SECURITIES PURCHASE AGREEMENT
This
SECURITIES
PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of May 31, 2007, is by and between Natural Nutrition, Inc., a Nevada
corporation, with its corporate headquarters located at 000 Xxxxx Xxxx Xxx
Xxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000 (the “Company”)
and
Cornell Capital Partners, L.P. (“Buyer”).
WHEREAS:
A. The
Company and Buyer are executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “1933
Act”),
and
Rule 506 of Regulation D (“Regulation D”)
as
promulgated by the United States Securities and Exchange Commission (the
“SEC”)
under
the 1933 Act.
B. The
Company has authorized a new secured convertible note of the Company, in the
form attached hereto as Exhibit A
(the
“Note”),
which
Note shall be convertible into the Company’s common stock, par value $0.001 per
share (the “Common
Stock”
and
as
converted, the “Conversion
Shares”),
in
accordance with the terms of the Note.
C. Buyer
wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) the Note in the aggregate
principal amount of U.S. $9,292,894 and (ii) a warrant, in substantially
the form attached hereto as Exhibit B
(the
“Warrant”),
to
acquire 62,508,179 shares of Common Stock (as exercised, collectively, the
“Warrant
Shares”).
D. Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in
the
form attached hereto as Exhibit C
(the
“Registration
Rights Agreement”),
pursuant to which the Company will agree to provide certain registration rights
with respect to the Registrable Securities (as defined in the Registration
Rights Agreement) under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
E. The
Note,
the Conversion Shares, the Warrant and the Warrant Shares collectively are
referred to herein as the “Securities”.
NOW,
THEREFORE,
the
Company and Buyer hereby agree as follows:
1. PURCHASE
AND SALE OF NOTE AND WARRANT.
(a) Purchase
of Note and Warrant.
(i) Note
and Warrant.
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6
and 7 below, on the Closing Date (as defined below), the Company shall issue
and
sell to Buyer, and Buyer shall purchase from the Company, (y) the Note in
the principal amount of U.S. $9,292,894 and (z) the Warrant to acquire the
Warrant Shares (the “Closing”).
(ii) Closing.
The
date and time of the Closing (the “Closing
Date”)
shall
be 10:00 a.m., EST time, on May 31, 2007 (or such other date as is mutually
agreed to by the Company and Buyer) after notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7
below at the offices of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, LLP, 000 XXX Xxxxxxx,
Xxxxx Xxxxx, Xxx Xxxxxx 00000.
(iii) Purchase
Price.
The
aggregate purchase price for the Note and the Warrant to be purchased by Buyer
at the Closing (the “Purchase
Price”)
shall
be U.S. $9,292,894.
(b) Form
of Payment.
On the
Closing Date, (i) Buyer shall pay the Purchase Price to the Company for the
Note and the Warrant to be issued and sold to Buyer at the Closing, by wire
transfer of immediately available funds in accordance with the Company’s written
wire instructions and (ii) the Company shall deliver to Buyer the Note in
an aggregate principal amount of U.S. $9,292,894 along with the Warrant to
acquire the Warrant Shares, in each case duly executed on behalf of the Company
and registered in the name of Buyer.
2. BUYER’S
REPRESENTATIONS AND WARRANTIES.
Buyer
represents and warrants to the Company that:
(a) No
Public Sale or Distribution.
Buyer
is acquiring the Note and the Warrant and, upon conversion of the Note and
exercise of the Warrant, will acquire the Conversion Shares issuable upon
conversion of the Note and the Warrant Shares issuable upon exercise of the
Warrant, for investment purposes, as principal for its own account and not
with
a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under
the
1933 Act; provided,
however,
that by
making the representations herein, Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Buyer is acquiring
the Securities hereunder in the ordinary course of its business. Buyer does
not
presently have any agreement or understanding, directly or indirectly, with
any
Person (as defined in Section 3(s)) to distribute any of the
Securities.
(b) Accredited
Investor Status.
At the
time Buyer was offered the Securities, it was, and at the date hereof it is,
and
on each date on which it exercises the Note or the Warrant it will be, an
“accredited investor” as defined in Rule 501(a) under the 1933 Act. Buyer
is not a registered broker-dealer under Section 15 of the 1934 Act (as
hereinafter defined).
(c) Reliance
on Exemptions.
Buyer
understands that the Securities are being offered and sold to it in reliance
on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the
truth
and accuracy of, and Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility
of
Buyer to acquire the Securities.
(d) Information.
Buyer
and its advisors, if any, have been furnished with all materials relating to
the
business, finances and operations of the Company and materials relating to
the
offer and sale of the Securities which have been requested by Buyer. Buyer
and
its advisors, if any, have been afforded the opportunity to ask questions of
the
Company. Neither such inquiries nor any other due diligence investigations
conducted by Buyer or its advisors, if any, or its representatives shall modify,
amend or affect Buyer’s right to rely on the Company’s representations and
warranties contained herein. Buyer understands that its investment in the
Securities involves a high degree of risk. Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the
Securities.
-2-
(e) No
Governmental Review.
Buyer
understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Resale.
Buyer
understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder,
(B) Buyer shall have delivered to the Company an opinion of counsel, in a
form reasonably acceptable to the Company, to the effect that such Securities
to
be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration, or (C) Buyer provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the
1933 Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”);
(ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the Person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 0000 Xxx)
may
require compliance with some other exemption under the 1933 Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any
other Person is under any obligation to register the Securities under the 1933
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder. The Securities may be pledged in connection with
a
bona fide margin account or other loan or financing arrangement secured by
the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and Buyer effecting a pledge
of
Securities shall not be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or
any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).
(g) Legends.
Buyer
understands that the certificates or other instruments representing the Note
and
the Warrant and, until such time as the resale of the Conversion Shares and
the
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares and the Warrant Shares, except as set forth below, shall
bear
any legend as required by the “Blue
Sky”
laws
of
any state and a restrictive legend in substantially the following form (and
a
stop-transfer order may be placed against transfer of such stock
certificates):
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[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE
BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act (a “Registration
Event”),
or
(ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel, in a form reasonably acceptable
to the Company, to the effect that such sale or transfer of the Securities
may
be made without registration under the applicable requirements of the 1933
Act,
or (iii) following a sale of transfer of such Securities pursuant to
Rule 144 (assuming the transferor is not an affiliate of the Company), or
(iv) while such Securities are eligible for sale under
Rule 144(k).
(h) Validity;
Enforcement.
This
Agreement and the Registration Rights Agreement to which Buyer is a party have
been duly and validly authorized, executed and delivered by Buyer and constitute
the legal, valid and binding obligations of Buyer enforceable against Buyer
in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(i) No
Conflicts.
The
execution, delivery and performance by Buyer of this Agreement and the
Registration Rights Agreement to which Buyer is a party and the consummation
by
Buyer of the transactions contemplated hereby and thereby will not
(i) result in a violation of the organizational documents of Buyer or
(ii) conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which Buyer is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws) applicable to Buyer,
except in the case of clauses (ii) and (iii) above, for such conflicts,
defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of Buyer to perform its obligations hereunder.
-4-
(j) Residency.
Buyer
is a resident of the jurisdiction specified below its signature to this
Agreement.
(k) Independent
Investment Decision.
Buyer
has independently evaluated the merits of its decision to purchase Securities
pursuant to the Transaction Documents (as defined in Section 3(b)) and
Buyer confirms that it has not relied on the advice of the Company nor any
other
Buyer’s business and/or legal counsel in making such decision.
(l) Certain
Trading Activities.
Buyer
has not directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with Buyer, engaged in any Short Sales (as defined
below) involving the Company’s securities). For the purpose of this Agreement,
“Short
Sales”
means
all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Securities and Exchange Act of 1934, as amended
(the “1934
Act”).
(m) General
Solicitation.
Buyer
is not purchasing the Securities as a result of any advertisement, article,
notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar.
(n) Organization.
Buyer
is an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization with the requisite corporate or
partnership power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry
out
its obligations thereunder.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to Buyer that:
(a) Organization
and Qualification.
The
Company and its “Subsidiaries”
(which
for purposes of this Agreement expressly excludes Interactive Nutrition
International, Inc., a company organized under the laws of Canada (“INII”),
but
includes any other joint venture or any other entity (i) in which the
Company, directly or indirectly, owns 50% or more of the outstanding capital
stock or holds an equity or similar interest representing 50% or more of the
outstanding equity or similar interest of such entity, (ii) that is a
“significant subsidiary” of the Company as defined under Regulation S-X of
the 1934 Act or (iii) in which the Company controls or operates all or part
of the business, operations or administration of such entity) are entities
duly
organized and validly existing in good standing under the laws of the
jurisdiction in which they are formed, and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted. Each of the Company and its Subsidiaries is duly qualified
as a
foreign entity to do business and is in good standing in every jurisdiction
in
which its ownership of property or the nature of the business conducted by
it
makes such qualification necessary, except to the extent that the failure to
be
so qualified or be in good standing would not reasonably be expected to have
a
Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect”
means
any material adverse effect on the business, properties, assets, operations,
results of operations, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby and the other Transaction Documents or by the agreements
and
instruments to be entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents. The only Subsidiaries are: CSI Business Finance, Inc.,
a
Texas corporation.
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(b) Authorization;
Enforcement; Validity.
The
Company has the requisite power and authority to enter into and perform its
obligations under this Agreement, the Note, the Registration Rights Agreement,
the Irrevocable Transfer Agent Instructions (as defined in Section 5(b)),
the Warrant and each of the other agreements entered into by the parties hereto
in connection with the transactions contemplated by this Agreement
(collectively, the “Transaction
Documents”)
and to
issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Note and the Warrant, the
reservation for issuance and the issuance of the Conversion Shares issuable
upon
conversion of the Note and the reservation for issuance and issuance of Warrant
Shares issuable upon exercise of the Warrant have been duly authorized by the
Company’s Board of Directors (the “Board”)
and
other than (i) the filing of a Form D under Xxxxxxxxxx X xx xxx
0000 Xxx, (xx) the filing with the SEC of one or more registration
statements in accordance with the requirements of the Registration Rights
Agreement, (iii) such filings as are required by the Principal Market (as
defined below) and (iv) such filings required under applicable securities
or Blue Sky laws of the states of the United States, no further filing, consent,
or authorization is required by the Company, the Board or its stockholders.
This
Agreement and the other Transaction Documents of even date herewith have been
duly executed and when delivered by the Company will constitute the legal,
valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(c) Issuance
of Securities.
The
issuance of the Note and the Warrant are duly authorized and are free from
all
taxes, liens and charges with respect to the issue thereof. As of the Closing,
a
number of shares of Common Stock shall have been duly authorized and reserved
for issuance which equals 130% of the maximum number of shares Common Stock
issuable upon conversion of the Note (assuming such conversion occurred at
Closing) and upon exercise of the Warrant (assuming such exercise occurred
at
Closing). Upon conversion in accordance with the Note or exercise in accordance
with the Warrant, as the case may be, the Conversion Shares and the Warrant
Shares, respectively, when issued, will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights, taxes, liens
and
charges with respect to the issue thereof, with the holders being entitled
to
all rights accorded to a holder of Common Stock. Based in part upon the accuracy
of the representations and warranties of Buyer set forth in Article 2, issuance
by the Company of the Securities is, or will be upon issuance, exempt from
registration under the 1933 Act.
(d) No
Conflicts.
Except
for those conflicts which are the subject of that certain Waiver referenced
in
Section 6(d) hereto, the execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the
transactions contemplated hereby and thereby (including, without limitation,
the
issuance of the Note and the Warrant, and reservation for issuance and issuance
of the Conversion Shares and the Warrant Shares) will not (i) result in a
violation of any articles or certificate of incorporation, articles or
certificate of formation, any certificate of designations or other constituent
documents of the Company or any of its Subsidiaries, any capital stock of the
Company or any of its Subsidiaries or Bylaws of the Company or any of its
Subsidiaries or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) in any
respect under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which
the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
foreign, federal and state securities laws and regulations and the rules and
regulations of the OTC Bulletin Board as reported on Bloomberg Financial Markets
LP (the “Principal
Market”))
applicable to the Company or any of its Subsidiaries or by which any property
or
asset of the Company or any of its Subsidiaries is bound or affected; except
in
the case of each of clauses (ii) and (iii), such as could not, individually
or in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect.
-6-
(e) Consents.
Other
than as contemplated in Section 3(b), the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration
with,
any court, governmental agency or any regulatory or self-regulatory agency
or
any other Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents, in each case
in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior
to
the Closing Date (other than those which the Company is not required to obtain
in accordance with the Transaction Documents until after the Closing Date)
and
the Company and its Subsidiaries are unaware of any facts or circumstances
which
might prevent the Company from obtaining or effecting any of the registration,
application or filings pursuant to the preceding sentence. The Company is not
in
violation of the listing requirements of the Principal Market and has no
knowledge of any facts which would reasonably lead to delisting or suspension
of
the Common Stock in the foreseeable future.
(f) Acknowledgment
Regarding Buyer’s Purchase of Securities.
The
Company acknowledges and agrees that Buyer is acting solely in the capacity
of
an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that Buyer is not (i) an
officer or director of the Company, (ii) to the Company’s knowledge, an
“affiliate” of the Company (as defined in Rule 144 of the 0000 Xxx) or
(iii) to the knowledge of the Company, a “beneficial owner” of more than
10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of
the 1934 Act). The Company further acknowledges that Buyer is not acting as
a
financial advisor or fiduciary of the Company or any of its Subsidiaries (or
in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by Buyer
or
any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to Buyer’s purchase of the Securities. The Company further represents
to Buyer that the Company’s decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.
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(g) No
General Solicitation; Placement Agent’s Fees.
Neither
the Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale
of the Securities. The Company shall pay, and hold Buyer harmless against,
any
liability, loss or expense (including, without limitation, attorney’s fees and
out-of-pocket expenses) arising in connection with any such claim. The Company
has not engaged any placement agent or other agent in connection with the sale
of the Securities.
(h) No
Integrated Offering.
None of
the Company, its Subsidiaries, any of their affiliates, and any Person acting
on
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations
of
any exchange or automated quotation system on which any of the securities of
the
Company are listed or designated. None of the Company, its Subsidiaries, their
affiliates and any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of any
of
the Securities under the 1933 Act or cause the offering of the Securities to
be
integrated with other offerings.
(i) Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Note and the Warrant Shares issuable upon
exercise of the Warrant will increase in certain circumstances. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Note in accordance with this Agreement and the Note and its
obligation to issue the Warrant Shares upon exercise of the Warrant in
accordance with this Agreement and the Warrant, in each case, is absolute and
unconditional regardless of the dilutive effect that such issuance may have
on
the ownership interests of other stockholders of the Company.
(j) Application
of Takeover Protections; Rights Agreement.
The
Company and the Board have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under its Articles of Incorporation or the laws of
the
jurisdiction of its formation which is or could become applicable to Buyer
as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and Buyer’s ownership of
the Securities. The Company has not adopted a stockholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock
or
a change in control of the Company.
(k) SEC
Documents; Financial Statements.
Since
December 31, 2005, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing filed prior
to the date hereof and all exhibits included therein and financial statements,
notes and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the “SEC
Documents”).
The
Company has delivered to Buyer or its representatives true, correct and complete
copies of the SEC Documents not available on the XXXXX system. As of their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in
the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with
respect thereto. Such financial statements have been prepared in accordance
with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary
in
order to make the statements therein, in the light of the circumstance under
which they are or were made and not misleading.
-8-
(l) Absence
of Certain Changes.
Since
December 31, 2006, there has been no material adverse change and no
material adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company
or
its Subsidiaries. Since December 31, 2006, the Company has not
(i) declared or paid any dividends, (ii) sold any assets, individually
or in the aggregate, in excess of $100,000 outside of the ordinary course of
business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $100,000. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company and its Subsidiaries,
individually and on a consolidated basis, will not, after giving effect to
the
transactions contemplated hereby to occur at the Closing, be Insolvent (as
defined below). For purposes of this Section 3(l), “Insolvent”
means,
with respect to any Person (as defined in Section 3(s)), (i) the
present fair saleable value of such Person’s assets is less than the amount
required to pay such Person’s total Indebtedness (excluding the Note and all
other indebtedness of the Company to the Buyer) (as defined in
Section 3(s)), (ii) such Person is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur
or believes that it will incur debts that would be beyond its ability to pay
as
such debts mature or (iv) such Person has unreasonably small capital with
which to conduct the business in which it is engaged as such business is now
conducted and is proposed to be conducted.
(m) No
Undisclosed Events, Liabilities, Developments or Circumstances.
No
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form SB-2 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
-9-
(n) Conduct
of Business; Regulatory Permits.
Neither
the Company nor its Subsidiaries is in violation of any term of or in default
under its Articles of Incorporation, any certificate of designations of any
outstanding series of preferred stock of the Company or Bylaws or their
organizational charter or bylaws, respectively. Neither the Company nor any
of
its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Without limiting the generality
of
the foregoing, the Company is not in violation of any of the rules, regulations
or requirements of the Principal Market and has no knowledge of any facts or
circumstances that would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future. Since
December 31, 2005, (i) trading in the Common Stock has not been
suspended by the SEC or the Principal Market and (ii) the Company has
received no communication, written or oral, from the SEC or the Principal Market
regarding the suspension or delisting of the Common Stock from the Principal
Market. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, except where the failure
to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(o) Foreign
Corrupt Practices.
Neither
the Company, nor any of its Subsidiaries, nor any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
or any of its Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
(iii) violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with any and all applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and any
and
all applicable rules and regulations promulgated by the SEC thereunder that
are
effective as of the date hereof.
(q) Transactions
With Affiliates.
Except
as set forth in the SEC Documents filed at least ten (10) days prior to the
date
hereof, that certain Agreement referenced in Section 7(o), and other than
the grant of stock options or the issuance of Common Stock or Series A
preferred stock as disclosed in the SEC Documents, none of the officers,
directors or employees of the Company or any of its Subsidiaries is presently
a
party to any transaction with the Company or any of its Subsidiaries (other
than
for ordinary course services as employees, officers or directors), including
any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any such officer, director, or employee has
a
substantial interest or is an officer, director, trustee or
partner.
-10-
(r) Equity
Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of
(i) Ten Billion (10,000,000,000) shares of Common Stock, of which as of the
date hereof, 17,904,650 shares of Common Stock are issued and outstanding,
up to
Ten Million (10,000,000) shares of Common Stock are reserved for issuance
pursuant to the Company’s stock option and purchase plans (of which
approximately 5,000,000 remain available for future issuances), approximately
1,953,000 shares are reserved for issuance pursuant to securities (other than
the Note and the Warrant) exercisable or exchangeable for, or convertible into,
shares of Common Stock and 95,237 shares of preferred stock are issued and
outstanding. All of such outstanding shares have been, or upon issuance will
be,
validly issued and are fully paid and nonassessable. Except as disclosed in
the
SEC Documents: (i) none of the Company’s capital stock is subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
or
exercisable or exchangeable for, any capital stock of the Company or any of
its
Subsidiaries, or contracts, commitments, understandings or arrangements by
which
the Company or any of its Subsidiaries is or may become bound to issue
additional capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any capital stock of the Company or any of its
Subsidiaries; (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound; (iv) there
are no financing statements securing obligations in any material amounts, either
singly or in the aggregate, filed in connection with the Company or any of
its
Subsidiaries; (v) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any
of
their securities under the 1933 Act (except pursuant to the Registration Rights
Agreement); (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries;
(vii) there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Securities;
(viii) the Company does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement; and (ix) the
Company and its Subsidiaries have no liabilities or obligations required to
be
disclosed in the SEC Documents but not so disclosed in the SEC Documents, other
than those incurred in the ordinary course of the Company’s or its Subsidiaries’
respective businesses and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect. The Company has furnished to Buyer
true, correct and complete copies of the Company’s Articles of Incorporation, as
amended and as in effect on the date hereof (the “Articles
of Incorporation”),
and
the Company’s Bylaws, as amended and as in effect on the date hereof (the
“Bylaws”),
and
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in
respect thereto. The SEC Documents, including the Company’s Annual Report for
the fiscal year ended December 31, 2006 on Form 10-KSB as filed with the
SEC on April 13, 2007, sets forth the shares of Common Stock owned
beneficially or of record and Common Stock Equivalents (as defined below) held
by each director and executive officer.
-11-
(s) Indebtedness
and Other Contracts.
Except
as disclosed in the SEC Documents, neither the Company nor any of its
Subsidiaries (i) has any outstanding Indebtedness, (ii) is a party to
any contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument could
reasonably be expected to result in a Material Adverse Effect, (iii) is in
violation of any term of or in default under any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of
the
Company’s officers, has or is expected to have a Material Adverse Effect. The
SEC Documents provide a detailed description of the material terms of any such
outstanding Indebtedness. For purposes of this Agreement: (x) “Indebtedness”
of
any
Person means, without duplication (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the deferred purchase
price of property or services, including (without limitation) “capital leases”
in accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either
case with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale
of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable
for
the payment of such indebtedness, and (H) all Contingent Obligations (as
defined below) in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) “Contingent
Obligation”
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
-12-
(t) Absence
of Litigation.
Except
as set forth in the SEC Documents, there is no action, suit, proceeding or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
of
its Subsidiaries, the Common Stock or any of the Company’s Subsidiaries or any
of the Company’s or its Subsidiaries’ officers or directors, whether of a civil
or criminal nature or otherwise.
(u) Insurance.
The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company
nor
any such Subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect.
(v) Employee
Relations.
(i)
Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries
believe that their relations with their employees are good. No executive officer
of the Company or any of its Subsidiaries has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary
or otherwise terminate such officer’s employment with the Company or any such
Subsidiary. To the knowledge of the Company, no executive officer of the Company
or any of its Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters.
(ii) The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or
in
the aggregate, reasonably be expected to result in a Material Adverse
Effect.
(w) Title.
Except
as disclosed in the SEC Documents, the Company and its Subsidiaries have good
and marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect the value
of
such property and do not interfere with the use made and proposed to be made
of
such property by the Company and any of its Subsidiaries. Any real property
and
facilities held under lease by the Company and any of its Subsidiaries are
held
by them under valid, subsisting and enforceable leases with such exceptions
as
are not material and do not interfere with the use made and proposed to be
made
of such property and buildings by the Company and its Subsidiaries.
-13-
(x) Intellectual
Property Rights.
The
Company and its Subsidiaries own or possess adequate rights or licenses to
use
all trademarks, service marks and all applications and registrations therefor,
trade names, patents, patent rights, copyrights, original works of authorship,
inventions, licenses, approvals, governmental authorizations, trade secrets
and
other intellectual property rights (“Intellectual
Property Rights”)
necessary to conduct their respective businesses as now conducted. None of
the
Company’s registered, or applied for, Intellectual Property Rights have expired
or terminated or have been abandoned, or are expected to expire or terminate
or
expected to be abandoned, within three years from the date of this Agreement.
The Company does not have any knowledge of any infringement by the Company
or
its Subsidiaries of Intellectual Property Rights of others. There is no claim,
action or proceeding being made or brought, or to the knowledge of the Company,
being threatened, against the Company or any of its Subsidiaries regarding
its
Intellectual Property Rights. The Company is unaware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their Intellectual Property Rights.
(y) Environmental
Laws.
The
Company and its Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to
so comply could be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect. The term “Environmental
Laws”
means
all federal, state, local or foreign laws relating to pollution or protection
of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous
Materials”)
into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands
or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(z) Subsidiary
Rights.
The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(aa) Investment
Company.
The
Company is not, and upon consummation of the sale of the Securities will not
be,
an “investment company”, a company controlled by an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act of
1940, as amended.
-14-
(bb) Tax
Status.
The
Company and each of its Subsidiaries (i) has made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its
books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(cc) Internal
Accounting and Disclosure Controls.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain asset and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities
at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 0000 Xxx) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed in to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is accumulated and communicated
to
the Company’s management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. Since December 31, 2006, neither
the Company nor any of its Subsidiaries have received any notice or
correspondence from any accountant identifying a material weakness in any part
of the system of internal accounting controls of the Company or any of its
Subsidiaries which is not specified in the Company’s Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2006.
(dd) Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company and
an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or
that
otherwise would be reasonably likely to have a Material Adverse
Effect.
(ee) Ranking
of Note.
Except
for Indebtedness to the Buyer, no Indebtedness of the Company is senior to
or
ranks pari
passu
with the
Note in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise.
(ff) Transfer
Taxes.
On the
Closing Date, all stock transfer or other taxes (other than income or similar
taxes) which are required to be paid in connection with the sale and transfer
of
the Securities to be sold to Buyer hereunder will be, or will have been, fully
paid or provided for by the Company, and all laws imposing such taxes will
be or
will have been complied with.
-15-
(gg) Manipulation
of Price.
The
Company has not, and to its knowledge no one acting on its behalf has,
(i) taken, directly or indirectly, any action designed to cause or to
result in the stabilization or manipulation of the price of any security of
the
Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
(hh) U.S.
Real Property Holding Corporation.
The
Company is not, nor has ever been, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon Buyer’s request.
(ii) Disclosure.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided Buyer or their agents or counsel with any information that constitutes
material, nonpublic information concerning the Company or its Subsidiaries
other
than the existence of the transactions contemplated by this Agreement or the
other Transaction Documents. The Company understands and confirms that Buyer
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to Buyer regarding the
Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company is true
and correct and does not contain any untrue statement of a material fact or
omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each press release issued by the Company or any of its Subsidiaries
during the twelve (12) months preceding the date of this Agreement did not
at
the time of release contain any untrue statement of a material fact or omit
to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(jj) INII.
Notwithstanding the exclusion of INII as a “Subsidiary” for purposes of this
Agreement, the Company hereby represents and warrants, and the Buyer hereby
acknowledges, that INII has incurred significant corporate tax liabilities
(the
“INII
Tax Liability”)
which
has resulted in the imposition of certain tax liens (the “INII
Tax Liens”)
as
disclosed in the audited financial statements of INII attached to this Agreement
as Exhibit
I.
Furthermore, the Company hereby represents and warrants and the Buyer
acknowledges that INII has also incurred significant pre-receivership vendor
debt (the “INII
Vendor Debt”)
which,
together with the INII Tax Liability, is estimated by the Company to be
approximately Cdn $3,000,000. Such INII Vendor Debt is also disclosed in the
audited financial statements of INII attached to this Agreement as Exhibit
I.
The
Company represents and warrants that, to the best of its knowledge after due
inquiry with legal counsel and assuming the Company purchases the INII Secured
Note, upon a foreclosure of INII’s assets by the Company under applicable
Canadian law and the value of INII’s assets is less than the obligations owed
under the INII Secured Note, the Company would likely acquire INII’s assets free
of the INII Tax Liability and the INII Vendor Debt. For purposes of this
Agreement, the term “INII
Secured Note”
means
that certain Convertible Promissory Note, dated March 31, 2004, originally
issued to Nesracorp Inc. (under its former name Interactive Nutrition, Inc.)
jointly by Bio-One Corporation and INII in the principal amount of $15,000,000
(as such note may be amended from time to time), which note is simultaneous
herewith being purchased by the Company. The current outstanding balance of
principal and accrued and unpaid interest (through the date hereof) under the
INII Secured Note is approximately $11,375,500.
-16-
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts timely to satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this
Agreement.
(b) Form D
and Blue Sky.
The
Company agrees to file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to Buyer promptly after
such filing. The Company shall, on or before the Closing Date, take such action
as the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Securities for sale to Buyer at the Closing
pursuant to this Agreement under applicable securities or Blue Sky laws of
the
states of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to Buyer on or prior
to
the Closing Date. The Company shall make all filings and reports relating to
the
offer and sale of the Securities required under applicable securities or Blue
Sky laws of the states of the United States following the Closing
Date.
(c) Reporting
Status.
Until
the date on which the Investor (as defined in the Registration Rights Agreement)
shall have sold all the Conversion Shares and Warrant Shares and the Note or
Warrant are not outstanding (the “Reporting
Period”),
the
Company shall file all reports required to be filed with the SEC pursuant to
the
1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Securities to purchase the
INII Secured Note and for general corporate and for working capital purposes,
provided, however, that the Company may not use the proceeds from the sale
of
the Securities for (i) the repayment of any other outstanding Indebtedness
of the Company or any of its Subsidiaries, other than trade payables incurred
in
the ordinary course of business, or (ii) the redemption or repurchase of
any of its or its Subsidiaries’ equity securities.
(e) Financial
Information.
The
Company agrees to send the following to each Investor (as defined in the
Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through XXXXX and are available to the public
through the XXXXX system, within one (1) Business Day (as defined below) after
the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K
or 10-KSB, any interim reports or any consolidated balance sheets, income
statements, stockholders’ equity statements and/or cash flow statements for any
period other than annual, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, (ii) on the same day as the release thereof, if
not publicly filed, facsimile or e-mailed copies of all press releases issued
by
the Company or any of its Subsidiaries, and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to
the
stockholders. As used herein, “Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of Newark, New Jersey are authorized or required by law to remain
closed.
-17-
(f) Listing.
Upon
request from time to time from Buyer, the Company shall promptly secure the
listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon each national securities exchange and automated quotation
system, if any, upon which the Common Stock is then listed (subject to official
notice of issuance) and shall maintain such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the authorization of the Common Stock
for
quotation on the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market.
The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) Fees.
The
Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commissions (other than for persons engaged
by Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection
with any claim against Buyer relating to any such payment. Except as otherwise
set forth in the Transaction Documents, each party to this Agreement shall
bear
its own expenses in connection with the sale of the Securities to Buyer.
Notwithstanding the foregoing, at the Closing the Company shall pay (i) the
fees and expenses of each of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP, U.S. counsel
to Buyer and Buyer’s Canadian counsel, incurred in connection with the
transactions contemplated by this Agreement, (ii) to Buyer (or its
designee) a non-refundable commitment fee in the amount of ten percent (10%)
of
the face amount of the Note, and (iii) to Buyer a non-refundable fee in the
amount of U.S. $75,000.00 to defray Buyer’s due diligence and other costs
relating to the transactions contemplated by this Agreement. Buyer may satisfy
any or all of the foregoing obligations at the Closing by withholding such
amounts from the purchase price for the Note and Warrant otherwise payable
to
the Company at the Closing.
(h) Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged by an
Investor (as defined in the Registration Rights Agreement) in connection with
a
bona fide margin agreement or other loan or financing arrangement that is
secured by the Securities. The pledge of Securities shall not be deemed to
be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document, including, without limitation,
Section 2(f) hereof; provided that an Investor and its pledgee shall be
required to comply with the provisions of Section 2(f) hereof in order to
effect a sale, transfer or assignment of Securities to such pledgee. The Company
hereby agrees to execute and deliver such documentation as a pledgee of the
Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by an Investor.
-18-
(i) Disclosure
of Transactions and Other Material Information.
On or
before 8:30 a.m., EST, on the fourth (4th)
Business Day following the date of this Agreement, the Company shall issue
a
press release and file a Current Report on Form 8-K describing the terms of
the transactions contemplated by the Transaction Documents in the form required
by the 1934 Act and attaching the material Transaction Documents (including,
without limitation, this Agreement (and all schedules to this Agreement), the
form of the Note, the form of Warrant and the form of the Registration Rights
Agreement) as exhibits to such filing (including all attachments, the
“8-K
Filing”).
From
and after the filing of the 8-K Filing with the SEC, Buyer shall not be in
possession of any material, nonpublic information received from the Company,
any
of its Subsidiaries or any of its respective officers, directors, employees
or
agents, that is not disclosed in the 8-K Filing. The Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide Buyer with any
material, nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the 8-K Filing with the SEC without the express
written consent of Buyer or as may be required under the terms of the
Transaction Documents. If Buyer has, or believes it has, received any such
material, nonpublic information regarding the Company or any of its
Subsidiaries, it shall provide the Company with written notice thereof. The
Company shall, within five (5) Trading Days (as defined in the Note) of receipt
of such notice, make public disclosure of such material, nonpublic information.
In the event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company,
its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. Buyer shall have no liability to the Company, its Subsidiaries,
or
any of its or their respective officers, directors, employees, stockholders
or
agents for any such disclosure. Subject to the foregoing, neither the Company,
its Subsidiaries nor Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of
Buyer, to make any press release or other public disclosure with respect to
such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Without the prior written consent
of
Buyer, neither the Company nor any of its Subsidiaries or affiliates shall
disclose the name of Buyer in any filing, announcement, release or otherwise,
unless such disclosure is required by law, regulation or the Principal
Market.
(j) Restriction
on Redemption and Cash Dividends.
So long
as the Note remains outstanding, the Company shall not, directly or indirectly,
redeem, purchase or declare or pay any cash dividend or distribution on, any
shares of its Common Stock or any other shares of its capital stock, without
the
prior express written consent of Buyer.
-19-
(k) Additional
Notes; Variable Securities; Dilutive Issuances.
So long
as the Note remains outstanding, the Company will not issue any Note other
than
to Buyer as contemplated hereby and the Company shall not issue any other
securities that would cause a breach or default under the Note. For so long
as
the Note or Warrant remain outstanding, the Company shall not, in any manner,
issue or sell any rights, warrants or options to subscribe for or purchase
Common Stock or directly or indirectly convertible into or exchangeable or
exercisable for Common Stock at a price which varies or may vary with the market
price of the Common Stock, including by way of one or more reset(s) to any
fixed
price (other than pursuant to antidilution provisions) unless the conversion,
exchange or exercise price of any such security cannot be less than the then
applicable Conversion Price (as defined in the Note) with respect to the Common
Stock into which the Note is convertible or the then applicable Exercise Price
(as defined in the Warrant) with respect to the Common Stock into which the
Warrant is exercisable. For long as the Note or Warrant remain outstanding,
the
Company shall not, in any manner, enter into or affect any Dilutive Issuance
(as
defined in the Note) if the effect of such Dilutive Issuance is to cause the
Company to be required to issue upon conversion of the Note or exercise of
the
Warrant any shares of Common Stock in excess of that number of shares of Common
Stock which the Company may issue upon conversion of the Note and exercise
of
the Warrant without breaching the Company’s obligations under the rules or
regulations of the Eligible Market (as defined in the Registration Rights
Agreement).
(l) Corporate
Existence.
So long
as the Note remains outstanding, the Company shall not be party to any
Fundamental Transaction (as defined in the Note) unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions
set
forth in the Note and the Warrant.
(m) Reservation
of Shares.
So long
as the Note or Warrant remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 130% of the number of shares of Common Stock issuable
upon conversion of all of the Note and issuable upon exercise of the Warrant
then outstanding (without taking into account any limitations on the conversion
of the Note or exercise of the Warrant set forth in the Note and Warrant,
respectively).
(n) Conduct
of Business.
The
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate,
in a
Material Adverse Effect.
(o) Additional
Issuances of Securities.
(i) For
purposes of this Section 4(o), the following definitions shall
apply.
(1) “Convertible
Securities”
means
any stock or securities (other than Options) convertible into or exercisable
or
exchangeable for shares of Common Stock.
-20-
(2) “Options”
means
any rights, warrants or options to subscribe for or purchase shares of Common
Stock or Convertible Securities.
(3) “Common
Stock Equivalents”
means,
collectively, Options and Convertible Securities.
(ii) From
the
date the Company receives a Registration Request (as defined in the Registration
Rights Agreement) until the date that is thirty (30) calendar days following
the
Effective Date (as defined in the Registration Rights Agreement), the Company
will not, directly or indirectly, offer, sell (only if the sales price is less
than the Conversion Price as defined in the Note), grant any option to purchase
(only if the sales price is less than the Conversion Price as defined in the
Note), or otherwise dispose of (or announce any offer, sale, grant or any option
to purchase or other disposition of) any of its or its Subsidiaries’ equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life
and
under any circumstances, convertible into or exchangeable or exercisable for
shares of Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a “Subsequent
Placement”).
(iii) So
long
as the Note is outstanding, the Company will not, directly or indirectly, effect
any Subsequent Placement unless the Company shall have first complied with
this
Section 4(o)(iii).
(1) The
Company shall deliver to Buyer a written notice (the “Offer
Notice”)
of any
proposed or intended issuance or sale or exchange (the “Offer”)
of the
securities being offered (the “Offered
Securities”)
in a
Subsequent Placement, which Offer Notice shall (w) identify and describe
the Offered Securities, (x) describe the price and other terms upon which
they are to be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (y) identify the
persons or entities (if known) to which or with which the Offered Securities
are
to be offered, issued, sold or exchanged and (z) offer to issue and sell to
or exchange with Buyer at least 50% of the Offered Securities (the “Basic
Amount”).
(2) To
accept
an Offer, in whole or in part, Buyer must deliver a written notice to the
Company prior to the end of the seventh (7th)
Business Day after Buyer’s receipt of the Offer Notice (the “Offer
Period”),
setting forth the portion of Buyer’s Basic Amount that Buyer elects to purchase
(the “Notice
of Acceptance”).
(3) The
Company shall have ten (10) Business Days from the expiration of the Offer
Period above to (i) offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by
Buyer (the “Refused
Securities”),
but
only to the offerees described in the Offer Notice (if so described therein)
and
only upon terms and conditions (including, without limitation, unit prices
and
interest rates) that are not more favorable to the acquiring person or persons
or less favorable to the Company than those set forth in the Offer Notice and
(ii) to publicly announce (a) the execution of such Subsequent
Placement Agreement (as defined below), and (b) either (x) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement,
which shall be filed with the SEC on a Current Report on Form 8-K with such
Subsequent Placement Agreement and any documents contemplated therein filed
as
exhibits thereto (the “Offer 8-K”).
In
the event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. Buyer shall have no liability to the Company, its Subsidiaries,
or
any of its or their respective officers, directors, employees, stockholders
or
agents for any such disclosure.
-21-
(4) In
the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in
Section 4(o)(iii)(3) above), then Buyer may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that Buyer elected to purchase pursuant
to
Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator
of which shall be the number or amount of Offered Securities the Company
actually proposes to issue, sell or exchange (including Offered Securities
to be
issued or sold to Buyer pursuant to Section 4(o)(iii)(3) above prior to
such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities. In the event that Buyer so elects to reduce
the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities
have
again been offered to Buyer in accordance with Section 4(o)(iii)(1)
above.
(5) Upon
the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, Buyer shall acquire from the Company, and the Company shall issue
to
Buyer, the number or amount of Offered Securities specified in the Notices
of
Acceptance, as reduced pursuant to Section 4(o)(iii)(3) above if Buyer have
so elected, upon the terms and conditions specified in the Offer. The purchase
by Buyer of any Offered Securities is subject in all cases to the preparation,
execution and delivery by the Company and Buyer of a purchase agreement relating
to such Offered Securities reasonably satisfactory in form and substance to
Buyer and its counsel.
(6) Any
Offered Securities not acquired by Buyer or other persons in accordance with
Section 4(o)(iii)(3) above may not be issued, sold or exchanged until they
are again offered to Buyer under the procedures specified in this
Agreement.
(iv) The
restrictions contained in subsections (ii) and (iii) of this Section 4(o)
shall not apply in connection with the issuance of any Excluded Securities
(as
defined in the Note).
-22-
(p) Additional
Registration Statements.
Until
the Effective Date (as defined in the Registration Rights Agreement), the
Company will not file a registration statement under the 1933 Act relating
to
securities that are not the Securities, other than Excluded Securities (as
defined in the Note).
(q) Lock-Up
Agreements.
The
Company shall not amend, waive or modify the Lock-Up Agreements without the
written consent of Buyer.
5. REGISTER;
TRANSFER AGENT INSTRUCTIONS.
(a) Register.
The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Note and the Warrant in which the Company shall
record the name and address of the Person in whose name the Note and the Warrant
have been issued (including the name and address of each transferee), the
principal amount of Note held by such Person, the number of Conversion Shares
issuable upon conversion of the Note and the number of Warrant Shares issuable
upon exercise of the Warrant held by such Person. The Company shall keep the
register open and available at all times during business hours for inspection
of
Buyer or its legal representatives upon reasonable notice.
(b) Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at The Depository Trust Company (“DTC”),
registered in the name of Buyer or its nominee(s), for the Conversion Shares
and
the Warrant Shares issued at the Closing or upon conversion of the Note or
exercise of the Warrant in such amounts as specified from time to time by Buyer
to the Company upon conversion of the Note or exercise of the Warrant in the
form of Exhibit D
attached
hereto (the “Irrevocable
Transfer Agent Instructions”).
The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(g) hereof, will be given by the
Company to its transfer agent, and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. Upon a
Registration Event or if Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall promptly
instruct its transfer agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by Buyer to effect such sale, transfer or assignment and, with
respect to any transfer, shall permit the transfer. In the event that a
Registration Event has occurred or such sale, assignment or transfer involves
Conversion Shares or Warrant Shares sold, assigned or transferred pursuant
to an
effective registration statement or pursuant to Rule 144, the transfer
agent shall issue such Securities to Buyer, assignee or transferee, as the
case
may be, without any restrictive legend. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to Buyer.
Accordingly, the Company acknowledges that the remedy at law for a breach of
its
obligations under this Section 5(b) will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of
this
Section 5(b), that Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being
required.
-23-
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
Closing
Date.
The
obligation of the Company hereunder to issue and sell the Note and the related
Warrant to Buyer at the Closing is subject to the satisfaction, at or before
the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion by providing Buyer with prior written notice
thereof:
(a) Buyer
shall have executed each of the Transaction Documents to which it is a party
and
delivered the same to the Company.
(b) Buyer
shall have delivered to the Company the Purchase Price for the Note and the
related Warrant being purchased by Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.
(c) The
representations and warranties of Buyer shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specific
date), and Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Buyer at or prior
to
the Closing Date.
(d) The
Company and Buyer shall have entered into a Waiver substantially in the form
of
Exhibit
J
hereto.
7. CONDITIONS
TO BUYER’S OBLIGATION TO PURCHASE.
Closing
Date.
The
obligation of Buyer hereunder to purchase the Note and the related Warrant
at
the Closing is subject to the satisfaction, at or before the Closing Date,
of
each of the following conditions, provided that these conditions are for Buyer’s
sole benefit and may be waived by Buyer at any time in its sole discretion
by
providing the Company with prior written notice thereof:
(a) (i) The
Company shall have entered into a security agreement and a pledge agreement
with
Buyer in forms satisfactory to Buyer, and (ii) INII shall have entered into
a security agreement and a guaranty with Buyer in forms satisfactory to
Buyer.
(b) The
Company shall have duly executed and delivered to Buyer (i) each of the
Transaction Documents and (ii) the Note, being purchased by Buyer at the
Closing pursuant to this Agreement, and (iii) the Warrant being purchased
by Buyer at the Closing pursuant to this Agreement.
(c) Buyer
shall have received the opinion of counsel of Xxxxxxxxxxx & Xxxxxxxx Xxxxxxx
Xxxxx Xxxxx LLP, dated as of the Closing Date, in substantially the form of
Exhibit E
attached
hereto.
-24-
(d) The
Company shall have delivered to Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit D
attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company’s transfer agent.
(e) The
Company shall have delivered to Buyer a true copy of a certificate evidencing
the formation and good standing of the Company and each of its Subsidiaries
in
such entity’s jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within fifteen (15)
Business Days prior to the Closing Date.
(f) The
Company shall have delivered to Buyer a true copy of a certificate evidencing
the Company’s qualification as a foreign corporation and good standing issued by
the Secretary of State (or comparable office) of each jurisdiction in which
the
Company conducts business, as of a date within fifteen (15) Business Days prior
to the Closing Date.
(g) The
Company shall have delivered to Buyer a certified copy of the Articles of
Incorporation as certified by the Secretary of State of the State of Nevada
within five (5) Business Days prior to the Closing Date.
(h) The
Company shall have delivered to Buyer a certificate, executed by the Secretary
of the Company and dated as of the Closing Date, as to (i) the resolutions
consistent with Section 3(b) as adopted by the Board in a form reasonably
acceptable to Buyer, (ii) the Articles of Incorporation and (iii) the
Bylaws, each as in effect at the Closing, in the form attached hereto as
Exhibit F.
(i) The
representations and warranties of the Company shall be true and correct in
all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specific
date)
and the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date. Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably
requested by Buyer in the form attached hereto as Exhibit G.
(j) The
Company shall have delivered to Buyer a letter from the Company’s transfer agent
certifying the number of shares of Common Stock outstanding as of a date within
five (5) days prior to the Closing Date.
(k) The
Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the Closing
Date, by the SEC or the Principal Market from trading on the Principal Market
nor shall suspension by the SEC or the Principal Market have been threatened,
as
of the Closing Date, either (A) in writing by the SEC or the Principal
Market or (B) by falling below the minimum listing maintenance requirements
of the Principal Market.
-25-
(l) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
(m) Buyer
shall have received lock-up agreements in the form attached hereto as
Exhibit H
(the
“Lock-Up
Agreements”),
duly
executed and delivered by the senior management of the Company (collectively,
“Management”),
which
limits the rights of Management to sell or transfer Common Stock of the Company
until the Note is repaid in full.
(n) That
certain secured convertible debenture (the “Cornell
Debenture”),
dated
September 9, 2005, issued by the Company to Buyer (as filed within the SEC
as Exhibit 99.4 to the Company’s Current Report on Form 8-K on
September 13, 2005) shall have been amended in a form satisfactory to
Buyer, including extending the maturity date thereof to June 1,
2012.
(o) The
Company shall have entered into (i) an Employment Agreement with Xxxx Xxxxxxx
and (ii) an Agreement with Xxxxxxx X. Xxxxxxxx an individual, relating to the
payment to Turnaround
Partners, Inc., an affiliate of the Company, of
shares
of
common stock of INII representing ten percent (10%) of the common stock of
INII
outstanding as of the date of this Agreement,
in each
case in a form acceptable to Buyer and subject to any additional conditions
agreed to in advance by the parties hereto.
(p) The
Company shall have delivered to Buyer such other documents relating to the
transactions contemplated by this Agreement as Buyer or its counsel may
reasonably request.
8. TERMINATION.
In the
event that the Closing shall not have occurred with respect to Buyer on or
before five (5) Business Days from the date hereof due to the Company’s or
Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party’s failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on
such
date without liability of any party to any other party; provided, however,
that
if this Agreement is terminated pursuant to this Section 8, due to the
failure of the Company to satisfy the conditions to Closing set forth in
Section 7, the Company shall remain obligated to reimburse the
non-breaching Buyer for its expenses described in Section 4(g)
above.
9. MISCELLANEOUS.
(a) Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
Jersey, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New Jersey or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the
State of New Jersey. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Superior Court of New Jersey, sitting in Xxxxxx County
and
the United States District Court for the District of New Jersey sitting in
Newark, New Jersey for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
-26-
(b) Counterparts.
This
Agreement may be executed in two (2) or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party; provided that a facsimile signature shall be considered due execution
and
shall be binding upon the signatory thereto with the same force and effect
as if
the signature were an original, not a facsimile signature.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement; Amendments.
This
Agreement and the other Transaction Documents supersede all other prior oral
or
written agreements between Buyer, the Company, their affiliates and Persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement, the other Transaction Documents and the instruments referenced herein
and therein contain the entire understanding of the parties with respect to
the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and Buyer, and any amendment to this Agreement made in conformity with
the provisions of this Section 9(e) shall be binding on Buyer and all
holders of Securities, as applicable. No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement
is
sought. The Company has not, directly or indirectly, made any agreements with
Buyer relating to the terms or conditions of the transactions contemplated
by
the Transaction Documents except as set forth in the Transaction Documents.
Without limiting the foregoing, the Company confirms that, except as set forth
in this Agreement, Buyer has not made any commitment or promise or has any
other
obligation to provide any financing to the Company or otherwise.
-27-
(f) Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall
be:
If
to the
Company:
Natural
Nutrition, Inc.
000
Xxxxx
Xxxx Xxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx
00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X.
Xxxxxxxx, Chief Executive Officer
Copy
to:
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP
000
X. Xxxxxxxx
Xxxx., Xxxxx 0000
Xxxxx,
XX
00000-0000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X.
Xxxxxx, Esq.
If
to the
Transfer Agent:
Worldwide
Stock Transfer, LLC
000
Xxxxx Xxxx
Xxxx
Xxxxxxx,
XX
00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxx X.
Xxxxxxxx
If
to
Buyer, to its address and facsimile number set forth below its signature to
this
Agreement,
with
a
copy (for informational purposes only) to:
Xxxxxxxxxxxx
Xxxx & Xxxxxxxxx, LLP
000
XXX
Xxxxxxx
Xxxxx
Xxxxx, Xxx
Xxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:(000) 000-0000
Attention:
Xxxx X.
Xxxxxx XX, Esq.
-28-
or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from an overnight courier service
in
accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any purchasers of the Note
or
the Warrant. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of Buyer (unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Note and the Warrant). Buyer may assign some
or
all of its rights hereunder without the consent of the Company, in which event
such assignee shall be deemed to be Buyer hereunder with respect to such
assigned rights.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
(i) Survival.
Unless
this Agreement is terminated under Section 8, the representations and
warranties of the Company and Buyer contained in Sections 2 and 3 and the
agreements and covenants set forth in Sections 4, 5 and 9 shall survive the
Closing and the delivery and exercise of Securities, as applicable. Buyer shall
be responsible only for its own representations, warranties, agreements and
covenants hereunder.
(j) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Indemnification.
In
consideration of Buyer’s execution and delivery of the Transaction Documents and
acquiring the Securities thereunder and in addition to all of the Company’s
other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless Buyer and each other holder of the
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified
Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made
by the Company in the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby
or
(c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (ii) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the
Securities, (iii) any disclosure made by Buyer pursuant to
Section 4(i) or (iv) the status of Buyer or holder of the Securities
as an investor in the Company pursuant to the transactions contemplated by
the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise
set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.
-29-
(l) No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
(m) Remedies.
Buyer
and each holder of the Securities shall have all rights and remedies set forth
in the Transaction Documents and all rights and remedies which such holders
have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights
under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages
by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under the Transaction Documents, any remedy at law may prove to
be
inadequate relief to Buyer. The Company therefore agrees that Buyer shall be
entitled to seek temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond
or
other security.
(n) Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever Buyer exercises
a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then Buyer may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and
rights.
-30-
(o) Payment
Set Aside.
To the
extent that the Company makes a payment or payments to Buyer hereunder or
pursuant to any of the other Transaction Documents or Buyer enforce or exercise
their rights hereunder or thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment
had
not been made or such enforcement or setoff had not occurred.
[Signature
Page Follows]
-31-
IN
WITNESS WHEREOF,
Buyer
and the Company have caused their respective signature page to this Securities
Purchase Agreement to be duly executed as of the date first written
above.
|
COMPANY:
NATURAL NUTRITION,
INC.
|
||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxxxx | |
|
Name: Xxxxxxx
X. Xxxxxxxx
Title: Chief
Executive Officer
|
||
IN
WITNESS WHEREOF,
Buyer
and the Company have caused their respective signature page to this Securities
Purchase Agreement to be duly executed as of the date first written
above.
|
CORNELL
CAPITAL PARTNERS, L.P.
BY: YORKVILLE
ADVISORS, LLC
ITS: INVESTMENT
MANAGER
|
||
| |
|
|
| By: | /s/ Xxxx Xxxxx | |
|
Name: Xxxx
Xxxxx
Title: Senior
Managing Director
|
||
|
Address:
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, XX
00000
Attn: Xxxx Xxxxxx and Xxxx
Xxxxx
|
||
EXHIBITS
Exhibit A Form of
Note
Exhibit B Form of
Warrant
Exhibit C Form of
Registration Rights Agreement
Exhibit D Form of
Irrevocable Transfer Agent Instructions
Exhibit E Form of
Company Counsel Opinion
Exhibit F Form of
Secretary’s Certificate
Exhibit G Form of
Officer’s Certificate
Exhibit H Form
of
Lock-Up Agreement
Exhibit I Audited
Financial Statements of INII
Exhibit J Waiver
and Consent
Exhibit A
[Form of
Note]
Exhibit B
[Form of
Warrant]
Exhibit C
[Form of
Registration Rights Agreement]
Exhibit D
[Form of
Irrevocable Transfer Agent Instructions]
Exhibit E
[Form of
Company Counsel Opinion]
Exhibit F
[Form of
Secretary’s Certificate]
Exhibit G
[Form of
Officer’s Certificate]
Exhibit H
[Form
of Lock-Up Agreement]
Exhibit I
Exhibit J
[Form
of Waiver and Consent]
LOCK
UP AGREEMENT
The
undersigned hereby agrees that for a period commencing on May 31, 2007
and
expiring on the earlier of (a) the date which is ten (10) days after the
date
that all amounts owed to Cornell Capital Partners, LP (the “Investor”)
by
Natural Nutrition, Inc., a Nevada corporation (the “Company”)
have
been fully paid and (b) the date upon which he shall cease to be an officer
or
director of the Company (the “Lock-up
Period”),
he
will not, directly or indirectly, without the prior written consent of
the
Investor, issue, offer, agree or offer to sell, sell, grant an option for
the
purchase or sale of, transfer, pledge, assign, hypothecate, distribute
or
otherwise encumber or dispose of any securities of the Company, including
common
stock or options, rights, warrants or other securities underlying, convertible
into, exchangeable or exercisable for or evidencing any right to purchase
or
subscribe for any common stock (whether or not beneficially owned by the
undersigned), or any beneficial interest therein (collectively, the
“Securities”).
In
order
to enable the aforesaid covenants to be enforced, the undersigned hereby
consents to the placing of (i) legends on certificates representing the
Company’s securities and/or (ii) stop-transfer orders with the transfer agent of
the Company’s securities with respect to any of the Securities registered in the
name of the undersigned or beneficially owned by the undersigned, and the
undersigned hereby confirms the undersigned’s investment in the
Company.
Dated:
May 31, 2007
|
Signature
/s/
Xxxx Xxxxxxx
Name:
Xxxx
Xxxxxxx
Address:
____________________
City,
State, Zip Code: ___________
________________________________
Print
Social Security Number (if applicable)
or
Taxpayer I.D. Number (if
applicable)
|
LOCK
UP AGREEMENT
Except
for those Securities (as defined below) issued to the undersigned for
compensation prior to the date hereof for services rendered to Natural
Nutrition, Inc., a Nevada corporation (the “Company”),
the
undersigned hereby agrees that for a period commencing on May 31, 2007
and
expiring on the earlier of (a) the date which is ten (10) days after the
date
that all amounts owed to Cornell Capital Partners, LP (the “Investor”)
by the
Company have been fully paid and (b) the date upon which he shall cease
to be an
officer or director of the Company (the “Lock-up
Period”),
he
will not, directly or indirectly, without the prior written consent of
the
Investor, issue, offer, agree or offer to sell, sell, grant an option for
the
purchase or sale of, transfer, pledge, assign, hypothecate, distribute
or
otherwise encumber or dispose of any securities of the Company, including
common
stock or options, rights, warrants or other securities underlying, convertible
into, exchangeable or exercisable for or evidencing any right to purchase
or
subscribe for any common stock (whether or not beneficially owned by the
undersigned), or any beneficial interest therein (collectively, the
“Securities”).
In
order
to enable the aforesaid covenants to be enforced, the undersigned hereby
consents to the placing of (i) legends on certificates representing the
Company’s securities and/or (ii) stop-transfer orders with the transfer agent of
the Company’s securities with respect to any of the Securities registered in the
name of the undersigned or beneficially owned by the undersigned, and the
undersigned hereby confirms the undersigned’s investment in the
Company.
Dated:
May 31, 2007
| Signature
/s/
Xxxxxxx X. Xxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxx
Address:
000 Xxxxx Xxxx Xxx Xxxx, Xxxxx 000
Xxxx,
Xxxxx, Zip Code: Xxxxxxx, Xxxxx 00000
____________________________
Print
Social Security Number (if applicable)
or
Taxpayer I.D. Number (if
applicable)
|
WAIVER AND
CONSENT
This
Waiver
and Consent is
made
as of May 31, 2007, by and between Cornell Capital Partners, LP, a Cayman Island
exempted limited partnership having its principal place of business at 000
Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000 (“Cornell
Capital”)
and
Natural Nutrition, Inc., a Nevada corporation having its principal place of
business at 000 Xxxxx Xxxx Xxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (the
“Company”
and
together with Cornell Capital the “Parties”
and
each, a “Party”).
RECITALS:
WHEREAS,
the
Parties have entered into that certain Securities Purchase Agreement (the
“2005
SPA”),
dated
September 9, 2005 (the “Transaction
Date”),
that
certain Convertible Debenture, dated the Transaction Date (the “Convertible
Debentures”),
that
certain Security Agreement, dated the Transaction Date (the “2005
SA”)
and
that certain Investor Registration Rights Agreement, dated the Transaction
Date
(the “2005
RRA”,
and
together with the 2005 SPA, the Convertible Debentures, the 2005 SA and all
other transaction documents related thereto or contemplated thereby, the
“2005
Transaction Documents”)
which
have been filed by the Company with the Company’s Current Report on Form 8-K
with the U.S. Securities and Exchange Commission on September 13,
2005;
WHEREAS,
the
2005 SPA contains a provision which restricts the Company, for so long as any
Convertible Debentures are outstanding, from entering into, amending, modifying,
or supplementing any agreement, transaction, commitment or arrangement with
any
of its subsidiaries or any of its subsidiary’s directors, persons who were
officers or directors at any time during the two (2) years prior to the
Transaction Date, stockholders who beneficially own five percent (5%) or more
of
the Company’s common stock, par value $0.001 per share (“Common
Stock”),
Affiliates (as such term is defined in the 2005 SPA) or with any individual
related by blood, marriage, or adoption to any such individual or with any
entity in which any such entity or individual owns a five percent (5%) or more
beneficial ownership interest (collectively, the “Affiliate
Conflict”);
WHEREAS,
the
2005 SPA also contains a provision which restricts the Company, for so long
as
any Convertible Debentures are outstanding and without the consent of Cornell
Capital, to (i) issue or sell shares of Common Stock or preferred stock without
consideration or for a consideration per share less than the bid price of the
Common Stock determined immediately prior to its issuance, (ii) issue any
warrant, option, right, contract, call or other security instrument granting
the
holder thereof the right to acquire Common Stock without consideration or for
a
consideration less than such Common Stock’s bid price value determined
immediately prior to its issuance and (iii) enter into any security instrument
granting to the holder a security interest in any and all assets of the Company
(the “Issuance
Conflicts”
and
together with the Affiliate Conflicts, the “2005
SPA Conflicts”);
WHEREAS,
the
2005 SA contains certain provisions which restrict the Company, from the date
thereof until the Obligations (as defined therein) have been fully paid and
satisfied and unless Cornell Capital shall consent otherwise, from (a) directly
or indirectly making, creating, incurring, assuming or permitting to exist
any
assignment, transfer, pledge, mortgage, security interest or other lien or
encumbrance of any nature in, to or against any part of the Pledged Property
(as
defined therein), (b) issuing or selling its stock, stock options, bonds, notes
or other corporate securities (except as permitted under the 2005 SPA) and
(c)
creating, incurring, assuming or suffering to exist any additional indebtedness
of any description whatsoever in an aggregate amount in excess of $250,000
outside of the ordinary course of its business (collectively, the “Security
Conflicts”
and
together with the 2005 SPA Conflicts, the “2005
Transaction Conflicts”);
WHEREAS,
the
Company acknowledges that as of the date hereof, the Obligations (as defined
in
the 2005 Security Agreement) have not been fully paid and
satisfied;
WHEREAS,
the
Company acknowledges that it may be in default under the 0000 XXX for failure
to
file the Registration Statement (as such term is defined therein) by the
Scheduled Filing Deadline (as such term is defined therein) and that it may
owe
to Cornell Capital amounts in the form of liquidated damages calculated in
accordance with Section 2(c) therein (the “2005
RRA Default”);
WHEREAS,
the
Company desires to enter into, contemporaneously with the execution of this
Waiver and Consent, a Securities Purchase Agreement with Cornell Capital
pursuant to which Cornell Capital will purchase a secured convertible note
(the
“Note”)
in the
amount of U.S. $9,292,894
(the “Purchase
Price”),
a
related warrant pursuant to which Cornell Capital shall be entitled to purchase
up to thirty-three percent (33%) of the Purchase Price of Common Stock (the
“Warrant”),
a
related Registration Rights Agreement (the “2007
RRA”),
a
management compensation agreement with an affiliate (the “2007
MA”)
and an
amended and restated 2005 SA (the “Amended
SA”,
and
together with the 2007 SPA, the Note, the Warrant, the 2007 RRA, the 2007 MA
and
all other transaction documents related thereto or contemplated thereby, the
“2007
Transaction Documents”)
to
secure the Company’s obligations under the 2007 Transaction
Documents;
WHEREAS,
the Company
desires to obtain the express consent of Cornell Capital to enter into and
carry
out its respective duties and obligations under the 2007 Transaction Documents
and to obtain from Cornell Capital an irrevocable waiver of the 2005 Transaction
Conflicts, the 2005 RRA Default and any and all other conflicts arising under
the 2005 Transaction Documents with respect to Company entering into the 2007
Transaction Documents and all other defaults of the Company under the 2005
Transaction Documents; and
WHEREAS,
based
on the foregoing, Cornell Capital is willing to provide a one-time consent
to
the Company to enter into and to carry out its respective duties and obligations
under the 2007 Transaction Documents and to grant to the Company an irrevocable
waiver of the 2005 Transaction Conflicts, the 2005 RRA Default and any and
all
other conflicts arising under the 2005 Transaction Documents with respect to
the
Company entering into the 2007 Transaction Documents and all other defaults
of
the Company under the 2005 Transaction Documents.
2
AGREEMENT:
NOW,
THEREFORE,
in
consideration of the foregoing and the mutual promises made herein, and for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Parties agree as follows:
1.
Recitals.
The
Recitals herein above are hereby incorporated into this Waiver and Consent
as if
fully stated herein.
2.
Consent.
Cornell
Capital hereby consents to the Company entering into and carrying out its
respective duties and obligations under the 2007 Transaction Documents, and
only
the 2007 Transaction Documents. This Consent is a one-time consent and Cornell
Capital may enforce this provision against the Company and its assigns for
any
and all future agreements or other instruments to which the Company and its
assigns are a party.
3. Waiver.
Cornell
Capital hereby grants to the Company an irrevocable waiver of the 2005
Transaction Conflicts, the 2005 RRA Default and any and all other conflicts
arising under the 2005 Transaction Documents with respect to the Company
entering into the 2007 Transaction Documents, and only the 2007 Transaction
Documents, and all other defaults of the Company under the 2005 Transaction
Documents.
4. Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Waiver and Consent shall be governed by the internal laws of the State
of New Jersey, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New Jersey or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New Jersey. Each Party hereby irrevocably submits to
the
exclusive jurisdiction of the Superior Court of New Jersey, sitting in Xxxxxx
County and the United States District Court for the District of New Jersey
sitting in Newark, New Jersey for the adjudication of any dispute hereunder
or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is
improper. Each Party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Waiver and Consent and agrees that such service shall constitute good
and
sufficient service of process and notice thereof. Nothing contained herein
shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
[Remainder
of Page Intentionally Left Blank]
3
In
Witness Whereof,
this
Waiver and Consent has been executed under seal by the Parties written
below as of the day and year first above written.
| CORNELL
CAPITAL PARTNERS, LP
By:
Yorkville Advisors, LLC
Its:
Investment Manager
By:
/s/
Xxxx Xxxxx
Name:
Xxxx Xxxxx
Title:
Senior Managing Director
NATURAL
NUTRITION, INC.
By:
/s/
Xxxxxxx X. Xxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxx
Title: Chief
Executive Officer
|
4
