EXHIBIT 10.15
SECURITIES PURCHASE AGREEMENT, dated as of August 16, 2005 (this
"Agreement"), between NUTRA PHARMA CORP., a California corporation with
principal executive offices at 0000 Xxxx Xxxxx Xxxx, Xxxxxxx Xxxxx, Xxxxxxx
00000 (the "Company"), and SBI BRIGHTLINE XII LLC, a Delaware limited liability
company with its principal offices at 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the "Purchaser").
INTRODUCTION
Subject to the terms and conditions of this Agreement, the Company may
issue and sell to the Purchaser and the Purchaser shall purchase from the
Company the following: (i) up to 24,000,000 shares of the Common Stock (the
"Shares"), par value $0.001 per share (the "Common Stock"); (ii) warrants (the
"$0.30 Warrants") exercisable for an aggregate of 2,000,000 shares of Common
Stock at the exercise price of $0.30 per share, in the form attached hereto as
Exhibit A hereto; and (iii) warrants (the "$0.40 Warrants"), exercisable for an
aggregate of 2,000,000 shares of Common Stock at the exercise price of $0.40 per
share, in the form of Exhibit B hereto, and (iii) warrants (the "$0.50
Warrants", and, together with the $0.30 Warrants and the $0.40 Warrants, the
"Warrants") exercisable for an aggregate of 2,000,000 shares of Common Stock at
the exercise price of $0.50 per share, in the form attached hereto as Exhibit C
hereto. This Agreement, together with the Warrants, are hereinafter referred to
as the "Transaction Agreements".
NOW THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and the Purchaser hereby agree as follows:
ARTICLE I
ACQUISITION OF SECURITIES
SECTION 1.01 PURCHASE AND SALE.
(a) Schedule 1.01(a) attached hereto defines 24 tranches of Shares that
the Purchaser has agreed to purchase from the Company (each, a "Tranche") and,
with respect to each Tranche, sets forth the number of Shares constituting such
Tranche (the "Tranche Shares") and the purchase price per share for the Tranche
Shares in such Tranche (the "Tranche Purchase Price"). The number of shares in
each Tranche, and the purchase price for each share, shall be adjusted for any
stock split, stock dividend or reverse stock split occurring after the date
hereof and prior to the closing of a Tranche.
(b) The Company may, in its sole discretion, elect to sell the Tranche
Shares of any Tranche to the Purchaser at any time commencing on the date (the
"Effective Date") on which the Registration Statement (as defined in Section
3.01(a)) of the Company covering the resale of the Shares is declared effective
under the Securities Act of 1933, as amended (the "Securities Act"), and
terminating reasonably promptly thereafter, provided, however, (i) the Company
must elect to sell all of the Tranche Shares included in a Tranche if it elects
to sell any of the Tranche Shares in such Tranche; (ii) the Company must elect
to sell the Tranche Shares in the order that
the Tranches are listed on Schedule 1.01(a); and (iii) the total beneficial
ownership of the Purchaser of shares of Common Stock shall not exceed 9.8% of
the Common Stock, giving effect to the acquisition of the Tranche or Tranches in
question. Subject to the immediately preceding sentence, the Company may elect
to sell Tranche Shares included in more than one Tranche at the same time. To
effect its election to sell Shares, the Company must give written notice thereof
(an "Election Notice") to the Purchaser. The Election Notice shall specify the
Tranche or Tranches with respect to which the election is being made and the
date on which the closing of the sale and purchase of the Tranche Shares shall
occur; provided, such date shall be a Business Day (as hereinafter defined) and
shall not be earlier than five Business Days after the date such Election Notice
is given to the Purchaser. An Election Notice shall be irrevocable except as
provided in Section 1.02(c). For purposes hereof, the term "Business Day" shall
mean any day which is not (i) a Saturday or a Sunday or (ii) a day on which
banking institutions are generally authorized or obligated to close in the City
of Los Angeles, California. Subject to the foregoing and provided that the
representations and warranties of the Company set forth herein are true and
correct as of the date of an Election Notice and that all conditions to the
respective obligations of the parties hereto set forth herein have either been
satisfied or waived, in the event that the Company gives an Election Notice, the
Purchaser shall be obligated to purchase the Tranche Shares, covered by such
notice.
(c) Simultaneous with the purchase of the Tranche Shares, the Company
shall deliver to the Purchaser the Warrants applicable to such Tranche.
SECTION 1.02 CLOSING PROCEDURES; THE CLOSINGS.
(a) Subject to the satisfaction or waiver of the conditions precedent
set forth in Article IV hereof, the closing of a purchase of Tranche Shares by
the Purchaser pursuant to this Agreement (each, a "Closing") shall occur at
10:00 a.m. on the date specified in the Election Notice delivered by the Company
with respect to such Tranche Shares unless the Company and the Purchaser have
mutually agreed on a different time or date with respect to such Closing (the
time and date of the Closing of a particular Tranche is referred to herein as
the "Tranche Closing Date"). Unless otherwise agreed by the Company and the
Purchaser, each Closing shall occur at the offices of Reitler Xxxxx & Xxxxxxxxxx
LLC, New York, New York, counsel to the Purchaser.
(b) At each Closing, (i) each of the Company and the Purchaser shall
deliver to the other, as applicable, any documents required to be delivered by
Sections 4.01 and 4.02 hereof which have not been delivered prior to such
Closing, (ii) the Purchaser shall deliver to the Company an acknowledgement of
the applicable Tranche Purchase Price for the Tranche Shares being purchased at
the Closing and state the date, not to exceed ten Business Days following the
Tranche Closing Date, on or prior to which the Tranche Purchase Price shall be
delivered by the Purchaser to the Company by wire transfer of immediately
available funds to an account designated in writing by the Company at or prior
to the Closing, and (iii) the Company shall deliver to the Purchaser one or more
stock certificates, determined in accordance with the instructions of the
Purchaser, representing the Tranche Shares being purchased or shall cause the
Tranche Shares being purchased to be electronically transferred to the
Purchaser. The payment of the Tranche Purchase Price referenced in clause (ii)
shall be deemed to have been delivered at the Closing for the purposes hereof.
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(c) If a Closing does not occur on a proposed Tranche Closing Date
because the conditions specified in Section 1.02(b) to be fulfilled by the
Purchaser and/or Article IV were not satisfied at the time of the applicable
proposed Tranche Closing Date, the Election Notice with respect to the Tranche
or Tranches proposed to be sold on such proposed Tranche Closing Date shall
automatically be revoked; provided, however, such revocation shall not impair
the right of the Company to give another Election Notice with respect to the
Tranche or Tranches covered by the revoked Election Notice or to compel the
Purchaser to purchase any Tranche Shares included in such Tranche or Tranches on
a subsequent Tranche Closing Date on which the conditions specified in such
sections and Article hereof are satisfied.
(d) If a Closing does not occur on a proposed Tranche Closing Date
because the conditions specified in Section 1.02(b) to be fulfilled by the
Company and/or Section 4.01 were not satisfied at the time of the applicable
proposed Tranche Closing Date, the Election Notice with respect to any Tranche
or Tranches proposed to be sold on such proposed Tranche Closing Date shall, at
the option of the Purchaser, be revoked and the Purchaser's obligations under
this Article I (for such Tranche and subsequent Tranches) shall terminate.
ARTICLE II
REPRESENATIONS AND WARRANTIES
SECTION 2.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Purchaser as follows:
(a) (i) The Common Stock has been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Company is subject to the periodic reporting requirements of Section 13 of the
Exchange Act. The Company has heretofore provided to the Purchaser true,
complete, and correct copies of all forms, reports, schedules, statements, and
other documents required to be filed by it under the Exchange Act since at least
December 31, 2003, as such documents have been amended since the time of the
filing thereof (collectively, including all forms, reports, schedules,
statements, and other documents filed by the Company therewith, the "SEC
Documents"). The SEC Documents, including, without limitation, any financial
statements and schedules included therein, at the time filed or, if subsequently
amended, as so amended, (i) did not contain any untrue statement of a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading and (ii) complied in all material respects with the
applicable requirements of the Exchange Act and the applicable rules and
regulations thereunder.
(ii) The Company maintains disclosure controls and procedures
required by Rule 13a-15 or 15d-15 under the Exchange Act; such controls and
procedures are effective to ensure that all material information concerning the
Company and its subsidiaries is made known on a timely basis to the individuals
responsible for the preparation of the Company's filings with the SEC and other
public disclosure documents. The Company has delivered to the Purchaser copies
of, all written descriptions of, and all policies, manuals and other documents
promulgating, such disclosure controls and procedures. To the Company's
knowledge, each
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director and executive officer thereof has filed with the SEC on a timely basis
all statements required by Section 16(a) of the Exchange Act and the rules and
regulations thereunder since at least December 31, 2004. As used in this Section
2.01(a), the term "file" shall be broadly construed to include any manner in
which a document or information is furnished, supplied or otherwise made
available to the SEC.
(iii) The Chief Executive Officer and the Chief Financial Officer
of the Company have signed, and the Company has furnished to the SEC, all
certifications required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of
2002; such certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither the
Company nor any of its officers has received notice from any governmental entity
questioning or challenging the accuracy, completeness, form or manner of filing
or submission of such certifications.
(iv) The Company has heretofore has provided to the Purchaser
complete and correct copies of all certifications filed with the SEC pursuant to
Sections 302 and 906 of Xxxxxxxx-Xxxxx Act of 2002 and hereby reaffirms,
represents and warrants to the Purchaser the matters and statements made in such
certificates.
(b) At the date hereof and at each Tranche Closing Date:
(i) the Common Stock is and shall be traded and quoted in the
over-the-counter Bulletin Board market or the Nasdaq Stock Market (collectively,
"Nasdaq");
(ii) the Company has and shall have performed or satisfied all of
its undertakings to, and of its obligations and requirements with, the
Commission; and
(iii) the Company has not, and shall not have taken any action that
would preclude, or otherwise jeopardize, the inclusion of the Common Stock for
quotation on the Nasdaq.
(c) Receptopharm, Inc., a Nevada corporation, and Nanologix, Inc., a
Delaware corporation are investments of the Company ("Investments"). Other than
the Investments or any entity in which the Company owns more than 50% of the
voting control (a "Subsidiary"), the Company has no subsidiaries or affiliated
corporation or owns any interest in any other enterprise (whether or not such
enterprise is a corporation). Each of the Company and Subsidiary has been duly
organized and is validly existing as a corporation in good standing under the
laws of the respective jurisdiction of its incorporation with full power and
authority (corporate and other) to own, lease and operate its respective
properties and conduct its respective business as described in the SEC
Documents; each of the Company and Subsidiary is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the ownership or leasing of its respective properties or the conduct of its
respective business requires such qualification, except where the failure to be
so qualified or be in good standing would not have a material adverse effect on
the business, prospects, condition (financial or otherwise), and results of
operations of the Company and Subsidiary taken as a whole; no proceeding has
been instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification;
each of the
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Company and Subsidiary is in possession of, and operating in compliance with,
all authorizations, licenses, certificates, consents, orders and permits from
state, federal, foreign and other regulatory authorities that are material to
the conduct of its business, all of which are valid and in full force and
effect; neither the Company nor Subsidiary is in violation of its charter or
bylaws or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any material bond, debenture, note
or other evidence of indebtedness, or in any material lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which it is a party or by which it or its respective
properties or assets may be bound, which violation or default would have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and Subsidiary taken as a whole; and
neither the Company nor Subsidiary is in violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or Subsidiary or over its respective properties or assets, which
violation would have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and Subsidiary taken
as a whole. The SEC Documents accurately describe any corporation, association
or other entity owned or controlled, directly or indirectly, by the Company or
Subsidiary.
(d) The Company has full legal right, power and authority to enter into
each of the Transaction Agreements and to perform the transactions contemplated
hereby and thereby. Each of the Transaction Agreements has been duly authorized,
executed and delivered by the Company and, assuming the due authorization,
execution, and delivery thereof by the other parties thereto, is a valid and
binding agreement on the part of the Company, enforceable in accordance with its
respective terms; the performance of each of the Transaction Agreements and the
consummation of the transactions herein or therein contemplated will not result
in a breach or violation of any of the terms and provisions of, or constitute a
default under, (i) any bond, debenture, note or other evidence of indebtedness,
or under any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which the Company
or Subsidiary is a party or by which its respective properties or assets may be
bound, (ii) the charter or bylaws of the Company or Subsidiary, or (iii) any
law, order, rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or Subsidiary or over its respective properties or
assets, which violation or default would have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and Subsidiary taken as a whole. No consent, approval, authorization or order
of, or qualification with, any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or Subsidiary or over
its respective properties or assets is required for the execution and delivery
of any Transaction Agreement and the consummation by the Company of the
transactions herein and therein contemplated, except such as may be required
under the Securities Act, the Exchange Act, or under state or other securities
or blue sky laws, all of which requirements have been, or in accordance
therewith will be, satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened, action, suit, claim or proceeding against the Company or
Subsidiary, or any of its respective officers or any of its properties, assets
or rights, before any court, government or governmental agency or body, domestic
or foreign, having jurisdiction over the Company or Subsidiary or over
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its officers or properties or otherwise that (i) is reasonably likely to result
in any material adverse change in the business, prospects, financial condition
or results of operations of the Company and Subsidiary taken as a whole or might
materially and adversely affect their properties, assets or rights taken as a
whole, (ii) might prevent consummation of the transactions contemplated by the
Transaction Agreements, (iii) will be required to be disclosed in the
Registration Statement, except to the extent heretofore disclosed in the SEC
Documents, or (iv) alleging violation of any Federal or state securities laws.
(f) The authorized capital stock of the Company consists of two billion
shares of Common Stock, of which 60,854,682 shares of Common Stock are
outstanding. Each of such outstanding shares of Common Stock and each
outstanding share of capital stock of Subsidiary, is duly and validly
authorized, validly issued, fully paid, and nonassessable, has not been issued
and is not owned or held in violation of any preemptive or similar right of
stockholders. Except as disclosed in the SEC Documents, (i) there is no
commitment, plan, or arrangement to issue, and no outstanding option, warrant,
or other right calling for the issuance of, any share of capital stock of, or
any security or other instrument convertible into, exercisable for, or
exchangeable for capital stock of, the Company or Subsidiary, except for an
aggregate of 13,600,000 options and/or warrants currently outstanding to acquire
shares of Common Stock, and (ii) except as described in the SEC Documents, there
is outstanding no security or other instrument convertible into or exchangeable
for capital stock of the Company or Subsidiary. The Shares and the shares of
Common Stock issuable upon the exercise of the Warrants (the "Warrant Shares")
have been duly authorized for issuance and sale to the Purchaser pursuant hereto
and the Warrants, respectively, and, when issued and delivered by the Company in
accordance with the terms of this Agreement against payment therefore and the
relevant Warrant or Warrants, respectively, will be duly and validly issued and
fully paid and nonassessable, and will be sold free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest of any kind
established by the Company; and no preemptive or similar right, co-sale right,
registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Shares or Warrant Shares or the
issuance and sale thereof other than those that have been expressly waived prior
to the date hereof and those that will automatically expire upon the execution
hereof. No further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and sale or
transfer of the Shares, the Warrants, or the Warrant Shares, except as may be
required under the Securities Act, the rules and regulations promulgated
thereunder or under state or other securities or blue sky laws. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the SEC Documents accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights under the Securities Act, the Exchange Act, and the rules and regulations
promulgated thereunder. The Company agrees to immediately reserve, free of
preemptive rights and other similar contractual rights of stockholders, a
sufficient number of its authorized, but unissued, shares of its Common Stock to
cover the Shares and the Warrant Shares.
(g) Xxxxxx LLP and Xxxxxxx X. Xxxxxx and Associates, P.A.
(collectively, the "Auditors"), which have examined the consolidated financial
statements of the Company, together with the related schedules and notes, for
the period from February 1, 2000 (inception)
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to December 31, 2004 and for the three month period ended March 31, 2005,
respectively, filed with the Commission as a part of the SEC Documents, and
which, pursuant to the rules and regulations of the Commission are to be
included in the Registration Statement, are independent accountants within the
meaning of the Securities Act, the Exchange Act, and the rules and regulations
promulgated thereunder; the audited consolidated financial statements of the
Company, together with the related schedules and notes, and the unaudited
financial information, forming part of the SEC Documents, fairly present and
will fairly present the financial position and the results of operations of the
Company at the respective dates and for the respective periods to which they
apply; and all audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, filed with the Commission as part of the SEC Documents,
complied and will comply as to form in all material respects with applicable
accounting requirements and with the rules and regulations of the Commission
with respect hereto when filed, have been and will be prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved except as may be otherwise stated therein (except as may be
indicated in the notes thereto or as permitted by the rules and regulations of
the Commission) and fairly present and will fairly present, subject in the case
of the unaudited consolidated financial statements, to customary year end audit
adjustments, the financial position of the Company as at the dates thereof and
the results of its operations and cash flows. The procedures pursuant to which
the aforementioned consolidated financial statements have been audited are
compliant with generally accepted auditing standards. The selected and summary
consolidated financial and statistical data included in the SEC Documents
present and will present fairly the information shown therein and have been
compiled on a basis consistent with the audited consolidated financial
statements presented therein. No other financial statements or schedules are
required to be included in the SEC Documents. The financial statements referred
to in this Section 2.01(g) contain all certifications and statements required
the SEC's Order, dated June 27, 2002, pursuant to Section 21(a)(1) of the
Exchange Act (File No. 4-460), Rule 13a-14 or 15d-14 under the Exchange Act, or
18 U.S.C. Section 1350 (Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002)
with respect to the report relating thereto. Since March 31, 2005,
(i) There has at no time been a material adverse change in the
financial condition, results of operations, businesses, properties,
assets, liabilities, or future prospects of the Company and Subsidiary
taken as a whole;
(ii) The Company has not authorized, declared, paid, or
effected any dividend or liquidating or other distribution in respect
of its capital stock or any direct or indirect redemption, purchase, or
other acquisition of any stock of the Company or Subsidiary.
(iii) Except as set forth in the SEC Documents, the operations
and businesses of the Company have been conducted in all material
respects only in the ordinary course.
There is no fact known to the Company which materially adversely affects or in
the future (as far as the Company can reasonably foresee) may materially
adversely affect the financial condition, results of operations, businesses,
properties, assets, liabilities, or future prospects of the Company; provided,
however, that the Company expresses no opinion as to political or economic
matters of general applicability. The Company has made known, or caused to be
made known, to the accountants or auditors who have prepared, reviewed, or
audited the
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aforementioned consolidated financial statements all material facts and
circumstances which could affect the preparation, presentation, accuracy, or
completeness thereof.
(h) Subsequent to the respective dates as of which information is given
in the SEC Documents, there has not been (i) any material adverse change in the
business, prospects, financial condition or results of operations of the Company
and Subsidiary taken as a whole, (ii) any transaction committed to or
consummated that is material to the Company and Subsidiary taken as a whole,
(iii) any obligation, direct or contingent, that is material to the Company and
Subsidiary taken as a whole incurred by the Company or Subsidiary, except such
obligations as have been incurred in the ordinary course of business, (iv) any
change in the capital stock or outstanding indebtedness of the Company or
Subsidiary that is material to the Company and Subsidiary taken as whole, (v)
any dividend or distribution of any kind declared, paid, or made on the capital
stock of the Company, or (vi) any loss or damage (whether or not insured) to the
property of the Company or Subsidiary which has a material adverse effect on the
business, prospects, condition (financial or otherwise), or results of
operations of the Company and Subsidiary taken as a whole.
(i) Except as set forth in the SEC Documents, (i) each of the Company
and Subsidiary has good and marketable title to all properties and assets
described in the SEC Documents as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest, other than
such as would not have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and Subsidiary taken
as a whole, (ii) the agreements to which the Company and Subsidiary is a party
described in the SEC Documents are legal, valid and binding agreements,
enforceable by the Company or Subsidiary, as applicable, in accordance with
their terms, and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in breach or default under any of such
agreements, and (iii) each of the Company and Subsidiary has valid and
enforceable leases for all properties described in the SEC Documents as leased
by it. Except as set forth in the SEC Documents, each of the Company and
Subsidiary owns or leases all such properties as are necessary to its respective
operations as now conducted and as described in the SEC Documents.
(j) Each of the Company and Subsidiary has timely filed all respective
federal, state, local and foreign tax returns required to be filed by it (or has
received extensions with respect to such filings) and has paid all taxes shown
thereon as due, and there is no tax deficiency that has been or, to the best of
the Company's knowledge, is likely to be asserted against the Company or
Subsidiary if audited, which might have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and Subsidiary taken as a whole, and all tax liabilities are adequately provided
for on the books of the Company and Subsidiary.
(k) Each of the Company and Subsidiary maintains insurance with
insurers of recognized financial responsibility of the types and in the amounts
generally deemed adequate for its business including, but not limited to,
insurance covering real and personal property owned or leased by the Company or
Subsidiary, as applicable, against theft, damage, destruction, acts of
vandalism, and all other risks customarily insured against, all of which
insurance is in full force and effect; neither the Company nor Subsidiary has
been refused any insurance coverage sought or applied for; and neither the
Company not Subsidiary has reason to believe that it will
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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 materially and adversely
affect the business, prospects, condition, or results of operations of the
Company and Subsidiary taken as a whole.
(l) No labor disturbance by the employees of the Company or Subsidiary
exists or, to the best of the Company's knowledge, is imminent. The Company is
not aware of any existing or imminent labor disturbance by the employees of any
principal suppliers or customers of the Company or Subsidiary that might be
expected to result in any material adverse change in the business, prospects,
financial condition, or results of operations of the Company and Subsidiary
taken as a whole. No collective bargaining agreement exists with any of the
Company's or Subsidiary's employees and, to the best of the Company's knowledge,
no such agreement is imminent.
(m) Each of the Company and Subsidiary owns or possesses adequate
rights to use all patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names, logos, and copyrights described or
referred to in the SEC Documents as owned by or used by it or that are necessary
to conduct its respective businesses as described in the SEC Documents; neither
the Company nor Subsidiary has received any notice of, or has knowledge of, any
infringement of or conflict with asserted rights of the Company or Subsidiary by
others with respect to any patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names, logos, or copyrights described
or referred to in the SEC Documents as owned by or used by it; and neither the
Company nor Subsidiary has received any notice of, or has knowledge of, any
infringement of, or conflict with, asserted rights of others with respect to any
patents, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names, logos, or copyrights described or referred to in the SEC
Documents as owned by or used by it or which, individually or in the aggregate,
in the event of an unfavorable decision, ruling or finding, would have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and Subsidiary taken as a whole.
(n) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future, to conduct its affairs in such a manner as to ensure that it is not and
will not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act and such
rules and regulations.
(o) Neither the Company nor Subsidiary has, and no person or entity
acting on behalf or at the request of the Company or Subsidiary has, at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any other applicable jurisdiction.
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(p) Neither the Company nor Subsidiary, nor any person acting on behalf
thereof, has taken or will take, directly or indirectly, any action designed to,
or that might reasonably be expected to cause or result in, stabilization in
violation of law, or manipulation, of the price of the Common Stock to
facilitate the sale or resale of the Shares or the Warrant Shares.
(q) [INTENTIONALLY OMITTED]
(r) Except as set forth in the SEC Documents, (i) each of the Company
and Subsidiary is in compliance in all material respects with all rules, laws
and regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
that are applicable to its business, (ii) neither the Company nor Subsidiary has
received notice from any governmental authority or third party of an asserted
claim under Environmental Laws, which claim is required to be disclosed in the
SEC Documents, (iii) to the best knowledge of the Company, neither the Company
nor Subsidiary is likely to be required to make future material capital
expenditures to comply with Environmental Laws (iv) no property which is owned,
leased or occupied by the Company or Subsidiary has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), or
otherwise designated as a contaminated site under applicable state or local law,
and (v) neither the Company nor Subsidiary is in violation of any federal or
state law or regulation relating to occupational safety or health.
(s) The books, records and accounts of each of the Company and
Subsidiary accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the results of operations of, the
Company and Subsidairy, as applicable, all to the extent required by generally
accepted accounting principles. Each of the Company and Subsidiary maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(t) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or Subsidiary to, or for the benefit of, any of the
officers, directors, or director-nominees of the Company or Subsidiary or any of
the members of the families of any of them, except as disclosed in the SEC
Documents.
(u) The Company is party to an exclusive financing agreement with
Xxxxxxx & Company LLC, an affiliate of the Chairman of the Board of Directors of
the Company, which agreement provides for an 8% success fee for any cash
proceeds in any equity financing and warrants for 10% of the shares issued in
such financing at an exercise price equal to the purchase price in such
transaction. The Company agrees to cause Xxxxxxx & Company LLC to enter into
10
an agreement with Bedrock Securities LLC, as joint placement agent in form and
such reasonably satisfactory to Bedrock Securities LLC. Except for the
foregoing, neither the Company nor Subsidiary has incurred any liability, direct
or indirect, for brokers, finders' or similar fees on behalf of or payable by
the Company or Subsidiary or the Purchaser in connection with the Transaction
Agreements or any other transaction involving the Company and the Purchaser.
(v) Except as set forth in the SEC Documents, no stockholder of the
Company has any right (which has not been waived or has not expired by reason of
lapse of time following notification of the Company's intent to file the
Registration Statement) to request or require the Company to register the sale
of any shares owned by such stockholder under the Securities Act on the
Registration Statement.
(w) Neither the Company or Subsidiary, nor, to the best knowledge of
the Company, any director, officer, agent, employee, or other person associated
with, or acting on behalf of, the Company or any Subsidiary, has, directly or
indirectly: used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity; made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds;
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended;
or made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment. The Company's internal accounting controls and procedures are
sufficient to cause the Company and Subsidiary to comply in all respects with
the Foreign Corrupt Practices Act of 1977, as amended.
(x) Except as disclosed in the SEC Documents, no director, officer, or
employee of the Company or Subsidiary has any interest, whether as an employee,
officer, director, shareholder, agent, independent contractor, security holder,
creditor, consultant, or otherwise (other than as less than 1% shareholder of a
publicly traded company), either directly or indirectly, in any person (whether
a corporation, partnership, limited partnership, limited liability company,
limited liability partnership, business trust, sole proprietorship, or
otherwise) that presently (i) provides any services or designs, produces and/or
sells any products or product lines, or engages in any activity which is the
same, similar to or competitive with any activity or business in which the
Company or Subsidiary is now engaged; (ii) is a supplier of, customer of,
creditor of, or has an existing contractual relationship with the Company or
Subsidiary; or (iii) has any direct or indirect interest in any asset or
property used by the Company or Subsidiary or any property, real or personal,
tangible or intangible, that is necessary or desirable for the conduct of the
business of the Company or the Subsidiary. Except as disclosed in the SEC
Documents, no current or former stockholder, director, officer or employee of
any member of the Company or Subsidiary or any affiliate thereof, is at present,
or since the inception of the Company has been, directly or indirectly through
his affiliation with any other person, a party to any transaction (other than as
an employee) with the Company or Subsidiary providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
cash payments to any such person.
(y) (i) The Company is in compliance with, and is not in violation of,
applicable federal, state, local or foreign statutes, laws and regulations
(including without limitation, any applicable building, zoning or other law,
ordinance or regulation) affecting its properties or the
11
operation of its business. The Company is not subject to any order, decree,
judgment or other sanction of any court, administrative agency or other
tribunal.
(ii) Each of The Company, its directors and its senior financial
officers has consulted with the Company's independent auditors and with the
Company's outside counsel with respect to, and (to the extent applicable to the
Company) is familiar in all material respects with all of the requirements of,
Xxxxxxxx-Xxxxx Act of 2002. The Company is in compliance with the provisions of
such act applicable to it as of the date hereof and has implemented such
programs and has taken reasonable steps, upon the advice of the Company's
independent auditors and outside counsel, respectively, to ensure the Company's
future compliance (not later than the relevant statutory and regulatory
deadlines therefore) with all provisions of such act which shall become
applicable thereto after the date hereof.
(z) Except for the representations and warranties contained in this
Section 2.01, the Company makes no representation or warranty to the Company,
express or implied, in connection with the transactions contemplated by this
Agreement.
SECTION 2.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER. The Purchaser represents and warrants to the Company as follows:
(a) The Purchaser is a limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation.
(b) The Purchaser has full legal right, power and authority to enter
into this Agreement and to perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Purchaser. The
execution, delivery and performance of this Agreement by the Purchaser and the
consummation of the transactions herein contemplated will not violate any
provision of the organizational documents of the Purchaser and will not result
in the creation of any lien, charge, security interest or encumbrance upon any
assets or property of the Purchaser pursuant to the terms or provisions of, or
will not conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a default under
any agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which the Purchaser is a party or by which the
Purchaser or any of its assets or properties may be bound or affected or any
statute or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other governmental body
applicable to the Purchaser or any of its properties. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution, delivery and
performance by the Purchaser of this Agreement or the consummation by the
Purchaser of the transactions contemplated hereby. Assuming the valid execution
hereof by the Company, this Agreement will constitute the legal, valid and
binding obligation of the Purchaser, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Purchaser
in Section 3.03 hereof may be legally unenforceable.
12
(c) There are no legal or governmental actions, suits or proceedings
pending or, to the Purchaser's knowledge, threatened to which the Purchaser is
or may be a party which seeks to prevent or restrain the transactions
contemplated by this Agreement or to recover damages as a result of the
consummation of such transactions. To the knowledge of the Purchaser, the
Purchaser has not been and is not currently the subject of an investigation or
inquiry by the Commission, National Association of Securities Dealers, Inc.,
NASD Regulation, Inc., or any state securities commission.
(d) The Purchaser is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares representing an investment decision like that involved in the purchase of
the Shares, the Warrants, and the Warrant Shares, including investments in
securities issued by the Company. The Purchaser is an "accredited investor"
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act. The Purchaser is not a "dealer" within the meaning of the
Securities Act or a "broker" or "dealer" within the meaning of the Exchange Act.
The Purchaser is able to bear the economic risk of loss of the Purchaser's
entire investment in the Shares, the Warrants, and the Warrant Shares.
(e) The Purchaser has requested, received, reviewed and considered all
information it deems relevant in making an informed decision to purchase the
Shares and the Warrants. The Purchaser understands that the Company is still in
the development stage and does not have operating revenues.
(f) The Purchaser is acquiring the Shares and the Warrants in the
ordinary course of its business and for its own account for investment only and
with no present intention of distributing any of such Shares in violation of the
Securities Act or entering into any arrangement or understanding with any other
person regarding the distribution of such Shares in violation of the Securities
Act (it being understood that the foregoing does not limit the Purchaser's right
to sell Shares pursuant to the Registration Statement).
(g) Except for the representations and warranties contained in this
Section 2.02, the Purchaser makes no representation or warranty to the Company,
express or implied, in connection with the transactions contemplated by this
Agreement.
SECTION 2.03 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the certificates delivered pursuant hereto shall
survive the execution of this Agreement, the termination of Purchaser's
obligations to purchase the Shares, and the delivery to the Purchaser of the
Shares and the Warrants being purchased and the payment therefor.
13
ARTICLE III
COVENANTS
SECTION 3.01 COVENANTS OF THE COMPANY.
(a) (i) As soon as practicable, but in any event no later than 60 days
following the date of this Agreement, the Company shall prepare and file with
the Commission a registration statement on Form SB-2 or other applicable form as
determined by the Company (the "Registration Statement") for the purpose of
registering the sale of the Shares by the Purchaser from time to time on the
facilities of any securities exchange or trading system on which the Common
Stock is then traded or in privately-negotiated transactions, which Registration
Statement shall contain all material non-public information disclosed to the
Purchasers by the Company in connection with the issuance and sale of the
Shares. For purposes of this Section 3.01(a), the term "Shares" shall include
any other securities of the Company issued in exchange for the Shares, as a
dividend on the Shares or in connection with a stock split or other
reorganization transaction affecting the Shares. The Company shall use its
commercially reasonable efforts to cause the Registration Statement to become
effective as soon as practicable, and in any event within 120 days following the
date of this Agreement.
(ii) The Company shall prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus
forming a part thereof as may be necessary to keep the Registration Statement
effective until the earliest date, after the date on which all of the Shares
have been purchased pursuant to this Agreement or the obligation of the
Purchaser to purchase the Shares pursuant to this Agreement has been terminated,
on which (i) all the Shares have been disposed of pursuant to the Registration
Statement, (ii) all of the Shares then held by the Purchaser may be sold under
the provisions of Rule 144 without limitation as to volume, whether pursuant to
Rule 144(k) or otherwise, or (iii) the Company has determined that all Shares
then held by the Purchaser may be sold without restriction under the Securities
Act and has removed any stop transfer instructions relating to such Shares and
offered to cause to be removed any restrictive legends on the certificates, if
any representing such Shares (the period between the Effective Date and the
earliest of such dates is referred to herein as the "Registration Period"). At
any time after the end of the Registration Period, the Company may withdraw the
Registration Statement and its obligations under this Section 3.01(a) shall
automatically terminate.
(iii) The Company shall not be obligated to prepare and to file a
post-effective amendment or supplement to the Registration Statement or the
prospectus constituting a part thereof during the continuance of a Blackout
Event; provided, however, that no Blackout Event may be deemed to exist for more
than 60 days, and there can be no more that one Blackout Event during any period
of 365 days. A "Blackout Event" means any of the following: (a) the possession
by the Company of material information that is not ripe for disclosure in a
registration statement or prospectus, as determined reasonably and in good faith
by the Chief Executive Officer or the Board of Directors of the Company or that
disclosure of such information in the Registration Statement or the prospectus
constituting a part thereof would be materially detrimental to the business and
affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the reasonable and good faith determination of the Chief
Executive Officer or the Board of Directors of the Company, be materially
adversely affected by disclosure in a registration statement or prospectus at
such time. Without the express written consent of the Purchaser, if required to
permit the continued sale of Shares by the Purchaser, a post-effective amendment
or supplement to Registration Statement or the prospectus constituting a part
thereof must be filed no later than the 61st day following commencement of a
Blackout Event. In the event that the filing of the Registration Statement or
such effectiveness
14
shall not take place within the time period heretofore set forth, the Company
shall issue to the holders of the securities described above and/or issuable
upon the exercise thereof (the "Underlying Shares") additional shares of Common
Stock and warrants in such number as shall equal 2.0% of the number of shares of
Common Stock, warrants, and/or Underlying Shares held by such holder per each 30
days, or part thereof, after the aforementioned time periods until the such
filing and/or effectiveness, as applicable, shall take place. The Company shall
cause the Registration Statement to remain effective until the earlier of (i)
the sale by the Investor of all of the aforementioned securities and (ii) the
date upon which the Investor may dispose of all of such securities without
regard to the limitations set forth in paragraph (e) of Rule 144 under the
Securities Act.
(iv) At least five (5) Business Days prior to the filing with the
Commission of the Registration Statement (or any amendment thereto) or the
prospectus forming a part thereof (or any supplement thereto), the Company shall
provide draft copies thereof to the Purchaser and shall consider incorporating
into such documents such comments as the Purchaser (and its counsel) may propose
to be incorporated therein. Notwithstanding the foregoing, no prospectus
supplement, the form of which has previously been provided to the Purchaser,
need be delivered in draft form to the Purchaser.
(v) The Company shall promptly notify the Purchaser upon the
occurrence of any of the following events in respect of the Registration
Statement or the prospectus forming a part thereof: (i) receipt of any request
for additional information from the Commission or any other federal or state
governmental authority during the Registration Period, the response to which
would require any amendments or supplements to the Registration Statement or
related prospectus; (ii) the issuance by the Commission or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose; or (iii) receipt of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Shares for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(vi) The Company shall furnish to the Purchaser with respect to the
Shares registered under the Registration Statement such number of copies of
prospectuses and such other documents as the Purchaser may reasonably request,
in order to facilitate the public sale or other disposition of all or any of the
Shares by the Purchaser pursuant to the Registration Statement.
(vii) The Company shall file or cause to be filed such documents as
are required to be filed by the Company for normal state securities law or "blue
sky" clearance in states specified in writing by the Purchaser; provided,
however, that the Company shall not be required to qualify to do business or
consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented.
(viii) With a view to making available to the Purchaser the
benefits of Rule 144, the Company agrees, from the date hereof and throughout
the Registration Period and so long as the Purchaser owns Shares purchased
pursuant to this Agreement, to:
(A) comply with the provisions of paragraph (c)(1) of Rule
144; and
15
(B) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company pursuant to Section 13,
14 or 15(d) under the Exchange Act; and, if at any time it is not required to
file such reports but in the past had been required to or did file such reports,
it will, upon the request of the Purchaser, make available other information as
required by, and so long as necessary to permit sales of its Shares pursuant to,
Rule 144.
(ix) The Company shall bear all expenses incurred by it in
connection with the procedures in this Section 3.01(a) and the registration of
the Shares pursuant to the Registration Statement and qualification of the
shares under applicable state securities laws. The Company shall not be
responsible for any expenses incurred by the Purchaser in connection with its
sale of the Shares or its participation in the procedures in paragraphs (i)
through (ix) of this Section 3.01(a), including, without limitation, any fees
and expenses of counsel or other advisers to the Purchaser and any underwriting
discounts, brokerage fees and commissions incurred by the Purchaser.
(b) (i) The Company may refuse to register (or permit its transfer
agent to register) any transfer of any Shares not made in compliance with the
Securities Act and for such purpose may place stop order instructions with its
transfer agent with respect to the Shares.
(c) So long as the Registration Statement is effective covering the
resale of Shares then still owned by the Purchaser, the Company shall furnish to
the Purchaser:
(i) as soon as practicable after available, one copy of (A) its
Annual Report to Stockholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles
by a firm of certified public accountants), (B) upon written request, its Annual
Report on Form 10-KSB or 10-K, (C) upon written request, its Quarterly Reports
on Form 10-QSB or 10-Q, (D) upon written request, its Current Reports on Form
8-K, and (E) a full copy of the Registration Statement (the foregoing, in each
case, excluding exhibits); and
(ii) upon the written request of the Purchaser, all exhibits
excluded by the parenthetical to subparagraph (i)(E) of this Section 3.01(c).
(d) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock, which transfer agent
and registration shall be reasonably satisfactory to the Purchaser.
(e) If at any time prior to the termination of the Registration Period,
any rumor, publication or event relating to or affecting the Company shall occur
as a result of which, in the reasonable opinion of the Purchaser, the market
price of the Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to, or amendment of, the Prospectus), the Company will, if reasonably
requested by the Purchaser, forthwith prepare, and, if permitted by law,
disseminate a press release or other public statement, reasonably satisfactory
to the Purchaser, responding to or commenting on such rumor, publication or
event.
16
(f) The Company shall comply with the Xxxxxxxx-Xxxxx Act of 2002 and
the regulations promulgated pursuant thereto if it is not in compliance at the
date hereof.
(g) [INTENTIONALLY OMITTED]
(h) Until the earlier of the termination of this Agreement and the
Closing of the purchase of the final Tranche Shares hereunder (the earlier of
such events, the "Release Time"), no amendment will be made in the certificate
of incorporation or by-laws (or, in each case, the comparable charter documents,
if any, under applicable law) of the Company.
(i) Until the Release Time, with the exception of a "PIPES" transaction
for up to an aggregate of 5,000,000 shares of Common Stock, which transaction
shall not include rights to registration under the Securities Act, and any other
corporate transaction with respect to which consent has been received from the
Purchaser, no share of capital stock of the Company, option or warrant for any
such share, right to subscribe to or purchase any such share, or security
convertible into, or exchangeable or exercisable for, any such share, shall be
issued or sold by the Company, otherwise than as contemplated by, or in
connection with, this Agreement. (j) Until the Release Time, no dividend or
liquidating or other distribution or stock split shall be authorized, declared,
paid, or effected by the Company in respect of the outstanding shares of capital
stock of the Company. Until the Release Time, no direct or indirect redemption,
purchase, or other acquisition shall be made by the Company or any affiliate
thereof of shares of capital stock of the Company.
(k) Until the Release Time, the Company will afford the officers,
directors, employees, counsel, agents, investment bankers, accountants, and
other representatives of the Purchaser free and full access to the plants,
properties, books, and records of the Company, will permit them to make extracts
from and copies of such books and records, and will from time to time furnish
the Purchaser with such additional financial and operating data and other
information as to the business, prospects, financial condition, and results of
operations of the Company as the Purchaser from time to time may request. Until
the Release Time, the Company will cause the independent certified public
accountants thereof to make available to the Purchaser and its independent
certified public accountants the work papers relating to the audits of the
Company referenced in this Agreement.
(l) Until the Release Time, the Company will conduct its affairs so
that at each Closing, no representation or warranty of the Company will be
inaccurate in any material respect, no covenant or agreement of the Company will
be breached, and no condition in this Agreement will remain unfulfilled by
reason of the actions or omissions of the Company. Except as otherwise consented
to by the Purchaser in writing, until the Release Time, the Company will use its
best efforts to preserve the business operations of the Company intact, to keep
available the services of its present personnel, to preserve in full force and
effect the contracts, agreements, instruments, leases, licenses, arrangements,
and understandings of the Company, and to preserve the good will of its
suppliers, customers, and others having business relations with any of them.
Until the Release Time, the Company will conduct its affairs in all respects
only in the ordinary course, other than in connection with the matters
referenced herein.
17
(m) Until the Release Time, the Company will immediately advise the
Purchaser in a detailed written notice of any material fact or occurrence or any
pending or threatened material occurrence of which it obtains knowledge and
which (if existing and known at the date of the execution of this Agreement)
would have been required to be set forth or disclosed in or pursuant to this
Agreement, which (if existing and known at any time prior to or at the relevant
Tranche Closing) would make the performance by any party of a covenant contained
in this Agreement impossible or make such performance materially more difficult
than in the absence of such fact or occurrence, or which (if existing and known
at the time of the applicable Tranche Closing) would cause a condition to any
party's obligations under this Agreement not to be fully satisfied.
(n) Before the Company releases any information concerning this
Agreement or any of the transactions contemplated by this Agreement which is
intended for, or may result in, public dissemination thereof, the Company shall
cooperate with the Purchaser, shall furnish drafts of all documents or proposed
oral statements to the Purchaser for comment, and shall not release any such
information without the written consent of Purchaser, which consent shall not be
unreasonably withheld. Nothing contained herein shall prevent the Company from
releasing any information if required to do so by law.
(o) The Company shall timely prepare and file any declaration or filing
necessary to comply with any transfer tax statutes that require any such filing
before the relevant Tranche Closing.
(p) The Company shall obtain make such state securities law or "blue
sky" filings and obtain such state securities law or "blue sky" filings as shall
be reasonably requested by the Purchaser, provided, however, that the Company
shall not be required to qualify to do business or to become subject to general
service of process in any such jurisdiction.
SECTION 3.02 COVENANTS OF THE PURCHASER.
(a) The Purchaser agrees to comply in all material respects with all
federal and state securities laws and the rules and regulations promulgated
thereunder in connection with any sale by it of the Shares, the Warrants and the
Warrant Shares, whether or not such sale is pursuant to the Registration
Statement. In connection with the sale of any Shares pursuant to the
Registration Statement, but without limiting the generality of the foregoing
sentence, the Purchaser shall (i) comply with the provisions of Regulation M
promulgated under the Exchange Act, and (ii) deliver to the purchaser of Shares
the prospectus forming a part of the Registration Statement and all relevant
supplements thereto which have been provided by the Company to the Purchaser on
or prior to the applicable delivery date.
(b) The Purchaser will cooperate with the Company in all material
respects in connection with the performance by the Company of its obligations
under Section 3.01(a), including timely supplying all information reasonably
requested by the Company (which shall include all information regarding the
Purchaser, and any person who beneficially owns Shares held by the Purchaser
within the meaning of Rule 13d-3 promulgated under the Exchange Act, and the
proposed manner of sale of the Shares required to be disclosed in the
Registration Statement) and executing and returning all documents reasonably
requested in connection with
18
the registration and sale of the Shares. The Purchaser hereby consents to be
named as an underwriter in the Registration Statement, if applicable, in
accordance with current Commission policy and, if necessary, to join in the
request of the Company for the acceleration of the effectiveness of the
Registration Statement.
(c) In connection with the sale of any Shares pursuant to the
Registration Statement, the Purchaser shall deliver to the purchaser thereof the
prospectus forming a part of the Registration Statement and all relevant
supplements thereto which have been provided by the Company to the Purchaser on
or prior to the applicable delivery date, all in accordance with the
requirements of the Securities Act and the rules and regulations promulgated
thereunder and any applicable blue sky laws. Unless such untrue statement or
omission relates to a Blackout Event, the Company shall file a post-effective
amendment or prospectus supplement as promptly as practicable, but in no event
later than five Business Days following the discovery of such untrue statement
or omission.
(e) If at any time or from time to time after the Effective Date, the
Company notifies the Purchaser in writing that the Registration Statement or the
prospectus forming a part thereof (taking into account any prior amendments or
supplements thereto) contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, or in the case of a
Blackout Event, the Purchaser shall not offer or sell any Shares or engage in
any other transaction involving or relating to the Shares (other than purchases
of Shares pursuant to this Agreement), from the time of the giving of notice
with respect to such untrue statement or omission until the Purchaser receives
written notice from the Company that such untrue statement or omission no longer
exists or has been corrected or disclosed in an effective post-effective
amendment to the Registration Statement or a valid prospectus supplement to the
prospectus forming a part thereof.
(f) The Purchaser acknowledges and understands that the Shares, the
Warrants, and the Warrant Shares are (or upon the issuance thereof will be)
"restricted securities" as defined in Rule 144. The Purchaser hereby agrees not
to offer or sell (as such terms are defined in the Securities Act and the rules
and regulations promulgated thereunder) any Shares, Warrants, or Warrant Shares
unless such offer or sale is made (a) pursuant to an effective registration of
such securities under the Securities Act, or (b) pursuant to an available
exemption from the registration requirements of the Securities Act. The
Purchaser agrees that it will not engage in hedging transactions with regard to
the Shares, the Warrants, and the Warrant Shares other than in compliance with
the Securities Act. A proposed transfer shall be deemed to comply with this
Section 3.02(f) if the Purchaser delivers to the Company a legal opinion in form
and substance reasonably satisfactory to the Company from counsel reasonably
satisfactory to the Company to the effect that such transfer complies with this
Section 3.02(f).
SECTION 3.03 INDEMNIFICATION.
(a) For the purpose of this Section 3.03: (i) the term "Purchaser
Affiliate" shall mean any person who controls the Purchaser within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act; and (ii)
the term "Registration Statement" shall include any
19
final prospectus, exhibit, supplement or amendment included in or relating to
the Registration Statement referred to in Section 3.01(a).
(i) The Company agrees to indemnify and hold harmless the Purchaser
and each Purchaser Affiliate, against any losses, claims, damages, liabilities
or expenses, joint or several, to which such Purchaser or such Purchaser
Affiliate may become subject, under the Securities Act, the Exchange Act, or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company, which consent shall not be
unreasonably withheld), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon (A) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, as amended as of the
Effective Date, including any information deemed to be a part thereof as of the
time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to
Rule 434 promulgated under the Securities Act, or the prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations, or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required (the "Prospectus"), or any amendment or
supplement thereto, (B) the omission or alleged omission to state in the
Registration Statement as of the Effective Date a material fact required to be
stated therein or necessary to make the statements in the Registration Statement
or any post-effective amendment or supplement thereto, or in the Prospectus or
any amendment or supplement thereto, not misleading, in each case in the light
of the circumstances under which the statements contained therein were made, or
(C) any inaccuracy in the representations and warranties of the Company
contained in this Agreement, or any failure of the Company to perform its
obligations hereunder, and will reimburse the Purchaser and each such Purchaser
Affiliate for any legal and other expenses as such expenses which are reasonably
incurred by the Purchaser or such Purchaser Affiliate in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon (A) an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, the prospectus included therein, or any amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by the Purchaser expressly for use therein, or (B) the
failure of the Purchaser to comply with the covenants and agreements contained
in Section 3.02 hereof, or (C) the inaccuracy of any representations made by the
Purchaser herein or (D) any statement or omission in any Prospectus that is
corrected or disclosed in any subsequent Prospectus that was delivered to the
Purchaser prior to the pertinent sale or sales by the Purchaser.
(ii) The Purchaser agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act and the Exchange Act, against any losses, claims, damages,
liabilities or expenses to which the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as
20
contemplated below) arise out of or are based upon (A) any failure to comply
with the covenants and agreements contained in Section 3.02 hereof, (B) the
inaccuracy of any representation made by the Purchaser herein, or (C) any (I)
untrue or alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or (II) omission or alleged omission to state in the Registration Statement, the
Prospectus or any amendment or supplement thereto a material fact required to be
stated therein or necessary to make the statements in the Registration Statement
or any amendment or supplement thereto, in the prospectus included therein, or
any amendment or supplement thereto, not misleading, in each case in the light
of the circumstances under which they were made; provided, that the Purchaser's
indemnification obligation under this clause (C) shall apply to the extent, and
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, such
prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by the Purchaser
expressly for use therein, and will reimburse the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person for any legal and other expense reasonably incurred by the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action.
(iii) Promptly after receipt by an indemnified party under this
Section 3.03 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 3.03, promptly notify the indemnifying
party in writing thereof; provided, that the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party for indemnification and contribution (except as provided
in paragraph (iv)) or otherwise than under the indemnity agreement contained in
this Section 3.03 or to the extent it is not materially prejudiced as a result
of such failure. In case any such action is brought against any indemnified
party and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with all other indemnifying parties
similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 3.03 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of commencement of action, in which case the reasonable fees and expenses of
counsel shall be at the expense of the indemnifying party or both the Company
and Purchaser, in the reasonable opinion of counsel to the Purchaser, have
defenses distinct from, or contradictory to, the defenses available to the
other.
(iv) If the indemnification provided for in this Section 3.03 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(i) or (ii) of this Section 3.03 in respect to any losses, claims, damages,
liabilities or expenses referred to herein (subject to the limitation of
paragraph (iii) of
21
this Section 3.03), then each applicable indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (I) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Purchaser from the sale of the Common Stock contemplated by this
Agreement or (II) if the allocation provided by clause (I) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (I) above but the relative
fault of the Company and the Purchaser in connection with the statements or
omissions or inaccuracies in the representations and warranties in this
Agreement that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Purchaser on the other
shall be deemed to be in the same proportion as the amount paid by the Purchaser
to the Company pursuant to this Agreement for the Shares purchased by the
Purchaser that were sold pursuant to the Registration Statement bears to the
difference (the "Difference") between the amount such Purchaser paid for the
Shares that were sold pursuant to the Registration Statement and the amount
received by such Purchaser from such sale. The relative fault of the Company on
the one hand and the Purchaser on the other shall be determined by reference to,
among other things, whether the untrue or alleged statement of a material fact
or the omission or alleged omission to state a material fact or the inaccurate
or the alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by the Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, omission or inaccuracy. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (iii) of this Section 3.03, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in paragraph (iii) of this Section
3.03 with respect to the notice of the threat or commencement of any threat or
action shall apply if a claim for contribution is to be made under this
paragraph (iv); provided, however, that no additional notice shall be required
with respect to any threat or action for which notice has been given under
paragraph (iii) for purposes of indemnification. The Company and each Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section 3.03 were determined solely by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in this paragraph. Notwithstanding the provisions of this Section
3.03, the Purchaser shall not be required to contribute any amount in excess of
the amount by which the Difference exceeds the amount of any damages that such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
ARTICLE IV
CONDITIONS TO CLOSING
SECTION 4.01 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The
obligation of the Purchaser to purchase Tranche Shares at a Closing shall be
subject to the satisfaction of the
22
following conditions, or the waiver of such conditions by the Purchaser, at or
prior to the applicable Tranche Closing Date:
(a) the representations and warranties of the Company set forth in
Section 2.01 of this Agreement shall be true and correct with the same force and
effect as though expressly made on every date during the term of this Agreement,
including each Tranche Closing Date, except for representations or warranties
made as of a particular date which representations and warranties shall be true
and correct as of such date;
(b) the Company shall have complied with all the agreements hereunder
and satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to such Tranche Closing Date;
(c) the Company shall have delivered to the Purchaser a certificate
executed by the Chairman of the Board or President and the chief financial or
accounting officer of the Company, dated the applicable Tranche Closing Date, to
the effect that the conditions in Section 4.01(a), (b), (h), (i), and (j) have
been satisfied;
(d) the Registration Statement shall have been declared by the
Securities and Exchange Commission (the "Commission") to be effective under the
Securities Act and shall not have been withdrawn, no stop order suspending the
effectiveness of the Registration Statement shall be in effect, and no
proceedings for the suspension of the effectiveness of the Registration
Statement shall have been instituted or threatened by the Commission;
(e) [INTENTIONALLY OMITTED]
(f) the Company shall retain, and through the term of this Agreement
shall continue to retain, an investor relations firm satisfactory to the
Purchaser, in its sole and absolute discretion.
(g) there shall not have been (i) any domestic or international event,
act, or occurrence, including, without limitation, event, act, or occurrence of
terrorism, that shall have materially and adversely disrupted, or, in the
opinion of the Purchaser, will in the immediate future materially and adversely
disrupt, the securities markets; or (ii) a general suspension of, or a general
limitation on prices for, trading in securities on the New York Stock Exchange
or the American Stock Exchange or in the over-the-counter market; or (iii) an
outbreak or increase in the level of major hostilities or other national or
international calamity; or (iv) a banking moratorium declared by any state or
federal authority; or (v) a moratorium in foreign exchange trading by major
international banks or persons declared; or (vi) a material interruption in the
mail service or other means of communication within the United States; or (vii)
a material or substantial loss suffered by the Company by fire, flood, accident,
hurricane, earthquake, theft, sabotage, or other calamity or malicious act,
whether or not such loss shall have been insured, or from any labor dispute or
court or government action, order, or decree, which will, in the discretion of
the Purchaser, make it inadvisable to proceed with any portion of the
transactions contemplated hereby; or (viii) any material adverse change in the
business, prospects, financial condition, or results of operations of the
Company; or (ix) any material governmental restrictions shall have been imposed
on trading in securities in general, which restrictions are not in effect on
23
the date hereof; or (x) passed by the Congress of the United States or by any
state legislature any act or measure, or adopted by any governmental body or
authoritative accounting institute or board, or any governmental executive, any
orders, rules, or regulations, which the Purchaser believes likely to have a
material adverse effect on the business, financial condition, or financial
statements of the Company or any of the Subsidiary or the market for the Common
Stock; or (xi) such material and adverse change in the market for the Company's
securities or securities in general or in political, financial, or economic
conditions as in the judgment of the Purchaser makes it inadvisable to proceed
with the transactions contemplated hereby.
(h) The Company shall have received state securities law or "blue sky"
clearance for the sale of the Shares in states specified in writing by the
Purchaser, other than states in which such clearance shall have required the
Company to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented.
(i) A Blackout Period shall not be in effect at either the date of the
Tranche Election Notice or the Tranche Closing Date.
SECTION 4.02 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to sell Tranche Shares at any Closing shall be subject
to the satisfaction of the following conditions, or the waiver of such
conditions by the Company, at or prior to the applicable Tranche Closing Date:
(a) the representations and warranties of the Purchaser set forth
in Section 2.02 of this Agreement shall be true and correct with the same force
and effect as though expressly made on and as of such Tranche Closing Date,
except for representations or warranties made as of a particular date which
representations and warranties shall be true and correct as of such date;
(b) the Purchaser shall have complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to such Tranche Closing Date;
(c) the Purchaser shall have delivered to the Company a certificate
executed by a duly authorized officer of the Purchaser, dated the applicable
Tranche Closing Date, to the effect that the conditions in clauses (a) and (b)
of this Section 4.02 have been satisfied; and
(d) no stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for the suspension of the
effectiveness of the Registration Statement shall have been instituted or
threatened by the Commission.
24
ARTICLE V
TERMINATION
SECTION 5.01 TERMINATION BY PURCHASER. The Purchaser may terminate its
obligations under Article I of this Agreement by oral or written notice to the
Company following the occurrence of one or more of the following:
(a) the Company shall default in any material respect in the
performance of any covenant or agreement under this Agreement, which default
shall continue for more than three business days following written notice
thereof from the Purchaser;
(b) the representations and warranties of the Company set forth in
Section 2.01 of this Agreement shall not be true and correct in all material
respects as of the date of this Agreement, and on each day thereafter (as if
each such date was a Tranche Closing Date), except for the representations and
warranties made as of a particular date which representations and warranties
need be true and correct only as of such date;
(c) the Company shall merge or consolidate with any Person, shall
effect any reorganization, or shall sell or substantially all of its assets, or
shall enter into any agreement contemplating the same;
(d) the Closing of the purchase and sale of the Tranche Shares
shall not have been completed by August 16, 2006;
except pursuant to Stock Equivalents (as hereinafter defined)
outstanding on the date of this Agreement and disclosed in the SEC Documents,
the Company issues, or agrees to issue: (i) shares of Common Stock at a purchase
price less than the highest of the Tranche Purchase Prices; (ii) shares of
capital stock convertible into Common Stock; or (iii) Stock Equivalents with an
exercise or conversion price less than the highest of the Tranche Purchase
Prices. For purposes hereof "Stock Equivalents" shall mean options, warrants,
calls, rights, commitments, convertible securities and other securities pursuant
to which the holder, directly or indirectly, has the right to acquire (with or
without additional consideration) capital stock or equity of the Company; or
(f) the Company declares or pays any dividend or distribution to
its shareholders, or purchases or redeems any Common Stock.
25
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as addressed as follows:
(a) if to the Company, to:
Nutra Pharma Corp.
0000 Xxxx Xxxxx Xxxx
Xxxxxxx Xxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxx Xxxxxxx
with a copy to:
Xxxx Xxxxxxx, LLP
1999 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other person at such other place
as the Company shall designate to the
Purchaser in writing; and
(b) if to the Purchaser, to:
SBI Brightline XII LLC
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Reitler Xxxxx & Xxxxxxxxxx LLC
000 Xxxxx Xxxxxx
00
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx Xxxxx, Esq.
Phone: 000-000-0000
Telecopy: 000-000-0000
SECTION 6.02 ASSIGNMENT. Neither party hereto may assign or delegate
any of such party's rights or obligations under or in connection with this
Agreement, and any attempted assignment or delegation of such rights or
obligations shall be void. Except as expressly provided in Section 3.03 with
respect to Purchaser Affiliates, directors and controlling persons of the
Company and officers of the Company who signed the Registration Statement, no
person, including without limitation any person who purchases or otherwise
acquires or receives any Shares from the Purchaser, is an intended third party
beneficiary of this Agreement, and no party to this Agreement shall have any
obligation arising under this Agreement to any person other than the other party
hereto and, to the extent expressly provided in Section 3.03, Purchaser
Affiliates, directors and controlling persons of the Company and officers of the
Company who signed the Registration Statement.
SECTION 6.03 CHANGES. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.
SECTION 6.04 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 6.05 SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 6.06 GOVERNING LAW; VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
regard to its conflicts of law principles, and the federal law of the United
States of America. The Company irrevocably consents to the jurisdiction of the
courts of the State of California and of any federal court, in each case located
in Los Angeles or Orange County, California in connection with any action or
proceeding arising out of, or relating to, this Agreement, any document or
instrument delivered pursuant to, in connection with, or simultaneously with
this Agreement, or a breach of this Agreement or any such document or
instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint, or other process and agrees that service
thereof may be made in accordance with Section 6.01. Within 30 days after such
service, or such other time as may be mutually agreed upon in writing by the
attorneys for the parties to such action or proceeding, the Company shall appear
or answer such summons, complaint, or other process. Should the Company fail to
appear or answer within such 30-day period or such extended period, as the case
may be, the Company shall be deemed in default and judgment may be entered
against the Company for the amount as demanded in any summons, complaint, or
other process so served.
27
SECTION 6.07 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
NUTRA PHARMA CORP.
BY:
-------------------------------------
NAME: XXX X. XXXXXXX
TITLE: CHIEF EXECUTIVE OFFICER
SBI BRIGHTLINE XII LLC
BY:
-------------------------------------
NAME: XXXXXX XXXXXXX
TITLE: MANAGING MEMBER
29
SCHEDULE 1.01(A)
TRANCHES
NUMBER OF TRANCHE SHARES TRANCHE PURCHASE PRICE PER
TRANCHE NO. INCLUDED IN TRANCHE TRANCHE SHARE (U.S. DOLLARS)
----------- ------------------------ ----------------------------
1 1,000,000 $0.30
2 1,000,000 $0.30
3 1,000,000 $0.30
4 1,000,000 $0.30
5 1,000,000 $0.30
6 1,000,000 $0.30
7 1,000,000 $0.30
8 1,000,000 $0.30
9 1,000,000 $0.40
10 1,000,000 $0.40
11 1,000,000 $0.40
12 1,000,000 $0.40
13 1,000,000 $0.40
14 1,000,000 $0.40
15 1,000,000 $0.40
16 1,000,000 $0.40
17 1,000,000 $0.50
18 1,000,000 $0.50
19 1,000,000 $0.50
20 1,000,000 $0.50
21 1,000,000 $0.50
22 1,000,000 $0.50
23 1,000,000 $0.50
24 1,000,000 $0.50
30
