Document:

Ligand-BrinsonPatrickSalesAgreement-ATMOctober2013

 

Exhibit 10.2
LIGAND PHARMACEUTICALS INCORPORATED
DOCS® ATM financing facility
$24,000,000 of Common Stock, 
$0.001 par value

SALES AGREEMENT

October 11, 2013

 

THIS SALES AGREEMENT (the “Agreement”) dated as of October 11, 2013 between Meyers Associates, L.P. (doing business as Brinson Patrick, a division of Meyers Associates, L.P.), having its principal office at 3 Columbus Circle, 15th Floor, New York, New York 10019 (the “Sales Manager”) and Ligand Pharmaceuticals Incorporated, a corporation organized and existing under the laws of the State of Delaware (the “Company”).
WHEREAS, the Company desires to issue and sell through the Sales Manager, as agent, shares of its Common Stock, $0.001 par value (the “Stock”), on the terms set forth in Article II below, in an aggregate offering price up to $24,000,000 (the “Maximum Amount”).  
WHEREAS, the Company has also entered into a separate at-the-market issuance sales agreement (the “Alternative Sales Agreement”), dated as of the date hereof, with MLV & Co. LLC (the “Alternative Sales Agent”), under which the Company also desires to sell and issue Stock on the terms set forth in the Alternative Sales Agreement.
IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the Sales Manager agree as follows:
ARTICLE 1
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
1.1    For purposes of this Agreement, unless the context requires to the contrary, the term “Company” shall also include all significant subsidiaries (as defined by Section 1-02 of Regulation S-X) of the Company.  The Company represents and warrants to, and agrees with, the Sales Manager that, as of the date of this Agreement and as of each Certificate Date (as defined in Section 2.1(d)):
(a)    The Company meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the “Act”), and the rules and regulations thereunder (the “Rules and Regulations”), and the Company is eligible to use Form S-3 for the transactions contemplated by this Agreement.  A registration statement on Form S-3 (Registration No. 333-177338) with respect to, among other securities, the Stock, including a form of base prospectus, has been prepared by the Company in conformity with the requirements of the Act and the Rules and Regulations, has been filed with the Securities and Exchange Commission (the “Commission”) and such registration statement became automatically effective under the Act upon filing.  No stop order suspending the effectiveness of such registration statement has been issued, and no proceedings for that purpose has been instituted or are pending or, to the knowledge of the Company, are contemplated or threatened by the Commission.  Such registration statement, as it may have heretofore been or may hereafter be amended, is referred to herein as the “Registration Statement,” and the final form of prospectus included in the Registration Statement for purposes of offers and sales of the Stock contemplated herein, as amended or supplemented from time to time, is referred to herein as the “Prospectus.”  Any reference herein to the Registration Statement, the Prospectus, or any amendment or supplement thereto shall be deemed to refer to and include the documents incorporated (or deemed to be incorporated) by reference therein, and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement or Prospectus shall be deemed to refer to and include the filing after the execution hereof of any document with the Commission deemed to be incorporated by reference therein.
(b)    Each part of the Registration Statement, when such part became or becomes effective, and the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the Commission and at each Settlement Date (as hereinafter defined), conformed or will conform in all material respects with the requirements of the Act and the Rules and Regulations; each part of the Registration Statement, when such part became or becomes effective, did not or will not contain an untrue statement of a material fact or omit to state a material fact required to 

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be stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the Commission and at each Settlement Date, did not or will not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that the foregoing shall not apply to statements in or omissions from any such document in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of the Sales Manager, specifically for use in the Registration Statement, the Prospectus or any amendment or supplement thereto.  There are no Commission comments to any part of the Registration Statement, Prospectus or any amendment or supplement thereto, that have not been resolved as of the date hereof.
(c)    The documents incorporated by reference in the Registration Statement or the Prospectus, or any amendment or supplement thereto, when they were or are filed with the Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), conformed or will conform in all material respects with the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder.
(d)    The financial statements of the Company, together with the related schedules and notes thereto, set forth or included in the Registration Statement and Prospectus, fairly present the financial condition of the Company as of the dates indicated and the results of operations, changes in financial position, stockholders’ equity, and cash flows for the periods therein specified, in conformity with generally accepted accounting principles consistently applied throughout the periods involved (except as otherwise stated therein).  The summary and selected financial and statistical data, if any, included in the Registration Statement and the Prospectus present fairly the information shown therein and, to the extent based upon or derived from the financial statements, have been compiled on a basis consistent with the financial statements presented therein.  As of the date hereof, there are no comments pending from the Commission that, if not resolved favourably to the Company, could have the effect of requiring a restatement of financial statements of the Company.
(e)    The accountants who certified the financial statements and the supporting schedules included in the Registration Statement are and, during the periods covered by their reports, were qualified and independent public accountants as required by Rule 2-01 of Regulation S-X.
(f)    The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware.  The Company is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its assets or properties (owned, leased or licensed) or the nature of its business makes such qualification necessary (including every jurisdiction in which it owns or leases real property), except for such jurisdictions where the failure to so qualify would not have a Material Adverse Effect on the Company.  For purposes of this Agreement, “Material Adverse Effect” means (i) any adverse effect on the business, operations, properties, prospects or financial condition of the Company, whether or not arising from transactions in the ordinary course of business, that is (either alone or together with all other adverse effects) material to the Company, and/or (ii) any material adverse effect on the transactions contemplated under this Agreement or any other agreement or document contemplated hereby or thereby.  Each of the Company’s significant subsidiaries is validly existing as a corporation, limited liability company or partnership, as applicable, in its respective jurisdiction of formation. Schedule 1.1(f) hereto identifies each of the Company’s subsidiaries that is a significant subsidiary (as defined in Section 1-02 of Regulation S-X) of the Company.  All of the issued and outstanding capital stock, limited liability company interests or partnership interests, as applicable, of each significant subsidiary has been duly authorized and validly issued, is fully paid and nonassessable and (except as otherwise disclosed in the Registration Statement and the Prospectus) is owned by the Company, directly or indirectly, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity.  Except as disclosed in the Registration Statement and the Prospectus, the Company does not own, lease or 

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license any asset or property or conduct any business outside the United States of America.  The Company has all requisite corporate power and authority and all necessary authorizations, approvals, consents, orders, licenses, certificates and permits of and from all governmental orders or regulatory bodies or any other person or entity, to own, lease, license and operate its assets and properties and conduct its business as now being conducted and as described in the Registration Statement and the Prospectus; except for such authorizations, approvals, consents, orders, licenses, certificates and permits the absence of which would not have a Material Adverse Effect.
(g)    The Company has good and marketable title to, or leasehold interests in, all properties and assets (including, without limitation, mortgaged assets) as described in the Registration Statement and the Prospectus as owned by the Company, free and clear of all liens, charges, encumbrances or restrictions, except such as are described in the Registration Statement and the Prospectus and except such as would not have a Material Adverse Effect on the Company.  The Company has such consents, easements, rights-of-way or licenses (collectively, “rights-of-way”) from any person as are necessary to conduct its business in the manner described in the Registration Statement, except for those which if not obtained would not, singly or in the aggregate, have a Material Adverse Effect on the Company, and none of such rights-of-way contains any restriction that is materially burdensome to the Company.
(h)    The Company has been subject to the requirements of Section 12 of the Exchange Act during the period commencing 12 months preceding the filing of the Registration Statement and ending on the date hereof (the “Reporting Period”) and during such Reporting Period the Company has timely filed all material and reports required under Sections 13(a), 13(c) 14 and/or 15(d) of the Exchange Act.  All such materials and reports conformed in form and substance to the requirements of the Exchange Act and the rules and regulations thereunder.  There is no litigation or governmental or other proceeding or investigation before any court or administrative authority or before or by any public body or board pending or, to the knowledge of the Company, contemplated or threatened against, or involving the assets, properties or businesses of the Company which would have a Material Adverse Effect on the Company or the offering contemplated by this Agreement, except as described in the Registration Statement.
(i)    The Company maintains insurance (issued by insurers of recognized financial responsibility) of the types and in the amounts generally deemed adequate for its businesses and, to the knowledge of the Company, consistent with insurance coverage maintained by similar companies in similar businesses, including, but not limited to, product liability insurance covering the Company’s products, insurance covering real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect.
(j)    Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as described therein, (i) there has not been any Material Adverse Effect, whether or not arising from transactions in the ordinary course of business; (ii) the Company has not sustained any material loss or interference with its assets, businesses or properties (whether owned or leased) from fire, explosion, earthquake, flood or other calamity, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree; (iii) since the date of the latest balance sheet, included or incorporated by reference in the Registration Statement and the Prospectus, except as reflected therein, the Company has not undertaken any liability or obligation, direct or contingent, except such liabilities or obligations that would not have an Material Adverse Effect; and (iv) there has not been any transaction that is material to the Company, except transactions in the ordinary course of business that have been disclosed in the Registration Statement and the Prospectus.
(k)    There is no document or contract of a character required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement that is not described or filed in the manner and within the time periods required under the Exchange Act and the rules and regulations thereunder.  Each document, instrument, contract and agreement of the Company described in the Registration Statement or the Prospectus or 

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incorporated by reference therein or listed as exhibits to the Registration Statement is in full force and effect and is valid and enforceable by and against the Company in accordance with their terms, assuming the due authorization, execution and delivery thereof by each of the other parties thereto except as otherwise disclosed in the Registration Statement or Prospectus.  The Company is not, nor to the knowledge of the Company is any other party, in default in the observance or performance of any term or obligation to be performed by it under any such agreement, and no event has occurred which with notice or lapse of time or both would constitute such a default, which default or event would have a Material Adverse Effect.  No default exists, and no event has occurred which with notice or lapse of time or both would constitute a default, in the due performance and observance of any term, covenant or condition, by the Company of any other agreement or instrument to which the Company is a party or by which it or its properties or business may be bound or affected, which default or event would have a Material Adverse Effect.
(l)    The Company is not in violation of any term or provision of its charter, by-laws or operating agreement, as applicable.  The Company is not in violation of any franchise, license, permit, judgment, decree, order, statute, rule or regulation, where the consequences of such violation would have a Material Adverse Effect.
(m)    Except as described in the Prospectus, neither the execution, delivery and performance of this Agreement by the Company nor the consummation of any of the transactions contemplated hereby (including, without limitation, the issuance and sale by the Company of the Stock) will give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with or result in the breach of any term or provision of, or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or require any consent or waiver under, or result in the execution or imposition of any lien, charge, encumbrance, claim, security interest, restriction or defect upon any properties or assets of the Company pursuant to the terms of, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company is a party or by which the Company is bound, or any of its properties are bound, or any franchise, license, permit, judgment, decree, order, statute, rule or regulation applicable to the Company or violate any provision of the charter or by-laws of the Company, except for such consents or waivers which have already been obtained and are in full force and effect.
(n)    All of the outstanding shares of common stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable and none of such shares were issued in violation of any pre-emptive or other similar right.  The Stock has been duly authorized and, when issued and sold pursuant to this Agreement, will be validly issued, fully paid and nonassessable and will not be issued in violation of any pre-emptive or other similar right.  Except as disclosed in the Registration Statement and the Prospectus, there is no outstanding option, warrant or other right calling for the issuance of, and there is no commitment, plan or arrangement to issue, any capital stock of the Company or any security convertible into or exercisable or exchangeable for such capital stock, except for standard dividend reinvestment plans.  The Stock conforms in all material respects to all statements relating thereto contained in the Registration Statement and the Prospectus.  All stock options issued by the Company have been issued in compliance with law; and the terms and provision of such stock options were established in compliance with law. 
(o)    Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as (x) described or referred to therein, or (y) are not material (as to clauses (i) and (ii) only), are consistent with past practice (as to clauses (i) and (ii) only), and are publicly disclosed, the Company has not (i) issued any securities (except as would have been permitted pursuant to the proviso contained in Section 3.1(k) of this Agreement) or incurred any liability or obligation, direct or contingent, except such liabilities or obligations incurred in the ordinary course of business including, without limitation, debt financing to acquire and develop properties, (ii) entered into any transaction not in the ordinary course of business or (iii) declared or paid any dividend or made any distribution on any shares of its capital stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of its capital stock. 

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(p)    Except as disclosed in the Registration Statement and Prospectus, no holder of any security of the Company has the right, which has not been waived, to have any security owned by such holder included in the Registration Statement.
(q)    All necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery and performance of this Agreement and the issuance and sale of the Stock by the Company.  This Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes and will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.  Except for any “blue sky” filings or Trading Market (as defined below) listing applications to be filed pursuant hereto, each approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby and the issuance and sale of the Stock by the Company has been obtained or made and is in full force and effect.  The Company will use best efforts to cause the Stock to be listed for trading on the Trading Market.  For purposes of this Agreement, the “Trading Market” is the national securities exchange or market on which the common stock of the Company trades or is admitted for trading.
(r)    The Company has not incurred any liability for a fee, commission or other compensation on account of the employment or engagement of a broker or finder in connection with, or as a result of, the transactions contemplated by this Agreement other than the fees payable to the Sales Manager and the Alternative Sales Manager contemplated by this Agreement. 
(s)    The Company is conducting its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, except where the failure to be so in compliance would not have a Material Adverse Effect.
(t)    No transaction has occurred between or among the Company and any of its officers or directors or any affiliate or affiliates of any such officer or director that is required to be described in and is not described in the Registration Statement and the Prospectus.  
(u)    The Company has not, nor will it, directly or indirectly, (i) taken any action designed to or which might reasonably be expected to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Stock or (ii) sell, bid for, or purchase the Stock to be issued and sold pursuant to this Agreement or the Alternative Sales Agreement, or pay anyone any compensation for soliciting purchases of the Stock other than the Sales Manager and the Alternative Sales Manager.
(v)    The Company has filed all federal, state, local and foreign tax returns that are required to be filed through the date hereof (and will file all such tax returns when and as required to be filed after the date hereof), or has received extensions thereof, and has paid all taxes shown on such returns to be due on or prior to the date hereof (and will pay all taxes shown on such returns to be due after the date hereof) and all assessments received by it to the extent that the same are material and have become due except where the failure to file such a return or pay such amount would not have a Material Adverse Effect.
(w)    The Company owns or has valid, binding and enforceable licenses and otherwise have the legal right to use the patents and patent applications, inventions, copyrights, trade and service marks, trade and service mark registrations, trade names, service names, technology, licenses and know-how (including without limitation trade secrets and other unpatented and/or unpatentable proprietary rights but excluding generally commercially available “off the shelf” software programs licensed pursuant to shrink wrap or “click and accept” licenses) necessary to conduct the 

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business of the Company in the manner described in the Registration Statement and the Prospectus (collectively, the “Company Intellectual Property”), except for any Company Intellectual Property the absence of which, individually or in the aggregate, would not have a Material Adverse Effect.  Except as described in the Prospectus, the Company Intellectual Property is free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest, whether imposed by agreement, contract, understanding, law, equity or otherwise, except for (i) liens for taxes not yet due, (ii) mechanics liens and similar liens for labor, materials or supplies incurred in the ordinary course of business for amounts that are not delinquent and (iii) any liens that individually or in the aggregate are not material (a “Permitted Liens”) or where any failure to have such adequate licenses or other rights of use to such intellectual property, individually or in the aggregate, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The Company is not obligated to pay a royalty, grant a license or provide other consideration to any third party in connection with the Company Intellectual Property other than as disclosed in the Registration Statement and the Prospectus.  Except as disclosed in the Registration Statement and the Prospectus or as would not have a Material Adverse Effect, (i) the Company has not received any notice of infringement or conflict by others challenging the validity, enforceability or scope of any Company Intellectual Property or otherwise asserting rights of others with respect to any Company Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim, (ii) the conduct of the business of the Company in the manner described in the Registration Statement and the Prospectus does not and, to the knowledge of the Company, will not, infringe, interfere or conflict with any valid issued patent claim or other intellectual property right of any third party and (iii) no third party, including without limitation any academic or governmental organization, possesses or could obtain rights to the Company Intellectual Property which, if exercised, could enable such party to develop products competitive to those of the Company.  Except as disclosed in the Registration Statement and the Prospectus, the Company has not received any notice or has any knowledge of (i) any potential infringement or misappropriation by others of the Company Intellectual Property or (ii) any intellectual property of others that potentially conflicts or interferes with the Company Intellectual Property, that might reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  To the Company’s knowledge, no claim of any patent or patent application (assuming the claims of patent applications issue as currently pending) included in the Company Intellectual Property is unenforceable or invalid, except for such unenforceability or invalidity that would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect.  Each former and current key employee and key independent contractor of the Company has signed and delivered one or more written contracts with the Company pursuant to which such employee or independent contractor assigns to the Company all of his, her or its rights in and to any inventions, discoveries, improvements, works of authorship, know-how or information made, conceived, reduced to practice, authored or discovered in the course of employment by or performance of services for the Company and any and all patent rights, copyrights, trademark and other intellectual property rights therein or thereto.
(x)    Except as described in the Registration Statement and the Prospectus, the Company possesses all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses as currently conducted, including without limitation all such certificates, authorizations and permits required by the United States Food and Drug Administration (the “FDA”) or any other federal, state or foreign agencies or bodies engaged in the regulation of pharmaceuticals or biohazardous materials, except where the failure to so possess such certificates, authorizations and permits, individually or in the aggregate, would not result in a Material Adverse Effect.  Except as described in the Registration Statement and the Prospectus, the Company has not received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit, nor is the Company aware of any facts which would form a reasonable basis for any such revocation or modification, which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect.

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(y)    Except to the extent disclosed in the Registration Statement and the Prospectus, to the Company’s knowledge, the preclinical and clinical testing, application for marketing approval of, manufacture, distribution, promotion and sale of the products and potential products of the Company is in compliance, in all material respects, with all laws, rules and regulations applicable to such activities, including without limitation applicable good laboratory practices, good clinical practices and good manufacturing practices, except for such non-compliance as would not, individually or in the aggregate, have a Material Adverse Effect.  The descriptions of the results of such tests and trials contained in the Registration Statement and the Prospectus are accurate in all material respects.  Except to the extent disclosed in the Registration Statement and the Prospectus, the Company has not received notice of adverse finding, warning letter or clinical hold notice from the FDA or any other U.S. or non-U.S. government agency, or any untitled letter or other correspondence or notice from the FDA or any other governmental authority or agency or any institutional or ethical review board alleging or asserting noncompliance with any law, rule or regulation applicable in any jurisdiction, except notices, letters, and correspondences and non-U.S. counterparts thereof alleging or asserting such noncompliance as would not, individually or in the aggregate, have a Material Adverse Effect. Except to the extent disclosed in the Registration Statement and the Prospectus, the Company has not, either voluntarily or involuntarily, initiated, conducted or issued, or caused to be initiated, conducted or issued, any recall, field correction, market withdrawal or replacement, safety alert, warning, “dear doctor” letter, investigator notice, or other notice or action relating to an alleged or potential lack of safety or efficacy of any product or potential product of the Company, any alleged product defect of any product or potential product of the Company, or any violation of any material applicable law, rule, regulation or any clinical trial or marketing license, approval, permit or authorization for any product or potential product of the Company, and the Company is not aware of any facts or information that would cause it to initiate any such notice or action and has no knowledge or reason to believe that the FDA, the European Medicines Agency (the “EMEA”) or any other governmental agency or authority or any institutional or ethical review board or other non-governmental authority intends to impose, require, request or suggest such notice or action.
(z)    The Company is not, nor will it be after the consummation of the transactions contemplated by this Agreement, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
(aa)    The Company’s systems of internal accounting controls taken as a whole are sufficient to meet the broad objectives of internal accounting control insofar as those objectives pertain to the prevention or detection of errors or irregularities in amounts that would be material in relation to the Company’s financial statements; and, to the best of the Company’s knowledge, neither the Company nor any employee or agent thereof has made any payment of funds of the Company or received or retained any funds, and no funds of the Company have been set aside to be used for any payment, in each case in violation of any law, rule or regulation.
(bb)    The Company is not involved in any labor dispute and, to the knowledge of the Company, no such dispute has been threatened, except for such disputes as would not have a Material Adverse Effect on the Company, or subject the Company or its shareholders to any material liability or disability.
(cc)        Except as disclosed in the Registration Statement or the Prospectus, (i) there has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, hazardous wastes or hazardous substances by the Company (or to the knowledge of the Company, any of their predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not have a Material Adverse Effect; (ii) there has been no material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company, except

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 for any such spill, discharge, leak emission, injection, escape, dumping or release which would not have a Material Adverse Effect; and (iii) the terms “hazardous wastes,” “toxic wastes” and “hazardous substances” shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection.
(dd)    Except as described in the Prospectus, there are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of the members of any of them.
(ee)    The Company acknowledges and agrees that the Sales Manager has informed the Company that it may, to the extent permitted under the Securities Act and the Exchange Act, purchase and sell shares of Stock for its own account while this Agreement is in effect
(ff)        To enable the Sales Manager to rely on Rule 5110(b)(7)(C)(i) of FINRA, the Company represents that it has: (i) a non-affiliate, public common equity float of at least $150 million or a non-affiliate, public common equity float of at least $100 million and annual trading volume of at least three million shares, and (ii) been subject to the Exchange Act reporting requirements for a period of at least 36 months.
(gg)    There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including without limitation Section 402 related to loans and Sections 302 and 906 related to certifications.
Any certificate signed by an officer of the Company and delivered to the Sales Manager or to counsel for the Sales Manager shall be deemed to be a representation and warranty by the Company to Sales Manager as to the matters set forth therein.
ARTICLE II
SALE AND DELIVERY OF SECURITIES
2.1    Sale and Delivery of Securities.
(a)    On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell through the Sales Manager, as agent, and the Sales Manager agrees to sell, as agent for the Company, on a best efforts basis, up to that number of shares of Stock as may be directed by the Company during the term of this Agreement, on the terms set forth herein.  The Stock will be sold from time to time as described in the Registration Statement and Prospectus, in amounts, and subject to price limitations, as directed by the Company and as agreed to by the Sales Manager.  
(b)    The Company or the Sales Manager may, upon notice to the other party hereto in writing (including by email correspondence) or by telephone (if confirmed promptly by facsimile or email), at any time and from time to time suspend the offering of Stock; provided, however, that such suspension shall not affect or impair the parties’ respective obligations with respect to the Stock sold hereunder prior to the giving of such notice.
(c)    The compensation to the Sales Manager for sales of Stock shall be at a fixed commission rate of 2% of the gross sales price per share for the Stock sold under this Agreement.  The remaining proceeds, after further deduction for any transaction fees imposed by any governmental or self-regulatory organization in respect to such sale shall constitute the net proceeds to the Company for such Stock (the “Net Proceeds”).

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(d)    Each time that the Company wishes to issue and sell the Stock hereunder it will notify the Sales Manager or the Alternative Sales Agent by email notice (or other method mutually agreed to in writing by the parties) (a “Placement Notice”) containing the parameters in accordance with which it desires the Stock to be sold, which shall at a minimum include the number/amount of shares of Stock to be issued, the time period during which sales are requested to be made, any limitation on the number/amount of shares of Stock that may be sold in any one trading day and any minimum price below which sales may not be made.  The Company shall open and maintain a trading account (the “Trading Account”) at a clearing agent designated by the Sales Manager to facilitate the transactions contemplated by this Agreement.  The Company shall, with respect to each sale of Stock sold by the Sales Manager, effect delivery of the applicable number of Stock to the Trading Account, on or before the third business day (or such other day as is industry practice for regular-way trading) following each sale of the Stock (each, a “Settlement Date”).  The Net Proceeds from the sale of the Stock shall be available in the Trading Account following the settlement of the sale on the Settlement Date.  The Sales Manager’s compensation shall be withheld from the sales proceeds on each Settlement Date and shall be paid to the Sales Manager.  Subject to the terms of the Placement Notice, the Sales Manager may also sell Stock by any other method permitted by law, including but not limited to in a privately negotiated transaction subject to prior written approval of the Company.
(e)    At each Settlement Date, the Company shall be deemed to have affirmed each representation, warranty, covenant and other agreement contained in this Agreement.  Any obligation of the Sales Manager under this Agreement shall be subject to the continuing accuracy of the representations and warranties of the Company herein, to the performance by the Company of its obligations hereunder and to the continuing satisfaction of the additional conditions specified in Article IV herein.
(f)    If the Company shall default on its obligation to deliver Stock on any Settlement Date, the Company shall (i) hold the Sales Manager harmless against any loss, claim or damage arising from or as a result of such default by the Company and (ii) pay the Sales Manager any commission to which it would otherwise be entitled absent such default.
(g)    The Company agrees that any offer to sell, any solicitation of an offer to buy or any sales of Placement Shares shall only be effected by or through only one of the Sales Manager or the Alternative Sales Agent on any single given day, but in no event more than one, and the Company shall not request that the Sales Manager and the Alternative Sales Agent sell Stock on the same day.  The aggregate offering price of the Stock that may be sold pursuant to this Agreement and the Alternative Sales Agreement shall not exceed the Maximum Amount.
ARTICLE III
COVENANTS OF THE COMPANY
3.1    The Company covenants and agrees with the Sales Manager that:
(a)    As promptly as practicable after the date of this Agreement, the Company will file a supplement to the Prospectus under Rule 424(b) of the Act naming the Sales Manager as an underwriter, to permit sales of the Stock under the Act.  
(b)    During the period in which the Sales Manager has been requested to offer and sell Stock, the Company will notify the Sales Manager promptly of the time when any subsequent amendment to the Registration Statement has become effective or any subsequent supplement to the Prospectus has been filed and of any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information.  The Company will prepare and file with the Commission, promptly upon the Sales Manager’s reasonable request, any 

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amendments or supplements to the Registration Statement or Prospectus that, in the Sales Manager’s reasonable opinion, may be necessary or advisable in connection with the sale of the Stock pursuant to this Agreement.  The Company will not file any amendment or supplement to the Registration Statement or Prospectus (other than a supplement to the Prospectus that (i) relates solely to the issuance of securities other than the Stock of the Company pursuant to this Agreement and (ii) does not materially change the information about the Company or its business, operations, properties or financial condition disclosed in the Registration Statement or Prospectus previously thereto (an “Excluded Supplement”)) unless a copy thereof has been submitted to the Sales Manager at least three (3) business days before the filing and the Sales Manager has not reasonably objected thereto; and it will notify the Sales Manager at the time of filing thereof of any document that, upon filing, is deemed to be incorporated by reference in the Registration Statement or Prospectus (unless such document is available on the SEC’s EDGAR database, in which case no notification shall be required).  The Company will cause each amendment to the Registration Statement or supplement to the Prospectus, and each filing or report incorporated therein, to be prepared in form and substance as required by the Act, the Rules and Regulations, the Exchange Act and the rules and regulations thereunder, and to be timely filed with the Commission.  Any press releases or similar publicity by the Company related to this offering that is not covered by the preceding provisions of this Section 3(b) must be reasonably acceptable to the Sales Manager. 
(c)    The Company will advise the Sales Manager, promptly after it shall receive notice or obtain knowledge thereof, of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, of the suspension of the qualification of the Stock for offering or sale in any jurisdiction, or of the initiation or threatening of any proceeding for any such purpose; and it will promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.
(d)    Within the time during which a prospectus relating to the Stock is required to be delivered under the Act, the Company will comply with all requirements imposed upon it by the Act and by the Rules and Regulations, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Stock as contemplated by the provisions hereof and the Prospectus.  If during such period any event occurs as a result of which the Prospectus, as then amended or supplemented, would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend or supplement the Registration Statement or Prospectus to comply with the Act, the Company will promptly notify the Sales Manager to suspend the offering of Stock during such period and the Company will amend or supplement the Registration Statement or Prospectus (at the expense of the Company) so as to correct such statement or omission or effect such compliance and will use commercially reasonable efforts to have any amendment or supplement to the Registration Statement or Prospectus declared effective as soon as possible, unless the Company has reasonable business reasons to defer public disclosure of the relevant information.
(e)    The Company will use commercially reasonable efforts to qualify the Stock for sale under the securities laws of such jurisdictions as the Sales Manager designates in writing and to continue such qualifications in effect so long as required for the sale of the Stock, except that the Company shall not be required in connection therewith to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction.
(f)    The Company will furnish to the Sales Manager and its legal counsel (at the expense of the Company) copies of the Registration Statement and the Prospectus during the period in which a prospectus relating to the Stock is required to be delivered under the Act, in each case as soon as available and in such quantities as the Sales Manager may from time to time reasonably request.  The Company will take such action as to enable the conditions set forth in Rule 153(b) to be satisfied at all times that the Sales Manager is selling Stock.
(g)    The Company will make generally available to its security holders as soon as practicable, but in any event not later than 15 months after the end of the Company’s current fiscal quarter, an earnings statement (which need 

10

 

not be audited) covering a 12-month period that satisfies the provisions of Section 11(a) of the Act and Rule 158 of the Rules and Regulations.
(h)    The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay all of its expenses incident to the performance of its obligations hereunder (including, but not limited to, any transaction fees imposed by any governmental or self-regulatory organization with respect to transactions contemplated by this Agreement and any blue sky fees) and will pay the expenses of printing all documents relating to the offering.  The Company will reimburse the Sales Manager for its reasonable out-of-pocket costs and expenses incurred in connection with entering into this Agreement, including, without limitation, reasonable travel, reproduction, printing and similar expenses, initial and ongoing due diligence, and reasonable fees and disbursements of its legal counsel, up to an aggregate amount of up to $40,000.  In addition, without limiting the foregoing, the Company will pay, or reimburse the Sales Manager for, any filing fees incurred by the Sales Manager in connection with filings (if any) required to be made by the Sales Manager with FINRA.
(i)    The Company will use commercially reasonable efforts to maintain the quotation of the Stock on the Trading Market and to file with the Trading Market all documents and notices required by the Trading Market of companies quotations for which are reported by the Trading Market.  
(j)    The Company will apply the Net Proceeds from the sale of the Stock as set forth in the Prospectus.
(k)    The Company will not, directly or indirectly, offer or sell any shares of common stock (other than the Stock) or securities convertible into or exchangeable for, or any rights to purchase or acquire, common stock, during the period from the date of this Agreement through the final Settlement Date for the sale of Stock hereunder without (i) giving the Sales Manager at least eight hours prior written notice specifying the nature of the proposed sale and the date of such proposed sale and (ii) suspending activity under this program for such period of time as may reasonably be determined by agreement of the Company and the Sales Manager; provided, however, that no such notice and suspension shall be required in connection with the Company’s issuance or sale of (i) shares of common stock pursuant to any employee or director stock option or benefits plan, stock ownership plan, dividend reinvestment plan described in the Prospectus, as such plans may be amended from time to time, (ii) common stock, options and equity-based awards issued pursuant to the exception contained in NASDAQ Rule 5635(c)(3), and (iii) common stock issuable upon conversion of securities or the exercise of warrants, options or other rights in effect or outstanding on the date hereof.  Notwithstanding the foregoing, this paragraph (k) shall not apply during periods that the Company is neither selling Stock through the Sales Manager or the Alternative Sales Agent nor has requested the Sales Manager or the Alternative Sales Agent to sell Stock.
(l)    The Company will, at any time during the term of this Agreement, as supplemented from time to time, advise the Sales Manager immediately after it shall have received notice or obtained knowledge thereof, of any information or fact that would materially alter or affect any opinion, certificate, letter and other document provided to the Sales Manager pursuant to Article IV below.
(m)    Each time that the Registration Statement or the Prospectus shall be amended or supplemented (other than an Excluded Supplement) and on the dates specified in Section 4.1(f) below, the Company shall (unless the Company is not then selling Stock through the Sales Manager and has not requested the Sales Manager to sell Stock) furnish or cause to be furnished to the Sales Manager forthwith a certificate, in form and substance satisfactory to the Sales Manager, to the effect that the statements contained in the certificates referred to in Section 4.1(f) below that were last furnished to the Sales Manager are true and correct at the time of such amendment, supplement, filing, as the case may be, as though made at and as of such time (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such time) or, in lieu of such certificates, 

11

 

certificates of the same tenor as the certificates referred to in said Section 4.1(f) below, modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such certificate.
(n)    Each time that a post-effective amendment to the Registration Statement is declared effective or the Company files an Annual Report on Form 10-K, and at such other times as may be reasonably requested by the Sales Manager, the Company shall (unless the Company is not then selling Stock through the Sales Manager and has not requested the Sales Manager to sell Stock) furnish or cause to be furnished forthwith to the Sales Manager and to its legal counsel, a written opinion of Latham & Watkins, LLP (“Company Counsel”), or other counsel reasonably satisfactory to the Sales Manager, dated the date of effectiveness of such amendment or the date of filing with the Commission of such document, as the case may be, in form and substance satisfactory to the Sales Manager, of the same tenor as the opinion referred to in Section 4.1(d) below, but modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such opinion.  In addition, at each such time, the Company shall cause to be forwarded to the Sales Manager such opinions of special counsel to the Company as may be reasonably requested by the Sales Manager.
(o)    Each time that a post-effective amendment to the Registration Statement is declared effective or the Company files a Annual Report on Form 10-K, and at such other times as may be reasonably requested by the Sales Manager, the Company shall (unless the Company is not then selling Stock through the Sales Manager and has not requested the Sales Manager to sell Stock) cause Grant Thornton, LLP, or other independent accountants then retained by the Company, forthwith to furnish to the Sales Manager a letter, dated the date of effectiveness of such amendment, or the date of filing of such supplement or other document with the Commission, as the case may be, in form and substance satisfactory to the Sales Manager, of the same tenor as the letter referred to in Section 4.1(e) below but modified to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter.
(p)    The Company represents and agrees that, unless it obtains the prior consent of the Sales Manager, and the Sales Manager represents and agrees that, unless it obtains the prior consent of the Company, it has not made and will not make any offer relating to the Stock that would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a “free writing prospectus” as defined in Rule 405, required to be filed with the Commission.  Any such free writing prospectus consented to by the Company and the Sales Manager is hereinafter referred to as a “Permitted Free Writing Prospectus.”  The Company represents that it has treated and agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule 433 (“Rule 433”), and has complied and will comply with the requirements of Rules 164 and 433, as applicable to any Permitted Free Writing Prospectus, including timely Commission filings where required, legending and record keeping.
For the purposes of this Section, “Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433  under the Act, relating to the Stock in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g). 
ARTICLE IV
CONDITIONS OF THE SALES MANAGER'S OBLIGATIONS 
4.1    The obligations of the Sales Manager to sell the Stock as provided in this Agreement shall be subject to the accuracy, as of the date hereof, and as of each Settlement Date contemplated under this Agreement, of the representations and warranties of the Company in this Agreement, to the performance by the Company of its obligations in this Agreement and to the following additional conditions:

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(a)    The Registration Statement shall be effective, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Company or the Sales Manager, threatened by the Commission, and any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to the Sales Manager’s reasonable satisfaction.  The supplement to the Prospectus contemplated by Section 3.1(a) above shall have been filed.
(b)    The Sales Manager shall not have advised the Company that the disclosures in the Registration Statement or the Prospectus are not reasonably acceptable to the Sales Manager.
(c)    Except as contemplated in the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall not have been any material adverse change in the capital stock of the Company, or any material adverse change, or any development that may reasonably be expected to cause a material adverse change, in the condition (financial or other), business, prospects, net worth or results of operations of the Company, or any adverse change in the rating assigned to any debt securities of the Company, if any.
(d)    The Sales Manager shall have received at the date of the first sale of Stock hereunder (the “Commencement Date”) and at every other date specified in Section 3.1(n) above, opinions of Company Counsel and special counsel, dated as of the Commencement Date and dated as of such other date, in form and substance reasonably acceptable to the Sales Manager.
(e)    At the Commencement Date and at such other dates specified in Section 3.1(o) above, the Sales Manager shall have received a “comfort letter” from Grant Thornton, LLP, independent public accountants for the Company, or other independent accountants then retained by the Company, dated the date of delivery thereof, in form and substance satisfactory to the Sales Manager.
(f)    The Sales Manager shall have received from the Company a certificate, or certificates, signed by (i) the Chief Financial Officer and (ii) the President and Chief Executive Officer or any Vice President of the Company, dated as of the Commencement Date and (unless the Company is not then selling Stock through the Sales Manager and has not requested the Sales Manager to sell Stock) dated as of the earlier of (x) the first business day of each calendar month thereafter if there is an active Placement Notice on such date and (y) the first business day of each calendar month thereafter on which a Placement Notice is delivered (each, a “Certificate Date”), to the effect that, to the best of their knowledge based upon reasonable investigation:
(i)    The representations and warranties of the Company in this Agreement are true and correct, as if made at and as of the Commencement Date or the Certificate Date (as the case may be), and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Commencement Date and each such Certificate Date (as the case may be);
(ii)    No stop order suspending the effectiveness of the Registration Statement has been issued, and no proceeding for that purpose has been instituted or, to the knowledge of such officer after due inquiry, is threatened, by the Commission;
(iii)    Since the date of this Agreement there has occurred no event required to be set forth in an amendment or supplement to the Registration Statement or Prospectus that has not been so set forth and there has been no document required to be filed under the Exchange Act and the rules and regulations thereunder that upon such filing would be deemed to be incorporated by reference in the Prospectus that has not been so filed; and

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(iv)    Since the date of this Agreement, there has not been any material adverse change in the assets or properties, business, prospects, results of operations, or condition (financial or otherwise) of the Company, which has not been described in an amendment or supplement to the Registration Statement or Prospectus (directly or by incorporation).
(g)    At the Commencement Date and on each Settlement Date, the Company shall have furnished to the Sales Manager such appropriate further information, officers’ certificates and similar documents as the Sales Manager may reasonably request.
(h)    At the Commencement Date and on each Settlement Date, the Company shall have listed for quotation the Stock on the Trading Market.
All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are satisfactory in form and substance to the Sales Manager.  The Company will furnish the Sales Manager with such conformed copies of such opinions, certificates, letters and other documents, as the Sales Manager shall reasonably request.
ARTICLE V
INDEMNIFICATION AND CONTRIBUTION
5.1    The Company agrees to indemnify and hold harmless the Sales Manager, each director, officer, employee, partner and agent of the Sales Manager and each person, if any, who (i) controls the Sales Manager within the meaning of Section 15 of the Act or Section 20 of the Exchange Act or (ii) is controlled by or is under common control with the Sales Manager (collectively, the “Sales Manager Indemnitees”), as follows:
(a)    against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(b)    against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and
(c)    against any and all expense whatsoever, as incurred (including, subject to Section 5.3 below, the reasonable fees and disbursements of legal counsel chosen by the Sales Manager), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon 

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and in conformity with written information furnished to the Company by the Sales Manager expressly for use in the Registration Statement (or any amendment thereto) or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto).
5.2    The Sales Manager agrees to indemnify and hold harmless the Company and its directors and each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 5.1 above, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendments thereto) or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by the Sales Manager expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto).  The total liability of the Sales Manager under this Section 5.2 shall not exceed the aggregate commissions received by the Sales Manager in respect of the Stock sold by the Sales Manager that is the subject of the dispute.
5.3    Any indemnified party that proposes to assert the right to be indemnified under this Article V will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Article V, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party will not relieve the indemnifying party from any liability that it might have to any indemnified party to the extent it is not materially prejudiced as a result thereof.  If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with legal counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below.  The indemnified party will have the right to employ its own legal counsel in any such action, but the fees, expenses and other charges of such legal counsel will be at the expense of such indemnified party unless (1) the employment of legal counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on the written advice of legal counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based on the written advice of legal counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed legal counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of legal counsel will be at the expense of the indemnifying party or parties.  It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties.  All such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred.  An indemnifying party will not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld).
5.4    In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Article V is applicable in accordance with its terms but for any reason 

15

 

is held to be unavailable from the Company or the Sales Manager, the Company and the Sales Manager will contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than the Sales Manager, such as persons who control the Company within the meaning of the Act, officers of the Company who signed the Registration Statement and directors of the Company, who also may be liable for contribution) to which the Company and the Sales Manager may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Sales Manager on the other.  The relative benefits received by the Company on the one hand and the Sales Manager on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total compensation (before deducting expenses) received by the Sales Manager from the sale of Stock on behalf of the Company.  If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and the Sales Manager, on the other, with respect to the statements or omission which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering.  Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Sales Manager, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission.  The Company and the Sales Manager agree that it would not be just and equitable if contributions pursuant to this Section 5.4 were to be determined by pro rata allocation or by any other method of allocation, which does not take into account, the equitable considerations referred to herein.  The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 5.4 shall be deemed to include, for the purpose of this Section 5.4, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the foregoing provisions of this Section 5.4, the Sales Manager shall not be required to contribute any amount in excess of the amount by which the aggregate commissions received by the Sales Manager exceeds the amount of any damages that the Sales Manager has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  For purposes of this Section 5.4, any person who controls a party to this Agreement within the meaning of the Act will have the same rights to contribution as that party, and each officer and director of the Company who signed the Registration Statement will have the same rights to contribution as the Company, subject in each case to the provisions hereof.  Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 5.4, will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve that party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 5.4.  No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld).
5.5    The indemnity and contribution provided by this Article V shall not relieve the Company and the Sales Manager from any liability the Company and the Sales Manager may otherwise have (including, without limitation, any liability the Company may have for a breach of its obligations to deliver Stock on any Settlement Date pursuant to Article II above).
ARTICLE VI

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REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY
6.1    All representations, warranties and agreements of the Company herein or in certificates delivered pursuant hereto shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Sales Manager or any controlling persons and shall survive delivery of and payment for the Stock.
ARTICLE VII
TERMINATION
7.1    The Company shall have the right, by giving notice as hereinafter specified, to terminate this Agreement in its sole discretion at any time.  Any such termination shall be without liability of any party to any other party except that the provisions of Section 3.1(h), Article V and Article VI above shall remain in full force and effect notwithstanding such termination.
7.2    The Sales Manager shall have the right, by giving notice as hereinafter specified, to terminate this Agreement in its sole discretion at any time.  Any such termination shall be without liability of any party to any other party except that the provisions of Section 3.1(h), Article V and Article VI above shall remain in full force and effect notwithstanding such termination. 
7.3    This Agreement shall remain in full force and effect unless terminated pursuant to Sections 7.1 or 7.2 above or otherwise by mutual agreement of the parties; provided that any termination shall in all cases be deemed to provide that Section 3.1(h), Article V and Article VI above shall remain in full force and effect.
7.4    Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided that such termination shall not be effective until the close of business on the date of receipt of such notice by the Sales Manager or the Company, as the case may be.  If such termination shall occur during a period when sales of Stock are being made pursuant to this Agreement, any sales of Stock made prior to the termination of this Agreement shall settle in accordance with the provisions of this Agreement.
ARTICLE VIII
NOTICES
8.1    All notices or communications hereunder shall be in writing and if sent to the Sales Manager shall be sent by mail, hand delivery, facsimile or electronic mail to the Sales Manager at Brinson Patrick, a division of Meyers Associates, L.P., 3 Columbus Circle, 15th Floor, New York, New York 10019, facsimile number (212) 453 -5555, Attention: Corporate Finance, twyche@bpmeyers.com or if sent to the Company, shall be mailed, delivered,  faxed or emailed to the Company at 11119 North Torrey Pines Rd, Suite 200, La Jolla, California 92037, Attention: General Counsel; facsimile number (858) 550-5658, cberkman@ligand.com.  Each party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose.
ARTICLE IX
MISCELLANEOUS
9.1    This Agreement shall inure to the benefit of and be binding upon the Company and the Sales Manager and their respective successors and the controlling persons, officers and directors referred to in Article V above, and no other person will have any right or obligation hereunder.

17

 

9.2    Indemnification pursuant to Section 5.1 hereof will not constitute the exclusive remedy available to the Sales Manager Indemnitees for any breach or alleged breach by the Company of any representation, warranty, covenant or agreement contained in this Agreement.
9.3    This Agreement constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral, between the parties hereto with regard to the subject matter hereof.
9.4    THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
9.5    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  The parties agree that this Agreement will be considered signed when the signature of a party is delivered by facsimile transmission.  Such facsimile transmission shall be treated in all respects as having the same effect as an original signature.
9.6    This Agreement shall not become effective until the effective date of the Company’s termination of the previous sales agreement between the Company and Cantor Fitzgerald & Co., dated as of March 26, 2013.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date hereof.

	
		
	LIGAND PHARMACEUTICALS INCORPORATED 

	 

	By:
	/s/ John P. Sharp

	 
	Name: John P. Sharp

	 
	Title: Chief Financial Officer

	
		
	MYERS ASSOCIATES, L.P. (doing business as Brinson Patrick, a division of Meyers Associates, L.P.

	 

	By:
	/s/ Todd Wyche

	 
	Name: Todd Wyche

	 
	Title: President

	 
	 

19

 SD\1355290.5

 

SCHEDULE 1.1(f) 
 
List of Significant Subsidiaries
Allergan Ligand Retinoid Therapeutics, Inc.   
Ligand JVR, Inc.  
Seragen, Inc.   
Pharmacopeia, LLC  
Metabasis Therapeutics, Inc.   
Neurogen Corporation  
Nexus Equity VI LLC
CyDex Pharmaceuticals, Inc.Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of [DATE] (the “Effective Date”), by and between Egalet Corporation, a Delaware corporation (the “Company”) and [EXECUTIVE] (the “Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company, each upon the terms set forth herein.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and intending to be legally bound hereby, the Company and the Executive agree as follows.

 

1.             Employment.  The Company hereby agrees to employ the Executive, and the Executive hereby accepts employment by the Company, for the period and upon the terms and conditions contained in this Agreement.

 

2.             Term.  The Executive’s term of employment with the Company under this Agreement shall begin on the Effective Date and shall continue on an at-will basis until that employment ceases in accordance with Section 6 for any reason (the “Term”).

 

3.             Office and Duties.

 

(a)           During the Term, the Executive shall serve as the [POSITION] of the Company, as well as in any other position to which the Executive is appointed by the Company’s Board of Directors (the “Board”).  The Executive shall report to the [Board] [and] [the Company’s Chief Executive Officer or his designee(s)] and shall perform such duties and have such responsibilities as the Board [or the Company’s Chief Executive Officer or his designee(s)] may determine from time to time and which are consistent with Executive’s then current position with the Company.

 

(b)           [During the Term, the Company shall cause the Executive to be elected or appointed to the Board and the Executive agrees to serve in such capacity without additional compensation; provided however, that during any period that the Company’s stock is publically traded, the Company’s obligation under this Section will be limited to nominating the Executive to the Board.]

 

(c)           During the Term, the Executive shall devote all of his working time, energy, skill and best efforts to the performance of his duties hereunder in a manner that will faithfully and diligently further the business and interests of the Company.

 

(d)           During the Term, the Executive shall not be engaged in any business activity which, in the reasonable judgment of the Board, conflicts with the Executive’s duties hereunder, whether or not such activity is pursued for pecuniary advantage.  Should the

 

 

Executive wish to provide any services to any other person or entity other than the Company or to serve on the board of directors of any other entity or organization, the Executive shall submit a written request to the Board for consideration and approval by the Board in its sole discretion.

 

4.             Compensation.

 

(a)           For all of the services rendered by the Executive hereunder during the Term, the Executive shall receive an annual base salary of $[SALARY] (the “Base Salary”), payable in accordance with the Company’s regular payroll practices in effect from time to time.  The Base Salary will be reviewed annually by the Board to determine if any increase is appropriate, and if Executive’s Base Salary is increased, then the term “Base Salary” as used in this Agreement shall mean the amount of the Executive’s Base Salary then in effect at the applicable time.

 

(b)           During the Term, the Executive shall be eligible to receive an annual bonus (pro-rated for the first fiscal year of the Term) with a target amount equal to [TARGET BONUS PERCENTAGE]% of the Base Salary (the “Annual Bonus”), on such terms and conditions as the Board may specify in its sole discretion.  Subject to the Executive’s continued employment through the payment date (except as otherwise provided in this Agreement), the Annual Bonus, if any, shall be paid to the Executive on the date the Company pays bonuses to its executives generally for the year to which such Annual Bonus relates.

 

(c)           During the Term, the Executive shall be entitled to participate in the Company’s employee benefit plans, including without limitation, any health, dental, vision and 401(k) plans maintained by the Company, on the same terms and conditions as may from time to time be applicable to the Company’s other executive officers, as such employee benefit plans may be in place from time to time.

 

(d)           The Executive shall be entitled to a minimum of twenty (20) days of vacation per year (prorated for any partial year worked), in accordance with Company’s policy as in effect from time to time.  The Executive shall also be entitled to sick days and paid holidays in accordance with the Company’s policy as in effect from time to time.

 

(e)           During the Term, the Executive shall be reimbursed by the Company for all necessary and reasonable expenses, professional dues, continuing education fees including without limitation any fees and expenses related to the maintenance of professional licenses, and membership dues incurred by him in connection with the performance of his duties hereunder.  The Executive shall keep an itemized account of such expenses, together with vouchers and/or receipts verifying the same.  Any such expense reimbursement will be made in accordance with the Company’s policies governing reimbursement of expenses as are in effect from time to time.

 

(f)            All payments and benefits made pursuant to this Agreement shall be subject to such withholding as the Company reasonably believes is required by any applicable federal, state, local or foreign law.

 

5.             Representations of Executive.  The Executive represents to the Company that (i) there are no restrictions, agreements or understandings whatsoever to which the

 

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Executive is a party that would prevent, or make unlawful, his execution of this Agreement and his employment hereunder; (ii) his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which he is a party, or by which he is bound, and (iii) he is of full capacity and free and able to execute this Agreement and to enter into employment with the Company.

 

6.             Termination.  The Term shall continue until the termination of the Executive’s employment with the Company as provided below.

 

(a)           Death or Disability.  If the Executive dies or becomes Disabled, the Term and the Executive’s employment with the Company shall immediately terminate.  Upon such a termination of employment, the Company shall

 

(i) pay to the Executive (or his estate, beneficiary or legal representative, as the case may be), within thirty (30) days following such termination of employment, all accrued but unpaid Base Salary and all accrued but unused vacation; and

 

(ii) reimburse the Executive (or his estate, beneficiary or legal representative, as the case may be) for all reimbursable expenses that have not been reimbursed as of such termination of employment, with such reimbursement to occur in accordance with the procedures set forth in Section 4(e).

 

For purposes of this Agreement, “Disabled” means that in the opinion of a qualified physician, mutually acceptable to the Company and the Executive, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, the Executive (x) is unable to engage in any substantial gainful activity or (y) has been receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company.

 

(b)           For Cause.  During the Term, the Company may terminate the Executive’s employment for Cause upon written notice.  Upon such a termination of employment, the Executive shall be entitled to only those benefits described in clauses (i) and (ii) of Section 6(a).  For purposes of this Agreement, “Cause” means

 

(i)          a material breach of this Agreement by the Executive that is not susceptible to remedy or cure, or if susceptible to remedy or cure, is not remedied or cured to the satisfaction of the Board within ten (10) business days following written notice from the Board to the Executive specifying the manner in which the Executive has breached this Agreement;

 

(ii)         the commission by the Executive of a felony or a crime involving moral turpitude (whether or not related to the Executive’s employment), or any other act or omission involving dishonesty or fraud with respect to the Company or any of its affiliates or causing material harm to the standing or reputation of the Company, or the Executive’s drug abuse or repeated intoxication; or

 

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(iii)        the Executive’s failure to perform his duties hereunder other than by reason of death or Disability, after written notice from the Board specifying the manner in which the Executive has failed to perform his duties and, if such failure is susceptible to cure, the failure of the Executive to cure such non-performance to the satisfaction of the Board within ten (10) business days following such written notice.

 

(c)           Without Cause.  During the Term, the Company may terminate the Executive’s employment with the Company at any time without Cause upon thirty (30) days’ prior written notice; provided, however, that during such notice period, the Board, in its sole discretion, may relieve the Executive of all of his duties, responsibilities and authority with respect to the Company and may restrict Executive’s access to Company property; provided, further, that the Board’s exercise of such discretion shall not constitute Good Reason (as defined below).  Upon such a termination of employment, the Company shall

 

(i)            provide the Executive with those benefits described in clauses (i) and (ii) of Section 6(a);

 

(ii)           continue providing the Executive with Base Salary for a period of [SEVERANCE PERIOD] months following the date of such termination of employment (the “Severance Period”), with such Base Salary to be paid in accordance with the Company’s regular payroll practice as if no such termination of employment had occurred; provided, however, that the Executive’s right to receive the payments set forth in this clause (ii) of Section 6(c) shall be conditioned on the Executive’s continued compliance with Sections 8 and 9 hereof and such payments shall not begin until the Executive signs and does not subsequently revoke a release of claims within sixty (60) days following such termination of employment, in substantially the form attached hereto as Exhibit A; provided, further, that if such sixty (60) day period spans two calendar years, any payment set forth in this Section 6(c)(ii) that, but for this proviso, would have been paid prior to the Company’s first payroll date in such second calendar year, shall not be paid until such payroll date (but only to the extent required to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)); and

 

(iii)          during the portion of the Severance Period during which the Executive and the Executive’s eligible dependents are eligible for COBRA coverage, reimburse the Executive and the Executive’s eligible dependents for their COBRA premiums less any amounts that the Executive would have been required to contribute for coverage under the Company’s health plans had the Executive remained employed by the Company, with such reimbursement to occur in accordance with the procedures set forth in Section 4(e); provided, however, that if, at any time during the Severance Period, the Executive and the Executive’s eligible dependents cease to be eligible for COBRA coverage (except as a result of Executive’s becoming eligible for coverage under the medical plans of a subsequent employer), the Company shall reimburse the Executive all reasonable premium costs incurred by the Executive to provide private health insurance coverage for the Executive and the Executive’s eligible dependents that is substantially equivalent to the health insurance by which the Executive and the Executive’s eligible dependents were covered on the date of the Executive’s termination less any amounts that the Executive would have been required to contribute for such coverage had the Executive remained employed by the Company, until the earlier of (x) the termination of the Severance

 

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Period and (y) the date on which the Executive becomes eligible for coverage under the medical plans of a subsequent employer.

 

(d)           Termination by Executive for Good Reason.  During the Term, the Executive may resign his employment for Good Reason.  Upon such a termination, the Executive shall be entitled to those benefits described in Section 6(c) as though the Executive had been terminated by the Company without Cause.  For purposes of this Agreement, “Good Reason” means the occurrence of any of the following circumstances:

 

(i)            a material diminution of the Executive’s authorities, duties, responsibilities or status (including offices, titles or reporting relationships) as an employee of the Company from those then in effect or the assignment to the Executive of duties or responsibilities inconsistent with his then current position;

 

(ii)           the Company’s relocation of the Executive’s principal job location or office that increases the Executive’s one-way commute by more than fifty (50) miles; or

 

(iii)          a reduction in the Executive’s Base Salary or benefits (other than a reduction in benefits that applies to the Executive and all other similarly positioned employees);

 

provided, that the events set forth in items (i), (ii) and (iii) of this Section 6(d) occur without the Executive’s express written consent; and provided further, that that no such occurrence of any of the events set forth in items (i), (ii) and (iii) of this Section 6(d) shall constitute Good Reason unless the Executive notifies the Company in writing of his intent to resign for Good Reason within 30 days following the occurrence of such circumstance and the Company fails to cure such circumstances within 30 days following receipt of such notice.

 

(e)           Termination by Executive without Good Reason.  During the Term, the Executive may resign his employment without Good Reason upon ninety (90) days prior written notice.  Upon such a termination of employment, the Executive shall be entitled to only those benefits described in clauses (i) and (ii) of Section 6(a).

 

(f)            Any severance or termination pay granted in this Section 6 will be the sole and exclusive remedy, compensation or benefit due to the Executive or his estate upon any termination of the Executive’s employment (without limiting the Executive’s rights under any disability, life insurance or deferred compensation arrangement in which the Executive participates at the time of such termination of employment).

 

7.             Certain Company Remedies.  The Executive acknowledges that his promised services and covenants, including without limitation the covenants in Sections 8 and 9 hereof, are of a special and unique character, which give them peculiar value, the loss of which cannot be reasonably or adequately compensated for in an action at law, and that, in the event there is a breach hereof by the Executive, the Company will suffer irreparable harm, the amount of which will be impossible to ascertain.  Accordingly, the Company shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either at law or in equity, to obtain damages for any breach of this Agreement, or to enjoin the Executive from

 

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committing any act in breach of this Agreement.  The remedies granted to the Company in this Agreement are cumulative and are in addition to remedies otherwise available to the Company at law or in equity.  If the Executive violates any of the restrictions contained in this Agreement, the restrictive period shall not run in favor of the Executive from the time of commencement of any such violation until such time as such violation shall be cured by the Executive to the satisfaction of the Company.

 

8.             Restrictive Covenants.

 

(a)           Confidentiality.  During the Term and at all times thereafter, the Executive shall, and shall cause his or her affiliates and representatives to keep confidential and not disclose to any other person or entity or use for his own benefit or the benefit of any other person or entity any confidential proprietary information, technology, know-how, trade secrets (including all results of research and development), product formulas, industrial designs, franchises, inventions or other intellectual property regarding the Company or its business and operations (“Confidential Information”) in his possession or control.  The obligations of the Executive under this Section 8(a) shall not apply to Confidential Information which (i) is or becomes generally available to the public without breach of the commitment provided for in this Section; (ii) is required to be disclosed by law, order or governmental authority; (iii) information that is independently developed by the Executive after termination of all employment with the Company or its affiliates, without the use of or reliance on any Confidential Information and (iv) information which becomes known to the Executive after termination of all employment with the Company or its affiliates, on a non-confidential basis from a third-party source if such source was not subject to any confidentiality obligation; provided, however, that, in case of clause (ii), the Executive shall notify the Company as early as reasonably practicable prior to disclosure to allow the Company or its affiliates to take appropriate measures to preserve the confidentiality of such Confidential Information.  During the Term and at all times thereafter, the Executive shall, and shall cause his affiliates and his representatives to, keep confidential and not disclose to any other person or entity any of the terms of this Agreement, except as required by applicable law, in connection with the enforcement by the Executive of his rights hereunder.

 

(b)           Non-Competition; Non-Solicitation.

 

(i)          During the period beginning on the Effective Date and ending [    ](1) months following the date on which the Executive’s employment with the Company is terminated for any reason (the later being referred to herein as the “Non-Compete Period”), the Executive covenants and agrees not to, and shall cause his affiliates not to, directly or indirectly anywhere in [SPECIFY GEOGRAPHICAL SCOPE], conduct, manage, operate, engage in or have an ownership interest in any business or enterprise that (A) [SPECIFY SCOPE OF BUSINESS], (B) uses any trademarks, tradenames or slogans similar to those of the Company or its affiliates; or (C) is engaged in any other activities that are otherwise competitive with the business of the Company or its affiliates as conducted or proposed to be conducted as of the Termination Date (collectively, the “Business”).  Notwithstanding the foregoing, nothing herein shall preclude the Executive from performing any duties as a stockholder, director, employee, consultant or agent of Company or its affiliates or owning, directly or indirectly, in the aggregate

 

(1)  Typically equal to the severance period.

 

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less than 5% of any business competitive with the Company or its affiliates that is subject to the reporting obligations of the Securities Exchange Act of 1934, as amended.

 

(ii)         During the Non-Compete Period, the Executive shall not, and shall cause his affiliates to not, directly or indirectly, call-on, solicit or induce any customer or other business relationship of the Company or its affiliates for the provision of products or services related to the business of the Company or in any other manner that would otherwise interfere with the business relationship between the Company and its affiliates  and their respective customers and other business relationships.

 

(iii)        During the Non-Compete Period, the Executive shall not, and shall cause his affiliates to not, directly or indirectly, call-on, solicit or induce, any employee of the Company or its affiliates to leave the employ of, or terminate its relationship with, the Company or its affiliates for any reason whatsoever, nor shall the Executive offer or provide employment (whether such employment is for the Executive or any other business or enterprise), either on a full-time, part-time or consulting basis, to any person who then currently is, or within six (6) months immediately prior thereto was, an employee or independent contractor of the Company; provided, however, the foregoing shall not prohibit a general solicitation to the public through general advertising or similar methods of solicitation not specifically directed at employees of the Company.

 

(iv)        The Executive acknowledges and agrees that the provisions of this Section 8 are reasonable and necessary to protect the legitimate business interests of the Company and its affiliates.  The Executive shall not contest that the Company’s and the Company’s affiliates’ remedies at law for any breach or threat of breach by the Executive or any of his or her affiliates of the provisions of this Section 8 will be inadequate, and that the Company and its affiliates shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Section 8 and to enforce specifically such terms and provisions, in addition to any other remedy to which the Company or its affiliates may be entitled at law or equity.  The restrictive covenants contained in this Section 8 are covenants independent of any other provision of this Agreement or any other agreement between the parties hereunder and the existence of any claim which the Executive may allege against the Company under any other provision of this Agreement or any other agreement will not prevent the enforcement of these covenants.

 

(v)         The Executive expressly acknowledges that the covenants contained in this Section 8(b) are a material part of the consideration bargained for by the Company and, without the agreement of the Executive to be bound by such covenants, the Company would not have agreed to enter into this Agreement.

 

(vi)        If any of the provisions contained in this Section 8(b) shall for any reason be held to be excessively broad as to duration, scope, activity or subject, then such provision shall be construed by limiting and reducing it, so as to be valid and enforceable to the maximum extent compatible with the applicable law or the determination by a court of competent jurisdiction.

 

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9.             Intellectual Property; Company Property.

 

(a)           Inventions Retained and Licensed.  The Executive has attached hereto, as Exhibit B, a list describing any inventions, original works of authorship, developments, improvements, and trade secrets which were made by the Executive prior to the Effective Date (collectively referred to as “Prior Inventions”) which belong to the Executive, which relate to the Company’s products or research and developments and which are not assigned to the Company hereunder; or, if no such Prior Inventions are listed, the Executive represents that there are no such Prior Inventions.  The Executive agrees that he will not incorporate, or permit to be incorporated, any Prior Invention owned by the Executive or in which the Executive has an interest into a Company product, process or machine without the Company’s prior written consent.  Notwithstanding the foregoing sentence, if, in the course of his employment with the Company, the Executive incorporates into a Company product, process or machine a Prior Invention owned by the Executive or in which the Executive has an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such Prior Invention as part of or in connection with such product, process or machine.

 

(b)           Assignment of Inventions.  The Executive agrees that he will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and does hereby assign to the Company, or its designee, all right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks or trade secrets, whether or not patentable or capable of registration under copyright or similar laws, which the Executive may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the time the Executive is in the employ of the Company (collectively referred to as “Inventions”) except as provided in Section 9(e).  The Executive further acknowledges that all original works of authorship which are made by him (solely or jointly with others) within the scope of and during the period of his employment with the Company and which are protectable by copyright are “works made for hire” as that term is defined in the United States Copyright Act.  The Executive understands and agrees that the decision whether or not to commercialize or market any Invention developed by him solely or jointly with others is within the Company’s sole discretion and for the Company’s sole benefit and that no royalty will be due to the Executive as a result of the Company’s efforts to commercialize or market any such Invention.

 

(c)           Maintenance of Records.  The Executive agrees to keep and maintain adequate and current written records of all Inventions made by him (solely or jointly with others) during the Term.  The records will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company.  The records will be available to and remain the sole property of the Company at all times.

 

(d)           Patent and Copyright Registrations.  The Executive agrees to assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating thereto in any and all countries, including, but not limited to, the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which the Company shall deem necessary in order to apply for and obtain such rights and in order to

 

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assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights or other intellectual property rights relating thereto. The Executive further agrees that his obligation to execute or cause to be executed, when it is in his power to do so, any such instrument or papers shall continue after the termination of the Term.  If the Company is unable because of the Executive’s mental or physical incapacity or for any other reason to secure the Executive’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to the Company as above, then the Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as the Executive’s agent and attorney in fact, to act for and on the Executive’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by the Executive.

 

(e)           Exception to Assignments.  The Executive understands that the provisions of this Agreement requiring assignment of Inventions to the Company shall not apply to any Invention that the Executive has developed entirely on his own time without using the Company’s equipment, supplies, facilities, trade secret information or Confidential Information except for those Inventions that either (i) relate at the time of conception or reduction to practice of the Invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company or (ii) result from any work that the Executive performed for the Company.  The Executive will advise the Company promptly in writing of any Inventions that the Executive believes meet the foregoing criteria and not otherwise disclosed on Exhibit B.

 

(f)            Upon the termination of his employment for any reason, the Executive shall deliver to the Company all memoranda, books, papers, letters, and other data, and all copies of the same, which were made by the Executive or otherwise came into his possession or under his control at any time prior to the termination of this Agreement, and which in any way relate to the business of the Company as conducted or as planned to be conducted on the date of the termination.

 

10.          Survival of Representations.  The provisions of Sections 7, 8 and 9 shall survive the termination, for any reason, of the Executive’s employment with the Company or of this Agreement.

 

11.          Key Person Insurance.  If the Company wishes to purchase a life insurance policy on the Executive or other insurance policy relating to the loss of the Executive’s services, the Executive agrees to submit to a customary insurance medical examination, if necessary, and otherwise cooperate with the Company in any reasonable manner with respect to obtaining any such insurance policy.

 

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12.          Miscellaneous.

 

(a)           Neither the failure, nor any delay, on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same, or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.  No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

 

(b)           This Agreement and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the State of Delaware (notwithstanding any conflict-of-laws doctrines of such state or other jurisdiction to the contrary), and without the aid of any canon, custom or rule of law requiring construction against the draftsman.

 

(c)           This Agreement is intended to comply with Code Section 409A, and the parties hereto agree to interpret, apply and administer this Agreement in the least restrictive manner necessary to comply therewith and without resulting in any increase in the amounts owed hereunder by the Company.  If the Executive’s termination of employment hereunder does not constitute a “separation from service” within the meaning of Code Section 409A, then any amounts payable hereunder on account of a termination of the Executive’s employment and which are subject to Code Section 409A shall not be paid until the Executive has experienced a “separation from service” within the meaning of Code Section 409A.  If, and only if, the Executive is a “specified employee” (as defined in Code Section 409A) and a payment or benefit provided for in this Agreement would be subject to additional tax under Code Section 409A if such payment or benefit is paid within six (6) months after the Executive’s separation from service, then such payment or benefit shall not be paid (or commence) during the six-month period immediately following the Executive’s separation from service except as provided in the immediately following sentence. In such an event, any payment or benefits that otherwise would have been made or provided during such six-month period and that would have incurred such additional tax under Code Section 409A shall instead be paid to the Executive in a lump-sum cash payment on the first day following the termination of such six-month period or, if earlier, within ten (10) days following the date of the Executive’s death.  No reimbursement or in-kind benefit shall be subject to liquidation or exchange for another benefit and the amount available for reimbursement, or in-kind benefits provided, during any calendar year shall not affect the amount available for reimbursement, or in-kind benefits to be provided, in a subsequent calendar year.  Any reimbursement to which the Executive is entitled hereunder shall be made no later than the last day of the calendar year following the calendar year in which such expenses were incurred.  Each payment hereunder shall be treated as a separate payment in a series of separate payments pursuant to Treasury Regulation Section 1.409A-2(b)(2)(iii).

 

(d)           All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received only when delivered (personally, by courier service such as Federal

 

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Express, or by other messenger), when sent by facsimile transmission (with electronic confirmation of receipt) or three (3) days after deposit in the United States mails, registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

If to the Executive: the Executive’s home address on record with the Company.

 

If to the Company:

 

Egalet Corporation

[Address]

Attention:

Fax No.:

 

Any party may alter the addresses to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this paragraph for the giving of notice.

 

(e)         The rights and obligations of both parties under this Agreement shall inure to the benefit of and shall be binding upon their heirs, successors and assigns, but shall not be assigned without the written consent of both parties; provided, however, that the Company may make such an assignment in connection with a sale of substantially all of the assets or other change of control of the Company.

 

(f)          This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.  This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

 

(g)         The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other provision or provisions may be invalid or unenforceable in whole or in part.

 

(h)         This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, between the parties hereto except as herein contained (including without limitation any prior employment agreements between the parties hereto).  The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.  This Agreement may not be modified or amended other than by an agreement in writing.

 

(i)          The section headings in this Agreement are for convenience only, form no part of this Agreement and shall not affect its interpretation.

 

(j)          Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate.

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.

 

 

	
 
    	
EGALET   CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
EXECUTIVE
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
[EXECUTIVE’S   NAME]
    

 

 

EXHIBIT A

 

RELEASE OF CLAIMS

 

This RELEASE OF CLAIMS (this “Release”) is given on this        day of               , 20     by [EXECUTIVE](the “Executive”).

 

WHEREAS, the Executive’s employment with Egalet Corporation, a Delaware corporation, (the “Company”), has terminated; and

 

WHEREAS, pursuant to Section 6(c) of the Employment Agreement by and between the Company and the Executive dated as of September [    ], 2013 (the “Employment Agreement”), the Company has agreed to pay the Executive certain amounts and to provide certain benefits, subject to his execution and non-revocation of this Release.  All terms used but not defined herein shall have the meanings ascribed to such terms in the Employment Agreement.

 

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the Executive agrees as follows:

 

1.             Consideration.  The Executive acknowledges that: (i) the payments set forth in Section 6(c) of the Employment Agreement constitute full settlement of all his rights under the Employment Agreement, (ii) he has no entitlement under any other severance or similar arrangement maintained by the Company or any of its Affiliates, and (iii) except as otherwise provided specifically in this Release, the Company does not and will not have any other liability or obligation to the Executive by reason of the cessation of his employment.  The Executive further acknowledges that, in the absence of his execution of this Release, the payments and benefits specified in Section 6(c)(ii) of the Employment Agreement would not otherwise be due to him.

 

2.            Executive’s Release.  The Executive on his own behalf and together with his heirs, assigns, executors, agents and representatives hereby generally releases and discharges the Company and its predecessors, successors (by merger or otherwise), parents, subsidiaries, affiliates and assigns, together with each and every of their present, past and future officers, managers, directors, shareholders, members, general partners, limited partners, employees and agents and the heirs and executors of same, and all other persons or entities who/that might be claimed to be jointly or severally liable with any of the persons or entities named previously (herein collectively referred to as the “Releasees”) from any and all suits, causes of action, complaints, obligations, demands, common law or statutory claims of any kind, whether in law or in equity, direct or indirect, known or unknown (hereinafter “Claims”), which the Executive ever had, now has or may have against the Releasees, or any one of them arising at any time up to and including the date of the this Release.  This Release specifically includes, but is not limited to:

 

b.             any and all Claims arising out of or relating to the Executive’s employment with the Company or the termination thereof;

 

 

c.             any and all Claims for wages and benefits including, without limitation, salary, stock options, stock, royalties, license fees, health and welfare benefits, severance pay, vacation pay, and bonuses;

 

d.             any and all Claims for wrongful discharge, breach of contract, whether express or implied, and Claims for breach of implied covenants of good faith and fair dealing;

 

e.             any and all Claims for alleged employment discrimination on the basis of race, color, religion, sex, age, national origin, veteran status, disability, handicap or any other protected characteristic, or retaliation in violation of any federal, state or local statute, ordinance, judicial precedent or executive order, including but not limited to claims for discrimination or retaliation under the following statutes: Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e et seq.; the Civil Rights Act of 1866, 42 U.S.C. §1981; the Civil Rights Act of 1991; the Age Discrimination in Employment Act, as amended, 29 U.S.C. §621 et seq.; the Older Workers Benefit Protection Act 29 U.S.C. §§ 623, 626 and 630; the Rehabilitation Act of 1972, as amended, 29 U.S.C. §701 et seq.; the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.; the Family and Medical Leave Act of 1993, 29 U.S.C. §2601, et seq.; the Fair Labor Standards Act, as amended, 29 U.S.C. §201, et seq.; the Fair Credit Reporting Act, as amended, 15 U.S.C. §1681, et seq.;  and the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §1000, et seq. (“ERISA”) or any comparable state statute or local ordinance;

 

f.             any and all Claims under any federal or state statute relating to employee benefits or pensions;

 

g.             any and all Claims in tort, including but not limited to, any Claims for assault, battery, misrepresentation, defamation, interference with contract or prospective economic advantage, intentional or negligent infliction of emotional distress, duress, loss of consortium, invasion of privacy and negligence; and

 

h.             any and all Claims for attorneys’ fees and costs.

 

The Executive expressly represents that he has not filed a lawsuit or initiated any other administrative proceeding against any Releasee.  The Executive further promises not to initiate a lawsuit or to bring any other Claim against any Releasee asserting a Claim that is released by this Release.  If he does so, and the action is found to be barred in whole or in part by this Release, the Executive agrees to pay the attorneys’ fees and costs, or the proportions thereof, incurred by the applicable Releasee in defending against those Claims that are found to be barred by this Release.  This Release will not prevent the Executive from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); provided, however, that any claims by the Executive for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be barred.  Furthermore, nothing in this Release precludes the Executive from challenging the validity of this Release under the requirements of the Age Discrimination in Employment Act, and the Executive shall not be responsible for reimbursing the attorneys’ fees and costs of the Releasees in connection with such a challenge to the validity of the Release.  The Executive acknowledges, however, that the Release applies to all Claims that he has under the Age Discrimination in Employment Act, and that, unless the Release is held to be invalid, all of the

 

 

Executive’s Claims under the Age Discrimination in Employment Act shall be extinguished by execution of this Release.

 

3.            Acknowledgment.  The Executive understands that the release of Claims contained in this Release extends to all of the aforementioned Claims and potential Claims which arose on or before the date that the Executive signs this Release, whether now known or unknown, suspected or unsuspected, and that this constitutes an essential term of this Release.  The Executive further understands and acknowledges the significance and consequences of this Release and of each specific release and waiver, and expressly consents that this Release shall be given full force and effect to each and all of its express terms and provisions, including those relating to unknown and uncompensated Claims, if any, as well as those relating to any other Claims specified herein.  The Executive hereby waives any right or Claim that the Executive may have to employment, reinstatement or re-employment with the Company.

 

4.            Remedies.  All remedies at law or in equity shall be available to the Releasees for the enforcement of this Release.  This Release may be pleaded as a full bar to the enforcement of any Claim released by this Release that the Executive may assert against the Releasees.

 

5.            No Admission of Liability.  This Release is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by the Company to the Executive.  The Executive acknowledges that the Company specifically denies any such violations.

 

6.            Severability.  If any term or provision of this Release shall be held to be invalid or unenforceable for any reason, then such term or provision shall be ineffective to the extent of such invalidity or unenforceability without invalidating the remaining terms or provisions hereof, and such term or provision shall be deemed modified to the extent necessary to make it enforceable.

 

7.            Advice of Counsel; Revocation Period.  The Executive is hereby advised to seek the advice of counsel prior to signing this Release.  The Executive hereby acknowledges that the Executive is acting of his own free will, that he has been afforded a reasonable time to read and review the terms of this Release, and that he is voluntarily executing this Release with full knowledge of its provisions and effects.  The Executive further acknowledges that he has been given at least [TWENTY-ONE (21)][FORTY-FIVE (45)] days within which to consider this Release and that he has SEVEN (7) days following his execution of this Release to revoke his acceptance, with this Release not becoming effective until the 7-day revocation period has expired.  If the Executive elects to revoke his acceptance of this Release, this Release shall not become effective and Executive must provide written notice of such revocation by certified mail (postmarked no later than seven days after the date the Executive accepted this Release) to:

 

Egalet Corporation

[Address]

Attention:

Fax No.:

 

8.            Representations and Warranties.  The Executive represents and warrants that he has not assigned any claim that he purports to release hereunder and that he has the full power

 

 

and authority to enter into this Release and bind each of the persons and entities that the Executive purports to bind.  The Executive further represents and warrants that he is bound by, and agrees to be bound by, his post-employment obligations set forth in the Restrictive Covenant Agreement.

 

9.            Governing Law.  This Agreement shall be governed by the laws of the State of Delaware without regard to the conflict of law principles of any jurisdiction. Any legal proceeding arising out of or relating to this Release will be instituted in a state or federal court in the State of Delaware, and the Executive hereby consents to the personal and exclusive jurisdiction of such court(s) and hereby waives any objection(s) that he may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

 

IN WITNESS WHEREOF, the Executive has executed this Release on the date first above written.

 

 

	
 
    	
 
    
	
 
    	
[EXECUTIVE]
    

 

 

EXHIBIT B

 

Proprietary/Confidentiality Schedules

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