STOCK PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT is made as of the 30th
day
of
March,
2006 by
and
between NaturalNano, Inc. (the “Company”), a corporation organized under the
laws of the State of Nevada, with its principal offices at 000 Xxxxxx Xxxxxx
Xxxxx, Xxxxx 000, Xxxx Xxxxxxxxx, Xxx Xxxx 00000, and SBI Brightline XIII,
LLC a
California limited liability company with its principal offices at 000 Xxxxxxx
Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the “Purchaser”).
IN
CONSIDERATION of the mutual covenants contained in this Agreement, the Company
and the Purchaser hereby agree as follows:
SECTION
1. Authorization
of Sale of the Shares.
Subject
to the terms and conditions of this Agreement, the Company may issue and sell
to
the Purchaser and the Purchaser shall purchase from the Company up to
10,500,000
shares
of
the Company’s Common Stock (the “Shares”), par value $.001 per share (the
“Common Stock”). The Company has authorized and has reserved and covenants to
continue to reserve, free of preemptive rights and other similar contractual
rights of stockholders, a sufficient number of its authorized but unissued
shares of its Common Stock to cover the Shares which may be issued pursuant
to
the terms of this Agreement.
SECTION
2. Agreement
to Purchase the Shares.
2.1 Schedule
2.1 attached hereto defines five
(5)
tranches
of Shares that the Purchaser has agreed to purchase from the Company (each,
a
“Tranche”) and, with respect to each Tranche, sets forth the number of Shares
constituting such Tranche (the “Tranche Shares”) and the purchase price per
share for the Tranche Shares in such Tranche (the “Tranche Purchase Price”).
2.2 The
Company may, in its sole discretion, elect to sell the Tranche Shares of any
Tranche to the Purchaser at any time after the date on which the Registration
Statement (as defined in Section 7.1) of the Company covering the Shares is
declared effective (the “Effective Date”); provided, however, (i) the Company
must elect to sell all of the Tranche Shares included in a Tranche if it elects
to sell any of the Tranche Shares in such Tranche; and (ii) the Company must
elect to sell the Tranche Shares in the order that the Tranches are listed
on
Schedule 2.1. The Company may elect to sell Tranche Shares included in more
than
one Tranche at the same time. To effect its election to sell Shares, the Company
must give written notice thereof (an “Election Notice”) to the Purchaser. The
Election Notice shall specify the Tranche or Tranches with respect to which
the
election is being made and the date on which the closing of the sale and
purchase of the Tranche Shares shall occur; provided, such date shall be a
business day and shall not be earlier than five days after the date such
Election Notice is given to the Purchaser. An Election Notice shall be
irrevocable except as provided in Section 3.5.
SECTION
3. Closing
of the Purchase of the Shares.
3.1 Subject
to the satisfaction or waiver of the conditions precedent set forth in Sections
3.2 and 3.3, the closing of a purchase of Tranche Shares by the Purchaser
pursuant to this Agreement (each, a “Closing”) shall occur at 10:00 a.m. on the
date specified in the Election Notice delivered by the Company with respect
to
such Tranche Shares (the time and date of the Closing of a particular Tranche
is
referred to herein as the “Tranche Closing Date”). Each Closing shall occur at
the offices of SBI, Newport Beach, California.
3.2 The
obligation of the Purchaser to purchase Tranche Shares at a Closing shall be
subject to the satisfaction of the following conditions, or the waiver of such
conditions by the Purchaser, at or prior to the applicable Tranche Closing
Date:
(a) the
representations and warranties of the Company set forth in Section 4
of this
Agreement shall be true and correct with the same force and effect as though
expressly made on and as of such Tranche Closing Date, except for
representations or warranties made as of a particular date which representations
and warranties shall be true and correct as of such date;
(b) the
Company shall have complied with all the agreements hereunder and satisfied
all
the conditions on its part to be performed or satisfied hereunder at or prior
to
such Tranche Closing Date;
(c) the
Company shall have delivered to the Purchaser a certificate executed by the
Chairman of the Board or President and the chief financial or accounting officer
of the Company, dated the applicable Tranche Closing Date, to the effect that
the conditions in clauses (a) and (b) have been satisfied;
(d) the
Registration Statement shall have been declared effective and shall not have
been withdrawn, no stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for the suspension of the
effectiveness of the Registration Statement shall have been instituted or
threatened by the Securities and Exchange Commission (the
“Commission”);
(e) Counsel
to the Company shall have delivered its legal opinion to the Purchaser that
the
Tranche Shares being issued on such Tranche Closing Date will, upon issuance,
be
duly authorized, validly issued, fully paid and non-assessable.
3.3 The
obligation of the Company to sell Tranche Shares at a Closing shall be subject
to the satisfaction of the following conditions, or the waiver of such
conditions by the Company, at or prior to the applicable Tranche Closing
Date:
(a) the
representations and warranties of the Purchaser set forth in Section 5 of this
Agreement shall be true and correct with the same force and effect as though
expressly made on and as of such Tranche Closing Date, except for
representations or warranties made as of a particular date which representations
and warranties shall be true and correct as of such date;
(b) the
Purchaser shall have complied with all the agreements hereunder and satisfied
all the conditions on its part to be performed or satisfied hereunder at or
prior to such Tranche Closing Date;
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(c) the
Purchaser shall have delivered to the Company a certificate executed by a duly
authorized officer of the Purchaser, dated the applicable Tranche Closing Date,
to the effect that the conditions in clauses (a) and (b) have been satisfied;
and
(d) no
stop
order suspending the effectiveness of the Registration Statement shall be in
effect, and no proceedings for the suspension of the effectiveness of the
Registration Statement shall have been instituted or threatened by the
Commission.
3.4 At
each
Closing, (i) each of the Company and the Purchaser shall deliver to the other,
as applicable, any documents required to be delivered by Sections 3.2 or 3.3
which have not been delivered prior to such Closing, (ii) the Purchaser shall
pay to the Company, by wire transfer of immediately available funds to an
account designated in writing by the Company at or prior to the Closing, the
applicable Tranche Purchase Price for the Tranche Shares being purchased at
the
Closing, and (iii) the Company shall deliver to the Purchaser a stock
certificate representing the Tranche Shares being purchased or shall cause
the
Tranche Shares being purchased to be electronically transferred to the
Purchaser.
3.5 If
a
Closing does not occur on a proposed Tranche Closing Date because the conditions
specified in Sections 3.3 and 3.4 were not satisfied at the time of the
applicable proposed Tranche Closing Date, the Election Notice with respect
to
the Tranche or Tranches proposed to be sold on such proposed Tranche Closing
Date shall automatically be revoked; provided, however, such revocation shall
not impair the right of the Company to give another Election Notice with respect
to the Tranche or Tranches covered by the revoked Election Notice or to compel
the Purchaser to purchase any Tranche Shares included in such Tranche or
Tranches on a subsequent Tranche Closing Date on which the conditions specified
in Section 3.2 are satisfied.
SECTION
4. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchaser as follows:
4.1 Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and the Company is qualified
to do business as a foreign corporation in each jurisdiction in which
qualification is required, except where the failure to so qualify would not
individually or in the aggregate have a material adverse effect on the financial
condition, results of operations, properties or business of the Company taken
as
a whole.
4.2 Subsidiaries.
The
Company has
one
wholly owned subsidiary, NaturalNano Research, Inc.
4.3 Authorized
and Outstanding Capital Stock.
The
Company has authorized the issuance of 200,000,000 shares of Common Stock,
of
which approximately 121,074,740 shares are issued and outstanding as of the
date
of this Agreement. The Company has 10,000,000 shares of preferred stock
authorized, none of which are issued or outstanding. The Company’s stock option
plan provides for the granting of options to the Company’s employees, directors,
consultants and advisors, to purchase an aggregate of up to 14,000,000 shares
of
Common Stock, of which as of the date of this Agreement, options to purchase
an
aggregate of 9,810,000 shares of Common Stock were outstanding. In addition,
the
Company has granted warrants to purchase an aggregate of 4,500,000 shares of
Common Stock as of the date of this Agreement. Except for shares of Common
Stock, options and warrants described in this Section 4.3, as
of the
date of this Agreement there
are
no
authorized or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase any capital stock of the Company or any
equity or debt securities convertible into or exchangeable or exercisable for
capital stock of the Company.
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4.4 Issuance,
Sale and Delivery of the Shares.
The
Shares have been duly authorized and, when issued, delivered and paid for in
the
manner set forth in this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable. No preemptive rights or other rights to subscribe
for or purchase exist with respect to the issuance and sale of the Shares by
the
Company pursuant to this Agreement. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for
the
issuance and sale of the Shares to be sold by the Company as contemplated
herein
4.5 Due
Execution, Delivery and Performance of the Agreements.
The
Company has full legal right, corporate power and authority to enter into this
Agreement and to perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company. The execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions herein contemplated will not violate any provision of the
organizational documents of the Company and will not result in the creation
of
any lien, charge, security interest or encumbrance upon any assets or property
of the Company pursuant to the terms or provisions of, or will not conflict
with, result in the breach or violation of, or constitute, either by itself
or
upon notice or the passage of time or both, a default under any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other
instrument to which the Company is a party or by which the Company or any of
its
assets or properties may be bound or affected or any statute or any
authorization, judgment, decree, order, rule or regulation of any court or
any
regulatory body, administrative agency or other governmental body applicable
to
the Company or any of its properties. No consent, approval, authorization or
other order of any court, regulatory body, administrative agency or other
governmental body is required for the execution, delivery and performance of
this Agreement or the consummation by the Company of the transactions
contemplated hereby, except for compliance with the Blue Sky laws and federal
securities laws applicable to the offering of the Shares. Assuming the valid
execution hereof by the Purchaser, this Agreement will constitute the legal,
valid and binding obligation of the Company, enforceable in accordance with
its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’
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 the indemnification agreements
of the Company in Section 7.3 hereof may be legally unenforceable.
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4.6 No
Actions.
There
are no legal or governmental actions, suits or proceedings pending or, to the
Company’s knowledge, threatened to which the Company is or may be a party which
seeks to prevent or restrain the transactions contemplated by this Agreement
or
to recover damages as a result of the consummation of such
transactions.
4.7 Investment
Company.
The
Company is not an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment company, within the
meaning of the Investment Company Act of 1940, as amended.
4.8 Brokers.
There
is
no broker, finder or other party that is entitled to receive from the Company
any brokerage or finder’s fee or other fee or commission as a result of any
transactions contemplated by this Agreement.
4.9 Books
and Records.
The
books, records and accounts of the Company accurately and fairly reflect, in
reasonable detail, the transactions in, and dispositions of, the assets of,
and
the results of operations of, the Company, all to the extent required by
generally accepted accounting principles. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences.
4.10 Sole
Representations and Warranties.
Except
for the representations and warranties contained in this Section 4, the Company
makes no representation or warranty to the Purchaser, express or implied, in
connection with the transactions contemplated by this Agreement.
SECTION
5. Representations,
Warranties and Covenants of the Purchaser.
The
Purchaser represents and warrants to the Company as follows:
5.1 Organization
and Qualification.
The
Purchaser is a company duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation.
5.2 Due
Execution, Delivery and Performance of the Agreements.
The
Purchaser has full legal right, power and authority to enter into this Agreement
and to perform the transactions contemplated hereby. This Agreement has been
duly authorized, executed and delivered by the Purchaser. The execution,
delivery and performance of this Agreement by the Purchaser and the consummation
of the transactions herein contemplated will not violate any provision of the
organizational documents of the Purchaser and will not result in the creation
of
any lien, charge, security interest or encumbrance upon any assets or property
of the Purchaser pursuant to the terms or provisions of, or will not conflict
with, result in the breach or violation of, or constitute, either by itself
or
upon notice or the passage of time or both, a default under any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other
instrument to which the Purchaser is a party or by which the Purchaser or any
of
its assets or properties may be bound or affected or any statute or any
authorization, judgment, decree, order, rule or regulation of any court or
any
regulatory body, administrative agency or other governmental body applicable
to
the Purchaser or any of its properties. No consent, approval, authorization
or
other order of any court, regulatory body, administrative agency or other
governmental body is required for the execution, delivery and performance of
this Agreement or the consummation by the Purchaser of the transactions
contemplated hereby. Assuming the valid execution hereof by the Company, this
Agreement will constitute the legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ 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 the indemnification agreements of the Purchaser in Section 7.3
hereof may be legally unenforceable.
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5.3 No
Actions.
There
are no legal or governmental actions, suits or proceedings pending or, to the
Purchaser’s knowledge, threatened to which the Purchaser is or may be a party
which seeks to prevent or restrain the transactions contemplated by this
Agreement or to recover damages as a result of the consummation of such
transactions. The Purchaser has not been and is not currently the subject of
an
investigation or inquiry by the Securities and Exchange Commission, the NASD,
or
any state securities commission.
5.4 Nature
of Purchaser.
The
Purchaser is knowledgeable, sophisticated and experienced in making, and is
qualified to make, decisions with respect to investments in shares representing
an investment decision like that involved in the purchase of the Shares,
including investments in securities issued by the Company. The Purchaser is
an
“accredited investor” within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act and would be considered a large,
institutional accredited investor. The Purchaser is not a “dealer” within the
meaning of the Securities Act or a “broker” or “dealer” within the meaning of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The
Purchaser is able to bear the economic risk of loss of the Purchaser’s entire
investment in the Shares.
5.5 Access
to Information.
The
Purchaser has requested, received, reviewed and considered all information
it
deems relevant in making an informed decision to purchase the Shares. The
Purchaser understands that the Company is still in the development stage and
does not have operating revenues.
5.5 Investment
Intent.
The
Purchaser is acquiring the Shares in the ordinary course of its business and
for
its own account for investment only and with no present intention of
distributing any of such Shares or entering into any arrangement or
understanding with any other person regarding the distribution of such Shares
(it being understood that the foregoing does not limit the Purchaser’s right to
sell Shares pursuant to the Registration Statement).
5.6 Sole
Representations and Warranties.
Except
for the representations and warranties contained in this Section 5, the
Purchaser makes no representation or warranty to the Company, express or
implied, in connection with the transactions contemplated by this
Agreement.
6
SECTION
6. Survival
of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the certificates delivered pursuant hereto shall
survive the execution of this Agreement, the delivery to the Purchaser of the
Shares being purchased and the payment therefor.
SECTION
7. Covenants.
7.1 Registration
Procedures and Expenses.
(a) As
soon
as practicable, but in any event no later than one hundred twenty (120) days
following the date of this Agreement, the Company shall prepare and file with
the Commission a registration statement on Form SB-2 or other applicable form
as
determined by the Company (the “Registration Statement”) for the purpose of
registering the sale of the Shares by the Purchaser from time to time on the
facilities of any securities exchange or trading system on which the Common
Stock is then traded or in privately-negotiated transactions, which Registration
Statement shall contain all material non-public information disclosed to the
Purchasers by the Company in connection with the issuance and sale of the
Shares. For purposes of this Section 7.1, the term “Shares” shall include any
other securities of the Company issued in exchange for the Shares, as a dividend
on the Shares or in connection with a stock split or other reorganization
transaction affecting the Shares. The Company shall use its commercially
reasonable efforts to cause the Registration Statement to become effective
as
soon as practicable.
(b) The
Company shall prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus forming a part
thereof as may be necessary to keep the Registration Statement effective until
the earliest date, after the date on which all of the Shares have been purchased
pursuant to this Agreement or the obligation of the Purchaser to purchase the
Shares pursuant to this Agreement has been terminated, on which (i) all the
Shares have been disposed of pursuant to the Registration Statement, (ii) all
of
the Shares then held by the Purchaser may be sold under the provisions of Rule
144 without limitation as to volume, whether pursuant to Rule 144(k) or
otherwise, or (iii) the Company has determined that all Shares then held by
the
Purchaser may be sold without restriction under the Securities Act and has
removed any stop transfer instructions relating to such Shares and offered
to
cause to be removed any restrictive legends on the certificates, if any
representing such Shares (the period between the Effective Date and the earliest
of such dates is referred to herein as the “Registration Period”). At any time
after the end of the Registration Period, the Company may withdraw the
Registration Statement and its obligations under this Section 7 (other than
its
obligations under Section 7.3) shall automatically terminate.
(c) The
Purchaser agrees to comply with all federal and state securities laws and the
rules and regulations promulgated thereunder in connection with any sale by
it
of the Shares, whether or not such sale is pursuant to the Registration
Statement. In connection with the sale of any Shares pursuant to the
Registration Statement, but without limiting the generality of the foregoing
sentence, the Purchaser shall (i) comply with the provisions of Regulation
M
promulgated under the Exchange Act, and (ii) deliver to the purchaser of Shares
the prospectus forming a part of the Registration Statement and all relevant
supplements thereto which have been provided by the Company to the Purchaser
on
or prior to the applicable delivery date.
7
(d) The
Company shall not be obligated to prepare and file a post-effective amendment
or
supplement to the Registration Statement or the prospectus constituting a part
thereof during the continuance of a Blackout Event. A “Blackout Event” means any
of the following: (a) the possession by the Company of material information
that
is not ripe for disclosure in a registration statement or prospectus, as
determined in good faith by the Chief Executive Officer or the Board of
Directors of the Company or that disclosure of such information in the
Registration Statement or the prospectus constituting a part thereof would
be
detrimental to the business and affairs of the Company; or (b) any material
engagement or activity by the Company which would, in the good faith
determination of the Chief Executive Officer or the Board of Directors of the
Company, be adversely affected by disclosure in a registration statement or
prospectus at such time.
(e) At
least
two (2) days prior to the filing with the Commission of the Registration
Statement (or any amendment thereto) or the prospectus forming a part thereof
(or any supplement thereto), the Company shall provide draft copies thereof
to
the Purchaser and shall consider incorporating into such documents such comments
as the Purchaser (and its counsel) may propose to be incorporated therein.
Notwithstanding the foregoing, no prospectus supplement, the form of which
has
previously been provided to the Purchaser, need be delivered in draft form
to
the Purchaser.
(f) The
Company shall promptly notify the Purchaser upon the occurrence of any of the
following events in respect of the Registration Statement or the prospectus
forming a part thereof: (i) receipt of any request for additional information
from the Commission or any other federal or state governmental authority during
the Registration Period, the response to which would require any amendments
or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of the Registration Statement
or
the initiation of any proceedings for that purpose; or (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
(g) The
Company shall furnish to the Purchaser with respect to the Shares registered
under the Registration Statement (and to each underwriter, if any, of such
Shares) such number of copies of prospectuses and such other documents as the
Purchaser may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Shares by the Purchaser pursuant to
the
Registration Statement.
(h) The
Company shall file or cause to be filed such documents as are required to be
filed by the Company for normal blue sky clearance in states specified in
writing by the Purchaser; provided,
however,
that
the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified
or
has not so consented.
8
(i) With
a
view to making available to the Purchaser the benefits of Rule 144, the Company
agrees, throughout the Registration Period and so long as the Purchaser owns
Shares purchased pursuant to this Agreement, to:
(i) comply
with the provisions of paragraph (c)(1) of Rule 144; and
(ii) file
with
the Commission in a timely manner all reports and other documents required
to be
filed by the Company pursuant to Section 13 or 15(d) under the Exchange Act;
and, if at any time it is not required to file such reports but in the past
had
been required to or did file such reports, it will, upon the request of the
Purchaser, make available other information as required by, and so long as
necessary to permit sales of its Shares pursuant to, Rule 144.
(j) The
Company shall bear all expenses incurred by it in connection with the procedures
in paragraphs (a) through (i) of this Section 7.1 and the registration of the
Shares pursuant to the Registration Statement. The Company shall not be
responsible for any expenses incurred by the Purchaser in connection with its
sale of the Shares or its participation in the procedures in paragraphs (a)
through (i) of this Section 7.1 including, without limitation, any fees and
expenses of counsel or other advisers to the Purchaser and any underwriting
discounts, brokerage fees and commissions incurred by the
Purchaser.
7.2 Covenants
of the Purchaser.
(a) The
Purchaser acknowledges and understands that the Shares are "restricted
securities" as defined in Rule 144. The Purchaser hereby agrees not to offer
or
sell (as such terms are defined in the Securities Act and the rules and
regulations promulgated thereunder) any Shares unless such offer or sale is
made
(a) pursuant to an effective registration of the Shares under the Securities
Act, or (b) pursuant to an available exemption from the registration
requirements of the Securities Act. The Purchaser agrees that it will not engage
in hedging transactions with regard to the Shares other than in compliance
with
the Securities Act. A proposed transfer shall be deemed to comply with this
Section 7.2(a) if the Purchaser delivers to the Company a legal opinion in
form
and substance satisfactory to the Purchaser from counsel satisfactory to the
Purchaser to the effect that such transfer complies with this Section
7.2(a).
(b) If
at any
time or from time to time after the Effective Date, the Company notifies the
Purchaser in writing that the Registration Statement or the prospectus forming
a
part thereof (taking into account any prior amendments or supplements thereto)
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading, the Purchaser shall not offer or
sell
any Shares or engage in any other transaction involving or relating to the
Shares (other than purchases of Shares pursuant to this Agreement), from the
time of the giving of notice with respect to such untrue statement or omission
until the Purchaser receives written notice from the Company that such untrue
statement or omission no longer exists or has been corrected or disclosed in
an
effective post-effective amendment to the Registration Statement or a valid
prospectus supplement to the prospectus forming a part thereof.
9
(c) In
connection with the sale of any Shares pursuant to the Registration Statement,
the Purchaser shall deliver to the purchaser thereof the prospectus forming
a
part of the Registration Statement and all relevant supplements thereto which
have been provided by the Company to the Purchaser on or prior to the applicable
delivery date, all in accordance with the requirements of the Securities Act
and
the rules and regulations promulgated thereunder and any applicable blue sky
laws.
(d) The
Company may refuse to register (or permit its transfer agent to register) any
transfer of any Shares not made in accordance with this Section 7.2 and for
such
purpose may place stop order instructions with its transfer agent with respect
to the Shares.
(e) The
Purchaser will cooperate with the Company in all respects in connection with
the
performance by the Company of its obligations under Section 7.1, including
timely supplying all information reasonably requested by the Company (which
shall include all information regarding the Purchaser, and any person who
beneficially owns Shares held by the Purchaser within the meaning of Rule 13d-3
promulgated under the Exchange Act, and the proposed manner of sale of the
Shares required to be disclosed in the Registration Statement) and executing
and
returning all documents reasonably requested in connection with the registration
and sale of the Shares. The Purchaser hereby consents to be named as an
underwriter in the Registration Statement, if applicable, in accordance with
current Commission policy and, if necessary, to join in the request of the
Company for the acceleration of the effectiveness of the Registration
Statement.
7.3 Indemnification.
For the
purpose of this Section 7.3:
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(i)
|
the
term “Purchaser Affiliate” shall mean any person who controls the
Purchaser within the meaning of Section 15 of the Securities Act
or
Section 20 of the Exchange Act; and
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(ii)
|
the
term “Registration Statement” shall include any final prospectus, exhibit,
supplement or amendment included in or relating to the Registration
Statement referred to in Section 7.1.
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(a) The
Company agrees to indemnify and hold harmless the Purchaser and each Purchaser
Affiliate, against any losses, claims, damages, liabilities or expenses, joint
or several, to which such Purchaser or such Purchaser Affiliate may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including
in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages, liabilities
or
expenses (or actions in respect thereof as contemplated below) arise out of
or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, as amended as of the
Effective Date, including any information deemed to be a part thereof as of
the
time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to
Rule 434 promulgated under the Securities Act, or the prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations,
or
filed as part of the Registration Statement at the time of effectiveness if
no
Rule 424(b) filing is required (the “Prospectus”), or any amendment or
supplement thereto, (ii) the omission or alleged omission to state in the
Registration Statement as of the Effective Date a material fact required to
be
stated therein or necessary to make the statements in the Registration Statement
or any post-effective amendment or supplement thereto, or in the Prospectus
or
any amendment or supplement thereto, not misleading, in each case in the light
of the circumstances under which the statements contained therein were made,
or
(iii) any inaccuracy in the representations and warranties of the Company
contained in this Agreement, or any failure of the Company to perform its
obligations hereunder, and will reimburse the Purchaser and each such Purchaser
Affiliate for any legal and other expenses as such expenses which are reasonably
incurred by the Purchaser or such Purchaser Affiliate in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided,
however,
that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon (i)
an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by the Purchaser expressly for use therein, or (ii)
the
failure of the Purchaser to comply with the covenants and agreements contained
in Section 7.2 hereof respecting the sale of the Shares, or (iii) the
inaccuracy of any representations made by the Purchaser herein or (iv) any
statement or omission in any Prospectus that is corrected or disclosed in any
subsequent Prospectus that was delivered to the Purchaser prior to the pertinent
sale or sales by the Purchaser.
10
(b) The
Purchaser will indemnify and hold harmless the Company, each of its directors,
each of its officers who signed the Registration Statement and each person,
if
any, who controls the Company within the meaning of the Securities Act and
the
Exchange Act, against any losses, claims, damages, liabilities or expenses
to
which the Company, each of its directors, each of its officers who signed the
Registration Statement or controlling person may become subject, under the
Securities Act, the Exchange Act, or any other federal or state statutory law
or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Purchaser) insofar as such losses, claims, damages, liabilities or expenses
(or
actions in respect thereof as contemplated below) arise out of or are based
upon
(i) any failure to comply with the covenants and agreements contained in
Section 7.2 hereof respecting the sale of the Shares, (ii) the inaccuracy
of any representation made by the Purchaser herein, or (iii) any (x) untrue
or
alleged untrue statement of any material fact contained in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or (y)
omission or alleged omission to state in the Registration Statement, the
Prospectus or any amendment or supplement thereto a material fact required
to be
stated therein or necessary to make the statements in the Registration Statement
or any amendment or supplement thereto, or in the Prospectus or any amendment
or
supplement thereto, not misleading, in each case in the light of the
circumstances under which they were made; provided, that the Purchaser’s
indemnification obligation under this clause (iii) shall apply to the extent,
and only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by the Purchaser
expressly for use therein, and will reimburse the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person for any legal and other expense reasonably incurred by the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action.
11
(c) Promptly
after receipt by an indemnified party under this Section 7.3 of notice of the
threat or commencement of any action, such indemnified party will, if a claim
in
respect thereof is to be made against an indemnifying party under this Section
7.3, promptly notify the indemnifying party in writing thereof; provided, the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution (except
as
provided in paragraph (d)) or otherwise than under the indemnity agreement
contained in this Section 7.3 or to the extent it is not prejudiced as a result
of such failure. In case any such action is brought against any indemnified
party and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate
in,
and, to the extent that it may wish, jointly with all other indemnifying parties
similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 7.3 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless the indemnified
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of commencement of action, in which case the reasonable fees and expenses of
counsel shall be at the expense of the indemnifying party.
(d) If
the
indemnification provided for in this Section 7.3 is required by its terms but
is
for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party under paragraphs (a) or (b) of this Section 7.3
in
respect to any losses, claims, damages, liabilities or expenses referred to
herein (subject to the limitation of paragraph (c) of this Section 7.3), then
each applicable indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of any losses, claims, damages,
liabilities or expenses referred to herein (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Purchaser from the placement of the Common Stock contemplated by this Agreement
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but the relative fault of
the
Company and the Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement that
resulted in such losses, claims, damages, liabilities or expenses, as well
as
any other relevant equitable considerations. The relative benefits received
by
the Company on the one hand and the Purchaser on the other shall be deemed
to be
in the same proportion as the amount paid by the Purchaser to the Company
pursuant to this Agreement for the Shares purchased by the Purchaser that were
sold pursuant to the Registration Statement bears to the difference (the
“Difference”) between the amount such Purchaser paid for the Shares that were
sold pursuant to the Registration Statement and the amount received by such
Purchaser from such sale. The relative fault of the Company on the one hand
and
the Purchaser on the other shall be determined by reference to, among other
things, whether the untrue or alleged statement of a material fact or the
omission or alleged omission to state a material fact or the inaccurate or
the
alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by the Purchaser and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, omission or inaccuracy. The amount paid or payable by a party as
a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (c) of this Section 7.3, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in paragraph (c) of this Section
7.3 with respect to the notice of the threat or commencement of any threat
or
action shall apply if a claim for contribution is to be made under this
paragraph (d); provided,
however,
that no
additional notice shall be required with respect to any threat or action for
which notice has been given under paragraph (c) for purposes of indemnification.
The Company and each Purchaser agree that it would not be just and equitable
if
contribution pursuant to this Section 7.3 were determined solely by pro rata
allocation or by any other method of allocation which does not take account
of
the equitable considerations referred to in this paragraph. Notwithstanding
the
provisions of this Section 7.3, the Purchaser shall not be required to
contribute any amount in excess of the amount by which the Difference exceeds
the amount of any damages that such Purchaser has otherwise been required to
pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
12
7.4 Information
Available.
So long
as the Registration Statement is effective covering the resale of Shares then
still owned by the Purchaser, the Company will furnish to the Purchaser:
(a) as
soon
as practicable after available, one copy of (i) its Annual Report to
Stockholders (which Annual Report shall contain financial statements audited
in
accordance with generally accepted accounting principles by a firm of certified
public accountants), (ii) upon written request, its Annual Report on Form
10-KSB, (iii) upon written request, its Quarterly Reports on Form 10-QSB, (iv)
upon written request, its Current Reports on Form 8-K, and (v) a full copy
of
the Registration Statement (the foregoing, in each case, excluding exhibits);
and
(b) upon
the
written request of the Purchaser, all exhibits excluded by the parenthetical
to
subparagraph (a)(v) of this Section 7.4.
SECTION
8. Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing, shall be mailed by first-class registered or certified airmail,
confirmed facsimile or nationally recognized overnight express courier postage
prepaid, and shall be deemed given when so mailed and shall be delivered as
addressed as follows:
13
| (a) |
if
to the Company, to:
|
NaturalNano,
Inc.
000
Xxxxxx Xxxxxx Xxxxx
Xxxxx
000
Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Phone:
000.000.0000
Facsimile:
585.214.8182
Attn:
Xxxxxxx X. Xxxxxxxxxx
|
or
to such other person at such other place as the Company shall designate
to
the Purchaser in writing; and
|
(b) if
to the
Purchaser, at its address as set forth above or at such other address or
addresses as may have been furnished to the Company in writing.
SECTION
9. Assignment.
Neither
party hereto may assign or delegate any of such party’s rights or obligations
under or in connection with this Agreement, and any attempted assignment or
delegation of such rights or obligations shall be void. Except as expressly
provided in Section 7.3 with respect to Purchaser Affiliates, directors and
controlling persons of the Company and officers of the Company who signed the
Registration Statement, no person, including without limitation any person
who
purchases or otherwise acquires or receives any Shares from the Purchaser,
is an
intended third party beneficiary of this Agreement, and no party to this
Agreement shall have any obligation arising under this Agreement to any person
other than the other party hereto and, to the extent expressly provided in
Section 7.3, Purchaser Affiliates, directors and controlling persons of the
Company and officers of the Company who signed the Registration
Statement.
SECTION
10. Changes.
This
Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Purchaser.
SECTION
11. Headings.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
SECTION
12. 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 shall not in any way be affected or
impaired thereby.
SECTION
13. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to its conflicts of law principles and the
federal law of the United States of America.
14
SECTION
14. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered to the other
parties.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their duly authorized representatives as of the day and year first above
written.
NaturalNano,
Inc.
By:
/s/ Xxxxxxx X.
Xxxxxxxxxx
Name:
Xxxxxxx
X. Xxxxxxxxxx
Title:
President
SBI
Brightline XIII, LLC
By: /s/
Xxxxxx
Xxxxxxx
Name:
Xxxxxx Xxxxxxx
Title:
Managing
Member
15
SCHEDULE
2.1
TRANCHES
|
Tranche
No.
|
Number
of Tranche Shares
Included
in Tranche
|
Tranche
Purchase Price per
Tranche
Share (U.S. Dollars)
|
||
|
1
|
2,500,000
|
$
1.20
|
||
|
2
|
2,000,000
|
$
1.35
|
||
|
3
|
2,000,000
|
$
1.50
|
||
|
4
|
2,000,000
|
$
1.65
|
||
|
5
|
2,000,000
|
$
1.75
|
||
|
Total
|
10,500,000
|
Average:
$1.47
|
