company and the Placement Agents that:

 

4.1           The Investor (a) is knowledgeable, sophisticated and experienced in making, and

is qualified to make decisions with respect to, investments in shares presenting an investment decision like that involved in the purchase of the Securities, including investments in securities issued by the Company and investments in comparable companies, (b) has answered all questions on the Signature Page and the Investor Questionnaire and the answers thereto are true and correct as of the date hereof and will be true and correct as of the Closing Date and (c) in connection with its decision to purchase the number of Securities set forth on the Signature Page, has received and is relying only upon the Disclosure Package and the Final Prospectus and the documents incorporated by reference therein.

 

4.2           (a) No action has been or will be taken in any jurisdiction outside the United

States by the Company or the Placement Agents that would permit an offering of the Securities, or possession or distribution of offering materials in connection with the issue of the Securities in any jurisdiction outside the United States where action for that purpose is required, (b) if the Investor is outside the United States, it will comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers the Securities or has in its possession or distributes any offering material, in all cases at its own expense and (c) the Placement Agents have not been authorized to make and have not made any representation, disclosure or use of any information in connection with the issue, placement, purchase and sale of the Securities, except as set forth or incorporated by reference in the Base Prospectus or the Final Prospectus.

 

4.3           (a) The Investor has full right, power, authority and capacity to enter into this

 

Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (b) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the

  

  

  

 

Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as to the enforceability of any rights to indemnification or contribution that may be violative of the public policy underlying any law, rule or regulation (including any federal or state securities law, rule or regulation).

 

4.4           The Investor understands that nothing in this Agreement, the General Disclosure

Package, the Final Prospectus or any other materials presented to the Investor in connection with the purchase and sale of the Securities constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Securities.

 

4.5           Since the time on which the Placement Agents first contacted such Investor about

the Offering, such Investor has not engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales involving the Company’s securities). Each Investor covenants that it will not engage in any transactions in the securities of the Company (including Short Sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed. Each Investor agrees that it will not use any of the Securities acquired pursuant to this Agreement to cover any short position in the Company’s common stock if doing so would be in violation of applicable securities laws. For purposes hereof, “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not against the box, and all types of direct and indirect stock pledges, forward sales contracts, options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.

 

5. Survival of Representations, Warranties and Agreements; Third Party Beneficiary. Notwithstanding any investigation made by any party to this Agreement or by the Placement Agents, all covenants, agreements, representations and warranties made by the Company and the Investor herein will survive the execution of the Agreement, the delivery to the Investor of the Securities being purchased and the payment therefor. The Placement Agents shall be third party beneficiaries with respect to the representations, warranties and agreements of the Investor in Section 4 hereof.

 

6. Notices. All notices, requests, consents and other communications hereunder will be in writing, will be mailed (a) if within the domestic United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile or (b) if delivered from outside the United States, by International Federal Express or facsimile, and will be deemed given (i) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two business days after so mailed and (iv) if delivered by facsimile, upon electric confirmation of receipt and will be delivered and addressed as follows:

  

  

  

 

(a) if to the Company, to:

 

Spherix Incorporated

6430 Rockledge Drive, Suite 503

Bethesda, MD 20817

Attention: Anthony Hayes, Chief Executive Officer

Fax No:

 

with a copy (which shall not constitute notice) to:

 

(b) if to the Investor, at its address on the Signature Page hereto, or at such other address or addresses as may have been furnished to the Company in writing.

 

7. Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Investor.

 

8. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and will not be deemed to be part of this Agreement.

 

9. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby.

 

10. Governing Law. This Agreement will be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflicts of law that would require the application of the laws of any other jurisdiction.

 

11. Counterparts. This Agreement may be executed in two or more counterparts, each of which will constitute an original, but all of which, when taken together, will constitute but one instrument, and will become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.

 

12. Confirmation of Sale. The Investor acknowledges and agrees that such Investor’s receipt of the Company’s counterpart to this Agreement shall constitute written confirmation of the Company’s sale of Securities to such Investor and an acceptance of such Investor’s offer to purchase such Securities.

 

13. Press Release. The Company and the Investor agree that the Company shall issue one or more press releases (a) announcing the Offering and (b) disclosing any material, non-public information regarding the proposed restructuring of the Company that was described in the Final Prospectus prior to the opening of the financial markets in New York City on the business day immediately after the date hereof.

  

  

  

 

14. Termination. In the event that the Placement Agreement is terminated by the Placement Agents pursuant to the terms thereof, the Agreement shall terminate without any further action on the part of the parties hereto.

 

15. Assignability of Agreement. The Agreement and the Investor’s rights, obligations and interest under the Agreement, including the Terms and Conditions for Purchase of Securities, are not transferable or assignable by the Investor.

  

  

  

 

EXHIBIT A

 

SPHERIX INCORPORATED

 

INVESTOR QUESTIONNAIRE

 

Pursuant to Section 3 of Annex I to the Agreement, please provide us with the following information:

 

	
1.  

	
The exact name that your Securities are to be registered in. You may use a nominee name if appropriate:

 

	
2.  

	
The relationship between the Investor and the registered holder listed in response to item 1 above:

 

	
3.  

	
The mailing address of the registered holder listed in response to item 1 above:

 

	
4.  

	
The Social Security Number or Tax Identification Number of the registered holder listed in the response to item 1 above:

 

	
5.  

	
Name of DTC Participant (broker-dealer at which the account or accounts to be credited with the Securities are maintained):

 

	
6.  

	
DTC Participant Number:

 

	
7.  

	
Name of Account at DTC Participant being credited with the Securities:

 

	
8.  

	
Account Number at DTC Participant being credited with the Securities:

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