<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
/X/ For quarterly period ended December 31, 1999
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
Commission file number 0-25377
NURESCELL INC.
A Nevada Corporation IRS Employer Identification No.:
33-0805583
Principal Executive Offices:
1400 Bristol Street North, Suite 240
Newport Beach, California 92660
(949) 752-0071
-------------------
Check whether Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Number of shares of Common Stock outstanding at February 11, 2000: 13,908,000
Transitional Small Business Disclosure Format (check one): Yes /X/ No / /
<PAGE>
NURESCELL INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
--------------- ---------------
Unaudited Audited
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 129,068 $ 125,421
Stock subscriptions receivable -0- 25,000
Advances to employees -0- 12,075
Note receivable officer -0- 54,673
Other receivables -0- 3,761
Prepaid finance acquisition costs 25,000 -0-
--------------- ---------------
Total Current Assets 154,068 220,930
Property, Plant and Equipment at Cost, Less
Accumulated depreciation and
amortization of $10,791 and $5,881 respectively 42,657 43,100
Other Assets
Deposits 3,000 3,000
Intangibles 18,609 18,609
Unamortized discounts on notes payable 129,375 -0-
--------------- ---------------
Total Other Assets 150,984 21,609
TOTAL ASSETS $ 347,709 $ 285,639
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable $ 114,116 $ 34,826
Accrued director's fees 11,472 -0-
Due to officer 20,000 -0-
Accrued salaries 15,360 3,000
Accrued interest 1,454 -0-
Payroll taxes payable 16,632 6,839
--------------- ---------------
Total Current Liabilities 179,034 44,665
Long-term Liabilities
Notes payable 385,000 -0-
--------------- ---------------
Total Long Term Liabilities 385,000 -0-
Stockholders' Equity (Deficiency)
Capital Stock 1,496 1,308
Additional Paid in Capital 2,197,486 884,192
Deficit accumulated during the development stage (2,415,307) (644,526)
--------------- ---------------
Total Stockholders' Equity (Deficiency) (216,325) 240,974
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (|DEFICIENCY) $ 347,709 $ 285,639
=============== ===============
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
NURESCELL INC
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the period For the period
May 12, 1998 May 12, 1998
(Date of (Date of
Three months Three months Nine months Inception) to Inception) to
ended December ended December ended December December 31, December 31,
31, 1999 31, 1998 31, 1999 1998 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
Research and Development $ 2,000 2,000 2,000
General and administration 1,358,258 170,704 1,769,290 401,837 2,409,321
Depreciation 1,706 3,547 4,910 5,557 10,791
------------ ------------ ------------ ------------ ------------
Total expenses 1,359,964 176,251 1,774,200 409,394 2,422,112
LOSS FROM OPERATIONS (1,359,964) (176,251) (1,774,200) (409,394) (2,422,112)
OTHER INCOME:
Interest Income -0- 2,114 3,409 2,114 6,805
------------ ------------ ------------ ------------ ------------
NET LOSS (1,359,964) (174,137) (1,770,791) (407,280) (2,415,307)
============ ============ ============ ============ ============
NET LOSS PER SHARE
Basic and fully diluted (0.10) (0.02) (0.13) (0.04) (0.19)
============ ============ ============ ============ ============
Weighted average common
shares outstanding 13,756,928 12,777,672 13,320,669 10,397,887 12,545,372
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
NURSECELL INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
For the period May 12, 1998 (Date of Inception)
to December 31,1999
<TABLE>
<CAPTION>
RETAINED
EARNINGS
(DEFICIT)
ADDITIONAL DURING THE COMMON
COMMON STOCK PAID-IN DEVELOPMENT STOCK
SHARES AMOUNT CAPITAL STAGE SUBSCRIBED TOTAL
----------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK:
Cash - Founding Stockholders 2,500,000 $ 250 $ 2,250 $ 2,500
Technology Purchase 10,000,000 1,000 9,000 10,000
Cash - $ 1 per share 498,000 50 497,950 498,000
Cash - $ 5 per share, net of costs 79,000 8 349,992 350,000
Common stock subscriptions $ 25,000 25,000
NET LOSS $ (644,526) (644,526)
----------- ----------- ----------- ----------- ---------- ------------
Balance March 31, 1999 13,077,000 1,308 859,192 (644,526) 25,000 240,974
Cash $100 and consulting services 30,000 3 74,997 75,000
Consulting Services 150,000 15 11,998 12,013
Payment of Common Stock Subscriptions $ (25,000) (25,000)
Exercise of Stock Options 120,000 12 59,988 60,000
Common Stock issued to directors 300,000 30 224,970 225,000
Common Stock issued to employees 120,000 12 89,988 90,000
Conversion of debt to capital 473,080 46 355,505 355,551
Award to Directors and Officers 734,562 71 550,848 550,919
Common Stock cancelled to exercise
option (10,213) (30,000) (30,001)
NET LOSS (1,770,781) (1,770,781)
----------- ----------- ----------- ----------- ---------- ------------
BALANCE DECEMBER 31,1999 (UNAUDITED) 14,994,429 $ 1,496 $ 2,197,486 $(2,415,307) $ -- $ (216,325)
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
NURESCELL INC
STATEMENT OF CASH FLOWS
FROM MAY 12, 1998 (DATE OF INCEPTION), TO DECEMBER 31,1999
<TABLE>
<CAPTION>
For the period
May 12, 1998
Nine months (date of
Ended inception) to
December December
31, 1999 31, 1999
(unaudited) (unaudited)
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,770,782) $ (2,415,307)
Adjustments:
Depreciation 4,910 10,791
Issuance of Stock for Services 1,278,383 1,278,382
(Increase) Decrease in:
Prepaid Finance Acquisition Costs (25,000) (25,000)
Advances to Employee 12,075 0
Notes Receivable - Officers 54,673 0
Other Receivables 3,761 0
Unamortized Discount of Notes Payable (129,375) (129,375)
Increase (Decrease) in:
Due to Officers 20,000 20,000
Accounts Payable 79,290 114,116
Accrued Salaries and Payroll Taxes Payable 22,153 31,992
Other Accrued Expenses 12,926 12,926
--------------- ---------------
Net Cash Flows Used by Operating Activities (436,986) (1,101,475)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property, Plant & Equipment 4,467 53,448
Deposits 3,000
Intangibles 18,609
--------------- ---------------
Net Cash Flows Used by Investing Activities (4,467) (75,057)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Common Stock 60,100 920,600
Notes Payable Long Term 385,000 385,000
--------------- ---------------
Net Cash Flows Provided by Financing Activities 445,100 1,305,600
--------------- ---------------
Net Increase in Cash 3,647 129,068
Cash at beginning of year 125,421 -0-
Cash at end of year $ 129,068 $ 129,068
=============== ===============
Non Cash Transactions
Issuance of stock for purchased technology 10,000
Issuance of stock for consulting services 74,900 74,900
Issuance of stock for consulting services 12,013 12,013
Issuance of stock to Directors 225,000 225,000
Issuance of stock to employees 90,000 90,000
Issuance of stock for conversion of debt 355,551 355,551
Issuance of stock as award to Directors and Officers 550,919 550,919
Stock cancelled to exercise option (30,001) (30,001)
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
BASIS OF PRESENTATION
The interim financial statements presented here have been prepared by Nurescell
Inc (the Company) without audit and, in the opinion of the management, reflect
all adjustments of a normal recurring nature necessary for a fair statement of
(a) the results of operations for the three months ended December 31, 1999, (b)
the financial position at December 31, 1999 and (c) the cash flow for the nine
months ended December 31, 1999. Interim results are not necessarily indicative
of results for a full year.
The balance sheet presented at March 31, 1999 has been derived from the
financial statements that have been audited by the Company's independent public
accountants. The financial statements and notes included herein should be read
in conjunction with the financial statements and notes included in the Company's
Annual Report on Form 10-KSB.
NATURE OF BUSINESS
The Company was incorporated on May 12, 1998, pursuant to the laws of the State
of Nevada under the name Nurescell Inc. The Company is currently engaged in the
research, development and testing of its proprietary radiation shielding
technology.
GOING CONCERN
The accompanying financial statements have been prepared on the assumption that
the Company will continue as a going-concern. This assumption anticipates that
the Company will be able to realize assets and satisfy obligations in the normal
course of business. The Company has accumulated net losses of $2,100,349 and
negative cash flows from operating activities of $1,096,475 from inception to
December 31, 1999. The Company has successfully completed its radiation and
shielding testing for the first five product formulations of its principal
technology, and commercial marketing of those products has begun. The technology
continues to undergo advanced independent performance testing to validate its
use in the nuclear industry, and that testing will require significant
additional financing. The company has identified a qualified ISO Certified
manufacturer for its technology, and manufacturing procedures and equipment are
in process of being implemented to accomplish large scale production in a
rigidly enforced quality control environment by that manufacturer. The Company
will not be able to generate significant commercial revenues until the
manufacturing implementation steps are approved and in place. Patents on the
Company's principal technology are patent-pending for the United States, but the
patents have not yet been issued. Patent applications have been filed for other
countries through European PCT, but those patents have also not been issued. The
Company's capacity to operate as a going-concern is dependent on its ability to
obtain adequate financing to fund its operations until the Company is able to
complete the necessary research, development and testing necessary to generate
commercial revenues sufficient to fund ongoing operations. These factors, among
others, raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR END
The company's fiscal year is March 31, 1999.
START-UP ACTIVITIES
In 1998, the American Institute of Certified Public Accountants (AICPA) amended
the AICPA SOP and Audit and Accounting Guides addressing the reporting of costs
of start-up activities. Effective for fiscal years beginning after December 15,
1998, SOP No. 98 require costs of start-up activities and organizational costs
to be expenses as incurred. Because early application in encouraged in prior
periods, the Company has restated the financial statements to conform. To date,
approximately $111,590 of start-up costs and organizational expenses have been
expensed.
-6-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management, to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The accompanying financial statements
include all adjustments, which, in the opinion of management of the Company, are
necessary in order to make these financial statements not misleading.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
BASIS OF PRESENTATION
Since the Company has no revenues and has not yet commenced its principal
operations, it is considered a "development stage enterprise," as defined by
SFAS No. 7, Accounting and Reporting by Development Stage Enterprises.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the statement of cash flows include cash and cash
on deposit. The Company maintains its cash balance in one financial institution.
During the fiscal year, the Company's cash balance periodically exceeded the
financial institution's insured Federal Deposit Insurance Corporation limit of
$100,000.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Expenditures for maintenance and
repairs are charged to operations as incurred while renewals and improvements
are capitalized. Depreciation of furniture, fixtures, and equipment is computed
using the straight- line method. Estimated useful lives for reporting purposes
are as follows:
Furniture, fixtures, and equipment 5 years
OTHER ASSETS
Other assets consist of deposits and intangibles. Intangibles include patent
application (and associated legal costs) and certain technology acquisitions
costs. Upon commencement of operations, all costs associated with obtaining
patents and technology acquisition costs will be amortized on a straight-line
basis over a 17- year period. The Company will evaluate the recoverability of
intangibles on an annual basis by comparing the estimated net realizable value
of the intangibles to their carrying value. Organization costs and start-up
costs have been expensed in accordance with AICPA pronouncement SOP-98.5.
LOSS PER SHARE
In 1997 the FASB issued Statement No. 128, Earnings per Share. Unlike primary
loss per share, basic loss per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted loss per share is very similar to
the previously reported fully diluted loss per share. The basic and diluted loss
per share is computed based on the weighed average number of common shares
outstanding. Common equivalent shares are not included in the per share
calculations where the effect of their inclusion would be antidilutive. Options
to purchase shares of common stock are not included in the computations of
diluted loss per share since the effect would be antidilutive.
INCOME TAXES
The Company accounts for its income taxes in accordance with the standards
specified in SFAS No. 109, Accounting for Income Taxes.
-7-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
3. INTANGIBLE ASSETS
On June 12, 1998 the Company entered into a Sales of Technology Agreement
("Agreement") with Dr. Adrian Joseph (now an officer of the Company) whereby the
Company acquired all rights, title and interest in a proprietary radiation
shielding technology ("Technology"). The Technology itself has not yet been
patented.
As consideration for the sale of the Technology, Dr. Joseph received 10,000,000
shares or 80 % of the Company's then outstanding common stock. The transfer of
the Technology was intended to be a tax-free exchange in accordance with
Internal Revenue Code Section 351. The Agreement stated that the Company valued
the Technology at $5,000,000; however, an independent valuation of the
technology was not obtained. Consequently, the Technology has been recorded at a
nominal value of $10,000 based on the fair value ($.0001 per share) of the
common stock issued in exchange for the Technology on the date of transfer.
4. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases office space under an operating sublease that requires
minimum monthly payments of $3,719. Rent expense for the period ended
December 31, 1999 was $32,597.
Effective June 1, 1999, the Company has moved to a new location and has entered
into a new three year lease that requires minimum monthly payments of $3,679 for
year one, $3,786 for year two, and $3,893 for year three.
The estimated future minimum lease payments under all operating leases for the
years ending March 31, are as follows:
<TABLE>
<CAPTION>
PERIOD ENDING
MARCH 31
-------------
<S> <C>
2000 $ 44,148
2001 45,432
2002 19,480
------------
Total $ 109,060
</TABLE>
5. INCOME TAXES
For federal income tax purposes, approximately $2,100,349 of net operating loss
carryforwards exists to offset future taxable income. These carryforwards expire
in 2014. No tax benefit has been reported in the accompanying financial
statements, however, because management believes that there is at least a 50%
chance that the carryforwards will expire unused. Accordingly, at December 31,
1999, the $536,650 tax benefit of the cumulative carryforwards has been offset
by a valuation allowance of the same amount.
6. COMMON STOCK
The Company has 50,000,000 shares of $.0001 par value common stock authorized of
which and 13,908,000 shares were issued and outstanding at December 31, 1999.
Common stock issued from issuance of $5.00 shares has been reflected net of
offering expenses of approximately of $45,000.
-8-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
7. STOCK OPTIONS
Effective June 15, 1998, the Board of Directors approved an Incentive Stock
Option Plan granting to any Director, Officer, Employee or Consultant to the
Company options to purchase Company Common stock over a ten-year period, at the
fair market value at time of grant. The aggregate number of common shares of the
Company, which may be granted under the plan is 360,000 shares. As of December
31, 1999, options for 360,000 shares have been granted under the plan, 120,000
of which have been exercised.
Effective October 6, 1999, the Board of Directors approved an agreement
granting to Dr. Chong Chiu 400,000 shares of Company Common Stock valued at
$.75 per share to be distributed over three years. On December 14, 1999,
134,000 shares of Company Common Stock were distributed to Chong Chiu and
133,000 shares of Company Common Stock will be disbursed on or before
December 15, 2000. On or before December 15, 2001, an additional 133,000
shares of Company Common Stock will be disbursed to Chong Chiu. Additionally,
Chong Chiu has been granted an option to purchase 200,000 shares of
Company Common Stock at $3 per share upon the successful formation of a
nuclear power committee with qualifying power plant managers.
Effective December 14, 1999, the Board of Directors granted to a board
member, S. Brewer, 300,000 shares of Company Common Stock valued at $.75 per
share for becoming a Board member of the Company. Additionally, S. Brewer has
been granted an option to purchase 200,000 shares of Company Common Stock for
$2 per share any time between November 1, 1999 and October 31, 2000.
8. STOCK WARRANTS
Effective September 15, 1998, the Board of Directors approved a plan to issue
units consisting of one share of Common Stock (the "Common Stock") and one Class
"A" Common Stock Purchase Warrant (the "Class A Warrants") of the Company.
The Class "A" Warrants are exercisable into one (1) share of Common Stock and
one (1) Class "B" Common Stock Purchase Warrant (the "Class "B" Warrant")
commencing the day immediately after the first anniversary of the closing of
this Offering (the "A" Exercise Date") and have an exercise price of $4.00. The
Class "A" Warrants expire on the first anniversary of the "A" Exercise Date (the
"A" Expiration Date"). The Class "B" Warrants are exercisable into one (1) share
of Common Stock commencing immediately upon their issuance (the "B" Exercise
Date") and have an exercise price of $3.00 per share of Company Common Stock.
The Class "B" Warrants expire on the first anniversary of the "B" Exercise Date
Prior to permitting the exercise of either the Class "A" or Class "B" Warrants
offered hereby, the Company will be required to either register the underlying
Common Stock or seek an exemption from registration under both federal and state
law. The Common Stock and the Class A warrants shall be immediately detachable.
9. RELATED PARTIES
The Company has also entered into consulting contracts with certain directors as
a means of inducing the directors to devote additional time and effort to the
Company over and above the time normally expected of a director. These contracts
provide for payments of $2,000 to $4,000 per month to each director under
contract, have no stated termination date but are cancelable by either party on
30 days written notice. Amounts paid by the Company under these contracts were
$138,012, respectively at December 31, 1999. Amounts accrued to these directors
for their services for the nine months ended December 31, 1999 are $57,360.
The Company purchased various chemicals, lab equipment, research material, and
start-up expenses from a related party. The purchase of lab equipment, research
materials and start-up expenses amounted to $20,000 during the period ended
March 31,1999. The purchase of chemicals for the period ended March 31, 1999
amounted to $14,000. There were no purchases from related parties in the nine
months ended December 31, 1999.
-9-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
10. CONVERSION OF DEBT TO STOCK
On November 22, 1999, the board of directors approved the conversion of debt
to stock for (a) six board members accrued director's fees, (b) accrued
salary for three officers of the Company (c) loans to the Company from one of
its officers, (d) and unreimbursed expenses for one of the officers and one
of the directors. The conversion was structured to pay 20% of the debt in
cash, and 80% of the debt to be converted into 473,080 shares of Company
Common Stock at $ .75 per share. In addition, an award of 734,562 shares of
Company Common Stock under Rule 16b-3(d) of the Securities Act of 1934 was
authorized. As of January 30, 2000 the stock has not been issued.
11. CONVERTIBLE PROMISSORY NOTE
On December 15, 1999, the Company issued a convertible promissory note to
Triton Private Equities Fund, L.P. for $250,000. Face value is $385,000 and
the note bears interest at 8% per annum, interest only, due quarterly
beginning March 31, 2000. The Company recorded an original issue discount of
$ 135,000, legal fees for the holder in the amount of $5,000, and a finder's
fee in the amount of $25,000. Additionally, a prepaid fee of $25,000 was
withheld to cover the first five months payments of an agreement between the
Company and Dutchess Advisors, Ltd. for assistance of the Company's
capitalization efforts.
The note has a warrant feature for 25,000 shares of Company Common Stock,
with a three-year expiration date. APB-16, par. 16 requires that separate
amounts attributable to the debt and the purchase warrant be computed and
accounting recognition be given to each component. The warrants can be
converted to common stock for $ 2.25 per share. As of the date of the note,
the warrants have not been publicly traded. The Company Common Stock, as of
the close on December 15, 1999, was traded at $ 1.50 per share. Since the
warrants had no value on December 15, 1999, no accounting recognition was
given them.
The original issue discount is being amortized over the two year life of the
convertible promissory note.
Interest on the note can be paid in shares of Company Common Stock at the
discretion of the Company, as follows: the dollar amount of the interest to be
paid divided by the average of the closing bid prices for the Common Stock for
the ten (10) trading days prior to the due date of such interest payment
multiplied by ninety percent (90).
The holder of the convertible promissory note can covert it to Company Common
Stock for the lesser of (a) one hundred twenty-five percent (125%) of the
closing price of the Company Common Stock at the date of the note or (b) the
average of the three lowest bid prices of the Company Common Stock for twenty
(20) trading days prior to the conversion date multiplied by a percentage
under the following schedule:
date of note to 120 days = 105%
121 days to 150 days = 103%
151 days to 180 days = 100%
181 days to 210 days = 97%
more than 210 days = 95%
12. SUBSEQUENT EVENTS
SIGNIFICANT CONTRACTS AND AGREEMENTS
On June 25, 1999, the Company entered into a consulting agreement with Dr.
Chong Chiu. Under that agreement, Dr. Chiu will provide certain marketing,
product development, specification review and other services to the Company
related to nuclear power plants. Dr. Chiu is the former Engineering and
Safety Manager of the San Onofre Nuclear Generating Station. The agreement
provides for Dr. Chiu to receive 15% percent of net (amount received after
cost of production) of all nuclear power plant revenues generated as a direct
result of his services.
-10-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SECURITIES OFFERINGS
The Company has filed a Form 10-SB registration statement with the Securities
and Exchange Commission, which filing has now become effective.
The Company's Common Stock is quoted on the OTC Bulletin Board under the symbol
"NUSL", and has been so quoted since June 10, 1999. Prior to that date, there
was no public trading market for the Company's equity securities. In addition,
the Company's Class "A" Common Stock Purchase Warrants (the "Class A Warrants")
are quoted on the OTC Bulletin Board under the symbol "NUSLW".
-11-
<PAGE>
PLAN OF OPERATION. Nurescell Inc. (the "Company" or "Registrant") is a
development stage company with operations to date principally consisting of
research, development and testing for its proprietary radiation shielding
technology (the "Nurescell Technology"). The Company is presently focused on
independent third party validation for the performance of its product, the
obtaining of patents for its technology, the establishment of manufacturing
procedures and processes, and the introduction of its product to the nuclear
industry. Although the Company intends to actively pursue research grants to
fund either all or a portion of product development for specific
applications, any such revenues are not anticipated prior to the fiscal
quarter ending December 31, 2000. Additionally, there are no assurances that
the Company will obtain any grants or that any grant funding received will be
sufficient to meet all the Company's funding requirements, either within this
estimated time frame or in the future. From inception to December 31, 1999,
the Company has obtained approximately $1,190,000 in financing through the
sale of equity or convertible debt securities through three private offerings
(the "Offerings"), each of which has been completed. Through December 31,
1999, the Company has utilized all of the proceeds of the Offerings to (i)
commence and pursue patent applications for the Nurescell Technology, (ii)
identify, negotiate and finalize suitable research, development and testing
contracts, and begin initial formal testing of the Nurescell Technology,
(iii) identify, negotiate and finalize preliminary marketing consulting
contracts and (iv) provide working capital for the ongoing administrative and
financing acquisition costs of the Company. The Company is presently funded
for working capital by approximately $160,000 in loans from its Chief
Executive Officer, Dr. Adrian Joseph. There is currently an order to be
filled providing for payment of approximately $100,000 to the Company, with
product shipment expected to begin in February 2000.
The Company's financial statements for the quarter ended December 31,
1999 have been prepared assuming the Company will continue as a
going-concern. As noted in the Company's financial statements for the year
ended March 31, 1999, as filed with the Company's report on Form 10-KSB for
that period, the presence of significant losses, negative cash flows and
limited working capital, together with the uncertainties associated with the
ability of the Company to obtain additional capital, raise substantial doubts
as to the Company's ability to continue as a going-concern. The Company's
ability to continue as a going-concern will be questionable until such time
as it is able to generate sufficient revenues (from research grants and/or
commercial operations) in excess of expenses to sustain its normal business
activities. Until that time, the Company will depend on its ability to raise
additional capital through either loans or equity or debt offerings. At this
time, the Company expects that it will need approximately $3 million in
additional funding over the next two years in order to complete the necessary
testing and marketing of its Nurescell Technology. The Company is currently
seeking financing of up to $10,000,000 pursuant to an equity line of financing
which is presently being negotiated. There can, however, be no
guarantee that such financing will be obtained or that any additional
financing will be available on terms favorable to the Company or its
shareholders, if at all. We anticipate that our present cash reserves,
together with projected cash flow from operations, will be sufficient to fund
our operations for no more than the next six months. If sufficient funds are
not available when needed, the Company will be required to severely curtail
its operations, which would
-12-
<PAGE>
have a material adverse effect on the Company's business, operating results
and financial condition.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 21, 1999, Biltmore Advisors, LLC brought an action against the
Company in Orange County, California, Superior Court seeking damages in
excess of $6,000,000 or, in the alternative, specific performance. The action
is based on a claim of breach of contract by the Company with respect to an
alleged stock sale agreement between the Company and Biltmore Advisors, LLC.
The Company believes that the action is without merit and intends to defend
against it to the extent necessary to protect its interests.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In October 1999, the Company privately issued 60,000 shares of common stock
to each of Eric I. Michelman and William A. Wilson pursuant to their exercise of
previously acquired stock options at $0.50 per share. The issuances were made
pursuant to Rule 701 under the Securities Act of 1933, with Mr. Wilson being a
Company director and Mr. Michelman having access to Company information by
virtue of having been the Company's securities counsel.
In December 1999, the Company privately issued (i) 10,000 shares of common
stock and options to purchase another 10,000 shares at $2.20 per share to
Kay Barone as a bonus, (ii) 10,000 shares of common stock and options to
purchase another 10,000 shares at $2.20 per share to Jasmin Kastor as a bonus,
(iii) 300,000 shares of common stock to Shelby T. Brewer in connection with his
being a Company director, (iv) 134,000 shares of common stock to Dr. Chong Chiu
for consulting services and (v) 100,000 shares of common stock to Harold L. Rapp
for his services as the Company's President. In addition, the Company privately
issued to Mr. Brewer options to acquire up to 200,000 shares of common stock at
$2.00 per share until October 31, 2000. Based on each investor's familiarity
with the Company by virtue of their employment, directorship or consulting
relationship, the issuances were made in reliance on Section 4(2).
In December 1999, the Company also privately issued a $385,000 convertible
promissory note and warrants for 25,000 shares of common stock to Triton Private
Equities Fund, L.P. for $250,000 in cash. The issuance was made pursuant to
Rule 506 of Regulation D and Section 4(6) of the Securities Act of 1933 in a
negotiated transaction. Triton Private Equities Fund, L.P. is an accredited
investor.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are attached hereto:
3.1 Articles of Incorporation, as amended*
3.2 Bylaws*
4.1 Form of $385,000 Series 1999-A 8% Convertible
Promissory Note due December 1, 2001
4.2 Form of Warrant issued to Triton Private Equities
Fund, L.P.
10.1 Securities Purchase Agreement between the Company and
Triton Private Equities Fund, L.P. dated December 15,
1999
10.2 Registration Rights Agreement between the Company and
Triton Private Equities Fund, L.P. dated December 15,
1999
27 Financial Data Schedule
- ------------------------
* Incorporated by reference from the Company's Registration Statement on Form
10-SB (File No. 0-25377).
(b) One report on Form 8-K was filed during the Company's fiscal
quarter ended December 31, 1999. Such report is dated December 16,
1999 and provided disclosure under Item 4 regarding changes in
the Company's certifying accountant. No financial statements
were required to be filed with such report.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: February 14, 2000 NURESCELL INC.
By: /s/ HAROLD L. RAPP
----------------------------
Harold L. Rapp, President
By: /s/ SHARON NITKA
----------------------------
Sharon Nitka,
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
3.1 Articles of Incorporation, as amended*
3.2 Bylaws*
4.1 Form of $385,000 Series 1999-A 8% Convertible
Promissory Note due December 1, 2001
4.2 Form of Warrant issued to Triton Private Equities
Fund, L.P.
10.1 Securities Purchase Agreement between the Company and
Triton Private Equities Fund, L.P. dated December 15,
1999
10.2 Registration Rights Agreement between the Company and
Triton Private Equities Fund, L.P. dated December 15,
1999
27 Financial Data Schedule
- ------------------------
* Incorporated by reference from the Company's Registration Statement on Form
10-SB (File No. 0-25377).
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<PAGE>
Exhibit 4.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
DATE: DECEMBER 15, 1999
NOTE # 01 U.S.$385,000.00
NURESCELL INC.
SERIES 1999-A EIGHT PERCENT (8%) CONVERTIBLE PROMISSORY NOTE
DUE DECEMBER 1, 2001
THIS NOTE is one of a duly authorized issue of Notes (a "Note" or the
"Notes") of Nurescell Inc., a corporation duly organized and validly existing
under the laws of the State of Nevada, U.S.A. (the "Company") designated as its
Series 1999-A Eight Percent (8%) Convertible Notes Due December 1, 2001, in an
aggregate principal face value for all Notes of this series of Three Hundred
Eighty Five Thousand and no/100 United States Dollars (US$385,000.00).
FOR VALUE RECEIVED, the Company promises to pay to THE TRITON PRIVATE
EQUITIES FUND, L.P., the registered holder hereof and its successors and assigns
(the "Holder"), the principal sum of Three Hundred Eighty Five Thousand and
no/100 United States Dollars ($385,000.00) on December 1, 2001 (the "Maturity
Date"), and to pay interest on the principal sum outstanding, at the rate of
eight percent (8%) per annum due and payable in quarterly installments in
arrears, on June 30, September 30, December 31 and March 31 of each year during
the term of
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this Note, with the first such payment to be made on March 31, 2000. Accrual of
interest on the outstanding principal amount, payable in cash or Common Stock
(defined hereinafter) at the Company's option, shall commence on the date hereof
and shall continue until payment in full of the outstanding principal amount has
been made or duly provided for. The interest so payable will be paid to the
person in whose name this Note (or one or more predecessor Notes) is registered
on the records of the Company regarding registration and transfers of the Note
(the "Note Register"); provided, however, that the Company's obligation to a
transferee of this Note arises only if such transfer, sale or other disposition
is made in accordance with the terms and conditions of that Securities Purchase
Agreement of even date herewith between the Company and The Triton Private
Equities Fund, L.P. (the "Securities Purchase Agreement").
The principal of, and interest on, this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing on
the Note Register of the Company as designated in writing by the Holder hereof
from time to time. The Company will pay the outstanding principal of and any and
all accrued and unpaid interest due upon this Note on the Maturity Date, less
any amounts required by law to be deducted or withheld, to the record Holder of
this Note as of the fifth business day (as defined in the Securities Purchase
Agreement) prior to the Maturity Date and addressed to such Holder at the last
address appearing on the Note Register. The forwarding of such funds shall
constitute a payment of outstanding principal and interest hereunder and shall
satisfy and discharge the liability for principal and interest on this Note to
the extent of the sum represented by such payment plus any amounts so deducted
or withheld. Except as herein provided, this Note may not be prepaid without the
prior written consent of the Holder. Interest may at the Company's option be
paid in Common Stock, with the number of shares of Common Stock to be delivered
in payment of such interest determined by taking the dollar amount of interest
being paid divided by [the average of the closing bid prices for the Common
Stock for the ten (10) trading days prior to the due date of such interest
payment multiplied by ninety percent (.90)].
This Note is subject to the following additional provisions:
1. NOTE EXCHANGEABLE. The Note is exchangeable commencing thirty (30)
days from the date hereof for an equal aggregate principal amount of Notes of
different authorized denominations, as requested by the Holder surrendering the
same, but not of denominations of less than Fifty Thousand United States Dollars
(US$50,000.00) without the Company's written consent. No service charge will be
made for such registration or transfer or exchange.
2. WITHHOLDING. The Company shall be entitled to withhold from all
payments of principal or interest pursuant to this Note any amounts required to
be withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. TRANSFER/EXCHANGE OF NOTE; REGISTERED HOLDER; OPINION OF COUNSEL;
LEGEND. This Note has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only in compliance
with the Securities Act of 1933, as amended (the "1933 Act") and applicable
state securities laws. Prior to due presentment for transfer of this Note, the
Company and any agent
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of the Company may treat the person in whose name this Note is duly registered
on the Company's Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or
bound by notice to the contrary.
The Holder understands and acknowledges by its acceptance hereof that
(i) except as provided in the Securities Purchase Agreement and in that
Registration Rights Agreement attached as Exhibit C to the Securities Purchase
Agreement (the "Registration Rights Agreement"), both such documents
incorporated herein by reference, this Note and the shares of common stock in
the Company issuable upon conversion thereof as herein provided ("Conversion
Shares") have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (a) subsequently registered thereunder, or (b) the Holder
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, substance and scope to the Company, to the effect that the
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration; (ii) any sale of
such securities made in reliance on Rule 144 promulgated under the 1933 Act may
be made only in accordance with the terms of said Rule and further, if said Rule
is not applicable, any resale of such securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other regulation and/or exemption under the 1933 Act or the rules and
regulations of the United States Securities and Exchange Commission (the "SEC")
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws (other than pursuant to the terms of the Securities Purchase
Agreement and the Registration Rights Agreement) or to comply with the terms and
conditions of any exemption thereunder.
Any Conversion Shares issued upon conversion of this Note, and if
applicable, any common stock of the Company issued in payment of interest as
herein provided, shall, if and only to the extent required by law, bear legends
in similar form to the legends set forth on the first page of this Note.
4. CONVERSION OF NOTE INTO COMMON STOCK; REDEMPTION BY THE COMPANY.
(a) The Holder of this Note is entitled, at its option, at any time
commencing the earlier of (i) the date on which the Registration Statement (as
defined in the Securities Purchase Agreement) is declared effective by the SEC;
or (ii) the date which is one hundred twenty (120) days after the date first
written at the top of this Note, to convert all or a portion of the original
principal face amount of this Note into shares of common stock in the Company,
$.0001 par value per share (defined herein as the "Common Stock"), at a
conversion price (the "Conversion Price") for each share of Common Stock equal
to the lesser of (x) one hundred twenty-five percent (125%) of the closing bid
price for the Common Stock on the date of issuance of this Note, or (y) a
percentage (the "Applicable Percentage") of the average of the three (3) lowest
closing bid prices for the Common
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Stock for the twenty (20) trading days immediately preceding the Conversion Date
(as hereinafter defined), as reported on the National Association of Securities
Dealers OTC Bulletin Board Market (or on such other national securities exchange
or market as the Common Stock may trade at such time). The Applicable Percentage
shall be equal to the following: (i) for conversions made on or before 120 days
after the date of this Note, 105%; (ii) for conversions made between 121 and 150
days after the date of this Note, 103%; (iii) for conversions made between 151
and 180 days after the date of this Note, 100%; (iv) for conversions made
between 181 and 210 days after the date of this Note, 97%; or (v) for
conversions made after 210 days after the date of this Note, 95%.
Any conversion of this Note shall be achieved by submitting to the
Company the fully completed form of conversion notice attached hereto as Exhibit
I (a "Notice of Conversion"), executed by the Holder of this Note evidencing
such Holder's intention to convert this Note or the specified portion (as herein
provided) hereof. A Notice of Conversion may be submitted via facsimile to the
Company at the telecopier number for the Company provided in the Securities
Purchase Agreement (or at such other number as requested in advance of such
conversion in writing by the Company), and if so submitted the original Notice
of Conversion shall be delivered to the Company within two (2) business days
thereafter. The Company and the Holder shall each keep records with respect to
the portion of this Note then being converted and all portions previously
converted; upon receipt by the Holder of the requisite Conversion Shares, the
outstanding principal amount of the Note shall be reduced by the amount
specified in the Notice of Conversion resulting in such Conversion Shares. The
Company may from time to time, but is not required to, instruct the Holder and
the Holder shall surrender this Note along with the Notice of Conversion for the
purposes of making a notation thereon as to the amount of principal being
converted, or of canceling this Note and issuing a new Note in the same form
with the principal amount of such Note reduced by the amount converted. Such new
or notated Note shall be delivered to the Holder within three (3) business days
after such Holder's surrender to the Company. No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share. Accrued interest on
the converted portion of the Note shall be payable upon conversion thereof, in
cash or Common Stock at the Conversion Price, at the Company's option. The date
on which a notice of conversion is given (the "Conversion Date") shall be deemed
to be either the date on which the Company receives from the Holder an original
Notice of Conversion duly executed, or, if earlier, the date set forth in such
Notice of Conversion if the original Notice of Conversion is received by the
Company within two (2) business days thereafter.
In all cases, the Company shall deliver the Conversion Shares to the
Holder within three (3) business days after the Conversion Date with respect to
such Conversion Shares being delivered, and at the address specified in the
Notice of Conversion. The Company acknowledges that the Securities Purchase
Agreement requires that the Company pay liquidated damages for late or
non-delivery of Conversion Shares.
Subject to the provisions of Paragraph 4(b) hereof, at the Maturity
Date, the remaining portion of this Note which remains unconverted, if any, plus
accrued interest shall be automatically
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converted into shares of Common Stock as of the Maturity Date, as if the Holder
had converted the remaining portion of this Note according to the provisions of
this Section 4, with the Conversion Date being equivalent in such event to the
Maturity Date, as if the Holder had provided the Company with a Notice of
Conversion with respect to the outstanding principal amount of this Note on the
Maturity Date. Other than a conversion made on the Maturity Date in accordance
with this paragraph, conversions of this Note must be effected in increments of
at least Ten Thousand U.S. Dollars ($10,000) of principal amount of this Note
(or such lesser outstanding principal amount of this Note).
(b) Notwithstanding anything herein to the contrary, the Company shall
have the right (but not the obligation) to redeem all or any portion of this
Note, provided the Company is not then in violation of any of its obligations
under this Note or under the Securities Purchase Agreement or any addenda
thereto, under the following conditions. At any time prior to delivery of any
Notice of Conversion (in this Section 4(b), a "Notice") to the Company by the
Holder in accordance with the terms of this Note, the Company may give to the
Holder notice (a "Redemption Notice") that it intends to pay the Holder the Cash
Redemption Amount (as hereinafter defined) with respect to all or such portion
of the Note referred to in the Redemption Notice. The "Cash Redemption Amount"
shall be equal to one hundred percent (100%) of the face amount of the portion
of the Note to be redeemed pursuant to the Redemption Notice, and shall be paid
to the Holder according to the Holder's written instructions to the Company
within three (3) business days after delivery of the Redemption Notice with
respect to such Note or portion thereof to be redeemed. If the Company does not
redeem within the time limits herein specified and according to the terms of
this Section 4(b), then unless waived by the Holder, the Redemption Notice shall
be null and void, and the Holder may convert all or such portion of this Note as
the Holder in its discretion determines. The Company may not redeem any portion
of the Note for which a Notice of Conversion has been submitted prior to or
within three (3) business days after a Redemption Notice is delivered to the
Holder.
5. OBLIGATIONS OF THE COMPANY HEREIN ARE UNCONDITIONAL. No provision of
this Note shall alter or impair the obligation of the Company, which obligation
is absolute and unconditional, to repay the principal amount of this Note at the
time, place, rate, and in the coin currency, hereinabove stated. This Note and
all other Notes now or hereafter issued in replacement of this Note on the same
or similar terms are direct obligations of the Company. This Note ranks at least
equally with all other Notes now or hereafter issued under the terms set forth
herein. The Conversion Price and number of shares of Common Stock issuable upon
conversion shall be subject to adjustment from time to time as provided in
Section 6 below.
6. ADJUSTMENTS.
(a) In the event the Company should at any time or from time to time,
after the date of this Note, fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or
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other distribution payable in additional shares of Common Stock (equal to at
least ten percent (10%) or more of the Company's then issued and outstanding
shares of Common Stock) or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly additional shares
of Common Stock (hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder for the additional shares of Common
Stock or the Common Stock Equivalents (including the additional shares of Common
Stock issuable upon conversion or exercise thereof), then, as of such record
date (or the date of such dividend, distribution, split or subdivision if no
record date is fixed), then unless the Conversion Price is otherwise
automatically adjusted in accordance with the terms of this Note, the Conversion
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of this Note shall be increased in proportion to
such increase in the aggregate number of shares of Common Stock outstanding and
those issuable with respect to such Common Stock Equivalents.
(b) If the number of shares of Common Stock outstanding at any time
after the date of this Note is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price shall be appropriately increased so that the number of shares
of Common Stock issuable upon conversion of this Note shall be decreased in
proportion to such decrease in outstanding shares.
(c) In the event the Company, at any time while all or any portion of
this Note is outstanding, shall be consolidated with or merged into any other
corporation or corporations or shall sell or lease all or substantially all of
its property and business as an entirety, then lawful provisions shall be made
as part of the terms of such consolidation, merger, sale or lease so that the
holder of this Note may thereafter receive in lieu of such Common Stock
otherwise issuable to such holder upon conversion of this Note, but at the
conversion rate which would otherwise be in effect at the time of conversion, as
hereinbefore provided, the same kind and amount of securities or assets as may
be issuable, distributable or payable upon such consolidation, merger, sale or
lease with respect to Common Stock of the Company.
7. RESERVATION OF SHARES. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Note, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the outstanding principal amount, and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of this Note, in addition to such other remedies as
shall be available to Holder, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase the number of
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes, including without limitation, using its best
efforts to obtain the requisite stockholder approval necessary to increase the
number of authorized shares of the Company's Common Stock.
8. NOTE HOLDER NOT DEEMED A STOCKHOLDER. No Holder, as such, of this
Note shall
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be entitled (prior to conversion of this Note into Common Stock, and only then
to the extent of such conversion) to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Note be construed to confer upon the Holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Note of the Conversion
Shares which he or she is then entitled to receive upon the due conversion of
all or a portion of this Note. Notwithstanding the foregoing, the Company will
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.
9. NO LIMITATION ON CORPORATE ACTION. No provisions of this Note and no
right or option granted or conferred hereunder shall in any way limit, affect or
abridge the exercise by the Company of any of its corporate rights or powers to
recapitalize, amend its Certificate of Incorporation, reorganize, consolidate or
merge with or into another corporation, or to transfer all or any part of its
property or assets, or the exercise of any other of its corporate rights and
powers.
10. REPRESENTATIONS OF HOLDER. Upon conversion of all or a portion of
this Note, the Holder shall confirm in writing, in a form reasonably
satisfactory to the Company, that the Conversion Shares so purchased are
being acquired solely for the Holder's own account and not as a nominee for
any other party, and that such Holder is an Accredited Investor (as defined
in Rule 501(a) of Regulation D promulgated under the 1933 Act). The Company
acknowledges that Holder's duly executed certification on the Notice of
Conversion is satisfactory confirmation of the facts set forth in the
immediately preceding sentence. If such Holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such Holder's conversion of all or a portion of the Note that
the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its
securities upon conversion of the Note shall not violate any United States or
state securities laws.
11. WAIVER OF DEMAND, PRESENTMENT, ETC. The Company hereby expressly
waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereunder, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.
12. ATTORNEY'S FEES. The Company agrees to pay all costs and expenses,
including without limitation reasonable attorney's fees, which may be incurred
by the Holder in collecting any amount due under this Note or in enforcing any
of Holder's conversion rights as described herein.
13. DEFAULT. If one or more of the following described "Events of
Default" shall
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occur:
(a) The Company shall continue in default in the payment of
principal or interest on this Note for a period of ten (10) days after a
notice of default is received by the Company with respect to any such
payment, or the Company shall not timely honor any Notice of Conversion
as specified herein and in the Securities Purchase Agreement; or
(b) Any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement, the Registration Rights
Agreement, or in any certificate or financial or other written statement
heretofore or hereafter furnished by or on behalf of the Company in
connection with the execution and delivery of this Note or the
Securities Purchase Agreement or the Registration Rights Agreement shall
be false or misleading in any material respect at the time made and the
Holder shall have provided seven (7) days prior written notice to the
Company of the alleged misrepresentation or breach of warranty and the
same shall continue uncured for a period of seven (7) days after such
written notice from the Holder; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement or
obligation of the Company under this Note or the Securities Purchase
Agreement and such failure shall continue uncured for a period of seven
(7) days after written notice from the Holder of such failure; or
(d) The Company shall either: (i) become insolvent; (ii) admit in
writing its inability to pay its debts generally or as they become due;
(iii) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (iv) apply for, or consent to the
appointment of, a trustee, liquidator, or receiver for its or for a
substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without
the Company's consent and such appointment is not discharged within
sixty (60) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or
assets of the Company and shall not be dismissed within sixty (60) days
thereafter; or
(g) Any money judgment, writ or Note of attachment, or similar
process in excess of Two Hundred Thousand United States Dollars
(US$200,000.00) in the aggregate shall be entered or filed against the
Company or any of its properties or assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in
any event later than five (5) days prior to the date of any proposed
sale thereunder; or
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(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or
any law for the relief of debtors shall be instituted by or against the
Company and, if instituted against the Company, shall not be dismissed
within sixty days after such institution or the Company shall by any
action or answer approve of, consent to, or acquiesce in any such
proceedings or admit the material allegations of, or default in
answering a petition filed in, any such proceeding; or
(i) The Company shall have its Common Stock delisted from the OTC
BULLETIN BOARD Market or suspended from trading thereon, and shall not
have its Common Stock relisted on the same or another national
securities exchange (other than the National Quotation Bureau, Inc.,
"pink sheets" market), or have such suspension lifted, as the case may
be, within ninety days after such delisting or suspension; or
(j) The Company shall have received a notice of default on the
payment of any debt(s) aggregating in excess of Two Hundred Thousand
United States Dollars (US$200,000.00) beyond any applicable grace
period;
then, or at any time thereafter, and in any and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
in one instance shall not be deemed to be a waiver in another instance or for
any other prior or subsequent Event of Default) at the option of the Holder and
in the Holder's sole discretion, the Holder may immediately accelerate the
maturity hereof, whereupon all principal and interest hereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Company, anything
herein or in any Note or other instrument contained to the contrary
notwithstanding, and the Holder may immediately, and upon the expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law or equity.
14. NOTE A GENERAL UNSECURED OBLIGATION OF THE COMPANY. This Note
represents a general unsecured obligation of the Company. No recourse shall be
had for the payment of the principal of, or the interest on, this Note, or for
any claim based thereon, or otherwise in respect hereof, against any
incorporator, shareholder, officer, director, or agent of the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
15. ENFORCEABILITY. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Note will not in any way be
affected or impaired thereby.
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16. ENTIRE AGREEMENT. This Note and Exhibit I attached hereto, the
Securities Purchase Agreement and the Exhibits attached thereto and the
Registration Rights Agreement and the Exhibits attached thereto (if any)
constitute the full and entire understanding between the Company and the Holder
with respect to the subject matter hereof and thereof. Neither this Note nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the Company and the Holder.
17. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the state of Delaware without giving effect to
applicable principles of conflict of law.
18. HEADINGS. Headings in this Note are for convenience only, and shall
not be used in the construction of this Note.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized, all as of the date first
hereinabove written.
NURESCELL INC.
By: ______________________________________
Mr. Adrian A. Joseph, CEO
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EXHIBIT I
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in
Order to Convert the Note)
The Undersigned hereby irrevocably elects to convert $ of the Eight
Percent (8%) Convertible Note Due December 1, 2001, No. 01, into shares of
Common Stock of Nurescell Inc. (the "Company"), according to the terms and
conditions set forth in such Note, as of the date written below. If securities
are to be issued to a person other than the Undersigned, the Undersigned agrees
to pay all applicable transfer taxes with respect thereto.
The Undersigned represents that it, as of this date, is an "accredited
investor" as such term is defined in Rule 501(a) of Regulation D promulgated by
the SEC under the 1933 Act.
The Undersigned also represents that the Conversion Shares are being
acquired for the Holder's own account and not as a nominee for any other party.
The Undersigned represents and warrants that all offers and sales by the
Undersigned of the Conversion Shares shall be made pursuant to registration of
the same under the 1933 Act, or pursuant to an exemption from registration under
the 1933 Act. The Undersigned acknowledges that the Conversion Shares shall if
(and only if) required by law contain the legend contained on page 1 of the
Note.
Conversion Date:* _____________________
Applicable Conversion Price: ______________________________
Holder (Print True Legal Name): ______________________________________
- -------------------------------------------------------
(Signature of Duly Authorized Representative of Holder)
Address of Holder:_____________________________________
_____________________________________
_____________________________________
* This original Notice of Conversion must be received by the Company by the
second business day following the Conversion Date.
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Exhibit 4.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
NURESCELL INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No. 01 Number of Shares: 25,000
Date of Issuance: December 15, 1999
Nurescell Inc., a Nevada corporation (the "Company"), hereby certifies
that, for value received, the Triton Private Equities Fund, L.P., and permitted
assigns, the registered holder hereof ("Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time after the date hereof, but not after 5:00 P.M. New York
time on the Expiration Date (as defined herein) 25,000 fully paid and
nonassessable shares of Common Stock (as defined herein) of the Company (each a
"Warrant Share" and collectively the "Warrant Shares") at a purchase price of
U.S.$2.25 per share (the "Exercise Price") in lawful money of the United States.
The number of Warrant Shares purchasable hereunder and the Exercise Price are
subject to adjustment as provided in Section 9 below.
Section 1.
(a) Definitions. The following words and terms used in this Warrant
shall have the following meanings:
"Common Stock" means (a) the Company's common stock and (b) any capital
stock into which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.
"Convertible Securities" mean any securities issued by the Company which
are convertible into or exchangeable for, directly or indirectly, shares of
Common Stock.
<PAGE>
"Expiration Date" means the date which is three (3) years from the date
of this Warrant or, if such date falls on a Saturday, Sunday or other day on
which banks are required or authorized to be closed in the City of New York or
the State of New York (a "Holiday"), the next preceding date that is not a
Holiday.
"Market Price" means the closing bid price on the day prior to the date
on which the Exercise Form is delivered to the Company, as quoted on the
National Association of Securities Dealers' OTC Bulletin Board Market or such
other national securities exchange or market on which the Common Stock may then
be listed.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement between the holder hereof (or its predecessor in interest) and the
Company for the purchase of this Warrant and the other Securities (as defined in
the Securities Purchase Agreement).
"Transfer" shall include any disposition of this Warrant or any Warrant
Shares, or of any interest in either thereof which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended, or
applicable state securities laws.
"Warrant" shall mean this Warrant and all Warrants issued in exchange,
transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S.$2.25 per share.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company's successors; and (B) to any
applicable law defined or referred to herein, shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.
(ii) When used in this Warrant, unless the otherwise specified in a
particular instance, the words "herein," "hereof," and "hereunder," and words of
similar import, shall refer to this Warrant as a whole and not to any provision
of this Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer
to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.
(iii) Whenever the context so requires the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the Holder, as a whole or in part, at any time prior to 5:00 P.M.
New York Time on the Expiration Date. The rights represented by this Warrant may
be exercised by the Holder, as a whole or from time to time
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in part (except that this Warrant shall not be exercisable as to a fractional
share) by (i) delivery of a written notice, in the form of the exercise form
attached as Exhibit I hereto (an "Exercise Form"), of the Holder's election to
exercise this Warrant, which notice shall specify the number of Warrant Shares
to be purchased, (ii) payment to the Company of an amount equal to the Warrant
Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus any applicable issue or transfer taxes) in
immediately available funds (either by wire transfer or a certified or cashier's
check drawn on a United States bank), for the number of Warrant Shares as to
which this Warrant shall have been exercised, and (iii) the surrender of this
Warrant, properly endorsed, at the principal office of the Company (or at such
other agency or office of the Company as the Company may designate by notice to
the Holder).
In addition, and notwithstanding anything to the contrary contained in
this Warrant, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company in a cashless exercise, including a written
calculation of the number of Warrant Shares to be issued upon such exercise in
accordance with the terms hereof (a "Cashless Exercise"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price, the Holder shall
surrender this Warrant for, and the Company shall issue in respect thereof, the
number of Warrant Shares determined by multiplying the number of Warrant Shares
to which the Holder would otherwise be entitled by a fraction, the numerator of
which shall be the difference between the then current Market Price per share of
the Common Stock and the Exercise Price, and the denominator of which shall be
the then current Market Price per share of Common Stock.
The Warrant Shares so purchased shall be deemed to be issued to the
Holder or Holder's designees, as the record owner of such Warrant Shares, as of
the date on which this Warrant shall have been surrendered, the completed
Exercise Form shall have been delivered, and payment (or notice of an election
to effect a Cashless Exercise) shall have been made for such Warrant Shares as
set forth above.
In the event of any exercise of the rights represented by this Warrant
in compliance with this Section 2(a), a certificate or certificates for the
Warrant Shares so purchased, registered in the name of, or as directed by, the
Holder, shall be delivered to, or as directed by, the Holder within three (3)
business days after such rights shall have been so exercised.
(b) Unless this Warrant shall have expired or shall have been fully
exercised, the Company shall issue a new Warrant identical in all respects to
the Warrant exercised except (i) it shall represent rights to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under
the Warrant exercised, less the number of Warrant Shares with respect to which
such Warrant is exercised, and (ii) the holder thereof shall be deemed to have
become the holder of record of such Warrant Shares immediately prior to the
close of business on the date on which the Warrant is surrendered and payment of
the amount due in respect of such exercise and any applicable taxes is made,
irrespective of the date of delivery of such share certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are properly closed, such person shall be deemed to have become
the holder of such Warrant Shares at the opening of business on the next
succeeding date on which the stock transfer books are open.
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(c) In the case of any dispute with respect to an exercise, the Company
shall promptly issue such number of Warrant Shares as are not disputed in
accordance with this Section. If such dispute only involves the number of
Warrant Shares receivable by the Holder under a Cashless Exercise, the Company
shall submit the disputed calculations to an independent accounting firm of
national standing via facsimile within two (2) business days of receipt of the
Exercise Form. The accountant shall audit the calculations and notify the
Company and the Holder of the results no later than two (2) business days from
the date it receives the disputed calculations. The accountant's calculation
shall be deemed conclusive absent manifest error. The Company shall then issue
the appropriate number of shares of Common Stock in accordance with this
Section.
Section 3. Covenants as to Common Stock. The Company covenants and
agrees that all Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such,
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. Notwithstanding the foregoing, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. No Limitation on Corporate Action. No provisions of this
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares
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<PAGE>
of Common Stock or other securities issuable upon the exercise thereof, and not
with any present intention of distributing any of the same. Upon exercise of
this Warrant, the holder shall, if requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the Warrant Shares so purchased are
being acquired solely for the holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
If such holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder's exercise of the Warrant that
the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of the Warrant shall not violate any United States or state
securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
(a) The holder of this Warrant understands that (i) this Warrant and the
Warrant Shares have not been and are not being registered under the Securities
Act or any state securities laws (other than as described in the Securities
Purchase Agreement and the Registration Rights Agreement), and may not be
offered for sale, sold, assigned or transferred unless (a) subsequently
registered thereunder, or (b) pursuant to an exemption from such registration;
(ii) any sale of such securities made in reliance on Rule 144 promulgated under
the Securities Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Securities and Exchange Commission
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities (other than as described in the
Securities Purchase Agreement and the Registration Rights Agreement) under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
Section 9. Adjustments.
(a) Reclassification and Reorganization. In case of any
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other
5
<PAGE>
than cash, the value shall be as determined by the Board of Directors of the
Company acting in good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall effect
a stock dividend, a stock split, a stock combination, or a reverse stock split
of the Common Stock, the number of Warrant Shares purchasable hereunder and the
Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen or destroyed, the Company shall, on receipt of an
indemnification undertaking reasonably satisfactory to the Company, issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen or
destroyed. In the event the holder hereof asserts such loss, theft or
destruction of this Warrant, the Company may require such holder to post a bond
issued by a surety reasonably satisfactory to the Company with respect to the
issuance of such new Warrant.
Section 11. Notice. Any notices required or permitted to be given under
the terms of this Warrant shall be sent by mail or delivered personally or by
courier and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be as provided in Section 8(f) of the Securities Purchase
Agreement (Holder is defined therein as the "Buyer"). Each party shall provide
notice to the other party of any change in address.
Section 12. Registration Right. Notwithstanding anything herein to the
contrary, unless the Warrant Shares have been registered in accordance with the
Registration Rights Agreement, during the three (3) year period commencing on
the date of this Warrant, if the Company proposes to file a registration
statement for a public offering of any of its securities under the Securities
Act of 1933, as amended, it will give written notice, at least twenty (20) days
prior to the filing of each such registration statement, to the holder of the
Warrant and/or the Common Stock previously received upon exercise hereof (and
not previously sold by such holder) of its intention to do so. Upon the holder's
request within ten (10) days after it has received such notice from the Company,
the Company shall include the Common Stock received or receivable upon exercise
of this Warrant owned in such registration statement such that said Common Stock
received or receivable upon such exercise shall be registered or qualified under
such registration statement. This provision is not applicable to a registration
statement filed on Form S-4 or Form S-8, nor is it applicable to the Warrant
once it has expired under the terms hereof or has been exercised and the holder
received non-restricted Common Stock upon such exercise. The rights described in
this Section 12 are in addition to the rights afforded the Holder by the
applicable provisions of the Securities Purchase Agreement.
Section 13. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. This Warrant
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shall be governed by and interpreted under the laws of the State of Delaware.
Headings are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Warrant shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of the
Holder and its successors and assigns. The Holder may not assign this Warrant
except in accordance with applicable federal and state securities laws. The
Holder shall immediately notify the Company with respect to any permitted
assignment of this Warrant.
Section 14. Date. The date of this Warrant is December 15, 1999. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
NURESCELL INC.
By: __________________________________
Mr. Adrian A. Joseph, CEO
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EXHIBIT I TO WARRANT
EXERCISE FORM TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THIS WARRANT
NURESCELL INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by the Warrant attached hereto as specified below
according to the conditions thereof and herewith makes payment of U.S. $
(unless effected by a Cashless Exercise in accordance with the terms of the
Warrant), the aggregate Warrant Exercise Price of such Warrant Shares in full
pursuant to the terms and conditions of the Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained upon exercise of the Warrant, except under
circumstances that will not result in a violation of the 1933 Act or applicable
state securities laws.
(ii) The undersigned requests that the stock certificates for the
Warrant Shares be issued, and a Warrant representing any unexercised portion
hereof be issued, pursuant to the terms of the Warrant in the name of the Holder
(or such other person(s) indicated below) and delivered to the undersigned (or
designee(s)) at the address or addresses set forth below.
Dated:___________________, _____.
HOLDER: ___________________________________
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
Address: ____________________________________
____________________________________
____________________________________
Number of Warrant Shares
Being Purchased: ________________________
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Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), is made as of
December 15, 1999, by and between Nurescell Inc., a corporation organized under
the laws of the State of Nevada, U.S.A., with headquarters located at 1400
Bristol Street North, Suite 240, Newport Beach, California 92660 (the "Company")
and the buyer set forth on the execution page hereof (the "Buyer").
RECITALS
A. The Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by the
provisions of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act") and Section 4(2) under the 1933 Act;
B. The Buyer desires to purchase from the Company, and the Company
desires to sell to the Buyer, for the amounts and upon the terms and conditions
stated in this Agreement, in a closing (the "Closing") as herein described,
certain of the Company's convertible notes as listed and described in Recital
B(i) immediately below, and certain warrants as listed and described in Recital
B(ii) below.
(i) At the Closing (the "Closing"), the Company's Series 1999-A Eight
Percent (8%) Convertible Notes, the form of which is attached
hereto as Exhibit A (the "Notes"), which may be converted into
common stock of the Company, $.0001 par value per share ("Common
Stock"), upon the terms and conditions hereof and upon the terms
and conditions of the Notes. The purchase price for the Notes
sold pursuant to this Agreement shall be as stated in Section
1(a) below. The total aggregate face amount of the Notes to be
issued and sold by the Company at the Closing is Three Hundred
Eighty Five Thousand and no/100 United States Dollars
($385,000.00), all in accordance with the terms of this Agreement
and of the Notes.
(ii) At the Closing, as additional consideration for Buyer's purchase
of the Notes a warrant (the "Warrants") to purchase 25,000 shares
of Common Stock at a purchase price of $2.25 per share, which
Warrants must be exercised if at all within three (3) years after
the date of issuance. The Warrants shall be substantially in the
form attached hereto as Exhibit B.
The Common Stock into which the Notes may (in accordance with their terms)
be convertible shall be collectively referred to herein as the "Conversion
Shares." Certain shares of Common Stock may (at the Company's option as
described in the Notes) be issued to the Buyer in payment of interest (the
"Interest Shares"). The Common Stock received upon exercise of the Warrants
shall be referred to as the "Warrant Shares." The Notes, the Conversion Shares,
the Interest
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Shares (if any), the Warrants and the Warrant Shares may be collectively
referred to herein as the "Securities."
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit C
attached hereto pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties, the Company and the Buyer hereby
agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. PURCHASE. The Buyer hereby agrees to purchase from the Company, and
the Company agrees to sell to the Buyer, $385,000.00 in aggregate principal
amount of Notes at the Closing. The purchase price (the "Purchase Price") for
the Notes purchased at the Closing shall be $250,000.00.
b. THE CLOSING. The date of the Closing (the "Closing Date") shall be
December 15, 1999. The Purchase Price for the Notes being purchased at the
Closing shall be delivered to the Escrow Agent (as defined in the Escrow
Agreement substantially in the form of Exhibit D attached hereto (the "Escrow
Agreement")) on behalf of the Company on or before the Closing Date. On or
before the Closing Date, the Company shall deliver the original Notes and
Warrants being purchased at the Closing, duly issued, authorized and executed by
the authorized officers on behalf of the Company, to the Escrow Agent (as
defined in the Escrow Agreement) on behalf of the Buyer.
c. FORM OF PAYMENT. The Buyer shall pay the Purchase Price for the
Securities purchased at the Closing by wire transfer of immediately available
funds in United States Dollars, to be deposited into the Escrow Account as
defined in the Escrow Agreement, against delivery to the Escrow Agent of duly
executed Notes and Warrants being purchased by the Buyer hereunder at such
Closing. The Escrow Agent shall be responsible for delivery of the Purchase
Price to the Company and the Notes and Warrants to the Buyer in accordance with
the terms of the Escrow Agreement and with the instructions of the said parties.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer understands, agrees with, and represents and warrants to the
Company with respect to its purchase hereunder, that:
a. INVESTMENT PURPOSES; COMPLIANCE WITH 1933 ACT. The Buyer is purchasing
the Securities for its own account for investment only and not with a view
towards, or in connection
2
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with, the public sale or distribution thereof, except pursuant to sales
registered under or exempt from the 1933 Act and applicable state securities
laws. The Buyer is not purchasing the Securities for the purpose of covering
short sale positions in the Common Stock established on or prior to the Closing
Date. The Buyer agrees to offer, sell or otherwise transfer the Securities only
(i) in accordance with the terms of this Agreement, the Notes and the Warrants,
as applicable, and (ii) pursuant to registration under the 1933 Act or to an
exemption from registration under the 1933 Act and any other applicable
securities laws. The Buyer does not by its representations contained in this
Section 2(a) agree to hold the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time pursuant to a
registration statement or in accordance with an exemption from registration
under the 1933 Act, in all cases in accordance with applicable state and federal
securities laws. The Buyer understands that it shall be a condition to the
issuance of the Conversion Shares, the Warrant Shares and the Interest Shares
(if any) that the Conversion Shares, the Warrant Shares and the Interest Shares
(if any) be and are subject to the representations set forth in this Section
2(a).
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor" as
that term is defined in Rule 501 (a) of Regulation D. The Buyer is a Delaware
limited partnership. The Buyer has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of an
investment made pursuant to this Agreement. The Buyer is aware that it may be
required to bear the economic risk of an investment made pursuant to this
Agreement for an indefinite period of time, and is able to bear such risk for an
indefinite period.
c. RELIANCE ON EXEMPTIONS. The Buyer understands the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of the applicable United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, acknowledgments,
understandings, agreements and covenants of the Buyer set forth herein in order
to determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. INFORMATION. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities that have
been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask all such questions of the Company as they have
in their discretion deemed advisable. The Buyer understands that its investment
in the Securities involves a high degree of risk. The Buyer has sought such
accounting, legal and tax advice as it has considered necessary to an informed
investment decision with respect to the investment made pursuant to this
Agreement.
e. NO GOVERNMENT REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
approved or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities, nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
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f. TRANSFER OR RESALE. The Buyer understands that: (i) except as provided
in the Registration Rights Agreement, the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless either (a) subsequently
registered thereunder or (b) the Buyer shall have delivered to the Company an
opinion by counsel reasonably satisfactory to the Company, in form, scope and
substance reasonably satisfactory to the Company, to the effect that the
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, (ii) any sale of
such securities made in reliance on Rule 144 (as hereafter defined) may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person though whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder and applicable state securities laws, and (iii) neither the
Company nor any other person is under any obligation to register such securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to
this Agreement or the Registration Rights Agreement).
g. LEGEND. The Buyer understands that the Notes, the Warrants, and until
such time as the Conversion Shares, the Warrant Shares and the Interest Shares
(if any) (collectively, the "Registrable Securities"), have been registered
under the 1933 Act as contemplated by the Registration Rights Agreement or
otherwise may be sold by the Buyer pursuant to Rule 144 (as amended, or any
applicable rule which operates to replace said Rule) promulgated under the 1933
Act ("Rule 144"), the stock certificates representing the Registrable Securities
will bear a restrictive legend (the "Legend") in substantially the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
The Legend shall be removed and the Company will issue certificates without
the Legend to the holder of the applicable Notes or any Registrable Securities
upon which the Legend is stamped, in accordance with Section 5(b).
h. AUTHORIZATION; ENFORCEMENT. This Agreement, the Registration Rights
Agreement and the Escrow Agreement have been duly and validly authorized,
executed and delivered by the
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Buyer and are each and collectively valid and binding agreements of the Buyer
enforceable in accordance with their terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company understands, agrees with, and represents and warrants to the
Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized and existing in good standing under the laws of the jurisdiction in
which is is incorporated, except as would not have a Material Adverse Effect (as
defined below), and has the requisite corporate power to own its properties and
to carry on its business as now being conducted. The Company is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary and where the failure so to qualify would have a
Material Adverse Effect. "Material Adverse Effect" means any material adverse
effect on the operations, properties or financial condition of the Company taken
as a whole. The Common Stock is eligible to trade and is listed for trading on
the OTC BULLETIN BOARD MARKET. The Company has received no notice, either
written or oral, with respect to the continued eligibility of the Common Stock
for such listing, and the Company has maintained all requirements for the
continuation of such listing, and the Company does not reasonably anticipate
that the Common Stock will be delisted from the OTC BULLETIN BOARD MARKET for
the foreseeable future. The Company has complied or will timely comply with all
requirements of the National Association of Securities Dealers and the OTC
BULLETIN BOARD MARKET with respect to the issuance of the Securities.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement and the Escrow Agreement, to issue and sell the
Notes and the Registrable Securities in accordance with the terms hereof, and to
perform its obligations under the Notes in accordance with the requirements of
the same, (ii) the execution, delivery and performance of this Agreement, the
Notes, the Warrants, the Registration Rights Agreement and the Escrow Agreement
by the Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by the Company's Board of Directors
and no further consent or authorization of the Company, its Board of Directors,
or its stockholders is required, (iii) this Agreement, the Registration Rights
Agreement, the Escrow Agreement and, on the Closing Date, the Notes and Warrants
sold at the Closing, have been duly and validly authorized, executed and
delivered by the Company, and (iv) this Agreement, the Notes (when issued), the
Warrants (when issued), the Registration Rights Agreement and the Escrow
Agreement constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting, generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application. The Company (and its legal
counsel) has examined this Agreement and is satisfied in its sole discretion
that this Agreement and
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the accompanying Exhibits, Schedules and the Addenda, if any, are in accordance
with Regulation D and the 1933 Act and are effective to accomplish the purposes
set forth herein and therein.
c. CAPITALIZATION. As of December 1, 1999, the authorized capital stock
of the Company consists of 50,000,000 shares of Common Stock of which 13,096,000
shares were issued and outstanding. An additional 554,000 shares of Common Stock
are in the process of being issued to a number of individuals involved with the
affairs of the Company, not to exceed five (5) persons. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. No shares
of Common Stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances. Except as disclosed in Schedule 3(c) (attached if
applicable), as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, (ii) there are no outstanding debt securities, and
(iii) there are no agreements or arrangements under which the Company or any of
its subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except as provided herein and in the Registration
Rights Agreement). If requested by the Buyer, the Company has furnished to the
Buyer, and the Buyer acknowledges receipt of same by its signature hereafter,
true and correct copies of the Company's Articles of Incorporation, as amended,
as in effect on the date hereof ("Articles of Incorporation"), and the Company's
Bylaws, as in effect on the date hereof (the "Bylaws").
d. ISSUANCE OF SECURITIES. The Registrable Securities are all duly
authorized and reserved for issuance, and in all cases upon issuance shall be
validly issued, fully paid and non-assessable, free from all taxes, liens and
charges with respect to the issue thereof, and will not be subject to preemptive
rights or other similar rights of stockholders of the Company.
e. ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE SECURITIES. The
Company acknowledges and agrees that the Buyer is not acting as financial
advisor to or fiduciary of the Company (or in any similar capacity with respect
to this Agreement or the transactions contemplated hereby), that this Agreement
and the transactions contemplated hereby, and the relationship between the Buyer
and the Company, are and will be considered "arms-length" notwithstanding any
other or prior agreements or nexus between the Buyer and the Company, whether or
not disclosed, and that any statement made by the Buyer, or any of its
representatives or agents, in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation, is merely
incidental to the Buyer's purchase of the Securities and has not been relied
upon in any way by the Company, its officers or directors. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
and the transactions contemplated hereby have been based solely upon an
independent evaluation by the Company, its officers and directors.
f. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security
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or solicited any offers to buy any security under circumstances which would
prevent the parties hereto from consummating the transactions contemplated
hereby pursuant to an exemption from registration under the 1933 Act and
specifically in accordance with the provisions of Regulation D. The transactions
contemplated hereby are exempt from the registration requirements of the 1933
Act, assuming the accuracy of the representations and warranties contained
herein of the Buyer.
g. NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Articles of
Incorporation or Bylaws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Except as set forth in Schedule 3(g)
(attached if applicable), neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or other organizational documents,
and neither the Company nor any of its/subsidiaries is in default (and no event
has occurred which, with notice or lapse of time or both, would put the Company
or any of its subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for possible defaults or rights as would not, in the aggregate or individually,
have a Material Adverse Effect. The business of the Company and its subsidiaries
is not being conducted, and shall not be conducted so long as the Buyer owns any
of the Securities, in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations which neither singly or in
the aggregate would have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws (any of which exceptions are set forth in
Schedule 3(g)), the Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Notes, the Warrants, the Registration Rights Agreement
or the Escrow Agreement in accordance with the terms hereof and thereof, or to
perform its obligations with respect to the Notes exactly as described in the
Notes (once issued), and with respect to the Warrants exactly as described in
the Warrants (once issued).
h. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed on Schedule
3(h) hereof, since at least June 28, 1999, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to
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<PAGE>
as the "SEC Documents"). The Company has delivered to the Buyer as requested by
the Buyer true and complete copies of the SEC Documents, except for such
exhibits, schedules and incorporated documents. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer (including the information referred to in Section 2(d) of this
Agreement) contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstance under which they are or were made, not misleading.
Except as set forth in the financial statements of the Company included in the
SEC Documents, the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
the date of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such financial
statements, in each case of clause (i) and (ii) next above which, individually
or in the aggregate, are not material to the financial condition, business,
operations, properties, operating results or prospects of the Company. The SEC
Documents contain a complete and accurate list of all written and oral
contracts, agreements, leases or other instruments to which the Company or any
subsidiary is a party or by which the Company or any subsidiary is subject which
are required by the rules and regulations promulgated by the SEC to be so listed
(each a "Contract"). None of the Company, its subsidiaries or, to the best of
the Company's knowledge, any of the other parties thereto, is in breach or
violation of any Contract, which breach or violation would, or with the lapse of
time, the giving of notice, or both, have a Material Adverse Effect.
i. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC Documents,
since at least September 30, 1998, there has been no material adverse change and
no material adverse development in the business, properties, operation,
financial condition, results of operations or prospects of the Company. The
Company has not taken any steps, and does not currently have any reasonable
expectation of taking any steps, to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge that its creditors intend to
initiate involuntary bankruptcy proceedings. The Company shall, at least until
Buyer no longer holds any of the Securities, maintain
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its corporate existence in good standing and shall pay all taxes when due except
for taxes it reasonably disputes.
j. ABSENCE OF LITIGATION. Except as set forth in Schedule 3(j) (attached
if applicable), there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein.
k. FOREIGN CORRUPT PRACTICES. Neither the Company nor any of its
subsidiaries, nor any officer, director or other person acting on behalf of the
Company or any subsidiary has, in the course of his actions for or on behalf of
the Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity, made any
direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
l. BROKERS; NO GENERAL SOLICITATION. The Company has taken no action that
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments relating to this Agreement and the transactions
contemplated hereby, other than to Bridgwater Capital Corporation and to
Dutchess Capital Partners, Inc. The Company and the Buyer both acknowledge that
no other broker or finder was involved with respect to the transactions
contemplated hereby, other than Bridgewater Capital Corporation and Dutchess
Capital Partners, Inc. Neither the Company nor any distributor participating on
the Company's behalf in the transactions contemplated hereby nor any person
acting for the Company, or any such distributor, has conducted any "general
solicitation," as described in Rule 502(c) under Regulation D, with respect to
the Securities being offered hereby.
m. ACKNOWLEDGMENT OF DILUTION. The number of Conversion Shares issuable
upon conversion of the Notes may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the
Common Stock declines. The Company's executive officers and directors have
studied and fully understand the nature of the securities being sold hereunder
and recognize they have a potential dilutive effect. The board of directors of
the Company has concluded in its good faith business judgment that such issuance
is in the best interests of the Company. The Company acknowledges that its
obligation to issue Conversion Shares upon conversion of the Notes is binding
upon it and enforceable regardless of the dilution that such issuance may have
on the ownership interests of other stockholders.
n. ELIGIBILITY TO FILE REGISTRATION STATEMENT. The Company is currently
eligible to file a registration statement with the SEC either on Form SB-1, Form
SB-2 or Form S-3 under the 1933 Act.
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o. (Intentionally Omitted.)
p. NON-DISCLOSURE OF NON-PUBLIC INFORMATION. (a) The Company shall in no
event disclose non-public information to the Buyer, advisors to or
representatives of the Buyer unless prior to such disclosure of information the
Company marks such information as "non-public information - confidential" and
provides the Buyer, such advisors and representatives with the opportunity to
accept or refuse to accept such non-public information for review. The Company
may, as a condition to disclosing any non-public information hereunder, require
the Buyer, its advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Buyer.
(b) Nothing herein shall require the Company to disclose non-public
information to the Buyer, its advisors or representatives, and the Company
represents that it does not disseminate non-public information to investors who
purchase stock in the Company in a public offering, to money managers or to
securities analysts; provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Buyer and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the registration statement
to be filed pursuant to the Registration Rights Agreement, would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances in which they were made, not misleading. Nothing herein
shall be construed to mean that such persons or entities other than the Buyer
(without the written consent of the Buyer prior to disclosure of such
information) may not obtain non-public information in the course of conducting
due diligence in accordance with the terms of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company of their
opinion that, based upon such due diligence by such persons or entities, that
the registration statement contains an untrue statement of a material fact or
omits a material fact required to be stated in such registration statement or
necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
4. COVENANTS.
a. BEST EFFORTS. Each party shall use its best efforts timely to satisfy
each of the conditions to be satisfied by it as provided in Sections 6 and 7 of
this Agreement.
b. SECURITIES LAWS. The Company agrees to timely file a Form D (or
equivalent form required by applicable state law) with respect to the Securities
if and as required under Regulation D and applicable state securities laws and
to provide a copy thereof to the Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as is necessary to sell
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the Securities being sold to the Buyer on each such date under applicable
securities laws of the United States and the relevant state(s), and shall if
specifically so requested provide evidence of any such action so taken to the
Buyer on or prior to the Closing Date.
c. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations hereunder would permit such termination.
d. USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Securities for the payment of production expenses, securities issuance and
legal expenses and general operational expenses.
e. FINANCIAL INFORMATION. Until such time as the Buyer no longer
beneficially owns Notes and Warrants, or the Common Stock into which the Notes
are convertible and/or the Warrants are exercisable, the Company agrees to send
the following reports to the Buyer: (i) after filing with the SEC, a copy of
each of its Annual Reports, its quarterly Reports, and any reports filed on Form
8-K; and (ii) as soon as practicable after release thereof, copies of all press
releases issued by the Company or any of its subsidiaries.
f. RESERVATION OF SHARES. The Company shall at all times have authorized,
and reserved for the purpose of issuance, a sufficient number of shares of
Common Stock to provide for the issuance of all of the Conversion Shares, the
Warrant Shares and the Interest Shares (if any). Prior to complete conversion of
the Notes and exercise of the Warrants, the Company shall not reduce the number
of shares of Common Stock reserved for issuance hereunder without the written
consent of the Buyer except for a reduction proportionate to a reverse stock
split effected for a business purpose other than affecting the requirements of
this Section, which reverse stock split affects all shares of Common Stock
equally.
g. LISTING. Upon the Closing, the Company shall promptly secure the
listing of the Common Stock underlying the Notes and the Warrants upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of shares of Registrable Securities from time to time
issued under the terms of this Agreement and the Registration Rights Agreement.
The Company shall at all times comply in all respects with the Company's
reporting, filing and other obligations under the by-laws or rules of the
National Association of Securities Dealers and the OTC BULLETIN BOARD MARKET (or
such other national securities exchange or market on which the Common Stock may
then be listed, as applicable).
h. PROSPECTUS DELIVERY REQUIREMENT. The Buyer understands that the 1933
Act requires delivery of a prospectus relating to the Common Stock in connection
with any sale thereof pursuant to a registration statement under the 1933 Act
covering any resale by the Buyer of the Common
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Stock being sold, and the Buyer shall comply with any applicable prospectus
delivery requirements of the 1933 Act in connection with any such sale. The
Company shall have the unequivocal right to rely upon the Buyer's representation
contained in this Section 4(h), and thus, with respect to any resales by the
Buyer pursuant to a registration statement of Common Stock issued to the Buyer
upon conversion of the Notes (or in payment of interest on the Notes) or upon
exercise of the Warrants, such Common Stock shall not contain a restrictive
legend of any kind.
i. INTENTIONAL ACTS OR OMISSIONS. Neither party shall intentionally
perform any act that if performed, or omit to perform any act which if omitted
to be performed, would prevent or excuse the performance of this Agreement or
any of the transactions contemplated hereby.
j. NO SHORTING. As a material inducement for the Company to enter into
this Agreement, the Buyer represents that it has not as of the date hereof, and
covenants on behalf of itself and its affiliates that neither Buyer nor any
affiliate of Buyer will at any time in which the Buyer or any affiliate of the
Buyer beneficially owns any of the Securities, engage in any short sales of, or
hedging or arbitrage transactions with respect to, the Common Stock, or sell
"put" options or similar instruments with respect to the Common Stock. The
Company acknowledges that a sale of Conversion Shares (or Warrant Shares) on the
date a conversion of the Notes (or exercise notice for the Warrants) is made,
even if such sale is made prior to delivery of the notice of conversion with
respect to such Conversion Shares (or exercise notice with respect to such
Warrant Shares), is not a "short sale" for purposes of this Section 4(j).
k. EXPENSES. The Company agrees to pay to or at the direction of the
Buyer the sum of $3,500.00 at the Closing as reimbursement for the attorney's
fees and expenses of the Buyer incurred by it in connection with the
transactions contemplated by this Agreement.
l. [Intentionally Omitted.]
m. RESTRICTION ON BELOW MARKET ISSUANCE OF SECURITIES. Until the date
which is the earlier of nine (9) months from the Closing Date or the date the
Notes have been paid or converted in full, the Company shall not issue or agree
to issue {other than (i) to the Buyer pursuant to the transactions contemplated
herein, (ii) pursuant to any employee stock option plan or employee stock
purchase plan of the Company established during the term of this restriction for
a legitimate business purpose and not to avoid the restrictions imposed in this
Section 4(m), (iii) pursuant to any existing security, option, warrant, scrip,
call or commitment or right in each case as disclosed on Schedule 3(c) hereof,
or (iv) with the consent of the Buyer, not to be unreasonably withheld} any
equity securities of the Company (or any security convertible into or
exercisable or exchangeable, directly or indirectly, for equity securities of
the Company) or debt securities of the Company if such securities are issued at
a price (or provide for a conversion, exercise or exchange price) which may be
less than the current market price for the Common Stock on the date of issuance
(in the case of Common Stock) or the date of conversion, exercise or exchange
(in the case of securities convertible into or exercisable or exchangeable,
directly or indirectly, for Common Stock). Except as provided with respect to
the transactions contemplated herein and in subsections (i), (ii), (iii), or
(iv) above of this Section 4(m),
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until such time as the Notes have been paid or converted in full, the Company
shall not grant any additional so-called "registration rights."
5. LEGEND AND TRANSFER INSTRUCTIONS.
a. TRANSFER AGENT INSTRUCTIONS. The Company shall instruct its transfer
agent to issue certificates, registered in the name of the Buyer or its
permitted nominee, for the Conversion Shares, the Warrant Shares and the
Interest Shares (if any) in accordance with the terms of the applicable Notes
and Warrants and in such amounts as specified from time to time by the Buyer to
the Company, upon conversion of the Notes or exercise of the Warrants (as
applicable). All such certificates shall bear the restrictive legend specified
in Section 2(g) of this Agreement only to the extent required by applicable law
and as specified in this Agreement and the Exhibits and Addenda hereto. The
Company warrants that no instruction other than such instructions referred to in
this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof in the case of the Conversion Shares, the Warrant Shares and the Interest
Shares (if any) prior to the registration of same under the 1933 Act, will be
given by the Company to its transfer agent and that the Conversion Shares, the
Warrant Shares and the Interest Shares (if any) shall otherwise be freely
transferable on the books and records of the Company as and to the extent
permitted by applicable law and provided by this Agreement, the Warrants and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of the Conversion Shares, the Warrant Shares and/or the
Interest Shares (if any). If the Buyer (x) provides the Company with an opinion
of counsel reasonably satisfactory to Company that registration by the Buyer of
the Notes, the Warrants, the Warrant Shares, the Conversion Shares and/or the
Interest Shares (if any) is not required under the 1933 Act, or (y) transfers
Securities to an affiliate which is an accredited investor (in accordance with
the provisions of this Agreement) or in compliance with Rule 144, then in either
instance the Company shall permit the said transfer, and if applicable promptly
(and in all events within two (2) trading days) instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by the Buyer.
b. REMOVAL OF LEGENDS. The Legend shall be removed and the Company shall
issue a certificate without such Legend to the holder of any Security upon which
it is stamped, and a certificate for a security shall be originally issued
without the Legend, if, unless otherwise required by state securities laws, (x)
the sale of such Security is registered under the 1933 Act, or (y) such holder
provides the Company with an opinion by counsel reasonably satisfactory to the
Company, that is in form, substance and scope reasonably satisfactory to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act or (z) such holder provides the
Company with assurances reasonably satisfactory to the Company and its counsel,
that such Security can be sold pursuant to Rule 144. The Buyer agrees that its
sale of all Securities, including those represented by a certificate(s) from
which the Legend has been removed, or which were originally issued without the
Legend, shall be made only pursuant to an effective registration statement (and
to deliver a prospectus in connection with such sale) or in compliance with an
exemption from the registration requirements of the 1933 Act. In the event the
Legend is
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<PAGE>
removed from any Security or any Security is issued without the Legend and
thereafter the effectiveness of a registration statement covering the sales of
such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to the holder of such Security, the Company shall be
entitled to require that the Legend be placed upon any such Security which
cannot then be sold pursuant to an effective registration statement or Rule 144
or with respect to which the opinion referred to in clause (y) next above has
not been rendered, which Legend shall be removed when such Security may be sold
pursuant to an effective registration statement or Rule 144 (or such holder
provides the opinion with respect thereto described in clause (y) next above.
c. CONVERSION OF NOTES. The Buyer shall have the right to convert the
Notes sold hereunder by delivering via facsimile an executed and completed
Notice of Conversion (as defined in the Notes) to the Company and delivering
within two (2) business days thereafter the original Notice of Conversion and
the original Note being converted by express courier to the Company. Each date
on which a Notice of Conversion is faxed to the Company in accordance with the
provisions hereof shall be deemed a "Conversion Date." The Company will transmit
the certificates representing the shares of Common Stock issuable upon
conversion of any Notes (along with a replacement Note representing the amount
of principal of said Note not so converted, if applicable) to the Buyer via
express courier, within three (3) business days after the relevant Conversion
Date (with respect to each conversion, the "Deadline"). Time is of the essence
with respect to the requirements of the immediately preceding sentence.
d. INJUNCTIVE RELIEF FOR BREACH. The Company acknowledges that a breach
of its obligations under Sections 5(a), 5(b) and 5(c) above will cause
irreparable harm to the Buyer by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly the Company agrees that the remedy
at law for a breach of its obligations under such Sections would be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of such Sections, the Buyer shall be entitled, in addition to all
other remedies at law or in equity, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
e. LIQUIDATED DAMAGES FOR NON-DELIVERY OF CERTIFICATES. In addition to
the provisions of Section 5(d) above, the Company understands and agrees that a
delay in the issuance of the Certificates beyond the Deadline will result in
substantial economic loss and other damages to the Buyer. As partial
compensation to the Buyer for such loss, the Company agrees to pay liquidated
damages (and which the Company acknowledges is not a penalty) to the Buyer for
issuance and delivery of the Certificates after the Deadline, in accordance with
the following schedule (where "No. Business Days Late" is defined as the number
of business days beyond five (5) business days from the date of delivery by the
Buyer to the Company of a facsimile Notice of Conversion (or, if later, from the
date on which all other necessary documentation duly executed and in proper form
required for conversion of Notes as described in this Agreement, including the
original Notice of Conversion, all in accordance with this Agreement ONLY IF
such necessary documentation has not been delivered to the Company within the
two (2) business day period after the facsimile delivery
14
<PAGE>
to the Company of the Notice of Conversion required in this Agreement)):
<TABLE>
<CAPTION>
No. Business Days Late Liquidated Damages
---------------------- ------------------
(in US$)
<S> <C>
1 $300
2 $400
3 $500
4 $600
5 $700
6 $800
7 $900
8 $1,000
9 $1,000
10 $1,500
11+ $1,500 + $500 for
each Business Day Late
beyond 11 days
</TABLE>
The Company shall pay the Buyer any liquidated damages incurred as called
for under this Section 5(e) by certified or cashier's check upon the earlier of
(i) issuance of the Certificates to the Buyer or (ii) each monthly anniversary
of the receipt by the Company of the Buyer's Notice of Conversion. Nothing
herein shall limit the Buyer's right to pursue actual damages for the Company's
failure to issue and deliver the Certificates to the Buyer in accordance with
the terms of this Agreement or for breach by the Company of this Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to sell Notes and Warrants at the
Closing is subject to the satisfaction, on or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The parties shall have executed this Agreement, the Registration
Rights Agreement and the Escrow Agreement, and the parties shall have delivered
the respective documents or signature pages thereof (via facsimile or otherwise
as permitted in the Escrow Agreement) to the Escrow Agent.
b. The Buyer shall have delivered to the Escrow Agent on behalf of the
Company the Purchase Price for the Notes and Warrants purchased at the Closing,
by wire transfer of immediately available funds pursuant to the wiring
instructions provided by the Escrow Agent.
15
<PAGE>
c. The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date made and as of the Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
e. The Company's Board of Directors shall have approved this Agreement
and the related documentation referred to herein.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer to purchase Notes and Warrants is subject
to the satisfaction, on or before the Closing Date, of each of the following
conditions, provided that these conditions are for the sole benefit of the Buyer
and may be waived by the Buyer at any time in its sole discretion:
a. The parties shall have executed this Agreement, the Registration
Rights Agreement and the Escrow Agreement, the parties shall have delivered the
respective documents or signature pages thereof (via facsimile or otherwise as
permitted in the Escrow Agreement) to the Escrow Agent on behalf of each other.
b. The representations and warranties of the Company shall be true and
correct in all material respects as of the date made and as of Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer may require a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably
requested by the Buyer.
c. With respect to the Closing, the Company shall have issued and have
duly executed by the authorized officers of the Company, and delivered to the
Escrow Agent on behalf of the Buyer, the Note and Warrant being sold at the
Closing (via facsimile or otherwise as required by the Escrow Agreement,
provided that any permitted facsimile of such documents shall be followed with
physical delivery to the Escrow Agent of the original instrument or security
within one (1) business day after facsimile of same to the Escrow Agent).
16
<PAGE>
d. The Common Stock shall be authorized for quotation on the OTC BULLETIN
BOARD MARKET (or another national securities exchange or market) and trading in
the Common Stock on such market shall not have been suspended by the SEC or
other relevant regulatory agency.
e. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
f. The Escrow Agent shall have received on behalf of the Buyer the
opinion of Company counsel, dated as of the Closing Date, substantially in the
form attached hereto as Exhibit E.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. In the event of any litigation regarding the
interpretation or application of this Agreement, the parties irrevocably consent
to jurisdiction in any of the state or federal courts located in the State of
Delaware and waive their rights to object to venue in any such court, regardless
of the convenience or inconvenience thereof to any party. Service of process in
any civil action relating to or arising out of this Agreement (including also
all Exhibits or Addenda hereto) or the transaction(s) contemplated herein may be
accomplished in any manner provided by law. The parties hereto agree that a
final, non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.
b. COUNTERPARTS. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
signature pages from such counterparts have been delivered to the Escrow Agent
on behalf of the other party. In the event any signature page is delivered by
facsimile transmission (which the parties agree is an acceptable form of
delivery), the party using such means of delivery shall cause three (3)
additional originally executed signature pages to be physically delivered to the
Escrow Agent on behalf of the other party within two (2) business days of the
execution and delivery hereof.
c. HEADINGS; GENDER, ETC. The headings of this Agreement are for
convenience of reference and shall not form a part of, or affect the
interpretation of this Agreement. As used herein, the masculine shall refer to
the feminine and neuter, the feminine to the masculine and neuter, and the
neuter to the masculine and feminine, as the context may require. As used
herein, unless the context clearly requires otherwise, the words "herein,"
"hereunder" and "hereby," shall refer to this entire Agreement and not only to
the Section or paragraph in which such word appears. If any date specified
herein falls upon a Saturday, Sunday or public or legal holidays, the date shall
be construed to mean the next business day following such Saturday, Sunday or
public or legal holiday. For
17
<PAGE>
purposes of this Agreement, a "business day" is any day other than a
Saturday, Sunday or public or legal holiday.
d. SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by U. S. Mail or delivered personally or by
courier or via facsimile (if via facsimile, to be followed within three (3)
business days by an original of the notice document via U.S. Mail or courier)
and shall be effective five (5) days after being placed in the mail, if mailed,
certified or registered, return receipt requested, or upon receipt, if delivered
personally or by courier or by facsimile, in each case properly addressed to the
party to receive the same. The addresses for such communications shall be:
If to the Company: Nurescell Inc.
1400 Bristol Street North, Suite 240
Newport Beach, California 92660
Telephone: 949.752.0071
Facsimile: 949.752.0091
Attention: Mr. Adrian A. Joseph, CEO
With a copy to: Herzog, Fisher, Grayson & Wolfe
9460 Wilshire Blvd., 5th Floor
Beverly Hills, California 90212
Telephone: 310.278.4900
Facsimile: 310.278.5430
Attention: Mr. Herbert N. Wolfe, Esq.
If to the Buyer, at the address on the signature page of this Agreement. Each
party shall provide written notice to the other party of any change in address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent
18
<PAGE>
of the other (which consent shall not be unreasonably withheld), and in any
event any assignee of the Buyer shall be an accredited investor (as defined in
Regulation D), in the written opinion of counsel who is reasonably satisfactory
to the Company and in form, substance and scope reasonably satisfactory to the
Company. Notwithstanding the foregoing, if applicable, any of the entities
constituting the Buyer (if greater than one (1) entity) may assign its rights
hereunder to any of its "affiliates," as that term is defined under the 1934
Act, without the consent of the Company; provided, however, that any such
assignment shall not release such assigning entity from its obligations
hereunder unless such obligations are assumed by such affiliate and the Company
has prior to such assignment and assumption consented in writing to the same;
and no such assignment shall be made unless it is made in accordance with any
applicable securities laws of any applicable jurisdiction. Any request for an
assignment made hereunder by the Buyer shall be accompanied by a legal opinion
in form, substance and scope reasonably satisfactory to the Company, that such
assignment is proper under applicable law. Notwithstanding anything herein to
the contrary, Buyer may pledge the Securities as collateral for a bona fide loan
pursuant to a security agreement with a third party lender, and such pledge
shall not be considered an assignment in violation of this Agreement so long as
it is made in compliance with all applicable law.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. Unless this Agreement is terminated under Section 8(1), the
representations and warranties of the Company and the Buyer contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
8 shall survive the Closing of the purchase and sale of Securities purchased and
sold hereby.
j. PUBLICITY. The Company and the Buyer shall have the right to review
before issuance by the other, any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without prior consultation with or approval of
the Buyer, to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations.
k. FURTHER ASSURANCE. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. In the event that the Closing shall not have occurred on
or before ten (10) business days from the date hereof, this Agreement shall
terminate at the close of business on such date. Neither party may unilaterally
terminate this Agreement after the Closing for any reason other than a material
breach of this Agreement by the non- breaching party. Such termination shall not
be the sole remedy for a breach of this Agreement by the non-breaching party,
and each party
19
<PAGE>
shall retain all of its rights hereunder at law or in equity. Notwithstanding
anything herein to the contrary, a party whose breach of a covenant or
representation and warranty or failure to satisfy a condition prevented the
Closing shall not be entitled to terminate this Agreement.
m. REMEDIES. No provision of this Agreement providing for any specific
remedy to a party shall be construed to limit such party to the specific remedy
described, and any other remedy that would otherwise be available to such party
at law or in equity shall be so available. Nothing in this Agreement shall limit
any rights a party may have with any applicable federal or state securities laws
with respect to the transactions contemplated hereby.
IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
[SIGNATURE PAGE FOLLOWS]
List of Exhibits
Exhibit A Form of Note
Exhibit B Warrant to Purchase Common Stock
Exhibit C Registration Rights Agreement
Exhibit D Escrow Agreement
Exhibit E Opinion of Counsel for Nurescell Inc.
20
<PAGE>
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT DATED
AS OF DECEMBER 15, 1999]
COMPANY:
NURESCELL INC.
By:_____________________________________________
Mr. Adrian A. Joseph, CEO
BUYER:
TRITON PRIVATE EQUITIES FUND, L.P.
By: Triton Capital Management, L.L.C., a General Partner
By:____________________________________________
Mr. John C. Tausche, Managing Member
BUYER'S ADDRESS:
225 North Market Street
Suite 220
Wichita, Kansas 67202
Telephone: 316.262.8874
Telecopier: 316.262.6801
21
<PAGE>
SECURITIES PURCHASE AGREEMENT
Schedule 3(c)
OUTSTANDING OPTIONS TO PURCHASE COMMON STOCK:
Effective June 15, 1998, the Company created an Incentive Stock Option Plan
granting to any director, employee or consultant of the Company options to
purchase Company Common stock over a ten-year period, at the fair market value
at time of grant. The aggregate number of common shares of the Company which may
be granted under the plan is 360,000 shares. As of December 1, 1999, options for
360,000 shares have been granted under the Plan, 120,000 of which have been
exercised.
In addition to options under the Incentive Stock Option Plan, the Company has
also issued options (1) to Adrian Joseph for the purchase of 100,000 shares of
Common Stock at $1.00 per share; (2) to an initial investor in the Company for
the purchase of 24,000 shares of Common Stock at $1.00 per share; (3) to Shelby
Brewer for the purchase of 200,000 shares of Common Stock at $2.00 per share;
and (4) to Harold Rapp for the purchase of 250,000 shares of Common Stock at
$.75 per share.
OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK:
Effective September 15, 1998 the Company issued units consisting of one share of
Common Stock (the "Common Stock") and one Class "A" Common Stock Purchase
Warrant (the "Class A Warrants") of the Company.
The Class "A" Warrants are exercisable into one (1) share of Common Stock and
one (1) Class "B" Common Stock Purchase Warrant (the "Class "B" Warrant")
commencing the day immediately after the first anniversary of the closing of the
offering of the units (the "A" Exercise Date") and have an exercise price of
$4.00. The Class "A" Warrants expire on the first anniversary of the "A"
Exercise Date (the "A" Expiration Date"). The Class "B" Warrants are exercisable
into one(1) share of Common Stock commencing immediately upon their issuance
(the "B" Exercise Date") and have an exercise price of $3.00 per share of
Company Common Stock. The Class "B" Warrants expire on the first anniversary of
the "B" Exercise Date.
Prior to permitting the exercise of either the Class "A" or Class "B" Warrants,
the Company will be required to either register the underlying Common Stock or
seek an exemption from registration under both federal and state law. The Common
Stock and the Class A Warrants are immediately detachable.
OTHER STOCK PURCHASE RIGHTS
22
<PAGE>
PURSUANT TO HIS EMPLOYMENT AGREEMENT, HAROLD RAPP IS ENTITLED TO RECEIVE FOR HIS
SERVICES 100,000 SHARES OF COMMON STOCK FOR EVERY SIX (6) MONTHS DURING THE TERM
OF THE SAID EMPLOYMENT AGREEMENT.
PURSUANT TO HIS CONSULTING AGREEMENT, AS AMENDED, DR. CHONG CHIU IS ENTITLED TO
RECEIVE 400,000 SHARES OF COMMON STOCK, 134,000 OF WHICH ARE IN THE PROCESS OF
BEING ISSUED, 133,000 OF WHICH ARE TO BE ISSUED IN 2000, AND THE REMAINDER OF
WHICH ARE TO BE ISSUED IN 2001.
PURSUANT TO A BOARD RESOLUTION ADOPTED ON NOVEMBER 22, 1999, THE COMPANY HAS
RESERVED THE RIGHT TO OFFER ITS EMPLOYEES AND CONSULTANTS COMMON STOCK IN LIEU
OF CASH COMPENSATION AT THE RATE OF FOUR SHARES FOR EVERY DOLLAR OF
COMPENSATION.
23
<PAGE>
SECURITIES PURCHASE AGREEMENT
SCHEDULE 3(g)
REGISTRATION OF ALL THE REGISTRABLE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, REQUIRES THE FILING OF A REGISTRATION STATEMENT WITH THE
SECURITIES AND EXCHANGE COMMISSION AND A DECLARATION OF EFFECTIVENESS OF THE
REGISTRATION STATEMENT BY THE SECURITIES AND EXCHANGE COMMISSION.
[ADDITIONAL REGISTRATION RIGHTS, IF ANY]
24
<PAGE>
SECURITIES PURCHASE AGREEMENT
SCHEDULE 3(j)
THE COMPANY IS CURRENTLY A DEFENDANT IN A CIVIL ACTION FILED BY BILMORE
ADVISORS, LLC, IN ORANGE COUNTY SUPERIOR COURT ON OCTOBER 21, 1999.
25
<PAGE>
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of December 15, 1999, between Nurescell Inc., a Nevada
corporation (the "COMPANY"), and the Purchaser named on the signature page
hereof (the "PURCHASER").
This Agreement is being entered into pursuant to that Securities
Purchase Agreement, dated as of the date hereof, by and between the Company and
the Purchaser (the "PURCHASE AGREEMENT").
The Company and the Purchaser hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"ADVICE" shall have the meaning set forth in Section 3(m).
"AFFILIATE" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"BLACKOUT PERIOD" shall have the meaning set forth in Section
3(n).
"BOARD" shall have the meaning set forth in Section 3(n).
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of Delaware generally are authorized or required by law or other
government actions to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, par value $.0001
per share.
"EFFECTIVENESS DATE" means with respect to the Registration
Statement the 120th day following the Closing Date.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2(a).
<PAGE>
"EVENT" shall have the meaning set forth in Section 7(e)(i).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means the 30th day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"NOTE" or "NOTES" means the Series 1999-A Eight Percent (8%)
Convertible Notes of the Company, the form of which is shown as Exhibit A to the
Purchase Agreement, issued or to be issued to the Purchaser pursuant to the
Purchase Agreement.
"OTC BULLETIN BOARD" shall mean the over-the-counter electronic
bulletin board market or exchange.
"PERSON" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means (i) the shares of Common Stock
issuable upon conversion of the Note (the "Conversion Shares") or in payment of
interest in accordance with the terms of the Note ("Interest Shares") and
exercise of the Warrants (the "Warrant Shares"), and upon any stock split, stock
dividend, recapitalization or similar event with respect to such Conversion
Shares, Interest Shares, Warrant Shares or any Note, (ii) the shares of Common
Stock issued upon any redemption of Note pursuant to the terms of the Notes and
(iii) any other dividend or other
2
<PAGE>
distribution with respect to, conversion or exchange of, or in replacement of,
Registrable Securities; PROVIDED, HOWEVER, that Registrable Securities shall
include (but not be limited to) a number of shares of Common Stock (the
"Required Number") equal to no less than the greater of (x) 300,000 shares of
Common Stock, or (y) 200% of the maximum number of shares of Common Stock which
would be issuable upon conversion of the Note and upon exercise of the Warrants,
assuming such conversion and exercise occurred on the Closing Date or the Filing
Date, whichever date would result in the greater number of Registrable
Securities. Notwithstanding anything contained herein to the contrary, if the
actual number of shares of Common Stock issuable upon conversion of the Note and
upon exercise of the Warrants exceeds the Required Number, the term "Registrable
Securities" shall be deemed to include such additional shares of Common Stock as
are necessary to include all of the shares of Common Stock issuable upon
conversion of the Note (and in payment of Interest, if applicable) and upon
exercise of the Warrants.
"REGISTRATION STATEMENT" means the registration statements and
any additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means any special counsel to the Holder, for
which the Holder will be reimbursed by the Company pursuant to Section 4.
2. REGISTRATION.
(a) REQUIRED REGISTRATION. On or prior to the Filing Date the
Company shall prepare and file with the Commission a Registration Statement
covering all Registrable Securities for an offering to be made on a continuous
basis pursuant to Rule 415. The Registration Statement shall be on Form SB-1,
Form SB-2 or Form S-3 (except if the Company is not then eligible to register
for resale the Registrable Securities on Form SB-1, Form SB-2 or Form S-3, in
which case such registration shall be on another appropriate form in accordance
herewith). The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities
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Act as promptly as possible after the filing thereof, but in any event prior to
the Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until such date as is the earlier of (x) the
date when all Registrable Securities covered by such Registration Statement have
been sold or (y) the date on which the Registrable Securities may be sold
without any restriction pursuant to Rule 144(k) as determined by the counsel to
the Company pursuant to a written opinion letter, addressed to the Company's
transfer agent to such effect (the "EFFECTIVENESS PERIOD"). If an additional
Registration Statement is required to be filed because the actual number of
shares of Common Stock into which the Note is convertible and the Warrants are
exercisable exceeds the number of shares of Common Stock initially registered in
respect of the Conversion Shares and the Warrant Shares based upon the
computation on the Closing Date, the Company shall have twenty (20) Business
Days to file such additional Registration Statement, and the Company shall use
its best efforts to cause such additional Registration Statement to be declared
effective by the Commission as soon as possible, but in no event later than
ninety (90) days after filing.
(b) SHELF REGISTRATION. If the Company is not on the Filing Date
eligible to file a registration statement on Form S-3, then as soon as possible
but no later than thirty (30) days after becoming eligible to file a
registration statement for a secondary or resale offering of the Registrable
Securities on Form S-3, the Company shall prepare and file with the Commission a
post-effective amendment to Form SB-2 (or such other applicable form filed in
accordance with Section 2(a) above) on Form S-3 to continue the registration of
all Registrable Securities pursuant to a "shelf" Registration Statement on Form
S-3 covering all Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. Notwithstanding anything to the contrary
contained herein, at no time during the Effectiveness Period shall any of the
Registrable Securities cease being registered.
3. REGISTRATION PROCEDURES.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form SB-1 or Form SB-2 (or if the
Company is not then eligible to register for resale the Registrable Securities
on Form SB-1 or Form SB-2 such registration shall be on another appropriate form
in accordance herewith) in accordance with the method or methods of distribution
thereof as specified by the Holder (except if otherwise directed by the Holder),
and cause the Registration Statement to become effective and remain effective as
provided herein; PROVIDED, HOWEVER, that not less than five (5) Business Days
prior to the filing of the Registration Statement or any related Prospectus or
any amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holder
and any Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will be subject to
the review of the Holder and such Special Counsel, and (ii) at the request of
the Holder cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of counsel to such Holder, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such
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Prospectus or any amendments or supplements thereto to which the Holder or any
Special Counsel shall reasonably object in writing within three (3) Business
Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holder true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holder thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the Holder of Registrable Securities to be sold and
any Special Counsel as promptly as possible (and, in the case of (i)(A) below,
not less than five (5) Business Days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one (1) Business
Day following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement and (C) with respect to the Registration Statement
or any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
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(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to the Holder and any Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to the Holder and any Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders
and any Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
PROVIDED, HOWEVER, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any Holder may request at
least two (2) Business Days prior to any sale of Registrable Securities.
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(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the OTC Bulletin Board
and any other securities exchange, quotation system, market or over-the-counter
bulletin board, if any, on which similar securities issued by the Company are
then listed as and when required pursuant to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) Require each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who fails to furnish such information within a reasonable time
prior to the filing of each Registration Statement, supplemented Prospectus
and/or amended Registration Statement.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section
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3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Securities under the Registration
Statement until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(j),
or until it is advised in writing (the "ADVICE") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
(n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "BOARD") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then the Company may postpone or suspend
filing or effectiveness of a registration statement for a period not to exceed
20 consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate during
any 12 month period (each, a "BLACKOUT PERIOD"); PROVIDED, HOWEVER, that no such
postponement or suspension shall be permitted for consecutive 20 day periods,
arising out of the same set of facts, circumstances or transactions.
4. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with the OTC Bulletin Board and each other securities exchange or market on
which Registrable Securities are required hereunder to be listed, (B) with
respect to filings required to be made with the Commission, (C) with respect to
filings required to be made under the OTC Bulletin Board and (D) in compliance
with state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holder in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and Special Counsel for the Holder, in the case of the Special Counsel,
to a maximum amount of $2,500.00, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public
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accountants (including the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort letter or
comfort letters). In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "LOSSES"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holder promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Holder.
(b) INDEMNIFICATION BY HOLDER. The Holders shall, severally and
not jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
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statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in or omitted from any information so
furnished in writing by such Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus Supplement. Notwithstanding anything to
the contrary contained herein, the Holder shall be liable under this Section
5(b) for only that amount as does not exceed the net proceeds to such Holder as
a result of the sale of Registrable Securities pursuant to such Registration
Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY) in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
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All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying, Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms. Notwithstanding anything to the contrary contained
herein, the Holder shall be liable or required to contribute under this Section
5(c) for only that amount as does not exceed the net proceeds to such Holder as
a result of the sale of Registrable Securities pursuant to such Registration
Statement.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
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.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties
6. RULE 144.
As long as any Holder owns Notes, Interest Shares, Conversion
Shares, Warrants or Warrant Shares, the Company covenants to timely file (or
obtain extensions in respect thereof and
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file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and to promptly furnish the Holder with true and complete copies of all such
filings. As long as any Holder owns Notes, Interest Shares, Conversion Shares,
Warrants or Warrant Shares, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and
furnish to the Holder and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Person to sell Interest Shares, Conversion Shares and Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
providing any legal opinions of counsel to the Company referred to in the
Purchase Agreement. Upon the request of any Holder, the Company shall deliver to
such Holder a written certification of a duly authorized officer as to whether
it has complied with such requirements.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of
its subsidiaries has, as of the date hereof entered into and currently in
effect, nor shall the Company or any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holder in this Agreement or
otherwise conflicts with the provisions hereof except for registration rights
provisions disclosed in the Company's Disclosure Schedule to the Purchase
Agreement. Except for registration rights provisions disclosed in the Company's
Disclosure Schedule to the Purchase Agreement, neither the Company nor any of
its subsidiaries has previously entered into any agreement currently in effect
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holder set forth herein, and are not otherwise in conflict with the
provisions of this Agreement. This Section 7(b) shall not prohibit the
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Company from entering into any agreements concerning the registration of
securities on Form S-8 or Form S-4.
(c) [INTENTIONALLY OMITTED.]
(d) PIGGY-BACK REGISTRATIONS. If at any time when there is not
an effective Registration Statement covering (i) Conversion Shares or (ii)
Warrant Shares, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or its then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each holder of Registrable Securities
written notice of such determination and, if within thirty (30) days after
receipt of such notice, any such holder shall so request in writing (which
request shall specify the Registrable Securities intended to be disposed of by
the Purchaser), the Company will cause the registration under the Securities Act
of all Registrable Securities which the Company has been so requested to
register by the holder, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered, provided that if at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 4 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered;
PROVIDED, HOWEVER, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 7(d) that are eligible for sale
pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten
public offering, if the managing underwriter(s) or underwriter(s) should
reasonably object to the inclusion of the Registrable Securities in such
registration statement, then if the Company after consultation with the managing
underwriter should reasonably determine that the inclusion of such Registrable
Securities, would materially adversely affect the offering contemplated in such
registration statement, and based on such determination recommends inclusion in
such registration statement of fewer or none of the Registrable Securities of
the Holder, then (x) the number of Registrable Securities of the Holders
included in such registration statement shall be reduced pro-rata among such
Holders (based upon the number of Registrable Securities requested to be
included in the registration), if the Company after consultation with the
underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y)
none of the Registrable Securities of the Holder shall be included in such
registration statement, if the Company after consultation with the
underwriter(s) recommends the inclusion of none of such Registrable Securities;
PROVIDED, HOWEVER, that if securities are being offered for the account of other
persons or entities as well as the Company, such reduction shall not represent a
greater fraction of the
13
<PAGE>
number of Registrable Securities intended to be offered by the Holder than the
fraction of similar reductions imposed on such other persons or entities (other
than the Company).
(e) FAILURE TO FILE REGISTRATION STATEMENT AND OTHER EVENTS. The
Company and the Purchaser agree that the Holder will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Period or
if certain other events occur. The Company and the Holder further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
Filing Date, or is not declared effective by the Commission on or prior to the
Effectiveness Date (or in the event an additional Registration Statement is
filed because the actual number of shares of Common Stock into which the Note is
convertible and the Warrants are exercisable exceeds the number of shares of
Common Stock initially registered is not filed and declared effective within the
time periods set forth in Section 2(a)), or (ii) the Company fails to file with
the Commission a request for acceleration in accordance with Rule 12dl-2
promulgated under the Exchange Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (iii) the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with and declared effective by the Commission, or
(iv) trading in the Common Stock shall be suspended or if the Common Stock is
delisted from the OTC Bulletin Board for any reason for more than ninety (90)
days in the aggregate, or (v) the conversion rights of the Holder are suspended
for any reason, including by the Company, or (vi) the Company breaches in a
material respect any covenant or other material term or condition to this
Agreement, the the Notes, the Purchase Agreement (other than a representation or
warranty contained therein) or any other agreement, document, certificate or
other instrument delivered in connection with the transactions contemplated
hereby and thereby, and such breach continues for a period of thirty days after
written notice thereof to the Company, or (vii) the Company has breached Section
3(n) of this Agreement (any such failure or breach being referred to as an
"EVENT"), the Company shall pay in cash as liquidated damages for such failure
and not as a penalty to the Holder an amount equal to 2% of the Holder's pro
rata share of the purchase price paid by the Holder for all Notes purchased and
then outstanding pursuant to the Purchase Agreement for each thirty (30) day
period until the applicable Event has been cured, which shall be pro rated for
such periods less than thirty (30) days (the "Periodic Amount"). Payments to be
made pursuant to this Section 7(e) shall be due and payable immediately upon
demand in immediately available funds. The parties agree that the Periodic
Amount represents a reasonable estimate on the part of the parties, as of the
date of this Agreement, of the amount of damages that may be incurred by the
Holder if the Registration Statement is not filed on or prior to the Filing Date
or has not been declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein during the
Effectiveness Period or if any other Event as described herein has occurred.
(f) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
14
<PAGE>
(i) The Company and the Purchaser acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Registration Rights Agreement or the Purchase Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Registration
Rights Agreement or the Purchase Agreement and to enforce specifically the terms
and provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
(ii) Each of the Company and the Purchaser (i) hereby
irrevocably submits to the jurisdiction of the United States District Court
sitting in the County of Kent, State of Delaware for the purposes of any suit,
action or proceeding arising out of or relating to this Agreement or the
Purchase Agreement and (ii) hereby waives, and agrees not to assert in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Purchaser consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7(f) shall affect or limit any right to serve
process in any other manner permitted by law.
(g) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holder. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holder and that does not directly or indirectly affect the rights
of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; PROVIDED,
HOWEVER, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(h) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., pacific
standard time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., pacific
standard time, on any date and earlier than 11:59 p.m., Pacific time, on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to the Holder at its address set forth in
the Purchase Agreement, or with respect to the Company, addressed to:
Nurescell Inc.
1400 Bristol Street North, Suite 240
Newport Beach, California 92660
15
<PAGE>
Attention: Mr. Adrian A. Joseph, CEO
Telephone No.: 949.752.0071
Facsimile No.: 949.752.0091
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company (other than conversion notices
for the Notes or exercise notices for the Warrants) shall be sent to Herbert N.
Wolfe, Esq., Herzog, Fisher, Grayson & Wolfe, 9460 Wilshire Blvd., 5th Floor,
Beverly Hills, California 90212, Telephone number 310.278.4300, Facsimile
310.278.5430. Copies of notices to the Holder shall be sent to H. Glenn Bagwell,
Jr., Esq., 3005 Anderson Drive, Suite 204, Raleigh, North Carolina 27609,
Telephone No.: (919) 785-3113, Facsimile No.: (919) 785-3116.
(i) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of the Holder and its successors and
assigns. The Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the Holder. The
Purchaser may assign its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
(j) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Notes or the Registrable Securities if: (i) the Holder
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such securities
by the transferee or assignees is restricted under the Securities Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. In
addition, each Holder shall have the right to assign its rights hereunder to any
other Person with the prior written consent of the Company, which consent shall
not be unreasonably withheld. The rights to assignment shall apply to the
Holders (and to subsequent) successors and assigns.
(k) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
16
<PAGE>
(l) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of law thereof.
(m) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(n) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(o) HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(p) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage and shall not be counted as outstanding.
(q) NOTICE OF EFFECTIVENESS. Within two (2) business days after
the Registration Statement which includes the Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities and to the Purchaser (with copies to the Holders whose Registrable
Securities are included in such Registration Statement, if other than the
Purchaser) confirmation that the Registration Statement has been declared
effective by the Commission in the form attached hereto as EXHIBIT A.
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
[SIGNATURE PAGE FOLLOWS]
17
<PAGE>
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT DATED
AS OF DECEMBER 15, 1999]
NURESCELL INC.
By:_____________________________________
Name: Mr. Adrian A. Joseph
Title: Chief Executive Officer
THE TRITON PRIVATE EQUITIES FUND, L.P.
By: Triton Capital Management, L.L.C.
By:_____________________________________
Mr. John C. Tausche, Managing Member
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT
[NAME AND ADDRESS OF TRANSFER AGENT]
Attn: _____________
The Triton Private Equities Fund, L.P.
C/o Triton Capital Mangement, L.L.C.
225 North Market Street, Suite 220
Wichita, Kansas 67202
Attn: Mr. John C. Tausche
Re: NURESCELL INC.
Ladies and Gentlemen:
We are counsel to Nurescell Inc., a Nevada corporation (the "COMPANY"), and
have represented the Company in connection with that certain Securities Purchase
Agreement (the "PURCHASE AGREEMENT"), dated as of December 2,1999, by and among
the Company and the Purchaser named therein (the "HOLDER") pursuant to which the
Company issued to the Holder its Series 1999-A Eight Percent (8%) Convertible
Notes (the "NOTES") along with warrants (the "WARRANTS") to purchase shares of
the Company's common stock, par value $.0001 per share (the "COMMON STOCK").
Pursuant to the Purchase Agreement, the Company has also entered into a
Registration Rights Agreement with the Holder (the "REGISTRATION RIGHTS
AGREEMENT"), dated as of December 2, 1999, pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Notes and exercise of the Warrants, under the Securities
Act of 1933, as amended (the "1933 ACT"). In connection with the Company's
obligations under the Registration Rights Agreement, on _________________, 1999,
the Company filed a Registration Statement on Form ___ (File No. 333-_____) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the resale of the Registrable Securities which names the
Holder as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[COMPANY COUNSEL]
By:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 129,068
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 154,068
<PP&E> 53,448
<DEPRECIATION> 10,791
<TOTAL-ASSETS> 347,709
<CURRENT-LIABILITIES> 179,034
<BONDS> 0
0
0
<COMMON> 1,496
<OTHER-SE> 2,197,486
<TOTAL-LIABILITY-AND-EQUITY> 347,709
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,774,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,454
<INCOME-PRETAX> (1,770,791)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,770,791)
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
