Document:

crr-ex102_32.htm

Exhibit 10.2

 

Confidential portions of this exhibit have been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. The redacted terms have been marked at the appropriate place with “[XXX]”.

CONTRACT MANUFACTURING SERVICES AGREEMENT

This CONTRACT MANUFACTURING SERVICES AGREEMENT (the “Agreement”) is entered into and made effective as of May 28, 2019 (the “Effective Date”) by and between, CARBO Ceramics Inc., a Delaware corporation (“CARBO”), whose registered address is 575 N. Dairy Ashford, Suite 300, Houston, Texas and PicOnyx, Inc., a Delaware corporation, whose registered address is 6002 Rogerdale Road, Suite 175, Houston TX, (“PICONYX”). PICONYX and CARBO are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

WHEREAS, CARBO owns the Manufacturing Facility and has personnel with experience in contract manufacturing;

 

WHEREAS, PICONYX desires to engage CARBO, and CARBO desires to be so engaged, to manufacture for PICONYX the Product at the PICONYX Property, under the terms and conditions contained herein; and

NOW THEREFORE, in consideration of the covenants and obligations expressed herein, and intending to be legally bound hereby, the Parties agree as follows

 

	
1.
	
DEFINITIONS.  As used in this Agreement, the following terms shall have the following respective meanings:
	
 

	
 
	
1.1.
	
“Adequate Assurance” has the meaning set forth in Section 8.3.
	
 

	
 
	
1.2.
	
“Affiliate” means any individual or entity directly or indirectly controlling, controlled by, or under common control with a Party.  For purposes of this definition, “control” means the direct or indirect ownership of at least fifty percent (50%) of the outstanding voting securities, or the right to control the management or policy decisions, of the controlled entity, by contract or otherwise.  
	
 

	
 
	
1.3.
	
“Applicable Laws” means all laws, rules, pronouncements, regulations and guidance promulgated by any Regulatory Authority that are applicable to either Party’s performance of their respective obligations under this Agreement, including but not limited to the procurement, storage and handling of Raw Materials, the operation of either Party’s business and the manufacturing process for the Product.  
	
 

	
 
	
1.4.
	
 “CARBO Technology” means all existing proprietary technology, including but not limited to, information, ideas, concepts, inventions, schematics, designs, systems, apparatuses, formulations, methods, process conditions, software (in source code) or database, owned or controlled by CARBO that are necessary for the manufacture of the Product in accordance with the requirements of this Agreement, including any and all prior amendments, improvements, updates, upgrades and derivative works thereto existing now, excluding any PICONYX Technology and excluding any Joint Technology.
	
 

Page 1 of 39

 

	
 
	
1.5.
	
“Change of Control” means any transaction in which a Third Party, not already a shareholder, acquires more than 50% of the outstanding voting equity.
	
 

	
 
	
1.6.
	
“Change of Control Notice” has the meaning set forth in Section 3 and Exhibit E. 
	
 

	
 
	
1.7.
	
“Change of Control Transaction” has the meaning set forth in Section 3 and Exhibit E.
	
 

	
 
	
1.8.
	
“Claim” has the meaning set forth in Section 11.1.  
	
 

	
 
	
1.9.
	
“Commercial Completion” means the point in time in which the parties agree that a Commercial Product is able to be produced at the Manufacturing Facility, with the PICONYX Property including the  large kiln, the pilot kiln and the milling equipment, and as set forth in Section 7.
	
 

	
 
	
1.10.
	
“Commercial Product” means any Product listed on Exhibit A, that meets the Product Specifications set forth in Exhibit B. 
	
 

	
 
	
1.11.
	
“Confidential Information” means all trade secrets, know how, proprietary information, techniques, or technology, and data disclosed by one party to the other party pursuant to this Agreement or generated pursuant to this Agreement, except any portion thereof which (i) the recipient can demonstrate by its written records was known by the recipient prior to the disclosure thereof by the disclosing party; (ii) is disclosed to the recipient without restriction, after disclosure thereof by the disclosing party, by a Third Party who has the right to make such disclosure; (iii) is or becomes part of the public domain through no breach of this Agreement by the recipient; or (iv) is independently developed by employees of the recipient without use of any of the other party’s Confidential Information.
	
 

	
 
	
1.12.
	
“Contract Manufacturing Price” has the meaning set forth in Section 8.1.
	
 

	
 
	
1.13.
	
“Contract Manufacturing Services” means all operations (including but not limited to testing and release, receiving, regulatory and compliance, making, picking, packaging, quality control, testing, storage, documentation, and/or shipment) required to produce and distribute the Commercial Product.
	
 

	
 
	
1.14.
	
“Development Product” means a new Product that is produced by CARBO for purposes of developing a new Commercial Product.
	
 

	
 
	
1.15.
	
“Disclosing Party” means a Party to this Agreement which discloses Confidential Information.
	
 

	
 
	
1.16.
	
“Exhibit” means the following Exhibits, which are attached hereto, and become a part of, this Agreement.
	
 

Exhibit A – Commercial Products

Page 2 of 39

 

Exhibit B – Products Specifications

Exhibit C – Contract Manufacturing Price Schedule

Exhibit D – Packaging Specifications and Materials

Exhibit E – Sale of PICONYX or PICONYX Property; Change of Control; 

Exhibit F – Manufacturing Facility

Exhibit G – PICONYX Background IP

Exhibit H – CARBO Retained Equipment

Exhibit I – Third Party Manufacturing Payment Schedule

Exhibit J – CARBO Background IP

 

	
 
	
1.17.
	
“Force Majeure Event” has the meaning set forth in Section 15.6.
	
 

	
 
	
1.18.
	
 “Indemnitee” has the meaning set forth in Section 11.3.
	
 

	
 
	
1.19.
	
“Indemnitor” has the meaning set forth in Section 11.3.
	
 

	
 
	
1.20.
	
“Initial Term” has the meaning set forth in Section 12.1.
	
 

	
 
	
1.21.
	
“Intellectual Property Rights” means all intellectual or industrial property rights and protections pursuant to the laws of any jurisdiction throughout the world including without limitation any and all present and future patents, patent applications (including with respect to patents, any patent rights granted upon any reissue, division, continuation or continuation-in-part applications now or hereafter filed), utility models issued or pending, registered and unregistered design rights and databases, models, copyrights (including the copyright on software in any code), trade secrets, trademarks, tradenames, rights title and interest in any proprietary know-how, and license rights in such intellectual or industrial property.
	
 

	
 
	
1.22.
	
“Joint Technology” means any conception, discovery, idea, design, or invention, including but not limited to, processes, equipment, products, materials, material properties, product features and formulations, that at least one employee or agent of CARBO and at least one employee or agent of PICONYX jointly develop, regardless of their relative contributions.  Joint Technology shall include, but is not limited to, improvements to CARBO Technology and improvements to PICONYX Technology. 
	
 

	
 
	
1.23.
	
“Maintenance Costs” means all costs, expenses, and fees incurred by CARBO to the extent those costs relate to, or otherwise support or are integral to, the use and operation of the PICONYX Property and the equipment therein, including without limitation, the repair and or replacement of equipment.
	
 

	
 
	
1.24.
	
“Manufacturing Facility” means the real property located at 4810 Industrial Drive, New Iberia, Louisiana, which CARBO has agreed to lease to PICONYX pursuant to the Surface Lease Agreement, as set forth in Exhibit F.
	
 

	
 
	
1.25.
	
“Minimum Quantity Commitment” has the meaning set forth in Section 6.3.
	
 

Page 3 of 39

 

	
 
	
1.26.
	
“Offering Proceeds” means PICONYX securing of an additional $3,000,000 of financing by way of equity, debt, and grants.
	
 

	
 
	
1.27.
	
“Order” and “Orders” have the meanings set forth in Section 6.2.
	
 

	
 
	
1.28.
	
“Packaging Specifications and Materials” means all material required to effect the labelling and packaging of the Commercial Product, and the Specifications for the packaging and shipment of the Commercial Product, as set forth in Exhibit D. 
	
 

	
 
	
1.29.
	
“PICONYX Patents” means PICONYX’S right, title and interest in: (a) the patents and applications listed on Exhibit G; (b) all United States, international, and foreign patents and patent applications, which are based upon, issue from, or claim a right of priority to the patents and applications listed on Exhibit G; (c) all reissues, reexamination certifications, or renewals, of the patents and applications described in (a) or (b); and, (d) any rights to patents and application that PICONYX acquires from a Third Party.
	
 

	
 
	
1.30.
	
“PICONYX Property” means the structure, as identified in Exhibit F, and all of its associated equipment, which CARBO transferred to PICONYX pursuant to the Subscription Agreement.  PICONYX Property does not include, and specifically excludes the equipment listed in Exhibit H, which is located on or at the Manufacturing Facility and owned by CARBO.
	
 

	
 
	
1.31.
	
“PICONYX Technology” means all existing proprietary technology, including but not limited to, the PICONYX Patents, information, ideas, concepts, inventions, schematics, designs, systems, apparatuses, formulations, methods, process conditions, software (in source code) or database, owned or controlled by PICONYX that are necessary for the manufacture of the Product in accordance with the requirements of this Agreement, including any and all prior amendments, improvements, updates, upgrades and derivative works thereto existing now, excluding any CARBO Technology and excluding any Joint Technology.
	
 

	
 
	
1.32.
	
“Product” means a material with potential or actual commercial value and includes the Commercial Products listed on Exhibit A and a Development Product, as the case may be. 
	
 

	
 
	
1.33.
	
“Product Specifications” means the specifications for, or concerning the manufacturing and packaging of, a Commercial Product, as listed in Exhibit A, and set forth in Exhibit B and Exhibit D, .
	
 

	
 
	
1.34.
	
“Property” means collectively, the Manufacturing Facility and the PICONYX Property.
	
 

	
 
	
1.35.
	
“Proposed Response” has the meaning set forth in Section 9.2.
	
 

	
 
	
1.36.
	
“Quarterly Average Cost” is the average Contract Manufacturing Price for the three months of the Calendar Quarter in which PICONYX fails to meet its Minimum Quantity Commitment.
	
 

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1.37.
	
“Raw Materials” means all materials to be incorporated or used in the manufacturing of the Commercial Product, including without limitation the materials listed in Exhibit C.
	
 

	
 
	
1.38.
	
 “Receiving Party” means a Party to this Agreement which is the recipient of Confidential Information.
	
 

	
 
	
1.39.
	
 “Regulatory Authority” means any national, supra-national, regional, state, or local regulatory agency, department, bureau, commission, council, or other governmental entity.     
	
 

	
 
	
1.40.
	
“Renewal Term” has the meaning set forth in Section 12.1.  
	
 

	
 
	
1.41.
	
“Rolling Forecast” has the meaning set forth in Section 6.1.
	
 

	
 
	
1.42.
	
“Storage Lease Agreement” means the Storage Lease Agreement of even date herewith by and between the Parties.
	
 

	
 
	
1.43.
	
“Subscription Agreement” means the Subscription and Asset Purchase Agreement of even date herewith by and between the Parties whereby CARBO has agreed to contribute certain assets and services in exchange for a certain number of shares of PICONYX Series Seed-1 Preferred stock.
	
 

	
 
	
1.44.
	
“Surface Lease Agreement” means the Surface Lease Agreement of even date herewith by and between the Parties.
	
 

	
 
	
1.45.
	
“Term” has the meaning set forth in Section 12.1.
	
 

	
 
	
1.46.
	
“Territory” means North America
	
 

	
 
	
1.47.
	
“Third Party” means any person or entity other than CARBO, PICONYX, and their respective Affiliates.
	
 

	
 
	
1.48.
	
“Third Party Manufacturing” has the meaning set forth in Section 2.4.2.
	
 

	
 
	
1.49.
	
“Unacceptable Product” has the meaning set forth in Section 5.1.
	
 

  

	
2.
	
CONTRACT MANUFACTURING SERVICES:
	
 

	
 
	
2.1
	
Appointment; Exclusivity.  
	
 

	
 
	
2.1.1
	
PICONYX hereby appoints CARBO, and CARBO accepts its appointment, as PICONYX’s exclusive manufacturer of the Commercial Product in the Territory, subject to the terms and conditions of this Agreement.  
	
 

	
 
	
2.1.1.1
	
During the Term, CARBO shall only manufacture and supply Commercial Product to PICONYX, pursuant to the provisions of this Agreement.
	
 

	
 
	
2.1.1.2
	
During the Term, PICONYX shall only contract with CARBO for the manufacturing of the Commercial Product, pursuant to the provisions of this Agreement.
	
 

	
 
	
2.1.2
	
PICONYX shall not engage any Third Party to manufacture 
	
 

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Commercial Product in the Territory during the Term except as otherwise permitted in Section 6.4.1, Section 6.4.2 or Section 6.4.3(c).
	
 

	
 
	
2.1.3
	
PICONYX shall offer CARBO the right of first refusal to manufacture any SiOC based product extensions or additions to PICONYX’s product line, on identical terms to a bona fide Third Party offer to perform such manufacturing.
	
 

	
 
	
2.2
	
Raw Materials.  
	
 

	
 
	
2.2.1
	
PICONYX shall provide all Raw Materials for use at the Property to make the Commercial Product.  PICONYX shall be the owner of the Raw Materials, all intermediate materials, and the Commercial Product made therefrom. 
	
 

	
 
	
2.2.2
	
CARBO may, but is not required to, offer Raw Material and other purchasing support and services, which support and services if agreed to by the Parties shall be listed on Exhibit C.  
	
 

	
 
	
2.3
	
Labeling and Packaging of Product.  
	
 

	
 
	
2.3.1
	
CARBO shall package and label the Commercial Product in accordance with the Packaging Specifications and Materials.  PICONYX shall provide all packaging materials listed in Exhibit D for the packaging of Commercial Product.
	
 

	
 
	
2.4
	
Manufacture and Delivery of Product.  
	
 

	
 
	
2.4.1
	
CARBO agrees to manufacture all Commercial Product specified in a PICONYX Order at the Property in accordance with the Product Specifications and pursuant to the provisions of this Agreement.  
	
 

	
 
	
2.4.2
	
PICONYX acknowledges that CARBO has manufactured, and may, subject the terms of this Agreement, continue to manufacture, other products for the benefit of Third Parties at the Property (“Third Party Manufacturing”). 
	
 

	
 
	
2.4.2.1
	
CARBO shall have the right to use equipment owned by CARBO, including but not limited to the equipment listed in Exhibit H, for Third Party Manufacturing.
	
 

	
 
	
2.4.2.2
	
CARBO, upon obtaining the written agreement of PICONYX, which agreement shall not be unreasonably withheld or delayed, may use PICONYX Property for Third Party Manufacturing.  It is acknowledged, that issues regarding scheduling, contamination, and damage of the PICONYX Property are not unreasonable, and can form a proper basis to withhold such agreement. 
	
 

2.4.2.3 Notwithstanding any other provisions, including Section 

Page 6 of 39

 

11.4 and Section 11.5, of this Agreement, CARBO SHALL BE STRICTLY LIABLE FOR ANY AND ALL DAMAGES, WHATSOEVER, THAT OCCUR TO PICONYX AND THE PICONYX PROPERTY, AS A RESULT OF THIRD PARTY MANUFACTURING. 

	
 
	
2.4.2.4
	
CARBO shall compensate PIXONYX for the use of PICONYX Property for Third Party Manufacturing as set forth in Exhibit I. 
	
 

	
 
	
2.4.3
	
The Commercial Product, Product Specifications and Packaging Specifications and Materials shall be amended as: (a) requested by PICONYX; or, (b) necessary to conform such Product Specifications to Applicable Laws in the reasonable discretion of PICONYX.  Such amendments shall be in writing and become a part of this Agreement.
	
 

	
 
	
2.4.4
	
If any change in the Commercial Product, Product Specifications, Packaging Specifications and Material, or if any change in the Applicable Laws or sources of Raw Materials requires either: (a) a change in the Commercial Product manufacturing process; or, (b) CARBO to conduct development, testing, or other activities (e.g., process development stability testing, validation of new specifications) in addition to those activities CARBO conducted or is required to conduct in its manufacture of the Commercial Product prior to such change being requested or required, PICONYX shall reimburse CARBO for all costs incurred by CARBO in connection with such change; provided that, prior to CARBO incurring them, CARBO provides PICONYX with a good faith estimate of such costs and they are approved in writing by PICONYX. Upon either Party becoming aware of any proposed changes in the Applicable Laws that would affect the manufacture of the Commercial Product, it shall promptly notify the other Party and shall consult with the other Party regarding the proposed changes and activities, including any adjustment to the Manufacturing Price Schedule, as provided for in this Agreement. 
	
 

 

	
 
	
2.5
	
At all times during the Term, PICONYX shall be obligated to maintain the PICONYX Property in good and serviceable condition consistent with all applicable laws and regulations.  Pursuant to this obligation to maintain the PICONYX Property, the Parties agree as follows: 
	
 

	
 
	
2.5.1
	
Within sixty (60) days of the Effective Date, and annually thereafter, CARBO and PICONIX shall agree on an annual (12 month period) maintenance schedule including Maintenance Costs, having at least quarterly details (the “Annual Maintenance Schedule”).  The Annual Maintenance Schedule shall be based 
	
 

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upon objectively reasonable bases, including historic costs, supplier estimates and historic practices.  Such agreement of the Parties shall not be unreasonably withheld or delayed.  PICONYX shall be responsible for all Maintenance Costs set forth in the Annual Maintenance Schedule, payable within 30 days of receipt of an invoice for the performance of any scheduled maintenance. 
	
 

	
 
	
2.5.2
	
The Parties agree that written consent from the other party shall be required prior to CARBO incurring Maintenance Costs, not set forth in the Annual Maintenace Schdule in excess of one thousand dollars ($1,000) for any single item (or a group of related items).  Any such costs incurred without such consent where consent is required shall be the sole responsibility of CARBO. Any such costs incurred without such consent where consent is not required shall be the sole responsibility of PICONYX, payable within 30 days of receipt of an invoice for such maintenance. 
	
 

	
 
	
2.5.3
	
In the case of emergency maintenance, CARBO shall contact, by the most expeditious means possible, David Bening, Allen Andress, Richard Landtiser, or such other person as PICONX identifies in writing, to obtain PICONYX’s written agreement, which written agreement can be via text message, to incure the Maintenance Costs for any emergency maintenance.     
	
 

	
 
	
2.6
	
In case of damage or loss materially affecting the PICONYX Property or the improvements thereon during the Term, PICONYX shall, at all times except a Force Majeure Event, promptly repair and restore the PICONYX Property to the extent necessary for use of the PICONYX Property hereunder consistent with prior practice and to substantially the same condition as existed prior to such damage or loss.  Provided, however, that in the event that such damage or loss exceeds available insurance coverage, PICONX may decommission the PICONYX Property in accordance with applicable laws and regulations.
	
 

	
 
	
2.7
	
CARBO shall have the right to access, or have its agents, contractors and/or representatives access, subject to the confidentiality obligations existing between the Parties, the Property at all times in order to perform CARBO’s duties and obligations hereunder.
	
 

	
 
	
2.8
	
Storage of Product.  All Product shall be stored in accordance with the Storage Lease Agreement.
	
 

 

	
3.
	
CHANGE OF CONTROL; SALE OF PICONYX OR PICONYX PROPERTY.  In the event of a Change of Control, Sale of PICONYX or the PICONYX Property, the provisions set forth in the attached Exhibit E shall control. 
	
 

 

Page 8 of 39

 

	
4.
	
PRODUCT SPECIFICATIONS; MANUFACTURING RECORDS, QUALITY CONTROL
	
 

	
 
	
4.1
	
Conformity to Product Specifications.  Each batch of Commercial Product shall conform to the Product Specifications.  
	
 

	
 
	
4.2
	
Quality Control.  CARBO agrees to prepare and submit to PICONYX, quality control records and reports, that will include a reasonable testing schedule of the requirements set forth in the Product Specification, and shall retain samples of Commercial Products for one (1) year from the date of the production run for quality control purposes.  PICONYX may request production samples from CARBO at any time during normal business hours, and CARBO shall send such samples to PICONYX at PICONYX's sole cost and expense.  
	
 

	
 
	
4.3
	
CARBO shall maintain manufacturing records in accordance with standards that are similar to or meet those of ISO 9000, including an accurate total of all PMN P-15-28 Product produced, as required by the US EPA 5(e) Consent Order.
	
 

	
 
	
4.4
	
Compliance with Applicable Laws.  Both Parties shall at all times comply with all Applicable Laws regarding the procurement of Raw Materials, and the manufacture, handling, and storage of Raw Materials, intermediate materials, and Product. Upon the reasonable written request of either Party, the other Party shall either certify in writing or provide evidence to such Party confirming its compliance with such Applicable Laws.  
	
 

 

	
5.
	
INSPECTION OF PRODUCT.
	
 

	
 
	
5.1
	
Inspection; Rejection of Unacceptable Product.  PICONYX may analyze representative samples of intermediates, and each lot of material and Product delivered hereunder for purposes of determining whether the same meets the Product Specifications.  PICONYX may reject any Commercial Product by promptly notifying CARBO in writing of PICONYX’s determination that such Commercial Product constitutes an Unacceptable Product.  Any Commercial Product will be deemed an “Unacceptable Product” if the Commercial Product does not meet the Product Specifications. 
	
 

	
 
	
5.2
	
Third Party Analysis.  If CARBO, after good faith consultation with PICONYX, disputes any finding by PICONYX that Product is an Unacceptable Product, representative samples of such Product shall be forwarded to a Third Party jointly selected by CARBO and PICONYX for analysis.  The findings of such Third Party regarding whether the Product was an Unacceptable Product shall be binding upon CARBO and PICONYX.  The cost of such analysis by such Third Party shall be borne by the Party whose findings differed from those generated by such Third Party.
	
 

Page 9 of 39

 

	
 
	
5.3
	
Remedies for Delivery of Unacceptable Product.  Unless any nonconformity is caused by (i) a negligent or wrongful act or omission by PICONYX or its agents, or (ii) the inability of the PICONYX Property to manufacture a Commercial Product, PICONYX’s sole and exclusive remedy for any Unacceptable Product delivered by CARBO to PICONYX is for CARBO to replace the Unacceptable Product with Product that meets the Product Specifications, including the cost of all Raw Materials needed to replace the Unacceptable Product. 
	
 

 

 

	
6.
	
PRODUCT ORDERS. 
	
 

	
 
	
6.1
	
Rolling Forecast.  On or before each June 1 and November 1 during the Term, PICONYX shall provide CARBO with a written forecast of PICONYX’s expected Commercial Product needs for a period of twelve (12) calendar months beginning on the date of such forecast (the “Rolling Forecast”).  Should PICONYX’s anticipated needs change, PICONYX is permitted to revise any Rolling Forecast by delivering such revised Rolling Forecast to CARBO in writing; provided that any revised Rolling Forecast shall not be effective to increase the quantity of any subsequent production run without CARBO’s consent unless such revised Rolling Forecast has been provided to CARBO at least twelve (12) weeks in advance of such production run. 
	
 

	
 
	
6.2
	
Placement of Orders.  Not later than the 15th of each January, April, July, and October during the Term (“Calendar Quarter(s)”), PICONYX shall submit completed Orders to CARBO in a format chosen by PICONYX specifying the quantity of Commercial Products for CARBO to manufacture and deliver to PICONYX during the following Calendar Quarter (each an “Order” and collectively, the “Orders”); provided that the initial Order may be delivered on such date as agreed to by the Parties. CARBO shall accept all Orders submitted by PICONYX in compliance with the terms and conditions of this Agreement as binding obligations of CARBO to provide the Commercial Products set forth therein.  All Orders shall be sent by PICONYX (a) to the address for CARBO specified in the Notice provisions of Section 13.4, or such other addresses as CARBO may notify PICONYX of in writing from time to time or (b) by email or facsimile to the email address or facsimile number provided by CARBO without any obligation to provide further written notice thereof or satisfy any other requirements set forth in the Notice provisions of Section13.4.  Upon receipt of an Order via email, CARBO shall respond to such email to confirm the receipt of such Order. The Orders are expressly subject to the terms and conditions of this Agreement, and in the event of any conflict between the provisions of this Agreement and any Order, the provisions of this Agreement shall control.
	
 

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6.3
	
Minimum and Maximum Quantity Commitment.  Once Commercial Completion is reached, the Parties will meet prior to PIXONYX providing each Rolling Forecast in order determine what the minimum quantity commitments (“Minimum Quantity Commitments”) and the maximum quantity commitments (“Maximum Quantity Commitments”)  will be for the respective upcoming Calendar Quarters.
	
 

	
 
	
6.4
	
Failure to Meet Quantity Commitments.
	
 

	
 
	
6.4.1
	
In the event that CARBO cannot or does not satisfy all of PICONYX’S volume requirements up to the Maximum Quantity Commitment for a particular Calendar Quarter on a timely basis in accordance with this Agreement, and such failure is not attributable to a Force Majeure Event, then PIXONYX shall have the right, at its sole discursion, to operate the PICONYX Property using PICONYX employees and contractors; or  to engage a Third Party to manufacture Commercial Product for PICONYX, until such time as CARBO is able to provide objectively reasonable assurance of its ability to resume supplying the Commercial Product in accordance with the terms of this Agreement.
	
 

 

	
 
	
6.4.2
	
In the event that CARBO cannot or does not satisfy all of PICONYX’S volume requirements up to the Maximum Quantity Commitment for any two (2) Calendar Quarters on a timely basis, regardless of the reason for such failure, the exclusivity provision of Section 2.1.1.2 shall automatically become non-exclusive.
	
 

	
 
	
6.4.3
	
Supplemental Quantities.
	
 

	
 
	
(a)
	
If, in any Calendar Quarter, PICONYX wishes for CARBO to manufacture quantities of Commercial Product in excess of the Maximum Quantity Commitment, PICONYX may give written notice to CARBO specifying the additional quantity desired (the “Supplemental Quantity”) and the desired month of delivery, and CARBO shall have the exclusive option to manufacture the Supplemental Quantity of Commercial Product for PICONYX.  Such notice shall be delivered to CARBO at least thirty (30) days prior to the desired delivery month.
	
 

	
 
	
(b)
	
CARBO’s exclusive option to manufacture the Supplemental Quantity shall be exercised by giving PICONYX written notice of CARBO’s willingness to manufacture the Supplemental Quantity (or portion thereof).  Such response shall be delivered at least fifteen (15) days prior to the desired month of delivery.
	
 

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(c)
	
In the event that CARBO waives or is deemed to have waived its option to manufacture the Supplemental Quantity PICONYX shall have the right, at its sole discursion, to operate the PICONYX Property using PICONYX employees and contractors; or  to engage a Third Party to manufacture the Supplemental Quantities of Commercial Product for PICONYX.
	
 

 

	
 
	
6.4.4
	
Provided however, when a failure to satisfy volume requirements, under Section 6.4.1, Section 6.4.2 or Section 6.4.3 (b), is limited to making an agreed upon increase in volume from a prior quarter, or in an agreed revised Rolling Forecast, PICONYX’s remedy shall be limited to: (a) having the shortage manufacture by PICONYX or a Third Party and (b) CARBO paying for any additional costs for such manufacturing.  In the event CARBO does not agree to manufacture any Supplemental Quantities, PICONYX’s remedy shall be limited to having such Supplemental Quantities manufactured by PICONYX or a Third Party, at PICONYX’s sole cost and expense.
	
 

 

	
 
	
6.5
	
In the event that PICONYX cannot or does not submit Orders of Commercial Product that meet or exceed the Minimum Quantity Commitment for a given Calendar Quarter, then PICONYX shall pay to CARBO an amount equal to the Quarterly Average Cost multiplied by the difference between (i) the actual amount of Commercial Product ordered and (ii) the Minimum Quantity Commitment for that Calendar Quarter.
	
 

 

	
7.
	
COMMERCIAL PROCESS DEVELOPMENT.  From the Effective Date, up until such time as Commercial Completion, CARBO will assist PICONYX in the creation and development of processes to manufacture the Commercial Products using the PICONYX Property (“Commercial Process Development”).  PICONYX shall bear all costs for Raw Materials and reject material for the Commercial Process Development.  Commercial Completion shall occur at such time as the Parties mutually agree in writing that the Commercial Product can be consistently produced in a manner which makes the process commercially viable.  
	
 

 

 

	
8.
	
CONTRACT MANUFACTURING PRICE AND PAYMENT.
	
 

	
 
	
8.1
	
Contract Manufacturing Price.  PICONYX shall pay CARBO for Contract Manufacturing Services, and CARBO shall provide Contract Manufacturing Services in consideration for the payment.  CARBO shall manufacture Commercial Product at the price set forth in Exhibit C, (the “Contract Manufacturing Price”). 
	
 

	
 
	
8.1.1
	
The Parties acknowledge that additional information and 
	
 

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understanding of the costs for manufacturing the Commercial Product may be obtained prior to achieving Commercial Completion.  Accordingly the Parties agree that the “Contract Manufacturing Price” will be determined prior to, but no later than,  Commercial Completion, and adjusted annually thereafter, for the purpose of addressing such additional information and understanding, upon the written agreement of the Parties, which agreement shall not be unreasonably withheld or delayed.
	
 

	
 
	
8.1.2
	
The Contract Manufacturing Price shall not exceed the Target Maximum Manufacturing Price.  
	
 

	
 
	
8.1.3
	
The Target Maximum Manufacturing Price shall be adjusted based upon actual changes to CARBO’S average costs accross all of CARBO’s facilites in New Iberia Lousiana (“New Iberia Average Costs”).  CARBO shall provide PICONX sixty (60) days written notice prior to a change in the Target Maximum Price.  Upon receipt of such notice, PICONX may request that the Parties meet and confirm regarding the change to the New Iberia Average Costs supporting the noticed change to the Target Maximum Manufacturing Price, and upon such request the Parties shall engage in good faith negotiations, based upon objective data, to reach an agreement to adjust the Target Maximum Manufacting Price, which agreement shall not be unreasonably withheld or delayed.
	
 

	
 
	
8.1.4
	
At all times the Parties agree to work towards and seek ways to reduce manufacturing costs.    
	
 

	
 
	
8.2
	
Payment.  Payments to CARBO for, the Contract Manufacturing Price of Commercial Product, as well as any other payment due from PICONYX to CARBO pursuant to this Agreement, shall be made by PICONYX within thirty (30) days after the date of a valid invoice, except as to Unacceptable Product.  In the event that Commercial Product is rejected by PICONYX as Unacceptable Product, but such Product is subsequently determined to be acceptable pursuant to Section 3.2, the payment for such Product shall be due and payable within thirty (30) days after the determination with respect to such Product is made in accordance with Section 3.2. If there is a dispute relating to an invoice, the Parties shall cooperate, in good faith, to resolve such dispute in a reasonable period of time.
	
 

 

	
 
	
8.2.1
	
Provided, however, that the payment for the Contract Manufacturing Services shall be made by PICONYX within thirty (30) days after the earlier of: (i) six (6) months from the receipt of the permit for the Pilot Kiln, (ii) the Offering Proceeds, or (iii)  the termination of this Agreement.  

	
 
	
8.3
	
Credit Requirements and Adequate Assurance.  After the first anniversary 
	
 

Page 13 of 39

 

	
 
		
date of this Agreement, if reasonable grounds for insecurity of payment or performance arise, CARBO may send a notice of demand to PICONYX requesting adequate assurance of performance. “Adequate Assurance” shall mean sufficient security in the form and for the term specified by and reasonably acceptable to CARBO, including, but not limited to, a standby, irrevocable letter of credit or a guarantee by a creditworthy entity.  Should PICONYX not provide Adequate Assurance as requested under this Section 8.3 within fifteen business (15) days from the receipt of a notice of demand, CARBO may suspend its obligations to perform Contract Manufacturing Services, until such time as PICONYX provides Adequate Assurance. 
	
 

 

	
9.
	
ACCESS TO MANUFACTURING FACILITY AND RECORDS.
	
 

	
 
	
9.1
	
Inspection by Regulatory Authorities.  Upon the request of any Regulatory Authority, such Regulatory Authority shall have access, to the extent required by law or regulation, to observe and inspect the PICONYX Property and the Manufacturing Facility, including the testing, labeling, packaging and/or warehousing of the Product and to audit such facilities for compliance with Applicable Laws.
	
 

	
 
	
9.2
	
Notification of Inquiries and Inspections.  CARBO shall notify PICONYX within three (3) business days of any written or oral inquiries, notifications, or inspection activity by any Regulatory Authority in regard to any Product at the PICONYX Property. To the extent permissible by law, CARBO shall provide a complete description of any such governmental inquiries, notifications or inspections promptly after such visit or inquiry.  CARBO shall furnish to PICONYX (a) within three (3) business days after receipt, any report or correspondence issued by any Regulatory Authority and (b) not later than five (5) business days prior to the time it provides to any Regulatory Authority, copies of proposed responses or explanations relating to items set forth above (each, a “Proposed Response”), in each case trade secrets or other confidential or proprietary information of both PARTIES, shall be protected to the full extent permitted by the law. CARBO shall discuss with PICONYX and consider in good faith any comments provided by PICONYX on the Proposed Response.  After the filing of a response with any Regulatory Authority or other regulatory agency, CARBO shall notify PICONYX and provide PICONYX with copies of any further contacts with such agency relating to the subject matter of the response.
	
 

 

	
10.
	
REPRESENTATIONS AND WARRANTIES; DISCLAIMERS; LIMITATION OF LIABILITY.
	
 

	
 
	
10.1
	
Representations and Warranties by CARBO. CARBO hereby represents, warrants and covenants that:
	
 

Page 14 of 39

 

	
 
	
10.1.1
	
it is a corporation or entity duly organized and validly existing under the laws of the state of its incorporation;
	
 

	
 
	
10.1.2
	
the execution, delivery, and performance of this Agreement by CARBO has been duly authorized by all requisite corporate action and does not require any shareholder action or approval;
	
 

	
 
	
10.1.3
	
it has the expertise, capability, power and authority to execute and deliver this Agreement and to perform its obligations hereunder;
	
 

	
 
	
10.1.4
	
the execution, delivery, and performance by CARBO of this Agreement, and the performance of its obligations hereunder, do not and will not (i) violate any order, writ, injunction, or decree of any court or Regulatory Authority entered against it or by which any of its property is bound, (ii) violate or conflict with, result in a breach of, or constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, or create in any person or entity the right to terminate, modify or cancel, any loan or credit agreement, note, mortgage, lease, or other contract or agreement to which CARBO is a party or by which CARBO or any of it properties or assets are bound, (iii) require the consent, waiver, authorization, permit or approval of, or any notice, filing or registration to or with, any Third Party, or (iv) violate or conflict with any provision of its articles of incorporation or bylaws, or formation or corporate governance documents; and,
	
 

	
 
	
10.1.5
	
it shall at all times comply with all Applicable Laws applicable to its activities under this Agreement.
	
 

	
 
	
10.2
	
Representations and Warranties by PICONYX.  PICONYX hereby represents, warrants and covenants that: 
	
 

	
 
	
10.2.1
	
it is a corporation duly organized and validly existing under the laws of the state of its incorporation;
	
 

	
 
	
10.2.2
	
the execution, delivery, and performance of this Agreement by PICONYX has been duly authorized by all requisite corporate action and does not require any shareholder action or approval;
	
 

	
 
	
10.2.3
	
it has the expertise, capability, power and authority to execute and deliver this Agreement and to perform its obligations hereunder;
	
 

	
 
	
10.2.4
	
the execution, delivery, and performance by PICONYX of this Agreement and its compliance with the provisions of this Agreement do not and shall not conflict with or result in a breach of any of the terms and provisions of or constitute a default under (i) any other agreement to which it is a party; (ii) the provisions of its charter or operative documents or bylaws; or (iii) any order, writ, injunction, or decree of any court or governmental authority entered against it or by which any of its property is bound; and
	
 

Page 15 of 39

 

	
 
	
10.2.5
	
it shall at all times comply with all Applicable Laws relating to its activities under this Agreement.
	
 

 

	
11.
	
INDEMNIFICATION.
	
 

	
 
	
11.1
	
PICONYX Indemnity.  PICONYX agrees that it shall be solely responsible for all injuries to all persons and all loss or damage to property that may result from PICONYX’s negligent acts or omissions and/or willful misconduct.  PICONYX further agrees to indemnify, save and hold CARBO, its Affiliates, and its and their officers, directors, employees, and agents from and against any and all Third Party losses, claims, damages, liabilities, obligations, penalties, judgments, awards, costs, expenses, and disbursements, including, without limitation, the costs, expenses, and disbursements, as and when incurred, of investigating, preparing, or defending any action, suit, proceeding, or investigation asserted by such Third Party, including, without limitation, reasonable attorneys’ fees and expenses, (each a “Claim”) caused by, relating to, based upon, arising out of, or in connection with PICONYX’s employees’ negligent acts or omissions and/or willful misconduct, including but not limited to, any acts or omissions or willful misconduct while onsite at the Manufacturing Facility or PICONYX Property, except to the extent such Claim was caused by CARBO’s negligence or willful misconduct.  
	
 

 

PICONYX further agrees that it shall release CARBO, and shall defend, indemnify and hold harmless CARBO from and against any and all Claims brought by or on behalf of any person or entity arising out of or in connection with any allegation, in whole or in part, that CARBO’s use of the PICONYX Technology infringes, misappropriates, dilutes, or violates the copyright, trade secret, trademark, trade dress, service mark, patent or any other proprietary right of any person or entity.

 

In addition, PICONYX shall assume all responsibility for, including control, removal and remediation of, and shall protect, defend and indemnify CARBO from and against all Claims arising from pollution or contamination associated with the Raw Materials, intermediate materials, Products, their storage, or Contract Manufacturing Services at the PIXONYX Property, as the case may be, except to the extent such Claim was caused by CARBO’s negligence or willful misconduct.

 

	
 
	
11.2
	
CARBO Indemnity.  CARBO agrees that CARBO shall be solely responsible for all injuries to all persons and all loss or damage to property that may result solely and directly from CARBO’s negligent acts or omissions and/or willful misconduct.  CARBO further agrees to indemnify, save and hold PICONYX, its Affiliates, and its and their officers, directors, employees, and agents from and against any and all 
	
 

Page 16 of 39

 

	
 
		
Claim caused by, relating to, based upon, arising out of, or in connection with (a) CARBO’s employees’ negligent acts or omissions and/or willful misconduct, including but not limited to, any acts or omissions or willful misconduct while at the PICONYX Property, except to the extent such Claim was caused by PICONYX’s negligence or willful misconduct.   
	
 

	
 
	
11.3
	
Procedure for Indemnification.  Each Party seeking to be reimbursed, indemnified, defended, and/or held harmless under this Agreement (each, an “Indemnitee”) shall (a) provide the Party obligated to indemnify such Indemnitee (the “Indemnitor”) with prompt, written notice of any Claim for which such Indemnitee seeks to be reimbursed, indemnified, defended, and/or held harmless, which notice shall include a reasonable identification of the alleged facts giving rise to such Claim; (b) grant the Indemnitor reasonable authority and control over the defense and settlement of any such Claim; and (c) reasonably cooperate with the Indemnitor and its agents in defense of any such Claim, at the Indemnitor’s expense. Each Indemnitee shall have the right to participate in the defense of any Claim for which Indemnitee seeks to be reimbursed, indemnified, defended, or held harmless, by using attorneys of such Indemnitee’s choice, at such Indemnitee’s expense. Any settlement of a Claim for which any Indemnitee seeks to be reimbursed, indemnified, defended, and/or held harmless under this Agreement shall be subject to the prior written approval of such Indemnitee, which approval shall not be unreasonably withheld, conditioned, or delayed.
	
 

	
 
	
11.4
	
Equipment Damages. Notwithstanding any provision, except Section 2.4.2.3, in this Agreement to the contrary, in no event shall CARBO be responsible for any damage or loss to the PICONYX Property and/or its equipment resulting from or in connection with the Contract Manufacturing Services performed hereunder, including without limitation the processing of the Raw Products and any manufacture of the Products, except to the extent such damage or loss is determined by a court of competent jurisdiction to have been caused by the negligence or willful misconduct of CARBO.
	
 

	
 
	
11.5
	
No Consequential Damages.  NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM OR ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR BUSINESS INTERRUPTIONS, HOWEVER THEY MAY BE CAUSED, REGARDLESS OF OWNERSHIP, REGARDLESS OF WHETHER OCCASIONED BY OR RESULTING FROM THE NEGLIGENCE, STRICT LIABILITY, BREACH OF WARRANTY OR OTHER FAULT OF COMPANY 
	
 

Page 17 of 39

 

	
 
		
OR CONNECTOR, AS THE CASE MAY BE, IN WHOLE OR IN PART, WHETHER SOLE, JOINT, ACTIVE OR PASSIVE.  THIS SECTION 11.5 SHALL SURVIVE THE TERMINATION OF THE AGREEMENT.
	
 

 

	
12.
	
TERM AND TERMINATION.
	
 

	
 
	
12.1
	
Term and Renewal.  This Agreement shall begin on the Effective Date and shall continue for five (5) years from the Effective Date (the “Initial Term”) unless earlier terminated in accordance with the terms hereof.  Thereafter, the Agreement will be automatically extended for up to fifteen (15) consecutive one (1) year terms (each a “Renewal Term”) unless PICONYX notifies CARBO in writing not less than one (1) year prior to the expiration of the Initial Term or any Renewal Term (both of which are referred to herein as the “Term”) that it will not extend the Agreement.  
	
 

	
 
	
12.2
	
Termination and Events of Default.  If during the Term, (i) either Party (the “Defaulting Party”) is in breach of any of its obligations under this Agreement or in the event there is a commencement of proceedings by or against the Defaulting Party under applicable bankruptcy, insolvency or reorganization laws (an “Event of Default”), and such breach remains uncured for a period of forty five (45) days for breaches related to the payment of money and ninety (90) days for all other breaches, after the date that the Defaulting Party receives written notice of the breach from the other Party (the “Notifying Party”) then the Notifying Party shall have the right to: (a) terminate this Agreement; or (b) specific performance of the obligations or (ii) PICONYX decommissions the PICONYX Property in accordance with Section 2.6 herein, and such decommissioning lasts more than sixty (60) days, then CARBO shall have the right to terminate this Agreement.  
	
 

	
 
	
12.2.1
	
In addition, if (i) the Parties are unable to make a Commercial Product within twelve (12) months of the Effective date, then either Party shall have the right, but not the obligation to terminate this Agreement, or (ii) PICONYX is unable to secure the Offering Proceeds, within six (6) months from the receipt of the permit for the Pilot Kiln, then CARBO shall have the right, but not the obligation to terminate this Agreement. 
	
 

	
 
	
12.3
	
Actions upon Expiration or Termination.  
	
 

	
 
	
12.3.1
	
Upon expiration or termination of this Agreement, for any reason, CARBO shall deliver all Raw Materials, work-in-process and finished Products to PICONYX, at PICONYX’s sole cost and expense. The expiration or termination of this Agreement shall not release any Party of any liabilities or obligations that arose prior to the expiration or termination date. All terms and conditions of this Agreement that, by their nature, a reasonable person would expect 
	
 

Page 18 of 39

 

	
 
		
to survive the termination of this Agreement shall so survive.
	
 

	
 
	
12.3.2
	
Upon the expiration or termination date of this Agreement, for any reason, PICONYX shall, at PICONYX’s sole discretion: (a), remove all PICONXY Property (except for the CARBO Retained Equipment as set forth in the attached Exhibit H in which the ownership thereof shall automatically transfer to CARBO), that is located in or on the Manufacturing Facility, at PICONYX’s sole cost and expense, within six (6) months of the expiration or termination date; or (b) sell the PICONYX Property (except for the CARBO Retained Equipment as set forth in the attached Exhibit H in which the ownership thereof shall automatically transfer to CARBO) that is located in or on the Manufacturing Facility to CARBO for the then “Net Book Value” of the PICONYX Property within sixty (60) days of the expiration or termination date.
	
 

 

	
13.
	
INSURANCE.  Each Party shall secure and maintain, at its sole cost and expense, the following insurance policies (with the minimum stated limits), each written as primary coverage and each waiving the insurer’s right of subrogation: (i) Workers’ Compensation: statutory limits, (ii) Employer’s Liability Insurance: $1 million per accident, (iii) Commercial General Liability: $1 million per occurrence, $2 million in the aggregate (iv) Automobile Liability: $1 million; and (v) Excess Liability: $1 million per occurrence in excess over the coverage outlined in (i) – (iv) above.   
	
 

 

	
14.
	
OWNERSHIP. 
	
 

	
 
	
14.1
	
PICONYX shall be the sole and exclusive owner of:  (a) PICONYX Technology; (b) all Intellectual Property Rights owned or controlled by PICONYX on the Effective Date; and, (c) all materials and information acquired by PICONYX after the Effective Date and provided to CARBO (or provided by a Third Party on PICONYX’s behalf) under this Agreement, including but not limited to, the Product Specifications, the Packaging Materials, and processes, know-how and technology developed or created by PICONYX, including all Intellectual Property Rights relating thereto.  
	
 

	
 
	
14.2
	
CARBO shall be the sole and exclusive owner of (a) CARBO Technology; (b) all Intellectual Property Rights owned or controlled by CARBO on the Effective Date; and, (c) all materials and information acquired by CARBO after the Effective Date and provided to PIXONYX (or provided by a Third Party on CARBO’s behalf) under this Agreement, including but not limited to any processes, know-how and technology developed or created by CARBO, including all Intellectual Property Rights relating thereto.
	
 

	
 
	
14.3
	
At all times the Raw Materials, intermediate materials, and Commercial Products shall be deemed the sole and exclusive property of PICONYX.
	
 

	
 
	
14.4
	
Subject to the terms and conditions of this Agreement PICONYX hereby 
	
 

Page 19 of 39

 

	
 
		
grants to CARBO a limited, non-exclusive, non-transferrable, non-assignable (except to subcontractors for the sole purpose of performing CARBO’s obligations hereunder), royalty free, fully paid up license to use the PICONYX Property for the internal manufacture, testing and packaging of the Product.  
	
 

	
 
	
14.5
	
This Agreement does not grant, and nothing in this Agreement shall be construed as granting, any rights to CARBO, by license (express or implied) or otherwise, to any of the patents and applications listed on Exhibit G, to any United States, international, and foreign patents and patent applications, which are based upon, issue from, or claim a right of priority to the patents and applications listed on Exhibit G, or to any reissues, reexamination certifications, or renewals, of such patents and applications.
	
 

	
 
	
14.6
	
This Agreement does not grant, and nothing in this Agreement shall be construed as granting, any rights to PICONYX, by license (express or implied) or otherwise, to any of the patents and applications listed on Exhibit J, to any United States, international, and foreign patents and patent applications, which are based upon, issue from, or claim a right of priority to the patents and applications listed on Exhibit J, or to any reissues, reexamination certifications, or renewals, of such patents and applications.
	
 

	
 
	
14.7
	
Joint Technology shall be owned and licensed as follows:
	
 

 

	
 
	
14.8.1
	
Joint technology, whether or not patentable, relating to equipment shall be owned by CARBO, with PICONYX having a royalty free, sublicensable, fully paid up exclusive license, to have made, import, and use in the field of SiOC based material processing and manufacturing.

 

	
 
	
14.8.2
	
Joint technology, whether or not patentable, relating to processes and methods shall be owned by PICONYX, with CARBO having a royalty free, sublicensable, fully paid up exclusive license, to use and practice, in the field of non-SiOC based material processing and manufacturing.

 

	
 
	
14.8.3
	
Joint Technology, whether or not patentable, relating to SiOC based materials and formulations, shall be owned by PICONYX.

 

	
 
	
14.8.4
	
Joint Technology not covered by Sections 14.8.1, 14.8.2 and 14.8.3 and which is derived from, or a direct improvement of, a Party’s Background IP shall be owned by that Party, with the other Party receiving a non-exclusive, royalty free, perpetual fully paid up license to practice and in all respects commercially use such Joint Technology. 

 

	
 
	
14.8.5
	
Any other Joint Technology, not covered by Sections 14.8.1, 14.8.2, 14.8.3 and 14.8.4 shall be jointly owned by the Parties, with each Party having an 

Page 20 of 39

 

	
 
		
undivided interest in the whole.

 

	
 
	
14.8.6
	
The Parties shall consult with each other regarding the filing of any patent applications relating to Joint Technology.  No background confidential information of a Party shall be included in a patent filling, without first obtaining the written consent of that Party, which consent shall not be unreasonably withheld or delayed. 

 

	
 
	
14.8.7
	
The owner of the Joint Technology shall be solely responsible for the prosecution of, maintenance of, enforcement of, and defense of, including without limitation the costs associated therewith, the patents and patent applications on Joint Technology.

 

	
 
	
14.8.8
	
The Parties shall cooperate and execute all documents reasonably necessary to effect the provisions of this Section 14.8.

 

	
15.
	
MISCELLANEOUS
	
 

	
 
	
15.1
	
Confidential Information.  Each Party will, and will cause each of its Affiliates and its and their respective directors, officers, partners, employees, agents, representatives, contractors, borrowed servants and similarly situated persons to treat and hold as confidential and not use or disclose, either in whole or in part, whether written, oral or otherwise any and all Confidential Information provided by the Disclosing Party to the Receiving Party or otherwise observed by the Receiving Party.  The obligations of confidentiality and restrictions on use set forth herein shall not apply to any data or information which (i) shall become generally available to the public other than as a result of disclosure by or on behalf of the Receiving Party or its Affiliates; (ii) was available to the Receiving Party on a non-confidential basis prior to the date of this Agreement; (iii) comes into the Receiving Party’s possession after the date of this Agreement from a third party not under any known obligation of confidentiality with respect to such information; (iv) shall be required to be disclosed by or on behalf of the Receiving Party as a result of any applicable law, rule or regulation of any governmental authority having competent jurisdiction; provided, however, that the Receiving Party shall give the Disclosing Party prior written notice before making any such disclosure in accordance with the provisions of this section; (v) is disclosed to a Receiving Party’s Affiliates and each of their respective directors, officers, partners, employees, counsel, accountants or other agents or representatives (provided such Persons have agreed to keep such data or information confidential) on a need to know basis; or (vi) is disclosed to a Receiving Party’s advisors and to any potential purchaser of all or substantially all of such Party’s assets or business related to this Agreement; provided that any such disclosure(s) will be made under an express obligation of confidentiality no less stringent than the terms set 
	
 

Page 21 of 39

 

	
 
		
forth herein.  The obligations of this Section 15.1 are in addition to, and do not alter, change or effect, the existing confidentially obligations between the Parties, which obligations and agreements remain in full force and effect.
	
 

 

	
 
	
15.2
	
Assignment.  The rights of either Party under this Agreement shall not be assigned, nor shall the performance of either Party’s duties be delegated without the other Party’s prior written consent, such consent to not be unreasonably withheld or delayed.  Provided, however, that that either Party may assign, without obtaining such consent, this Agreement or its rights and obligations hereunder to an Affiliate, or a Third Party that succeeds by purchase, merger, consolidation or otherwise to all or substantially all of the assets or business of such Party relating to this Agreement, upon written notice to the other Party.
	
 

	
 
	
15.3
	
Entire Agreement; Amendment. This Agreement, together with its Exhibits, the Confidentiality/Ownership/Lease Agreements and the referenced schedules, embodies and shall constitute the entire agreement and understanding of the Parties relating to the subject matter of this Agreement and shall supersede all prior oral or written agreements, contracts, understandings, representations, or arrangements, whether oral or written, between them, relating to the subject matter of this Agreement.  No change or addition may be made to this Agreement or any schedule attached hereto except in writing, signed by a duly-authorized representative of each Party, and expressly stating that it is a modification of this Agreement.
	
 

	
 
	
15.4
	
Notices.  All communications between the Parties with respect to any of the provisions of this Agreement shall be sent to the addresses set forth below by notice by nationally recognized courier or by prepaid certified mail, or by facsimile transmission or other electronic means of communications, with confirmation by letter given by the close of business on or before the next following business day (except that no such confirmation letter shall be required in the case of Orders and invoices delivered hereunder).  All notices provided hereunder shall be effective upon receipt.
	
 

 

If to PICONYX, to: 

PicOnyx, Inc.

Attn: David Bening

6002 Rogerdale Road

Suite 175

Houston TX  77072

Tel: 614-704-0076

Fax: [none]

Page 22 of 39

 

Email:david.bening@piconyxinc.com

 

with a copy, which copy shall not constitute notice, to: 

Attn: Damian Burke

Melior Innovations, Inc.

6002 Rogerdale Road

Suite 175

Houston TX  77072

Tel: 713-652-9108

Fax: [none]

Email:damian.burke@meliorinnovations.com

 

If to CARBO, to:

CARBO Ceramics Inc.

575 N. Dairy Ashford Road, Suite 300

Houston, Texas 77079-1121

Attn: Ernesto Bautista III

Tel: 281-921-6450

Fax:

Email: ernesto.bautista@carboceramics.com

 

with a copy, which copy shall not constitute notice, to: 

Attn: _CARBO Ceramics Inc. 

575 N. Dairy Ashford Road, 

Suite 300

Houston, Texas 77079-1121

Attn: Robert J. Willette
Tel: 281-921-6490

Fax:

Email: robert.willette@carboceramics.com

 

	
 
	
15.5
	
Severability; Waiver; Headings.  If any provision of this Agreement is held to be void or unenforceable by a court of competent jurisdiction, such finding(s) shall not be construed to render any other provision of this Agreement either void or unenforceable, and all other provisions shall remain in full force and effect.  Upon any such determination, the Parties shall make such amendments to this Agreement as necessary to remove the invalid or unenforceable part of any such provision, but otherwise achieve to the maximum extent permissible, the economic, legal, and commercial intent and objectives of the original provision.  Failure or delay by either Party in exercising or enforcing any provision, right, or 
	
 

Page 23 of 39

 

	
 
		
remedy under this Agreement, or waiver of any remedy hereunder, in whole or in part, shall not be deemed a waiver thereof, or prevent the subsequent exercise of that or any other rights or remedy.  The headings and captions used in this Agreement are solely for the convenience of reference and shall not affect its interpretation.
	
 

	
 
	
15.6
	
Force Majeure.  Neither PICONYX nor CARBO shall be in breach of this Agreement if there is any failure of performance under this Agreement (other than a payment failure) occasioned by any act of God, fire, act of government or state, war, civil commotion, insurrection, or embargo or any other reason beyond the reasonable control of the Party affected thereby, including without limitation a Parties inability to obtain sufficient Raw Materials (a “Force Majeure Event”). Such excuse shall continue as long as the Force Majeure Event continues.  Upon cessation of such Force Majeure Event, the affected Party shall promptly resume performance hereunder.  Each Party agrees to give the other Party prompt written notice of the occurrence of any Force Majeure Event, the nature thereof, and the extent to which the affected Party will be unable fully to perform its obligations hereunder.  Each Party further agrees to use reasonable efforts to correct the Force Majeure Event as quickly as possible and to give the other Party prompt written notice when it is again fully able to perform such obligations.   
	
 

	
 
	
15.7
	
Independent Contractors.  The Parties acknowledge, agree and declare that the relationship hereby established between them is solely that of provider and recipient of manufacturing services and that each Party hereto is an independent contractor with respect to the other. Except as otherwise provided herein, no Party shall have any right, power, or authority to create any obligation, express or implied, on behalf of any other Party. Nothing in this agreement is intended to create or constitute a joint venture, partnership, agency, trust, or other association of any kind between the Parties.
	
 

	
 
	
15.8
	
Choice of Law: Jurisdiction.  The provisions of this Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to conflict of laws principles.  Any and all disputes between the Parties arising out of or related to this Agreement shall be heard in the state and federal courts located in the State of Texas, and the Parties hereby consent and submit to the jurisdiction of such courts.  
	
 

	
 
	
15.9
	
Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall constitute together the same document.
	
 

[Signature Page Follows]

Page 24 of 39

 

 

 

IN WITNESS WHEREOF, the Parties hereto, by their authorized officers, have executed this Agreement as of the Effective Date.

 

			
	
PICONYX, INC.
	
 
	
CARBO CERAMICS INC.

	
 
	
 
	
 

	
By:  /s/ David J. Bening
	
 
	
By: /s/ Ernesto Bautista III

	
Name: David J. Bening
	
 
	
Name: Ernesto Bautista III

	
Title: CEO
	
 
	
Title: Vice President, Chief Financial Officer

 

 

Page 25 of 39

 

 

 

EXHIBIT A

 

Commercial Products

 

 

M-Tone 5100

M-Tone 5000 series (vary by particle sizes)

M-Tone 6000 series High temperature grades

M-Tone 7000 series Matte Finish grades (Blend of 5000 series grades) 

 

As specified in Exhibit B.

 

Page 26 of 39

 

EXHIBIT B

 

Product Specifications

 

The Parties acknowledge that these Specifications are only guidelines as of the Effective Date.  The Parties anticipate that these Specifications will be refined and modified based upon information learned form the work to reach Commercial Completion.  The Parties agree that on or before Commercial Completion they will use Reasonable Objective Bases, which includes cost, regulatory, scienfitic, engineering and customer bases, to finalize these Specifications.  Once finalized, these Specifications can be modified, upon the written agreement of the Parties, for Reasonable Objective Bases, which agreement shall not be unreasonably withheld or delayed. 

 

I.  For each finished Commercial Product

 

Particle Size  [XXX]

[XXX]

[XXX]

[XXX]

 

Density

[XXX]

[XXX]

[XXX]

[XXX]

 

 

Color  

 

[XXX]

[XXX]

[XXX]

[XXX]

 

__________ 

_________ for M-Tone ____[A]________

_________ for M-Tone ____[B]________

_________ for M-Tone ____[etc.]________

 

 

___________ 

_________ for M-Tone ____[A]________

_________ for M-Tone ____[B]________

_________ for M-Tone ____[etc.]________

Page 27 of 39

 

 

 

 

Moisture Content 

[XXX]

[XXX]

[XXX]

[XXX]

 

 

 

II.  For all Raw Materials 

 

[XXX]

[XXX]

[XXX]

[XXX]

 

[XXX]

[XXX]

 

 

III.  [XXX]

 

[XXX]

[XXX]

 

IV.  [XXX]

 

[XXX]

[XXX]

 

 

V.  [XXX]

 

[XXX]

  

Page 28 of 39

 

EXHIBIT C

 

Contract Manufacturing Price Schedule

 

	
 
	
1.
	
Manufacturing conversion costs will be based on Carbo’s cumulative cost of direct labor (material processing & handling, plant maintenance and supervision), energy consumption (electricity & natural gas),. The Carbo New Iberia, LA facility labor rates ([XXX]) and the energy rates as of the Execution Date of this Agreement are provided below for reference.
	
 

Hourly:

[XXX]

[XXX]

[XXX]

[XXX]

[XXX]

[XXX]

 

Supervisors: 

[XXX]

[XXX]

 

Management: 

[XXX]

[XXX]

 

Energy:

[XXX]

 

[XXX]

[XXX]

[XXX]

[XXX]

 

	
 
	
2.
	
Contract Manufacturing Prices will be [XXX]. Carbo will supply PicOnyx  Carbo’s typical cost of Labor and Energy periodically during the Commercial Process Development in a separate document. 
	
 

	
 
	
3.
	
[XXX]:
	
 

 

 

 

 

 

 

Page 29 of 39

 

				
				
	
Manufacturing Phase(s)
	
Expected Volume (LB)-Based on PicOnyx Business Plan
	
“Target Maximum Manufacturing Price” ($/LB) Based on PicOnyx Business Plan with Carbo Margin* 
	
Note

	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]

	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]

	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]

	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]

	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]

*Target Maximum Manufacturing Prices may be adjusted pursuant to Section 8.1.3 of this Agreement.

Page 30 of 39

 

EXHIBIT D

 

 

Packaging Specification and Materials

 

 

For ALL commercial products listed in Exhibit A:

 

[XXX]

 

					
	
Capacity (Gallon)
	
Capacity (LB)
	
Diameter
	
Height (in)
	
Weight (LB)

	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]

	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]

	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]
	
[XXX]

 

 

 

[XXX]

Page 31 of 39

 

EXHIBIT E

 

Sale of PICONYX or PICONYX Property; Change of Control 

 

	
 
	
1.
	
Sale of PICONYX or PICONYX Property; Change of Control

	
 
	
a.
	
 In the event PICONYX (a) receives a bona fide offer from a Third Party for the acquisition of the PIXONYX Property; (b) receives a bona fide offer from a Third Party for the acquisition of more than 50% of its outstanding voting equity; or (c) engages in a merger, consolidation, or any other transaction that results in a change in more than 50% of PICONYX’s voting equity (“Change of Control Transaction”), PICONYX shall. to the extent permissible, provide to CARBO prompt written notice thereof (“Change of Control Notice”). 
	
 

 

 

 

Page 32 of 39

 

EXHIBIT F

 

Manufactuing Facility 

 

 

 

Page 33 of 39

 

 

 

Page 34 of 39

 

EXHIBIT G

 

PICONYX Background IP

 

[XXX]

 

 

 

 

 

 

Page 35 of 39

 

EXHIBIT H

 

CARBO Retained Equipment

 

 

			
	
Asset Number
	
Asset Class
	
Asset Description

	
10014
	
Land
	
Land 14.53

	
10015
	
Land
	
Land 9.552 Acres

	
10060
	
Buildings
	
Building-KIII

	
10072
	
Buildings
	
Roof Access & Vent Impr P1

	
10280
	
Buildings
	
Concrete Area 1

	
10282
	
Buildings
	
Concrete Area 2

	
10284
	
Buildings
	
Concrete Area 3

	
10285
	
Buildings
	
Lights Area 3

	
10286
	
Buildings
	
Concrete Area 4

	
10287
	
Buildings
	
Area 04 Enclosure

	
10288
	
Buildings
	
Concrete Area 5

	
10289
	
Buildings
	
Lights Area 4

	
10290
	
Buildings
	
Lights Area 5

	
10291
	
Buildings
	
Lights Area 6

	
10292
	
Buildings
	
Lights Area 7

	
10293
	
Buildings
	
Lights Area 8

	
10294
	
Buildings
	
Lights Area 9

	
10296
	
Buildings
	
Control Room/Lab

	
10297
	
Buildings
	
Lights Area 15

	
10310
	
Buildings
	
Facility Renovations NI

	
10333
	
Buildings
	
Ventilation - All Areas

	
10363
	
Land Imprv
	
Transformer Yard Fence Grounding

	
10364
	
Land Imprv
	
Transformer Yard Limestone

	
10396
	
Buildings
	
Concrete Foundation (30% Building)

	
23196
	
M&E
	
Raw Material Nuisance Dust Collector

	
23197
	
M&E
	
Raw Material Nuisance Dust Collector Rotary

	
23198
	
M&E
	
Raw Material Nuisance Dust Collector Rotary

	
23199
	
M&E
	
Raw Material Nuisance Dust Collector Isolation

	
23200
	
M&E
	
Area P01 Vent Fan #1

	
23201
	
M&E
	
Area P01 Vent Fan #2

	
23212
	
M&E
	
Slurry Storage Tank

	
23213
	
M&E
	
Slurry Storage Tank Agitator

	
23214
	
M&E
	
Slurry Transfer Pump

	
23215
	
M&E
	
Slurry Cooler

	
23218
	
M&E
	
Area P02 Sump Agitator

	
23224
	
M&E
	
Piping Area 2

	
23225
	
M&E
	
Electrical Area 2

	
23334
	
M&E
	
Piping Area 12

Page 36 of 39

 

			
	
23335
	
M&E
	
Electrical Area 12

	
23336
	
M&E
	
480V MCC NO.1

	
23337
	
M&E
	
480V MCC NO.2

	
23338
	
M&E
	
480V MCC NO.3

	
23339
	
M&E
	
480V MCC NO.4

	
23340
	
M&E
	
Lab UPS

	
23343
	
M&E
	
Automatic Transfer Switch, Power To 480V LTG PNL

	
23344
	
M&E
	
PLC Cabinet No. 1

	
23345
	
M&E
	
PLC Cabinet No. 2

	
23346
	
M&E
	
Network Cabinet No. 1

	
23347
	
M&E
	
Network Cabinet No. 2

	
23353
	
M&E
	
Ethernet Switch

	
23440
	
M&E
	
Plant 1 Ventilation Fan #1

	
23441
	
M&E
	
Plant 1 Ventilation Fan #2

	
23442
	
M&E
	
Plant 1 Ventilation Fan #3

	
23443
	
M&E
	
Plant 1 Ventilation Fan #4

	
23580
	
M&E
	
Plant PLC

	
23601
	
M&E
	
Area 07 Electrical Tray Reroute

	
23602
	
M&E
	
Area 08 Electrical/VFDs

	
23603
	
M&E
	
Area 01/02 Equipment

	
23616
	
M&E
	
Area 01 Electrical

	
23617
	
M&E
	
Area 02 Electrical

	
23622
	
M&E
	
Area 07Electrical

	
23623
	
M&E
	
Area 08 Electrical

	
24037
	
M&E
	
Heat Exchangers

	
24046
	
M&E
	
Hoppers

	
24050
	
M&E
	
Bag Unloader Setup

	
2[XXX]3
	
Buildings
	
Building

	
3[XXX]3
	
Buildings
	
Building

	
Lab01
	
M&E
	
Resin Coating QC Microwave Muffle Furnace

	
Lab04
	
M&E
	
Spec Mill

	
Lab06
	
M&E
	
High Pressure Blower

	
Lab07
	
M&E
	
Spectro Ciros ICP

	
Lab12
	
M&E
	
Photo-Optical Particle Analyzer

	
Lab13
	
M&E
	
Zeiss Stereo Zoom Microscope with Image Analysis S

	
10281
	
Buildings
	
Lights Area 1

	
10283
	
Buildings
	
Lights Area 2

	
10309
	
Buildings
	
Plant I Kiln Roof Replacement

	
10332
	
Buildings
	
Kiln Isolation Wall

	
23311
	
M&E
	
Electrical Area 6

	
24045
	
M&E
	
Concrete Foundation (70% Machine Support)

 

Page 37 of 39

 

EXHIBIT I

 

Third Party Manufacturing Payment Schedule

 

 

The Parties shall agree on a commercially reasonable compensation, for CARBO to pay to PICONYX, for each use by CARBO of PICONYX Property for Third Party Manufacturing.  Factors to include in determining a commercially reasonable compensation shall include, but are not limited to, any risk to PICONYX Property and the Contract Manufacturing Price Schedule of Exhibit C.

 

 

 

Page 38 of 39

 

EXHIBIT J

 

CARBO Background IP

 

[XXX]

 

Page 39 of 39Exhibit 10.1

 

EXECUTION VERSION

 

AMENDED AND RESTATED

 

AGREEMENT

 

This Amended and Restated Agreement (this “Agreement”) is dated as of July 24, 2019 by and between Tuesday Morning Corporation, a Delaware corporation (the “Company”), Jeereddi II, LP (“Jeereddi II”), Purple Mountain Capital Partners LLC (“PMCP”) and the entities and natural persons set forth in the signature pages hereto (together with Jeereddi II and PMCP, the “Jeereddi/PMCP Group”) (each of the Company and the Jeereddi/PMCP Group, a “Party” to this Agreement, and collectively, the “Parties”).

 

RECITALS

 

WHEREAS, the Company and the Jeereddi/PMCP Group are parties to an Agreement, dated as of October 1, 2017 (the “Prior Agreement”), and each of the Parties desires to amend and restate the Prior Agreement by entering into this Agreement pursuant to the terms set forth herein; and

 

WHEREAS, as of the date hereof, the Jeereddi/PMCP Group is deemed to beneficially own shares of Common Stock of the Company (the “Common Stock”) totaling, in the aggregate, 1,038,771 shares (the “Shares”), or approximately 2.22%, of the Common Stock issued and outstanding on the date hereof.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound hereby, agree as follows:

 

1.                                           Nomination and Election of the Continuing Director; Related Agreements.

 

(a)                                 Nomination of the Continuing Director. The Company agrees to nominate James T. Corcoran (together with any replacement properly appointed pursuant to this Section 1(a), the “Continuing Director”) to stand for election as a director of the Company at the 2019 Annual Meeting (the “2019 Annual Meeting”).  In the event the Continuing Director is unable to serve as a director, resigns as a director  or is removed during the Standstill Period, and so long as the Jeereddi/PMCP Group meets the Minimum Ownership Threshold (as defined below) at such time, the Jeereddi/PMCP Group shall have the right to recommend a replacement director to the Board, and the Board shall appoint such replacement director to the Board, provided such replacement director is “independent” pursuant to the SEC and NASDAQ listing standards, and is not an Affiliate or Associate (as such terms are defined below) of the Jeereddi/PMCP Group, and such replacement director shall be mutually agreed upon by the Company and the Jeereddi/PMCP Group, in good faith, with the Company’s agreement not to be unreasonably withheld. The Board will recommend, support and solicit proxies for the election of the Continuing Director in the same manner as for any other nominees of the Company at the 2019 Annual Meeting.

 

(b)                                 For the duration of the Standstill Period, and so long as the Continuing Director has been elected to the Board by the stockholders of the Company, the Board shall take all necessary actions to appoint the Continuing Director to the Nominating and Governance Committee and to such other committees and subcommittees of the Board as the Board shall deem appropriate.

 

(c)                                  If at any time the Jeereddi/PMCP Group ceases to collectively beneficially own a “net long position” (as such term is defined in Rule 14e-4 of the Securities Exchange Act of 1934, as amended, or the rules or regulations promulgated thereunder (the “Exchange Act”)) of at least 533,344 shares of the Company’s Common Stock (subject to adjustment for stock splits, reclassifications, combinations and similar adjustments), (the “Minimum Ownership Threshold”), Continuing Director will immediately offer his letter of resignation for consideration by the Board and all applicable committees and subcommittees thereof.

 

 

(d)                                      Additional Agreements.

 

(i)                                     Each member of the Jeereddi/PMCP Group agrees that it will cause its controlled Affiliates and controlled Associates to comply with the terms of this Agreement and shall be responsible for any breach of this Agreement by any such controlled Affiliate or Associate. As used in this Agreement, the terms “Affiliate” and “Associate” shall have the respective meanings set forth in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or the rules or regulations promulgated thereunder (the “Exchange Act”) and shall include all persons or entities that at any time during the term of this Agreement become Affiliates or Associates of any person or entity referred to in this Agreement.

 

(ii)                                  Each member of the Jeereddi/PMCP Group hereby agrees that it will not, and that it will not permit any of its controlled Affiliates or Associates to, (1) nominate or recommend for nomination any person for election at the 2019 Annual Meeting and the 2020 annual meeting of stockholders (the “2020 Annual Meeting”), directly or indirectly, (2) submit any proposal for consideration at, or bring any other business before, the 2019 Annual Meeting or the 2020 Annual Meeting, directly or indirectly, or (3) initiate, encourage or participate in any “withhold” or similar campaign with respect to the 2019 Annual Meeting or the 2020 Annual Meeting, directly or indirectly.  No member of the Jeereddi/PMCP Group shall publicly or privately encourage or support any other stockholder to take any of the actions described in this Section 1(d)(ii).

 

(iii)                               Each member of the Jeereddi/PMCP Group agrees that it will appear in person or by proxy at the 2019 Annual Meeting and the 2020 Annual Meeting and vote all shares of Common Stock of the Company beneficially owned by the Jeereddi/PMCP Group at such meeting (x) in favor of the election of the director nominees recommended by the Board, (y) in favor of the ratification of the appointment of the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2019, or June 30, 2020, as applicable, and (z) in accordance with the Board’s recommendation with respect to the Company’s “say-on-pay” proposal; provided, however, that to the extent that the recommendation of both Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis & Co., LLC (“Glass Lewis”) differs from the Board’s recommendation with respect to any matter other than nominees for election as directors to the Board, the Jeereddi/PMCP Group shall have the right to vote in accordance with the recommendation of ISS and Glass Lewis with respect to such matters.

 

(iv)                              The Continuing Director shall continue to comply with all lawful and other reasonable and customary policies, codes, guidelines and documentation required by the Company in connection with service on the Board.  The irrevocable resignation letter previously submitted to the Company by the Continuing Director in connection with the Prior Agreement shall hereby be deemed to be re-submitted in connection with this Agreement, and such letter shall continue in full force and effect pursuant to the terms of this Agreement.

 

(v)                                 During the time that the Jeereddi/PMCP Group, or each member individually, is not obligated to file with the SEC beneficial ownership reports on Schedule 13D, each member of the Jeereddi/PMCP Group agrees to promptly notify (but in any event within two (2) business days) the Company when (i) the Jeereddi/PMCP Group no longer meets the Minimum Ownership Threshold, or (ii) when they have made purchases of the Company’s Common stock equal to 1% or more of the Company’s outstanding shares of Common Stock.

 

2.                                           Standstill Provisions.

 

(a)    For purposes of this Agreement, “Standstill Period” shall mean the period from the date of execution of this Agreement until the later of (x) the date that is the first day to submit stockholder director nominations for the 2021 annual meeting of stockholders pursuant to the Company’s Bylaws (the “2021 Advance Notice Date”) and (y) the date that the Continuing Director no longer serves on the Board; provided, however, that if the Continuing Director is not re-nominated by the Board for election at the 2020 Annual Meeting, the Standstill Period shall end thirty (30) days following the conclusion of the 2020 Annual Meeting; and provided, further, that if the Continuing Director resigns for any reason prior to the 2021 Advance Notice Date, the Standstill Period shall continue until the 2021 Advance Notice Date.

 

2

 

(b)    Each member of the Jeereddi/PMCP Group agrees that during the Standstill Period, neither it nor any of its controlled Affiliates or controlled Associates will, and it will cause each of its controlled Affiliates and controlled Associates not to, directly or indirectly, in any manner:

 

(i)                                     engage in any solicitation of proxies or consents or become a “participant” in a “solicitation” (as such terms are defined in Regulation 14A under the Exchange Act) of proxies or consents (including, without limitation, any solicitation of consents that seeks to call a special meeting of stockholders), in each case, with respect to securities of the Company or any securities convertible or exchangeable into or exercisable for any such securities;

 

(ii)                                  form, join or in any way participate in any “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to the Common Stock (other than a “group” that includes all or some of the persons identified on Exhibit A, but does not include any other entities or persons not identified on Exhibit A as of the date hereof); provided, however, that nothing herein shall limit the ability of an Affiliate of any member of the Jeereddi/PMCP Group to join the Jeereddi/PMCP Group following the execution of this Agreement, so long as any such Affiliate agrees to be bound by the terms and conditions of this Agreement;

 

(iii)                               deposit any Common Stock in any voting trust or subject any Common Stock to any arrangement or agreement with respect to the voting of any Common Stock, other than any such voting trust, arrangement or agreement solely among the members of the Jeereddi/PMCP Group and otherwise in accordance with this Agreement;

 

(iv)                              engage in any short sale or purchase, sale or grant of any option, warrant, convertible security, stock appreciation right or other similar right (including, without limitation, any put or call option or swap transaction) with respect to any security (other than a board-based market basket or index) that includes, related to or derives any significant part of its value from a decline in the market price or value of the securities of the Company;

 

(v)                                 seek, or encourage any person, to submit nominations in furtherance of a “contested solicitation” for the election or removal of directors with respect to the Company or seek, encourage or take any other action with respect to the election or removal of any directors (except as provided for in Section 1);

 

(vi)                              (A) call or seek to call or request the call of any meeting of stockholders, including by written consent, (B) seek, alone or in concert with others, representation on, or nominate or publicly recommend any candidate to, the Board, except as specifically set forth in Section 1, (C) seek the removal of any member of the Board, (D) solicit consents from stockholders or otherwise act or seek to act by written consent, (E) conduct a referendum of stockholders, (F) make a request for any stockholder list or other Company books and records, (G) make any proposal for consideration by stockholders at any meeting of stockholders, or by written consent, (H) make any offer or proposal (with or without conditions) with respect to any tender offer, merger, acquisition, recapitalization, restructuring, liquidation, disposition, distribution, spin-off, asset sale, joint venture or other business combination involving the Company (an “Extraordinary Transaction”), or encourage, initiate or support any other third party with respect to any of the foregoing, (I) make any public communication in opposition to any Extraordinary Transaction approved by the Board or (J) otherwise acting alone, or in concert with others, seek to control the governance or policies of the Company.

 

(vii)                           seek to advise, encourage, support or influence any person with respect to the voting or disposition of any securities of the Company at any annual or special meeting of stockholders or by written consent, except in accordance with Section 1;

 

(viii)                        make any public statement, other than in support of the recommendations of the Board, regarding how any member of the Jeereddi/PMCP Group intends to vote or instructing other stockholders how to vote;

 

3

 

(ix)                              make any public disclosure regarding any intent or proposal with respect to the Board, the Company, its management or policies, any of its securities or assets or agreement that is inconsistent with the provisions of this Agreement;

 

(x)                                 institute, solicit or join, as a party, any litigation, arbitration or other proceeding against the Company or any of its current or former directors or officers (including derivative actions), other than (A) litigation by the Jeereddi/PMCP Group to enforce the provisions of this Agreement, (B) counterclaims with respect to any proceeding initiated by, or on behalf of, the Company or its Affiliates against the Jeereddi/PMCP Group or the Continuing Director, and (C) the exercise of statutory appraisal rights; provided, that the foregoing shall not prevent any member of the Jeereddi/PMCP Group from responding to or complying with a validly issued legal process;

 

(xi)                              enter into any negotiations, arrangements, understanding or agreements (whether written or oral) with, or advise, finance, assist, seek to persuade or knowingly encourage, any third party to take any action or make any statement in connection with any of the foregoing, or make any investment in or enter into any arrangement with any other person that engages, or offers or proposes to engage, in any of the foregoing, or otherwise take or cause any action or make any statement inconsistent with any of the foregoing;

 

(xii)                           take any action challenging the validity or enforceability of this Section 2 or this Agreement, or make any request or submit any proposal to amend the terms of this Agreement other than through non-public communications with the Company that would not be reasonably determined to trigger public disclosure obligations for any Party; or

 

(xiii)                        disclose any intention, plan or arrangement inconsistent with any provision of this Section 2.

 

(c)     Except as expressly provided in Section 1 or Section 2(b), each member of the Jeereddi/PMCP Group shall be entitled to vote its shares on any other proposal duly brought before the 2019 Annual Meeting or the 2020 Annual Meeting, as applicable.

 

(d)    Notwithstanding anything herein to the contrary, nothing in this Section 2 shall be deemed to in any way restrict or limit the Continuing Director from, in his capacity as a member of the Board, privately expressing or advocating for his views to the Company, other members of the Board or during Board meetings.

 

3.                                           Representations and Warranties of the Company.

 

The Company represents and warrants to the Jeereddi/PMCP Group that (a) the Company has the corporate power and authority to execute this Agreement and to bind it thereto, (b) this Agreement has been duly and validly authorized, executed and delivered by the Company, constitutes a valid and binding obligation and agreement of the Company, and is enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles and (c) the execution, delivery and performance of this Agreement by the Company does not and will not violate or conflict with (i) any law, rule, regulation, order, judgment or decree applicable to the Company, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could constitute such a breach, violation or default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any organizational document, agreement, contract, commitment, understanding or arrangement to which the Company is a party or by which it is bound.

 

4.                                                Representations and Warranties of the Jeereddi/PMCP Group.

 

Each member of the Jeereddi/PMCP Group represents and warrants to the Company that (a) the authorized signatory of the member of the Jeereddi/PMCP Group set forth on the signature page hereto has the power and authority to execute this Agreement and any other documents or agreements to be entered into in connection with this Agreement and to bind such member thereto, (b) this Agreement has been duly authorized, executed and delivered by each member of the Jeereddi/PMCP Group, and is a valid and binding obligation of such member, enforceable against such member in accordance with its terms, except as enforcement thereof may be limited by applicable

 

4

 

bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles, (c) the execution of this Agreement, the consummation of any of the transactions contemplated hereby, and the fulfillment of the terms hereof, in each case in accordance with the terms hereof, will not conflict with, or result in a breach or violation of the organizational documents of any member of the Jeereddi/PMCP Group as currently in effect, (d) the execution, delivery and performance of this Agreement by each member of the Jeereddi/PMCP Group does not and will not violate or conflict with (i) any law, rule, regulation, order, judgment or decree applicable to any member of the Jeereddi/PMCP Group, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could constitute such a breach, violation or default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any organizational document, agreement, contract, commitment, understanding or arrangement to which such member is a party or by which it is bound, (e) as of the date of this Agreement, the Jeereddi/PMCP Group is deemed to beneficially own in the aggregate 1,038,771 shares of Common Stock, (f) as of the date hereof, each member of the Jeereddi/PMCP Group does not currently have, and does not currently have any right to acquire or any interest in any other securities of the Company (or any rights, options or other securities convertible into or exercisable or exchangeable (whether or not convertible, exercisable or exchangeable immediately or only after the passage of time or the occurrence of a specified event) for such securities or any obligations measured by the price or value of any securities of the Company or any of its controlled Affiliates, including any swaps or other derivative arrangements designed to produce economic benefits and risks that correspond to the ownership of Common Stock, whether or not any of the foregoing would give rise to beneficial ownership (as determined under Rule 13d-3 promulgated under the Exchange Act), and whether or not to be settled by delivery of Common Stock, payment of cash or by other consideration, and without regard to any short position under any such contract or arrangement), and (g) the Jeereddi/PMCP Group will not, directly or indirectly, compensate or agree to compensate the Continuing Director for his service as a nominee or director of the Company with any cash, securities (including any rights or options convertible into or exercisable for or exchangeable into securities or any profit sharing agreement or arrangement), or other form of compensation directly or indirectly related to the Company or its securities.

 

5.                                                Press Release.

 

During the Standstill Period, neither the Company nor the Jeereddi/PMCP Group shall issue any press release or public announcement regarding this Agreement or the matters contemplated hereby, except as required by law or the rules of any stock exchange or with the prior written consent of the other Party, and otherwise in accordance with this Agreement.

 

6.                                                Expenses.

 

Each Party shall be responsible for its own fees and expenses in connection with the negotiation and execution of this Agreement and the transactions contemplated hereby (including actions in respect of any stockholder meeting prior to the termination or expiration of this Agreement).

 

7.                                                Specific Performance.

 

Each of the members of the Jeereddi/PMCP Group, on the one hand, and the Company, on the other hand, acknowledges and agrees that irreparable injury to the other Party hereto would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and that such injury would not be adequately compensable by the remedies available at law (including the payment of money damages). It is accordingly agreed that the Jeereddi/PMCP Group (or any of the entities and natural persons listed in the signature pages hereto), on the one hand, and the Company, on the other hand (the “Moving Party”), shall each be entitled to specific enforcement of, and injunctive relief to prevent any violation of, the terms hereof, and the other Party hereto will not take action, directly or indirectly, in opposition to the Moving Party seeking such relief on the grounds that any other remedy or relief is available at law or in equity. This Section 7 is not the exclusive remedy for any violation of this Agreement.

 

8.                                                Severability.

 

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby

 

5

 

stipulated and declared to be the intention of the Parties that the Parties would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. In addition, the Parties agree to use their best efforts to agree upon and substitute a valid and enforceable term, provision, covenant or restriction for any of such that is held invalid, void or enforceable by a court of competent jurisdiction.

 

9.                                                  Notices.

 

Any notices, consents, determinations, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending Party); (iii) upon confirmation of receipt, when sent by email (provided such confirmation is not automatically generated); or (iv) one (1) business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the Party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

	
If to the Company:
    	
 
    	
Tuesday Morning Corporation
    
	
 
    	
 
    	
6250 LBJ Freeway
    
	
 
    	
 
    	
Dallas, TX 75240
    
	
 
    	
 
    	
Attention: General Counsel
    
	
 
    	
 
    	
Telephone: (972) 387-3562
    
	
 
    	
 
    	
Facsimile: (972) 934-7231
    
	
 
    	
 
    	
Email: BZeterberg@TuesdayMorning.com
    
	
 
    	
 
    	
 
    
	
With a copy (which shall not   constitute notice) to:
    	
 
    	
Skadden, Arps, Slate, Meagher & Flom LLP
    
	
 
    	
 
    	
300 South Grand Ave., Suite 3400
    
	
 
    	
 
    	
Los Angeles, CA 90071
    
	
 
    	
 
    	
Attention: Brian J. McCarthy
    
	
 
    	
 
    	
Telephone: (213) 687-5070
    
	
 
    	
 
    	
Facsimile: (213) 621-5070
    
	
 
    	
 
    	
Email: Brian.McCarthy@skadden.com
    
	
 
    	
 
    	
 
    
	
If to the Jeereddi/PMCP Group   or any member thereof:
    	
 
    	
Jeereddi II, LP
    
	
 
    	
 
    	
6430 Sunset Boulevard, Suite 1575
    
	
 
    	
 
    	
Los Angeles, CA 90028
    
	
 
    	
 
    	
Attention: Naveen Jeereddi
    
	
 
    	
 
    	
Telephone: (310) 550-7270
    
	
 
    	
 
    	
Facsimile: (310) 510-6805
    
	
 
    	
 
    	
Email: nj@jeereddi.com
    
	
 
    	
 
    	
 
    
	
With a copy (which shall not   constitute notice) to:
    	
 
    	
Olshan Frome Wolosky LLP
    
	
 
    	
 
    	
1325 Avenue of the Americas
    
	
 
    	
 
    	
New York, NY 10019
    
	
 
    	
 
    	
Attention: Andrew M. Freedman
    
	
 
    	
 
    	
Telephone: (212) 451-2250
    
	
 
    	
 
    	
Facsimile: (212) 451-2222
    
	
 
    	
 
    	
Email: AFreedman@olshanlaw.com
    

 

10.                               Applicable Law.

 

This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without reference to the conflict of laws principles thereof. Each of the Parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder brought by the other Party hereto or its successors or assigns, shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware). Each of the Parties hereto hereby irrevocably submits with regard to any

 

6

 

such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement in any court other than the aforesaid courts. Each of the Parties hereto hereby irrevocably waives, and agrees not to assert in any action or proceeding with respect to this Agreement, (i) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason, (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) to the fullest extent permitted by applicable legal requirements, any claim that (A) the suit, action or proceeding in such court is brought in an inconvenient forum, (B) the venue of such suit, action or proceeding is improper or (C) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

 

11.                               Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the Parties and delivered to the other Party (including by means of electronic delivery or facsimile).

 

12.                               Mutual Non-Disparagement.

 

Subject to applicable law, each of the Parties covenants and agrees that, during the Standstill Period, or, if earlier, until such time as the other Party or any of its agents, subsidiaries, affiliates, successors, assigns, officers, key employees or directors shall have breached this Section 12, neither it nor any of its respective agents, subsidiaries, affiliates, successors, assigns, officers, key employees or directors, shall in any way publicly criticize, disparage, call into disrepute, or otherwise defame or slander the other Parties or such other Parties’ subsidiaries, affiliates, successors, assigns, officers (including any current officer of a Party or a Parties’ subsidiaries who no longer serves in such capacity following the execution of this Agreement), directors (including any current director of a Party or a Parties’ subsidiaries who no longer serves in such capacity following the execution of this Agreement), employees, stockholders, agents, attorneys or representatives, or any of their businesses, products or services, in any manner that would reasonably be expected to damage the business or reputation of such other Parties, their businesses, products or services or their subsidiaries, affiliates, successors, assigns, officers (or former officers), directors (or former directors), employees, stockholders, agents, attorneys or representatives. This Section 12 shall not limit the ability of any director of the Company to act in accordance with his or her fiduciary duties or otherwise in accordance with applicable law.

 

13.                               Confidentiality.

 

The Jeereddi/PMCP Group agrees that it will not, and will cause its Affiliates and Associates not to, seek to obtain confidential information of the Company from the Continuing Director, and the Continuing Director agrees to keep confidential and not publicly disclose the Company’s confidential information, including all discussions and matters considered in meetings of the Board or Board committees and subcommittees, unless previously disclosed publicly by the Company.  The Confidentiality Agreement, dated August 14, 2017, by and among the Company, Jeereddi Investments LP and PMCP (the “Confidentiality Agreement”), shall continue in full force and effect in accordance with its terms.

 

14.                               Entire Agreement; Amendment and Waiver; Successors and Assigns; Third Party Beneficiaries.

 

This Agreement amends and restates the Prior Agreement and, together with the Confidentiality Agreement, contains the entire understanding of the Parties hereto with respect to their subject matter.  There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings between the Parties other than those expressly set forth herein and in the Confidentiality Agreement.  No modifications of this Agreement can be made except in writing signed by an authorized representative of each of the Company and the Jeereddi/PMCP Group. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. The terms and conditions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the Parties hereto and their respective successors, heirs, executors, legal representatives, and permitted assigns. No Party shall assign this Agreement or any rights or obligations hereunder without, with respect to any member of the Jeereddi/PMCP

 

7

 

Group, the prior written consent of the Company, and with respect to the Company, the prior written consent of an authorized representative of the Jeereddi/PMCP Group. This Agreement is solely for the benefit of the Parties hereto and is not enforceable by any other persons.

 

[The remainder of this page intentionally left blank]

 

8

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized signatories of the Parties as of the date first set forth above.

 

 

	
TUESDAY MORNING   CORPORATION
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Steven R. Becker
    	
 
    
	
Name:
    	
Steven R. Becker
    	
 
    
	
Title:
    	
Chief Executive Officer
    	
 
    
				

 

[Signature Page to Agreement]

 

 

	
Jeereddi II, LP
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
Jeereddi Investments,   LP, its
    	
 
    
	
 
    	
Investment Manager
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Naveen Jeereddi
    	
 
    
	
 
    	
Name:
    	
Naveen Jeereddi
    	
 
    
	
 
    	
Title:
    	
Chief Executive Officer
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Jeereddi I, LP
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Naveen Jeereddi
    	
 
    
	
 
    	
Name:
    	
Naveen Jeereddi
    	
 
    
	
 
    	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Jeereddi Partners, LLC
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Naveen Jeereddi
    	
 
    
	
 
    	
Name:
    	
Naveen Jeereddi
    	
 
    
	
 
    	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Jeereddi Investments,   LP
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Naveen Jeereddi
    	
 
    
	
 
    	
Name:
    	
Naveen Jeereddi
    	
 
    
	
 
    	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Jeereddi Capital, LLC
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Naveen Jeereddi
    	
 
    
	
 
    	
Name:
    	
Naveen Jeereddi
    	
 
    
	
 
    	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    	
 
    
	
PMCP I, LP
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ James T. Corcoran
    	
 
    
	
 
    	
Name:
    	
James T. Corcoran
    	
 
    
	
 
    	
Title:
    	
General Partner
    	
 
    
	
 
    	
 
    	
 
    
	
PMCP GP, LLC
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ James T. Corcoran
    	
 
    
	
 
    	
Name:
    	
James T. Corcoran
    	
 
    
	
 
    	
Title:
    	
CEO
    	
 
    

 

[Signature Page to Agreement]

 

 

	
Purple Mountain Capital   Partners LLC
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ James T. Corcoran
    	
 
    
	
 
    	
Name:
    	
James T. Corcoran
    	
 
    
	
 
    	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
/s/ Naveen Jeereddi
    	
 
    
	
Naveen Jeereddi
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/ James T. Corcoran
    	
 
    
	
James T. Corcoran
    	
 
    

 

[Signature Page to Agreement]

 

 

EXHIBIT A

 

Jeereddi I, LP

Jeereddi II, LP
 Jeereddi Partners, LLC

Jeereddi Investments, LP

Jeereddi Capital, LLC

PMCP I, LP

PMCP GP, LLC

Purple Mountain Capital Partners LLC

Naveen Jeereddi

James T. Corcoran

 

[Exhibit A]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00298-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00298-of-00352.parquet"}]]