Exhibit 10.2





Exhibit 10.2




PLACEMENT AGENCY AGREEMENT





June 9, 2010



Ladenburg Thalmann & Co. Inc.

4400 Biscayne Blvd

14th Floor

Miami, Florida 33137




Ladies and Gentlemen:



Introduction. Subject to the terms and conditions herein (this “Agreement”),
Cereplast, Inc., a Nevada corporation (the “Company”), hereby agrees to sell registered
securities (the “Securities”) of the Company, including, but not limited to, shares (the
“Shares”) of the Company’s common stock, par value $0.001 per share (the “Common
Stock”) and warrants to purchase Common Stock (the “Warrants”) directly to various
investors (each, an “Investor” and, collectively, the “Investors”) with Ladenburg
Thalmann & Co. Inc. acting as exclusive placement agent (the “Placement Agent”). The
purchase price to the Investors and terms of the Warrants shall be determined by negotiations
between the Company and the Investors. The Placement Agent may retain other brokers or dealers to
act as sub-agents or selected-dealers on its behalf in connection with the Offering (as defined
below).



The Company hereby confirms its agreement with the Placement Agent as follows:



Section 1. Agreement to Act as Placement Agent.




(a) On the basis of the representations, warranties and agreements of the Company
herein contained, and subject to all the terms and conditions of this Agreement, the
Placement Agent shall be the exclusive placement agent in connection with the offering and
sale by the Company of the Securities from time to time pursuant to the Company’s
registration statement on Form S-3 (File No. 333-166307) (the “Registration
Statement”), with the terms of such offering (the “Offering”) to be subject to
market conditions and negotiations between the Company and the prospective Investors. The
Placement Agent will act on a reasonable best efforts basis and the Company agrees and
acknowledges that there is no guarantee of the successful placement of the Securities, or
any portion thereof, in the prospective Offering. Under no circumstances will the Placement
Agent or any of its “Affiliates” (as defined below) be obligated to underwrite or purchase
any of the Shares for its own account or otherwise provide any financing. The Placement
Agent shall act solely as the Company’s agent and not as principal. The Placement Agent
shall have no authority to bind the Company with respect to any prospective offer to
purchase Shares and the Company shall have the sole right to accept offers to purchase
Shares and may reject any such offer, in whole or in part. Subject to the terms and
conditions hereof, payment of the purchase price for, and delivery of, the Securities shall
be made at one or more closings (each a “Closing” and the date on which each Closing
occurs, a “Closing Date”). As compensation for services rendered, on each Closing
Date, the Company shall pay to the Placement Agent the fees and expenses set forth below:




(i) A cash fee equal to 6.5% of the gross proceeds received by the Company from
the sale of the Securities at each Closing of the Offering.


 


 









 






(ii) Such number of Common Stock purchase warrants (the “Placement Agent
Warrants”) to Placement Agent or its designees at each Closing to purchase
 shares of Common Stock equal to 3% of the aggregate number of Shares sold in the
Offering. The Placement Agent Warrants shall have the same terms as the warrants
issued to the Investors in the Offering except that the exercise price shall be 125%
of the public offering price per share and shall have an expiration date of 5 years
from the effective date of the Registration Statement (as further defined below).
The Placement Agent Warrants shall not be transferable for six months from the date
of the Offering except as permitted by Financial Industry Regulatory Authority
(“FINRA”) Rule 5110(g)(1).




(iii) The Company also agrees to reimburse Placement Agent’s expenses (with
supporting invoices/receipts) up to a maximum of 0.8% of the aggregate gross
proceeds raised in the placement, but in no event more than $30,000. Such
reimbursement shall be payable immediately upon (but only in the event of) a Closing
of the Offering.




(b) The term of the Placement Agent’s exclusive engagement will be for a period of 12
months (the “Exclusive Term”). Notwithstanding anything to the contrary contained
herein, the provisions concerning confidentiality, indemnification and contribution
contained herein and the Company’s obligations contained in the indemnification provisions
will survive any expiration or termination of this Agreement, and the Company’s obligation
to pay fees actually earned and payable and to reimburse expenses actually incurred and
reimbursable pursuant to Section 1 hereof and which are permitted to be reimbursed under
FINRA Rule 5110(f)(2)(D), will survive any expiration or termination of this Agreement.
Nothing in this Agreement shall be construed to limit the ability of the Placement Agent or
its Affiliates to pursue, investigate, analyze, invest in, or engage in investment banking,
financial advisory or any other business relationship with Persons (as defined below) other
than the Company. As used herein (i) “Person” means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision thereof) or
other entity of any kind and (ii) “Affiliate” means any Person that, directly or
indirectly through one or more intermediaries, controls or is controlled by or is under
common control with a Person as such terms are used in and construed under Rule 405 under
the Securities Act of 1933, as amended (the “Securities Act”).



Section 2. Representations, Warranties and Covenants of the Company. The Company hereby
represents, warrants and covenants to the Placement Agent as of the date hereof, and as of each
Closing Date, as follows:




(a) Securities Law Filings. The Company has filed with the Securities and
Exchange Commission (the “Commission”) the Registration Statement under the
Securities Act, which was filed on April 26, 2010, and declared effective on May 26, 2010,
for the registration under the Securities Act of the Securities. Following the
determination of pricing among the Company and the prospective Investors introduced to the
Company by Placement Agent, the Company will file with the Commission pursuant to Rule
424(b) under the Securities Act, and the rules and regulations (the “Rules and
Regulations”) of the Commission promulgated thereunder, a prospectus supplement relating
to the terms of the Offering and of the Securities and the plan of distribution thereof and
will advise the Placement Agent of all further information (financial and other) with
respect to the Company required to be set forth therein. Such registration statement, at any
given time, including the exhibits thereto filed at such time, as amended at such time, is
hereinafter called the “Registration Statement”; such prospectus in the form in
which it appears in the Registration Statement is hereinafter called the “Base
Prospectus”; and the


 


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amended
or supplemented form of prospectus, in the form in which it will be filed with the
Commission pursuant to Rule 424(b) (including the Base Prospectus as so amended or
supplemented) is hereinafter called the “Prospectus Supplement.” The Registration
Statement at the time it originally became effective is hereinafter called the “Original
Registration Statement.” Any reference in this Agreement to the Registration Statement,
the Original Registration Statement, the Base Prospectus or the Prospectus Supplement shall
be deemed to refer to and include the documents incorporated by reference therein (the
“Incorporated Documents”), if any, which were or are filed under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), at any given time, as the
case may be; and any reference in this Agreement to the terms “amend,” “amendment” or
“supplement” with respect to the Registration Statement, the Original Registration
Statement, the Base Prospectus or the Prospectus Supplement shall be deemed to refer to and
include the filing of any document under the Exchange Act after the date of this Agreement,
or the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be,
deemed to be incorporated therein by reference. All references in this Agreement to
financial statements and schedules and other information which is “contained,” “included,”
“described,” “referenced,” “set forth” or “stated” in the Registration Statement, the Base
Prospectus or the Prospectus Supplement (and all other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other information
which is or is deemed to be incorporated by reference in the Registration Statement, the
Base Prospectus or the Prospectus Supplement, as the case may be. The Company has not
received any notice that the Commission has issued or intends to issue a stop order
suspending the effectiveness of the Registration Statement or the use of the Base Prospectus
or the Prospectus Supplement or intends to commence a proceeding for any such purpose.




(b) Assurances. The Original Registration Statement, as amended, (and any
further documents to be filed with the Commission) contains all exhibits and schedules as
required by the Securities Act. Each of the Registration Statement and any post-effective
amendment thereto, at the time it became effective, complied in all material respects with
the Securities Act and the applicable Rules and Regulations and did not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. The Base Prospectus, and the
Prospectus Supplement, each as of its respective date, comply or will comply in all material
respects with the Securities Act and the applicable Rules and Regulations. Each of the Base
Prospectus and the Prospectus Supplement, as amended or supplemented, did not and will not
contain as of the date thereof any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Incorporated Documents, when
they were filed with the Commission, conformed in all material respects to the requirements
of the Exchange Act and the applicable rules and regulations promulgated thereunder, and
none of such documents, when they were filed with the Commission, contained any untrue
statement of a material fact or omitted to state a material fact necessary to make the
statements therein (with respect to Incorporated Documents incorporated by reference in the
Base Prospectus or Prospectus Supplement), in light of the circumstances under which they
were made not misleading. No post-effective amendment to the Registration Statement
reflecting any facts or events arising after the date thereof which represent, individually
or in the aggregate, a fundamental change in the information set forth therein is required
to be filed with the Commission. Except for this Agreement, there are no documents required
to be filed with the Commission in connection with the transaction contemplated hereby that
(x) have not been filed as required pursuant to the Securities Act or (y) will not be filed
within the requisite time period. Except for this Agreement, there are no contracts or other
documents required to be described in the Base Prospectus or Prospectus Supplement, or to be
filed as
exhibits or schedules to the Registration Statement, which have not been described or
filed as required.


 


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(c) Offering Materials. Neither the Company nor any of its directors and
officers has distributed and none of them will distribute, prior to each Closing Date, any
offering material in connection with the offering and sale of the Securities other than the
Base Prospectus, the Prospectus Supplement, the Registration Statement, copies of the
documents incorporated by reference therein and any other materials permitted by the
Securities Act.




(d) Subsidiaries. All of the direct and indirect subsidiaries of the Company
(the “Subsidiaries”) are set forth in the Incorporated Documents. The Company owns,
directly or indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any liens, charges, security interests, encumbrances, rights of
first refusal, preemptive rights or other restrictions (collectively, “Liens”), and
all of the issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.




(e) Organization and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, with the requisite
power and authority to own and use its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary is in violation or default of
any of the provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, could not have or reasonably be expected to result in:
(i) a material adverse effect on the legality, validity or enforceability of this Agreement
or any other agreement entered into between the Company and the Investors, (ii) a material
adverse effect on the results of operations, assets, business, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform in any material respect on a
timely basis its obligations under this Agreement or the transactions contemplated under the
Prospectus Supplement (any of (i), (ii) or (iii), a “Material Adverse Effect”) and
no an action, claim, suit, investigation or proceeding (including, without limitation, an
informal investigation or partial proceeding, such as a deposition), whether commenced or
threatened (“Proceeding”) has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.




(f) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by this
Agreement and the Prospectus Supplement and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of each of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby and under the
Prospectus Supplement have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, the Company’s Board of Directors
(the “Board of Directors”) or the Company’s stockholders in connection therewith
other than in connection with the Required Approvals (as defined below). This Agreement has
been duly executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except (i) as limited by general equitable principles
and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.


 


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(g) No Conflicts. The execution, delivery and performance by the Company of
this Agreement and the transactions contemplated pursuant to the Prospectus Supplement, the
issuance and sale of the Securities and the consummation by it of the transactions
contemplated hereby and thereby to which it is a party do not and will not (i) conflict with
or violate any provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii) conflict with,
or constitute a default (or an event that with notice or lapse of time or both would become
a default) under, result in the creation of any Lien upon any of the properties or assets of
the Company or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject (including federal
and state securities laws and regulations), or by which any property or asset of the Company
or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii),
such as could not have or reasonably be expected to result in a Material Adverse Effect.




(h) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of
this Agreement and the transactions contemplated pursuant to the Prospectus Supplement,
other than: (i) the filing with the Commission of the Prospectus Supplement, (ii)
application(s) to the Nasdaq Capital Market (the “Trading Market”) for the listing
of the Securities for trading thereon in the time and manner required thereby and (iii) such
filings as are required to be made under applicable state securities laws (collectively, the
“Required Approvals”).




(i) Issuance of the Securities; Registration. The Securities are duly
authorized and, when issued and paid for in accordance with the Prospectus Supplement, will
be duly and validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company. The shares underlying the Warrants (the “Warrant Shares”),
when issued in accordance with the terms of the Warrants, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company. The Company has
reserved from its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to the Prospectus Supplement.


 


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(j) Capitalization. The capitalization of the Company is as set forth in the
SEC Reports. The Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of employee
stock options under the Company’s stock option plans, the issuance of shares of Common Stock
to employees pursuant to the Company’s employee stock purchase plans and pursuant to the
conversion and/or exercise of securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time any Common Stock, including, without
limitation, any debt, preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common
Stock (“Common Stock Equivalents”) outstanding as of the date of the most
recently filed periodic report under the Exchange Act. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by this Agreement and the transactions contemplated pursuant
to the Prospectus Supplement. Except as a result of the purchase and sale of the
Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound
to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and
sale of the Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Investors) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. All of the outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the Board of Directors
or others is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders.




(k) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein, together with the
Prospectus and the Prospectus Supplement, being collectively referred to herein as the
“SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As
of their respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes required by GAAP,
and fairly present in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited statements, to
normal, immaterial, year-end audit adjustments.


 


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(l) Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC Reports, except
as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i)
there has been no event, occurrence or development that has had or that could reasonably be
expected to result in
a Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities not required
to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in
filings made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or distribution of cash
or other property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to existing Company
stock option plans. The Company does not have pending before the Commission any request for
confidential treatment of information. Except for the issuance of the Securities
contemplated by the Prospectus Supplement or disclosed in the Prospectus Supplement, no
event, liability, fact, circumstance, occurrence or development has occurred or exists or is
reasonably expected to occur or exist with respect to the Company or its Subsidiaries or
their respective business, prospects, properties, operations, assets or financial condition
that would be required to be disclosed by the Company under applicable securities laws at
the time this representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is made.




(m) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, any Subsidiary or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any of this
Agreement and the transactions contemplated pursuant to the Prospectus Supplement or the
Securities or (ii) could, if there were an unfavorable decision, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary,
nor any director or officer thereof, is or has been the subject of any Action involving a
claim of violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the Commission involving the Company or
any current or former director or officer of the Company. The Commission has not issued any
stop order or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.




(n) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s relationship
with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No executive officer, to the
knowledge of the Company, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive covenant in
favor of any third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect to any of
the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.


 


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(o) Compliance. Neither the Company nor any Subsidiary: (i) is in default
under or in violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company or any Subsidiary
under), nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of its properties
is bound (whether or not such default or violation has been waived), (ii) is in violation of
any judgment, decree or order of any court, arbitrator or governmental body or (iii) is or
has been in violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not have or reasonably
be expected to result in a Material Adverse Effect.




(p) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses as described
in the SEC Reports, except where the failure to possess such permits could not reasonably be
expected to result in a Material Adverse Effect (“Material Permits”), and neither
the Company nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.




(q) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable title in all
personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the Subsidiaries and Liens
for the payment of federal, state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in compliance.




(r) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual
property rights and similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to so have could
have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
None of, and neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of, the Intellectual Property Rights has expired, terminated or been
abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from
the date of this Agreement. Neither the Company nor any Subsidiary has received, since the
date of the latest audited financial statements included within the SEC Reports, a notice
(written or otherwise) of a claim or otherwise has any knowledge that the Intellectual
Property Rights violate or infringe upon the rights of any Person. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where failure to
do so could not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.


 


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(s) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance coverage. Neither
the Company nor any Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business without a
significant increase in cost.




(t) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any transaction with
the Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than for (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock option plan
of the Company.




(u) Sarbanes-Oxley; Internal Accounting Controls. The Company is in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of the date hereof and as of
each Closing Date. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The Company has
established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and designed such disclosure controls and procedures to
ensure that information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s most recently filed periodic
report under the Exchange Act (such date, the “Evaluation Date”). The Company
presented in its most recently filed periodic report under the Exchange Act the conclusions
of the certifying officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the Company’s internal control over financial reporting (as such term is
defined in the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.




(v) Certain Fees. Except as set forth in the Prospectus Supplement, no
brokerage or finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this Agreement and the
transactions contemplated pursuant to the Prospectus Supplement. The Investors shall have
no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for fees
of a type contemplated in this Section that may be due in connection with the transactions
contemplated by this Agreement and the transactions contemplated pursuant to the Prospectus
Supplement.


 


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(w) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an
“investment company” subject to registration under the Investment Company Act of 1940, as
amended.




(x) Registration Rights. No Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the Company.




(y) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance requirements of such
Trading Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and maintenance
requirements.




(z) Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Investors as a result of the
Investors and the Company fulfilling their obligations or exercising their rights under this
Agreement and the transactions contemplated pursuant to the Prospectus Supplement, including
without limitation as a result of the Company’s issuance of the Securities and the
Investors’ ownership of the Securities.




(aa) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by this Agreement and the transactions contemplated pursuant
to the Prospectus Supplement, the Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Investors or their agents or counsel with any
information that it believes constitutes or might constitute material, non-public
information which is not otherwise disclosed in the Prospectus Supplement. The Company
understands and confirms that the Investors will rely on the foregoing representation in
effecting transactions in securities of the Company. All of the disclosure furnished by or
on behalf of the Company to the Investors regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is
true and correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The press releases
disseminated by the Company during the twelve months preceding the date of this Agreement
taken as a whole do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made, not
misleading.


 


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(bb) No Integrated Offering. Neither the Company, nor any of its Affiliates,
nor any Person acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with prior offerings by the
Company for purposes of any applicable shareholder approval provisions of any Trading Market
on which any of the securities of the Company are listed or designated.




(cc) Solvency. Based on the consolidated financial condition of the Company as
of each Closing Date, after giving effect to the receipt by the Company of the proceeds from
the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they
mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on
its business as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business conducted by the
Company, and projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would receive, were
it to liquidate all of its assets, after taking into account all anticipated uses of the
cash, would be sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and amounts of cash
to be payable on or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from each
Closing Date. The SEC Reports sets forth as of the date hereof all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other
than trade accounts payable incurred in the ordinary course of business), (y) all
guaranties, endorsements and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the Company’s balance sheet
(or the notes thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of business; and (z)
the present value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default
with respect to any Indebtedness.




(dd) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, the
Company and each Subsidiary (i) has made or filed all United States federal and state income
and all foreign income and franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations and (iii) has set aside on its books provision reasonably
adequate for the payment of all material taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company or of any Subsidiary know of no basis for any such claim.




(ee) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any foreign or
domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of which the
Company is aware) which is in violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.


 


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(ff) Accountants. The Company’s accounting firm is set forth in the Prospectus
Supplement. To the knowledge and belief of the Company, such accounting firm (i) is a
registered public accounting firm as required by the Exchange Act and (ii) shall express its
opinion with respect to the financial statements to be included in the Company’s Annual
Report on Form 10-K for the year ending December 31, 2010.




(gg) Regulation M Compliance.  The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or
to result in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased,
or, paid any compensation for soliciting purchases of, any of the Securities (other than for
Placement Agent’s placement of the Securities), or (iii) paid or agreed to pay to any Person
any compensation for soliciting another to purchase any other securities of the Company.




(hh) Office of Foreign Assets Control. Neither the Company nor, to the
Company’s knowledge, any director, officer, agent, employee or Affiliate of the Company is
currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control
of the U.S. Treasury Department.




(ii) U.S. Real Property Holding Corporation. The Company is not and has never
been a U.S. real property holding corporation within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Investor’s
request.




(jj) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries
or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to regulation by the Board of Governors of the Federal Reserve System
(the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or
Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the
outstanding shares of any class of voting securities or twenty-five percent or more of the
total equity of a bank or any entity that is subject to the BHCA and to regulation by the
Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a
controlling influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.




(kk) Money Laundering. The operations of the Company are and have been
conducted at all times in compliance with applicable financial record-keeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended,
applicable money laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or
before any court or governmental agency, authority or body or any arbitrator involving the
Company with respect to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.




(ll) Certificates. Any certificate signed by an officer of the Company and
delivered to the Placement Agent or to counsel for the Placement Agent shall be deemed to be
a representation and warranty by the Company to the Placement Agent as to the matters set
forth therein.


 


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(mm) Reliance. The Company acknowledges that the Placement Agent will rely
upon the accuracy and truthfulness of the foregoing representations and warranties and
hereby consents to such reliance.




(nn) FINRA Affiliations. There are no affiliations with any FINRA member firm
among the Company’s officers, directors or, to the knowledge of the Company, any five
percent (5%) or greater stockholder of the Company.



Section 3. Delivery and Payment. Each Closing shall occur at the offices of the Placement Agent
(or at such other place as shall be agreed upon by the Placement Agent and the Company). Subject
to the terms and conditions hereof, at each Closing payment of the purchase price for the
Securities sold on such Closing Date shall be made by Federal Funds wire transfer, against delivery
of such Securities, and such Securities shall be registered in such name or names and shall be in
such denominations, as the Placement Agent may request at least one business day before the time of
purchase (as defined below).



Deliveries of the documents with respect to the purchase of the Securities, if any, shall be
made at the offices of Placement Agent. All actions taken at a Closing shall be deemed to have
occurred simultaneously.



Section 4. Covenants and Agreements of the Company. The Company further covenants and agrees with
the Placement Agent as follows:




(a) Registration Statement Matters. The Company will advise the Placement
Agent promptly after it receives notice thereof of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to any
Prospectus Supplement or any amended Prospectus Supplement has been filed and will furnish
the Placement Agent with copies thereof. The Company will file promptly all reports and any
definitive proxy or information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 14 or 15(d) of the Exchange Act subsequent to the date
of any Prospectus Supplement and for so long as the delivery of a prospectus is required in
connection with the Offering. The Company will advise the Placement Agent, promptly after
it receives notice thereof (i) of any request by the Commission to amend the Registration
Statement or to amend or supplement any Prospectus Supplement or for additional information,
and (ii) of the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or any post-effective amendment thereto or any order directed at
any Incorporated Document, if any, or any amendment or supplement thereto or any order
preventing or suspending the use of the Base Prospectus or any Prospectus Supplement or any
amendment or supplement thereto or any post-effective amendment to the Registration
Statement, of the suspension of the qualification of the Securities for offering or sale in
any jurisdiction, of the institution or threatened institution of any proceeding for any
such purpose, or of any request by the Commission for the amending or supplementing of the
Registration Statement or a Prospectus Supplement or for additional information. The Company
shall use its best efforts to prevent the issuance of any such stop order or prevention or
suspension of such use.  If the Commission shall enter any such stop order or order or
notice of prevention or suspension at any time, the Company will use its best efforts to
obtain the lifting of such order at the earliest possible moment, or will file a new
registration statement and use its best efforts to have such new registration statement
declared effective as soon as practicable.  Additionally, the Company agrees that it shall
comply with the provisions of Rules 424(b), 430A, 430B and 430C, as applicable, under the
Securities Act, including with respect to the timely filing of documents thereunder, and
will use its reasonable efforts to confirm that any filings made by the Company under such
Rule 424(b) are received in a timely manner by the Commission.


 


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(b) Blue Sky Compliance. The Company will cooperate with the Placement Agent
and the Investors in endeavoring to qualify the Securities for sale under the securities
laws of such jurisdictions (United States and foreign) as the Placement Agent and the
Investors may reasonably request and will make such applications, file such documents, and
furnish such information as may be reasonably required for that purpose, provided the
Company shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so qualified or
required to file such a consent, and provided further that the Company shall not be required
to produce any new disclosure document other than a Prospectus Supplement. The Company
will, from time to time, prepare and file such statements, reports and other documents as
are or may be required to continue such qualifications in effect for so long a period as the
Placement Agent may reasonably request for distribution of the Securities. The Company will
advise the Placement Agent promptly of the suspension of the qualification or registration
of (or any such exemption relating to) the Securities for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification, registration or exemption,
the Company shall use its best efforts to obtain the withdrawal thereof at the earliest
possible moment.




(c) Amendments and Supplements to a Prospectus Supplement and Other Matters.
The Company will comply with the Securities Act and the Exchange Act, and the rules and
regulations of the Commission thereunder, so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement and any Prospectus Supplement. If
during the period in which a prospectus is required by law to be delivered in connection
with the distribution of Securities contemplated by any Prospectus Supplement (the
“Prospectus Delivery Period”), any event shall occur as a result of which, in the
judgment of the Company or in the opinion of the Placement Agent or counsel for the
Placement Agent, it becomes necessary to amend or supplement the Incorporated Documents or
any Prospectus Supplement in order to make the statements therein, in the light of the
circumstances under which they were made, as the case may be, not misleading, or if it is
necessary at any time to amend or supplement the Incorporated Documents or any Prospectus
Supplement or to file under the Exchange Act any Incorporated Document to comply with any
law, the Company will promptly prepare and file with the Commission, and furnish at its own
expense to the Placement Agent and to dealers, an appropriate amendment to the Registration
Statement or supplement to the Registration Statement, the Incorporated Documents or any
Prospectus Supplement that is necessary in order to make the statements in the Incorporated
Documents and any Prospectus Supplement as so amended or supplemented, in the light of the
circumstances under which they were made, as the case may be, not misleading, or so that the
Registration Statement, the Incorporated Documents or any Prospectus Supplement, as so
amended or supplemented, will comply with law. Before amending the Registration Statement
or supplementing the Incorporated Documents or any Prospectus Supplement in connection with
the Offering, the Company will furnish the Placement Agent with a copy of such proposed
amendment or supplement and will not file any such amendment or supplement to which the
Placement Agent reasonably objects.




(d) Copies of any Amendments and Supplements to a Prospectus Supplement. The
Company will furnish the Placement Agent, without charge, during the period beginning on the
date hereof and ending on the later of the last Closing Date of the Offering, as many copies
of the Incorporated Documents and any Prospectus Supplement and any amendments and
supplements thereto (including any Incorporated Documents, if any) as the Placement Agent
may reasonably request.


 


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(e) Free Writing Prospectus. The Company covenants that it will not, unless it
obtains the prior written consent of the Placement Agent, make any offer relating to the
Securities that would constitute an Company Free Writing Prospectus or that would otherwise
constitute a “free writing prospectus” (as defined in Rule 405 of the Securities
Act) required to be filed by the Company with the Commission or retained by the Company
under Rule 433 of the Securities Act. In the event that the Placement Agent expressly
consents in writing to any such free writing prospectus (a “Permitted Free Writing
Prospectus”), the Company covenants that it shall (i) treat each Permitted Free Writing
Prospectus as a Company Free Writing Prospectus, and (ii) comply with the requirements of
Rule 164 and 433 of the Securities Act applicable to such Permitted Free Writing Prospectus,
including in respect of timely filing with the Commission, legending and record keeping.




(f) Transfer Agent. The Company will maintain, at its expense, a registrar and
transfer agent for the Common Stock.




(g) Earnings Statement. As soon as practicable and in accordance with
applicable requirements under the Securities Act, but in any event not later than 18 months
after the last Closing Date, the Company will make generally available to its security
holders and to the Placement Agent an earnings statement, covering a period of at least 12
consecutive months beginning after the last Closing Date, that satisfies the provisions of
Section 11(a) and Rule 158 under the Securities Act.




(h) Periodic Reporting Obligations. During the Prospectus Delivery Period, the
Company will duly file, on a timely basis, with the Commission and the Trading Market all
reports and documents required to be filed under the Exchange Act within the time periods
and in the manner required by the Exchange Act.




(i) Additional Documents. The Company will enter into any subscription,
purchase or other customary agreements as the Placement Agent or the Investors deem
necessary or appropriate to consummate the Offering, all of which will be in form and
substance reasonably acceptable to the Placement Agent and the Investors. The Company
agrees that the Placement Agent may rely upon, and is a third party beneficiary of, the
representations and warranties and applicable covenants set forth in any such purchase,
subscription or other agreement with Investors in the Offering.




(j) No Manipulation of Price.  The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.




(k) Acknowledgment. The Company acknowledges that any advice given by the
Placement Agent to the Company is solely for the benefit and use of the Board of Directors
of the Company and may not be used, reproduced, disseminated, quoted or referred to, without
the Placement Agent’s prior written consent.


 


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Section 5. Conditions of the Obligations of the Placement Agent. The obligations of the Placement
Agent hereunder shall be subject to the accuracy of the representations and warranties on the part
of the Company set forth in Section 2 hereof, in each case as of the date hereof and as of each
Closing Date as though then made, to the timely performance by each of the Company of its covenants
and other obligations hereunder on and as of such dates, and to each of the following additional
conditions:




(a) Accountants’ Comfort Letter. On the date hereof, the Placement Agent shall
have received, and the Company shall have caused to be delivered to the Placement Agent, a
letter from HJ Associates & Consultants, LLP (the independent registered public accounting
firm of the Company), addressed to the Placement Agent, dated as of the date hereof, in form
and substance satisfactory to the Placement Agent. The letter shall not disclose any change
in the condition (financial or other), earnings, operations, business or prospects of the
Company from that set forth in the Incorporated Documents or the applicable Prospectus
Supplement, which, in the Placement Agent’s sole judgment, is material and adverse and that
makes it, in the Placement Agent’s sole judgment, impracticable or inadvisable to proceed
with the Offering of the Securities as contemplated by such Prospectus Supplement.




(b) Compliance with Registration Requirements; No Stop Order; No Objection from the
FINRA. Each Prospectus Supplement (in accordance with Rule 424(b)) and Permitted Free
Writing Prospectus, if any, shall have been duly filed with the Commission, as appropriate;
no stop order suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; no order preventing or suspending the use of any Prospectus
Supplement shall have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; no order having the effect of ceasing or
suspending the distribution of the Securities or any other securities of the Company shall
have been issued by any securities commission, securities regulatory authority or stock
exchange and no proceedings for that purpose shall have been instituted or shall be pending
or, to the knowledge of the Company, contemplated by any securities commission, securities
regulatory authority or stock exchange; all requests for additional information on the part
of the Commission shall have been complied with; and the FINRA shall have raised no
objection to the fairness and reasonableness of the placement terms and arrangements.




(c) Corporate Proceedings. All corporate proceedings and other legal matters
in connection with this Agreement, the Registration Statement and each Prospectus
Supplement, and the registration, sale and delivery of the Securities, shall have been
completed or resolved in a manner reasonably satisfactory to the Placement Agent’s counsel,
and such counsel shall have been furnished with such papers and information as it may
reasonably have requested to enable such counsel to pass upon the matters referred to in
this Section 5.




(d) No Material Adverse Change. Subsequent to the execution and delivery of
this Agreement and prior to each Closing Date, in the Placement Agent’s sole judgment after
consultation with the Company, there shall not have occurred any Material Adverse Change or
Material Adverse Effect.




(e) Opinion of Counsel for the Company. The Placement Agent shall have
received on each Closing Date the favorable opinion of legal counsel to the Company, dated
as of such Closing Date, including, without limitation, a negative assurance letter,
addressed to the Placement Agent in form and substance satisfactory to the Placement Agent.


 


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(f) Officers’ Certificate. The Placement Agent shall have received on each
Closing Date a certificate of the Company, dated as of such Closing Date, signed by the
Chief Executive Officer and Principal Accounting and Financial Officer of the Company, to
the effect that, and the Placement Agent shall be satisfied that, the signers of such
certificate have reviewed the Registration Statement, the Incorporated Documents, any
Prospectus Supplement, any Permitted Free Writing Prospectus, and this Agreement and to the
further effect that:




(i) The representations and warranties of the Company in this Agreement are
true and correct, as if made on and as of such Closing Date, and the Company has
complied with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date;




(ii) No stop order suspending the effectiveness of the Registration Statement
or the use of the Base Prospectus or any Prospectus Supplement has been issued and
no proceedings for that purpose have been instituted or are pending or, to the
Company’s knowledge, threatened under the Securities Act; no order having the effect
of ceasing or suspending the distribution of the Securities or any other securities
of the Company has been issued by any securities commission, securities regulatory
authority or stock exchange in the United States and no proceedings for that purpose
have been instituted or are pending or, to the knowledge of the Company,
contemplated by any securities commission, securities regulatory authority or stock
exchange in the United States;




(iii) When the Registration Statement became effective, at the time of sale,
and at all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Incorporated Documents, if any, when such documents
became effective or were filed with the Commission, contained all material
information required to be included therein by the Securities Act and the Exchange
Act and the applicable rules and regulations of the Commission thereunder, as the
case may be, and in all material respects conformed to the requirements of the
Securities Act and the Exchange Act and the applicable rules and regulations of the
Commission thereunder, as the case may be, and the Registration Statement and the
Incorporated Documents, if any, did not and do not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading (provided, however, that the preceding
representations and warranties contained in this paragraph (iii) shall not apply to
any statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by the Placement Agent expressly for use
therein) and, since the effective date of the Registration Statement, there has
occurred no event required by the Securities Act and the rules and regulations of
the Commission thereunder to be set forth in the Incorporated Documents which has
not been so set forth; and




(iv) Subsequent to the respective dates as of which information is given in the
Registration Statement, the Incorporated Documents and any Prospectus Supplement,
there has not been: (a) any Material Adverse Change; (b) any transaction that is
material to the Company and the Subsidiaries taken as a whole, except transactions
entered into in the ordinary course of business; (c) any obligation, direct or
contingent, that is material to the Company and the Subsidiaries taken as a whole,
incurred by the Company or any Subsidiary, except obligations incurred in the
ordinary course of business; (d) any material change in the capital stock (except
changes thereto resulting from the exercise of outstanding stock options or
warrants) or outstanding indebtedness of the Company or
any Subsidiary; (e) any dividend or distribution of any kind declared, paid or
made on the capital stock of the Company; or (f) any loss or damage (whether or not
insured) to the property of the Company or any Subsidiary which has been sustained
or will have been sustained which has a Material Adverse Effect.


 


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(g) Bring-down Comfort Letter.  On each Closing Date, the Placement Agent shall
have received from HJ Associates & Consultants, LLP, or such other independent registered
public accounting firm of the Company, a letter dated as of such Closing Date, in form and
substance satisfactory to the Placement Agent, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (a) of this Section 5, except
that the specified date referred to therein for the carrying out of procedures shall be no
more than three business days prior to such Closing Date.




(h) Stock Exchange Listing. The Common Stock shall be registered under the
Exchange Act and shall be listed on the Trading Market, and the Company shall not have taken
any action designed to terminate, or likely to have the effect of terminating, the
registration of the Common Stock under the Exchange Act or delisting or suspending from
trading the Common Stock from the Trading Market, nor shall the Company have received any
information suggesting that the Commission or the Trading Market is contemplating
terminating such registration or listing.




(i) Additional Documents. On or before each Closing Date, the Placement Agent
and counsel for the Placement Agent shall have received such information and documents as
they may reasonably require for the purposes of enabling them to pass upon the issuance and
sale of the Securities as contemplated herein, or in order to evidence the accuracy of any
of the representations and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.



If any condition specified in this Section 5 is not satisfied when and as required to be
satisfied, this Agreement may be terminated by the Placement Agent by notice to the Company at any
time on or prior to a Closing Date, which termination shall be without liability on the part of any
party to any other party, except that Section 6 (Payment of Expenses), Section 7 (Indemnification
and Contribution) and Section 8 (Representations and Indemnities to Survive Delivery) shall at all
times be effective and shall survive such termination.



Section 6. Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred by
the Company in connection with the performance of its obligations hereunder and in connection with
the transactions contemplated hereby, including, without limitation: (i) all expenses incident to
the issuance, delivery and qualification of the Securities (including all printing and engraving
costs); (ii) all fees and expenses of the registrar and transfer agent of the Common Stock; (iii)
all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the
Securities; (iv) all fees and expenses of the Company’s counsel, independent public or certified
public accountants and other advisors; (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of experts), the Base
Prospectus and each Prospectus Supplement, and all amendments and supplements thereto, and this
Agreement; (vi) all filing fees, reasonable attorneys’ fees and expenses incurred by the Company or
the Placement Agent in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Securities for offer and sale under the
state securities or blue sky laws or the securities laws of any other country, and, if requested by
the Placement Agent, preparing and printing a “Blue Sky Survey,” an “International Blue
Sky Survey” or other memorandum, and any supplements thereto, advising the
Placement Agent of such qualifications, registrations and exemptions; (vii) if applicable, the
filing fees incident to the review and approval by the FINRA of the Placement Agent’s participation
in the offering and distribution of the Securities; (viii) the fees and expenses associated with
including the Securities on the Trading Market; (ix) all costs and expenses incident to the travel
and accommodation of the Company’s and the Placement Agent’s employees on the “roadshow,”
if any; and (x) all other fees, costs and expenses referred to in Part II of the Registration
Statement.


 


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Section 7. Indemnification. The Company agrees to indemnify the Placement Agent in accordance with
the provisions of Schedule A hereto, which is incorporated by reference herein and made a part
hereof.



Section 8. Representations and Indemnities to Survive. The indemnities, agreements,
representations, warranties and other statements of the Company or any person controlling the
Company, and of its officers, set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the Placement Agent, or
any of its or their partners, officers or directors or any controlling person, as the case may be,
and will survive delivery of and payment for the Securities to be sold in the proposed Offering and
any termination of this Agreement. A successor to a Placement Agent, or to the Company, its
directors or officers or any person controlling the Company, shall be entitled to the benefits of
the indemnity, contribution and reimbursement agreements contained in this Agreement.



Section 9. Notices. All communications hereunder shall be in writing and shall be mailed, hand
delivered or telecopied and confirmed to the parties hereto as follows:



If to the Placement Agent to the address set forth above, attn: General Counsel, Facsimile:
305-572-4220



If to the Company:



300 Continental Blvd., Suite 100

El Segundo, CA 90245

Facsimile: (310) 615-9800

Attention: Frederic Scheer




With a copy to:




Sichenzia Ross Friedman Ference LLP

61 Broadway, 32 nd Floor

New York, NY 10006

Facsimile (212) 930-9725

Attn: Gregory Sichenzia, Esq.

Marcelle Balcombe, Esq.




Any party hereto may change the address for receipt of communications by giving written notice
to the others.


 


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Section 10. Successors. This Agreement will inure to the benefit of and be binding upon the
parties hereto, and to the benefit of the employees, officers and directors and controlling persons
referred to in Section 7 hereof, and to their respective successors, and personal representative,
and no other person will have any right or obligation hereunder.



Section 11. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph
or provision of this Agreement shall not affect the validity or enforceability of any other
section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement
is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid and enforceable.



Section 12. Governing Law Provisions. This Agreement shall be deemed to have been made and
delivered in New York City and both this engagement letter and the transactions contemplated hereby
shall be governed as to validity, interpretation, construction, effect and in all other respects by
the internal laws of the State of New York, without regard to the conflict of laws principles
thereof. Each of the Placement Agent and the Company: (i) agrees that any legal suit, action or
proceeding arising out of or relating to this engagement letter and/or the transactions
contemplated hereby shall be instituted exclusively in New York Supreme Court, County of New York,
or in the United States District Court for the Southern District of New York, (ii) waives any
objection which it may have or hereafter to the venue of any such suit, action or proceeding, and
(iii) irrevocably consents to the jurisdiction of the New York Supreme Court, County of New York,
and the United States District Court for the Southern District of New York in any such suit, action
or proceeding. Each of the Placement Agent and the Company further agrees to accept and
acknowledge service of any and all process which may be served in any such suit, action or
proceeding in the New York Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York and agrees that service of process upon the Company
mailed by certified mail to the Company’s address shall be deemed in every respect effective
service of process upon the Company, in any such suit, action or proceeding, and service of process
upon the Placement Agent mailed by certified mail to the Placement Agent’s address shall be deemed
in every respect effective service process upon the Placement Agent, in any such suit, action or
proceeding. If either party shall commence an action or proceeding to enforce any provision of
this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the
other party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.



Section 13. General Provisions.




(a) This Agreement constitutes the entire agreement of the parties to this Agreement
and supersedes all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof, including the
Investment Banking Agreement dated April 28, 2010 (the “IBA Agreement”), provided,
however, the terms and conditions set forth in Exhibit A to the IBA Agreement, other than
paragraph I thereof, shall expressly survive the execution and delivery of this Agreement.
This Agreement may be executed in two or more counterparts, each one of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived unless waived in
writing by each party whom the condition is meant to benefit. Section headings herein are
for the convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.




(b) The Company acknowledges that in connection with the offering of the Securities:
(i) the Placement Agent has acted at arms length, are not agents of, and owe no
fiduciary duties to the Company or any other person, (ii) the Placement Agent owes the
Company only those duties and obligations set forth in this Agreement and (iii) the
Placement Agent may have interests that differ from those of the Company. The Company
waives to the full extent permitted by applicable law any claims it may have against the
Placement Agent arising from an alleged breach of fiduciary duty in connection with the
offering of the Securities.



[The remainder of this page has been intentionally left blank.]




 


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If the foregoing is in accordance with your understanding of our agreement, please sign below
whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in
accordance with its terms.



	 	 	 	 	 
	 	Very truly yours,



CEREPLAST, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Frederic Scheer 	 
	 	 	Title:  	Chief Executive Officer 	 




The foregoing Placement Agency Agreement is hereby confirmed and accepted as of the date first
above written.



	 	 	 	 	 	 	 
	LADENBURG THALMANN & CO. INC.	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 





 


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SCHEDULE A – INDEMNIFICATION




The Company hereby agrees to indemnify and hold the Placement Agent, its officers, directors,
principals, employees, affiliates, and members, and their successors and assigns, harmless from and
against any and all loss, claim, damage, liability, deficiencies, actions, suits, proceedings,
costs and legal expenses or expense whatsoever (including, but not limited to, reasonable legal
fees and other expenses and reasonable disbursements incurred in connection with investigating,
preparing to defend or defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever, or in appearing or preparing for
appearance as witness in any proceeding, including any pretrial proceeding such as a deposition)
(collectively, “Losses”) arising out of, based upon, or in any way related or attributed to, (i)
any breach of a representation, warranty or covenant by the Company contained in this Agreement or
(ii) any activities or services performed hereunder by the Placement Agent, unless it is finally
judicially determined in a court of competent jurisdiction that such Losses were the primary and
direct result of the intentional misconduct or gross negligence of the Placement Agent in
performing the services hereunder.



If the Placement Agent receives written notice of the commencement of any legal action, suit
or proceeding with respect to which the Company is or may be obligated to provide indemnification
pursuant to this Schedule A, the Placement Agent shall, promptly after the receipt of such written
notice, give the Company written notice thereof (a “Claim Notice”). Failure to promptly give such
Claim Notice shall not constitute a waiver by the Placement Agent of its right to indemnity
hereunder with respect to such action, suit or proceeding. Upon receipt by the Company of a Claim
Notice from the Placement Agent with respect to any claim for indemnification which is based upon a
claim made by a third party (“Third Party Claim”), the Company may assume the defense of the Third
Party Claim with counsel of its own choosing, as described below. The Placement Agent shall
cooperate in the defense of the Third Party Claim and shall furnish such records, information and
testimony and attend all such conferences, discovery proceedings, hearings, trial and appeals as
may be reasonably required in connection therewith. The Placement Agent shall have the right to
employ its own counsel in any such action which shall be at the Company’s expense if (i) the
Company and the Placement Agent shall have mutually agreed in writing to the retention of such
counsel, (ii) the Company shall have failed in a timely manner to assume the defense and employ
counsel or experts reasonably satisfactory to the Placement Agent in such litigation or proceeding
or (iii) the named parties to any such litigation or proceeding (including any impleaded parties)
include the Company and the Placement Agent and representation of the Company and the Placement
Agent by the same counsel or experts would, in the reasonable opinion of the Placement Agent, be
inappropriate due to actual or potential differing interests between the Company and the Placement
Agent. The Company shall not satisfy or settle any Third Party Claim for which indemnification has
been sought and is available hereunder, without the prior written consent of the Placement Agent,
which consent shall not be delayed and which shall not be required if the Placement Agent is
granted a release in connection therewith. The indemnification provisions hereunder shall survive
the termination or expiration of this Agreement.



The Company further agrees, upon demand by the Placement Agent, to promptly reimburse the
Placement Agent for, or pay, any loss, claim, damage, liability or expense as to which the
Placement Agent has been indemnified herein with such reimbursement to be made currently as any
loss, damage, liability or expense is incurred by the Placement Agent. Notwithstanding the
provisions of the aforementioned indemnification, any such reimbursement or payment by the Company
of fees, expenses, or disbursements incurred by the Placement Agent shall be repaid by the
Placement Agent in the event of any proceeding in which a final judgment (after all appeals or the
expiration of time to appeal) is entered in a court of competent jurisdiction against the Placement
Agent based solely upon its gross negligence or intentional misconduct in the performance of its
duties hereunder, and provided further, that the Company shall not be required to make
reimbursement or payment for any settlement effected without the
Company’s prior written consent (which consent shall not be unreasonably withheld or delayed).


 


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If for any reason the foregoing indemnification is unavailable or is insufficient to hold the
Placement Agent harmless, the Company agrees to contribute the amount paid or payable by the
Placement Agent in such proportion as to reflect not only the relative benefits received by the
Company, as the case may be, on the one hand, and the Placement Agent, on the other hand, but also
the relative fault of the Company and the Placement Agent as well as any relevant equitable
considerations. In no event shall the Placement Agent contribute in excess of the fees actually
received by it pursuant to the terms of this Agreement.



For purposes of this Agreement, each officer, director, member, and employee or affiliate of
the Placement Agent and each person, if any, who controls the Placement Agent (or any affiliate)
within the meaning of either Section 15 of the Securities Act of 1933, as amended, or Section 20 of
the Securities Exchange Act of 1934, as amended, shall have the same rights as the Placement Agent
with respect to matters of indemnification by the Company hereunder.



Notwithstanding any provision of this engagement letter to the contrary, the Company agrees
that neither the Placement Agent nor its Affiliates, and the respective officers, directors,
employees, agents and representatives of the Placement Agent, its Affiliates and each other person,
if any, controlling the Placement Agent or any of its affiliates, shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the
engagement and transaction described herein except for any such liability for losses, claims,
damages or liabilities incurred by the Placement Agent or its Affiliates, and the respective
officers, directors, employees, agents and representatives of the Placement Agent, its Affiliates
and each other person, if any, controlling the Placement Agent or any of its affiliates, that are
finally judicially determined in a court of competent jurisdiction that such Losses were the
primary and direct result from the intentional misconduct or gross negligence of such individuals
or entities.




 


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