Document:

Exhibit 10.69

 

AMENDMENT AGREEMENT

 

This Amendment Agreement dated January 25, 2011 (this “Amendment Agreement”) to the Investment Agreement dated April 20, 2006 is hereby executed:

 

AMONGST

 

(i)                                     IL&FS INVESTMENT MANAGERS LIMITED, a company incorporated in India under the Companies Act, 1956 and having its registered office at the IL&FS Financial Centre, C-22, G Block, Bandra Kurla Complex, Sandra (East), Mumbai 400 051 India (hereinafter referred to as “Investor”, which expression shall, unless repugnant to the context or meaning thereof, mean and include its successors and assigns), as manager of and acting for and on behalf of IL&FS TRUST COMPANY LIMITED, a company incorporated under the Companies Act, 1956 having its Registered Office at the IL&FS Financial Centre, Plot No. C-22, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051, as the trustee (“Trustee”) of the IL&FS Private Equity Trust, a trust established under the Indian Trusts Act, 1882, which is a Venture Capital Fund registered with the Securities and Exchange Board of India, investing through its venture capital scheme Leverage India Fund, which shall, unless repugnant to the subject or context, mean and include the Trustee for the time being and from time to time of the said trust, its successors and assigns);

 

AND

 

(ii)                                  NAPO INDIA PRIVATE LIMITED, a company organised and existing under the Companies Act, 1956, whose registered office is at Office No 12, 91, Nadgevi X Lane, 2nd Floor, Mumbai 400 003, India (hereinafter referred to as “Napo India” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns);

 

AND

 

(ii)                                  NAPO PHARMACEUTICALS, INC., a company organised and existing under laws of the State of Delaware, USA, whose registered office is at 185 Berry Street, Suite 1300, San Francisco, CA 94107 (hereinafter referred to as “Napo” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns).

 

Napo, Napo India, and the Investor are individually referred to as “Party” and collectively as “Parties”.

 

RECITALS:

 

A.                                    The Parties have executed an Investment Agreement dated April 20, 2006 (“Investment Agreement”).

 

B.                                    The Parties have made certain amendments to the Investment Agreement by way of a letter dated April 10, 2010 (“Letter”, attached wherewith as Annexure I) and are

 

 

desirous of executing this Amendment Agreement to amend the Investment Agreement to reflect the amendments affected via the Letter (effective as of April 10, 2010) on the terms and conditions hereinafter appearing.

 

NOW, THEREFORE THIS AMENDMENT AGREEMENT WITNESSETH AS FOLLOWS:

 

1.                                      Definitions

 

1.1                               Unless otherwise defined herein capitalised terms and conditions used herein and not defined herein shall have the meaning ascribed to such term under the Investment Agreement.

 

2.                                      Amendments

 

2.1.                            As set forth in the Letter, effective as of April 10, 2010; Section 2 (a) of the Investment Agreement shall be amended by deleting it in its entirety and replacing it with the following:

 

“Tenure of the OCRPSs: Subject to the terms of this Agreement, the OCRPSs shall have a tenure of eight (8) years from the Effective Date (“Tenure”). Subject to the terms of this Agreement, the OCRPSs shall be compulsorily redeemable by Napo India upon the expiry of the Tenure”.

 

3.                                      Representations

 

3.1.                            Each Party represents, severally and not jointly, to the other Parties hereto that:

 

3.1.1.                  such Party has the full power and authority to enter into, execute and deliver this Amendment Agreement and to perform the transactions contemplated hereby and, if such Party is not a natural Person, such Party is duly incorporated or organised with limited liability and existing under the laws of the jurisdiction of its incorporation or organisation;

 

3.1.2.                  the execution and delivery by such Party of this Amendment Agreement and the performance by such Party of the transactions contemplated hereby have been duly authorised by all necessary corporate or other action of such Party;

 

3.1.3.                  assuming the due authorisation, execution and delivery hereof by the other Parties, this Amendment Agreement constitutes the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganisation, moratorium or similar laws affecting creditors’ rights generally.

 

 

4.                                      Amendment to the Charter Documents

 

4.1.                            Within 5 Business Days of the execution hereof, the Board and the shareholders of Napo India shall passing appropriate resolutions, as necessary, amending the Charter Documents to reflect the changes made under Clause 2 hereof and adopting the amended Charter Documents. Certified true copies of the said resolutions shall - be provided to the Investor.

 

4.2.                            The agreed form of the revised Charter Documents is as enclosed herewith at Annexure

 

4.3.                            Within 20 (20) Business Days from the execution hereof, Napo India shall make appropriate filings with the Registrar of Companies, Mumbai in respect of the aforesaid amendments to the Charter Documents. An electronic copy of the same shall be provided to the Investor.

 

5.                                      Investment Agreement in Full Force and Effect

 

5.1.                            Notwithstanding anything stated in the Investment Agreement and/or this Amendment Agreement but subject to the proviso to this Clause 5.1 the Parties hereby agree by way of clarification that since a Liquidity Event has occurred, the Investor’s right of redemption of OCRPSs is for the Liquidity Amount in accordance with the teens set forth in the Investment Agreement. In the abundance of caution it is hereby clarified that the Investor does not have any right to redeem the OCRPSs for the Redemption Amount.

 

Provided that, if there is a any change of Law that prohibits the Investor following a Liquidity Event from (i) selling Napo India Series C Preferred Stock or Napo India Common Stock directly, or (ii) instructing Napo India to sell, the Napo India Series C Preferred Stock or Napo India Common Stock (collectively, the “Napo India Shares”), as the case may be, then provided that Investor is prohibited at all times after such Liquidity Event under the Laws of India in terms of (i) and (ii) above, up to and including the date being the expiry of the Tenure, then the Investor shall have the right to redeem and Napo India shall have the obligation to redeem all the OCRPSs for the Redemption Amount. In the event of an established breach of Section 2 or Section 8 of the Investment Agreement by the Napo Group, which breach is not cured in accordance with the provisions of the Investment Agreement, the Investor shall at anytime during the Tenure have the right, and Napo India shall have the obligation, to redeem at the option of the Investor all the OCRPSs for an amount equivalent to the Redemption Amount.

 

5.2.                            This Amendment Agreement (along with the Letter) shall form an integral part of the Investment Agreement and shall be read along with the Investment Agreement. All references in the Investment Agreement to “this Agreement” shall include the reference to this Amendment Agreement and the Letter, wherever the context so requires. Further, reference to the Investment Agreement in any other documents shall include reference to the Investment Agreement as amended by this Amendment Agreement and the Letter.

 

5.3.                            This Amendment Agreement and the Letter shall modify the agreement and the understanding set out in the Investment Agreement, as applicable, only to the limited extent set out herein and therein. Except as specifically and expressly amended by this Amendment Agreement and the Letter, all other provisions of the Investment Agreement

 

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shall remain unchanged and in full force and effect and shall continue to remain applicable and binding on the Parties.

 

5.4.                            This Amendment Agreement shall be effective as of April 10, 2010.

 

5.5.                            Save and except for the aforesaid all other terms and conditions of the Investment Agreement shall remain unaltered and in force. In the event of conflict between the terms of this Amendment Agreement and/or the Letter on the one hand, and the provisions of the Investment Agreement on the other, the provisions of this Amendment Agreement and/or the Letter (as the case may be) shall prevail in relation to the matters set out herein and therein.

 

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IN WITNESS WHEREOF, the Parties have entered into this Amendment Agreement the day and year first above written.

 

 

	
/S/   [Name of Signatory]
    	
 
    
	
For and on behalf of IL&FS   INVESTMENT MANAGERS LIMITED
    
	
Authorised   Signatory
    	
 
    
	
Name:
    	
 
    
	
Designation:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/S/   [Name of Signatory]
    	
 
    
	
For   and on behalf of NAPO INDIA PRIVATE   LIMITED
    	
 
    
	
Authorised   Signatory
    	
 
    
	
Name:
    	
 
    
	
Designation:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/S/   [Name of Signatory]
    	
 
    
	
For   and on behalf of NAPO   PHARMACEUTICALS, INC.
    	
 
    
	
Authorised   Signatory
    	
 
    
	
Name:
    	
 
    
	
Designation:
    	
 
    

 

 

INVESTMENT RIGHTS AGREEMENT

 

A.            IL&FS INVESTMENT MANAGERS LIMITED, a company incorporated in India under the Companies Act, 1956 and having its registered office at the IL&FS Financial Centre, C-22, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 India (hereinafter referred to as “Investor”, which expression shall, unless repugnant to the context or meaning thereof, mean and include its successors and assigns), as manager of and acting for and on behalf of IL&FS TRUST COMPANY LIMITED, a company incorporated under the Companies Act, 1956 having its Registered Office at the IL&FS Financial Centre, Plot No. C-22, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051, as the trustee (“Trustee”) of the IL&FS Private Equity Trust, a trust established under the Indian Trusts Act, 1882, which is a Venture Capital Fund registered with the Securities and Exchange Board of India, investing through its venture capital scheme Leverage India Fund, which shall, unless repugnant to the subject or context, mean and include the Trustee for the time being and from time to time of the said trust, its successors and assigns);

 

B.            NAPO INDIA PRIVATE LIMITED, a company organised and existing under the Companies Act, 1956, whose registered office is at 23rd Floor, Express Towers, Nariman Point Mumbai — 400 001, India (hereinafter referred to as “Napo India” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns);

 

C.            NAPO PHARMACEUTICALS, INC., a company organised and existing under laws of the State of Delaware, USA, whose registered office is at 1170, Veterans Boulevard, Ste. 244, South San Francisco, California  94080, USA (hereinafter referred to as “Napo” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns);

 

D.            THE PERSONS set forth in Annexure I being current members of the key management team of Napo hereinafter referred to as the “Management Team”.

 

Napo, Napo India, the Investor, and the Management Team are individually referred to as “Party” and collectively as “Parties”.

 

WHEREAS:

 

a)             The Investor has agreed to invest Rupees 1,38,000,000 being an amount equivalent to US $3,000,000 (“Investment Amount”) in Napo India. The Investment Amount is to be invested by subscription to 100 Shares (as defined hereinafter) (“Investor Shares”) and 3,529,412 OCRPSs (as defined hereinafter) to be issued by Napo India (collectively “Instruments”) to the Investor.

 

b)             Within five  (5) Business Days after the Investor has invested the Investment Amount in Napo India, and has subscribed to the Investor Shares and the OCRPSs, Napo India shall invest an amount equal to the Investment Amount in Napo. Napo India shall make such investment by subscription to the Napo India Series C Preferred Stock (as defined hereinafter) to be issued to Napo India by Napo at a price per Series C Preferred Stock of US $0.85.

 

c)              Pursuant to a subscription agreement as of the date hereof among Napo, Napo India and Investor (“Subscription Agreement” and, together with this Agreement, the “Transaction Agreements”), the Investor has subscribed to the Instruments.

 

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d)             The Parties are entering into this Agreement for the purpose of recording the terms and conditions regulating the relationship of the Investor, Napo, Napo India and the Management Team for certain matters relating to the transfer of Securities, and the management and operation of Napo India and their mutual rights and obligations.

 

1)             DEFINITIONS AND INTERPRETATION

 

a)             In this Agreement, unless the context requires otherwise, capitalised terms have the meaning ascribed to them in this Section 1. Capitalised terms not otherwise defined herein shall have the meaning ascribed to them in the Subscription Agreement:

 

“Business” means the business of pharmaceuticals, bio-technology, development of drugs and health care related business linked to the technologies developed by Napo and/or Napo India.

 

“Business Day” means any day other than a Saturday, a Sunday or any day on which banks in  New York City, United States of America are permitted to be closed.

 

“Change of Law” means a change of Law such that the Investor is permitted under applicable Law to own and hold the Napo India Series C Preferred Stock.

 

“Effective Date” means the Completion Date, as defined in the Subscription Agreement.

 

“Encumbrance” means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, deed of trust, security interest or other encumbrance of any kind.

 

“Exempted New Securities” means Securities issued pursuant to or in connection with : (i) sale/offerings pursuant to a registration statement filed under the Securities Act, 1933, or under any comparable securities law(s) for any recognized stock exchange, or Securities issued pursuant to or in connection with  a listing under (x) the Alternative Investment Market operated by the London Stock Exchange (“AIM”) or (y) the London Stock Exchange; (ii) a merger or acquisition of another Person with the Napo Group; (iii) stock splits, stock dividend or recapitalization or distribution of profits as approved by the board of directors of Napo India or Napo; (iv) strategic acquisitions including but not limited to joint ventures/ partnerships/ alliances with vendors or those pursuant to marketing/distribution arrangements; (v) exercise or conversion of outstanding convertible securities and (vi)  stock or the exercise of stock options, issued pursuant to  any incentive equity plan of Napo.

 

“Financial Year” means the financial year of Napo, which ends on December 31 of the calendar year.

 

“Governmental Authority” means any nation or government or any province, state or any other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of India or the United States of America or any political subdivision thereof or of any other applicable jurisdiction; any court, tribunal or arbitrator and any securities exchange or body or authority regulating such securities exchange.

 

“Investor Share Entitlement” means one (1) Share per OCRPS, as may be adjusted pursuant to Section 4(c) or one (1) share of the Napo India Series C Preferred Stock per OCRPS, as may be adjusted pursuant to Section 4 (c), as the case may be.

 

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“Law” means all applicable provisions of all (i) constitutions, treaties, statutes, laws (including the common law), codes, rules, regulations, ordinances or orders of any Governmental Authority, (ii) approvals of any Governmental Authority and (iii) orders, decisions, injunctions, judgments, awards and decrees of or agreements with any Governmental Authority.

 

“Liquidity Event” means any of the following events singly or in combination: (i) listing of the Securities of Napo India or Napo through an initial public offering or an offer for sale of Securities, with gross cash proceeds of at least US$10,000,000 to Napo, including without limitation a listing of such Securities on AIM or the London Stock Exchange; (ii) conversion of Napo’s Series C Preferred Stock in accordance with Napo’s Certificate of Incorporation, as amended from time to time, (including, without limitation a merger, acquisition, or any public offering or by a vote of the stockholders of Napo); (iii) buyback by Napo India or Napo of Securities of Napo India or Napo, other than the redemption or repurchase of the OCRPSs that may be required at the end of the Tenure by this Agreement; or (iv) sale or transfer of  substantially all the assets of Napo India or Napo, which results in cash proceeds or  tradeable Securities to the Investor.

 

“Liquidity Amount” means an amount, being the net proceeds received by Napo India from the sale of Napo common stock, (net of any charges related to the sale of the Napo common stock that would ordinarily apply to such sale of Napo Stock, including but not limited to commissions and taxes of any kind and taxes that may be owed by Napo India to any Government Authority as a result of such sale).

 

“Napo Group” shall mean either Napo India or Napo, as the context may require or Napo India and Napo, collectively.

 

“Napo India Series C Preferred Stock” means  that number of shares of Series C Preferred Stock of Napo issued by Napo to Napo India pursuant to the Series C Documents, equal to the quotient obtained by dividing the Investment Amount (converted to US dollars on the date Napo India acquires the shares of Series C Preferred Stock ) by US $ 0.85  being not less than 3,529,412 Napo Shares.

 

“Napo Shares” means any shares of Napo’s capital stock issued and outstanding and such additional shares of Napo’s capital stock as may be issued pursuant to Section 4(c).

 

“Napo India Common Stock” means the shares of Napo common stock issued to Napo India upon conversion of Napo India Series C Preferred Stock in accordance with the Series C Documents.

 

“New Securities” means Securities other than Exempted New Securities.

 

“OCRPS” means an optionally convertible, redeemable, non-cumulative, non-participating preference share of Napo India having a par value of Rupee One (1), with a fixed dividend rate of 0.00001 % which preference shares are: (i) convertible into Shares; or (ii) exchangeable for Napo India Series C Preferred Stock (subject to compliance with applicable Law, including but not limited to, Regulation S, if applicable) or (iii) redeemable under certain circumstances, for an amount as set forth in this Agreement.

 

“Person” means any natural person, firm, company, Governmental Authority, joint venture, association, partnership or other entity (whether or not having separate legal personality).

 

“Pro Rata Share” means, with respect to any shareholder, the proportion that the number of Securities held by such shareholder bears to the aggregate number of Securities held by all shareholders, in each case on a fully diluted basis, in the respective company.

 

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“Redemption Amount” means, at the time of redemption, the aggregate amount equal to the Investment Amount, plus a premium that yields for the Investor an internal rate of return of twenty percent (20%) per annum on the Investment Amount, calculated from the date of investment by the Investor in Napo India until the date of actual receipt by the Investor of the Redemption Amount, in consideration for the OCRPSs pursuant to the terms hereof.

 

“Regulation S” means Regulation S, promulgated under the U.S. Securities Act of 1933, as amended.

 

“Securities” means, with respect to any Person, such Person’s equity share capital, partnership interests or other ownership interests (including, without limitation, in the case of Napo India, Shares, and in the case of Napo all types of preferred and common stock) or any options, warrants, loans or other securities that are directly or indirectly convertible into, or exercisable or exchangeable for, such equity share capital, partnership interests or other ownership interests.

 

“Series C Documents” means, collectively, the Stock Purchase Agreement, the  Third Amended Investor Rights Agreement, and the Third Amended and Restated Certificate of Incorporation, as amended from time to time, that set forth and govern the rights, preferences and privileges of all holders of Napo’s Series C Preferred Stock. Each of the Series C Documents are annexed hereto as Annexures II to IV. It is agreed and acknowledged that the Series C Documents may be amended to provide for the automatic conversion of the Series C Preferred Stock into Common Stock upon Napo’s listing under AIM or the London Stock Exchange.

 

“Shares” means equity shares of Napo India having a par value of Rs.10.

 

“Share Capital” means the share capital of Napo India, on a fully-diluted and as-if-converted basis or the capitalization of Napo, on a fully-diluted and as-if-converted basis, as the context may require.

 

“Subsidiary” or “Subsidiaries” means, with respect to any specified Corporate Entity, any other Corporate Entity directly controlled by such specified Corporate Entity.  For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Corporate Entity, shall mean the possession of the power to direct or cause the direction of the management or policies of such Corporate Entity through the ownership of voting securities or any other means. “Corporate Entity” shall mean a corporation, a partnership, a limited liability company, a trust, or any other entity or organization.

 

“Transfer” means to sell, gift, assign, amalgamate, merge or suffer to exist (whether by operation of law or otherwise) or create any Encumbrance on any Shares or any right, title or interest therein or otherwise to dispose of in any manner whatsoever.

 

b)             Interpretation :

 

i)                 Any reference herein to any Section, Annexure is to such Section, or Annexure to this Agreement unless the context otherwise requires. The Annexures to this Agreement shall be deemed to form part of this Agreement;

 

ii)              References to any Party shall, where the context permits, include such Party’s successors, legal representatives and permitted assigns;

 

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iii)           The headings are inserted for convenience only and shall not affect the construction of this Agreement;

 

iv)          Unless the context requires otherwise, words importing the singular include the plural and vice versa, and pronouns importing a gender include each of the masculine, feminine and neuter genders; and

 

v)             The words “hereof,” “hereunder” and “hereto,” and words of like import, refer to this Agreement as a whole and not to any particular Section hereof.

 

2)             TERMS OF THE OCRPSs

 

a)             Tenure of the OCRPSs: Subject to the terms of this Agreement, the OCRPSs shall have a tenure of four (4) years from the Effective Date (“Tenure”). Subject to the terms of this Agreement, the OCRPSs shall be compulsorily redeemable by Napo India upon the expiry of the Tenure.

 

b)             Exchange, Conversion and Redemption of the OCRPSs: The terms of the exchange, conversion and redemption of the OCRPSs shall be as follows:

 

i)                 If, prior to a Liquidity Event, there occurs a Change of Law (“Scenario 1”), subject to and in compliance with applicable Law, the Investor may exchange all the OCRPSs held by it for the Napo India Series C Preferred Stock. To consummate the transfer of the Napo India Series C Preferred Stock to the Investor, the Investor shall execute the Napo’s Third Amended Investor Rights Agreement for the Series C Preferred Stock (Annexure III) and any purchase agreements reasonably requested by Napo India. The exchange of the OCRPSs held by the Investor for the Napo India Series C Preferred Stock shall be in accordance with Section 8(a) of this Agreement.

 

ii)              If there is a Liquidity Event, prior to a Change of Law and prior to the expiry of the Tenure (“Scenario 2”), then subject to and in compliance with applicable Law the Investor shall have the right to cause Napo India to sell such number of Napo India Common Stock as directed by the Investor. Upon transfer of the Napo India Common Stock, Napo India shall utilize the Liquidity Amount subject to the provisions of the Companies Act, 1956, and prior to use of such proceeds for any other purpose, to redeem such number of OCRPSs held by the Investor as determined in accordance with Section 8(c) of this Agreement; provided, however, that the Investor’s right to instruct Napo India to transfer the Napo India Common Stock, and Napo India’s obligation to transfer the Napo India Common Stock, shall also be subject to any applicable market stand-off requirements, lock-up requirements and regulatory holding periods. In the event the amount available with Napo India to redeem the OCRPSs is less than the Liquidity Amount, as a result of accumulated losses in Napo India or for any reason, Napo Group undertakes to make available necessary funds to Napo India to the extent of the differential amount in order to enable Napo India to redeem all the OCRPS’s for an amount equivalent to the Liquidity Amount.  However, such obligation of Napo  Group would not apply in a situation in which due to change in applicable Law,  force majeure or third-party actions, Napo India or Napo are prohibited from  delivering the Liquidity Amount to the Investor in connection with redeeming  the OCRPSs. In such an event, the Napo Group will take all reasonable steps necessary to redeem the OCRPSs. However, Napo’s obligation to fund Napo India in such event will be restricted to the Redemption Amount, if such funding is required to enable Napo India to redeem the OCRPS or any portion thereof. Until such redemption, the Liquidity Amount will not be utilized by Napo Group for any other  purpose.

 

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iii)           In the event of Scenario 2, if the Liquidity Event is as a result of: (x) a merger with another listed company; or (y) a sale/transfer of substantially all the assets of Napo India or Napo, which assets shall include but not be limited to drug molecules, intellectual property rights in relation to drugs, brands and, if the Investor instructs Napo India not to participate in the Liquidity Event, the Investor shall have the right to redeem all the OCRPSs held by the Investor in accordance with Section 9(c) of this Agreement.

 

iv)          If there is no Liquidity Event prior to expiry of the Tenure, (“Scenario 3”) the Investor shall be entitled to redeem all the OCRPS for an amount equivalent to the Redemption Amount. Upon the expiry of the Tenure Napo India shall have the right to redeem all the OCRPS for an amount equivalent to  the Redemption Amount, which amount shall be credited to a bank account as designated by the Investor.

 

v)             During the Tenure, the Investor shall be entitled to convert the OCRPSs into such number of Shares, being equivalent to the Investor Share Entitlement provided that the Investor shall exercise the conversion option attached to all the OCRPSs held by it in a single instance and such conversion is subject to and in compliance with all applicable Laws and any contractual lock-ups and market standoff requirements. In the event the Investor converts the OCRPSs into Shares pursuant to this Agreement, the following rights of the Investor shall terminate forthwith: (x) all rights of the Investor pursuant to Sections 2(b)(i)-(iv), 2(c), and Section 8; and (y) all rights of the Investor pursuant to this Agreement in respect of the affairs and management of Napo.

 

The OCRPSs shall be exchanged, converted or redeemed in the manner set forth in Section 8.

 

c)              Guarantee of Redemption Amount. Prior to the occurrence of a Liquidity Event, Napo guarantees the payment of the Redemption Amount by Napo India to the Investor upon redemption of all the OCRPSs held by the Investor in accordance with the terms of this Agreement.  Prior to a Liquidity Event, upon redemption of the OCRPSs pursuant to this Agreement if for any reason, Napo India is unable to pay an amount equivalent to the entire Redemption Amount, to the Investor upon the redemption of the OCRPSs held by the Investor, then Napo shall forthwith pay either the Investor or Napo India (as the case may be) such amount such that the Investor receives the entire Redemption Amount. Notwithstanding anything mentioned in this foregoing sentences in this Section 2(c), upon the occurrence of a Liquidity Event, Napo’s obligation to guarantee payment of the Investment Amount, the Redemption Amount, the Liquidity Amount or any other recovery by Investor otherwise shall terminate, and Napo shall have no further obligations under this Agreement. Notwithstanding the foregoing, following the date hereof,  if there is a any change of Law that prohibits the Investor following a Liquidity Event from (i) selling Napo India Series C Preferred Stock or Napo India Common Stock directly, or (ii) instructing  Napo India to sell, the Napo India Series C Preferred Stock or Napo India Common Stock (collectively, the “Napo India Shares”), as the case may be, then provided that Investor is prohibited at all times after such Liquidity Event under the Laws of India in terms of (i) and (ii) above, up to and including  the date being the expiry of the Tenure, then the Investor shall have the right to redeem and Napo India shall have the obligation to redeem all the OCRPSs for the Redemption Amount. In the event of an established breach of Section 2 or Section 8 of this Agreement by the Napo Group, which breach is not cured in accordance with the provisions of this Agreement, the Investor shall at anytime during the Tenure have the right, and Napo India shall have the obligation, to redeem at the option of the Investor all the OCRPSs for an amount equivalent to the Redemption Amount. For the avoidance of doubt, the guarantee payment pursuant to this 

 

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Section 2(c) is in addition to the obligations of the Napo Group pursuant to Section 2(b)(ii).

 

d)             Investor Share Entitlement.  Notwithstanding anything mentioned herein to the contrary, in the event the Investor proposes to exercise the Exchange Right (as defined hereinafter) or to receive the Liquidity Amount or convert the OCRPSs (as the case may be), the Investor shall be entitled to such number of Napo India Series C Preferred Stock or Napo India Common Stock or Shares (assuming the Investor has executed all the required documents) equivalent to the Investor Share Entitlement.

 

3)             PURCHASE OF NAPO INDIA SERIES C PREFERRED STOCK AND RESERVATION OF NAPO INDIA SHARES

 

a)             No later than five (5) Business Days after the issuance of the OCRPSs to the Investor, Napo India shall subscribe for, and Napo shall issue to Napo India, the Napo India Series C Preferred Stock, in accordance with the terms and conditions contained in the Series C Documents. Napo India shall be a party to the relevant Series C Documents and shall be entitled to all the rights and subject to all the obligations pursuant to the Series C Documents.

 

b)             The Napo India Series C Preferred Stock to be owned by Napo India pursuant to the terms of this Agreement shall rank pari passu with all other Series C Preferred Stock issued by Napo, in accordance with the rights, preferences and privileges set forth in Napo’s  Third Amended and Restated Certificate of Incorporation, as amended from time to time.

 

c)              Notwithstanding any term in this Agreement or any term of the Subscription Agreement that may be construed or interpreted otherwise, Napo India’s rights, preferences and privileges with respect to any and all Napo India Series C Preferred Stock shall be the same as the rights, preferences and privileges for all Napo’s Series C Preferred Stock, as set forth in, and determined by, the Series C Documents.

 

d)             In accordance with the terms of this Agreement, Napo India shall reserve and keep available for issue upon conversion of the OCRPSs such number of its authorized but unissued Shares, as will be sufficient to permit the conversion in full of all outstanding OCRPSs. All Shares which shall be so issuable, when issued upon conversion in accordance with the terms of such OCRPSs, shall be duly and validly issued and fully paid and non-assessable, and not subject to preemptive rights except as otherwise set forth herein.

 

4)             RIGHTS AND PREFERENCES OF THE INVESTOR

 

a)             Liquidation Preference. In the event of winding-up or liquidation of either Napo India or Napo to the extent of funds legally available, the Investor shall be entitled to amounts calculated in the following manner:

 

i)                 If the Investor is holding Series C Preferred Stock, an amount calculated being the Pro Rata Share to which a holder of Series C Preferred Stock would otherwise be entitled.

 

ii)              Prior to a Liquidity Event , if the Investor is holding OCRPSs, an amount to which the Investor would be entitled as a creditor of Napo India up  to the Redemption Amount, or

 

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iii)           After a Liquidity Event resulting in cash proceeds to Napo India, if the Investor is holding OCRPSs, an amount up to the Liquidity Amount

 

iv)          Prior to a Liquidity Event, the Investor shall be entitled to receive payment from the assets of Napo, or Napo India, pursuant to Sections 4(a)(i) and (ii), prior to any distribution made upon any Share Capital of Napo or Napo India or otherwise to the Management Team or to Napo, except as otherwise required by applicable Law, and except to the extent that a member of the Management Team has purchased preferred stock.

 

b)             Pre-emptive Rights. In the event that Napo India shall from time to time after the date hereof propose to issue New Securities (other than  Exempted New Securities), then the Investor shall have a preemptive right, to subscribe for a Pro Rata Share of such New Securities. Not less than 30 Business Days before a proposed issuance of New Securities (other than Exempted New Securities) (a “Proposed Issuance”), Napo India shall deliver to the Investor a written notice of the Proposed Issuance setting forth (i) the number, type and terms of the Securities to be issued, (ii) the consideration to be received by Napo India in connection with the Proposed Issuance and (iii) the identity of the allottees. Within fifteen (15) Business Days following delivery of the notice referred to in this Section 4(b), the Investor if it elects to exercise its rights under this Section 4 shall give written notice to Napo India specifying the number of Securities to be purchased by the Investor upto its Pro Rata Share of such New Securities.

 

c)              Anti-Dilution Rights. In the event that, prior to conversion or redemption or exchange of the OCRPSs, in accordance with the terms of this Agreement:

 

i)                 Napo India proposes to issue New Securities to any Person(s) other than to the Investor (and other than Exempted New Securities) after the Effective Date at a price per Security less than Rs. 39 per Share or an amount as adjusted against any subsequent dilutions pursuant to Section 4(b), the number of Shares into which Investor’s OCRPSs are convertible shall be adjusted, to reflect the price at which the New Securities are being offered;

 

ii)              Napo  proposes to issue New Securities to any Person(s) other than Napo India (other than Exempted New Securities) after the Effective Date, and prior to a Liquidity Event, at a price per Security less than US$ 0.85 per share or an amount as adjusted against any subsequent dilutions pursuant to Section 4(b) (the “Dilutive Price”), Napo shall issue to Napo India additional shares of Series C Preferred Stock such that the aggregate number of shares of  Series C Preferred Stock held by Napo India shall equal the quotient obtained by dividing the Investment Amount by the Dilutive Price.

 

iii)           Nothing in this Section 4(c) shall apply to any issuance of Exempted New Securities by Napo or Napo India.

 

d)             Drag Along Rights. Napo India shall be subject to drag-along rights of Napo in accordance with the terms and conditions of the  Third Amended and Restated Investor Rights Agreement attached hereto as Annexure III. The Investor shall be subject to drag-along rights of Napo India, such that, if sixty-seven percent (67%) or more of the holders of the Share Capital of Napo India sells their shares to a third party (“Selling Shareholders”), and in the event the Investor is holding the OCRPSs or Shares, the Selling Shareholders shall have the right and the Investor shall have the obligation to sell all the OCRPSs or Shares along with the Selling Shareholders on the same terms and conditions. In the event that, prior to a Liquidity Event, the Investor still holds the

 

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OCRPSs and does not wish to sell its holding on such terms and conditions, the Investor may redeem the OCRPSs pursuant to Section 2(b) above.

 

e)              Transfer of Securities.

 

i)                 The Investor may Transfer the OCRPSs and the Shares held by it to any Person subject to the requirements of applicable Laws, including specifically, applicable securities Laws of India.  Provided that any such Transfer of at least half the number of all the OCRPS’s and Shares as adjusted pursuant to Section 4(c) to any Person (“Transferee”) would entitle the Transferee to certain rights  subject to such Transferee executing a deed of adherence as set forth in Annexure V.  Such Transferee shall have the rights and obligations of the Investor as set forth in this Agreement; provided, however, that the Transferee shall not under any circumstances have the board rights or affirmative voting and veto rights of the Investor pursuant to Section 5 below;

 

ii)              After conversion of the OCRPSs to Shares, the Investor may Transfer the Shares but not less than all of the Shares to any Transferee subject to the requirements of applicable Laws, including specifically, applicable securities Laws of India. The Transferee would, subject to executing a deed of adherence as set forth in Annexure V, have the same rights of the Investor as set forth in this Agreement; provided, however, that the Transferee shall not under any circumstances have the board rights or affirmative voting and veto rights of the Investor pursuant to Section 5 below.

 

iii)           Prior to the redemption, conversion or exchange of the OCRPSs by the Investor in accordance with the terms of this Agreement, Napo India shall not Transfer the Napo India Series C Preferred Stock or Napo India Common Stock to any Person except with the prior written consent of the Investor.

 

5)             CORPORATE GOVERNANCE AND MANAGEMENT

 

a)             Board of Directors. Until a Liquidity Event, the number of directors constituting the entire Board of Napo shall not exceed eleven (11). All directors of Napo and Napo India shall be elected by the shareholders in accordance with the bylaws of Napo or Napo India, as the case may be, and the provisions of this Agreement.

 

b)             Investor Director. From the Effective Date until immediately prior to a Liquidity Event, the Investor shall have the right to nominate one director (“Investor Director”) on the board of directors of Napo until termination of this Agreement, provided, however, that the Investor has agreed to suspend its right to such nomination to the board of Napo until July 15 , 2006  (the “Board Tenure”). Upon a Liquidity Event, the Investor’s right to nominate the Investor Director in Napo shall terminate and any existing Investor Director term shall automatically terminate.  However, the Investor will have the right to appoint an Investor Director to the Board of Napo India until the termination of this Agreement.  During the Board Tenure, the Investor Director shall be a director whose office is not liable to be vacated by retirement or by rotation. Subsequent to the occurrence of a Liquidity Event  until termination of this Agreement, the Investor shall be entitled to nominate an observer to the board of Napo after July 15, 2006, if and only to the extent the Investor does not have the right to nominate an Investor Director to Napo’s Board. For the avoidance of doubt : (i) such observer shall not have any rights of a director other than to merely attend meetings of the board of Napo; (ii) all costs in relation to such observer’s participation in the board of Napo shall be exclusively borne by the Investor. However at the option of the Investor, Napo will include the  observer in the Board Meeting through video conferencing / telephone calls.  Such observer shall be subject to Napo’s

 

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customary confidentiality agreements and may be excused from any Napo Board meetings where counsel to Napo reasonably believes that the attorney client privilege may be impacted by such observer’s attendance.

 

c)              Right To Nominate, Alternate Director; No Proxies: In the event of the departure of the Investor Director, the Investor shall have the right to nominate an alternate director to be duly appointed in place of the original Investor Director. In the event that the duly appointed Investor Director is unable to attend any particular board meeting or any meeting of a committee on which he or she sits, the Investor Director may send another individual to attend such meeting in his or her stead; provided, however, that the individual substituting for the duly appointed Investor Director (i) must also be a senior executive employee of the Investor and (ii) may not serve as a proxy for purposes of voting in the Investor Director’s stead insofar as the board of directors of Napo is concerned. For the avoidance of doubt, such Person substituting for the duly appointed Investor Director to the board of directors of Napo India may serve as a proxy for purposes of voting in the Investor Director’s stead. In all cases, such alternate shall be subject to such confidentiality obligations as imposed on Napo or Napo India’s employee’s or consultants and may be excluded from such meetings where the attorney-client privilege may otherwise be impaired as determined by counsel for such company

 

d)             Rights of Investor Director. The Investor Director shall have the same voting rights as any other director on the board of directors of Napo or Napo India, subject to applicable Law.

 

e)              Committees of the Board. During the Board Tenure, subject to approval of the board of the respective company, whenever the board of Napo India or Napo forms any committee, the Investor Director will have the right to participate on that committee. The Investor Director shall be given notice of all meetings in accordance with the bylaws, and shall be deemed to be present through video-conference participation or otherwise on the board and on the committees to which he or she has been nominated.

 

f)               Reasonable Expenses. All reasonable and documented expenses incurred by the Investor Director for attendance at a meeting of the board of directors of Napo or Napo India shall be borne by Napo or Napo India, as the case may be.

 

g)              Notice.  A meeting of the board of directors of Napo or Napo India may be called in accordance with the bye-laws or articles of association. The Investor shall be entitled to a written agenda, which may be delivered by electronic mail or otherwise, specifying in reasonable detail the business of such meeting. Subject to the above, Napo or Napo India (as the case may be) shall ensure that notice of a meeting of the board of directors is received in compliance with applicable Law and the bye-laws or articles of association prior to such meeting of the board of directors.

 

h)             Telephonic and Video-Conferencing Participation.  If permitted by applicable Law and Napo’s bye-laws or the articles of association of Napo India, as the case may be, the Investor Director may at his or her option participate in meetings of the board of directors by telephone or video conferencing or any other means of contemporaneous communication, provided that the Investor Director must acknowledge his presence for the purpose of the meeting and the Investor Director not doing so shall not be entitled to speak or vote at the meeting. The Investor Director may not leave the meeting by disconnecting his telephone or other means of communication unless he has previously obtained the express consent of the chairman of the meeting and the Investor Director shall conclusively be presumed to have been present and formed part of the quorum at all times during the meeting unless he has previously obtained the express consent of the chairman of the meeting to leave the meeting as aforesaid.

 

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i)                 Affirmative Voting Matters. Until the earlier to occur of (i) a Liquidity Event; or (ii) termination of this Agreement,  no action set forth below may be taken by Napo at a meeting of the board of directors (or committee thereof) or at a shareholders’ meeting, in connection with any of the matters set forth in this Section 5(i) without the affirmative vote of the Investor Director (in the case of a meeting of the board of directors) and the Investor in the case of shareholders meeting, without which such matter shall be deemed not to be approved. The Investor agrees not to unreasonably withhold, condition or delay its affirmative vote in respect of such matters. Until the termination of this Agreement in accordance with Section 17, no action set forth below may be taken by Napo India at a meeting of the board of directors (or committee thereof) or at a shareholders’ meeting, in connection with any of the matters set forth in this Section 5(i) without the affirmative vote of the Investor Director (in the case of a meeting of the board of directors) and the Investor in the case of shareholders meeting, without which such matter shall be deemed not to be approved. The matters which shall be subject to the provisions of this Section 5(i) are:

 

i)                 So long as the Investor holds any OCRPSs, any action that authorizes, creates or issues debt instruments which are more favourable or superior to the terms of the OCRPSs.

 

ii)              Any amendments to the memorandum of association, articles of association or by-laws of Napo India or the Third Amended and Restated Certificate of Incorporation, as amended or bylaws of Napo to the extent such amendment adversely affects the rights and interest of the Investor and not the other stockholders of Napo (i.e. providing for the conversion of the Series C Preferred Stock into Common Stock upon a Liquidity Event or vote of the stockholders under the Certificate or the elimination of Napo’s or any stockholder’s right of first refusal under the Bylaws are, for example, actions that would not require the Investor’s consent). Notwithstanding the foregoing, the provisions of this Agreement shall not be modified without the written consent of the Investor

 

iii)           Any changes in the accounting year of Napo or Napo India.

 

iv)          Any business other than the Business.

 

v)             Issuance of New Securities, buy-back, re-purchase, redemption of Securities of Napo or Napo India other than: (1) the issuance of Exempted New Securities and/or (2) the issuance of Series C Preferred Stock for an amount aggregating up to US $6,500,000 to third party investors in the current second tranche of the Series C round of funding for an aggregate amount not exceeding $10,136,015.

 

j)                Budgetary and Financial Estimates. Prior to the commencement of any Financial Year, until a Liquidity Event, the board of directors of Napo and Napo India shall approve on an annual basis the following :

 

i)                 Estimated sources and applications of funds;

 

ii)              Estimated profit and loss account;

 

iii)           Estimated balance sheet; and

 

iv)          Detailed assumptions underlying the forecasts for sub-clauses (i) — (iii); above.

 

k)             ESOP Plan and Compensation Committee. The board of directors of Napo shall establish or maintain an employee stock option plan (“ESOP Plan”). The ESOP Plan shall be administered by a compensation committee of the board of directors of Napo

 

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(“Compensation Committee”). Until a Liquidity Event and only during the Board Tenure, the Investor shall have the right to nominate the Investor Director to the Compensation Committee.

 

l)                 Use of Funds. Napo India shall utilize the Investment Amount exclusively for the purposes of subscribing to the Napo India Series C Stock in accordance with the Transaction Agreements.

 

6)             UNDERTAKINGS AND REPRESENTATIONS BY NAPO

 

a)             Napo hereby undertakes as follows :

 

i)                 Non-Transfer of Napo India Shareholding. It shall not Transfer its shareholding or any portion of such shareholding, in Napo India until the earlier of the following: (i) termination of this Agreement; or (ii) the Investor has exchanged the OCRPSs for Napo India Series C Preferred Stock.

 

ii)              Prohibition on Encumbrance. It shall not create an Encumbrance over its shareholding or any portion of its shareholding in Napo India, or commit any act which has the effect of being detrimental to the beneficial and fiduciary rights and obligations of Napo India in its capacity as a controlling shareholder of Napo India without the express written consent of the Investor.

 

iii)           Amendment to Charter Documents. It shall, to the extent required under applicable Law, to make the provisions of this Agreement legally enforceable, amend the relevant provisions of the memorandum of association, articles of association, and bylaws of Napo India and the Certificate of Incorporation of Napo.

 

iv)          Indemnity Regarding Management Team.  Napo shall indemnify the Investor with respect to any third party claim arising out of a breach of the representation set forth in Section 7(a)(v) below.

 

b)             Merger Opportunities. After July 15, 2006 and only until a Liquidity Event, Napo shall undertake to evaluate reasonable proposals submitted by the Investor for potential mergers, acquisitions and/or amalgamation of/by/into other entities engaged in related lines of activities or Business. Provided that Napo shall not be under any obligation to accept or adopt such proposals if such proposals, in the reasonable opinion of the board of directors and the then current Management Team, are not in the best interests of Napo or its shareholders. Napo and the Investor confer on a good faith basis in evaluating any such proposals pursuant to this Section 6(b).

 

7)             UNDERTAKINGS AND REPRESENTATIONS BY THE MANAGEMENT TEAM

 

a)             Undertakings. Each of the members of the Management Team, for so long as he or she remains a member of the Management Team,  hereby undertake as follows :

 

i)                 Issuance of Instruments/Stock. Each Person shall not in any manner obstruct, impede, hinder, block or deter the issuance and allotment of the Instruments by Napo India to the Investor and/or the Series C Preferred Stock, by Napo to Napo India in accordance with the Subscription Agreement and this Agreement.

 

ii)              Appointment to the Board. Each Person shall not in any manner obstruct, impede, hinder, block or deter the appointment of an Investor Director to the board of directors of Napo or Napo India (as the case may be), in accordance with the terms of this Agreement.

 

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iii)           Encumbrance. Except pursuant to, in connection with and only until a Liquidity Event, and except as may be required by applicable Law or court order, each Person shall not create an Encumbrance of the Napo Shares held by such Person as of the date hereof or commit any act which has the effect of being detrimental to the beneficial and fiduciary rights and obligations of such Person in Napo in his or her capacity as a member of the Management Team without the express written consent of the Investor, which consent shall not be unreasonably withheld,  conditioned or delayed, by the Investor provided that such Person shall be entitled to create any Encumbrance on his or her Napo Shares in favour of a banking institution or organization or another reputable financial institution for purposes of availing himself or herself of any financial assistance.

 

iv)          Napo Shares Lock-Up. Subject to applicable Law, such member of the Management Team shall not Transfer any of the Napo Shares held by such Person as of the Effective Date until the earlier of the following: (i) termination of this Agreement; or (ii) occurrence of a Liquidity Event; provided, however, that this covenant shall not preclude an Person from transferring any portion of his or her Napo Shares to family trusts (established for the benefit of family members) and/or family members so long as such person has entered into a deed of adherence in form annexed hereto as Annexure V.  Upon the occurrence of a Liquidity Event, each Person shall comply with all regulatory and underwriter requirements with respect to holding periods and lock-ups on his or her Napo Shares, but the restriction on Encumbrances set forth in Section 7(a)(iii) will no longer apply.

 

v)             No Conflict. Each Person by undertaking his or her respective responsibilities in the Napo Group will not be in violation of any judgment, decree or order, or any term of any employment contract relating to such Person’s previous employment.

 

vi)          Amendment to Charter Documents. Each Person shall to the extent required under, and subject to applicable Law to make the provisions of this Agreement legally enforceable, cause to amend the relevant provisions of the memorandum of association, articles of association, and by-laws of Napo India and the Certificate of Incorporation of Napo.

 

vii)       Supporting Liquidity Events. In connection with the first Liquidity Event, each Person shall not unreasonably withhold, condition or delay approval or consent to such Liquidity Event in their capacity as a stockholder and shall extend all reasonable co-operation and support as a stockholder in effecting a Liquidity Event, as may be approved by the Board of Directors of Napo.

 

b)             Specific Undertakings.  Ms. Lisa A Conte and Dr. Stephen R King undertake that each of them shall continue to be in the employment of Napo until the occurrence of a Liquidity Event, and thereafter until expiration of any lock-up period to which each of them may be subjected, such continued employment, to be on terms no less favorable to either of them than those terms upon which each is currently employed, and subject to customary increases to such terms from time to time.

 

c)              Representations. Each of the members of the Management Team hereby represent and warrant to the Investor that:

 

i)                 to the best of such Person’s knowledge no order has been made and no resolution has been passed for the winding up of Napo or of Napo India for a provisional liquidator to be appointed in respect of Napo or Napo India and no petition has been presented and no meeting has been convened for the purpose of winding up Napo or Napo India.

 

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ii)              to the best of such Person’s knowledge no receiver has been appointed in respect of Napo or Napo India or all or any of their assets.

 

iii)           So long as Section 7(b) requires the undertakings set forth therein, subject to applicable Law, such members will not initiate new activities that could be in direct competition to the Napo Group’s existing or proposed Business through any vehicle other than Napo or its subsidiaries.

 

8)             EXCHANGE, CONVERSION OR REDEMPTION OF OCRPSs

 

a)             In the event of Scenario 1, the Investor shall have until the earlier of: (1) eighteen (18) months calculated from the occurrence of the Change of Law; (2) four years from the Effective Date (“Exercise Period”) to elect subject to and in compliance with applicable Law and any contractual lock-ups and market standoff requirements to exchange all the OCRPSs held by it for the Napo India Series C Preferred Stock (“Exchange Right”). The Investor shall send a written notice of its intention to exercise its right to exchange all the OCRPSs for the Napo India Series C Preferred Stock by sending a written notice to Napo India. Subject to the foregoing, within fourteen (14) Business Days of the exercise of  the Exchange Right by the Investor, the following shall occur simultaneously :

 

i)                 Napo India shall transfer the Napo India Series C Preferred Stock to the Investor.

 

ii)              The Investor shall Transfer all the Instruments held by it to Napo India or Napo or to such other Person as nominated by Napo India and in the case of the Shares such shares shall be transferred for a consideration being the par value of such Shares.

 

If the Investor exercises the Exchange Right, upon transfer of the Napo India Series C Preferred Stock to the Investor, the Investor shall have all the rights of holders of Series C Preferred Stock as set forth in the Series C Documents, as amended from time to time. In the event, the Investor has not exercised the Exchange Right within the Exercise Period, then Investor shall no longer have the right to exercise the Exchange Right.

 

b)             In the event that there occurs a Change of Law and, during the Exercise Period, the Investor has not elected to exercise the Exchange Right, then, if Napo has or has had a Liquidity Event, all the OCRPSs held by the Investor shall automatically be exchanged for the Napo India Series C Preferred Stock and the Investor shall automatically be deemed a party to the Series C Documents, and, as a condition to receiving the share certificates of Napo India Common Stock shall execute the Series C Documents as requested by Napo. The exchange of all the OCRPSs for the Napo India Series C Preferred Stock shall be in accordance with Section 8(a)(i) and (ii).

 

c)              In the event of Scenario 2, subject to applicable Law and any contractual limitations imposed on Napo India, including but not limited to any lock-ups imposed in connection with a Liquidity Event, at the sole option of the Investor, Napo India shall sell such number of Napo India Common Stock shares as may be  instructed in writing by the Investor to Napo India (but shall have no additional obligation, beyond that owed to any other holder of Series C Preferred Stock, to register  the Napo India Common Stock or to pay any fees or expenses except to cover customary brokerage fees, if any which will be calculated in determining the Liquidity Amount in any event). Within fifteen (15) Business Days from the receipt of the Liquidity Amount, Napo India shall utilize the Liquidity Amount, subject to the provisions of the Companies Act, 1956, to redeem such number of  OCRPSs held by the Investor pro rated with respect to the number of shares of Napo India Common Stock sold. Simultaneously, with the receipt of the Liquidity Amount, the Investor shall sell and Napo shall have the right to purchase or nominate a Person to

 

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purchase such number of the Investor Shares, pro rated with respect to the number of shares of Napo India Common Stock sold. This pro rated sale of the Investor Shares shall apply to each successive sale of Napo India Common Stock, such that when all the Napo India Common Stock is finally sold, then the Investor shall have no further Instruments or rights in Napo India.

 

d)             In the event of Scenario 3, within 15 Business Days from the expiry of the Tenure, Napo India shall redeem all of the OCRPSs for an amount equivalent to the Redemption Amount and shall credit a bank account as designated by the Investor with the Redemption Amount. Simultaneous, with the occurrence of the redemption (as the case may be), the Investor shall sell all Shares held by it to Napo or to such other Person as nominated by Napo Group for a consideration being the par value of such Shares.

 

e)              Pursuant to Section 2(b)(v), in the event the Investor proposes to convert the OCRPSs into Shares of Napo India, it shall send a written notice to Napo India (“Conversion Notice”) expressing its intention to convert all the OCRPSs into Shares of Napo India. Within fourteen (14) Business Days of receipt of the Conversion Notice, Napo India shall subject to applicable Law issue and allot such number of Shares equivalent to the Investor Share Entitlement to the Investor.

 

f)               Notwithstanding anything to the contrary mentioned in this Agreement, in the event the Investor ceases to hold the OCRPSs or any Shares and has received all amounts owed to it pursuant to this Agreement, the Investor will cease to have any rights in relation to the OCRPSs or in respect of the management and affairs of Napo India, or any interest in the Napo India Series C Preferred Stock or Napo India Common Stock or Napo or this Agreement.

 

9)             EXIT MECHANISM

 

a)             Liquidity Events. The Napo Group and the Management Team agree to work towards creating a Liquidity Event, such as one listed in Section 9 (b) below, for the investment of the Investor pursuant to this Agreement within a period of three years from the Effective Date. Napo Group shall bear all expenses for the Liquidity Event.

 

b)             Possible Liquidity Events.  The Parties shall in good faith consider any one of the following actions as a Liquidity Event:

 

i)                 Listing of shares of Napo India or Napo through an IPO or Offer for Sale;

 

ii)              Sale of  Napo India or Napo;

 

iii)           Induction of new investors or strategic partners (other than in the ordinary course of business);

 

iv)          Buyback of Securities ;

 

v)             Merger of Napo India or Napo with other listed companies

 

vi)          Sale/transfer of substantially all the assets of Napo India or Napo. which assets shall include but not be limited to drug molecules, intellectual property rights in relation to drugs, brands.

 

c)              Investor’s Right To Opt — Out of Liquidity Events.   If the Investor choses not to participate in the Liquidity Events being either of the following: (x) a merger with another listed company in which Napo is not the surviving company; or (y) a sale/transfer of substantially all the assets of Napo India or Napo which assets shall include but not be

 

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limited to drug molecules, intellectual property rights in relation to drugs, brands, the Napo Group shall have the obligation and the Investor shall have the right and obligation to redeem all the OCRPSs held by it for the Redemption Amount.

 

d)             Preference over Management Team.   For a period of twelve (12) months from the Liquidity Event, the Investors shall have preference over the Management Team, to exit when any subsequent Liquidity Event occurs. The Management Team members shall not unreasonably withhold approval and shall do all acts and deeds reasonably required to effectuate such liquidity. The Investor shall not be considered a Promoter of the project and therefore the Investor’s shares shall not be subject to any statutory lock up restrictions arising from an IPO in India or US subject, however, to applicable Law and/or requirements of investment bankers/underwriters as required in  such public offering.

 

e)              No Restrictions on Investor. In the event of the occurrence of a Liquidity Event, subject to applicable Law and except for the requirements of investment bankers and underwriters in relation to a public offering of securities, the Securities held by Napo India and/or the Investor shall not be subject to any other “lock-up” requirements or be subject to any transfer restrictions of similar nature.

 

10)      ACCOUNTS AND PROVISION OF INFORMATION

 

a)             Auditors. Napo Group shall appoint reputable auditors to audit the accounts and financial statements of Napo, Napo India and their respective Subsidiaries.

 

b)             Information Rights. Until the occurrence of a Liquidity Event or the termination or expiry of this Agreement, subject to confidentiality obligations as may be reasonably required by the Napo Group, Napo Group shall provide the Investor with the following information :

 

i)                 Commencing with  quarter beginning July 1, 2006, quarterly, semi-annual and unaudited annual accounts within thirty (30) days after the end of each relevant quarter, and half-year and within forty-five (45) days after the end of the financial year (“Financial Statements”).

 

ii)              Each Financial Statement shall be accompanied by a report from the chief executive officer (“CEO Report”). The CEO Report shall provide a discussion on the key issues in relation to the affairs and management of the Napo Group and variances if any to the budget and a comparison of the Financial Statement to the financial statement pertaining to the immediately succeeding period.

 

iii)           MIS reports (in a format to be mutually agreed upon) within fifteen (15) days after the end of each month.

 

iv)          Access to Napo Group Information: Until the occurrence of a Liquidity Event, the Napo Group shall upon reasonable prior notice allow the Investor and its authorised representatives the right during normal business hours to inspect its books and accounting records and those of its Subsidiaries, to make extracts and copies there from at its own expense provided that Napo Group shall at its reasonable discretion require the Investor and its authorised representatives to enter into appropriate confidentiality obligations prior to such inspection, and access of information.

 

11)      DEFAULT AND REMEDY

 

a)             In the event of any Party committing a breach of any of its material obligations pursuant to and in accordance with this Agreement and the Subscription Agreement and failing to rectify the same within a period of ninety (90) Business Days of receipt of a written notice

 

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of such breach, the aggrieved Party shall be entitled to invoke the dispute resolution provision set forth in Section 16(b),  below, and may exercise all its rights in law, equity or otherwise.

 

12)      REPRESENTATIONS AND WARRANTIES

 

a)             Each Party represents, severally and not jointly, to the other Parties hereto that :

 

i)                 such Party has the full power and authority to enter into, execute and deliver this Agreement and to perform the transactions contemplated hereby and, if such Party is not a natural Person, such Party is duly incorporated or organised with limited liability and existing under the laws of the jurisdiction of its incorporation or organisation;

 

ii)              the execution and delivery by such Party of this Agreement and the performance by such Party of the transactions contemplated hereby have been duly authorised by all necessary corporate or other action of such Party;

 

iii)           assuming the due authorisation, execution and delivery hereof by the other Parties, this Agreement constitutes the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganisation, moratorium or similar laws affecting creditors’ rights generally; and

 

iv)          the execution, delivery and performance of this Agreement by such Party and the consummation of the transactions contemplated hereby will not (i) violate any provision of the organisational or governance documents of such Party, (ii) require such Party to obtain any consent, approval or action of, or make any filing with or give any notice to, any governmental authority in such Party’s country of organisation or any other Person pursuant to any instrument, contract or other agreement to which such Party is a party or by which such Party is bound, other than as specifically contemplated or set forth in this Agreement and the Subscription Agreement; (iii) conflict with or result in any material breach or violation of any of the terms and conditions of, or constitute (or with notice or lapse of time or both constitute) a default under, any instrument, contract or other agreement to which such Party is a party or by which such Party is bound, (iv) violate any order, judgment or decree against, or binding upon, such Party or upon its respective securities, properties or businesses, or (v) other than as contemplated or set forth in this Agreement violate any Law  or regulation of such Party’s country of organisation or any other country in which it maintains its principal office. Without limiting the exceptions to the foregoing, it is acknowledged and contemplated that applicable securities laws and employment laws and public policy may limit the actions or require prior consents to the performance of the Napo Group’s obligations hereunder.

 

v)             So long as Section 7(b) requires the undertakings set forth therein, subject to the disclosure regarding Napo’s use of part-time employees and consultants, set forth on Annexure I attached hereto, the full-time Management Team members shall not assume any executive responsibilities in any other company without the prior approval of the Investor and shall ensure that any activity assumed by them does not result in dilution of management time spent by them on the activities of Napo Group.

 

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13)      CONFIDENTIALITY

 

a)             The Investor undertakes that it shall not reveal, and shall use its reasonable efforts to ensure that its directors, officers, managers, partners, members, employees, legal, financial and professional advisors and bankers (collectively, “Representatives”) do not reveal, to any third party any Confidential Information without the prior written consent of  Napo. The term “Confidential Information” as used in this Agreement means (a) any information concerning the organisation, business, technology, trade secrets, know-how, finances, transactions or affairs of Napo India or Napo or the Investor or any other Party or any of their respective Representatives or affiliates (whether conveyed in written, oral or in any other form and whether such information is furnished before, on or after the date hereof), (b) any information or materials prepared by a Party or its Representatives that contains or otherwise reflects, or is generated from, Confidential Information and (c) the terms of this transaction (except to the extent and in the manner as the transaction is required under applicable Law to be disclosed or may be publicly announced or published by mutual written agreement among the parties.)

 

b)             Napo and Napo India undertake that they shall not reveal, and shall use their respective reasonable efforts to ensure that their respective Representatives do not reveal, to any third party any Confidential Information of Investor without the prior written consent of the Investor.

 

c)              Notwithstanding the foregoing, the provisions of Section 13 (a) and Section 13(b)  shall not apply to :

 

i)                 disclosure of Confidential Information that is or becomes generally available to the public other than as a result of disclosure by or at the direction of a Party or any of its Representatives in violation of this Agreement;

 

ii)              disclosure by a Party to its Representatives provided such Representatives are bound by similar confidentiality obligations;

 

iii)           disclosure, after giving prior notice to the other Parties to the extent practicable under the circumstances and subject to any practicable arrangements to protect confidentiality, to the extent required under the rules of any stock exchange or by applicable laws or governmental regulations or judicial or regulatory process or generally accepted accounting principles applicable to any Party or in connection with any judicial process regarding any legal action, suit or proceeding arising out of or relating to this Agreement; and

 

iv)          disclosure by Napo India or Napo of Confidential Information concerning Napo India or Napo or the terms of this Agreement that is reasonably necessary in the ordinary course of business or otherwise in connection with or pursuant to transactions or proposed transactions of Napo India or Napo, including but not limited to a listing on AIM or the London Stock Exchange.

 

v)             disclosure by Napo India or Napo of Confidential Information to existing investors of Napo including but not limited to Glenmark Pharmaceuticals and Asia Pharm.

 

14)      FURTHER ASSURANCES

 

a)             Each Party shall, at any time and from time to time upon the written request of any other Party :

 

i)                 promptly and duly execute and deliver all such further instruments and documents, and do or procure to be done all such acts or things, as such other Party may reasonably deem necessary or desirable in obtaining the full benefits of this Agreement and of the rights and ownership herein granted;

 

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ii)              do or procure to be done each and every act or thing which such other Party may from time to time reasonably require to be done for the purpose of enforcing such other Party’s rights under this Agreement.

 

15)      NOTICES

 

a)             Each notice, demand or other communication given or made under this Agreement shall be in writing and delivered to the relevant Party at its address or fax number set out below (or such other address or fax number as the addressee has by three (3) Business Days’ prior written notice specified to the relevant Party) :

 

To Napo India :                                                         Napo India Private Ltd.

c/o AZB & Partners

23rd Floor, Express Towers

Nariman Point

Mumbai — 400 00

India

 

Attention: Shuva Mandal

 

To Investor :                                                                          IL&FS Investment Managers Ltd.

IL&FS Financial Centre

C-22, G Block,

Bandra Kurla Complex

Bandra (East), Mumbai 400 051

India

 

Attention: Deepa Sankaran

 

To Napo :                                                                                         Napo Pharmaceuticals, Inc.

1170 Veterans Blvd., Suite 244

South San Francisco, California 94080

USA

 

Attention:  Chief Executive Officer

Copy:                                                                                                              Donald C. Reinke

Reed Smith LLP

II Embarcadero Center, 20th Floor

San Francisco, CA 94111

415.391.8269

 

To Management Team:     Napo Pharmaceuticals, Inc.

1170 Veterans Blvd., Suite 244

South San Francisco, California 94080

USA

 

Attention:  Chief Executive Officer

 

Any notice, demand or other communication so addressed to the relevant party shall (a) where sent by registered post or private courier shall be deemed to have been delivered when actually delivered to the relevant address and receipt is confirmed by the government or private carrier; and (b) where sent via facsimile, shall be deemed to have been delivered upon receipt of a transmission report confirming dispatch.

 

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16)      GOVERNING LAW AND DISPUTE SETTLEMENT

 

a)             Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, United States of America, applicable to contracts as if entered into solely by Delaware residents and to be performed entirely within Delaware (excluding that body of law know as conflicts of law).

 

b)             Arbitration. In the case of any dispute or claim arising out of or in connection with or relating to this Agreement, or the breach, termination or invalidity hereof, the Parties shall attempt to first resolve such dispute or claim through discussions between senior executives of each Party. If the dispute is not resolved through such discussions within ten (10) Business Days after one Party has served a written notice on the other Party requesting the commencement of consultation, such dispute shall be referred to the highest ranking executive of each Party for resolution.  If the dispute is still not resolved through discussions between the highest ranking executives of the Parties within a further seven (7) Business Days, then the dispute or claim shall be finally settled by arbitration under the United Nations Commission on International Trade Law Arbitration Rules (the “UNCITRAL Rules”) as are in force at the time of any such arbitration and as may be amended by the rest of this Section 16(b). For the purpose of such arbitration, there shall be three arbitrators who shall be appointed by the relevant Parties in accordance with the UNCITRAL Rules (the “Arbitration Board”). The Investor shall appoint one arbitrator and the CEO of Napo shall appoint one arbitrator. The two arbitrators so appointed shall appoint the third arbitrator as may be mutually agreed amongst them. All arbitration proceedings shall be conducted in the English language and the place of arbitration shall be in New York City. The Parties shall be entitled to seek injunctive reliefs from the courts of India.  The arbitrators shall decide any such dispute or claim strictly in accordance with the governing law specified in Section 16(a). Judgement upon any arbitral award rendered hereunder may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.

 

c)              Good Faith. Each Party shall co-operate in good faith to expedite (to the maximum extent practicable) the conduct of any arbitral proceedings commenced under this Agreement.

 

d)             Costs and Expenses. The costs and expenses of the arbitration, including, without limitation, the fees of the arbitration and the Arbitration Board, shall be determined by the Arbitration Board. The Arbitration Board would have the power to award interest on any sum awarded pursuant to the arbitration proceedings and such sum would carry interest, if awarded, until the actual payment of such amounts.

 

e)              Final and Binding. Subject to applicable Law, any award made by the Arbitration Board shall be final and binding on each of the Parties that were parties to the dispute.  The Parties expressly agree to waive the applicability of any laws and regulations that would otherwise give the right to appeal the decisions of the Arbitration Board so that there shall be no appeal to any court of law for the award of the Arbitration Board, and that a Party shall not challenge or resist any enforcement action taken by any other Party in any court of law in whose favour an award of the Arbitration Board was given.

 

17)      TERM

 

a)             The  obligations of each party under this Agreement shall  continue until the earliest to occur of:

 

i)                 the expiry of the Tenure and after the Investor has received the Redemption Amount; or

 

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ii)              the Investor receiving the Liquidity Amount;

 

iii)           occurrence of a Change of Law whereby the Investor is permitted under applicable Law to own and hold Series C Preferred Stock, upon which effective date,  Napo India sells the Napo India Series C Preferred Stock to the Investor and Investor transfers all the Instruments in accordance with the terms and conditions of this Agreement.

 

at which time, this Agreement and the obligations of each party shall terminate; provided, however, that Sections 12 to 16 shall survive any such termination.

 

18)      MISCELLANEOUS

 

a)             Amendment: This Agreement may not be amended, modified or supplemented except by a written instrument executed by Napo, Napo India and the Investor.

 

b)             Waiver: No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by the Party waiving such provision.  No failure or delay by a Party in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of the same preclude any further exercise thereof or the exercise of any other right, power or remedy.  Without limiting the foregoing, no waiver by a Party of any breach by another Party of any provision hereof shall be deemed to be a waiver of any subsequent breach of that or any other provision hereof.

 

c)              Assignment: Neither this Agreement nor any of the rights or obligations hereunder shall  be assignable, except with the mutual written consent of Napo, Napo India and the Investor; provided, however, that the Investor may assign its rights under this Agreement subject to applicable Law (except for its rights set forth in Section 5). .

 

d)             Entire Agreement: The Transaction Agreements together with the Series C Documents constitute the whole agreement between the Parties relating to the subject matter hereof. No party relied upon any representation or warranty in entering this Agreement other than those expressly contained in the Transaction Agreements. Notwithstanding anything mentioned in any other document, the Transaction Agreements supersede all term sheets.

 

e)              Severability: Each and every obligation under this Agreement shall be treated as a separate obligation and shall be severally enforceable as such and in the event of any obligation or obligations being or becoming unenforceable in whole or in part.  To the extent that any provision or provisions of this Agreement are unenforceable they shall be deemed to be deleted from this Agreement, and any such deletion shall not affect the enforceability of the remainder of this Agreement.

 

f)               Counterparts and Facsimile Signatures: This Agreement may be executed in one or more counterparts which, signed and taken together, shall constitute one document. A facsimile signature on this Agreement, if legible and complete, will be regarded as an original signature.

 

g)              Consent to Specific Performance. The Parties declare that it is impossible to measure in money the damages that would be suffered by a Party by reason of the failure by any other Party to perform any of the obligations hereunder.  Therefore, if any Party shall institute any action or proceeding to seek specific performance or enforcement of the provisions hereof, any Party against whom such action or proceeding is brought hereby waives any claim or defence therein that the other Party has an adequate remedy at law.

 

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IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the Effective Date.

 

Signed and delivered for and on behalf of

 

	
NAPO INDIA PRIVATE LIMITED
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By      :
    	
 
    
	
 
    	
 
    
	
Title   :
    	
 
    
	
 
    	
 
    
	
Signed   and delivered for and on behalf of
    	
 
    
	
 
    	
 
    
	
NAPO INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By      :
    	
 
    
	
 
    	
 
    
	
Title   :
    	
 
    
	
 
    	
 
    
	
Signed   and delivered for and on behalf of
    	
 
    
	
 
    	
 
    
	
IL&FS MANAGERS LIMITED
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By      :
    	
 
    
	
 
    	
 
    
	
Title   :
    	
 
    
	
 
    	
 
    
	
Signed   and delivered for and on behalf of
    	
 
    
	
 
    	
 
    
	
ON   BEHALF OF AND AS CONSTITUTED ATTORNEY OF THE MANAGEMENT TEAM
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By      :
    	
 
    
	
 
    	
 
    
	
Title   :
    	
 
    

 

27Exhibit 10.70

 

INVESTMENT RIGHTS AGREEMENT

 

This investment Rights Agreement (“Agreement”) entered into on this 1st day of October, 2007, by and among:

 

A.                                    IL&FS TRUST COMPANY LIMITED, a company incorporated under the Companies Act, 1956 having its Registered Office at The IL&FS Financial Centre, Plot No C-22, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051, as the trustee (“Trustee”) of the IL&FS Private Equity Trust, a trust established under the Indian Trusts Act, 1882, which is a Venture Capital Fund registered with the Securities and Exchange of India, investing through its venture capital scheme Leverage India Fund, which shall, unless repugnant to the subject or context, mean and include the Trustee for the time being and from time to time of the said trust, its successors and assigns acting through its investment manager IL&FS INVESTMENT MANAGERS LIMITED, a company incorporated in India under the Companies Act, 1956 and having its registered office at The IL&FS Financial Centre, Plot No. C-22, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051, India (hereinafter referred to as “Investor”, which expression shall, unless repugnant to the context or meaning thereof, mean and include its successors and assigns);

 

B.                                    SINDU PRIVATE LIMITED, a company organised and existing under the Companies Act, 1956, whose registered office is at 101 Jyothi Homes, Srinagar Colony, Hyderabad 500073, India, (hereinafter referred to as “Sindu” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns);

 

C.                                    NAPO PHARMACEUTICALS, INC., a company organised and existing under laws of the State of Delaware, USA, whose registered office is at 1170, Veterans Boulevard, Ste. 244, South San Francisco, California 94080, USA (hereinafter referred to as “Napo” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns); and

 

D.                                    INDUS PHARMACEUTICALS, INC., a company organised and existing under laws of the State of Delaware, USA, and parent corporation of Sindu (hereinafter referred to as “IndUS” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns) Napo, Sindu, IndUS and the Investor are hereinafter individually referred to as “Party” and collectively as “Parties”.

 

WHEREAS:

 

A.                                    Sindu is engaged in the business of conducting research and development activities for all kinds of pharmaceuticals (“Business”)

 

B.                                    Sindu, IndUS and Napo have approached the Investor with their proposal of investment in Sindu and the Investor has accepted such proposal by agreeing to invest in Sindu the INR equivalent of USD 500,000 i.e. INR 19,874,900 (“Investment Amount”) and the Shares Investment Amount in Sindu.  The Shares Investment Amount is to be invested by subscription to 10 Shares (as defined in the Subscription Agreement) and the Investment

 

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Amount is to be invested by subscription to 357,143 OCRPSs (as defined in the Subscription Agreement) (the Shares and the OCRPSs are hereinafter collectively referred to as “Sindu Equity”) to be issued by Sindu to the Investor

 

C.                                    Within ten (10) Business Days after the Investor has invested the Total Investment Amount in Sindu, and has subscribed to the Sindu Equity, Sindu shall invest an amount equal to the Total Investment Amount in Napo.  Sindu shall make such investment by subscription to the Sindu Napo Common Stock (as defined hereinafter) to be issued to Sindu by Napo at a price per Common Share of UK 70 pence pursuant to the terms of the Subscription Agreement

 

D.                                    Pursuant to the subscription agreement as of the date hereof entered into among Napo, Sindu, IndUS and the Investor (the “Subscription Agreement” and, together with this Agreement, the “Transaction Agreements”), the Investor has subscribed to the Sindu Equity

 

E.                                     The Parties are entering into this Agreement for the purpose of recording the terms and conditions regulating the relationship of the Investor, Napo, IndUS and Sindu for certain matters relating to the transfer of the Sindu Equity, and the management and operation of Sindu and their mutual rights and obligations

 

NOW, THEREFORE, the parties agree as follows:

 

1)                                     DEFINITIONS AND INTERPRETATION

 

a)                                     In this Agreement, unless the context requires otherwise, capitalised terms have the meaning ascribed to them in this Clause 1.  Capitalised terms not otherwise defined herein shall have the meaning ascribed to them in each Subscription Agreement:

 

“Affiliate” means and includes any entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a Party, where control means the ownership or control, directly or indirectly, of more than fifty percent of all of the voting power of the shares (or other securities or rights) entitled to vote for the election of directors, managers or other governing authority.  In relation to the Investor, the term Affiliate shall also mean and include any fund under the management of the Investor or under the management of the investment manager of the Investor

 

“Business Day” means any day other than a Saturday, a Sunday or any day on which banks in New York City (United States of America) and Mumbai (India) are permitted to be closed

 

“Change of Law” means a change of Law such that the Investor is permitted under applicable Law to own and hold Sindu Napo Common Stock

 

“Corporate Reorganization” means the sale of all or substantially all of the assets of Napo authorized by Napo and/or its stockholders in accordance with applicable Law, or a

 

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merger or consolidation of Napo into or with another corporation for cash and/or other consideration

 

“Corporate Reorganization Consideration” means the consideration received by Napo’s stockholders for their stock in Napo in connection with a Corporate Reorganization (net of any charges related to the receipt of such consideration, including but not limited to commissions and taxes of any kind and taxes that may be owed by Sindu to any Government Authority in respect of such consideration)

 

“Effective Date” means the Completion Date, as defined in the Subscription Agreement

 

“Encumbrance” means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, deed of trust, security interest, option, voting arrangement or other encumbrance of any kind

 

“Exempted New Securities” means Securities issued pursuant to or in connection with :  (i) sale/offerings pursuant to a registration statement filed under the Securities Act, 1933, or under any comparable securities law(s) for any recognized stock exchange, or Securities issued pursuant to or in connection with a listing under (a) the Alternative Investment Market operated by the London Stock Exchange (“AIM”) or (b) the London Stock Exchange; (ii) a merger or acquisition of another Person with the Napo Group; (iii) stock splits, stock dividend or recapitalization or distribution of profits as approved by the board of directors of Sindu or Napo; (iv) strategic acquisitions including but not limited to joint ventures/ partnerships/ alliances with vendors or those pursuant to marketing/distribution arrangements; (v) exercise or conversion of outstanding convertible securities and (vi) stock options, stock or the exercise of stock options, issued pursuant to any incentive equity plan of Sindu, IndUS or Napo

 

“Financial Year” means the financial year of Napo, which ends on December 31 of the calendar year

 

“Governmental Authority” means any nation or government or any province, state or any other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of India or the United States of America or any political subdivision thereof or of any other applicable jurisdiction; any court, tribunal or arbitrator and any securities exchange or body or authority regulating such securities exchange

 

“Investor Share Entitlement” means:

 

(a)                                 one (1) share of Sindu Napo Common Stock per OCRPS held by the Investor, at the time of determination, as may be appropriately adjusted for applicable stock splits, bonus, combinations, reclassifications and the like, or

 

(b)                                 in the event that the Investor exercises its rights under Clause 6(f) below, the larger of:

 

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(i)                                     The Pro Rata Share of Shares equal to a maximum of 5% of the paid up share capital of Sindu as on the date of conversion post issuance of Shares to the Investor, depending on the number of OCRPSs held by the Investor on such date; or

 

(ii)                                  Such number of Shares, as provides the Investor with an IRR of 30% at the Follow on Investment Valuation

 

“Law” means all applicable provisions of all (i) constitutions, treaties, statutes, laws (including the common law), codes, rules, regulations, ordinances or orders of any Governmental Authority, (ii) approvals of any Governmental Authority and (iii) orders, decisions, injunctions, judgments, awards and decrees of or agreements with any Governmental Authority

 

“Liquidity Amount” means an amount, being the net proceeds received by Sindu from the sale of Sindu Napo Common Stock including any dividend or other compensation received by Sindu on the Sindu Napo Common Stock, (net of any charges related to the sale of the Sindu Napo Common Stock that would ordinarily apply to such sale of Sindu Napo Common Stock, including but not limited to commissions and taxes of any kind and taxes that may be owed by Sindu to any Government Authority as a result of such sale)

 

“Napo Common Stock” shall mean common stock of Napo

 

“Napo Group” shall mean Sindu, IndUS or Napo, as the context may require or Sindu, IndUS and Napo, collectively

 

“New Securities” means Securities other than the exercise or conversion of outstanding convertible securities and the issuance of stock options or stock or the exercise of stock options, issued pursuant to any incentive equity plan of Sindu

 

“OCRPS” means an optionally convertible, redeemable, non-cumulative, non-participating preference share of Sindu having a par value of Rupee Ten (10), with a fixed dividend rate of 0.00001% which preference shares are:  (i) convertible into Shares of Sindu; or (ii) exchangeable for Sindu Napo Common Stock (subject to compliance with applicable Law), or (iii) redeemable under certain circumstances, for an amount as set forth in this Agreement

 

“Person” means any natural person, firm, company, Governmental Authority, joint venture, association, partnership or other entity (whether or not having separate legal personality)

 

“Pro Rata Share” means, with respect to any shareholder, the proportion that the number of Securities held by such shareholder bears to the aggregate number of Securities held by all shareholders, in each case on a fully diluted basis, in the respective company

 

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“Regulation S” means Regulation S, promulgated under the U.S. Securities Act of 1933, as amended

 

“Shares” means equity shares of Sindu having a par value of INR 10 with one vote per share

 

“Securities” means, with respect to any Person, such Person’s equity share capital, partnership interests or other ownership interests (including, without limitation, in the case of Sindu, Shares) or any options, warrants, loans or other securities that are directly or indirectly convertible into, or exercisable or exchangeable for, such equity share capital, partnership interests or other ownership interests

 

“Sindu Napo Common Stock” means the Napo Common Stock issued to Sindu upon the purchase by Sindu of Napo Common Stock and shall include Securities resulting from stock splits, stock dividend or by recapitalization or distribution of profits or on a Corporate Reorganization

 

“Subsidiary” or “Subsidiaries” means, with respect to any specified Corporate Entity, any other Corporate Entity directly controlled by such specified Corporate Entity.  For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Corporate Entity, shall mean the beneficial ownership directly or indirectly of more than 50% of the voting securities of such entity or the possession of the power to direct or cause the direction of the management or policies of such Corporate Entity through the ownership of voting securities or any other means.

 

“Corporate Entity” shall mean a corporation, a partnership, a limited liability company, a trust, or any other entity or organization

 

“Transfer” means to sell, gift, assign, amalgamate, merge or suffer to exist (whether by operation of law or otherwise) or create any Encumbrance on any Shares or any right, title or interest therein or otherwise to dispose of or alienate in any manner whatsoever

 

b)                                     Interpretation :

 

(i)                                     References to any Party shall, where the context permits, include such Party’s successors, legal representatives and permitted assigns;

 

(ii)                                  The headings are inserted for convenience only and shall not affect the construction of this Agreement;

 

(iii)                               Unless the context requires otherwise, words importing the singular include the plural and vice versa, and pronouns importing a gender include each of the masculine, feminine and neuter genders; and

 

(iv)                              The words “hereof,” “hereunder” and “hereto,” and words of like import, refer to this Agreement as a whole and not to any particular Clause hereof.

 

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2)                                     TERMS OF THE OCRPSs

 

a)                                     Tenure of the OCRPSs:  Subject to the terms of this Agreement, the OCRPSs shall have a tenure of four (4) years from the Effective Date (“Tenure”).  Subject to the terms of this Agreement, the OCRPSs shall be compulsorily redeemable by Sindu upon the expiry of the Tenure.  The OCRPSs shall be exchanged, converted or redeemed in the manner and pursuant to the terms set forth in Clause 6

 

3)                                     PURCHASE OF SINDU NAPO COMMON STOCK

 

a)                                     No later than ten (10) Business Days after the issuance of the OCRPSs to the Investor, Sindu shall subscribe for, and Napo shall issue to Sindu, the Sindu Napo Common Stock in accordance with the terms of the Subscription Agreement

 

b)                                     No later than fifteen (15) Business Days after the investment by Sindu in the Sindu Napo Common Stock, Napo Group shall arrange to open necessary trading account for selling of Sindu Napo Common Stock by Sindu whose operating/trading control shall always be with Investor

 

c)                                      If the Sindu Napo Common Stock has not been issued by Napo to Sindu by November 5, 2007 (or such later date as mutually agreed to between the Parties), then Sindu shall (and Napo undertakes that Sindu shall) redeem all the OCRPSs issued to the Investor on 6th November, 2007 for an amount that is equal to 105% of the Investment Amount (without any deductions), and thereafter neither Sindu, Napo, IndUS or the Investor shall have any further rights or obligations under this Agreement.  Simultaneously, with the receipt of the aforesaid amount, the Investor shall sell and Napo shall have the right to purchase or nominate a Person to purchase the outstanding Shares (such Shares shall be transferred for a consideration being the par value of such Shares), such that when all the Sindu Napo Common Stock is redeemed, then the Investor shall have no further Sindu Equity or any other rights in Sindu, or under this Agreement

 

4)                                     RIGHTS AND PREFERENCES OF THE INVESTOR

 

a)                                     Investor Transfer of Securities:  Subject to the conditions set forth herein below, the Investor or its Affiliates may Transfer all (and not part of) the OCRPSs (or the Shares issued to the Investor pursuant to conversion of the OCRPSs) along with all the other Shares held by it to any Person who is “Resident Indian” as defined under the Foreign Exchange Management Act, 1999, subject to the requirements of applicable Laws, including specifically, applicable securities Laws of India and subject to such Person executing a Deed of Adherence as set forth in Annexure 1.  Such Transfer shall only be permitted so long as the Transferee becomes a party to this Agreement, and shall have the rights and obligations of the Investor as set forth in this Agreement; provided, however, that the Transferee shall not under any circumstances have any board rights or affirmative rights pursuant to Clause 8 below.  Notwithstanding the foregoing, the Investor is free to Transfer their Shares to any of its Affiliates with all the rights of the Investor pursuant to this Agreement continuing to remain with the Investor

 

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b)                                     Sindu Transfer of Securities:  Except pursuant to Clauses 4(d), 6(d) and 6(e), so long as the Investor holds any OCRPSs, Sindu shall not on its own accord Transfer the Sindu Napo Common Stock equivalent to the Investor Share Entitlement without the prior written consent of the Investor

 

c)                                      Voting of Sindu Napo Common Stock:  If at any time there is a vote of stockholders of Napo, whether by written consent, or a stockholders meeting or in any other manner, Sindu shall exercise its vote(s) in the manner instructed by the Investor, the intent being that the Investor shall be entitled to vote those number of Sindu Napo Common Stock shares as equal to the Investor Share Entitlement

 

d)                                     Liquidation Preference:  If the Investor is holding OCRPSs, then in the event of winding-up, dissolution and/or liquidation of Napo, or Sindu (except by virtue of a Corporate Reorganization), to the extent of funds legally available, Sindu shall be permitted to sell the Sindu Napo Common Stock without the prior consent of the Investor, and the Investor shall be entitled to such an amount equal to the amount to which the Investor would be entitled as a creditor of Sindu up to the Liquidity Amount (net of any charges related to the receipt of such cash proceeds, including but not limited to taxes of any kind and taxes that may be owed by Sindu to any Government Authority as a result of such receipt).  In the event the amount available under applicable Law with Sindu to redeem the OCRPSs is less than the Liquidity Amount as a result of accumulated losses in Sindu or due to insufficient profits or funds for any other reason, Napo Group undertakes to immediately make available the necessary funds to Sindu to the extent of such differential amount in order to enable Sindu to redeem the applicable OCRPSs for an amount equivalent to the Liquidity Amount.  Notwithstanding the foregoing, such obligation of Napo Group will not apply in any situation in which due to a change in applicable Law from the Effective Date, force majeure, the Napo Group are prohibited from delivering the Liquidity Amount in full to the Investor in connection with redeeming the OCRPSs

 

e)                                      Pre-emptive Rights:  In the event that, after the Effective Date, and so long as the Investor holds any Sindu Equity, Sindu proposes to issue any New Securities (other than Exempted New Securities), the Investor shall have a preemptive right, to subscribe for a Pro Rata Share of such New Securities.  Not less than fifteen (15) Business Days before a proposed issuance of New Securities (a “Proposed Issuance”), Sindu shall deliver to the Investor a written notice of the Proposed Issuance setting forth (i) the number, type and terms of the Securities to be issued, (ii) the consideration to be received by Sindu in connection with the Proposed Issuance and (iii) the identity of the allottees.  Within ten (10) Business Days following delivery of the notice referred to in this Clause 4(e), the Investor, if it elects to exercise its rights under this Clause 4(e) shall give written notice to Sindu specifying the number of Securities to be purchased by the Investor (which shall not be greater than its Pro Rata Share of such New Securities) and Sindu shall issue and allot such number of New Securities to the Investor within five (5) Business Days thereafter, upon receipt of the consideration specified in the aforesaid notice.  Provided further that Sindu shall not issue any New Securities after the date of execution of this Agreement, as mentioned above, till the Completion Date, as defined in Subscription Agreement

 

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f)                                       Anti-Dilution Rights:  In the event that if, after the Effective Date but prior to the conversion or redemption or exchange of the OCRPSs in accordance with the terms of this Agreement, Sindu proposes to issue New Securities (other than Exempted New Securities) to any Person(s) other than to the Investor (“Follow on Investment Valuation”), the number of Shares that the OCRPSs shall be converted into in the event that the Investor exercises its rights under Clause 6(f) below shall be adjusted, to reflect the price at which the New Securities are being offered, such that the number of Shares that the OCRPSs held by the Investor convert into (pursuant to Clause 6(f) below) is as per its Investor Share Entitlement

 

g)                                      Dividends etc.:  In the event that post the Effective Date and prior to conversion or redemption or exchange of the OCRPSs in accordance with the terms of this Agreement, Napo declares and pays a dividend, bonus or other entitlement on the Sindu Napo Common Stock, the Investor will be entitled to any such dividend, bonus and other entitlements on the Sindu Napo Common Stock, in proportion to its Investor Share Entitlement (net of any charges related to such dividends, bonuses and other entitlements that would ordinarily apply to such payments including but not to taxes of any kind and taxes that may be owed by Sindu to any Government Authority as a result of the receipt of such payment) in accordance with the terms of this Agreement

 

5)                                     UNDERTAKINGS AND REPRESENTATIONS BY NAPO

 

a)                                     Napo and IndUS hereby undertake as follows:

 

(i)                                     Non-Transfer of Sindu Shareholding.  Except pursuant to or until a Corporate Reorganization occurring after Sindu acquires the Sindu Napo Common Stock, neither Napo (or its successors in interest), or IndUS (or its successors in interest) shall directly or indirectly Transfer its shareholding, or any portion of such shareholding, in Sindu until the earlier of the following:  (i) termination of this Agreement; or (ii) the Investor having exchanged the OCRPSs for Sindu Napo Common Stock or redeemed its OCRPSs and transferred its Shares; or (iii) the consent of all holders of the then outstanding OCRPSs has been obtained for such Transfer.  However in the event of a Corporate Reorganization Napo Group undertakes that Napo Group and/or the new entity resulting from Corporate Reorganization will guarantee the performance of the Transaction Agreements in all respects as per the obligations of Napo Group under the Transaction Agreements till the Investor receives the Liquidity Amount or the Corporate Reorganization Consideration as per Clause 6(e) of this Agreement as may be applicable

 

(ii)                                  Prohibition on Encumbrance.  Except pursuant to or until a Corporate Reorganization occurring after Sindu acquires the Sindu Napo Common Stock, neither Napo or IndUS shall create an Encumbrance over its shareholding or any portion of its shareholding in Sindu until the earlier of the following:  (i) termination of this Agreement; or (ii) the Investor has exchanged the OCRPSs for Sindu Napo Common Stock or redeemed its OCRPSs and transferred its Shares; or (iii) the consent of all holders the then outstanding OCRPSs has been

 

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obtained for such Transfer.  However in the event of a Corporate Reorganization Napo Group undertakes that Napo Group and/or the new entity resulting from Corporate Reorganization will guarantee the performance of the Transaction Agreements in all respects as per the obligations of Napo Group under the Transaction Agreements till the Investor receives the Liquidity Amount or the Corporate Reorganization Consideration as per Clause 6(e) of this Agreement as may be applicable

 

(iii)                               Amendment to Charter Documents.  Sindu shall, on or before Completion Date, amend the relevant provisions of the articles of association and bylaws of Sindu to incorporate therein the provisions of this Agreement and the Subscription Agreement.  The revised articles of association of Sindu shall be in a form satisfactory to the Investor

 

6)                                     EXCHANGE, CONVERSION OR REDEMPTION OF OCRPSs

 

a)                                     If, prior to the expiry of the Tenure, there occurs a Change of Law, then subject to and in accordance with applicable Law, as soon as practicable after such Change of Law, and in any event within 30 Business Days thereof, the Investor shall compulsorily exchange all of the OCRPSs then held by the Investor for the Investor’s Share Entitlement (“Exchange Right”).  Such transfer/exchange of OCRPSs shall be done as per applicable law without any additional cost to be incurred by Investor.  Provided that, simultaneously with such transfer/exchange, the Investor shall Transfer all the Sindu Equity held by it to Sindu or Napo, or such other Person as nominated by Napo, as per applicable law, and in the case of the Shares, such Shares shall be transferred for a consideration being the par value of such shares.  It is hereby clarified that, upon exercise of the Exchange Right, and upon consequent transfer of the Investor Share Entitlement to the Investor, the Investor shall have the rights that other holders of Napo Common Stock would have.

 

b)                                     In the event that the Investor does not exercise the Exchange Right under Clause 6(a) above, within 30 Business Days from the date of the Change in Law, all the OCRPSs held by the Investor shall automatically be exchanged for the Investor Share Entitlement, and, as a condition to receiving the share certificates in relation to the Investor Share Entitlement, the Investor shall execute such purchase agreements as reasonably requested by Sindu/Napo.  The exchange of all the OCRPSs for the Sindu Napo Common Stock and the Transfer of the Shares shall be in accordance with Clause 6(a)(i) and (ii) above.

 

c)                                      If there is no Change of Law prior to the expiry of the Tenure, then at anytime prior to the expiry of the Tenure, subject to and in compliance with applicable Law, the Investor shall have the right to cause Sindu to sell in part or full up to such number of Sindu Napo Common Stock shares as equal to such Investor’s Share Entitlement as directed by the Investor at the price determined by the Investor; provided, however, that Sindu has no obligation to sell such Sindu Napo Common Stock if there is no willing buyer for such Sindu Napo Common Stock at the price requested by the Investor (but shall have no additional obligations to pay any transfer fees or expenses except to cover customary brokerage fees, if any, which will be calculated in determining the Liquidity Amount in any event).  Upon sale of the Sindu Napo Common Stock, Sindu shall utilize the

 

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Liquidity Amount subject to the provisions of the Companies Act, 1956, and prior to use of such proceeds for any other purpose, to redeem such number of OCRPSs held by the Investor as determined below in this clause; provided, however, that the Investor’s right to instruct Sindu to transfer the Sindu Napo Common Stock, and Sindu’s obligation to transfer the Sindu Napo Common Stock, shall also be subject to any applicable Laws and regulatory holding periods.  In the event the amount available under applicable Law with Sindu to redeem the OCRPSs is less than the Liquidity Amount as a result of accumulated losses in Sindu or due to insufficient profits or funds for any other reason, Napo Group undertakes to immediately make available the necessary funds to Sindu to the extent of such differential amount in order to enable Sindu to redeem the applicable OCRPS’s for an amount equivalent to the Liquidity Amount.  Notwithstanding the foregoing, such obligation of Napo Group will not apply in any situation in which due to a change in applicable Law from the Effective Date, force majeure, the Napo Group are prohibited from delivering the Liquidity Amount in full to the Investor in connection with redeeming the OCRPSs.  Until such redemption, the Liquidity Amount will not be utilized by the Napo Group for any other purpose.  Subject to the foregoing, within fifteen (15) Business Days from the receipt of the Liquidity Amount, Sindu shall utilize the Liquidity Amount, subject to the provisions of the Companies Act, 1956, and applicable Law, to redeem such number of OCRPSs held by the Investor in the ratio of the Investor Share Entitlement with respect to the number of shares of Sindu Napo Common Stock sold (adjusted appropriately for stock splits, combinations, reclassifications and the like).  Simultaneously, with the receipt of the Liquidity Amount, the Investor shall sell and Napo shall have the right to purchase or nominate a Person to purchase such number of the Shares, pro rated with respect to the number of shares of Sindu Napo Common Stock sold (such Shares shall be transferred for a consideration being the par value of such shares).  This pro rated sale of the Shares shall apply to each successive sale of Sindu Napo Common Stock, such that when all the Sindu Napo Common Stock is finally sold, then the Investor shall have no further Sindu Equity or any other rights in Sindu, or under this Agreement

 

d)                                     If there is no Change of Law prior to the expiry of the Tenure, and the Investor has not fully exercised its rights pursuant to Clause 6(c) above, then immediately upon expiry of the Tenure, Sindu shall, without requiring the consent of the Investor, have the right to sell the outstanding Sindu Napo Common Stock held by Sindu and use the proceeds obtained therefrom to compulsorily redeem the outstanding OCRPS and credit to the Investor’s account an amount equivalent to the Liquidity Amount applicable to such outstanding OCRPS within 15 days of the date of expiry of the Tenure.  In the event the amount available under applicable Law with Sindu to redeem the OCRPSs is less than the Liquidity Amount applicable to such outstanding OCRPSs as a result of accumulated losses in Sindu or due to insufficient profits or funds for any other reason, Napo Group undertakes to immediately make available the necessary funds to Sindu to the extent of such differential amount in order to enable Sindu to redeem the applicable OCRPS’s for an amount equivalent to the Liquidity Amount.  Simultaneously, with the receipt of the Liquidity Amount, the Investor shall sell and Napo shall have the right to purchase or nominate a Person to purchase the outstanding Shares (such Shares shall be transferred for a consideration being the par value of such shares), such that when all the Sindu Napo

 

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Common Stock is finally sold, then the Investor shall have no further Sindu Equity or any other rights in Sindu, or under this Agreement

 

e)                                      Notwithstanding the foregoing, in the event of a Corporate Reorganization prior to a Change of Law where the Investor has not fully exercised its rights pursuant to Clause 6(c) above or Clause 6(f) below, then upon consummation of the Corporate Reorganization, Sindu shall redeem the OCRPS then outstanding and credited to the Investor’s account(s) in consideration of the Corporate Reorganization Consideration allocated to the Investor based on the Investor’s Share Entitlement, which consideration if in cash shall be credited to a bank account as designated by the Investor and otherwise appropriately transferred to the Investor; provided, however, that if applicable Law prohibits the Investor from receiving equity securities as the Corporate Reorganization Consideration, Sindu shall at the option of the Investor (i) pay the Investor the fair market value of such securities in cash as such equity securities are valued in the Corporate Reorganization (net of any charges related to the receipt of such consideration, including but not limited to commissions and taxes of any kind and taxes that may be owed by Sindu to any Government Authority in respect of such consideration), or (ii) establishing a structure reasonably acceptable to the Investor that would permit the Investor to retain the beneficial interest in such Corporate Reorganization securities pari passu with the Investor’s beneficial interest through the OCRPSs in the Sindu Napo Common Stock.  In the event the amount available under applicable Law with Sindu to redeem the OCRPSs is less than the Corporate Reorganization Consideration allocated to the Investor based on Investor’s Share Entitlement applicable to such outstanding OCRPSs as a result of accumulated losses in Sindu or due to insufficient profits or funds for any other reason, Napo Group undertakes to immediately make available the necessary funds to Sindu to the extent of such differential amount in order to enable Sindu to redeem the applicable OCRPS’s for an amount equivalent to the Corporate Reorganization Consideration allocated to the Investor based on Investor’s Share Entitlement.  Simultaneously, with the aforesaid, the Investor shall sell and Napo shall have the right to purchase or nominate a Person to purchase the outstanding Shares (such Shares shall be transferred for a consideration being the par value of such shares), such that when all the Sindu Napo Common Stock is finally sold, then the Investor shall have no further Sindu Equity or any other rights in Sindu, or under this Agreement

 

f)                                       At any time during the Tenure, the Investor shall be entitled to convert the OCRPSs then outstanding and Sindu shall issue to the Investor such number of Shares being equivalent to the Investor Share Entitlement; provided, however, that the Investor shall exercise the conversion option attached to all the OCRPSs held by it in a single instance and such conversion is subject to and in compliance with all applicable Laws

 

g)                                      Notwithstanding anything to the contrary mentioned in this Agreement, in the event the Investor ceases to hold all the OCRPSs (and consequently any Shares) whether by exchange, or redemption, and has received all amounts owed to it pursuant to this Agreement, the Investor will cease to have any rights or interest in relation to the OCRPSs, or any rights or interest in the Sindu Napo Common Stock, Napo, or Sindu and this Agreement shall terminate with respect to the Investor in accordance with Clause 16 hereto

 

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7)                                     EXIT MECHANISM

 

a)                                     Liquidity Events:  The Napo Group agree to work towards creating a Liquidity Event, such as one listed in Clause 7 (b) below, for the investment of the Investor pursuant to this Agreement within a period of three years from the Effective Date.  Napo Group shall bear all expenses for the Liquidity Event

 

b)                                     Possible Liquidity Events:  The Parties shall in good faith consider any one of the following actions as a Liquidity Event:

 

(i)                                     Listing of shares of Sindu through an IPO or Offer for Sale;

 

(ii)                                  Sale of Sindu’s entire business or 100% of its share capital including OCRPS;

 

(iii)                               Buyback of Securities;

 

(iv)                              Merger of Sindu with other listed companies

 

8)                                     ACCOUNTS AND CORPORATE GOVERNANCE (INFO RIGHTS)

 

a)                                     Auditors:  Napo Group shall appoint reputable auditors to audit the accounts and financial statements of Napo, Sindu and their respective Subsidiaries

 

b)                                     Board and Investor Director:  The Board shall consist of at least 3 directors and upto 5 Directors.  So long as the Investor holds any OCRPSs or Shares purchased hereunder, it shall have the right to appoint a Director to the Board of Sindu (the “Investor Director”) until the termination of this Agreement in accordance with its terms

 

c)                                      Rights of Investor Director:  The Investor Director shall have the same voting rights as any other director on the board of directors and committees of Sindu, subject to applicable Law.  The Investor Director shall be given notice of all meetings in accordance with the bylaws

 

d)                                     Reasonable Expenses:  All reasonable and documented expenses incurred by the Investor Director for attendance at a meeting of the board of directors or committees of Sindu shall be borne by Sindu

 

e)                                      Notice:  A meeting of the board of directors of Sindu may be called in accordance with the bylaws or articles of association.  The Investor Director shall be entitled to a written agenda, which may be delivered by electronic mail or otherwise, specifying in reasonable detail the business of such meeting.  Subject to the above, Sindu (as the case may be) shall ensure that notice of a meeting of the board of directors is received in compliance with applicable Law and the bylaws or articles of association at least five (5) Business Days prior to such meeting of the board of directors

 

f)                                       Telephonic and Video-Conferencing Participation:  If permitted by applicable Law and the articles of association of Sindu, the Investor Director may at his or her option participate in meetings of the board of directors by telephone or video conferencing or

 

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any other means of contemporaneous communication, provided that the Investor Director must acknowledge his presence for the purpose of the meeting and the Investor Director not doing so shall not be entitled to speak or vote at the meeting.  The Investor Director may not leave the meeting by disconnecting his telephone or other means of communication unless he has previously obtained the express consent of the chairman of the meeting and the Investor Director shall conclusively be presumed to have been present and formed part of the quorum at all times during the meeting unless he has previously obtained the express consent of the chairman of the meeting to leave the meeting as aforesaid

 

g)                                      Affirmative Voting Matters:  Until the termination of this Agreement in accordance with Clause 16 no action set forth below may be taken by Sindu at a meeting of the board of directors (or committee thereof) or by circular resolution or at a shareholders’ meeting, in connection with any of the matters set forth in this Clause 8(g) without the affirmative vote of the Investor Director (in the case of a meeting of the board of directors (or committee thereof) or by circular resolution) and the Investor in the case of shareholders meeting, without which such matter shall be deemed not to be approved by the Board, committee or shareholders.  The Investor agrees not to unreasonably withhold, condition or delay its affirmative vote in respect of such matters.  The matters which shall be subject to the provisions of this Clause 8(g) are:

 

(i)                                     So long as the Investor holds any OCRPSs, any action that authorizes, creates or issues debt instruments, which are more favourable or superior to the terms of the OCRPSs

 

(ii)                                  Any amendments to the memorandum of association, articles of association or by-laws of Sindu to the extent such amendment adversely affects the rights and interest of the Investors.  Notwithstanding the foregoing, the provisions of this Agreement shall not be modified without the written consent of the Investors

 

(iii)                               Any changes in the accounting year of Sindu

 

(iv)                              Undertaking any business other than the Business

 

(v)                                 Issuance of New Securities by Sindu, buy-back, re-purchase, redemption of Securities of Sindu, reduction of the share capital of Sindu or any other change in capital structure of Sindu

 

(vi)                              Change in the size of the Board of Sindu such that the number of Directors is reduced below 3 or increased to more than 5

 

h)                                     Budgetary and Financial Estimates:  Prior to the commencement of any Financial Year, until the termination of this Agreement, the board of directors of Sindu shall approve on an annual basis the following :

 

(i)                                     Estimated sources and applications of funds;

 

(ii)                                  Estimated profit and loss account;

 

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(iii)                               Estimated balance sheet; and

 

(iv)                              Detailed assumptions underlying the forecasts for sub-clauses (i) - (iii); above

 

i)                                         Use of Funds:  Sindu shall utilize the Investment Amount exclusively for the purposes of subscribing to the Sindu Napo Common Stock in accordance with the Transaction Agreements

 

9)                                     DEFAULT AND REMEDY

 

a)                                     In the event of any Party committing a breach of any of its material obligations pursuant to and in accordance with this Agreement and the Subscription Agreement and failing to rectify the same within a period of fifteen (15) Business Days of receipt of a written notice of such breach, the aggrieved Party shall be entitled to invoke the dispute resolution provision set forth in Clause 15(b) below, and may exercise all its rights in law, equity or otherwise including termination of this Agreement

 

10)                              REPRESENTATIONS AND WARRANTIES

 

a)                                     Each Party represents, severally and not jointly, to the other Parties hereto that:

 

(i)                                     such Party has the full power and authority to enter into, execute and deliver this Agreement including under its charter documents and to perform the transactions contemplated hereby and, if such Party is not a natural Person, such Party is duly incorporated or organised with limited liability and existing under the laws of the jurisdiction of its incorporation or organisation;

 

(ii)                                  the execution and delivery by such Party of this Agreement and the performance by such Party of the transactions contemplated hereby have been duly authorised by all necessary corporate or other action of such Party;

 

(iii)                               assuming the due authorisation, execution and delivery hereof by the other Parties, this Agreement constitutes the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganisation, moratorium or similar laws affecting creditors’ rights generally; and

 

(iv)                              the execution, delivery and performance of this Agreement by such Party and the consummation of the transactions contemplated hereby will not (i) violate any provision of the organisational or governance documents of such Party, (ii) require such Party to obtain any consent, approval or action of, or make any filing with or give any notice to, any governmental authority in such Party’s country of organisation or any other Person pursuant to any instrument, contract or other agreement to which such Party is a party or by which such Party is bound, other than as specifically contemplated or set forth in this Agreement and the Subscription Agreement; (iii) conflict with or result in any material breach or violation of any of the terms and conditions of, or constitute (or with notice or

 

14

 

lapse of time or both constitute) a default under, any instrument, contract or other agreement to which such Party is a party or by which such Party is bound, (iv) violate any order, judgment or decree against, or binding upon, such Party or upon its respective securities, properties or businesses, or (v) other than as contemplated or set forth in this Agreement violate any Law or regulation of such Party’s country of organisation or any other country in which it maintains its principal office.  Without limiting the exceptions to the foregoing, it is acknowledged and contemplated that applicable securities laws and employment laws and public policy may limit the actions or require prior consents to the performance of the Napo Group’s or the Investor’s obligations hereunder

 

b)                                     The Napo Group represents and warrants that the transactions contemplated herein are in accordance with Law and that no regulatory approvals are required by it to enter into this and to perform its obligations hereunder

 

11)                              CONFIDENTIALITY

 

a)                                     The Investor undertakes that it shall not reveal, and shall use its reasonable efforts to ensure that its directors, officers, managers, partners, members, employees, legal, financial and professional advisors and bankers (collectively, “Representatives”) do not reveal, to any third party any Confidential Information without the prior written consent of Napo.  The term “Confidential Information” as used in this Agreement means (a) any information concerning the organisation, business, technology, trade secrets, know-how, finances, transactions or affairs of Sindu or Napo or IndUS or any other Party or any of their respective Representatives or affiliates (whether conveyed in written, oral or in any other form and whether such information is furnished before, on or after the date hereof), (b) any information or materials prepared by a Party or its Representatives that contains or otherwise reflects, or is generated from, Confidential Information and (c) the terms of this transaction (except to the extent and in the manner as the transaction is required under applicable Law to be disclosed or may be publicly announced or published by mutual written agreement among the parties.)

 

b)                                     Napo, IndUS and Sindu undertake that they shall not reveal, and shall use their respective reasonable efforts to ensure that their respective Representatives do not reveal, to any third party any Confidential Information of any Investor without the prior written consent of such Investor

 

c)                                      Notwithstanding the foregoing, the provisions of Clause 11(a) and Clause 11(b) shall not apply to :

 

(i)                                     disclosure of Confidential Information that is or becomes generally available to the public other than as a result of disclosure by or at the direction of a Party or any of its Representatives in violation of this Agreement;

 

(ii)                                  disclosure by a Party to its Representatives provided such Representatives are bound by similar confidentiality obligations;

 

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(iii)                               disclosure, after giving prior notice to the other Parties to the extent practicable under the circumstances and subject to any practicable arrangements to protect confidentiality, to the extent required under the rules of any stock exchange or by applicable laws or governmental regulations or judicial or regulatory process or generally accepted accounting principles applicable to any Party or in connection with any judicial process regarding any legal action, suit or proceeding arising out of or relating to this Agreement; and

 

(iv)                              disclosure by Sindu or Napo of Confidential Information concerning Sindu or Napo or the terms of this Agreement that is reasonably necessary in the ordinary course of business or otherwise in connection with or pursuant to transactions or proposed transactions of Sindu or Napo, including but not limited to a listing on AIM or the London Stock Exchange

 

(v)                                 disclosure by Sindu or Napo of Confidential Information to existing investors of Napo

 

12)                              FURTHER ASSURANCES

 

a)                                     Each Party shall, at any time and from time to time upon the written request of any other Party :

 

(i)                                     promptly and duly execute and deliver all such further instruments and documents, and do or procure to be done all such acts or things, as such other Party may reasonably deem necessary or desirable in obtaining the full benefits of this Agreement and of the rights and ownership herein granted;

 

(ii)                                  do or procure to be done each and every act or thing, which such other Party may from time to time reasonably require to be done for the purpose of enforcing such other Party’s rights under this Agreement

 

13)                              INDEMNITY

 

a)                                     Napo undertakes to indemnify and keep indemnified for a period of one year from the date of this Agreement (the “Indemnified Period”) the Investor and its directors (the “Investor Parties”) against any loss, liability, claims, costs and expenses directly suffered by the Investor Parties as a result of, or in connection with or arising from a breach by Napo of the Sindu warranties and/or Napo Warranties or any terms of the Transaction Agreements not to exceed $500,000 in the aggregate (collectively, the “Losses”).  Such indemnity shall extend to include all costs, charges and expenses which Investor may pay or incur in disputing or defending any claim or action or other proceedings where authorized in accordance with the provisions of this Clause in respect of which indemnity may be sought under this Clause

 

b)                                     Notwithstanding the foregoing, without in any way limiting the obligation of Napo to indemnify the Investor Parties pursuant to the above Clause, Napo shall not be required to indemnify the Investor Parties for breach of any Sindu Warranties and/or Napo Warranties (A) unless written notice thereof has been given by the Investor Parties during

 

16

 

the Indemnified Period and (B) unless and until the aggregate dollar amount of all Losses resulting or arising from any and all such breaches exceeds an aggregate of $50,000, at which point Napo shall indemnify the Investor Parties for the aggregate amount of all such Losses incurred, not to exceed $500,000 in the aggregate for all such Losses

 

c)                                      The foregoing indemnities of Napo shall not apply with respect to any breach by Napo of Sindu Warranties and/or Napo Warranties that results in a claim by a third party, unless the Investor Parties shall, with reasonable promptness, provide Napo with copies of any claims or other documents received and shall otherwise make available to Napo all relevant information material to the defense of any claim against the Investor Parties which shall serve as the basis for a claim by the Investor Parties pursuant to the terms hereof.  Notwithstanding the foregoing, the Investor Parties’ failure to give prompt notice or to provide copies of documents or to furnish relevant information shall not constitute a defense (in part or in whole) to any claim by the Investor Parties against Napo, except and only to the extent that such failure by the Investor Parties shall result in material prejudice to Napo.  Napo shall have thirty (30) days (or such shorter period as may be necessitated by the exigencies of such claim) within which to elect to defend such claim at its own expense and with counsel of its own choosing (who shall be reasonably acceptable to the Investor Parties, provided that the Investor Parties shall have the right at all times to fully participate in the defense thereof at their own expense.  Napo may not settle or compromise any such claim without the prior written consent of the Investor Parties, which consent shall not unreasonably be withheld unless as part of the settlement Napo obtains an unconditional release of the Investor Parties.  If Napo shall, within such thirty (30) days (or shorter) period, fail to defend such claim with counsel reasonably acceptable to the Investor Parties, the Investor Parties shall have the right, but not the obligation, to undertake the defense of such claim.  The Investor Parties may not settle or compromise any such claim without the prior written consent of Napo, which consent shall not be unreasonably withheld unless as part of the settlement the Investor Parties obtain an unconditional release of Napo

 

d)                                     Any claim of indemnity made by the Investor Parties under this Clause must be made in good faith in a writing executed by an officer of the Investor (the “Notice of Claim”) delivered to Napo within the Indemnified Period, and, if raised by such date, such claim shall survive until final resolution thereof.  Any such Notice of Claim will set forth with reasonable specificity the nature of the claim for indemnity and, if then determinable, the approximate amount of the claimed Losses, and shall include copies of any formal demand or complaint

 

e)                                      For the avoidance of doubt.  Napo shall be liable in accordance with the terms of this indemnity in respect of the business, operation and activities of Napo and Sindu to the extent such business, operation and activities of Napo and Sindu are the subject matter of a breach of the Sindu Warranties and/or Napo Warranties

 

f)                                       Napo shall ensure that Sindu enjoys the benefit of suitable director and officers insurance policy to cover its employees and directors and such director and officers insurance policy will not be terminated without the consent of the Investor

 

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14)                              NOTICES

 

a)                                     Each notice, demand or other communication given or made under this Agreement shall be in writing and delivered to the relevant Party at its address or fax number set out below (or such other address or fax number as the addressee has by three (3) Business Days’ prior written notice specified to the relevant Party) :

 

	
To Sindu :
    	
Sindu Private Ltd.
    
	
 
    	
C/o IndUS Pharmaceuticals, Inc
    
	
 
    	
27 Jenkins Road
    
	
 
    	
Andover, MA 01810
    
	
 
    	
 
    
	
 
    	
Attention: Mr Pravin Chaturvedi
    
	
 
    	
 
    
	
To Investor :
    	
IL&FS Investment Managers Limited
    
	
 
    	
The IL&FS Financial Centre, Plot No. C-22, G Block,
    
	
 
    	
Bandra-Kurla Complex, Bandra (East), Mumbai 400 051
    
	
 
    	
India
    
	
 
    	
 
    
	
 
    	
Attention: Mr Sunil Diwakar
    
	
 
    	
 
    
	
To Napo :
    	
Napo Pharmaceuticals, Inc.
    
	
 
    	
1170 Veterans Blvd., Suite 244
    
	
 
    	
South San Francisco, California 94080
    
	
 
    	
USA
    
	
 
    	
 
    
	
 
    	
Attention: Chief Executive Officer
    
	
 
    	
 
    
	
Copy:
    	
Mr Donald C. Reinke
    
	
 
    	
Reed Smith LLP
    
	
 
    	
II Embarcadero Center, 20th Floor
    
	
 
    	
San Francisco, CA 94111
    
	
 
    	
415.391.8269
    

 

Any notice, demand or other communication so addressed to the relevant party shall (a) where sent by registered post or private courier shall be deemed to have been delivered when actually delivered to the relevant address and receipt is confirmed by the government or private carrier; and (b) where sent via facsimile, shall be deemed to have been delivered upon receipt of a transmission report confirming dispatch

 

15)                              GOVERNING LAW AND DISPUTE SETTLEMENT

 

a)                                     Governing Law:  This Agreement shall be governed by and construed in accordance with the laws of India, without effect to its principles of conflict of laws

 

b)                                     Arbitration:  In the case of any dispute or claim arising out of or in connection with or relating to this Agreement, or the breach, termination or invalidity hereof, the Parties shall attempt to first resolve such dispute or claim through discussions between senior

 

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executives of each Party.  If the dispute is not resolved through such discussions within ten (10) Business Days after one Party has served a written notice on the other Party requesting the commencement of consultation, such dispute shall be referred to the highest ranking executive of each Party for resolution.  If the dispute is still not resolved through discussions between the highest ranking executives of the Parties within a further seven (7) Business Days, then the dispute or claim shall be finally settled by arbitration under the United Nations Commission on International Trade Law Arbitration Rules (the “UNCITRAL Rules”) as are in force at the time of any such arbitration and as may be amended by the rest of this Clause 15(b).  For the purpose of such arbitration, there shall be three arbitrators who shall be appointed by the relevant Parties in accordance with the UNCITRAL Rules (the “Arbitration Board”).  The Investor shall appoint one arbitrator and the CEO of Napo shall appoint one arbitrator who shall represent the Napo Group.  The two arbitrators so appointed shall appoint the third arbitrator as may be mutually agreed amongst them.  All arbitration proceedings shall be conducted in the English language and the place of arbitration shall be in Mumbai.  The Parties shall be entitled to seek injunctive reliefs from the courts of India having jurisdiction.  The arbitrators shall decide any such dispute or claim strictly in accordance with the governing law specified in Clause 15(a).  Judgement upon any arbitral award rendered hereunder may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be

 

c)                                      Good Faith:  Each Party shall co-operate in good faith to expedite (to the maximum extent practicable) the conduct of any arbitral proceedings commenced under this Agreement

 

d)                                     Costs and Expenses:  The costs and expenses of the arbitration (other than attorneys fees and expenses), including, without limitation, the fees of the arbitration and the Arbitration Board, shall be determined by the Arbitration Board.  The Arbitration Board would have the power to award interest on any sum awarded pursuant to the arbitration proceedings and such sum would carry interest, if awarded, until the actual payment of such amounts

 

e)                                      Final and Binding:  Subject to applicable Law, any award made by the Arbitration Board shall be final and binding on each of the Parties that were parties to the dispute

 

16)                              TERM

 

a)                                     This Agreement shall come into effect on the Effective Date and shall continue until the Investor ceases to hold any OCRPSs and Shares at which time, this Agreement and the obligations and rights of each Party shall terminate, provided, however, that Clauses 10, 11, 12, 13, 14, 15 and 17 shall survive any such termination

 

17)                              MISCELLANEOUS

 

a)                                     Amendment:  This Agreement may not be amended, modified or supplemented except by a written instrument executed by Napo, Sindu, IndUS and Investors

 

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b)                                     Waiver:  No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by the party waiving such provision.  No failure or delay by a Party in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of the same preclude any further exercise thereof or the exercise of any other right, power or remedy.  Without limiting the foregoing, no waiver by a Party of any breach by another Party of any provision hereof shall be deemed to be a waiver of any subsequent breach of that or any other provision hereof

 

c)                                      Assignment:  Neither this Agreement nor any of the rights or obligations hereunder shall be assignable, except with the mutual written consent of Napo, Sindu and the Investor.  Provided that upon a transfer by the Investor of its OCRPSs and Shares to a Person in accordance with this Agreement, it shall have the right to assign all its rights and obligations under this Agreement to such Person except the rights under Clause 8 unless the transfer is to an Affiliate

 

d)                                     Entire Agreement:  This Agreement, any Investor subscription agreements and the schedules and annexures attached hereto constitute the entire agreement and understanding between the parties with respect to the subject matters herein, and supersede and replace any prior agreements and understandings, whether oral or written between and among them with respect to such matters

 

e)                                      Severability:  Each and every obligation under this Agreement shall be treated as a separate obligation and shall be severally enforceable as such and in the event of any obligation or obligations being or becoming unenforceable in whole or in part.  To the extent that any provision or provisions of this Agreement are unenforceable they shall be deemed to be deleted from this Agreement, and any such deletion shall not affect the enforceability of the remainder of this Agreement

 

f)                                       Counterparts and Facsimile Signatures:  This Agreement may be executed in one or more counterparts which, signed and taken together, shall constitute one document.  A facsimile signature on this Agreement, if legible and complete, will be regarded as an original signature

 

g)                                      Consent to Specific Performance:  The Parties declare that it is impossible to measure in money the damages that would be suffered by a Party by reason of the failure by any other Party to perform any of the obligations hereunder

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

20

 

IN WITNESS WHEREOF, this Agreement has been executed on the day and year first above written

 

 

	
/s/   Pravin Chaturvedi
    	
 
    
	
FOR AND ON BEHALF OF SINDU PRIVATE LIMITED
    	
 
    
	
By:
    	
Pravin   Chaturvedi
    	
 
    
	
Title:
    	
Director
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   Lisa A. Conte
    	
 
    
	
FOR AND ON BEHALF OF NAPO PHARMACEUTICALS INC.
    	
 
    
	
By:
    	
Lisa   A. Conte
    	
 
    
	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   Pravin Chaturvedi
    	
 
    
	
FOR AND ON BEHALF OF INDUS PHARMACEUTICALS INC.
    	
 
    
	
By:
    	
Pravin   Chaturvedi
    	
 
    
	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   [name of signatory]
    	
 
    
	
FOR AND ON BEHALF OF IL&FS TRUST COMPANY LIMITED
    	
 
    
	
BY THE HAND OF AUTHORISED REPRESENTATIVE OF IL&FS INVESTMENT MANAGERS   LIMITED
    	
 
    
	
By:
    	
 
    
	
Title:
    	
 
    

 

21

 

ANNEXURE I

 

DEED OF ADHERENCE
 FORM OF DEED OF ADHERENCE

 

THIS DEED (“DEED”) IS MADE ON      DAY OF            , 200[  ]

 

BETWEEN:

 

A.                                    IL&FS TRUST COMPANY LIMITED, a company incorporated under the Companies Act, 1956 having its Registered Office at The IL&FS Financial Centre, Plot No. C-22, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051, as the trustee (“Trustee”) of the IL&FS Private Equity Trust, a trust established under the Indian Trusts Act, 1882, which is a Venture Capital Fund registered with the Securities and Exchange of India, investing through its venture capital scheme Leverage India Fund, which shall, unless repugnant to the subject or context, mean and include the Trustee for the time being and from time to time of the said trust, its successors and assigns acting through its investment manager IL&FS INVESTMENT MANAGERS LIMITED, a company incorporated in India under the Companies Act, 1956 and having its Registered Office at The IL&FS Financial Centre, Plot No. C-22, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051, India (hereinafter referred to as “Investor”, which expression shall, unless repugnant to the context or meaning thereof, mean and include its successors and assigns);

 

B.                                    SINDU PRIVATE LIMITED, a company organised and existing under the Companies Act, 1956, whose registered office is at 101 Jyothi Homes, Srinagar Colony, Hyderabad 500073, India, (hereinafter referred to as “Sindu” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns);

 

C.                                    NAPO PHARMACEUTICALS, INC., a company organised and existing under laws of the State of Delaware, USA, whose registered office is at 1170, Veterans Boulevard, Ste. 244, South San Francisco, California 94080, USA (hereinafter referred to as “Napo” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns);

 

D.                                    INDUS PHARMACEUTICALS, INC., a company organised and existing under laws of the State of Delaware, USA, and parent corporation of Sindu (hereinafter referred to as “IndUS” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns); and

 

E.                                     [            ] (the New Shareholder);

 

WHEREAS:

 

(A)                               The Investor, Sindu, Napo and IndUS are parties to an Investment Rights Agreement dated [   ] (the Agreement)

 

22

 

(B)                               The New Shareholder proposes to purchase for [   ] OCRPSs/ Shares of Rs. [   ] each in the capital of Sindu from the Investor, for a purchase price of [   ]

 

(C)                               This deed is made by the New Shareholder in compliance with Section 4(a) of the Agreement

 

THIS DEED WITNESSES AS FOLLOWS:

 

(1)                                 Capital terms used but not defined in this Deed shall have the respective meanings given to such terms in the Agreement

 

(2)                                 The New Shareholder confirms that it has been supplied with a copy of the Agreement

 

(3)                                 The New Shareholder hereby purchases [   ] OCRPSs/ Shares of Rs. [   ] each in the capital of Sindu from the Investor at a purchase price of Rs. [   ] per OCRPS/ Share and agrees to hold the shares subject to Agreement and the memorandum and articles of association of Sindu

 

(4)                                 The New Shareholder undertakes to Sindu, Napo and IndUS to be bound by the Agreement in all respects as if the New Shareholder was a party to the Agreement and named in it as the Investor and to observe and perform all the provisions and obligations of the Agreement applicable to or binding on the Investor under the Agreement insofar as they fall to be observed or performed on or after the date of this deed.  Provided that the New Shareholder shall not under any circumstances have the board rights or affirmative voting and veto rights of the Investor pursuant to Clause 8 of the Agreement

 

(5)                                 Napo, Sindu and IndUS undertake to the New Shareholder to observe and perform all the provisions and obligations of the Agreement applicable to or binding on them under the Agreement and acknowledge that the New Shareholder shall be entitled to the rights and benefits of the Agreement as if the New Shareholder were named in the Agreement in place of Investor as a shareholder with effect from the date of this deed.  Provided that the New Shareholder shall not under any circumstances have the board rights or affirmative voting and veto rights of the Investor pursuant to Clause 8 of the Agreement

 

(6)                                 This deed is made for the benefit of (a) the parties to the Agreement and (b) every other person who after the date of the Agreement (and whether before or after the execution of this deed) assumes any rights or obligations under the Agreement or adheres to it

 

(7)                                 The New Shareholder hereby represents and warrants, as of the date hereof, to Napo, Sindu and IndUS Team as follows:

 

(i)                                     The New Shareholder has the legal capacity and the full power, authority to enter into this Deed and to perform the obligations set out in this Deed and the Agreement and has duly executed and delivered this Deed;

 

(ii)                                  Neither the execution of this Deed nor the performance by the New Shareholder of any of its obligations hereunder or under the Agreement will conflict with or result in a breach of any provisions of any law, regulation, judgment, order,

 

23

 

authorization, agreement or obligation or document binding on or applicable to the New Shareholder;

 

(iii)                               No event is outstanding which constitutes (or with the giving of notice, lapse of time or making of any determination or satisfaction of other conditions, is likely to constitute) a default under any other document or obligation assumed or otherwise binding on the New Shareholder to an extent which has or is reasonably likely to have a material adverse effect on the performance of the obligations by the New Shareholder under this Deed or the Agreement;

 

(iv)                              The New Shareholder has not granted or agreed to grant in favour of any person any interest in or any option or other rights in respect of any of the OCRPSs/ Shares of Sindu to be held by it

 

(8)                                 The address and facsimile number of the New Shareholder for the purposes of Clause 14 of the Agreement is as follows:  [   ]

 

(9)                                 This deed may be executed in any number of counterparts, all of which taken together shall constitute one and the same deed and any party may enter into this deed by executing a counterpart

 

(10)                          This deed is governed by and shall be construed in accordance with Indian law.  The terms and conditions of the Agreement in relation to the provisions regarding arbitration shall be deemed to have been incorporated in this Deed

 

IN WITNESS OF WHICH THIS DEED HAS BEEN EXECUTED AND HAS BEEN DELIVERED ON [             ]

 

 

	
/s/   Pravin Chaturvedi
    	
 
    
	
FOR AND ON BEHALF OF [NEW SHAREHOLDER]
    	
 
    
	
By:
    	
Pravin   Chaturvedi
    	
 
    
	
Title:
    	
Director
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   Pravin Chaturvedi
    	
 
    
	
FOR AND ON BEHALF OF SINDU PRIVATE LIMITED
    	
 
    
	
By:
    	
Pravin   Chaturvedi
    	
 
    
	
Title:
    	
Director
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   Lisa A. Conte
    	
 
    
	
FOR AND ON BEHALF OF NAPO PHARMACEUTICALS INC.
    	
 
    
	
By:
    	
Lisa   A. Conte
    	
 
    
	
Title:
    	
CEO
    	
 
    

 

24

 

	
/s/   Praving Chaturvedi
    	
 
    
	
FOR AND ON BEHALF OF INDUS PHARMACEUTICALS INC.
    	
 
    
	
By:
    	
Pravin   Chaturvedi
    	
 
    
	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   [name of signatory]
    	
 
    
	
FOR AND ON BEHALF OF IL&FS TRUST COMPANY LIMITED
    	
 
    
	
BY THE HAND OF AUTHORISED REPRESENTATIVE OF IL&FS INVESTMENT MANAGERS   LIMITED
    	
 
    
	
By:
    	
 
    
	
Title:
    	
 
    

 

25

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