SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is made and entered into as
of December 1, 2004, by and between The Justice Fund, Ltd. (the "Company"), and
The Nutmeg Group, L.L.C., a US Virgin Islands limited liability company (the
"Purchaser").
1. Subscription. Subject to the terms and conditions contained herein,
the Purchaser hereby agrees to purchase from the Company, and the Company
hereby agrees to issue and sell to the Purchaser, shares (the "Shares") of
the Company's Common Stock (the "Common Stock"), and warrants to purchase
additional shares of Common Stock, for an aggregate purchase price of
$300,000 (the "Purchase Price"). The Nutmeg Group, LLC, or its designee
("Nutmeg") shall pay $150,000, when the Registration is filed (the
"Closing"), the balance of the $150,000, within 5 days of when the
Registration is deemed effective (the "Second Closing").
The number of shares issuable to Nutmeg will equal the amount paid by Nutmeg,
divided by the lesser of:
(a) $.10, or
(b) fifty (50%) of the average closing bid price for Common Stock on the
five trading days immediately following the Company becoming public,
or
(c) fifty (50%) of the average closing bid price for Common Stock on the
five trading days immediately following the date on which the
registration statement (as described below) is declared effective.
(the lesser of (a), (b), and (c) being hereinafter referred to as
the "Fixed Price").
Purchaser will be issued Warrants (hereinafter "Warrants") exercisable into such
number of shares of Common Stock as is equal to 100% of the Purchase Price paid
by Purchaser, divided by the Fixed Price. The Common Stock into which the
Warrants are exercisable will have piggyback registration rights, and the
Warrants will be transferable. Unexercised Warrants will expire December 31,
2009 ("Warrant Expiration Date"). The Warrants will be exercisable into Common
Stock at $.05 per share.
The Purchaser will receive at Closing a flat non-accountable expense allowance
of Conditioned upon Funding, Nutmeg will receive at the Second Closing, a flat
non-accountable expense allowance to cover due diligence expenses, legal, escrow
fees and miscellaneous costs, of $10,000. At the election of Nutmeg, or its
designees, any or all of the foregoing compensation and expense allowances can
be taken in kind, pursuant to the same terms and conditions as that of an
investment herein, for a like amount.
Closing. The closing (the "Closing") of the purchase and sale of the
Securities shall take place at the offices of the Company, the Company will
deliver to the Purchaser a certificate for the Shares and the warrant agreement
against payment to the Company of the Purchase Price by wire transfer or other
acceptable consideration designated by the Company.
Conditions to Obligations of the Purchaser. The Purchaser's obligation to
purchase the Securities at the Closing is subject to the fulfillment (or waiver
by the Purchaser), at or prior to the Closing, of each of the following
conditions:
Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects at the time of the Closing, except
as such representations and warranties are affected by the consummation of the
transactions contemplated by this Agreement.
Performance by the Company. The Company shall have duly performed and
complied in all material respects with all agreements and conditions contained
in this Agreement and required to be performed or complied with by the Company
at or prior to the Closing.
Maximum Exercise/ Share delivery. At any point in time, the Purchaser shall
not be entitled to receive shares of common stock if such issuance would result
in beneficial ownership by the Purchaser and its affiliates of more than 4.99%
of the outstanding shares of common stock of the Company on such issue date,
including:
(i) the number of shares of common stock beneficially owned by the
Purchaser and its affiliates, and
(ii) the number of shares of common stock issuable upon the exercise or
conversion of securities owned.
For the purposes of this provision as set forth in the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder. Subject to the foregoing, the Purchaser shall not be limited
to aggregate common stock issuances of only 4.99% and aggregate common stock
issuances may exceed 4.99%. The Purchaser may void the issuance limitation
described in this Section upon 61 days prior written notice to the Company. The
Purchaser may allocate which of the equity of the Company deemed beneficially
owned by the Purchaser shall be included in the 4.99% amount described above and
which shall be allocated to the excess above 4.99%. Any shares of common stock
issuable to the Purchaser, but for this provision, shall be placed in Escrow.
The Escrow Agent, Xxxxxxx X. Xxxxxxxx, shall hold the Escrowed Stock, in escrow,
to facilitate any Warrant exercise, and/or any delivering of Shares to the
Purchaser, so as remain in compliance with and subject to the terms of this
Agreement, including this paragraph.
Nonfulfillment of Conditions. If any of the conditions specified in Section
3 shall not have been fulfilled at or prior to the Closing, the Purchaser shall
be relieved of all further obligations under this Agreement, without thereby
waiving any other rights the Purchaser may have by reason of such
nonfulfillment.
Conditions to Obligations of the Company. The obligations of the Company to
issue and sell the Securities to the Purchaser at the Closing shall be subject
to the fulfillment (or waiver by the Company), at or prior to the Closing, of
each of the following conditions:
1.1 Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties made by the Purchaser in this Agreement shall be
true and correct in all material respects when made and at the time of the
Closing.
1.2 Performance by the Purchaser. The Purchaser shall have duly performed
and complied in all material respects with all agreements and conditions
contained in this Agreement and required to be performed or complied with by the
Purchaser at or prior to the Closing, including but not limited to payment to
the Company of the Purchase Price for the Securities in immediately available
funds.
2. Representations and Warranties of the Company. The Company represents
and warrants to the Purchaser as follows:
2.1 Corporate Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of its incorporation and has all requisite corporate power and authority
to own or lease its properties and to carry on its business as presently
conducted.
2.2 Authorization. This Agreement and the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company. This Agreement has been duly executed and delivered by the
Company, and are the legal, valid and binding obligations of the Company,
enforceable against it in accordance with their terms.
2.3 No Conflict or Violation. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate, conflict with or result in a breach of or constitute a default
under any provision of the Certificate of Incorporation or Bylaws of the
Company, (b) violate, conflict with or result in a breach of or constitute a
default under any judgment, order, decree, rule or regulation of any court or
governmental agency to which the Company is subject or (c) violate, conflict
with or result in a breach of any applicable rule or regulation of any federal,
state, local or other governmental authority.
2.4 Stock. The Securities to be issued to the Purchaser pursuant to this
Agreement are duly authorized and, when issued and paid for in accordance with
the terms of this Agreement, will be validly issued, fully paid and
nonassessable.
3. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company that:
3.1 Authorization. The Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Illinois and has all requisite power and authority to execute and deliver this
Agreement and to subscribe for and purchase the
Securities hereunder. This Agreement and the transactions contemplated hereby
and thereby have been duly authorized by all necessary limited liability company
action on the part of the Purchaser. This Agreement has been duly executed and
delivered by the Purchaser, and is the legal, valid and binding obligations of
the Purchaser, enforceable against it in accordance with their terms.
3.2 No Conflict or Violation. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate, conflict with or result in a breach of or constitute a default
under any provision of the limited liability company agreement of the Purchaser,
(b) violate, conflict with or result in a breach of or constitute a default
under any judgment, order, decree, rule or regulation of any court or
governmental agency to which the Purchaser is subject or (c) violate, conflict
with or result in a breach of any applicable rule or regulation of any federal,
state, local or other governmental authority.
3.3 Access to Information; Investigation. The Purchaser made, either
alone or together with its advisors (if any), such independent investigation of
the Company, its management and related matters as the Purchaser deemed to be,
or such advisors (if any) have advised to be, necessary or advisable in
connection with an investment in the Securities. The Purchaser and its advisors
(if any) have received all information and data that the Purchaser and such
advisors (if any) believe to be necessary in order to reach an informed decision
as to the advisability of an investment in the Shares.
3.4 Information Regarding the Purchaser. The Purchaser is (a) not an
"underwriter" within the meaning of the Securities Act of 1933 or otherwise, (b)
not otherwise acting as a placement agent, broker or dealer in connection with
its acquisition of the Securities and (c) acquiring the Securities for its own
account and not with a view to distribution.
3.5 Reliance on Representations and Warranties of the Purchaser. The
Purchaser understands and acknowledges that the Company is relying on the
representations and warranties made by the Purchaser in this Agreement in
connection with the transactions contemplated hereby, the Company's preparation
of the Prospectus Supplement and the filing of the Prospectus Supplement with
the Securities and Exchange Commission.
4. Amendments and Waivers. This Agreement may be amended and the observance
of any provision hereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of each party to be bound thereby. No provision of this Agreement shall
be deemed to have been waived, unless such waiver is contained in a written
notice given to the party claiming such waiver, and no such waiver shall be
deemed to be a waiver of any other or further obligation or liability of the
party or parties in whose favor the waiver was given.
5. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by the Purchaser or by the
Company in connection with the transactions contemplated by this Agreement shall
survive the Closing Date and shall remain in full force and effect for three
years thereafter. All covenants and agreements contained in this
Agreement shall survive the Closing Date indefinitely until, by their respective
terms, they are no longer operative. No claims shall be made after the date on
which the applicable representation or warranty upon which such claim was based
ceases to survive pursuant to this Section 9; provided, however, that the
expiration of any representation or warranty under this Section 9 shall not
affect any claim made in good faith prior to the date of such expiration.
6. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
7. Notices. All notices, requests, demands and other communications given
hereunder (collectively, "Notices") shall be in writing and delivered personally
or by overnight courier to the parties at the following addresses or sent by
telecopier or telex, with confirmation received, to the telecopy specified
below:
If to the Company, at:
Xx. Xxxxxx X. Xxxxxxxx
The Justice Fund, Ltd.
0000 Xxxxxxxxxx
Xxxxxxxxxx XX 00000
Phone:(000) 000-0000; Fax:(000) 000-0000
If to the Purchaser, at:
The Nutmeg Group, L.L.C.
0000 Xxxxxxxxxx
Xxxxxxxxxx XX 00000
Phone:(000) 000-0000; Fax:(000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxx
All Notices shall be deemed delivered when actually received if delivered
personally or by overnight courier, sent by telecopier or telex (promptly
confirmed in writing), addressed as set forth above. Each of the parties shall
hereafter notify the other in accordance with this Section 11 of any change of
address or telecopy number to which notice is required to be mailed.
Governing Law; Enforcement. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Illinois applicable to contracts made in that state, without giving effect to
the conflicts of laws principles thereof. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties are entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Illinois or in Illinois state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any federal court located in the State of Illinois
or any Illinois state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of Illinois.
Disputes. The parties agree to submit any dispute arising under this
Agreement to arbitration to be held in Illinois. Arbitration shall be by a
single arbitrator experienced in the matters at issue selected by the parties in
accordance with the commercial arbitration rules of Better Business Bureau or
the American Arbitration Association. The decision of the arbitrator shall be
final and binding as to any matter submitted to him under this Agreement. All
costs and expenses incurred in connection with such arbitration proceeding shall
be borne by the party against whom the decision is rendered.
Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall constitute one and the same instrument.
Entire Agreement. This Agreement and the Letter Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede all prior negotiations, agreements and understandings, whether written
or oral, of the parties.
8. No Third-Party Rights. This Agreement is not intended, and shall not be
construed, to create any rights in any parties other than the Company and the
Purchaser and no person shall assert any rights as third-party beneficiary
hereunder.
9. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to affect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT AS OF
THE DATE FIRST SET FORTH ABOVE.
THE JUSTICE FUND, LTD.
/s/ Xxxxxx X. Xxxxxxxx
----------------------
By: Xxxxxx X. Xxxxxxxx
Its: President
THE NUTMEG GROUP, L.L.C.
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------
By: Xxxxxxx X. Xxxxxxxx
Its: Manager
