Document:

ex10-1.htm

Exhibit 10.1

SECOND AMENDED AND RESTATED

LICENSE AGREEMENT

 

This second amended and restated license agreement (the “Agreement”) is made on the 21st day of May, 2010 effective as of the 26th day of September, 2006, by and between Argyll Biotechnologies, LLC, a closely-held Delaware limited liability company having a principal office at 10815 Rancho Bernardo Road, Suite 101, San Diego, California 92127 (“Argyll Biotech”), and Immunosyn Corporation, a Delaware corporation having a principal office at 10815 Rancho Bernardo Road, Suite 101, San Diego, California 92127 (“Immunosyn”), either or both of which may be referred to as a Party or the Parties to this Agreement.

 

In consideration of mutual promises, covenants and representations contained in this Agreement, Argyll Biotech and Immunosyn hereby agree as follows:

 

Definitions

 

“SF-1019” as used herein shall mean one or more pharmaceutical products for a Licensed Use that:  (i) is a caprine based serum filtered in a proprietary manner developed and owned by or licensed by Argyll Biotech, (ii) is developed during the term of this Agreement using technology previously developed by Argyll Biotech and chemically similar to those pharmaceutical products previously developed by Argyll Biotech ; and/or (iii) is a replacement for or an improvement of a pharmaceutical product defined under (i) or (ii) of this paragraph.

 

“Licensed Use” as used herein shall refer to the treatment, alleviation, and/or prevention of a disease or pathological condition in a human or animal, including, but not limited to, chronic inflammatory demyelinating polyneuropathy (“CIPD”), diabetic neuropathy, diabetic ulcers, diabetes myelitis, and human immunodeficiency virus infection.

 

1.    BACKGROUND

 

1.1           Argyll Biotech has identified and is investigating a novel class of pharmaceutical products, one of which is referred to as SF-1019, that increases the efficacy of the mammalian immune system and the ability of a mammal to resist and/or overcome a viral infection and immune system disorders.

 

1.2           Argyll Biotech has assumed the organization, management and administration of the continued development of SF-1019, including, but not limited to, all financial commitments and requirements associated with the necessary analysis of SF-1019.  Based on preliminary experiments, SF-1019 is an effective treatment for a plurality of viral and immune system disorders including conditions related to CIDP, diabetes myelitis, and human immunodeficiency virus infection.  Argyll Biotech intends to develop and procure regulatory and other approval for the marketing, sale and distribution of one or more commercial forms of SF-1019.

 

1.3           Immunosyn was organized and capitalized for the purpose of marketing, distributing and selling SF-1019 and other novel bio-pharmaceutical products throughout the world.  Following its formation and capitalization, Immunosyn has committed to raising a substantial amount of capital that will be used, in part, to finance a marketing and distribution network for those products.

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

1.4           Argyll Biotech now desires to license to Immunosyn, and Immunosyn now desires to procure a license from Argyll Biotech, for the marketing, sale and distribution of SF-1019 for the Licensed Use pursuant to the terms, conditions, and limitations described in this Agreement.

 

2.           GRANT OF RIGHTS

 

2.1           Subject to the terms and conditions of this Agreement, Argyll Biotech grants to Immunosyn an exclusive, worldwide commercial license to market, distribute, sell, and promote SF-1019 solely for the Licensed Use.  Unless expressly stated herein, no other license and rights are granted by Argyll Biotech.

 

2.2           Subject to the terms and conditions of this Agreement, Argyll Biotech hereby grants to Immunosyn an exclusive, worldwide license to any and all intellectual property which is owned by, assigned to or licensed by Argyll Biotech for the sole purpose of marketing, distribution, sale and promotion of SF-1019 for the Licensed Use.

 

2.3           Immunosyn does not have the right to sublicense the rights granted under Section 2.1 to any third party including without limitation any subsidiaries or affiliates of Argyll Biotech absent the express written agreement of Argyll Biotech.

 

2.4           (a)           Argyll Biotech further grants to Immunosyn the non-exclusive, worldwide right to use trademarks, service marks, logo, and other source-identifying indicia that Argyll Biotech may create for SF-1019 (the “Trademarks”).

 

(b)           All use of Trademarks by Immunosyn shall clearly indicate that Argyll Biotech is the owner of the Trademarks.  At least ten business days prior to any new use of Trademarks, Immunosyn shall provide Argyll Biotech with samples of proposed literature and advertising using the Trademarks for approval by Argyll Biotech.  If no objection is received from Argyll Biotech within five business days of receipt of such samples, Immunosyn may use the Trademarks in the manner used in the samples submitted for approval.

 

(c)           If necessary in any country to permit Immunosyn to use the Trademarks, Argyll Biotech shall make application to register Immunosyn as a permitted user or registered user of the Trademarks and, if necessary, or if requested by Argyll Biotech, Immunosyn undertakes to join in such application and to take such action as may be necessary or requested by Argyll Biotech to implement such application or retain, enforce or defend the Trademarks.  If necessary in any country to maintain Argyll Biotech’s rights in the Trademarks, Immunosyn shall enter into a registered user agreement or permitted user agreement regulating its use of the Trademarks.

 

(d)           Immunosyn acknowledges that Argyll Biotech is the owner of the Trademarks.  Immunosyn shall not at any time do, cause to be done, or permit any act or thing inconsistent with, contesting or in any way impairing or tending to impair such ownership.  

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

Immunosyn agrees that all use of the Trademarks by Immunosyn shall inure to the benefit of and be on behalf of Argyll Biotech.  Immunosyn acknowledges that nothing in this Agreement shall give Immunosyn any right, title or interest in the Trademarks other than the right to use the Trademarks in accordance with this Agreement.  Immunosyn agrees that it will not challenge the title or ownership of Argyll Biotech to the Trademarks or attack or contest the validity of the Trademarks.

 

(e)           Argyll Biotech, in consultation with Immunosyn, shall register and maintain the Trademarks, or cause the Trademarks to be registered and maintained, in those countries in which such Trademarks shall be used, at Argyll Biotech’s sole expense.  If either Party learns of any actual, alleged or threatened unauthorized use or other infringement of the Trademarks by others in any country, that Party agrees to promptly notify the other Party of such unauthorized use or other infringement.  Argyll Biotech shall use reasonable efforts, as determined in its sole and unfettered discretion, to retain, enforce or defend the Trademarks.

 

(f)           To the extent permitted by law, all labeling, packaging, literature, promotional material and advertising for a SF-1019 that is marketed, distributed or sold by Immunosyn in any country shall contain Argyll Biotech’s name and logo with comparable prominence as the name and logo used by Immunosyn.  To the extent practicable, or as required by applicable law to protect the Trademarks, Immunosyn shall include on any material bearing any Trademarks an acknowledgement that such Trademark is the property of Argyll Biotech.

 

2.5           At any time during the first five (5) years after execution of this Agreement (the “Option Period”), Immunosyn shall have, and Argyll Biotech hereby grants to Immunosyn, a right of first negotiation to enter into an arrangement with Argyll Biotech (including, without limitation, any co-development, co-promotion, research and development, commercialization or intellectual property license agreement, joint venture, partnership, or other partnering relationship) for the licensing of any intellectual property or know-how owned by Argyll Biotech, or to which Argyll Biotech has an exclusive license, involving compounds or products which are not part of SF-1019 (“License Relationship”).

 

(a)           In the event that Argyll Biotech is interested in establishing a License Relationship with a third party during the Option Period, Argyll Biotech shall give written notice thereof to Immunosyn, together with any and all materials and relevant information and data regarding the subject matter of such proposed License Relationship that Argyll Biotech has in its possession or control.

 

(b)           With respect to each License Relationship, Immunosyn shall have ninety (90) days after receipt of such written notice and all such information and data to enter into a non-binding letter of intent with Argyll Biotech containing the proposed material terms of an agreement regarding the License Relationship.  During such 90-day time period, Argyll Biotech shall not negotiate such a License Relationship with any third party.  In the event that Immunosyn and Argyll Biotech do not enter into a non-binding letter of intent as aforesaid, Argyll Biotech shall be free to proceed to negotiate with any third parties as it deems appropriate without any further obligation to Immunosyn.

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

2.6           To facilitate the marketing, sale and distribution rights licensed to Immunosyn under this Agreement Argyll Biotech grants to Immunosyn full access to Argyll Biotech’s research and development files and activities, including without limitation medicinal chemistry, screening, clinical trial protocols and results, and other similar materials, relating to SF-1019 all at such times and under such conditions as the Parties may agree to avoid disruption and interference with the orderly operation of Argyll Biotech’s research and development.

 

2.7           All rights not expressly granted in this Agreement are reserved by Argyll Biotech, and no implied licenses shall be deemed granted to Immunosyn by contract or by law.  Without limitation on the foregoing, Argyll Biotech reserves all rights to make SF-1019 or have SF-1019 made by others on its behalf.

 

3.           DEVELOPMENT AND REGULATORY MATTERS

 

3.1           (a)           The Parties acknowledge that Argyll Biotech currently intends in the future to submit an initial regulatory registration application for use of SF-1019 with respect to a Licensed Use with one or more regulatory bodies, such as the United States Food and Drug Administration or a foreign regulatory bodies (the “Initial Regulatory Filing”).  Until the Initial Regulatory Filing is made and continuing indefinitely thereafter, Argyll Biotech shall be solely responsible for conducting clinical studies and all other regulatory matters, manufacturing matters and/or pre-clinical studies necessary to support, prepare and file the Initial Regulatory Filing, and Argyll Biotech shall use all commercially reasonable efforts necessary to make such Initial Regulatory Filing.  Argyll Biotech shall keep Immunosyn informed as to the status of such efforts, shall permit Immunosyn to review and privately to Argyll Biotech comment on the Initial Regulatory Filing and each subsequent regulatory filing during each filing’s preparation, and shall consult with Immunosyn regarding the preparation of the Initial Regulatory Filing and each subsequent filing.

 

(b)           Promptly after the execution date of this Agreement, Argyll Biotech shall deliver to Immunosyn copies of relevant and material data, studies and other written materials in Argyll Biotech’s possession as of the execution date of this Agreement relating to SF-1019, its predecessors and cognates, including without limitation any necessarily related patents, patent applications and know-how.

 

(c)           During the term of this Agreement:  (i) each Party shall provide to the other Party any material data or other information relating to SF-1019, including without limitation any such information relating to patents, patent applications and know-how, from time to time as such data and information is developed or acquired by such Party; and (ii) each Party shall deliver to the other Party all data relating to SF-1019 studies being conducted by or on behalf of either Party promptly after such data become available.

 

(d)           All such data and information exchanged or required to be exchanged by the Parties pursuant to this Section 3.1 shall be owned by Argyll Biotech, whether in Argyll Biotech’s possession or control as of the execution date of this Agreement or developed by any Party during the term of this Agreement.  Argyll Biotech hereby grants Immunosyn the right to use all such data and information Immunosyn in accordance with its obligations and license rights under this Agreement.

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

3.2           Argyll Biotech shall own all regulatory approvals that may result from the Initial Regulatory Filing or subsequent filings in any country or territory in which such filings are made (each a “Registration”), including, without limitation, Registrations granting pricing and reimbursement approvals for any country or territory as the same may be granted or issued by the appropriate regulatory body for such country or territory.

 

3.3           (a)           Within one hundred eighty (180) days after the execution date of this Agreement, Argyll Biotech may prepare and submit to Immunosyn, a clinical budget containing the budget for the conduct of proposed clinical development plans for the development of SF-1019 for calendar years 2010 through and including 2012, on a calendar year-by-calendar year basis (such budgets, as modified from time to time, are referred to as “Clinical Budgets”).

 

(b)           Also within one hundred eighty (180) days after the execution date of this Agreement, Argyll Biotech may prepare and submit to Immunosyn a clinical development plan for calendar years 2010 through 2012 describing Argyll Biotech’s proposed program for obtaining regulatory approval for the Licensed Use of SF-1019.  Such clinical development plan shall include:  (i) a plan for the rapid and orderly commencement of those clinical and other studies ongoing with respect to SF-1019; (ii) the allocation of regulatory strategy and responsibility for continued development of SF-1019; (iii) the research and development activities for the development of SF-1019 for calendar years 2010 through 2012, including the allocation of resources, which shall be consistent with the proposed clinical budget for such period; (iv) “go/no go” decision criteria for each stage of development of SF-1019; (v) timelines for scientific, medical, regulatory and other activities to be undertaken by Argyll Biotech for the purpose of obtaining Registrations for SF-1019 in each country in which SF-1019 will be marketed, distributed and sold for the Licensed Use, and providing marketing support and developing new indications and formulations for SF-1019.  Every clinical development plan for the relevant period shall include clinical studies required for approval of new indications within the Licensed Use.

 

(c)           Argyll Biotech will be primarily responsible for implementing the regulatory strategy for SF-1019 in all countries in which SF-1019 will be marketed, sold and distributed for a Licensed Use, including, without limitation, responsibility for all regulatory compliance, worldwide safety surveillance, adverse event reporting and all other necessary support services.

 

(d)           Any and all changes to any clinical development plan and/or the Clinical Budgets shall be at the sole and unfettered discretion of Argyll Biotech.

 

3.4           (a)           Argyll Biotech shall be responsible for the preparation of all protocols and the conduct of all activities relating to any Registrations and all Initial and other Regulatory Filings necessary or desirable to register SF-1019 for a Licensed Use in any country.  Argyll Biotech shall also conduct all communications with all regulatory authorities during the registration process.  During such process, Immunosyn shall collaborate and cooperate with Argyll Biotech in the preparation and filing of all documents necessary therefore and all regulatory interactions and compliance with regulatory authorities in any country.  All regulatory activities (including without limitation adverse event reporting) in accordance with this Agreement and the clinical development plans shall be conducted on behalf of Argyll Biotech.  

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

Argyll Biotech shall appoint Immunosyn as its agent for regulatory compliance and all other regulatory activities for which Immunosyn is responsible.

 

(b)           Argyll Biotech shall supply clinical materials necessary for all studies to be conducted pursuant to the clinical development plans specified herein.  Such clinical materials shall be supplied in accordance with, in all material respects, clinical good manufacturing practices (“cGMP”), at least ninety (90) days prior to the anticipated delivery date for each shipment thereof.

 

(c)           In connection with performing its obligations pursuant to the clinical development plans, each of Immunosyn and Argyll Biotech shall use all commercially reasonable efforts to perform such responsibilities diligently, with the objective of maximizing the sales potential of SF-1019 for a Licensed Use and promoting the therapeutic profile and benefits of SF-1019 for that use in the most commercially beneficial manner.  Without limiting the generality of the foregoing, each such Party shall:

 

(i)            cooperate with the other Party to implement the clinical development plans, and such other activities that, from time to time, Argyll Biotech decides are necessary for the commercial success of SF-1019;

 

(ii)           use commercially reasonable efforts to perform the work set out for such Party to perform in the clinical development plans;

 

(iii)           conduct all work pursuant to the clinical development plans in good scientific manner, and in compliance in all material respects with all requirements of applicable laws, rules and regulations, and all other requirements of any applicable cGMP, good laboratory practice and current good clinical practice to attempt to achieve the objectives of the clinical development plans efficiently and expeditiously; and

 

(iv)           maintain records, in sufficient detail and in good scientific manner, which shall be complete and accurate and shall fully and properly reflect all work done and results achieved in connection with the clinical development plans in the form required under all applicable laws and regulations.  The other such Party shall have the right, during normal business hours and upon reasonable prior written notice, to inspect and copy all such records at its own expense, so long as doing so is not unreasonably disruptive.  The other such Party shall maintain such records and information contained therein in confidence in accordance with this Agreement and any confidentiality agreements that may be effective as between the Parties hereto, and shall not use such records or information except to the extent otherwise permitted by this Agreement.

 

(v)           Immunosyn shall permit duly authorized representatives of Argyll Biotech to inspect, on the premises of Immunosyn, at all reasonable times, all products sold by Immunosyn including any products sold or offered for sale under the Trademarks, Immunosyn’s quality control records, and Immunosyn’s facilities used in or relating to the marketing, distribution or sale of SF-1019 to insure compliance with current Good Manufacturing Practice as defined in Parts 210 and 211 of Title 21 of the U.S. Code of Federal Regulations, as may be amended from time to time, or any successor thereto.

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

3.5           Argyll Biotech shall be responsible for the one hundred per cent of the development costs related to SF-1019 for the Licensed Use.

 

3.6           In the event that registration of an Initial Regulatory Filing is denied or is materially delayed by the relevant regulatory authority, then Argyll Biotech shall as soon a practical:  (a) reassess the relevant clinical development plan to address the regulatory authority’s objections and questions, (b) provide Immunosyn notice of such developments, (c) from time to time as additional such developments arise, provide Immunosyn notice of such additional developments, and (d) keep Immunosyn reasonably informed of all deliberations regarding all such developments.  As used in this Section 3.6, a material delay is a delay arising from a requirement set forth by the regulatory authority that Argyll Biotech conduct additional clinical studies not conducted in connection with the submission of the Initial Regulatory Filing.  In the event of a material delay, Argyll Biotech shall apply its sound scientific, commercial and regulatory judgment with all deliberate speed to determine whether or not it is in the best interest of both of Immunosyn and Argyll Biotech to go forward with the conduct of any additional clinical studies required by the regulatory authority.

 

3.7           Argyll Biotech shall have the right to immediately suspend the relevant clinical development activities with respect to SF-1019 for a Licensed Use in the event that Argyll Biotech determines that there exist significant concerns relating to patient safety with respect to a clinical study.  Upon making the determination to suspend such clinical activities, Argyll Biotech shall notify Immunosyn in writing immediately, but not later than ten (10) business days after such suspension, of any such suspension and the reasons therefore.  Argyll Biotech shall then promptly determine what actions should be taken with respect to such clinical activities.  Once a determination is made with respect to the appropriate actions to be taken, Argyll Biotech shall review and re-evaluate the relevant clinical development plan and the clinical budget and make any changes necessary to implement such actions.

 

3.8           Each Party shall be responsible for, and hereby assumes, any and all risks of personal injury or property damage attributable to the negligent or willful acts or omissions of such Party or its affiliates, including their respective directors, officers, employees and agents and for the activities and obligations of such Party pursuant to this Section 3.

 

4.           DISTRIBUTION AND PROMOTION

 

4.1           Immunosyn shall use all commercially reasonable efforts to launch, promote and sell SF-1019 for the Licensed Uses in each country in which regulatory approval for such Licensed Use is obtained and to perform such responsibilities diligently, with the objective of maximizing the sales potential of SF-1019 and promoting its therapeutic profile and benefits in the most commercially beneficial manner.

 

4.2           (a)           In connection with its responsibilities for distribution, marketing and sales of SF-1019 for the Licensed Use, Immunosyn shall provide all sales force (including, without limitation, sales administration and training), order entry, customer service, reimbursement management, medical affairs, medical information, marketing (including all advertising and promotional expenditures), warehousing, physical distribution, invoicing, credit and collections, production forecasting and other related facilities and services necessary or desirable for such distribution, marketing and sales.

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

4.3           Immunosyn shall prepare proposed-marketing and promotional plans for SF-1019 for each country in which SF-1019 may be marketed and sold for the Licensed Use, which shall include plans related to the prelaunch, launch, promotion and sales and which shall include but not be limited to pricing strategy, sales targets, forecasts for the number of sales representatives, copies of promotional materials, and a reasonably descriptive overview of the marketing and advertising campaigns proposed to be conducted (the “Marketing Plans”).  Immunosyn shall provide copies of the proposed Marketing Plans to Argyll Biotech for Argyll Biotech’s review and comment as soon as practicable after preparation and as frequently as may be required based upon Immunosyn’s usual marketing campaign cycles, but in no case less that once each calendar year.  Immunosyn shall in good faith include all comments received from Argyll Biotech on any such Marketing Plan, and will provide Argyll Biotech with a copy of the final Marketing Plan as soon as it is available.  The Parties intend and expect that, except for the first Marketing Plan to be prepared after execution of this Agreement, each subsequent Marketing Plan for each calendar year will be finalized no later than the first day of December of the immediately preceding calendar year.  Any such final Marketing Plan may be reviewed and revised in accordance with Immunosyn’s usual internal practices, provided that Argyll Biotech shall be provided copies of the proposed revisions, and given the same opportunity to comment and consideration as provided to Argyll Biotech for the initial Marketing Plans.

 

4.4           Argyll Biotech shall have the right to participate in the planning of promotional materials and promotional activities with respect to SF-1019 for the Licensed Use.  All promotional materials and promotional activities shall be developed by Immunosyn, with optional input from Argyll.  Such activities may include symposia, key opinion leader events, and similar such events.  Prior to finalizing such promotional materials and promotional activities, Immunosyn shall include Argyll Biotech in its internal circulation of information regarding such promotional materials and events during the development of such promotional materials and any event related materials and upon the finalization of such materials.

 

4.5           Argyll Biotech shall have the right to promote SF-1019 for the Licensed Use and any other use in any country in which regulatory approval for such promotion has been obtained.

 

(a)           Argyll Biotech shall have the right to have its sales force and medical liaison personnel participate in the promotion of SF-1019 throughout the world.

 

(b)           Argyll Biotech will be included in, and have the right to participate in, all promotional activities being conducted by Immunosyn pursuant to the then current Marketing Plan, including participation in symposia, key opinion leader events, and the like.  Immunosyn shall provide Argyll Biotech’s sales force with all promotional materials and support services to the same extent available to Immunosyn’s sales force.  Argyll Biotech shall not be required to reimburse Immunosyn for Immunosyn’s incremental costs and expenses associated with providing such materials and services to Argyll Biotech’s sales force.

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

4.6           From and after the execution date of this Agreement, each of Argyll Biotech and Immunosyn shall be responsible for its own distribution costs, sales costs, marketing costs, general and administrative costs, and/or other operating income/expense items.

 

5.           LICENSE FEES

 

5.1           As consideration to Argyll Biotech for the rights granted to Immunosyn under this Agreement, Immunosyn shall issue to Argyll Biotech one hundred forty seven million (147,000,000) shares of common stock in Immunosyn, as described in the Private Placement Memorandum dated August 2006 (the “License Fee”);

 

5.2           If and to the extent that the proceeds received by Argyll Biotech from the disposition of Immunosyn’s stock issued under Section 5.1, herein, net of all fees, taxes and expenses, are insufficient to fund Argyll Biotech’s clinical budget for obtaining regulatory approval for sale of SF-1019 in the United States and the United Kingdom (“Development Completion”), Immunosyn shall pay a royalty to Argyll Biotech equal to four and one-half per cent (4.5%) of its gross receipts (the “Royalty Fee”) from sales of SF-1019 for the Licensed Use until Argyll Biotech’s said development costs have been reimbursed in full.

 

5.3           All payments to Argyll Biotech shall be final and non-refundable, regardless of any termination or suspension of this Agreement; provided, however, that the Parties may agree to the return, repayment or refund by Argyll Biotech to Immunosyn of all or any agreed portion of the License Fee previously paid by Immunosyn to Argyll Biotech in the event that Argyll Biotech shall have breached or defaulted in the performance of one or more of its material obligations hereunder, and such default shall have continued for 45 days after written notice thereof was provided to Argyll Biotech by Immunosyn (or, if such default cannot be cured within such 45-day period, if Argyll Biotech does not commence and diligently continue actions to cure such default during such 45-day period).

 

6.           PAYMENTS AND REPORTS

 

6.1           Commencing with Immunosyn’s first commercial sale of SF-1019 (“First Commercial Sale”) and continuing thereafter, Immunosyn shall submit to Argyll Biotech monthly statements which shall set forth the amount of its gross sales of SF-1019 and the calculation of Royalty Fees due on such gross sales for such month (the “Royalty Reports”).  For the purpose of this Agreement, any compassionate use of SF-1019 in any country shall not be construed as commercial sale as used herein.

 

6.2           Immunosyn shall submit its Royalty Reports on the fifth business day following the close of such month (closed in accordance with Immunosyn’s then standard practices) with sufficient detail to enable Argyll Biotech to determine the facts relied upon by Immunosyn in calculating the Royalty Fee.

 

6.3           Immunosyn shall make all payments required under this Agreement in U.S. Dollars.  Whenever conversion of payments from any foreign currency shall be required, such conversion shall be at the rate of exchange used by Immunosyn for its own financial reporting purposes at such time without taking into account the effect of any hedging transactions by Immunosyn or its Affiliates.

 

6.4           Immunosyn shall keep complete and accurate records pertaining to the sale of SF-1019.  Immunosyn shall permit an independent, certified public accountant appointed by Argyll Biotech and reasonably acceptable to Immunosyn, at reasonable times and upon reasonable notice but not more often than two times each calendar year, to examine such records as may be necessary to determine the correctness of any report or payment made under this Agreement, to determine the consistency of actual expenditures versus the budgeted expenditures set forth in any clinical budget and/or any marketing budget, as the case may be, or obtain information as to the determination of aggregate net sales, operating profit or loss, development costs, distribution costs, sales costs, marketing costs, general and administrative costs and other operating income/expense.  Results of any such examination shall be made available to all Parties except that said independent, certified public accountant shall verify to Argyll Biotech such amounts and shall disclose no other information revealed in such audit.

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

6.5           Immunosyn shall bear the full cost of the performance of any audit requested by Argyll Biotech except as hereinafter set forth.  If, as a result of any inspection of the books and records Immunosyn, it is shown that payments made by Immunosyn to Argyll Biotech under this Agreement were less than the amount which should have been paid, then Immunosyn shall within thirty days thereafter make all payments required to be made to eliminate any discrepancy revealed by said inspection plus all costs of such audit.

 

7.           MANUFACTURE AND SUPPLY

 

7.1           Commencing on the execution date of this Agreement and thereafter during the term of this Agreement, Argyll Biotech (or its affiliates) shall be responsible for the manufacture of all requirements of SF-1019 for clinical and commercial use pursuant to this Agreement, including, without limitation, all product labeling and other package inserts and materials required by the applicable regulatory authorities.  Argyll Biotech shall use commercially reasonable efforts to ensure that all services, facilities and goods used in connection with such manufacture comply with the applicable Manufacturing Standards in effect from time to time.

 

7.2           Argyll Biotech shall use good faith efforts to supply Immunosyn with all of Immunosyn’s requirements for SF-1019 for commercial use (which shall be deemed to include all of the requirements of Immunosyn’s distributors), and Immunosyn shall purchase from Argyll Biotech all of such requirements for SF-1019.  Immunosyn shall place orders for the requirements of its distributors, and either have Argyll Biotech ship directly to such distributors or to Immunosyn for its reshipment to such distributors.

 

7.3           It is agreed by the Parties that the purchase price of SF-1019 sold by Argyll Biotech to Immunosyn shall be forty percent (40%) of the “Gross Sales Price” (as defined) of SF-1019.  The “Gross Sales Price” shall be determined as the price at which SF-1019 is advertised for sale to a third party consumer by Immunosyn or Immunosyn’s affiliates or sublicensees as permitted under Section 2.3.  The Gross Sales Price shall be determined by mutual agreement of the Parties; provided, however, that in no event shall it be less than 2.5 times Argyll Biotech’s fully burdened manufacturing cost, research and development expenses, administrative overhead and standard-mark up customary for similar products and manufacturers.  Notwithstanding the preceding sentence, the Parties may agree to a lesser Gross Sales Price and even a Gross Sales Price of zero for the sale of SF-1019 to third parties for research and/or compassionate use purposes.  The purchase price of SF-1019 by Immunosyn under the License Agreement for any sale or use that would not constitute a sale to a third party consumer shall be determined solely by Argyll Biotech.

 

  

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License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

7.4           (a)           All quantities of SF-1019 supplied by Argyll Biotech pursuant to this Section 7 will comply in all material respects with all applicable Manufacturing Standards and shall adhere in all material respects to all applicable governmental laws and regulations relating to the manufacture, sale and shipment of each shipment of SF-1019 at the time shipped by Argyll Biotech hereunder.

 

(b)           At its sole and unfettered discretion, Argyll Biotech may conduct, or cause to be conducted, quality control testing of SF-1019 prior to shipment, in accordance with appropriate specifications and applicable Manufacturing Standards as are in effect from time to time and such other quality control testing procedures adopted by Argyll Biotech from time-to-time (collectively, the “Testing Methods”).  Initially and until decided otherwise, the Testing Methods shall include and Argyll Biotech shall undertake all FDA required release testing.  Argyll Biotech shall retain records pertaining to such testing.  Each shipment of SF-1019 Product(s) hereunder shall be accompanied by a certified quality control protocol and certificate of analysis for each lot of SF-1019 therein as well as such customs and other documentation as is necessary or appropriate.

 

(c)           Immunosyn shall have the right, at reasonable times and upon reasonable notice, to inspect all facilities at which SF-1019 is manufactured pursuant to this Section 7 for compliance with cGMP, subject to existing agreements with third party manufacturers.

 

7.5           (a)           Immunosyn shall test or cause to be tested SF-1019 supplied under this Section 7 in accordance with Immunosyn’s customary procedures within 30 days of its receipt at Immunosyn’s facility or that of its designee.  Immunosyn or its designee shall have the right to reject any shipment of SF-1019 made to it under this Agreement that does not meet the agreed-upon specifications and applicable Manufacturing Standards in any material respects when received by it at such destination when tested in accordance with the Testing Methods.  All claims by Immunosyn of non-conforming SF-1019 shall be deemed waived unless made by Immunosyn in writing and received and materially accepted by Argyll Biotech within such 30-day period.

 

(b)           All claims of non-conforming SF-1019 shall be accompanied by a report of analysis (including a sample of SF-1019 from the batch analyzed) of the allegedly non-conforming SF-1019 that shall have been made by Immunosyn or its designee, using the Testing Methods.  Argyll Biotech shall undertake its own analysis of such sample after receiving such claim and report from Immunosyn.  If, after its own analysis, Argyll Biotech does not confirm such non-conformity, Immunosyn may submit the disputed SF-1019 to an independent testing laboratory, to be agreed upon by Argyll Biotech, for testing in accordance with the Testing Methods.  The findings of such laboratory shall be binding on the Parties, absent manifest error.  Expenses of such independent testing shall be borne by either Immunosyn or Argyll Biotech depending on which such Party’s initial findings are contradicted by the independent laboratory.  In the event that any SF-1019 shipment or batch thereof is ultimately agreed or found not to meet the agreed upon specifications and/or applicable Manufacturing Standards for which Argyll Biotech is responsible under this Agreement, Argyll Biotech agrees to replace such shipment or batch with conforming SF-1019.  Immunosyn shall promptly return any such rejected shipment to Argyll Biotech at Argyll Biotech’s expense.  In the event that any SF-1019 shipment or batch thereof is ultimately found to meet the agreed upon specifications and applicable Manufacturing Standards, Immunosyn shall accept and pay for such shipment or batch.

 

  

11

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

(c)           Upon Argyll Biotech’s receipt and confirmation that a claim that a shipment or batch thereof of SF-1019 does not meet the agreed upon specifications and/or applicable Manufacturing Standards, Argyll Biotech shall use commercially reasonable efforts to replace such shipment or batch thereof with an additional shipment of SF-1019 as soon as practicable.

 

7.6           The Parties acknowledge and agree that Argyll Biotech currently obtains SF-1019 through contractual arrangements with a third party manufacturer.  Upon the execution and delivery of this Agreement, Argyll Biotech maintains that, to the best knowledge of Argyll Biotech, it is not in breach under any such contracts and that data and information provided to Immunosyn by Argyll Biotech relating to such contracts is accurate and complete in all material respects and contains no material errors or omissions.

 

7.7           (a)           Argyll Biotech shall notify Immunosyn (i) as promptly as possible, but in no event more than ten days after Argyll Biotech’s receipt of a firm order for SF-1019 from Immunosyn, or (ii) immediately upon becoming aware that Argyll Biotech is unable to supply the quantity of SF-1019 to Immunosyn that Argyll Biotech is required to supply hereunder, if Argyll Biotech is unable to supply such quantities of SF-1019.  In such event, Argyll Biotech shall implement commercially reasonable efforts to remedy such shortage, including through the use of third party manufacturers for all or a portion of such quantities of SF-1019, as determined are necessary by Argyll Biotech and Immunosyn.

 

(b)           In the event that Argyll Biotech is unable to supply Immunosyn’s requirements of SF-1019 due to force majeure or otherwise, Argyll Biotech shall allocate the SF-1019 that Argyll Biotech has in inventory and that Argyll Biotech is able to produce among the quantities of all such requirements, so that Immunosyn receives at least its proportionate share of such available supplies, as determined from reasonable forecasts (taking into consideration past sales and sales performance against forecast) and orders for SF-1019.

 

7.8           All purchases by Immunosyn shall be made pursuant to written purchase orders which shall be accepted by Argyll provided they comply with the terms of this Agreement.  The printed terms on any purchase order or order acknowledgement which would otherwise modify, supplement or affect the terms of this Agreement shall be of no force or effect.  Argyll shall not be required to deliver quantities which have not been scheduled by Immunosyn in written forecasts submitted to Argyll at least three months prior to the expected date of delivery.  All shipments shall be delivered by Argyll at its place of manufacturing, and Immunosyn shall be responsible for arranging and payment of all costs of shipment and delivery to destination, including export and import.

 

8.           OWNERSHIP; PATENTS; TRADEMARKS

 

8.1           Argyll Biotech owns all right, title and interest in and to any and all the intellectual property that relates to this Agreement and Immunosyn’s activities hereunder subject.  All new or useful process, manufacture, compound, composition of matter, improvements, discoveries, claims, formulae, processes, trade secrets, technologies and know-how, to the extent relating to, derived from and useful for the manufacture, use or sale of SF-1019 (including, without limitation, the formulation, delivery or use thereof in the commercial marketplace), including, without limitation, synthesis, preparation, recovery and purification processes and techniques, control methods and assays, chemical data, toxicological and pharmacological data and techniques, clinical data, medical uses, product forms and product formulations and specifications, whether patentable or unpatentable, that is conceived or first reduced to practice or demonstrated to have utility during the term of this Agreement, including all documentation thereof in written or electronic media (collectively, the “Inventions”) developed by any Party or jointly by Argyll Biotech and Immunosyn shall be owned exclusively by Argyll Biotech, except for Inventions developed solely by Immunosyn which have general utility in connection with other products and/or compounds in addition to a SF-1019 (“Immunosyn Inventions”).  Immunosyn shall promptly take any action reasonably necessary or desired by Argyll Biotech, and at its own expense, to confirm Argyll Biotech’s ownership of such Inventions and also all Immunosyn Inventions.

 

  

12

  

 

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

8.2           (a)           Argyll Biotech shall have full responsibility for, and shall control the preparation and prosecution of, all patent applications and the maintenance of all patents that relate to Inventions throughout the world.  In connection therewith, Argyll Biotech shall generally consult with Immunosyn on all future filings with respect to patents and the prosecution and maintenance of such patents that are directly related to Immunosyn activities hereunder, including where appropriate or reasonably requested by Immunosyn, providing copies to Immunosyn of any such filings made to, and written communications received from, any patent office relating, in whole or in part, to patents.  Argyll Biotech shall, in its sole and unfettered discretion, pay all costs and expenses of filing, prosecuting and maintaining patents covering Inventions derived from the development of SF-1019.  Immunosyn shall have full responsibility for, and shall control the preparation and prosecution of, all patent applications and the maintenance of all patents relating to Immunosyn Inventions throughout the world.  In connection therewith, Immunosyn shall generally consult with Argyll Biotech on all future filings with respect to such patents and the prosecution and maintenance of such patents, including where appropriate or reasonably requested by Argyll Biotech, providing copies to Argyll Biotech of any such filings made to, and written communications received from, any patent office relating, in whole or in part, to such patents.  Immunosyn shall pay all costs and expenses of filing, prosecuting and maintaining patents covering Immunosyn Inventions.  Notwithstanding the foregoing, Argyll Biotech shall have the right to file patent applications or maintain patents for Immunosyn Inventions that relate in any way to SF-1019.  Argyll Biotech shall have a perpetual, worldwide, royalty free and no-cost license, including the right to sublicense and grant sublicensing rights to third parties, for all Immunosyn Inventions for the purpose of using, offering for sale, improving, manufacturing (including the right to have made), importing and selling SF-1019 including all of its improved versions.

 

(b)           The Parties agree to cooperate with each other to execute all lawful papers and instruments, to make all rightful oaths and declarations and to provide consultation and assistance as may be necessary in the preparation, prosecution, maintenance and enforcement of all such patents and patent applications pursuant to this Agreement.

 

  

13

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

8.3           (a)           If Immunosyn learns of an infringement, unauthorized use, misappropriation or ownership claim or threatened infringement or other such claim (any of the foregoing, an “infringement”) by a third party with respect to SF-1019 or any related technology, or to any Trademark in any territory throughout the world, Immunosyn shall promptly notify Argyll Biotech and shall promptly provide Argyll Biotech with available evidence of such infringement.

 

(b)           Argyll Biotech shall have the first right, but not the duty, to institute patent or Trademark infringement actions against third parties.  If Argyll Biotech does not institute an infringement proceeding against an offending third party within 180 days of learning of such infringement or, in the event that a third party files a paragraph IV certification relating to any patent pursuant to 21 U.S.C. ss.3550)(2)(A)(vii)(IV) of the Hatch/Waxman Act (or any successor statute), if Argyll Biotech notifies Immunosyn that it does not intend to institute an infringement proceeding against such third party, Immunosyn shall have the right, but not the duty, to institute such an action with respect to any infringement by such third party; provided that Immunosyn may not enter into any settlement, consent judgment or other voluntary final disposition of such action which adversely effects SF-1019 or any Trademark without the prior written consent of Argyll Biotech.  The costs and expenses of any such action (including fees of attorneys and other professionals) shall be borne by the Party instituting the action, or, if the Parties elect to cooperate in instituting and maintaining such action, such costs and expenses shall be borne by the Parties in such proportions as they may agree in writing.  Each Party shall execute all necessary and proper documents, take such actions as shall be appropriate to allow the other Party to institute and prosecute such infringement actions and shall otherwise cooperate in the institution and prosecution of such actions (including, without limitation, consenting to being named as a nominal Party thereto).  Each Party prosecuting any such infringement actions shall keep the other Party reasonably informed as to the status of such actions.  Any award paid by a third party as a result of such an infringement action (whether by way of settlement or otherwise) shall be applied first to reimburse the Parties for all costs and expenses incurred by the Parties with respect to such action on a pro rata basis and, if after such reimbursement any funds shall remain from such award, they shall be allocated as follows:  (i) if Argyll Biotech has instituted and maintained such action alone, Argyll Biotech shall be entitled to retain such remaining funds; (ii) if Immunosyn has instituted and maintained such action alone, Immunosyn shall be entitled to retain such remaining funds; or (iii) if the Parties have cooperated in instituting and maintaining such action, the Parties shall allocate such remaining funds between themselves in the same proportion as they have agreed to bear the expenses of instituting and maintaining such action.

 

(c)           Immunosyn shall have the first right, but not the duty, to institute patent infringement actions against third parties based on the use of Immunosyn Inventions which are used in the development, use, manufacture, distribution, promotion and/or sale of SF-1019.  If Immunosyn does not institute an infringement proceeding against an offending third party within 180 days of learning of such infringement or, in the event that a third party files a paragraph IV certification relating to any Immunosyn Inventions pursuant to 21 U.S.C. ss.3550)(2)(A)(vii)(IV) of the Hatch/Waxman Act (or any successor statute), if Immunosyn does not institute an infringement proceeding against such third party within 30 days of receipt of notice of such paragraph IV certification, Argyll Biotech shall have the right, but not the duty, to institute such an action with respect to any infringement by such third party; provided that Argyll Biotech may not enter into any settlement, consent judgment or other voluntary final disposition of such action which adversely effects any Immunosyn Inventions without the prior written consent of Immunosyn, which will not be unreasonably withheld.  The costs and expenses of any such action (including fees of attorneys and other professionals) shall be borne by the Party instituting the action, or, if the Parties elect to cooperate in instituting and maintaining such action, such costs and expenses shall be borne by the Parties in such proportions as they may agree in writing.  Each Party shall execute all necessary and proper documents, take such actions as shall be appropriate to allow the other Party to institute and prosecute such infringement actions and shall otherwise cooperate in the institution and prosecution of such actions (including, without limitation, consenting to being named as a nominal Party thereto).  Each Party prosecuting any such infringement actions shall keep the other Party reasonably informed as to the status of such actions.  Any award paid by a third party as a result of such an infringement action (whether by way of settlement or otherwise) shall be applied first to reimburse the Parties for all costs and expenses incurred by the Parties with respect to such action on a pro rata basis and, if after such reimbursement any funds shall remain from such award, they shall be allocated as follows:  (i) if Immunosyn has instituted and maintained such action alone, Immunosyn shall be entitled to retain such remaining funds; (ii) if Argyll Biotech has instituted and maintained such action alone, Argyll Biotech shall be entitled to retain such remaining funds; or (iii) if the Parties have cooperated in instituting and maintaining such action, the Parties shall allocate such remaining funds between themselves in the same proportion as they have agreed to bear the expenses of instituting and maintaining such action.

 

  

14

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

8.4           (a)           In the event of the institution or threatened institution of any suit by a third party against Immunosyn for patent or Trademark infringement involving only the manufacture, use, distribution, sale or marketing of SF-1019, Immunosyn shall promptly notify Argyll Biotech in writing of such suit.  Argyll Biotech shall be required to diligently defend such suit at its own expense, shall control the defense of such action and, subject to Section 8.4(c), shall be responsible for all damages incurred as a result thereof and shall indemnify Immunosyn in connection therewith.  Immunosyn hereby agrees to in good faith assist and cooperate with Argyll Biotech, in the defense of any suit related to SF-1019 or any Trademark (including, without limitation, consenting to being named as a nominal Party thereto).  During the pendency of such action and thereafter, Immunosyn shall continue to make all payments due under this Agreement.  If Argyll Biotech finally prevails and receives an award from such third party as a result of such action (whether by way of judgment, award, decree, settlement or otherwise), such award shall be retained entirely by Argyll Biotech.

 

(b)           In the event of the institution or threatened institution of any suit by a third party against Immunosyn for patent infringement involving the Immunosyn Inventions which are used in the development, use, manufacture, distribution, promotion and/or sale of SF-1019 Product(s), Immunosyn shall promptly notify Argyll Biotech in writing of such suit.  Immunosyn shall be required to diligently defend such suit at its own expense, shall control the defense of such action and shall be responsible for all payment of damages incurred as a result thereof (or payment of any license fees incurred in connection with any license obtained by the Parties from such third party); provided that (A) to the extent that such suit relates to Immunosyn Inventions used solely by Argyll Biotech, Argyll Biotech shall diligently defend such suit at its own expense, shall control the defense of such action and shall be responsible for all payment of damages incurred as a result thereof (or payment of any license fees incurred in connection with any license obtained by Argyll Biotech from such third party) and (B) to the extent that such suit relates to Immunosyn Inventions used by both Immunosyn and Argyll Biotech, the Parties shall cooperate in the defense of such action and shall be responsible for payment of damages incurred as a result thereof (or payment of any license fees incurred in connection with any license obtained by the Parties from such third party) on a basis which is proportionate to their relative usage (as reflected by sales and similar objective criteria) of such Immunosyn Inventions.  In the event that a Party is solely responsible for defending an action involving Immunosyn Inventions, the other Party shall assist and cooperate with such Party, at such Party’s reasonable request and expense.  If a Party which is solely responsible for defending an action involving Immunosyn Inventions finally prevails and receives an award from such third party as a result of such action (whether by way of judgment, award, decree, settlement or otherwise), such award shall be retained entirely by such Party.  If the Parties cooperate in the defense of an action involving Immunosyn Inventions pursuant to (B) above and such Parties finally prevail and receive an award from such third party as a result of such action (whether by way of judgment, award, decree, settlement or otherwise), such award shall be shared on an equitable basis by the Parties.

 

  

15

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

(c)           In the event that Argyll  Biotech (A) determines that a license under third party patents or Trademarks should be obtained to avoid infringement of such third party patents or Trademarks to make, have made, use or sell SF-1019 in any country(ies) in the world, or royalties should be paid to such third party in respect of sales of such product anywhere in the world, or (B) if Argyll Biotech or Immunosyn finally loses and is required to pay damages or an award to a third party as a result of an action commenced under Section 8.4(a) (whether by way of judgment, award, decree, settlement or otherwise); then the Royalty and purchase price for SF-1019 due from Immunosyn to Argyll Biotech pursuant to Sections 5.1 shall be increased by an amount sufficient to reimburse Argyll Biotech for the amount of such damages within a period not to exceed three years.

 

9.           PUBLICATION; CONFIDENTIALITY

 

9.1           The Parties recognize that each may wish to publish the results of their work relating to the subject matter of this Agreement.  However, the Parties also recognize the importance of acquiring patent protection.  Consequently, subject to any applicable laws or regulations obligating any Party to do otherwise, any proposed publication by any Party shall comply with this Section 9.  All publications, whether written or oral, shall be prepared in accordance with the joint publication strategy established and approved jointly by Argyll Biotech and Immunosyn.  At least 45 days before a manuscript is to be submitted to a publisher, the publishing Party will provide the other Party with a copy of the manuscript.  If the publishing Party wishes to make an oral presentation, it will provide the other Party with a summary of such presentation at least 30 days before such oral presentation and, if an abstract is to be published, 30 days before such abstract is to be submitted.  Any oral presentation, including any question period, shall not include any Confidential Information (as defined below) unless the Parties otherwise mutually agree in writing in advance of such oral presentation.

 

9.2           Argyll Biotech and Immunosyn will each review the manuscript, abstract, text or any other material provided to it under Section 9.1 to determine whether patentable subject matter is disclosed.  The non-publishing Party will notify the publishing Party within 30 days of receipt of the proposed publication if the non-publishing Party, in good faith, determines that patentable subject matter is or may be disclosed, or if, in good faith, it believes Confidential Information is or may be disclosed.  If it is determined by the non-publishing Party that patent applications should be filed, the publishing Party shall delay its publication or presentation for a period not to exceed 60 days from the non-publishing Party’s receipt of the proposed publication or presentation to allow time for the filing of patent applications covering patentable subject matter.  In the event that the delay needed to complete the filing of any necessary patent application will exceed the 60-day period, the Parties will discuss the need for obtaining an extension of the publication delay beyond the 60-day period.  If it is determined in good faith that Confidential Information or proprietary information is being disclosed, the Parties will consult in good faith to arrive at an agreement on mutually acceptable modifications to the proposed publication or presentation to avoid such disclosure.

 

  

16

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

9.3           The Parties agree to the terms of the confidentiality and non disclosure as set forth in this Section.  Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, the Parties agree that, during the term of protection for Confidential Information (as defined below) received from the other Party shall be ten (10) years from the date of receipt.  The receiving Party, its affiliates and its licensees shall ensure that their respective employees, officers, directors and other representatives shall keep completely confidential and not publish or otherwise disclose and not use for any purpose any information furnished to it or them by the disclosing Party, its affiliates or its licensees or developed under or in connection with this Agreement, including the terms of this Agreement, except to the extent that it can be established by the receiving Party by competent proof that such information:  (i) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the disclosing Party; (ii) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party; (iii) became generally available to the public or was otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; or (iv) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a third party who had no obligation to the disclosing Party not to disclose such information to others (all such information to which none of the foregoing exceptions applies, shall be deemed “Confidential Information”).

 

9.4           The restrictions contained in Section 9.3 shall not apply to Confidential Information that:  (i) is submitted by the recipient to governmental authorities to facilitate the issuance of regulatory approval for SF-1019 unless such submission is submitted in confidence, provided that reasonable measures shall be taken to assure confidential treatment of such information; (ii) is provided by the recipient to third parties under confidentiality provisions at least as stringent as those in this Agreement, for consulting, manufacturing development, manufacturing, external testing, or marketing trials; or (iii) is otherwise required to be disclosed in compliance with applicable laws or regulations or order by a court or other regulatory body having competent jurisdiction; provided that if a Party is required to make any such disclosure of disclosing Party’s Confidential Information such Party will, except where impracticable for necessary disclosures (for example, to physicians conducting studies or to health authorities), give reasonable advance notice to the disclosing Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such Confidential Information required to be disclosed.

 

  

17

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

9.5           Each Party shall use, and cause each of its affiliates and its licensees to use, any Confidential Information obtained by such Party from the disclosing Party, its affiliates or its licensees, pursuant to this Agreement or otherwise, solely in connection with the activities or transactions contemplated hereby.

 

9.6           Each Party shall be entitled, in addition to any other right or remedy it may have, at law or in equity, to an injunction, without the posting of any bond or other security, enjoining or restraining the disclosing Party, its affiliates and/or its licensees from any violation or threatened violation of this Section 9.

 

10.           REPRESENTATIONS AND WARRANTIES

 

10.1           Each Party represents and warrants to the other Party, as of the execution date of this Agreement, that:

 

(a)           Such Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

 

(b)           Such Party has taken all corporate action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement and has full power and authority to enter into this Agreement and perform its obligations under this Agreement;

 

(c)           This Agreement has been duly executed by such Party and constitutes a valid and legally binding obligation of such Party, enforceable in accordance with its terms, subject to and limited by:  (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other laws generally applicable to creditors’ rights; and (ii) judicial discretion in the availability of equitable relief;

 

(d)           Such Party is not required to obtain the consent, approval, order, or authorization of any third party, or complete any registration, qualification, designation, declaration or filing with, any federal, state, local, or provincial governmental authority, in connection with the execution and delivery of this Agreement and the performance by such Party of its obligations under this Agreement, including, without limitation, the grant of rights to the other Party pursuant to this Agreement, or such Party has done so;

 

(e)           The execution and delivery of this Agreement, and the performance by such other Party of its obligations under this Agreement, including without limitation the grant of rights to the other Party pursuant to this Agreement, will not:  (i) conflict with, nor result in any violation of or default under any such instrument, judgment, order, writ, decree, contract or provision; (ii) give rise to any event that results in the creation of any lien, charge or encumbrance upon any assets of such Party or the suspension, revocation, impairment, forfeiture or non-renewal of any material permit, license, authorization or approval that applies to such Party, its business or operations or any of its assets or properties; or (iii) conflict with any rights granted by such Party to any third party or breach any obligation that such Party has to any third party; and

 

  

18

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

(f)           all data and information provided by one Party to the other Party is accurate and complete in all material respects and contains no material errors or omissions.

 

10.2           To the best of its knowledge, Argyll Biotech represents and warrants to Immunosyn, as of the execution date of this Agreement, that:

 

(a)           Argyll Biotech believes that it is the owner of, or has exclusive rights to, all of the patents and Trademarks necessary to produce and manufacture SF-1019 for the Licensed Use, and has the exclusive right to grant the rights granted under this Agreement therefor.  To the knowledge of Argyll Biotech, all of such patents and Trademarks are valid, in full force and effect and have been maintained to date, and are not the subject of any interference or opposition proceeding except as otherwise disclosed;

 

(b)           Argyll Biotech (i) is not aware of any asserted or unasserted claims, interferences, oppositions or demands of any third party against SF-1019 or the Trademarks in existence as of the execution date of this Agreement; and (ii) to the knowledge of Argyll Biotech, the Parties’ practice of any invention claimed in such patents or the exercise of any rights to SF-1019 or the Trademarks as contemplated by this Agreement do not infringe any patent or other intellectual property right of any third party; and

 

(c)           except as otherwise disclosed, Argyll Biotech has rights to all of the know-how relating to the manufacture and use of SF-1019 in existence on the execution date of this Agreement and the right to grant all rights with respect thereto granted to Immunosyn pursuant to this Agreement.

 

10.3           To the best of its knowledge, Immunosyn represents and warrants to Argyll Biotech, as of the execution date of this Agreement, that:

 

(a)           Immunosyn:  (i) is not aware of any asserted or unasserted claims, interferences, oppositions or demands of any third party against it with regard to the patents and trademarks necessary to market, distribute, sell, and promote SF-1019 for the Licensed Use; and (ii) to the knowledge of Immunosyn, the Parties’ practice of any invention claimed in such patents or the exercise of any rights to SF-1019 or the Trademarks as contemplated by this Agreement do not infringe any patent or other intellectual property right of any third party;

 

(b)           Immunosyn has rights to all of the know-how relating to marketing, distribution, sale and promotion of SF-1019 in existence on the execution date of this Agreement pursuant to this Agreement;

 

(c)           Immunosyn’s marketing, sale and distribution of SF-1019 for the Licensed Use, in accordance with the terms of this Agreement, do not infringe upon or conflict with any patent or other proprietary rights of any third party; and

 

  

19

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

(d)           all of the data and information provided to Argyll Biotech by Immunosyn relating to SF-1019 and the Trademarks is accurate and complete in all material respects and contains no material errors or omissions.

 

11.           RECALL AND INDEMNIFICATION

 

11.1           In the event that either Party learns that any regulatory authority in any country has alleged or proved that SF-1019 does not comply with applicable rules and regulations in such country, it shall notify the other Party immediately.  Argyll Biotech shall conduct any appropriate investigation and shall make a determination as to the disposition of any such matter.  If Immunosyn is required or if Argyll Biotech should deem it appropriate to recall any SF-1019, Argyll Biotech shall bear the costs and expenses associated with such recall, unless the predominant cause of such recall results from Immunosyn’s willful wrongdoing or negligence, in which case Immunosyn shall bear all costs and expenses associated with such recall.

 

11.2           Immunosyn shall indemnify, defend and hold harmless Argyll Biotech and its respective affiliates, and respective directors, officers, employees and agents, from and against any and all liabilities, damages, losses, costs and expenses (including the reasonable fees of attorneys and other professionals) to the extent arising out of or resulting from:

 

(a)           negligence, recklessness or wrongful intentional acts or omissions of Immunosyn or its affiliates and respective directors, officers, employees and agents, in connection with the work performed by Immunosyn under the clinical development plans or the fulfillment of Immunosyn’s obligations under the marketing plans;

 

(b)           any use, distribution or sale of SF-1019 by Immunosyn or its affiliates or due to any negligence, recklessness, or wrongful intentional acts or omissions by or strict liability of, Immunosyn or its affiliates and their respective directors, officers, employees and agents; or

 

(c)           due to any negligence, recklessness or wrongful intentional acts or omissions by, or strict liability of, Immunosyn or its affiliates, and their respective directors, officers, employees and agents.

 

11.3           Argyll Biotech shall indemnify, defend and hold harmless Immunosyn and its affiliates, and their directors, officers, employees and agents, from and against any and all liabilities, damages, losses, costs and expenses (including the reasonable fees of attorneys and other professionals) to the extent arising out of or resulting from:

 

(a)           negligence, recklessness or wrongful intentional acts or omissions of Argyll Biotech or its affiliates and respective directors, officers, employees and agents, in connection with the work performed by Argyll Biotech under the clinical development plans or the fulfillment of Argyll Biotech’s obligations under the marketing plans; or

 

(b)           due to any negligence, recklessness or wrongful intentional acts or omissions by, or strict liability of, Argyll Biotech or its affiliates, and their respective directors, officers, employees and agents.

 

  

20

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

11.4           In the event that any person (an “Indemnitee”) entitled to indemnification under Sections 11.2 or 11.3 is seeking such indemnification, such Indemnitee shall inform the indemnifying Party of the claim as soon as reasonably practicable after such Indemnitee receives notice of such claim, shall permit the indemnifying Party to assume direction and control of the defense of the claim (including the sole right to settle it at the sole discretion of the indemnifying Party, provided that such settlement does not impose any obligation on, or otherwise adversely affect, the Indemnitee or any of the other parties) and shall cooperate as requested (at the expense of the indemnifying Party) in the defense of the claim.

 

11.5           As the Parties intend complete indemnification, all costs and expenses incurred by an Indemnitee in connection with enforcement of Sections 11.2 and 11.3 shall also be reimbursed by the indemnifying Party.

 

12.           TERM AND TERMINATION

 

12.1           This Agreement shall become effective as of the date set forth above and, unless earlier terminated pursuant to the other provisions of this Section 12, shall expire on the later of (i) 10 years from the date when SF-1019 is commercially sold, or (ii) from the date on which the sale of SF-1019 ceases to be covered by a valid claim within a patent which is licensed to Immunosyn by Argyll Biotech pursuant to Section 2.2, on a country-by-country, and product-by-product basis.

 

12.2           Argyll Biotech may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in the event that Immunosyn shall have materially breached or defaulted in the performance of any of its material obligations hereunder, and such default shall have continued for 180 days after written notice thereof was provided to Immunosyn by Argyll Biotech (or, if such default cannot be cured within such 180-day period, if Immunosyn does not commence and diligently continue actions to cure such default during such 180-day period).  Any such termination shall become effective at the end of such 180-day period unless Immunosyn has cured any such breach to Argyll Biotech’s complete satisfaction or default prior to the expiration of such 180-day period (or, if such default cannot be cured within such 180-day period, if Immunosyn has commenced and diligently continued actions to cure such default).  The right of Argyll Biotech to terminate this Agreement, as provided in this Section 12.2 shall not be affected in any way by its waiver or failure to take action with respect to any previous default.

 

12.3           Immunosyn shall have the right to terminate this Agreement in the event that it determines, in its reasonable discretion and after thorough review and analysis, that there exists a significant concern regarding a regulatory or patient safety issue that would seriously impact the long-term viability of SF-1019.  The Agreement shall immediately terminate upon a non-rebutted, conclusive finding by Immunosyn that there exists a significant concern regarding a regulatory or patient safety issue that would seriously impact such long term viability.  In the event of such termination, any remaining obligation of Immunosyn to pay the Royalty shall immediately terminate and Argyll Biotech shall have no claim therefore; provided, however, that Argyll Biotech shall have no liability in such event to return or repay any portion of the License Fee previously paid to it by Immunosyn unless otherwise agreed by the Parties.

 

  

21

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

12.4           If this Agreement expires pursuant to its terms or is terminated by any Party pursuant to this Section 12, in addition to any other remedies available to the Parties at law or in equity:  (i) Immunosyn shall promptly transfer to Argyll Biotech copies of all data, reports, records and materials in their possession or control that relate to SF-1019, and return to Argyll Biotech all records and materials in its possession or control containing Confidential Information of Argyll Biotech or Confidential Information of Immunosyn that relates in any way to SF-1019 (provided that Immunosyn may keep one copy of such Confidential Information of Argyll Biotech for archival purposes only); and (ii) Argyll Biotech shall promptly return to Immunosyn all relevant records and materials in Argyll Biotech’s possession or control containing Confidential Information of Immunosyn (provided that the Argyll Biotech may keep one copy of such Confidential Information of Immunosyn for archival purposes only).

 

13.           LIMITATION OF LIABILITY

 

13.1           IN NO EVENT SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR ANY LOST PROFITS, LOST SAVINGS, OR OTHER INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES OR FOR ANY CLAIM BY ANY OTHER PARTY, INCLUDING WITHOUT LIMITATION, LOST PROFITS, RESULTING FROM EXERCISE OF THIS LICENSE OR MANUFACTURE, SALE, OR USE OF THE INVENTION OR PRODUCTS OR INTELLECTUAL PROPERTY LICENSED HEREUNDER EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE GRANTING OR USE OF THE SUBLICENSE HEREUNDER THAT EXCEED ANY PAYMENTS RECEIVED FROM A PARTY.

 

13.2           Argyll Biotech makes no representation, warrants, either express or implied, or covenants hereunder regarding this license and the products licensed hereunder.  The inventions and technology licensed hereunder are provided without a warranty of merchantability or fitness for a particular purpose or any other warranty, express or implied.  Argyll Biotech makes no representation or warranty that the products and/or services licensed hereunder will not infringe any patent or other proprietary right or confer by implication, estoppel or otherwise any license or rights under any patents or other intellectual property of Argyll Biotech other than as expressly stated herein.

 

14.           FORCE MAJEURE

 

14.1           Neither of the Parties shall be held liable or responsible to the other Party nor be deemed to be in default under, or in breach of any provision of, this Agreement for failure or delay in fulfilling or performing any obligation of this Agreement when such failure or delay is due to force majeure, and without the fault or negligence of the Party so failing or delaying.  For purposes of this Agreement, force majeure is defined as causes beyond the control of the Party, including, without limitation, acts of God; acts, regulations, or laws of any government; war; civil commotion; destruction of production facilities or materials by fire, flood, earthquake, explosion or storm; labor disturbances; epidemic; and failure of public utilities or common carriers.  In such event Argyll Biotech or Immunosyn, as the case may be, shall immediately notify the other Party of such inability and of the period for which such inability is expected to continue.  The Party giving such notice shall thereupon be excused from such of its obligations under this Agreement as it is thereby disabled from performing for so long as it is so disabled and the 30 days thereafter.  To the extent possible, each Party shall use reasonable efforts to minimize the duration of any force majeure.

 

  

22

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

15.           DISPUTE RESOLUTION

 

15.1           Subject to the arbitration agreement in Section 15.2, the federal and state courts having jurisdiction over San Diego County, California shall have exclusive jurisdiction and venue over all judicial proceedings involving the Parties under this Agreement.  Both Parties agree to the exclusive personal jurisdiction of said courts.

 

15.2           In the event of any dispute arising out of or related in any way whatsoever to this Agreement, the Parties agree to submit all such disputes to a confidential, binding arbitration in accordance with California law in the City of San Diego.  A Party may initiate arbitration by serving the other Party with written notice making reference to this Agreement, describing the dispute to be arbitrated, and naming its arbitrator.  The Party receiving the notice shall respond in writing within fourteen (14) business days by naming its arbitrator and describing any additional disputes or counterclaims it wishes to have resolved.  The two Parties’ arbitrators shall then appoint a third arbitrator who shall serve as the chairman of the proceedings.  In the event the Party receiving the initial notice fails to nominate its arbitrator within the specified time period, the arbitrator appointed by the Party initiating the arbitration shall serve as the sole arbitrator with power to make a decision and render a binding award.  All arbitrators appointed in accordance with this Agreement shall be experienced in the field of licensing biotechnology, and the chairman shall be an attorney having experience litigating in said field.  The award maybe confirmed by any court having jurisdiction over the Parties.

 

16.           MISCELLANEOUS

 

16.1           Nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the Parties.  No Party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein.

 

16.2           No Party shall be entitled to assign its rights or delegate its obligations hereunder without the express written consent of the other Party, except that Argyll Biotech may assign its rights and transfer its duties hereunder, without the consent of Immunosyn, to (A) a directly or indirectly wholly-owned subsidiary of Argyll Biotech, or (B) to any assignee of all or substantially all of its business (or that portion of its overall business of which this Agreement is a part (e.g. all of its biopharmaceutical business).

 

16.3           Any books and records to be maintained under this Agreement by a Party or its affiliates shall be maintained in accordance with generally accepted accounting principles.

 

16.4           Solely to the extent necessary to allow any Party to use it rights and perform its obligations under this Agreement, each Party hereby grants to the other Party and its affiliates the rights to use patents, know-how and Immunosyn Inventions (as applicable) in accordance with this Agreement.  Each Party shall execute, acknowledge and deliver such further instruments, and do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

 

  

23

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

16.5           (a)           Any notice, request or other communication required or permitted to be given under or in connection with this Agreement shall be deemed to have been sufficiently given if in writing and personally delivered or sent by certified mail (return receipt requested), facsimile transmission (receipt verified), or overnight express courier service (signature required), prepaid, to the Party for which such notice is intended, at the address set forth for such Party below:

 

In the case of Argyll Biotech, to:

 

Argyll Biotechnologies, LLC

10815 Rancho Bernardo Road

Suite 101

San Diego, CA  92127

Attn:  CEO

In the case of Immunosyn, to:

 

Immunosyn Corporation

10815 Rancho Bernardo Road

Suite 101

San Diego, California 92127

Attn:  President

or to such other address for such Party as it shall have specified by like notice to the other Party, provided that notices of a change of address shall be effective only upon receipt thereof.  If notice is delivered personally or by facsimile transmission, the date of delivery shall be deemed to be the date on which such notice or request was given.  If sent by overnight express courier service, the date of delivery shall be deemed to be the next business day after such notice or request was deposited with such service.  If sent by certified mail, the date of delivery shall be deemed to be the third business day after such notice or request was deposited with the U.S. Postal Service.

 

16.6           Except as otherwise provided herein, Argyll Biotech and Immunosyn shall not have any right, express or implied, to use in any manner the name or other designation of the other or any other trade name, trademark or logos of the other Party for any purpose in connection with the performance of this Agreement.

 

16.7           Except as otherwise provided herein, neither Argyll Biotech no Immunosyn shall make any public announcement concerning this Agreement or the subject matter hereof without first consulting with the other Party and providing such Party with a reasonable opportunity to comment on such proposed public announcement except as may be required by the U.S. securities laws.

 

  

24

  

 

License Agreement

        Argyll Biotechnologies LLC

        Immunosyn Corporation

 

16.8           A waiver by any Party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach hereof.  All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of any Party.

 

16.9           Nothing in this Agreement shall be deemed to permit a Party to export, reexport or otherwise transfer any SF-1019 product sold under this Agreement without compliance with applicable laws.

 

16.10          When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement, provided such invalid term is not fundamental to the Agreement.

 

16.11          No amendment, modification or supplement of any provisions of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party.

 

16.12          This Agreement shall be governed by and interpreted in accordance with the laws of the State of California as if the dispute arose in California between citizens of California without regard to any conflicts of law principles that might otherwise apply.

 

16.13          This Agreement constitutes the entire agreement between the Parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the Parties with respect to the subject matter of this Agreement.

 

16.14          All of the terms and provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Parties hereto and their respective permitted successors and assigns.

 

16.15          This Agreement may be executed simultaneously in any number of counterparts, any one of which need not contain the signature of more than one Party but all such counterparts taken together shall constitute one and the same agreement.

 

  

25

  

 

License Agreement        

        Argyll Biotechnologies LLC      

        Immunosyn Corporation      

 

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized representative as of the day and year first above written.

 

	  	
ARGYLL BIOTECHNOLOGIES, LLC

	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	
By:

	
/s/ James T. Miceli 

	  
	  	  	
James T. Miceli

	  
	  	  	
CEO

	  
	  	  	  	  

	  	
IMMUNOSYN CORPORATION

	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	
By:

	
/s/ Stephen D. Ferrone 

	  
	  	  	
Stephen D. Ferrone 

	  
	  	  	
President

	  
	  	  	  	  

 

 

26ex4-13.htm

EXHIBIT 4.13

 Offeree No. __________

Spare Backup, Inc.

 

Confidential Private Offering Memorandum

 

TOTAL OFFERING

$2,000,000

(40 Units)

 

OFFERING PRICE

$50,000 PER UNIT

 

Each Unit consists of (i) a $50,000 of 312,500 shares of Spare Backup, Inc. Common stock) and (ii) a Common Stock Purchase Warrant to Purchase 312,500 shares of Common Stock priced at $0.20 (twenty - cents) per Share.

 

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK, AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.

 

 

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS CONFIDENTIAL PRIVATE OFFERING MEMORANDUM.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

 

 

 

 

1

 

 

 

 

The date of this Memorandum is January 1, 2009

 

 

 

 

 

 

2

 

 

RISK FACTORS

 

THE UNITS OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND ARE, THEREFORE, HIGHLY SPECULATIVE IN NATURE AND SHOULD NOT BE PUR­CHASED BY PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.  IN ANALYZING THIS OFFERING, PROSPECTIVE INVESTORS SHOULD CARE­FULLY CONSIDER THE RISK FACTORS AND THE SPECU­LATIVE FACTORS INHERENT IN AND AFFECTING BOTH OUR BUSINESS AND THE VALUE OF OUR SECURITIES.  IN ADDITION TO THE OTHER INFORMATION IN THIS CONFIDENTIAL PRIVATE OFFERING MEMORANDUM, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE UNITS OFFERED BY THIS CONFIDENTIAL PRIVATE OFFERING MEMORANDUM.

STATEMENTS CONTAINED IN THIS CONFIDENTIAL PRIVATE OFFERING MEMORANDUM THAT ARE NOT BASED ON HISTORICAL FACT ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGA­TION REFORM ACT OF 1995.  FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE," "ESTIMATE," "ANTICIPATE," "CONTINUE" OR SIMILAR TERMS VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS.  INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH IN THE FOLLOWING RISK FACTORS WHICH CONSTITUTES CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS.

 

Notwithstanding the information contained in this Confidential Private Offering Memorandum, prospective investors are encouraged to ask questions of our officers and directors and request additional information concerning the Offering and our business.  We will provide prospective investors with answers to their questions and to obtain any additional information to the extent management possesses such information or can acquire it without unreasonable effort or expense.  No federal or state commission, department or agency has made any evaluation, finding, recommendation or endorsement with respect to the securities offered hereby.

We have generated minimal revenues since inception. As a result, our current operations are not an adequate source of cash to fund future operations. To fund our cash requirements, we have relied on private placement issuances of equity and debt financing instruments.

 

We have only recently begun to focus on commercialization efforts with regard to the products related to our wholly owned subsidiary Spare Backup and there is no guarantee that those efforts including all publicly announce relationships will enable the Company to successfully market those products.

Our pricing model for our products and services is unproven and may be less than anticipated, which may harm gross margins;

 

 

3

 

We face severe competition from other storage and software companies, many of whom have greater resources than we do, and we may be unable to become a competitive force in our marketplace.

In addition, some of these competitors have a longer operating history than we do and many of them have substantially greater financial and other resources than we do.  As a result, we will likely encounter greater difficulty in implementing our business plans than will our competitors.

 

Our success is dependent on the performance and retention of our Chief Executive Officer and key employees.

The terms of this offering, including the offering price of the Units and the exercise price of the warrants were arbitrarily determined.

The offering price of the Units, the exercise price of the warrants, and other terms of the Offering were determined by negotiation between us and certain potential investors, and are not necessarily related to our asset value, book value, financial condition or any other recognized indication of value.

There is a $50,000 minimum investment amount in this offering and there is substantial risk that we will be unable to raise the full offering amount which will limit our ability to execute our business plan.

Because Management expects to continue to incur net loses, we may not be able to implement our business strategy and the price of our stock may decline.

Management has substantial discretion over the use of funds raised in this offering and investors will have no voice in the application of proceeds.

The report of the Company's independent registered public accounting firm on our financial statements for the year ended December 31, 2007 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses and cash used in operations.  Please look at all SEC filings.

The Units and their component securities are not registered under federal securities laws and resale of such securities will be restricted in accordance with applicable law.

The Offering is being made pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Act") and Regulation D and Rule 144A under the Act, solely to accredited investors (as such term is defined in the Act and Regulation D thereunder and qualified institutional buyers (as such term is defined in Regulation 144A under the Act).  Neither the Units, nor the shares of common stock underlying the warrants included in the Units, have been registered under the Act, and may be deemed "restricted securities" as such term is defined in the Act.  As such, the resale of any of such securities may not be made without registration under the Act or the existence of an exemption from such registration requirement.  No assurance can be given as to if or when such securities will be registered for resale by the investors.  Accordingly, investors in the Units must be prepared to bear the economic risk of investment for an indefinite period of time.

 

 

4

 

Our business is capital intensive, particularly with respect to advertising and marketing, and our lack of revenues and profits may make our obtaining additional capital more difficult.

Our operations are capital intensive and our growth will consume a substantial portion of our available working capital.  Therefore, depending upon the timing and rate at which we are able to generate revenues from operations, we may require additional capital in order to fund our operations.  Unless we are able to generate sufficient revenues to sustain and grow operations, we will require additional funding in order to remain viable.  Our current lack of significant revenues or profitable operations may cause us difficulty in raising additional financing if we require it.  We cannot predict whether additional financing will be available to us on acceptable terms.

Our inability to timely complete product and technology development may hurt us.

We have not yet completed development and testing of certain proposed products and proposed enhancements to our systems, some of which are still in the planning stage or in relatively early stages of development. Our success will depend in part upon our ability to fund and complete product development to permit their timely introduction into the marketplace. We will be required to commit considerable time, effort and resources to complete development of our proposed products and product enhancements, however, our product development efforts are subject to all of the risks inherent in the development of new products and technology, including unanticipated delays, expenses and difficulties, as well as the possible insufficiency of funding to complete development.

Our product development efforts may not be successfully completed. In addition, our proposed products may not satisfactorily perform the functions for which they are designed, they may not meet applicable price or performance objectives and unanticipated technical or other problems may occur which result in increased costs or material delays in development.  Despite testing by us and by current and potential end users, problems may be found in new products after the commencement of commercial shipments, resulting in loss of, or delay in, market acceptance.

It is not possible to foresee all risks which may affect us.  Moreover, we cannot predict whether we will successfully effectuate our current business plan.  Each prospective purchaser is encouraged to carefully analyze the risks and merits of an investment in the Units and should take into consideration when making such analysis, among others, the Risk Factors discussed above as well as to review of public filings with the Securities and Exchange Commission available at www.sec.gov.

 

5

 

 

Terms of the Offering

	Issuer:	Spare Backup, Inc. (OTCBB:) SPBU
	 	 
	Securities Offered:	The Company is offering up to a maximum of $2,000,000 worth of common stock with a 10% overallotment option.  The Company has the right to increase the offering by 100%.
	 	 
	Offering Period:	March 1, 2009 through April 30, 2009 unless extended by the Company.
	 	 
	Description of Units:	
The Company will offer units for investment.  Units totaling up to a maximum of $2,000,000 USD consisting of (i) 312,500 shares of common stock, and (ii) warrants to purchase 312,500 shares of common stock at a purchase price of $0.20 per share for a period of three years following the final closing date of the offering period .

	 	 
	Minimum Investment:	The minimum subscription is for $50,000 (USD) or one Unit, however, the Company reserves the right to accept subscriptions for a fractional Unit.
	 	 
	Description of Securities:	
The Company will offer the securities in Units.  Each Unit will cost $50,000.  The Company will offer up to a maximum of 40 units.  Each Unit will consist of:

 

·  312,500 shares of Spare Backup, Inc. common stock.

·  A Warrant to purchase 312,500 shares of common stock exercisable at a purchase price of $0.20 per share for a period of three years following the final closing date of the offering period.

	 	 
	Investor Warrants:	
·  For each unit an investor will receive warrants to purchase 312,500 shares of common stock exercisable at a purchase price of $0.20 per share for a  period of three years following the final closing date of the offering period.

	 	 
	Listing:	Spare Backup, Inc. is listed on the OTCBB under the symbol SPBU.
	 	 
	Registration Rights:	Spare Backup, Inc. agrees to extend registration rights for all of the shares of Common Stock and warrants received as part of this offering, and use its “best efforts” after the closing to file a registration statement.  This registration statement shall cover the resale of the shares of all Common Stock as well as the underlying Investor Warrants.  In the event that Spare Backup completes the raise of any additional monies prior to filing a registration statement for the securities in this offering with the Securities Exchange Commission, Spare Backup agrees to offer the same registration rights and securities pricing to the investor if either is more favorable to the investor.

 

 

6

 

 

	Placement Agent:	The Units will be offered and sold by the Company.  The Company has not enlisted the services of a placement agent.
	 	 
	Investor Suitability:	Investment in these Units involves a significant amount of risk.  Accordingly, an investment in the Units is suitable only for persons of adequate financial means who have no need for substantial liquidity with respect to their investment and who are capable of suffering a loss of their entire investment in any amount of Units purchased.  Any person should not purchase the Units unless he or she meets the following suitability requirements.  The prospective investor is an “accredited investor” as defined in Regulation D promulgated under the Act or is otherwise a qualified investor as determined by the Company based on the circumstances of the investor and the amount of the subscription the investor intends to make.
	 	 
	
Company Representations And Warrantees

	See Exhibit B.
	 	 
	Additional Information	
Potential investors interested in obtaining more information on Spare Backup, Inc. are urged to review the Company’s public filings with the Securities and Exchange Commission available at www.sec.gov.

 

 

7

 

 

Confidential Private Offering memorandum

and

Subscription Agreement

 

We are offering for sale a maximum of 40 units (the “Units”) for $50,000 per Unit, to accredited investors only.  Each Unit consists of 312,500 shares of Spare Backup, Inc. common stock, par value $0.001 per share (“Common Stock”), and a Common Stock Purchase Warrant (the “Warrants”) to purchase 312,500 shares of Common Stock exercisable at $0.20 for a period of 3 years.

The minimum investment is one Unit.  Partial Units may be offered and sold at the discretion of the Company.

The Units are being offered by Spare Backup, Inc. The purchase price is payable in cash upon subscription.  All proceeds received by us from subscribers for the Units offered hereby will be deposited directly into an account maintained by us, and shall be immediately available for our use.

This offering shall continue until February 28, 2009 (the “Termination Date”).  However the company has the right to extend it by 30 days at there own discretion.

We will update this Confidential Private Placement Memorandum (“Memorandum”) from time to time to disclose material events affecting us.

In order to subscribe for the Units, a prospective investor must deliver the following items to our Placement Agent: (i) A fully executed copy of this Subscription Agreement with all open lines completed, dated and signed; (ii) a fully executed copy of the Purchasers Questionnaire attached hereto, with all open lines completed, dated and signed; and (iii) the Purchase Price by cash, wire transfer, certified check or money order payable to the order of Spare Backup, Inc.

1.             Subscription.

Subject to the terms and conditions hereinafter set forth in this Subscription Agreement, the undersigned hereby offers to purchase ____ Units for a total purchase price of _______________ (# of Units multiplied by 50,000) (the “Purchase Price”).  The minimum subscription is one Unit ($50,000).  In the sole discretion of the Company subscriptions for less than the minimum investment may be accepted.

2.             Conditions to Offer.

The offering is made subject to the following conditions:  (i) that the Company shall have the right to accept or reject this Offer, in whole or in part, for any reason whatsoever; and (ii) that the undersigned agrees to comply with the terms of this Subscription Agreement and to execute and deliver any and all further documents necessary to complete the transaction.

Acceptance of this Offer shall be deemed given by the countersigning of this Subscription Agreement on our behalf.

3.             Representations and Warranties of the Undersigned.

 

 

8

 

The undersigned, in order to induce us to accept this Offer, hereby warrants and represents as follows:

(A)           The undersigned has sufficient liquid assets to sustain a loss of the undersigned's entire investment.

(B)           The undersigned is either an Accredited Investor as that term is defined in Regulation D promulgated under the Securities Act, or a non-accredited investors who is a sophisticated investor and who either alone or with his/her purchaser representatives has such knowledge and experience in financial and business matters that he/she is capable of evaluating the merits and risks of the prospective investment.  In general, an "Accredited Investor" is deemed to be an institution with assets in excess of $5,000,000 or an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with his/her spouse.

(C)           We have not made any other representations or warranties to the undersigned with respect to Spare Backup, Inc. or rendered any investment advice.

(D)           The undersigned has ___ or has not ___ (please check the appropriate box) authorized any person or institution to act as his Purchaser Representative (as that term is defined in Regulation D of the General Rules and Regulations under the Act) in connection with this transaction.  The undersigned has such knowledge and experience in financial, investment and business matters that the undersigned is capable of evaluating the merits and risks of the prospective investment in the Units.  The undersigned has consulted with such independent legal counsel or other advisers as the undersigned has deemed appropriate to assist the undersigned in evaluating the proposed investment in the Units.

 (E)           The undersigned represents that the undersigned (i) has adequate means of providing for the undersigned's current financial needs and possible personal contingencies and has no need for liquidity of investment in the Company; (ii) can afford (a) to hold unregistered securities for an indefinite period of time as required; and (b) sustain a complete loss of the entire amount of the subscription; and (iii) has not made an overall commitment to investments which are not readily marketable which is disproportionate so as to cause such overall commitment to become excessive.

 

(F)           The undersigned has been afforded the opportunity to ask questions of, and receive answers from the officers and/or directors of the Company acting on its behalf concerning the terms and conditions of this transaction and to obtain any additional information, to the extent that the Company possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information furnished; and has availed himself of such opportunity to the extent the undersigned considers appropriate in order to permit the undersigned to evaluate the merits and risks of an investment in the Company.  It is understood that all documents, records and books pertaining to this investment have been made available for inspection, and that the books and records of the Company will be available upon reasonable notice for inspection by investors during reasonable business hours at its principal place of business.

(G)           The undersigned further acknowledges that this offering has not been passed upon or the merits thereof endorsed or approved by any state or federal authorities.

(H)           The Units being subscribed for are being acquired solely for the account of the undersigned for personal investment and not with a view to, or for resale in connection with, any distribution in any jurisdiction where such sale or distribution would be precluded.  By such representation, the undersigned means that no other person has a beneficial interest in the Units, and that no other person has furnished or will furnish directly or indirectly, any part of or guarantee the payment of any part of the consideration to be paid to the Company in connection therewith.  The undersigned does not intend to dispose of all or any part of the securities underlying the Units except in compliance with the provisions of the Act and applicable state securities laws, and understands that the securities underlying the Units are being offered pursuant to a specific exemption under the provisions of the Act, which exemption(s) depends, among other things, upon the compliance with the provisions of the Act.

 

 

9

 

(I)           The undersigned acknowledges that he has not been provided with any offering literature or other documentation on the Company other than this Memorandum and Subscription Agreement.

(J)           The undersigned hereby agrees that the Company may insert the following or similar legend on the face of the certificates evidencing the Common Stock issued as part of the Units and upon any certificates representing shares of Common Stock underlying the Common Stock Purchase Warrants, if required in compliance with the Securities Act or state securities laws:

"These securities have not been registered under the Securities Act of 1933, as amended ("Act"), or any state securities laws and may not be sold or otherwise transferred or disposed of except pursuant to an effective registration statement under the Act and any applicable state securities laws, or an opinion of counsel satisfactory to counsel to the issuer that an exemption from registration under the act and any applicable state securities laws is available."

The undersigned certifies that each of the foregoing representations and warranties set forth in subsections (A) through (J) inclusive of this Section 3 are true as of the date hereof and shall survive such date.

The undersigned certifies that each of the foregoing representations and warranties set forth in subsections (A) through (J) inclusive of this Section 3 are true as of the date hereof and shall survive such date.

4.             Indemnification.

The undersigned understands that the securities acquired as a result of the subscription right provided in Section 1 hereof are being offered without registration under the Act and applicable state securities laws and in reliance upon the exemption for transactions by the Company not involving any public offering; that the availability of such exemption is, in part, dependent upon the truthfulness and accuracy of the representations made by the undersigned herein; that the Company will rely on such representations in accepting any subscriptions for the Units and that the Company may take such steps as it considers reasonable to verify the accuracy and truthfulness of such representations in advance of accepting or rejecting the undersigned's subscription.  The undersigned agrees to indemnify and hold harmless the Company against any damage, loss, expense or cost, including reasonable attorneys' fees, sustained as a result of any misstatement or omission on the undersigned's part.

5.             FOR CALIFORNIA RESIDENTS ONLY:

EACH CALIFORNIA RESIDENT WHO SUBSCRIBES FOR THE PURCHASE OF SECURITIES HEREIN HAS THE RIGHT, PURSUANT TO SECTION 517.061(11) (A) (5) OF THE CALIFORNIA SECURITIES ACT, TO WITHDRAW HIS SUBSCRIPTION FOR THE PURCHASE AND RECEIVE A FULL REFUND OF ALL MONIES PAID WITHIN THREE BUSINESS DAYS AFTER THE EXECUTION OF THE SUBSCRIPTION AGREEMENT OR PAYMENT FOR THE PURCHASE HAS BEEN MADE, WHICHEVER IS LATER.  WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY PERSON.  TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY AT THE ADDRESS SET FORTH IN THIS MEMORANDUM INDICATING HIS INTENTION TO WITHDRAW.

 

 

10

 

SUCH LETTER OR TELEGRAM SHOULD BE SET AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED THIRD BUSINESS DAY.  IT IS ADVISABLE TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME IT WAS MAILED.  IF THE REQUEST IS MADE ORALLY, IN PERSON OR BY TELEPHONE TO AN OFFICER OF THE COMPANY, A WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED.

FOR RESIDENTS OF ALL STATES:

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS.  THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

6.             No Waiver.

Notwithstanding any of the representations, warranties, acknowledgments or agreements made herein by the undersigned, the undersigned does not thereby or in any manner waive any rights granted to the undersigned under federal or state securities laws.

7.             Revocation.

The undersigned agrees that the undersigned shall not cancel, terminate or revoke this Subscription Agreement or any agreement of the undersigned made hereunder other than as set forth under Section 5 above, and that this Subscription Agreement shall survive the death or disability of the undersigned.

8.             Termination of Subscription Agreement.

If the Company elects to cancel this Subscription Agreement, provided that it returns to the undersigned, without interest and without deduction, all sums paid by the undersigned, this offer shall be null and void and of no further force and effect, and no party shall have any rights against any other party hereunder.

9.             Miscellaneous.

(A)           All notices or other communications given or made hereunder shall be in writing and shall be mailed by registered or certified mail, return receipt requested, postage prepaid, to the undersigned at the undersigned's address set forth below and to Spare Backup, Inc., 72757 Fred Waring Drive, Palm Desert, California 92260.

 

 

11

 

(B)           This Subscription Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties.

(C)           The provisions of this Subscription Agreement shall survive the execution thereof.

(D)           This Subscription Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.  The parties further: (i) agree that any legal suit, action or proceeding arising out of or relating to this Subscription Agreement shall be instituted exclusively in any Federal or State court of competent jurisdiction within the County of Broward, State of California, (ii) waive any objection that they may have now or hereafter to the venue of any such suit, action or proceeding, and (iii) irrevocably consent to the in personam jurisdiction of any Federal or State court of competent jurisdiction within the County of Broward, State of California in any such suit, action or proceeding.  The parties each further agree to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in a Federal or State court of competent jurisdiction within the County of Broward, State of California, and that service of process upon the parties mailed by certified mail to their respective addresses shall be deemed in every respect effective service of process upon the parties, in any action or proceeding.

10.           Certification.

The undersigned certifies that the undersigned has read this entire Subscription Agreement and that every statement on the undersigned's part made and set forth herein is true and complete. 

IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on the date his signature has been subscribed and sworn to below.

 

	
The Units are

	  	 
	to be issued in 	Print Name of Investor	 
	(check one box):	 	 
	 	 	 
	 	  	 
	
____ individual name

	
Print Name of Joint Investor

	 
	 	
(if applicable)

	 
	 	 	 
	 	 	 
	____ joint tenants	 	 
	with rights of 	Signature of Investor	 
	survivorship	 	 
	 	 	 
	 	 	 
	____ tenants in the entirety	 	 
	 	Signature of Joint Investor	 
	 	 	 
	____ corporation	 	 
	(an officer must sign)  	Address of Investor	 
	 	 	 
	____ partnership	 	 
	(all general partners must sign)	 	 
	 	 	 
	Accepted as of the ___ day of ___________ , 2009	 
	 	 	 
	SPARE BACKUP, INC.	 	 
	 	 	 
	
By: ______________________________________

	 
	
Cery Perle, CEO

	 	 
	 	 	 

 

 

12

 

 

Purchaser Questionnaire

 

The information contained herein is being furnished to the Company in order that it may determine whether offers of subscriptions for the Units may be made to the undersigned.  I understand that (a) the Company will rely on the information contained herein for purposes of such determination, (b) the securities underlying the Units will not be registered under the Act in reliance upon the exemptions from registration afforded under the Act, (c) the securities underlying the Units will not be registered under the securities laws of any state in reliance upon similar exemptions, and (d) this questionnaire is not an offer to purchase the Units in any case where such offer would not be legally permitted.

Information contained in this questionnaire will be kept confidential by the Company and its agents, employees or representatives.  I understand, however, that the Company may have the need to present it to such parties as it deems advisable in order to establish the applicability under any federal or state securities laws of an exemption from registration.

In accordance with the foregoing, the following representations and information are hereby made and furnished:

Please answer all questions.  If the answer is "none" or "not applicable," please so state.

INFORMATION REQUIRED OF EACH PROSPECTIVE INVESTOR IF INDIVIDUAL (NOT A CORPORATION OR LEGAL ENTITY):

1.             Name: ______________________________________________ Age:  ________

 

Social Security Number: _________________ No. of Dependents: 

Marital Status: _________________  Citizenship:  ________________

2.             Residence Address and Telephone Number: 

__________________________________________________________

__________________________________________________________

__________________________________________________________

3.             State in which you:

Are licensed to drive?  ___________________________________

Are registered to vote?  __________________________________

File income tax returns?  __________________________________

4.             Employer and Position:  __________________________________________

_____________________________________________________________

_____________________________________________________________

 

13

 

 

5.             Business Address and Telephone Number: ____________________________

	
  

	
_____________________________________________________________

	
  

	
_____________________________________________________________

	
6.

	
Business or professional education and the degrees received are as follows:

School                                            Degree                                   Year Received

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

 

	7. 	
(a)  Individual income during 2006:

      (exclusive of spouse's income)

	
____ $ 50,000 - $100,000

____ $100,000 - $200,000

____ over $200,000

 

	
 

	
(b)  Individual income during 2007:

       (exclusive of spouse's income)   

	
____ $ 50,000 - $100,000

____ $100,000 - $200,000

____ over $200,000

 

	
 

	
(c)  Estimated income during 2008:

      (exclusive of spouse's income)

	

____ $50,000 - $100,000

____ $100,000 - $200,000

____ over $200,000

 

	
 

	

(d)  Joint income, with spouse, 

      during 2006:

	

____ $100,000 - $300,000

____ over $300,000

 

	
 

	

(e)  Joint income, with spouse, 

      during 2007:

	

____ $100,000 - $300,000

____ over $300,000

 

	
 

	

(f)  Estimated joint income, 

      with spouse, for 2008:

	

____ $100,000 - $300,000

____ over $300,000

 

	

8.

	
Estimated net worth

(may include joint net

worth with spouse)

	

____ under $1,000,000

____ over $1,000,000

 

	
9.

	
Are you involved in any litigation, which, if an adverse decision occurred, would materially affect your financial condition?   Yes____   No____   If yes, please provide details:

	 

	
  

	
________________________________________________________________

	
  

	
________________________________________________________________

	
  

	
________________________________________________________________

	
10.

	
Do you consider yourself to be an experienced and sophisticated investor or are you advised by a qualified investment advisor, all as required under the various securities laws and regulations:  Yes____   No____ 

 

 

14

 

 

	
11.

	
Do you understand the full nature and risk of an investment in the Units, and can you afford the complete loss of your entire investment.  Yes____   No____ 

	
12.

	
Are you able to bear the economic risk of an investment in the Units for an indefinite period of time and do you understand that an investment in the Units is illiquid.  Yes____   No____

	
13.

	
Do you further understand that you will be required to agree not to dispose of the securities underlying the Units except in compliance with Rule 144 under the Act or pursuant to the registration statement filed by the company any other conditions contained in the accompanying Subscription Agreement.  Yes____  No____

 

	
14.

	
Have you participated in other private placements of securities?   Yes____   No____

	
15.

	
Have read the public releases of company and financial fillings?   Yes____  No____

I understand that the Company will be relying on the accuracy and completeness of my responses to the foregoing questions and I represent and warrant to the Company as follows:

	
  

	
(i)

	 	
The answers to the above questions are complete and correct and may be relied upon by the Company whether the offering in which I propose to participate is exempt from registration under the Act and the securities laws of certain states;

	
  

	
(ii)

	 	
I will notify the Company immediately of any material change in any statement made herein occurring prior to the closing of any purchase by me of an interest in the Company; and

	
  

	
(iii)

	 	
I have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment; I am able to bear the economic risk of the investment and currently could afford a complete loss of such investment.

IN WITNESS WHEREOF, I have executed this Purchaser Question­naire this _____ day of __________________, 2009, and declare that it is truthful and correct to the best of my knowledge.

 

___________________________________

Signature of Prospective Investor

 

___________________________________

Signature of Prospective Investor (Joint Investor)

 

15

 

 

INFORMATION REQUIRED OF EACH PROSPECTIVE INVESTOR IF CORPORATION OR

LEGAL ENTITY:

1.             Name : ____________________________________________________

 

Tax ID #: ___________________________________ :

2.             Corporation or Entity Address and Telephone Number: 

__________________________________________________________

__________________________________________________________

__________________________________________________________

3.             State in which :

Is Incorporated or Registered?  __________________________________

File tax returns?  __________________________________

4.            Total Assets if a corporation or entity:

____  Under $5,000,000

____  Over    $5,000,000

 

	
5.

	
Does the corporation/entity understand the full nature and risk of an investment in the Units, and can you afford the complete loss of your entire investment. Yes____   No____

	
6.

	
Is the corporation/entity able to bear the economic risk of an investment in the Units for an indefinite period of time and do you understand that an investment in the Units is illiquid.  Yes____   No____

	
7.

	
Do you further understand that the corporation/entity will be required to agree not to dispose of the securities underlying the Units except in compliance with Rule 144 under the Act or any other conditions contained in the accompanying Subscription Agreement.  Yes____   No____

 

	
8.

	
Has the corporation/entity participated in other private placements of securities.  Yes____   No____

 

 

16

 

 

I understand that the Company will be relying on the accuracy and completeness of my responses to the foregoing questions and I represent and warrant to the Company as follows:

	
  

	
(i)

	 	
The answers to the above questions are complete and correct and may be relied upon by the Company whether the offering in which I propose to participate is exempt from registration under the Act and the securities laws of certain states;

	
  

	
(ii)

	 	
I will notify the Company immediately of any material change in any statement made herein occurring prior to the closing of any purchase by me of an interest in the Company; and

	
  

	
(iii)

	 	
The Corporation/Entity has sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment; I am able to bear the economic risk of the investment and currently could afford a complete loss of such investment.

IN WITNESS WHEREOF, I have executed this Purchaser Question­naire this ____ day of __________________, 2009, and declare that it is truthful and correct to the best of my knowledge.

 

________________________________________

Signature of Prospective Investor (Must be Officer)

 

________________________________________

 

 

17

 

 

Exhibit B

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

The Company represents and warrants to the Investor, as of the date hereof, the Initial Closing Date and each Subsequent Closing Date, that:

(a)           The Company has been validly formed and is legally existing as a corporation in good standing under the laws of the State of California, with full corporate power and authority to conduct its business as currently conducted, and is in good standing in each jurisdiction in which the conduct of its business or the nature of its properties requires such qualification or authorization, except where the failure to be so qualified or authorized and in good standing could not reasonably be expected to have a material adverse effect on the business and financial condition of the Company and its subsidiaries, taken as a whole (a “Material Adverse Effect”).  As of the date hereof, the Company does not have, directly or indirectly, any subsidiaries other than as disclosed in the Company’s filings with the SEC (collectively, the “Subsidiaries”).  Each Subsidiary has been duly organized, is validly existing and in good standing under the laws of the jurisdiction of its organization, has the power and authority to own its properties and to conduct its business and is duly qualified and authorized to transact business and is in good standing in each jurisdiction in which the conduct of its business or the nature of its properties requires such qualification or authorization, except where the failure to be so qualified or authorized and in good standing could not reasonably be expected to have a Material Adverse Effect.

 

(b)           Except for the Subsidiaries and as otherwise disclosed in its public filings, the Company holds no ownership or other interest, nominal or beneficial, direct or indirect, in any corporation, partnership, joint venture or other business entity.  All of the issued and outstanding capital stock of each Subsidiary is owned by the Company, free and clear of any lien, charge, mortgage, pledge, security interest, claim, equity, trust or other encumbrance, preferential arrangement, defect or restriction of any kind whatsoever (each, a “Lien”), and has been duly authorized and validly issued, and is non-assessable.

 

(c)           The current authorized capital stock of the Company 150,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of blank check preferred stock, par value $0.001 per share, of which 50,000 shares have been designated as Series A Preferred Stock.  The Company has received the required stockholder votes by virtue of proxy approving the authorized capital to be increased to 300,000,000 shares of common stock.  As of the date hereof  not more than 175,000,000 shares of Common Stock are issued and outstanding or reserved for issuance for any derivative instruments outstanding, and all such shares of capital stock (including the Securities issued in the Placement) are, as the case may be, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights.  The Shares and the Warrant Shares have been duly reserved, and when issued in accordance with the terms of the Placement, will be validly issued, fully paid and nonassessable and not subject to preemptive or any other similar rights and no personal liability will attach to the ownership thereof.  The outstanding options, warrants and other convertible securities of the Company are as set forth in the Memorandum and the Company’s filings with the SEC (collectively, the “Company Documents”).  The issuance of the Securities or the consummation of the Placement will not trigger any resetting or re-pricing of any debt or equity security instrument of the Company or any Subsidiary.

 

 

18

 

 

(d)           Neither the Memorandum, the Subscription Documents nor any of Company Documents contain any untrue statement of a material fact, and the Company Documents will not omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, except that the Company shall have no liability for any information provided to the Company in writing by, and relating to, the Placement Agent, for use in and used in the Memorandum.  It is understood that any summary in the Memorandum of a document which appears therein in full (either as signed or substantially in the form to be signed) does not constitute an untrue or misleading statement merely because it is a summary; provided, however, that any such summary may not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading.  If, at any time before the Placement is completed or terminated or before all subscriptions are accepted by the Company, there should be any change which would cause the Company Documents not to comply with this Section 7(d), the Company will promptly advise the Investor thereof and make any necessary corrective filings with the SEC and prepare and furnish the Placement Agent with such copies of such supplements or amendments to the Memorandum and the Subscription Documents as will cause the Memorandum and the Subscription Documents, as so supplemented or amended, to comply with this Section 7(d), and will make to Investors, if deemed necessary by counsel to the Company, an offer of rescission.

 

(e)           Neither the Company nor any Subsidiary is in: (i) violation of its certificate or articles of incorporation, by-laws or other organizational documents, (ii) default under, and no event has occurred which, with notice or lapse of time or both, would constitute a default under or result in the creation or imposition of any Lien upon any of its property or assets pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (iii) violation in any respect of any law, rule, regulation, ordinance, directive, judgment, decree or order of any judicial, regulatory or other legal or governmental agency or body, foreign or domestic, except (in the case of clause (ii) above) for any Lien disclosed in the Memorandum and the exhibits thereto and except, in the cases of (ii) and (iii), where such defaults or violations do not, individually or in the aggregate, have a Material Adverse Effect.

 

(f)           The execution, delivery and performance of this Agreement, all Company Documents, the Subscription Documents, the Warrants and all other documents to be entered into by the Company in connection with any transaction described in the Memorandum or in connection with the Placement, and the consummation of the transactions contemplated hereby and thereby, have been or will be prior to such execution, delivery, performance or consummation, as the case may be, duly and validly authorized by the Company and do not and will not: (i) constitute, or result in, a breach or violation of any of the terms, provisions or conditions of the Articles of Incorporation or Bylaws of the Company or any of its Subsidiaries, (ii) constitute, or result in, a material violation of any applicable statute, law, ordinance or regulation of any state, territory or other jurisdiction, or (iii) violate, constitute, or result in, a default under (or an event which with the passing of time or the giving of notice or both would constitute a default under) or breach of the terms, provisions or conditions of any material indenture, note, contract, commitment, instrument or document to which the Company or any of its Subsidiaries is or will be a party or by which the Company, any of its Subsidiaries or any of their respective properties are bound, or any award, judgment, decree, rule or regulation of any court or governmental or regulatory agency or body having jurisdiction over the Company or any of its Subsidiaries or their respective activities or properties except, in the cases of (ii) and (iii), where such defaults or violations do not, individually or in the aggregate, have a Material Adverse Effect.

 

19

 

 

(g)           This Agreement, the Subscription Documents, the Warrants and all other documents to be entered into by the Company in connection with any transaction described in the Memorandum or in connection with the Placement have been duly authorized, executed and delivered by the Company and constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms, except insofar as enforcement of the indemnification or contribution provisions hereof may be limited by applicable laws or principles of public policy and except further as to enforcement, to the availability of equitable remedies and limitations imposed by bankruptcy, insolvency, reorganization and other similar laws and related court decisions relating to or affecting creditors’ rights generally.

 

(h)           The Company has never declared, paid or made any dividends or other distributions of any kind on or in respect of its capital stock.

 

(i)            Except as disclosed in the Company Documents, since December 31, 2007, there has been no material adverse change (or any development involving a prospective material adverse change), whether or not arising from transactions in the ordinary course of business, in or affecting: (i) the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects of the Company and each Subsidiary, taken as a whole; (ii) the long-term debt or capital stock of the Company or any of its Subsidiaries; or (iii) the Placement or consummation of any of the other transactions contemplated by this Agreement.  Since the date of the latest balance sheet presented in or attached to the Memorandum, neither the Company nor any Subsidiary has incurred or undertaken any liabilities or obligations, whether direct or indirect, liquidated or contingent, matured or un-matured, or entered into any transactions, including any acquisition or disposition of any business or asset, which are material to the Company and the Subsidiaries taken as a whole, except for liabilities, obligations and transactions which are disclosed in the Memorandum and the exhibits thereto.

 

(j)           The financial statements, including the notes thereto, and the supporting schedules included in the Memorandum and in the Company Documents present fairly, in all material respects and as of the dates indicated and for the periods specified the financial position and the cash flows and results of operations of the Company and the Subsidiaries.  Except as otherwise stated in the Memorandum and in the Company Documents, such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved.  The supporting schedules, if any, included in the Memorandum and the Company Documents present fairly the information required to be stated therein.  The other financial and statistical information included in the Memorandum and the Company Documents present fairly the information included therein in all material respects.

 

(k)           Sherb & Co., LLP, whose report is included or attached to the Memorandum, are independent public accountants as required by the Securities Act, the Exchange Act and the Rules and Regulations.

 

(l)           The statistical, industry-related and market-related data included in the Memorandum are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate, and such data agree with the sources from which they are derived.

(m)          It is advised and accepted that all public fillings have been read and party has no questions with regards to them.

 

20

 

 

(n)           No consent, approval, authorization or order of any court or governmental or regulatory agency or body or any individual or entity is required on the part of the Company or any Subsidiary for the lawful consummation of the transactions contemplated hereby and thereby.

(o)           Each of the Company and the Subsidiaries has all necessary consents, approvals, authorizations, orders, registrations, qualifications, licenses, filings and permits of, with and from all applicable judicial, regulatory and other legal or governmental agencies and bodies and all third parties, foreign and domestic (collectively, the “Consents”), to own, lease and operate their respective properties and conduct their respective businesses as are now being conducted and as disclosed in the Memorandum, except where the failure to have any such Consent would not have a Material Adverse Effect.  Each such Consent is valid and in full force and effect, and neither the Company nor any Subsidiary has received written notice of any investigation or proceedings which results in or, if decided adversely to the Company or any Subsidiary, could reasonably be expected to result in, the revocation of, or imposition of a materially burdensome restriction on, any Consent.

 

(p)           Each of the Company and the Subsidiaries is in compliance with all applicable laws, rules, regulations, ordinances, directives, judgments, decrees and orders, foreign and domestic, except where the failure to so comply does or would not have a Material Adverse Effect.

 

(q)           Neither the Company nor any of its directors, officers, employees, agents or representatives (“Company Representatives”) has taken or will take any action which has caused or may cause the Placement not to qualify for exemption from the registration requirements of the Securities Act or of United States federal, state or other securities or other laws.  In connection with the Placement, neither the Company nor the Company Representatives shall offer or cause to be offered the Units by any form of general solicitation or general advertising as defined in Rule 502(c) of Regulation D.  The Company and the Company Representatives have not taken and shall not take any action (except for actions contemplated by the Memorandum) that would cause the Placement to be integrated with other transactions under Rule 502(a) of Regulation D.  Neither the Company nor, to the Company’s knowledge, any of its Affiliates or Company Representatives has, prior to the date hereof, made any offer or sale of any securities which could be “integrated” for purposes of the Securities Act or the Rules and Regulations with the offer and sale of the Securities pursuant to the Memorandum.

 

(r)            Except as disclosed in the Company Documents, and except for such matters that, individually or in the aggregate, would not have a Material Adverse Effect on the business, operations or financial results of the Company and its subsidiaries (either individually or in the aggregate) there are no claims, actions, suits, investigations or proceedings before or by any arbitrator, court, governmental authority or instrumentality pending or threatened against or affecting the Company or any of its subsidiaries or involving the properties of the Company which might affect the business, properties or financial condition of the Company or any of its subsidiaries or which might affect the transactions or other acts contemplated by this Agreement or the validity or enforceability of this Agreement;

 

(s)           The Company will not offer the Units for sale hereunder on the basis of any communications or documents relating to the Units except the Memorandum and the exhibits thereto and documents described or referred to therein, including the Subscription Documents.

 

 

21

 

 

(t)           The Company and the Subsidiaries maintain a system of internal accounting and other controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of reliable financial statements in conformity with United States generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accounting for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any material differences.

 

(u)           Neither the Company nor any of its Subsidiaries has violated or is currently in violation of any provisions of: (a) any federal or state environmental law, (b) Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”), (c) the Bank Secrecy Act, as amended, (d) the Money Laundering Control Act of 1986, as amended, (e) the Foreign Corrupt Practices Act, or (f) the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, and the rules and regulations promulgated under any such law, or any successor law, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect.

 

(v)           So long as the Common Stock and the Warrants (including the Common Stock receivable upon the exercise thereof) are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Company, during any period in which it is not subject to and in compliance with Section 13 or 15(d) of the Exchange Act, or is not exempt from such reporting requirements pursuant to and in compliance with Rule 12g3-2b under the Exchange Act, provide to each holder of Common Stock and to each prospective purchaser (as designated by such holder) of Common Stock upon the request of such holder or prospective holder, any information required to be provided by Rule 144A(d)(4) under the Securities Act.

 

(w)           The Company is not and, at all times up to and including consummation of the transactions contemplated by this Agreement, and after giving effect to application of the net proceeds of the Placement, will not be, subject to registration as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”), and is not and will not be an entity “controlled” by an “investment company” within the meaning of the 1940 Act.   The Company will: (i) utilize the proceeds of the Placement in accordance with the “Use of Proceeds” section of the Memorandum and (ii) initially utilize the proceeds of the Placement and all other funds of the Company in such a manner so as to cause the Company not to be subject to the 1940 Act, and will thereafter use its best efforts to avoid the Company’s becoming subject to the 1940 Act.

 

(x)           No relationship, direct or indirect, exists between or among any of the Company or any Affiliate of the Company, on the one hand, and any director, officer, stockholder, customer or supplier of the Company or any Affiliate of the Company, on the other hand, which is required by the Securities Act, the Exchange Act or the Rules and Regulations to be described in the Memorandum or the Company’s filings with the SEC which is not so described.  There are no outstanding loans (except for mortgage loans made in the ordinary course of business), advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members, except as disclosed in the Memorandum.

 

 

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(y)           The Company and each Subsidiary owns or leases all such properties as are necessary to the conduct of its business as presently operated.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all Liens except such as are described in the Memorandum or such as do not (individually or in the aggregate) materially interfere with the use made or proposed to be made of such property by the Company and the Subsidiaries.  Any real property and buildings held under lease or sublease by the Company and the Subsidiaries are held by them under valid and enforceable leases with such exceptions as are not material to, and do not interfere with, the use made and proposed to be made of such property and buildings by the Company and the Subsidiaries.  Neither the Company nor any Subsidiary has received any written notice (or, to the Company’s knowledge, any other notice) of any claim adverse to its ownership of any real or personal property or of any claim against the continued possession of any real property, whether owned or held under lease or sublease by the Company or any Subsidiary.

 

(z)           The Company and each Subsidiary: (i) owns or possesses all rights to use, option and/or license, as the case may be, all patents, patent applications, provisional patents, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, formulae, mask works, customer lists, internet domain names, know-how and other intellectual property (including trade secrets and other unpatented and/or un-patentable proprietary or confidential information, systems or procedures, “Intellectual Property”) necessary for the conduct of their respective businesses as being conducted and as described in the Memorandum and (ii) does not believe that the conduct of their respective businesses does or will conflict with, and have not received any notice of any claim of conflict with, any such right of others, which conflict would have a Material Adverse Effect.  To the best of the Company’s knowledge, all Intellectual Property developed by and belonging to the Company or any Subsidiary (including, without limitation, that which is developed by consultants to the Company or any Subsidiary) which has not been patented has been kept confidential so as, among other things, all such information may be deemed proprietary to the Company.  To the Company’s knowledge, there is no infringement by third parties of any Intellectual Property.  There are no pending or, to the Company’s knowledge, threatened actions, suits, proceedings or claims by others challenging the Company’s or any Subsidiary’s rights in or to any Intellectual Property, and there are no facts which would form a reasonable basis for any such claim.  There is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company or any Subsidiary infringes or otherwise violates any Intellectual Property rights of others, in each case which would be reasonably likely to have a Material Adverse Effect, and the Company is unaware of any other fact which would form a reasonable basis for any such claim.

 

(aa)           The Company and the Subsidiaries maintain insurance in such amounts and covering such risks as are customary for similarly-sized public companies engaged in similar businesses in similar industries, all of which insurance is in full force and effect.  There are no material claims by the Company or any Subsidiary under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause.  The Company reasonably believes that it will be able to renew its existing insurance as and when such coverage expires or will be able to obtain replacement insurance adequate for the conduct of its business.

 

(bb)           Each of the Company and the Subsidiaries has properly prepared and timely filed all federal, state, foreign and other tax returns that are required to be filed by it and has paid or made provision for the payment of, except such as may be contested in good faith, all taxes, assessments, governmental or other similar charges, including without limitation, all sales and use taxes and all taxes which the Company or any Subsidiary is obligated to withhold from amounts owing to employees, creditors and third parties, with respect to the periods covered by such tax returns (whether or not such amounts are shown as due on any tax return).  No deficiency assessment with respect to a proposed adjustment of the Company’s or any Subsidiary’ federal, state, local or foreign taxes is pending or, to the Company’s knowledge, threatened which, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect.  The accruals and reserves on the books and records of the Company and the Subsidiaries in respect of tax liabilities for any taxable period not finally determined are adequate in all material respects to meet any assessments and related liabilities for any such period and, since the date of the Company’s most recent audited financial statements, the Company and the Subsidiaries have not incurred any liability for taxes other than in the ordinary course of its business.  There is no tax Lien, whether imposed by any federal, state, foreign or other taxing authority, outstanding against the assets, properties or business of the Company or any Subsidiary.

 

 

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(cc)            No labor disturbance by the employees of the Company or any Subsidiary currently exists or, to the Company’s knowledge, is likely to occur.

 

(dd)           No “prohibited transaction” (as defined in either Section 406 of the ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)), “accumulated funding deficiency” (as defined in Section 302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan for which the Company or any Subsidiary would have any liability; each employee benefit plan of the Company or any Subsidiary is in compliance in all material respects with applicable law, including (without limitation) ERISA and the Code; the Company has not incurred and does not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from any “pension plan”; and each employee benefit plan of the Company or any Subsidiary that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.

 

(ee)           Neither the Company, any Subsidiary nor, to the Company’s knowledge, any of their respective employees or agents has at any time during the last five (5) years: (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments that are not prohibited by the laws of the United States or any jurisdiction thereof or any foreign jurisdiction.

 

(ff)           The Company has not offered the Units to any person or entity with the intention of unlawfully influencing: (i) a customer or supplier of the Company or any Subsidiary to alter the customer’s or supplier’s level or type of business with the Company or any Subsidiary or (ii) a journalist or publication to write or publish favorable information about the Company, any Subsidiary or its products or services

 

(gg)          In addition to the foregoing, to the extent not set forth herein, the Investor may rely on the representations and warranties made by the Company in the Subscription Agreement provided by the Company and used in connection with the Placement.

 

 

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