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TOLL MANUFACTURING CONVERSION AGREEMENT

This TOLL MANUFACTURING CONVERSION AGREEMENT (the "Agreement"), effective as of May 27, 2011 (the "Effective Date") is by and between JUBILANT CADISTA PHARMACEUTICALS INC., a Delaware corporation, having offices at 207 Kiley Place, Salisbury, Maryland 21801 ("Cadista") and JUBILANT LIFE SCIENCES LTD., a company organized under the laws of India, having offices at Plot 1-A Institutional Area, Sector 16/A, Noida 201 301, Utter Pradesh, India  ("Jubilant").

WITNESSETH

WHEREAS, subject to the terms and conditions set forth in this Agreement, Jubilant wishes to have Cadista manufacture for Jubilant the Products (as such term is defined below) and Cadista is agreeable to manufacturing and supplying the Products as provided herein;

NOW, THEREFORE, in consideration of the foregoing premises, and the mutual covenants and obligations set forth herein, Cadista and Jubilant hereby agree as follows:

1.           DEFINITIONS.  For purposes hereof the following terms shall have the meanings set forth:

"Affiliate(s)" means any firm, corporation (including, without limitation, service corporation and professional corporation), partnership (including, without limitation, general partnership, limited partnership and limited liability partnership), limited liability company, joint venture, business trust, association or other entity that now or in the future, directly or indirectly, controls, is controlled by or is under common control with a party.  For purposes of the foregoing, "control" shall mean, with respect to:  (a) a corporation, the ownership, directly or indirectly, of greater than fifty percent (50%) of the voting power to elect the directors thereof; and (b) any other entity, managerial control by virtue of a written agreement.  For purposes of this Agreement, Jubilant and Cadista shall be deemed not to be Affiliates, Cadista’s subsidiaries, if any, shall be deemed not to be Affiliates of Jubilant  and Jubilant’s Affiliates shall be deemed not to be Affiliates of Cadista.

"API” means active pharmaceutical ingredient.

“Bankruptcy Code” is defined in Section 7.2(g).

“Business Purpose” is defined in Section 8.1.

"cGMP" or “Good Manufacturing Practice” means the FDA's then-current Good Manufacturing Practices applicable to the manufacture of pharmaceutical products for human use in the United States, the FDA's guidance documents, and all successor regulations.

[***Confidential treatment requested pursuant to a request for confidential treatment filed with the 

Securities and Exchange Commission. Omitted portions have been separately filed with the Commission.]

  

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"Certificate of Analysis" shall mean a document identified as such and provided by Cadista to Jubilant that sets forth the analytical test results, in accordance with the FDA, for a specified lot of Product shipped to Jubilant or its designee hereunder.

"Confidential Information" has the meaning set forth in Section 8.2.

"DEA" means the United States Drug Enforcement Administration.

“Disclosing Party” is defined in Section 8.1.

"Effective Date" is defined in the first paragraph of this Agreement.

“Facility” is defined in Section 2.4.

"FDA" means the United States Food and Drug Administration, or any predecessor or successor agency or division within the Food and Drug Administration of the United States of America.

"FD&C Act" means the Food, Drug and Cosmetic Act and the rules and regulations of the FDA promulgated hereunder.

“Forecast” has the meaning set forth in Section 2.3(a).

“Governmental Authority” shall mean any court, administrative agency or commission or other governmental agency, body or instrumentality, domestic (whether federal, state or local) or foreign.

"Indemnified Party" means, collectively, the party entitled to receive indemnification as provided in this Agreement and such party's Affiliates, distributors, directors, officers, shareholders, employees, representatives, agents, sublicensees, successors and assigns.

"Indemnifying Party" means the party required to provide indemnification as provided in this Agreement.

"Label", "Labeled" or "Labeling" means all labels and other written, printed or graphic matter upon (i) the Products or any container or wrapper utilized with the Products or (ii) any written material accompanying the Products, including without limitation, package inserts.

"Liabilities" has the meaning set forth in Section 4.2 hereof.

 

  

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"Manufacturing Costs of Cadista" shall mean the sum of the costs of labor (including allocable employee benefits and employment taxes), Materials that are not supplied free of charge by Jubilant, energy, utilities and other charges (including packaging and labeling) incurred for the manufacture of the Product (including costs for quality control), and normal production overhead (i.e., indirect labor, maintenance, facilities and utilities and other reasonable allocable overhead of the manufacturing factory), all as recorded in Cadista’s accounting records and determined in accordance with the generally accepted accounting principles of the United States, consistently applied throughout the specified period.

"Manufacturing Process" shall mean any and all operations required or necessary in the manufacture, handling, testing, filling, processing, packaging, labeling and storage of the Products.

"Materials" means (i) all raw materials, chemical intermediates, components, active ingredients (including API) and other ingredients required in the Manufacturing Process for the Products, and (ii) Product Packaging Materials, or any materials described in the package configuration or bill of materials.

“New Price” is defined in Section 2.2(d).

“New Price Documentation” is defined in Section 2.2(d).

"Packaging Specifications" means packaging specifications in effect on the Effective Date, or as subsequently amended in accordance with this Agreement, for each Product sold under the Product name.

"Person" means an individual, corporation, partnership or other entity.

“PO” has the meaning set forth in Section 2.3(b).

"Price" means the price to be paid by Jubilant to Cadista for the Products as set forth on Exhibit A hereto, as the same may be amended by the parties from time to time as provided herein.

“Proceeding” means any action, suit, demand or claim, and any legal, administrative, arbitration or other alternative dispute resolution proceeding, hearing or investigation.

"Products" or "Product" means, collectively, the products (including private labeled Products) in such dosage and strength as set forth in Exhibit A, manufactured in accordance with the Product Specifications.

"Products ANDA" means the ANDA relating to the Products owned and controlled by Jubilant.

“Product Packaging Materials” shall mean all packaging materials used in the Manufacturing Process for, and shipment of, Product as in effect on the Effective Date, including primary and secondary containers, closures, tertiary packaging materials, including product labeling, all as revised from time to time in accordance with the terms and conditions of this Agreement.

  

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"Product Specifications" means the Product Specifications set forth in Exhibit B hereto.

“Proposed Revised Price” is defined in Section 2.1.

“Receiving Party” is defined in Section 8.1.

“Regulatory Approval” means the license or marketing approval necessary as a prerequisite for marketing a Product in the Territory.

"Term" means the term of this Agreement as provided in Section 7.1.

"Territory" means the United States of America (including all of its states, Puerto Rico, the District of Columbia, and all territories and possessions).

“Third Party” means any entity other than Cadista or Jubilant or an Affiliate of Cadista or Jubilant.

“Work in Progress” shall mean any Materials, which have been partially converted into, but are not yet, a Product.

2.             MANUFACTURE AND SUPPLY.

2.1           Supply Obligations. (a) Cadista shall manufacture, package and testfor Jubilant on a made to order basis the Products, in accordance with the Product Specifications and the terms hereof.  Cadista will be paid toll manufacturing charges for manufacturing  the Products at the prices listed on the attached Exhibit A during the Term.  The prices listed in Exhibit A will be reviewed by the Parties on an annual basis not later than thirty (30) days prior to the expiry of each calendar year during the Term.  The Parties shall negotiate adjustments to the prices for the Products in good faith and attempt to reach Agreement on the adjusted prices for the immediately following calendar year.  Without limiting the foregoing, in the event that the Manufacturing Costs of Cadista increase, Cadista shall send notice (the “Cadista Notice”) to Jubilant, documenting in detail the increased Manufacturing Cost of Cadista and proposing revised prices (“Proposed Revised Prices”) for Product, which Proposed Revised Prices shall not reflect an increase on a per unit basis of more than the actual dollar per unit increase in Manufacturing Costs of Cadista not already reflected in the pricing.  The Parties agree to negotiate in good faith any reasonable adjustment to such prices (up to the Proposed Revised Price) for the affected Products. In the event that after negotiating in good faith, in connection with the annual price adjustment described above or in connection with a  Cadista Notice containing a Proposed Revised Price, the parties are unable to reach agreement on the adjusted price (i) prior to the commencement of the next calendar year, in the case of annual price adjustments, on (ii) within thirty (30) days of Jubilant’s receipt of Cadista Notice, in the case of Cadista’s provision of a Proposed Revised Price, either party may terminate this Agreement with respect to such Product in accordance with Section 7.2(d) below.  Cadista may not send the Cadista Notice prior to the one year anniversary of this Agreement.  Products may be added to this Agreement by amending Exhibits A and B by mutual written agreement of the parties, in the form of Exhibit C, or otherwise.

  

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If notice of termination is not sent by Jubilant within forty-five (45) days after receipt of the Cadista Notice, the Proposed Revised Price (or if there was a negotiation, the last price proposed by Cadista (which must be not greater than the Proposed Revised Price)) shall become binding and effective on purchase orders placed forty-five (45) calendar days after Jubilant’s receipt of the Cadista Notice documenting the increase in the Manufacturing Costs of Cadista.

(b) Except as provided in Sections 2.3(h),  3.2 and 3.3, Jubilant shall supply all Materials necessary for the manufacture of Products free of charge to Cadista.  To the extent the parties agree that Cadista shall procure certain Material then Cadista’s out-of-pocket costs for such Material (including, without limitation, all shipping, insurance, tariffs, customs) and its procurement will be added to the purchase price for the affected Product.

 

2.2.           Product Labeling.

(a) Packaging Standards.  Cadista represents and warrants that the Products will be packaged in accordance with the Packaging Specifications provided by Jubilant. Jubilant represents and warrants that the Packaging Specifications it provides to Cadista (including without limitation artwork, names, logos and trademarks of Jubilant and/or its Affiliates) comply with applicable laws, rules and regulations promulgated by any Governmental Authority having jurisdiction over the manufacture and distribution of the Products and to the best of its information and knowledge do not infringe or violate any intellectual property or proprietary rights of any third party.  Jubilant acknowledges that it has reviewed and approved all Product Packaging Materials.

(b) Future Required Revisions.  Subject to the provisions of Section 2.2(d), all costs and expenses incurred as a result of revisions to the Packaging Specifications required by any applicable Governmental Authority from and after the Effective Date shall be borne by Jubilant, including but not limited to Materials costs, and costs of any Materials or Work in Progress rendered redundant, obsolete or unusable as a result of such revisions. Subject to the provisions of Section 2.2(d), all costs and expenses incurred as a result of revisions to Product Specifications or Manufacturing Process required by any applicable Governmental Authority from and after the Effective Date shall be borne by Jubilant, including but not limited to capital expenditures, Materials costs and costs of any Materials or Work in Process rendered redundant, obsolete or unusable as a result of such revisions. Subject to the provisions of the preceding sentence, all printed Product Packaging Materials so rendered redundant, obsolete or unusable as a result of such revisions, shall be owned by Cadista and must be destroyed on instruction from Jubilant at Jubilant’s expense.

  

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(c) Jubilant Requested Specification Revisions.  Cadista shall make such revisions to the Packaging Specifications as are reasonably requested in writing by Jubilant (excluding any revisions described in Section 2.2(b)) with leadtime acceptable to Cadista.  Cadista may, at its option, make such revisions to the Product Specifications as are reasonably requested in writing by Jubilant (excluding any revisions described in Section 2.2(b)) with leadtime acceptable to Cadista.  In connection with any revision described in this Section 2.2(c), Jubilant shall, at its sole cost and expense, and in accordance with Section 2.2(d), provide to Cadista, in a digital format acceptable to Cadista, artwork for changes in Product Specifications or Packaging Specifications, relating to graphics.  For any such revision, Jubilant shall bear all costs and expenses incurred as a result of any revision described in this Section 2.2(c), including but not limited to Materials costs and costs of any Materials or Work in Progress rendered redundant, obsolete or unusable as a result of such revision.

(d) Price Revisions for Changes.  Prior to the implementation of any changes to Product Specifications, Packaging Specifications, Manufacturing Processes, or Product Packaging Materials as described in Sections 2.2(b) and 2.2(c), Cadista will provide a detailed description of Cadista’s incremental costs to be incurred by Cadista with respect to such change (“New Price Documentation”).  The parties agree to negotiate in good faith to reach agreement in writing on the new price (the “New Price”) of any Product manufactured hereunder by Cadista, which is affected by any such change, which price shall be the existing price increased by the amount of any incremental costs to be incurred by Cadista as a result of such change.  In the event that after negotiating in good faith the parties are unable to reach agreement on the New Price Documentation within thirty (30) calendar days of receipt of a detailed description of Cadista’s increased costs by Jubilant, Jubilant may terminate this Agreement in accordance with Section 7.2(e) below, if the new price (or if there is a negotiation, the last price proposed by Cadista, which must be less than or equal to the New Price) is not acceptable. If notice of termination of this Agreement is not sent by Jubilant within forty-five (45) after receipt of the proposed New Price Documentation, the New Price (or if there is a negotiation, the last price proposed by Cadista, which must be less than or equal to the New Price), shall become binding and effective on purchase orders placed after forty-five (45) calendar days after Jubilant’s receipt of Cadista’s proposed New Price Documentation.

(e)  Equipment.  If Cadista requires dedicated equipment to complete its duties hereunder, the cost of such dedicated equipment and its maintenance and installation shall be paid for by Jubilant and shall be the property of Jubilant.  At the termination of Agreement with respect to all affected Products for which said equipment was used, Jubilant will remove such equipment from Cadista’s premises, at Jubilant’s expense unless the parties agree otherwise in writing.

 

2.3  Forecasts; Excess Orders.

(a)           Jubilant shall annually provide a good faith annual forecast (“Forecast”) of the timing and pace of its expected specific orders for each Product broken down on a monthly basis. The first such Forecast shall be given upon execution of this Agreement and shall cover orders during the remainder of the 2011 calendar year, and subsequent Forecasts shall be delivered to Cadista on or before each November 1, with respect to the following calendar year. The estimates in each Forecast shall be good faith forecasts to assist Cadista in planning its production and shall be non-binding and without prejudice to Jubilant’s subsequent firm orders.

  

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(b)           All purchases and sales between Jubilant and Cadista will be initiated by Jubilant’s issuance of written purchase orders sent via e-mail, airmail or facsimile (each a “PO”).  Each PO shall specify the date of delivery to Jubilant (the “Delivery Date”) which shall be no earlier than ninety (90) days after the date of such order (“Leadtime”), the delivery destination within the U.S. (the “Delivery Destination”) for the ordered Product, the transportation carrier to be used for delivery thereof, and the Delivery Date.  If any PO fails to indicate a particular transportation carrier to be used for delivery, Cadista shall have the right to select a transportation carrier.  Cadista is manufacturing the Product on a made to order basis and may deliver the Product to Jubilant on or before the Delivery Date.  Quantities of each SKU of the Products actually shipped by Cadista may vary from the quantities specified in any order by up to ten percent (10%), and shall still be deemed to be in compliance with such orders; provided, however, that Jubilant shall only be invoiced and required to pay for the quantities that Cadista actually ships to Jubilant which will be full case quantities; provided further that any deviation in the ordered quantities of the Products up to ten percent (10%) will at Jubilant’s election increase/decrease, as appropriate, the quantity of the Products specified in Jubilant's next order of the Products (without regard to forecasted quantities).

(c)           In the event that Jubilant shall in any period, submit purchase orders (“Excess Orders”) for a product in excess of one hundred twenty five percent (125%) of the most current Forecast for such period, Cadista shall use commercial reasonable efforts to fill such Excess Orders as promptly as practicable, but shall not be in breach hereof if notwithstanding such efforts, it shall be unable to fill such Excess Orders.

(d)           If Cadista becomes aware that despite using commercially reasonable efforts, it cannot supply at least ninety percent (90%) of any month's estimated purchase quantity of each Forecast, Cadista will inform Jubilant in writing as soon as possible of the specific purchase orders that Cadista cannot fulfill, but in no event later than ten (10) days from Cadista becoming aware of same and the reasons that Cadista cannot fulfill such orders and Jubilant will have the remedies set forth in Section 3.5 (if such failure to supply constitutes a Supply Interruption).

(e)           All Products ordered by Jubilant shall be in amounts consistent with the then-current minimum order sizes and minimum batch sizes, or multiplies thereof. Cadista shall not change the minimum batch size for any Product without providing prior notice to Jubilant.

(f)           In ordering and delivering Product, Cadista and Jubilant may use their respective standard forms, provided that nothing in those forms shall be construed to modify or amend the terms and conditions of this Agreement, and, in the case of any conflict herewith, the terms and conditions of this Agreement shall control.

(g)           Cadista’s obligation to supply is conditioned on the timely receipt of Materials from Jubilant.

  

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(h)           In the event any Materials are lost or wasted (beyond the yield threshold provided in section 3.10) during, before or after processing by Cadista due to the negligence of Cadista or due to Product failing to meet Product Specifications, Cadista shall reimburse Jubilant for such Materials in an amount equal to Jubilant’s cost for such Materials.  Notwithstanding the foregoing, if any failure of Product to meet Product Specifications is caused by Materials not meeting their specifications then the cost of the lost or wasted Materials shall be borne by Jubilant.  To the extent Cadista pays for Materials lost or wasted it will not be responsible for the cost of Materials in a replacement batch.

2.4           Facility and Records Maintenance; Audit.

(a) Cadista shall, at all times, maintain and operate the manufacturing facility or facilities at which the Products are manufactured (collectively, the "Facility"), and implement and maintain such quality control procedures, so as to be able to perform its obligations hereunder in compliance with all applicable laws, including, without limitation, cGMPs. Each party shall promptly notify the other upon receipt by it of any adverse notice from any governmental agency relating to the Products, employees, environmental conditions or the operation of the Facility.  Cadista shall maintain true and complete books and records of all data relating to the manufacture, supply and sale of Products. Such review shall not include any financial records of Cadista or its Affiliates. Such audits shall be performed during normal business hours as soon as can reasonably be arranged but in any case not later than thirty (30) days after written notice to Cadista.  Any of Jubilant’s representatives conducting any audit hereunder, at Cadista’s request, shall enter into an agreement with Cadista, its Affiliates or subcontractors with respect to confidentiality containing provisions substantially similar to those set forth in Section 8.  A Cadista representative shall accompany any of Jubilant’s representatives.  In all cases, Jubilant shall ensure that its representatives conduct each such audit so as to cause minimum interference to the normal operation of Cadista’s and its Affiliates' facilities.  In connection with any such audit, Jubilant and its representatives shall comply with those site procedures, instructions of Cadista’s representatives and instructions applicable to employees of Cadista of which Jubilant has been reasonably notified.  Cadista and its Affiliates shall cooperate with and provide reasonable assistance to Jubilant during such audit.  All audits shall be at Jubilant’s sole expense.  Visits by Jubilant’s representatives to Cadista and its Affiliates’ facilities may involve the transfer of confidential information and shall be subject to the terms of Section 8 hereof.  The results of such audits and inspections shall be considered confidential information under Section 8.

(b)           The parties, shall, at Jubilant’s request jointly appoint an independent audit firm, reasonably acceptable to Cadista to audit the books of account of Cadista in order to determine whether Cadista has properly taken into account its incremental costs under Section 2.2(d) and Manufacturing Costs of Cadista under Section 2.1.  The appointed audit firm may perform audits during regular business hours, not more than once in any calendar year and upon reasonable prior notice to Cadista.  Jubilant shall bear the audit fees unless such third party auditor determines that the amount actually paid by Jubilant, in the aggregate, exceeds the amounts to be paid by Jubilant hereunder by $10,000, in which case Cadista shall bear the audit fees. In addition the price for Products shall be adjusted consistent with the auditors’ determination.   The results of the audit shall be final and binding upon the parties. This Section 2.4(b) shall survive termination of this Agreement.

  

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2.5           Third Party Contractors.  Jubilant and Cadista agree that Cadista shall have the right in connection with Cadista's supply obligations hereunder to contract with one or more Third Parties for the manufacture and supply of the Products to Jubilant, provided, however, that: (i) Jubilant must consent in writing (such consent not to be unreasonably withheld); (ii) Cadista shall cause each and every such Third Party to comply fully with the terms and conditions set forth in this Agreement with respect to the confidentiality, indemnity, manufacture and supply of such Products to Jubilant; (iii) Cadista shall remain fully responsible for the manufacture and supply of such Products to Jubilant; (iv) the use of such Third Party shall not increase the price of the Products to Jubilant; and (v) Cadista shall defend and hold harmless Jubilant from all acts and omissions on part of such Third Party.

2.6           Products ANDA.  Jubilant shall be responsible, at its own cost, for the maintenance of the Products ANDA.

3.           PACKAGING, DELIVERY AND ACCEPTANCE.

3.1           Delivery of Products.  Jubilant shall provide Cadista with appropriate instructions for each shipment of the Products designating the carrier, destination, method of transport and insurance requirements.  Cadista shall ship Products from its Facilities or the facilities of its Affiliates or permitted subcontractors, if any Ex-works such Facility freight prepaid (as defined in the Incoterms 2010 established by the International Chamber of Commerce), in accordance with Jubilant’s instructions set forth in each respective PO, transmitted to Cadista in accordance with the applicable provisions of this Agreement.  Jubilant shall specify a Delivery Destination within the U.S.  Cadista shall not be responsible for delays due to the actions or omissions of Jubilant’s designated carrier.  In the event Jubilant requests that Cadista store a Product for more than thirty (30) days then the parties will agree on the fee payable by Jubilant to Cadista for such storage.  Jubilant shall be responsible for all sales, use, excise and other taxes and duties imposed by any Governmental Authority that are applicable to the purchase or shipment of Product.  In the event Cadista pays any such taxes, or duties applicable to purchase or shipment of such Product, such amounts paid by Cadista shall be invoiced by Cadista to Jubilant and shall be paid by Jubilant in accordance with the terms of this Agreement.  Cadista shall be responsible for all taxes related to Cadista’s, its Affiliates’, or its subcontractors’ manufacture of a Product, including income, payroll, and business licensing (including privilege) taxes.

  

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3.2           Acceptance and Rejection.  Jubilant shall be entitled to reject any shipment of Products that fails to conform to the Product Specifications or Packaging Specifications at the time of delivery to Jubilant.  Jubilant shall notify Cadista of such rejection within thirty (30) days after delivery of such Products shipment to Jubilant, and shall set forth in such notification the basis under this Agreement for such rejection, including any testing or inspection results, provided, however, that in the event any such non-conformity is latent or was not obvious and could not be readily discovered from a physical inspection of the Products shipment, Jubilant may give written notice to Cadista of its rejection of such shipment within thirty (30) days after Jubilant's discovery of such non-conformance.  Failure to so notify Cadista, or failure to identify the basis under this Agreement for rejection of any Product, shall constitute acceptance of such Product, except to the extent the Product fails to conform to the Product Specifications or Packaging Specifications as the case may be.  After such failure to notify, Jubilant shall be obligated to make payment for such Product in accordance with pricing provisions of this Agreement.  If the parties disagree as to whether any Product meets the Product Specifications or Packaging Specifications and the parties are unable to negotiate a commercially reasonable resolution, then samples and/or batch records, as appropriate, from the disputed shipment shall promptly be submitted for testing and evaluation to an independent Third Party as shall be agreed to in writing by both parties.  The determination of such Third Party as to whether the disputed Product shipment meets the Product Specifications or Packaging Specifications shall be final and binding.  The cost of the testing and evaluation by the independent third party shall be borne by the party whose position is found to be erroneous.

If, pursuant to this Section 3.2, any Products are found not to conform to the Product Specifications or Packaging Specifications, as a result of a cause occurring prior to placement thereof with the carrier (and not arising as a result of the Materials being defective or failing to meet their respective specifications), at Cadista’s option, Jubilant shall either (i) deliver such non-conforming Products to Cadista or (ii) destroy such non-conforming Products in accordance with applicable laws, rules and regulations.  Cadista shall reimburse Jubilant for all reasonable costs and expenses in connection such delivery or destruction, and, at Cadista’s option and as Jubilant’s exclusive remedy, Cadista shall either: (i) credit Jubilant for the amount paid or payable by Jubilant to Cadista for such rejected Product shipment (and reimburse Jubilant for the Material of such rejected batch at Jubilant’s cost for such Materials), or (ii) replace such rejected Product shipment (with Cadista paying Jubilant for all Materials or such replacement shipment in an amount equal to Jubilant’s  cost), at no additional cost to Jubilant, as promptly as reasonably practicable, but in no event later than forty-five (45) days from receipt of notice of non-conformity of such shipment from Jubilant.

Jubilant shall notify Cadista in writing of any claim relating to quantitative deficiencies in any shipment of Product that Jubilant considers to have been caused prior to shipment hereunder within thirty (30) days following receipt of any such shipment.  Any claim for a quantitative deficiency which is not made within such thirty (30) days shall be deemed to have been waived by Jubilant and Jubilant shall be obligated to make payment for such Product in accordance with Section 5 of this Agreement.  In the event Jubilant determines there is a quantitative deficiency from the applicable shipping documentation, the parties shall investigate such deficiency and, if the parties agree that such deficiency occurred prior to shipment, Cadista shall, at Jubilant’s option and as Jubilant’s exclusive remedy for such quantitative deficiency, (a) credit Jubilant for the amount paid by Jubilant to Cadista in excess of the aggregate price for actual quantities shipped; or (b) subject to Cadista having Product on hand at the time of request by Jubilant, rectify any such deficiency by promptly shipping the appropriate quantities of any relevant Product to Jubilant, but in no event later than fifteen (15) calendar days following the occurrence of such a deficiency, in which case Jubilant shall be obligated to pay for any such quantities pursuant to Section 5 of this Agreement.

  

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3.3           Product Recall. (a) In the event of any recall of the Products arising out of, relating to, or occurring as a result of, any act or omission by, Cadista (but specifically excluding the use of defective Materials supplied by or for Jubilant):

(A)  upon substantiation, at the election of Jubilant, either:

(i)           replace the amount of Products recalled (with Jubilant supplying all Materials to Cadista at Jubilant’s cost therefor); or

(ii)           give credit to Jubilant against outstanding receivables due from Jubilant and future purchases of the Products (or refund ,at Jubilant’s option ) in an amount equal to the amount paid by Jubilant for the Products (plus Jubilant’s cost of Materials included in such Products)   so recalled or seized; and

(B)  indemnify and save Jubilant harmless from and against any and all damages to or claims by Third Parties associated with or resulting from any such Recall.

(b)             In the event of any recall or seizure of the Products arising out of, relating to or occurring as a result of any act or omission of Jubilant or defective Materials, Jubilant shall remain responsible to Cadista for the purchase price of the recalled Products, shall be solely responsible for any transportation costs, import duties, if any, taxes, insurance, handling and other costs incurred by Jubilant in respect of such recalled or seized Products, and reimburse Cadista for all transportation costs, if any, taxes, insurance, handling and out-of-pocket costs, if any, incurred by Cadista in respect of such recalled or seized Products, shall promptly reimburse Cadista for all Third Party costs and expenses incurred by Cadista  in connection with such Recall, and shall indemnify and save Cadista harmless from and against any and all damages to or claims by Third Parties associated with or resulting from any such Recall.

(c)             For purposes of this Section 3.3, "recall" shall mean (i) any action by Cadista and/or Jubilant to recover title to or possession of the Products sold or shipped and/or (ii) any decision by Jubilant not to sell or ship the Products to Third Parties which would have been subject to recall if it had been sold or shipped, in each case taken in the good faith belief that such action was appropriate under the circumstances.

(d)             Each party shall keep the other fully informed of any notification or other information, whether received directly or indirectly, which might affect the marketability, safety or effectiveness of the Products, or which might result in liability issues or otherwise necessitate action on the party of either party, or which might result in recall or seizure of the Products.

(e)             Prior to any reimbursement pursuant to this Section 3.3 the party claiming reimbursement shall provide the other with reasonably acceptable documentation of all reimbursable costs and expenses.

  

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(f)             Jubilant shall maintain records of all sales of each Product sufficient to administer adequately a Recall for a period of three (3) years after the termination or assignment of this Agreement (or the period ending with the last expiration date of a Product sold by Jubilant, if that is a longer period).  At Jubilant’s request, Cadista shall provide Jubilant with information and records concerning the Products in Cadista’s possession or control as the manufacturer of such Products which are reasonably necessary to implement the Recall.

(g)             This Section 3.3 shall survive the termination of this Agreement and shall continue for the shelf life of the Product affected hereunder.

3.4           Maintenance of Products.  Jubilant shall store and maintain the Products in compliance with the Product Specifications.

 

 

3.5           Interruption of Supply.  Notwithstanding Section 11.2, if: (i) Cadista is unable to supply the Products to Jubilant in accordance with Cadista's obligations under this Agreement for sixty (60) days or more; or (ii) Cadista fails to deliver a shipment of Products within thirty (30) days of the Delivery Date due to Cadista’s actions or omissions at least once during a calendar quarter for three (3) consecutive quarters (each a "Supply Interruption"), and Cadista does not provide Jubilant with assurance of Cadista’s ability to perform such obligations to Jubilant's reasonable satisfaction, then as Jubilant’s sole remedy  Jubilant may immediately terminate this Agreement with respect to such Product or in its entirety, within 180 days of such event,  upon  thirty (30) days' notice in accordance with Section 7.2(c) hereof.   In the case of a Supply Interruption, then Cadista will return any Service Level Charges (as defined in the Distribution Agreement) relating to the Product for which a Supply Interruption occurs, paid to it by Jubilant under the Marketing and Distribution Agreement) between the parties hereto dated the date hereof, arising from such Supply Interruption  (the “Distribution Agreement”).

3.6           Correspondence with Governmental Authority.  The parties shall as soon as reasonably practicable (and in any event, within six (6) business days of the date of receipt of notice) notify the other party in writing of, and shall provide the other party with copies of, any correspondence and other documentation received or prepared in connection with any of the following events:  (i) receipt of a regulatory letter, warning, or similar item, from the FDA or any other Governmental Authority in connection with any Product, and (ii) any regulatory comments relating to any Product requiring a response or action by the other party; provided, however, that the parties’ obligations under this Section shall continue only during such time as Cadista is manufacturing the given Product for Jubilant in accordance with this Agreement.

  

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3.7

	
Complaints.

(a)  Jubilant shall maintain complaint files for Products in accordance with Good Manufacturing Practices and Jubilant’s standard policy. Cadista shall promptly provide to Jubilant copies of any complaints received by Cadista or its Affiliates with respect to Products and, in connection with such complaints, shall promptly report to Jubilant any findings identified in the Manufacturing Process or distribution that could reasonably be expected to affect the safety or efficacy of the Products throughout their respective shelf lives. Jubilant shall promptly provide Cadista with copies of any complaints received by Customer with respect to Products. All Product re-testing conducted by Cadista shall be at Jubilant's sole cost and expense, such re-testing amounts are to be no greater than the costs and expenses incurred by Cadista in similar tests conducted by Cadista in the ordinary course of business; provided, however, if it is determined that the Product that was the subject of such testing is not in compliance with the Product Specifications, then such re-testing shall be at Cadista's sole cost and expense. Jubilant shall have responsibility for responding to all complaints in the Territory and for promptly providing Cadista with a copy of any responses to complaints, relating to Product. Jubilant shall have responsibility for reporting any complaints relating to Product to the FDA and any other Governmental Authority, including, but not limited to, complaints relating to the manufacture of Product as well as adverse drug experience reports.

 

(b)  Section 3.7 shall survive the termination of this Agreement for the three years after shelf life of the Products affected or until the destruction of such affected Products.

3.8           Additional Covenants of Jubilant.  Jubilant shall (i) not give any purchaser of Products any guarantee or warranty on behalf of Cadista, (ii) not represent itself as an agent of Cadista for any purpose, (iii) follow up and investigate customer and tampering complaints related to the Products, in the Territory, and keep Cadista reasonably informed, as appropriate, as to the nature, status and resolution of such complaints on a timely and regular basis and provide reasonably sufficient information to Cadista to investigate such complaints, and (iv) upon receipt by Jubilant or its designee of any Product, handle, use and store pending sale such Product in compliance with Good Manufacturing Practices, applicable laws, rules, and regulations, and the Product Specifications.

3.9           Obtaining Approvals.  Jubilant shall be responsible for obtaining all Regulatory Approvals that are required in relation to the manufacture (other than general permits for the Facility), distribution and sale of the Products, including, without limitation, the Products ANDA.  Cadista shall be responsible to obtain all Regulatory Approvals related generally to the Facility.

3.10           Yield.  In the event the number of units (i.e. tablets or capsules) in batches of a Product is consistently less than 75% of the number of units that could reasonably be expected to be produced using the Materials used to make the batches, the parties shall meet to discuss improvements to the manufacturing process and which party should bear the cost for the lower yield on a going-forward basis.

  

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4.           PRODUCT TESTING; INDEMNIFICATION; INSURANCE.

4.1           Product Testing.  Cadista shall conduct, or cause to be conducted, all physical parameters and in-process testing with respect to each batch of Products to be supplied pursuant hereto prior to delivery thereof to Jubilant.  Cadista shall retain or cause to be retained a sample of each batch tested for at least the shelf life of such batch plus one (1) year, or such longer period as may be required by cGMPs. Cadista will administer the stability program as outlined in the approved Products ANDA.  To the extent requested by Jubilant or as required by applicable law, each shipment of Product by Cadista will be accompanied by a Certificate of Analysis.  Cadista acknowledges that Jubilant has requested that each shipment of Product be accompanied by a Certificate of Analysis.

4.2           Indemnification by Jubilant.  Jubilant shall indemnify, defend and hold harmless Cadista, its Affiliates ,and their respective employees, officers, directors and agents from and against any and all liabilities, losses, claims, demands, assessments, fines, damages, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses and all costs of defense) (collectively, "Liabilities") arising out of, relating to, or incidental to (a) the handling, storage, transportation, use, distribution, promotion, marketing and sale of the Products, in each case  by Jubilant or its Affiliates pursuant to this Agreement in the Territory, except for any Liabilities for which Cadista has agreed to indemnify Jubilant pursuant to and subject to the limitations set forth herein; (b) the material breach or inaccuracy of any representations or warranties made by, or covenants of Jubilant in this Agreement; (c) the infringement or misappropriation of any copyright or trademark arising out of the marketing and/or sale of the Products in or out of the Territory by Jubilant during the term of this Agreement;  (d) the infringement or misappropriation of any patent, trade secret or other proprietary right arising out of or relating to the manufacture or composition of  the Products or Materials;  (e) the gross negligence or willful misconduct of Jubilant or its Affiliates any of their respective agents, directors, officers or employees; and (f) failure of any Material to meet its specifications.

4.3           Indemnification by Cadista. Cadista shall indemnify, defend and hold harmless Jubilant, its Affiliates ,and their respective employees, officers, directors and agents  from and against all Liabilities arising out of, relating to, or incidental to (a) the failure of the Products upon delivery to meet the Product Specifications or for Product warranties contained herein; (b) the material breach or inaccuracy of any representations or warranties made by, or covenants of, Cadista in this Agreement; and (c) the gross negligence or willful misconduct of Cadista or its Affiliates, or their respective agents, directors, officers or employees.

4.4           In no event shall either party be liable to the other for cover, incidental, special, consequential or punitive damages, including any claim for damages based on lost revenues or profits, however caused or on any theory of liability..

 

Cadista shall not be liable for Product defects that have been caused by defective Materials (including, without limitation, Materials that fail to meet their specifications) abnormal or incorrect conditions of use, storage pending use, accident, misuse or negligence by Jubilant, its employees, servants and agents or by Jubilant’s designated carrier after any Product leaves a  Facility.

  

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EXCEPT FOR THE REPRESENTATIONS, WARRANTIES, AND COVENANTS UNDER THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.

 

IN NO EVENT WILL CADISTA’S LIABILITY TO JUBILANT FOR DAMAGES OR THIRD PARTY INDEMNIFICATION OR FOR MATTERS RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT EXCEED $500,000 IN THE AGGREGATE DURING OR AFTER THE TERM.

4.5           Procedure for Indemnification.

4.5.1             Notice   Promptly after becoming aware of same, the Indemnified Party shall notify the Indemnifying Party of any claim or discovery of any fact upon which the Indemnified Party intends to base a claim for indemnification. For a period that shall not exceed fifteen (15) business days following any such notification, as provided herein, the Indemnified Party and Indemnifying Party shall investigate and discuss in good faith whether such claim is subject to indemnification. An Indemnified Party's failure to so notify the Indemnifying Party shall not, however, relieve such Indemnifying Party from any liability under this Agreement to the Indemnified Party with respect to such claim except to the extent that such Indemnifying Party is actually denied, during the period of delay in notice, the opportunity to remedy or otherwise mitigate the event or activity(ies) giving rise to the claim for indemnification and thereby suffers or otherwise incurs additional liquidated or other readily quantifiable damages as a result of such failure. The Indemnifying Party, while reserving the right to contest its obligations to indemnify hereunder, shall be responsible for the defense of any claim, demand, lawsuit or other proceeding in connection with which the Indemnified Party claims indemnification hereunder.  The Indemnified Party shall have the right at its own expense to participate jointly with the Indemnifying Party in the defense of any such claim, demand, lawsuit or other proceeding, but with respect to any issue involved in such claim, demand, lawsuit or other proceeding with respect to which the Indemnifying Party has acknowledged its obligation to indemnify the Indemnified party hereunder, the Indemnifying Party shall have the right to select counsel, settle, try or otherwise dispose of or handle such claim, demand, lawsuit or other proceeding on such terms as the Indemnifying Party shall deem appropriate, subject to any reasonable objection of the Indemnified Party.

4.5.2           Cooperation.  The Indemnified Party shall reasonably cooperate with the Indemnifying Party in the defense of such claim, suit or proceeding and may be represented, at the Indemnified Party's expense, by counsel of its choice.  Any settlement or compromise of such claim, suit or proceeding that seeks to impose any material obligation upon the Indemnified Party, or limit any of the material rights of the Indemnified Party under this Agreement, shall require the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed.

  

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4.6           Insurance.  Each party shall maintain in effect at all times during the Term of this Agreement insurance with a carrier with an A.M. Best rating of A-XII or better.  Such insurance shall include, without limitation, worker's compensation in statutory amounts, and employers' liability insurance, comprehensive general liability insurance (including products liability) and automobile insurance in amounts not less than Five Million Dollars ($5,000,000) per occurrence and in the aggregate. Each party shall designate the other and its Affiliates as "additional insureds" on such insurance policies.  Upon a party’s reasonable request, the other party hereto shall provide the requesting party with copies of all applicable endorsements and certificates of insurance, evidencing such coverage and stating that the other party is named as an additional insured, which shall also state that the additional insured shall be provided a minimum of thirty (30) calendar days prior written notice of any proposed cancellation, or expiration without renewal, and five (5) business days prior written notice of any proposed change in carriers or material terms of coverage.

5.           PRICE AND PAYMENT TERMS.

5.1           Price.  Jubilant shall purchase from Cadista all Products which are accepted pursuant to Sections 2.3 and 3.2 above at the prices set forth on Exhibit A, as such prices may be adjusted by the Parties from time as provided herein.

5.2           Invoicing.  Upon completion of manufacturing of the Products and the Products are ready for shipping Cadista shall submit invoices to Jubilant which provide for the payment of the Price.  Jubilant shall pay each invoice in full within sixty (60) days after the date of invoice.  All payments shall be made in U.S. Dollars.  In the event that payment is not received by Cadista on or before the due date, the unpaid portion of such payment shall accrue interest at a rate of one percent (1%) per month compounded monthly (12.68% per annum) until such unpaid portion is paid to Cadista in full.

6.           REPRESENTATIONS; WARRANTIES; AND COVENANTS  .

6.1           By Cadista.  Cadista hereby represents, warrants, and covenants to Jubilant as follows:

(a)           Cadista is a corporation duly organized and validly existing under the laws of the State of Delaware;

(b)           Cadista has the requisite authority to execute and deliver this Agreement and to perform its obligations hereunder, without limitation, in manufacturing and supplying the Products to Jubilant hereunder in accordance with the terms of this Agreement;

(c)           The execution and performance of Cadista's obligations hereunder are not and will not be in violation of or in conflict with any material obligation it may have to any Third Party;

  

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(d)           Cadista is not debarred and Cadista does not and will not use in any capacity the services of any person debarred under Subsection 306(a) or (b) of the Generic Drug Enforcement Act of 1992;

(e)           To the best of Cadista's knowledge and belief, there are no investigations, adverse Third Party allegations or actions, or claims against Cadista, including any pending or threatened action against Cadista, in any court or by or before any governmental body or agency, with respect to the Products, the manufacture of the Products at the Facility or its obligations set forth herein which may adversely affect Cadista's ability to perform its obligations under this Agreement;

(f)           Cadista currently possesses and shall, at its own cost, maintain all necessary licenses, permits, registrations, or approvals required by the FDA with respect to the Facility;

(g)           The Products delivered to Jubilant under this Agreement (i) shall meet the Product Specifications in effect as of the date that title to such Products passes to Jubilant; (ii) shall be approved by the FDA and satisfy all regulations and laws applicable to the manufacture, packaging, storage and shipment of such Products, (iii) shall not be adulterated or misbranded pursuant to Sections 501 and 502 of the FD&C Act (21 U.S.C.A. §§ 351 & 352); (iv) shall not be an article that may not be introduced into interstate commerce consistent with the intended use for such Products pursuant to the FD&C Act or any other applicable laws; and (v) shall conform with the applicable expiration dating of such Products; and

(h)           The Products delivered to Jubilant pursuant to this Agreement, at the time of delivery, shall be free and clear of all liens, security interests or other encumbrances.

6.2           By Jubilant.  Jubilant represents, warrants, and covenants to Cadista as follows:

(a)           Jubilant is a corporation duly organized and in good standing under the laws of India;

(b)           Jubilant has the requisite corporate authority to execute and deliver this Agreement and to perform its obligations hereunder;

(c)           The execution and performance of Jubilant's obligations hereunder are not and will not be in violation of or in conflict with any material obligations it may have to any Third Party;

(d)           The manufacture, sale or use of the Products according to the Product Specifications under this Agreement will not infringe any patent right of or other government grant of intellectual property to any Third Party, or otherwise violate any applicable laws;

  

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 (e)           The Materials (i) shall meet their respective specifications in effect as of the date that they are delivered to Cadista, (ii) shall be approved by the FDA and satisfy all regulations and laws applicable to the manufacture, packaging, storage and shipment of such Products,  (iii) shall not be adulterated or misbranded pursuant to Sections 501 and 502 of the FD&C Act (21 U.S.C.A. §§ 351 & 352), (iv) shall not be an article that may not be introduced into interstate commerce consistent with the intended use for such Materials pursuant to the FD&C Act or any other applicable laws, and (v) shall conform with the applicable expiration dating of such Materials;

(f)           To the best of Jubilant's knowledge and belief, there are no investigations, adverse Third Party allegations or actions, or claims against Jubilant, including any pending or threatened action against Jubilant, in any court or by or before any governmental body or agency, with respect to the Materials, the Products, or the manufacture of the Products which may adversely affect Jubilant’s or Cadista's ability to perform its obligations under this Agreement;

(g)           Jubilant is not debarred and Jubilant has not and will not use in any capacity the services of any person debarred under Subsections 306(a) or (b) of the Generic Drug Enforcement Act of 1992;

(h) Jubilant shall maintain all necessary permits (other than those relating to the Facility generally), relating to the Products to enable Cadista to manufacture the Product, including without limitation, the Products ANDA,  and Jubilant is in compliance in all material respects with such licenses, permits, registrations and approvals; and

(i) Jubilant will not sell or allow the Products to be sold outside the Territory.

7.           TERM AND TERMINATION.

7.1           Term. The term of this Agreement shall commence on the Effective Date and, unless sooner terminated pursuant to Section 7.2 hereof, shall continue in full force and effect for a period of five (5) years, provided, however, that the term of this Agreement may be extended by mutual written agreement of the parties.

7.2           Termination.  Prior to the expiration of the Term, this Agreement may be terminated:

(a)           in its entirety or with respect to any Product, immediately upon the mutual written consent of Jubilant and Cadista;

(b)           in its entirety or with respect to the affected Product, by either Jubilant or Cadista, upon thirty (30) calendar days prior written notice if the other party materially breaches any provision of this Agreement and fails to cure such breach within thirty (30) calendar days following receipt of written notice from a non-breaching party specifying the breach to be cured;

  

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(c)           in its entirety or with respect to the affected Product, by Jubilant upon thirty (30) days' written notice if any of the conditions set forth in Section 3.5 occur, within 180 days of its occurrence;

(d)           in its entirety or with respect to any Product, by Jubilant  or Cadista pursuant to Section 2.1 upon written notice to the other party in which case the Agreement shall terminate with respect to such Product eighteen (18) months after provision of such notice and during such eighteen (18) month period Cadista may not increase the price of the Products;

(e)           in its entirety or with respect to any Product, by Jubilant  pursuant to Section 2.2(d), in which case the Agreement shall terminate 180 days after Jubilant provides notice to Cadista, and during such 180 day period Cadista may not increase the price of the Products; and

(f)           in its entirety or with respect to any Product, in the event either party ceases conducting business in a normal course, becomes insolvent, makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for its business or assets, or avails itself of, or becomes subject to, any case under the Bankruptcy Code, 11 USC 101 et seq. (“Bankruptcy Code”) or any other statute of any state or country relating to insolvency or the protection of creditor rights, the other party shall have a right to terminate this Agreement, provided that in the case of an involuntary bankruptcy proceeding such right to terminate shall only become effective if the other party consents thereto or such proceeding is not dismissed within ninety (90) days after the filing thereof.  The parties agree that each party may fully exercise all of its rights and elections under the Bankruptcy Code.

7.3           Post-Termination.  Termination of this Agreement shall not affect any payment obligations or other liabilities which have accrued as of the date of such termination, including, without limitation, any damages or liabilities resulting from a party's breach of its obligations under this Agreement.   Upon expiration or termination of this Agreement, whichever is sooner, Cadista shall manufacture and ship to Jubilant and Jubilant shall purchase in accordance with the provisions hereof all amounts of the Products ordered pursuant to POs which have been accepted by Cadista prior to the date of termination.  If this Agreement is terminated by Jubilant or Cadista for any reason Jubilant will reimburse Cadista for any Materials purchased for by Cadista in reliance on POs or the Forecasts, against delivery of same (at the expense of Jubilant) to Jubilant.

8.           CONFIDENTIALITY OBLIGATIONS.

8.1           General.  In order to enable the parties to perform their respective obligations under this Agreement (the “Business Purpose”), each party or its affiliates, parent companies, subsidiaries, divisions or related companies (the “Disclosing Party”) may disclose to the other party or its affiliates, parent companies, subsidiaries, divisions or related companies (the “Receiving Party”) certain confidential information of such party.

  

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8.2           Information Covered.  These confidentiality obligations will apply to all information disclosed by the Disclosing Party (or on the Disclosing Party’s behalf) to the Receiving Party, whether directly or indirectly, in writing, orally, electronically or by drawings or inspection of equipment, products, facilities, software or other property of the Disclosing Party, including, but not limited to, (a) any information, regardless of form, proprietary to or maintained in confidence by the Disclosing Party, including, without limitation, any information, patents, patent applications, technical data or know-how relating to products, formulations, manufacturing, discoveries, ideas, inventions, concepts, software, equipment, designs, drawings, specifications, techniques, processes, systems, models, data, source code, object code, documentation, diagrams, flow charts, research, development, business plans or opportunities, business strategies, marketing plans or opportunities, marketing strategies, future projects or products, projects or products under consideration, procedures, sales data, and information related to finances, costs, prices, suppliers, vendors, licensors, licensees, business partners, customers, consumers and employees; and (b) any other information marked as confidential or, if not disclosed in writing, identified as confidential at the time of disclosure and summarized in a written document that is marked confidential and delivered within thirty (30) days after the disclosure date (“Confidential Information”).

8.3           Obligations.  The parties agree that (a) the Receiving Party will treat all Confidential Information with the same degree of care as the Receiving Party accords to its own confidential information, but in no case less than reasonable care; (b) the Receiving Party will not use, disseminate, or in any way disclose any Confidential Information, except to its personnel or authorized representatives to the extent necessary for the Business Purpose, and for any other purpose the Disclosing Party may hereafter authorize, provided that all such persons shall have agreed in writing to be bound by terms and conditions substantially similar to, and no less restrictive with respect to limitations on use and disclosure than, those of this Agreement; and (c) the Receiving Party will deliver to the Disclosing Party, in accordance with any request from the Disclosing Party, all tangible embodiments of the Confidential Information including copies, notes, packages, pictures, diagrams, computer memory media, and all other materials reflecting or containing Confidential Information.

8.4           Information Not Covered. The Receiving Party will have no obligation with respect to any portion of the Disclosing Party’s Confidential Information that (a) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party, generally known or available to the public; (b) was acquired by the Receiving Party before receiving such information from the Disclosing Party and without restriction as to use or disclosure; (c) is hereafter rightfully furnished to the Receiving Party by a third party, without restriction as to use or disclosure; (d) is information which the Receiving Party can document was independently developed by it or on its behalf without reference to the Disclosing Party’s Confidential Information received hereunder; or (e) is disclosed with the prior written consent of the Disclosing Party.  The Receiving Party may disclose the Confidential Information pursuant to the requirements of a governmental agency or operation of law, provided that it gives the Disclosing Party reasonable advance notice sufficient to contest such requirement of disclosure, takes all reasonable and lawful actions to avoid and/or minimize the extent of such disclosure, and cooperates with the Disclosing Party, at the Disclosing Party’s cost, if the Disclosing Party wishes to seek a protective order

  

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8.5           Injunctive Relief.  The Receiving Party acknowledges that the unauthorized disclosure or use of the Disclosing Party’s Confidential Information by the Receiving Party may cause irreparable harm and significant injury to the Disclosing Party, the degree of which may be difficult to ascertain.  Accordingly, the Receiving Party agrees that the Disclosing Party will have the right to seek an immediate injunction enjoining any breach of this Agreement, as well as the right to pursue any and all other rights and remedies available at law or in equity for such a breach.

8.6           Survival.  Each party’s duty to protect the Confidential Information disclosed under this Agreement shall survive termination of this Agreement for five (5) years.

9.           DISPUTE RESOLUTION.  The executive officers in charge of manufacturing for each of Jubilant and Cadista shall meet as often as necessary to review the performance of the parties under this Agreement and to resolve any disputes.

10.           RELATIONSHIP OF THE PARTIES.   Cadista shall at all times be deemed to be an independent contractor, solely responsible for the manner by and the form in which it performs this Agreement.  Nothing contained in this Agreement shall be construed as creating a partnership, joint venture or any other type of relationship between Cadista and Jubilant, other than that of buyer and seller of goods and licensor and licensee of a license.  Neither party shall have the authority to represent itself as having the authority to bind or obligate the other party in any manner whatsoever.

11.           MISCELLANEOUS.

11.1         Binding Nature and Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.  Neither party shall, without the prior written consent (not to be unreasonably withheld or delayed) of the other party having been obtained, assign or transfer this Agreement to any person; provided, however, that (a) Cadista may subcontract its manufacturing and supply obligations, subject to the limitations contained in Section 2.5; (b) each party may assign or transfer this Agreement to any Affiliate or to any successor by merger of such party of its pharmaceutical business or upon a sale of substantially all of a party's assets or the assets of its pharmaceutical business, without the prior written consent of the other party hereto; and (c) in the case of an assignment to an Affiliate of a party, the Affiliate shall in writing assume all the rights and obligations of the transferor under this Agreement.  No permitted assignment of this Agreement or any rights hereunder shall relieve the assigning party of any of its obligations hereunder.

  

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11.2         Force Majeure.  Neither party shall be liable to the other on account of any failure to perform or on account of any delay in performance of any obligation under this Agreement, other than for the payment of money, if and to the extent that such failure or delay shall be due to a cause beyond the control of the relevant party and which, by the exercise of reasonable diligence and care, such party could not reasonably have been expected to avoid, including but not limited to any acts of God, acts of the public enemy, insurrections, riots, embargoes, political upheavals, actions or decrees of governmental bodies, communications failures, work stoppage, natural disaster, fires, explosions, floods, or energy shortages (a “Force Majeure Event”).  The party directly affected shall promptly notify in writing the other party of the specific causes beyond the control of that party and the probable duration of the delay and be excused from such performance of such obligation to the extent that it is necessarily prevented, hindered or delayed thereby during the continuance of any such happening or event.  This Agreement, in so far as it relates to such obligation, shall be deemed suspended so long as and to the extent that such obligation is affected by a Force Majeure Event.  The party directly affected shall use efforts to eliminate or circumvent the Force Majeure Event.

11.3        Governing Law.  This Agreement shall be governed, construed and enforced exclusively in accordance with the laws of the State of New York applicable therein without regard to the applicable principles of conflicts of laws that might otherwise govern.

11.4         Notices. Any written notice required or permitted to be delivered pursuant to this Agreement shall be in writing and shall be deemed delivered:  (a) upon delivery if delivered in person; (b) three (3) business days after deposit in United States registered or certified mail, return receipt requested, postage prepaid; (c) upon transmission if sent via facsimile, (confirmed by a telephone conversation with the recipient); (d) one (1) business day after deposit with a nationally recognized overnight courier; in each case addressed to the following addresses in accordance with this Section 11.4:

If to Jubilant:

Jubilant Life Sciences Ltd.

Plot No 1-A, Institutional Area,

Sector 16/A Noida 201 301,

Uttar Pradesh, India Attn: President

If to Cadista:

Jubilant Cadista Pharmaceutical Inc.

207 Kiley Drive

Salisbury, Maryland   21801

Attn: President

or to such other address as may be specified by either party hereto upon notice given to the other.

11.5         Entire Agreement; Modifications.  This Agreement, together with all of the Exhibits thereto, sets forth the entire, final, and exclusive agreement between the parties as to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, and discussions, whether oral or written, between the parties.  This Agreement may be modified only pursuant to a writing executed by authorized representatives of Cadista and Jubilant. This Agreement does not supersede any other agreement between the parties with respect to Products not supplied pursuant to this Agreement

  

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11.6         Injunctive Relief.  Each party acknowledges that breach of this Agreement may cause irreparable harm and significant injury to the other party, the degree of which may be difficult to ascertain.  Accordingly, each party will have the right to seek an immediate injunction enjoining any breach of this Agreement, without the posting of a bond, as well as, subject to the provisions of this Agreement, the right to pursue any and all other rights and remedies available at law or in equity for such a breach.

11.7         Facsimile Execution.  This Agreement may be executed in facsimile counterparts each of which is hereby agreed to have a legal binding effect of an original signature.  The parties hereto agree to forward the original signatures by overnight mail to the other party upon execution.

 

11.8         Headings.  The headings and subheadings used in this Agreement are only used for convenience of reference, and are not to be considered in construing this Agreement.

11.9         Waiver.  The failure of any party to enforce, at any time, any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision, nor to affect, in any way, the validity of this Agreement or any part thereof or the right of the party thereafter to enforce each and every provision.  Any waiver of a breach under this Agreement shall be in writing and signed by the waiving party and shall not constitute a waiver of any prior, concurrent or subsequent breaches of this Agreement.

11.10       Survival.  Notwithstanding anything to the contrary contained in this Agreement, the provisions of Sections 2.2, 2.4, 3.3, 3.7, 4, 5.2, 6, 7.3, 8, 9 and 11 shall survive the termination or expiration of this Agreement.

11.11       Severability. The provisions of this Agreement are severable.  If any provision of this Agreement shall be found to be invalid or unenforceable in any respect, such provision shall be carried out and enforced only to the extent to which it shall be valid and enforceable, and any such invalidity or unenforceability shall not affect the validity or enforceability of any other provision of this Agreement, all of which shall be fully carried out and enforced as if such invalid or unenforceable provision had not been set forth herein.  In the event a part or provision of the Agreement held invalid or unenforceable or in conflict with the law affecting consideration to either party, the parties agree to negotiate in good faith the amendment of such part or provision in a manner consistent with the intention of the parties as expressed in this Agreement.

11.12       Business Days.  If any payment is required to be made or other action is required to be taken pursuant to this Agreement on a day which is not a business day, then such payment or action shall be made or taken on the next business day.

11.13       Expenses.  All legal and other costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses.

  

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[SIGNATURE PAGE TO FOLLOW]

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed as of the Effective Date by their duly authorized representatives.

	  	
JUBILANT CADISTA PHARMACEUTICALS INC.

	  	  
	  	
By:

	/s/ Kamal Mandan  
	  	
Name: Kamal Mandan

	  	
Title: Chief Financial Officer

	  	  
	  	
JUBILANT LIFE SCIENCES LTD.

	  	  
	  	
By:

	
/s/ Neeraj Agrawal

	  	
Name: Neeraj Agrawal

	  	
Title: CEO Generics

  

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EXHIBIT A

Products, Price and Minimum Order Sizes

	
Product

	  	
Minimum

Order Size

	  	
Batch

Size

	  	
Price per

Unit

	
Lamotrgine Chewable  Tablets 5 mg

 

Lamotrigine Chewable Tablets 25mg

	
  

	
1 batch

 

1 batch

	
  

	
[***]

 

[***]

	
  

	
[***]

 

[***]

Any amendments to this Exhibit A shall be evidenced by the Parties executing below:

	
JUBILANT CADISTA

	  	
JUBILANT LIFE SCIENCES LTD.

	
PHARMACEUTICALS INC.

	  	  
	  	  	  
	
By:

	  	  	
By:

	  
	
Name:

	  	  	
Name:

	  
	
Title:

	  	  	
Title:

	  
	
Date:

	  	  	
Date:

	  

 

 

[***Confidential treatment requested pursuant to a request for confidential treatment filed with the

Securities and Exchange Commission. Omitted portions have been separately filed with the Commission.]

 

  

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EXHIBIT B

Product Specifications

See Attached

 

[***Confidential treatment requested pursuant to a request for confidential treatment filed with the

Securities and Exchange Commission. Omitted portions have been separately filed with the Commission.]

 

  

27

  

 

	
Cadista Pharmaceuticals Inc.

	
Page 1 of 2

FINISHED PRODUCT ANALYSIS REPORT

	

Product:

	LAMOTRIGINE TABLETS (CHEWABLE, DISPERSIBLE), 25 mg	 
	

Product Code: 312

	 	

Test Method: FP-034C

	
Revision No.: 3

	
Supersedes: FP-034B

	
Effective Date: AUG 27 2010

	
Prepared By / Date: [***]

	
Approved By / Date: [***]

	
Approved By / Date: [***]

	
Batch No: 

	
Date Received: 

	
Log No:

	
Test

	
Specification

	
Results

	
LNB

	
Test

By

	
Description

	
[***]

 

 

	  	  	  
	
Identification A

	
[***]

 

 

	  	  	  
	
Identification B

	
[***]

 

 

	  	  	  
	
Loss on Drying

	
[***]

 

 

	  	  	  
	
Disintegration Time

	
[***]

 

 

	  	  	  
	
Dissolution

 

	[***]	
Mean:

 

Range:

 

RSD:

	  	  

 

	
Checked By / Date: ___________________

	
       Approved By / Date:______________

	
FP Specification Form: V 1.3

	
08/10

[***Confidential treatment requested pursuant to a request for confidential treatment filed with the

Securities and Exchange Commission. Omitted portions have been separately filed with the Commission.]

 

  

28

  

 

	
Cadista Pharmaceuticals Inc.

	
Page 2 of 2

FINISHED PRODUCT ANALYSIS REPORT

	

Product:

	LAMOTRIGINE TABLETS (CHEWABLE, DISPERSIBLE), 25 mg	 
	

Product Code: 312

	 	

Test Method: FP-034C

	
Batch No: 

	
Date Received: 

	
Log No:

	
Test

	
Specification

	
Results

	
LNB

	
Test

By

	

Uniformity of Dosage Units

(Content Uniformity)

	
[***]

 

 

	

AV:

Mean:

Range:

	  	  
	

Related Substances

	
[***]

 

 

	  	  	  
	

Assay

	
[***]

 

 

	  	  	  
	

Residual Solvents

	
[***]

 

 

	

Uniformity of

Dispersion

	
[***]

 

 

	  	  	  
	

Friability

	[***]	
 

 

	  	  

 

Remarks:  Approved: ______________ / Not Approved: ______________

 

	
Checked By / Date: ___________________

	
       Approved By / Date:______________

 

Comments (if any): _______________________________________________________________

 

	
FP Specification Form: V 1.3

	
08/10

 

[***Confidential treatment requested pursuant to a request for confidential treatment filed with the

Securities and Exchange Commission. Omitted portions have been separately filed with the Commission.]

 

  

29

  

 

	
Cadista Pharmaceuticals Inc.

	
Page 1 of 2

FINISHED PRODUCT ANALYSIS REPORT

	

Product:

	

LAMOTRIGINE TABLETS (CHEWABLE, DISPERSIBLE), 5 mg

	 
	

Product Code: 311

	 	

Test Method: FP-034C

	
Revision No.: 3

	
Supersedes: FP-034B

	
Effective Date: AUG 27 2010

	
Prepared By / Date: [***]

	
Approved By / Date: [***]

	
Approved By / Date: [***]

	
Batch No: 

	
Date Received: 

	
Log No:

	
Test

	
Specification

	
Results

	
LNB

	
Test

By

	
Description

	
[***]

 

 

	  	  	  
	
Identification A

	
[***]

 

 

	  	  	  
	
Identification B

	
[***]

 

 

	  	  	  
	
Loss on Drying

	
[***]

 

 

	  	  	  
	
Disintegration Time

	
[***]

 

 

	  	  	  
	
Dissolution

 

	[***]	
Mean:

 

Range:

 

RSD:

	  	  

 

	
Checked By / Date: ___________________

	
       Approved By / Date:______________

	
FP Specification Form: V 1.3

	
08/10

[***Confidential treatment requested pursuant to a request for confidential treatment filed with the

Securities and Exchange Commission. Omitted portions have been separately filed with the Commission.]

 

  

30

  

 

	
Cadista Pharmaceuticals Inc.

	
Page 2 of 2

FINISHED PRODUCT ANALYSIS REPORT

	

Product:

	

LAMOTRIGINE TABLETS (CHEWABLE, DISPERSIBLE), 5 mg

	 
	

Product Code: 311

	 	

Test Method: FP-034C

	
Batch No: 

	
Date Received: 

	
Log No:

	
Test

	
Specification

	
Results

	
LNB

	
Test

By

	

Uniformity of Dosage Units

(Content Uniformity)

	
[***]

 

 

	

AV:

Mean:

Range:

	  	  
	

Related Substances

	
[***]

 

 

	  	  	  
	

Assay

	
[***]

 

 

	  	  	  
	

Residual Solvents

	
[***]

 

 

	

Uniformity of

Dispersion

	
[***]

 

 

	  	  	  
	

Friability

	[***]	
 

 

	  	  

 

Remarks:  Approved: ______________ / Not Approved: ______________

 

	
Checked By / Date: ___________________

	
       Approved By / Date:______________

 

Comments (if any): _______________________________________________________________

 

	
FP Specification Form: V 1.3

	
08/10

 

[***Confidential treatment requested pursuant to a request for confidential treatment filed with the

Securities and Exchange Commission. Omitted portions have been separately filed with the Commission.]

 

  

31

  

 

EXHIBIT C

FORM OF AMENDMENT TO ADD PRODUCT

The undersigned hereby agree to amend the Toll Manufacturing Conversion Agreement dated as of May ___, 2011 by adding the following Product and other information  to the table in Exhibit A thereto as of  ________ (the “Amendment Date”)and appending the attached specification in Schedule 1 to Exhibit B.

	
Product

	  	
Minimum

Order Size

	  	
Batch

Size

	  	
Price per

Unit

	  	
  

	  	
  

	  	
  

	  

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed as of the Amendment Date by their duly authorized representatives.

	  	
JUBILANT CADISTA PHARMACEUTICALS INC.

	  	  
	  	
By:

	
 

	  	
Name:

	  	
Title:

	  	  
	  	
JUBILANT LIFE SCIENCES LTD.

	  	  
	  	
By:

	
 

	  	
Name:

	  	
Title:

  

Schedule 1 to Amendment

To Be Attached to Exhibit B

 

[***Confidential treatment requested pursuant to a request for confidential treatment filed with the

Securities and Exchange Commission. Omitted portions have been separately filed with the Commission.]

 

  

32

  

[Specifications]

  

33Unassociated Document

EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of July __, 2011, is by and among American Standard Energy Corp., a Delaware corporation with offices located at 4800 North Scottsdale Road, Suite 1400, Scottsdale, AZ 85251 (the ”Company”), and the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).

RECITALS

A.           The Company and each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

B.           Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) the aggregate number of shares of common stock, $0.001 par value, of the Company (the “Common Stock”) as set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers (which aggregate amount for all Buyers shall be [            ] shares of Common Stock and shall collectively be referred to herein as the “Common Shares”), (ii) a warrant to initially acquire  up to that number of additional shares of Common Stock set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers, in the form attached hereto as Exhibit A (the “Series A Warrants”) (as exercised, collectively, the “Series A Warrant Shares”), and (iii) a warrant to initially acquire up to that number of additional shares of Common Stock set forth opposite such Buyer’s name in column (5) on the Schedule of Buyers, in the form attached hereto as Exhibit B (the “Series B Warrants”) (as exercised, collectively, the “Series B Warrant Shares”). The Series A Warrants and the Series B are collectively referred to herein as the “Warrants.” The Series A Warrant Shares and the Series B Warrant Shares are collectively referred to herein as the “Warrant Shares.”

C.           At the Closing, the parties hereto shall execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit E (the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities (as defined in the Registration Rights Agreement), under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

D.           The Common Shares, the Warrants and the Warrant Shares are collectively referred to herein as the “Securities.”

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each Buyer hereby agree as follows:

 

  

 

  

 

	
1.

	
PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.

(a)           Common Shares and Warrants. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, shall purchase from the Company on the Closing Date (as defined below), such aggregate number of Common Shares as is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers along with (i) Series A Warrants to initially acquire  up to that aggregate number of Series A Warrant Shares as is set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers and (ii) Series B Warrants to initially acquire up to that aggregate number of Series B Warrant Shares as is set forth opposite such Buyer’s name in column (5) on the Schedule of Buyers.

(b)           Closing. The closing (the “Closing”) of the purchase of the Common Shares and the Warrants by the Buyers shall occur at the offices of Anslow & Jaclin, LLP, 195 Route 9 South, Manalapan, NJ 07726. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New York time, on the first (1st) Business Day on which the conditions to the Closing set forth in Sections 6 and 7 below are satisfied or waived (or such later date as is mutually agreed to by the Company and each Buyer). As used herein “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are required by law to remain closed.

(c)           Purchase Price.  The aggregate purchase price for the Common Shares and the Warrants to be purchased by each Buyer (the “Purchase Price”) shall be the amount set forth opposite such Buyer’s name in column (6) on the Schedule of Buyers.

(d)                 Form of Payment. On the Closing Date, (i) each Buyer shall pay its respective Purchase Price (less, in the case of any Buyer, the amounts withheld pursuant to Section 4(g)) to the Company for the Common Shares and the Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions and (ii) the Company shall deliver to each Buyer certificates representing (A) such aggregate number of Common Shares as is set forth opposite such Buyer’s name in column (3) of the Schedule of Buyers, (B) a Series A Warrant pursuant to which such Buyer shall have the right to initially acquire up to such number of Series A Warrant Shares as is set forth opposite such Buyer’s name in column (4) of the Schedule of Buyers and (C) a Series B Warrant pursuant to which such Buyer shall have the right to initially acquire up to such number of Series B Warrant Shares as is set forth opposite such Buyer’s name in column (5) of the Schedule of Buyers, in all cases, duly executed on behalf of the Company and registered in the name of such Buyer or its designee.

	
  

	 

	
2.

	
BUYER’S REPRESENTATIONS AND WARRANTIES.

Each Buyer, severally and not jointly, represents and warrants to the Company with respect to only itself that, as of the date hereof and as of the Closing Date:

 

  

2

  

 

(a)           Organization; Authority. Such Buyer is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents (as defined below) to which it is a party and otherwise to carry out its obligations hereunder and thereunder.

(b)           No Public Sale or Distribution. Such Buyer is (i) acquiring its Common Shares and Warrants, and (ii) upon exercise of its Warrants will acquire the Warrant Shares issuable upon exercise thereof, in each case, for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by making the representations herein, such Buyer does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Such Buyer is acquiring the Securities hereunder in the ordinary course of its business. Such Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities in violation of applicable securities laws.

(c)           Accredited Investor Status.  Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

(d)           Reliance on Exemptions. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.

(e)           Information. Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by such Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

(f)           No Governmental Review.  Such Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

  

3

  

 

(g)           Transfer or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement and Section 4(h) hereof: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company (if requested by the Company) an opinion of counsel to such Buyer, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person (as defined below) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

(h)           Validity; Enforcement. This Agreement and the Registration Rights Agreement  have been duly and validly authorized, executed and delivered on behalf of such Buyer and constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(i)           No Conflicts.  The execution, delivery and performance by such Buyer of this Agreement and the Registration Rights Agreement and the consummation by such Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment  or decree (including federal and state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Buyer to perform its obligations hereunder.

(j)           Residency. Such Buyer is a resident of the jurisdiction specified below its address on the Schedule of Buyers.

(k)           Certain Trading Activities.  Such Buyer has not directly or indirectly, nor has any person acting on behalf of or pursuant to any understanding with such Buyer, engaged in any transactions in the securities of the Company (including, without limitation, Short Sales involving the Company’s securities) since the time that such Buyer was first contacted by the Company or the Placement Agent (as defined herein) regarding the investment in the Company contemplated herein.  “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the 1934 Act (“Regulation SHO”) and all types of direct and indirect stock pledges, forward sales contracts, options, puts, calls, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

 

  

4

  

 

(l)           Residency; Foreign Securities Laws.  Unless such Buyer resides, in the case of individuals, or is headquartered or formed, in the case of entities, in the United States, such Buyer acknowledges that the Company will not issue any Securities in compliance with the laws of any jurisdiction outside of the United States and the Company makes no representation or warranty that any Securities issued outside of the United States have been offered or sold in compliance with the laws of the jurisdiction into which such Shares were issued.  Any Buyer not a resident of or formed in the United States warrants to the Company that no filing is required by the Company with any governmental authority in such Buyer’s jurisdiction in connection with the transactions contemplated hereby.  If such Buyer is domiciled or was formed outside of the United States, such Buyer has satisfied itself as to the full observance of the laws of its jurisdiction in connection with the acquisition of the Securities or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Securities.  If such Buyer is domiciled or was formed outside the United States, such Buyer’s acquisition of and payment for, and its continued ownership of the Securities, will not violate any applicable securities or other laws of his, her or its jurisdiction.

(m)           Acknowledgements Regarding Placement Agents.  Such Buyer acknowledges that the Placement Agent is acting as the exclusive placement agent on a “best efforts” basis for the Securities being offered hereby and will be compensated by the Company for acting in such capacity.  Such Buyer further acknowledges that the Placement Agent and their respective directors, officers, employees, representatives and controlling persons have no responsibility for making any independent investigation of the SEC Documents and make no representation or warranty to the Buyer, express or implied, with respect to the Company or the Securities or the accuracy, completeness or adequacy of the SEC Documents or any other publicly available information, nor shall any of the foregoing persons be liable for any loss or damages of any kind resulting from the use of the information contained therein or otherwise supplied to the Buyer.  In addition, such Buyer acknowledges that it has not relied on information provided by any of such persons but has conducted its own investigation.

	
  

	 

	
3.

	
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

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

(a)           Organization and Qualification. Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company or any of its Subsidiaries to perform any of their respective obligations under any of the Transaction Documents (as defined below). Other than the Persons (as defined below) set forth on Schedule 3(a), the Company has no Subsidiaries. “Subsidiaries” means any Person in which the Company, directly or indirectly, (I) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (II) controls or operates all or any part of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein as a “Subsidiary.”

 

  

5

  

 

(b)           Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof.  The execution and delivery of this Agreement and the other Transaction Documents by the Company, and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Common Shares and the issuance of the Warrants and the reservation for issuance and issuance of the Warrant Shares issuable upon exercise of the Warrants) have been duly authorized by the Company’s board of directors or other governing body and (other than the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, a Form D with the SEC and any other filings as may be required by any state securities agencies) no further filing, consent or authorization is required by the Company, its board of directors or its stockholders or other governing body.  This Agreement has been, and the other Transaction Documents will be prior to the Closing, duly executed and delivered by the Company or its agent, and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law.  “Transaction Documents” means, collectively, this Agreement, the Warrants, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined below) and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time.

(c)           Issuance of Securities.  The Common Shares, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock.  The Warrants are duly authorized and upon issuance in accordance with the terms of the Transaction Documents shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof.  As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than 100% of the maximum number of Warrant Shares issuable upon exercise of the Warrants as of such date (without taking into account any possible adjustments pursuant to the anti-dilution rights attendant thereto or any limitations on the exercise of the Warrants set forth therein).  Upon exercise in accordance with the Warrants, the Warrant Shares, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Subject to the accuracy of the representations and warranties of the Buyers in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.

 

  

6

  

 

(d)           No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Common Shares, the Warrants and Warrant Shares and the reservation for issuance of the Warrant Shares) will not (i) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries, or Bylaws (as defined below) of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of the OTC Bulletin Board (the “Principal Market”) and including all applicable  federal laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to have a Material Adverse Effect.

(e)           Consents.  Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with (other than the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, a Form D with the SEC and any other filings as may be required by any state securities agencies), any court, Governmental Entity (as defined below) or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Transaction Documents, in each case, in accordance with the terms hereof or thereof.  All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the Closing Date, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company or any Subsidiary from obtaining or effecting any of the registration, application or filings contemplated by the Transaction Documents. The Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.

 

  

7

  

 

(f)           Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that to its actual knowledge each Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that no Buyer is (i) an officer or director of the Company or any of its Subsidiaries, (ii) to its actual knowledge, an “affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries or (iii) to its actual knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”)). The Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the Securities. The Company further represents to each Buyer that the Company’s decision to enter into the Transaction Documents to which it is a party has been based solely on the independent evaluation by the Company and its representatives.

(g)           No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by any Buyer or its investment advisor) relating to or arising out of the transactions contemplated hereby. Other than Canaccord Genuity Inc. and Northland Securities, Inc. (collectively, the “Placement Agent”), neither the Company nor any of its Subsidiaries has engaged any placement agent or other agent in connection with the offer or sale of the Securities.

(h)           No Integrated Offering. Assuming the accuracy of the Buyers representations and warranties set forth in Section 2, none of the Company, its Subsidiaries or any of their affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Securities under the 1933 Act, whether through integration with prior offerings or otherwise, or cause this offering of the Securities to require approval of stockholders of the Company under any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated for quotation. None of the Company, its Subsidiaries, their affiliates nor any Person acting on their behalf will take any action or steps that would require registration of the issuance of any of the Securities under the 1933 Act or cause the offering of any of the Securities to be integrated with other offerings.

(i)           Dilutive Effect. The Company understands and acknowledges that the number of Warrant Shares will increase in certain circumstances. The Company further acknowledges that its obligation to issue the Warrant Shares upon exercise of the Warrants in accordance with this Agreement and the Warrants is, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

 

  

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(j)           Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to any Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and any Buyer’s ownership of the Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Subsidiaries.

(k)           SEC Documents; Financial Statements. Since October 1, 2010, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). No other information provided by or on behalf of the Company to any of the Buyers which is not included in the SEC Documents (including, without limitation, information referred to in Section 2(e) of this Agreement) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or were made.

 

  

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(l)           Absence of Certain Changes.  Except as set forth in the SEC Documents, since the date of the Company’s most recent audited financial statements contained in form 10-K, there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any of its Subsidiaries. Since the date of the Company’s most recent audited financial statements contained in a Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, outside of the ordinary course of business or (iii) made any material capital expenditures, individually or in the aggregate. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below). For purposes of this Section 3(l), “Insolvent” means, (I) with respect to the Company and its Subsidiaries, on a consolidated basis, (i) the present fair saleable value of the Company’s and its Subsidiaries’ assets is less than the amount required to pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below), (ii) the Company and its Subsidiaries are unable to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (iii) the Company and its Subsidiaries intend to incur or believe that they will incur debts that would be beyond their ability to pay as such debts mature; and (II) with respect to the Company and each Subsidiary, individually, (i) the present fair saleable value of the Company’s or such Subsidiary’s (as the case may be) assets is less than the amount required to pay its respective total Indebtedness, (ii) the Company or such Subsidiary (as the case may be) is unable to pay its respective debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (iii) the Company or such Subsidiary (as the case may be) intends to incur or believes that it will incur debts that would be beyond its respective ability to pay as such debts mature. Neither the Company nor any of its Subsidiaries has engaged in any business or in any transaction, and is not about to engage in any business or in any transaction, for which the Company’s or such Subsidiary’s remaining assets constitute unreasonably small capital.

(m)           No Undisclosed Events, Liabilities, Developments or Circumstances. No event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced, (ii) would reasonably be expected to have a Material Adverse Effect or (iii) could have a material adverse effect on any Buyer’s investment hereunder.

(n)           Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, Bylaws, any certificate of designation, preferences or rights of any other outstanding series of preferred stock of the Company or any of its Subsidiaries or their organizational charter, certificate of formation or certificate of incorporation or bylaws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. Without limiting the generality of the foregoing, the Company is not in violation of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances that could reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future. Since October 1, 2010, other than as set forth in the SEC Documents, (i) the Common Stock has been listed or designated for quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market. The Company and each of its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

 

  

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(o)           Foreign Corrupt Practices.  Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any director, officer, agent, employee or other Person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

(p)           Sarbanes-Oxley Act. Except as set forth in the SEC Documents, the Company and each Subsidiary is in compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

(q)           Transactions With Affiliates. Other than as disclosed in the SEC Documents, none of the officers, directors or employees of the Company or any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the knowledge of the Company or any of its Subsidiaries, any corporation, partnership, trust or other Person in which any such officer, director, or employee has a substantial interest or is an employee, officer, director, trustee or partner.

 

  

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(r)           Equity Capitalization.  As of the date hereof, the authorized capital stock of the Company consists of (i) 70,000,000 shares of Common Stock, of which, 37,326,447 are issued and outstanding and 10,959,480 shares are reserved for issuance pursuant to securities (other than the Warrants) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii) 1,000,000 shares of preferred stock, none of which are issued and outstanding.  31,577,605 shares of Common Stock are held in treasury.  All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and nonassessable. 22,618,297 shares of the Company’s issued and outstanding Common Stock on the date hereof are as of the date hereof owned by Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on the assumption that only officers, directors and holders of at least 10% of the Company’s issued and outstanding Common Stock are “affiliates” without conceding that any such Persons are “affiliates” for purposes of federal securities laws) of the Company or any of its Subsidiaries. To the Company’s knowledge, except as set forth in the SEC Documents, no Person owns 10% or more of the Company’s issued and outstanding shares of Common Stock (calculated based on the assumption that all Convertible Securities (as defined below), whether or not presently exercisable or convertible, have been fully exercised or converted (as the case may be) taking account of any limitations on exercise or conversion (including “blockers”) contained therein without conceding that such identified Person is a 10% stockholder for purposes of federal securities laws).  Except as disclosed in the SEC Documents: (i) none of the Company’s or any Subsidiary’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company or any Subsidiary; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no financing statements securing obligations in any amounts filed in connection with the Company or any of its Subsidiaries; (v) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except pursuant to the Registration Rights Agreement); (vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; (viii) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) neither the Company nor any of its Subsidiaries have any liabilities or obligations required to be disclosed in the SEC Documents which are not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect. The Company has made available to the Buyers true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto that have not been disclosed in the SEC Documents.

 

  

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(s)           Indebtedness and Other Contracts. Neither the Company nor any of its Subsidiaries, (i) except as disclosed in the SEC Documents, has any outstanding Indebtedness (as defined below), (ii) is a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, (iii) is in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with generally accepted accounting principles) (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, claim, lien, tax, right of first refusal, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; and (z) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any Governmental Entity or any department or agency thereof.

 

  

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(t)           Absence of Litigation.  Except as disclosed in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, Governmental Entity, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s or its Subsidiaries’ officers or directors which is outside of the ordinary course of business or individually or in the aggregate material to the Company or any of its Subsidiaries. Without limitation of the foregoing, there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any of its Subsidiaries or any current or former director or officer of the Company or any of its Subsidiaries. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the 1933 Act or the 1934 Act.

(u)           Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

(v)           Employee Relations.  Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union. The Company believes that its and its Subsidiaries’ relations with their respective employees are good. No executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company or any of its Subsidiaries has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such Subsidiary. To the Company’s knowledge, no executive officer or other key employee of the Company or any of its Subsidiaries is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer or other key employee (as the case may be), to the Company’s knowledge, does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

(w)           Non-Oil and Gas Property.  Each of the Company and its Subsidiaries holds good title to all real property, leases in real property, or other interests in real property owned or held by the Company or any of its Subsidiaries (other than any property included in the Interests (as defined below)) (the “Other Real Property”) owned by the Company or any of its Subsidiaries, as applicable. The Other Real Property is free and clear of all mortgages, defects, claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests and other encumbrances (collectively “Encumbrances”) and is not subject to any rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature except for (a) liens for current taxes not yet due, and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto.

 

  

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(x)           Non-Oil and Gas Fixtures and Equipment. Each of the Company and its Subsidiaries, as applicable, has good title to, or a valid leasehold interest in, the tangible personal property, equipment, improvements, fixtures, and other personal property and appurtenances that are used by the Company or its Subsidiary in connection with the conduct of its business (the “Company Fixtures and Equipment”), except that the Company Fixtures and Equipment do not include any property included in the Interests.  The Company Fixtures and Equipment are structurally sound, are in good operating condition and repair, are adequate for the uses to which they are being put, are not in need of maintenance or repairs except for ordinary, routine maintenance and repairs and are sufficient for the conduct of the Company’s and/or its Subsidiaries’ businesses, as applicable, in the manner as conducted prior to the Closing.  Each of the Company and its Subsidiaries owns all of its Company Fixtures and Equipment free and clear of all Encumbrances except for (a) liens for current taxes not yet due, and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto.

(y)           Oil and Gas Interests.

	
  

	
(i)

	
For the purpose of this Agreement, the following definitions shall apply:

(1)           “Appurtenant Rights” means, with respect to the Properties (as defined below), in each case, insofar as they may relate to the Properties, the Company’s or any of its Subsidiaries’, as applicable, interest in (a) all presently existing and valid unitization and pooling declarations, agreements, and/or orders relating to or affecting the Properties and all rights in the Properties covered by the Units (as defined below) created thereby; (b) all wells, well and leasehold equipment, pipelines, platforms, facilities, improvements, goods and other personal property located on or used in connection with the Properties; (c) all presently existing production sales contracts, operating and other contracts or agreements which relate to the Properties; and (d) all permits, licenses, easements, rights-of-way, rights of use, and similar agreements pertaining to the Properties.

(2)           “Basic Documents” means all of the following documents and instruments, including those that are recorded and unrecorded, with respect to the Company or any of its Subsidiaries:

a.           All material contracts and agreements comprising any part of, or relating or pertaining to, the Interests, including, without limitation, farm-in agreements, farm-out agreements, joint operating agreements, Unit agreements and contracts by which the Interests were acquired;

 

  

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b.           All agreements or arrangements for the sale, gathering, transportation, compression, treating, processing or other marketing of a material volume of production from the Interests (including calls on, or other rights to purchase, production, whether or not the same are currently being exercised), comprising any part of or otherwise relating or pertaining to the Interests; and

c.           All documents and instruments evidencing the Interests.

(3)           “Consent” means any consents, approvals, orders, authorizations, notifications, notices, estoppel certificates, releases, registrations, ratifications, declarations, filings, waivers, exemptions or variances.

(4)           “Good and Defensible Title” means, as to the Interest in question, (i) title to such Interest by virtue of which the Company or any of its Subsidiaries, as applicable, can successfully defend against a claim to the contrary made by a third party, based upon industry standards for exploration and production companies in the acquisition of oil and gas properties, and in the exercise of reasonable judgment and in good faith; and, (ii) in the case of the Wells (as defined below) , title that entitles the Company or such Subsidiary, as applicable, to receive not less than the Net Revenue Interest (as defined below) for each of the Wells and obligates the Company or such Subsidiary, as applicable, to bear not more than the Working Interest for each of the Wells  (unless there is a corresponding increase in the Net Revenue Interest  for a respective Well); and (iii) such Interest is not subject to any Encumbrances, with the exception of any bona-fide debt facility for the benefit of the Company.

(5)           “Governmental Authorizations” means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Entity or pursuant to any Legal Requirement.

(6)           “Governmental Entity” means any:

a.           nation, state, county, city, town, village, district, or other political jurisdiction of any nature;

b.           federal, state, local, municipal, foreign, or other government;

c.           governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal);

d.           multi-national organization or body; or

 

  

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e.           body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

(7)           “Interests” means the Properties and the Appurtenant Rights of the Company and its Subsidiaries.

(8)           “Legal Requirement” means any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty.

(9)            “Net Revenue Interest” means a share, expressed as a decimal, of the oil, gas and other minerals (or the proceeds of sale thereof) produced and saved from or otherwise attributable to an Interest and the zones, horizons and reservoirs produced therefrom, after the deduction of all royalties, overriding royalties and other burdens on production.

(10)           “Over-produced” means to have taken more production from an Interest (or the Units in which the Interest participates) or any product thereof, than the ownership of the Company or any of its Subsidiaries and the Company’s or any of its Subsidiaries’ predecessors in the Interest would entitle the Company or any of its Subsidiaries and/or the Company’s or any of its Subsidiaries’ predecessors (absent any balancing agreement or arrangement) to receive.

(11)           “Preferential Right” means any preferential right or option to purchase or otherwise to acquire an Interest or any interest therein, held by another party to a Basic Document, which arises as a result of the transactions contemplated by this Agreement.

(12)           “Properties” means all of the Company’s and its Subsidiaries’ rights, titles and interests in and to the following oil and gas and/or mineral properties:

a.           All oil, gas and/or mineral patented claims, unpatented claims, rights and/or leases and other mineral interests, including, without limitation, all of the Company’s operating rights, record title interests, working interests, and overriding royalty interests, without depth or other restrictions or exclusions;

b.           All Wells of the Company and its Subsidiaries;

c.           All surface leases, rights-of-way, easements, servitudes and other rights-of-use (whether surface, subsurface or subsea); and

d.           All licenses and servitudes.

 

  

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(13)           “Routine Governmental Approvals” means Governmental Authorizations required to be obtained from any Governmental Entity that are customarily obtained after consummation of a transaction.

(14)           “Under-produced” means to have taken less production from an Interest (or the Units in which the Interest participates) or any product thereof, than the ownership of the Company or any of its Subsidiaries and the Company’s or any of its Subsidiaries’ predecessors in the Interest would entitle the Company or any of its Subsidiaries and/or the Company’s or any of its Subsidiaries’ predecessors (absent any balancing agreement or arrangement) to receive.

(15)           “Units” means oil, gas and other mineral production, proration, or other types of units, and any ownership interests therein.

(16)           “Well” or “Wells” means all of the Company’s and any of its Subsidiaries’ oil, gas and condensate wells, (whether producing, not producing or abandoned or temporarily abandoned).

(17)           “Working Interest” means a share, expressed as a decimal, of the costs of exploring, drilling, developing and operating an Interest and producing oil, gas and other minerals from the zones, horizons and reservoirs therein and thereunder.

(ii)            Except for Interests acquired within the 180 days prior to the date of this Agreement or as disclosed in Schedule 3(y), the Company holds Good and Defensible Title to the Interests.

(iii)            Except as disclosed in Schedule 3(y), the Basic Documents are in full force and effect and constitute valid and binding obligations of the parties thereto.

(iv)            Except as disclosed in Schedule 3(y), neither the Company nor any of its Subsidiaries is in material breach or default (and no situation exists which with the passing of time or giving of notice would give rise to such a breach or default) of its obligations under any Basic Document, and no breach or default by any other party to any Basic Document (or situation which with the passage of time or giving of notice would give rise to such a breach or default) exists, to the extent such breach or default (whether by the Company, any Subsidiary or another party to any Basic Document) could adversely affect any of the Interests.

(v)            All payments (including, without limitation, all delay rentals, royalties, excess royalties, minimum royalties, overriding royalty interests, shut in royalties and valid calls for payment or prepayment under operating agreements) owing under the Basic Documents have been and are being made timely and properly, and before the same became delinquent (by the Company or the applicable Subsidiary where the non payment of same by another party to any Basic Document could adversely affect any of the Interests) have been and are being made by such other party in all material respects.

 

  

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(vi)            All conditions necessary to maintain the Basic Documents in force have been duly performed.

(vii)            No non-consent operations exist with respect to any of the Interests that have resulted or will result in a temporary or permanent increase or decrease in either the Company’s or any of its Subsidiaries’ Net Revenue Interest or Working Interest in such Interest.

(viii)            To the Company’s knowledge, except as disclosed in Schedule 3(nn), no delinquent unpaid bills or past due charges exist for any labor and materials incurred by or on behalf of the Company or any of its Subsidiaries’ related to the exploration, development or operation of any of the Interests.

(ix)            Except as may be provided for by a Basic Document, neither the Company nor any of its Subsidiaries nor any of the Interests is subject to (i) any area of mutual interest agreements, (ii) any farm out or farm in agreement under which any party thereto is entitled to receive assignments of any Interest or any interest therein not yet made, or could earn additional assignments of any Interest or any interest therein after the date hereof, (iii) any tax partnership or (iv) any agreement, contract or commitment relating to the disposition or acquisition of the assets of, or any interest in, any other Person.

(x)            All severance, production, ad valorem and other similar taxes based on or measured by ownership or operation of, or production from, the Interests have been, and are being, paid (properly and timely, and before the same become delinquent) by the Company or the applicable Subsidiary in all respects.

(xi)            (i) The ownership and operation of the Interests has, to the extent that non conformance could adversely affect any of the Interests, been conducted in conformity with all applicable material Legal Requirements of all Governmental Entities having jurisdiction over any of the Interests, the Company or any of its Subsidiaries, and (ii) neither the Company nor any of its Subsidiaries has received any notice of noncompliance with regard to any material Legal Requirement of any Governmental Entity having jurisdiction over any of the Interests, the Company or any of its Subsidiaries.

(xii)            There are no Preferential Rights or Consents, other than Routine Governmental Approvals that affect any of the Interests and that will be triggered by the transactions contemplated by the Transaction Documents.

(xiii)            There exist no agreements or other arrangements under which the Company or any of its Subsidiaries undertakes to perform gathering, transportation, processing or other marketing services for any other party for a fee or other consideration that is now, or may hereafter be, unrepresentative of commercial rates being received by other parties in comparable, arm’s length transactions.

(xiv)            Except as disclosed in Schedule 3(y), there are no known Wells located on any of the Interests that (i) the Company or any of its Subsidiaries is currently obligated by law or contract to currently plug and abandon or to cease development or exploration, (ii) the Company or any of its Subsidiaries will be obligated by law or contract to plug and abandon with the lapse of time or notice or both because the Well is not currently capable of producing severed crude oil, natural gas, casing head gas, drip gasoline, natural gasoline, petroleum, natural gas liquids, condensate, products, liquids, other hydrocarbons or other minerals or materials in paying quantities or otherwise currently being used in normal operations, (iii) are subject to exceptions to a requirement to plug and abandon issued by a Governmental Entity, or (iv) to the Company’s knowledge, have been plugged and abandoned, but have not been plugged in accordance in all material respects with all applicable requirements of any Governmental Entity.

 

  

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(xv)            Except as disclosed in Schedule 3(y), no suit, action or proceeding (including, without limitation, tax or environmental demands proceedings) is pending or threatened, which might result in material impairment or loss of title to any of the Interests or the material value thereof.

(xvi)            All proceeds from the sale of hydrocarbons produced from the Company’s or the applicable Subsidiaries’ proportionate share of the Interests are currently being paid to the Company or such Subsidiary in all material respects, and no portion of such proceeds is currently being held in suspense by any purchaser thereof or any other party by whom proceeds are paid except for immaterial amounts.

(z)           Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted and as presently proposed to be conducted.  None of the Company’s or its Subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected to expire, terminate or be abandoned, within three years from the date of this Agreement.  The Company has no knowledge of any infringement by the Company or any of its Subsidiaries of Intellectual Property Rights of others.  There is no claim, action or proceeding being made or brought, or to the knowledge of the Company or any of its Subsidiaries, being threatened, against the Company or any of its Subsidiaries regarding their Intellectual Property Rights.  The Company is not aware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.

(aa)           Environmental Laws.

The Company and its Subsidiaries (A) are in compliance with all Environmental Laws (as defined below), (B) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (A), (B) and (C), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.  The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

  

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No Hazardous Materials:

have been disposed of or otherwise released from any Interest of the Company or any of its Subsidiaries in violation of any Environmental Laws; or

are present on, over, beneath, in or upon an Interest or any portion thereof in quantities that would constitute a violation of any Environmental Laws.  No prior use by the Company or any of its Subsidiaries of any Interest has occurred that violates any Environmental Laws, which violation would have a material adverse effect on the Business.

Neither the Company nor any of its Subsidiaries knows of any other person who or entity which has stored, treated, recycled, disposed of or otherwise located on any Interest any Hazardous Materials, including, without limitation, such substances as asbestos and polychlorinated biphenyls.

(iv)           To the Company’s knowledge, none of the Interests are on any federal or state "Superfund" list or Liability Information System ("CERCLIS") list or any state environmental agency list of sites under consideration for CERCLIS, nor subject to any environmental related liens.

(bb)           Subsidiary Rights.  The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the Company or such Subsidiary.

(cc)           Tax Status.  The Company and each of its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply, except in each case where the failure to file, pay or set aside would not have a Material Adverse Effect. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim.  The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

 

  

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(dd)           Internal Accounting and Disclosure Controls.  Except as set forth in the SEC Documents, the Company and each of its Subsidiaries maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. Except as disclosed in the SEC Documents, the Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. Except as disclosed in the SEC Documents, neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant or other Person relating to any potential material weakness or significant deficiency in any part of the internal controls over financial reporting of the Company or any of its Subsidiaries.

(ee)           Off Balance Sheet Arrangements.  There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in the SEC Documents and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.

(ff)           Investment Company Status.  The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

(gg)           Acknowledgement Regarding Buyers’ Trading Activity.  It is understood and acknowledged by the Company that (i) following the public disclosure of the transactions contemplated by the Transaction Documents, in accordance with the terms thereof, none of the Buyers have been asked by the Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the Company or any of its Subsidiaries, to desist from effecting any transactions in or with respect to (including, without limitation, purchasing or selling, long and/or short) any securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) any Buyer, and counterparties in “derivative” transactions to which any such Buyer is a party, directly or indirectly, presently may have a “short” position in the Common Stock which was established prior to such Buyer’s knowledge of the transactions contemplated by the Transaction Documents; and (iii) each Buyer shall not be deemed to have any affiliation with or control over any arm’s length counterparty in any “derivative” transaction. The Company further understands and acknowledges that following the public disclosure of the transactions contemplated by the Transaction Documents pursuant to the Press Release (as defined below) one or more Buyers may engage in hedging and/or trading activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value and/or number of the Warrant Shares deliverable with respect to the Securities are being determined and (b) such hedging and/or trading activities, if any, can reduce the value of the existing stockholders’ equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement, the Warrants or any other Transaction Document or any of the documents executed in connection herewith or therewith.

 

  

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(hh)           Manipulation of Price.  Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company, no Person acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company or any of its Subsidiaries to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities (other than the Placement Agent), or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company or any of its Subsidiaries.

(ii)           U.S. Real Property Holding Corporation.  Neither the Company nor any of its Subsidiaries is, or has ever been, and so long as any of the Securities are held by any of the Buyers, shall become, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company and each Subsidiary shall so certify upon any Buyer’s request.

(jj)           Registration Eligibility.  The Company is eligible to register the Registrable Securities for resale by the Buyers using Form S-1 promulgated under the 1933 Act.

(kk)           Transfer Taxes.  On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance, sale and transfer of the Securities to be sold to each Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

(ll) Bank Holding Company Act.  Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).  Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any equity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

  

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(mm) Intentionally Omitted.

(nn) Illegal or Unauthorized Payments; Political Contributions.  Neither the Company nor any of its Subsidiaries nor, to the best of the Company’s knowledge (after reasonable inquiry of its officers and directors), any of the officers, directors, employees, agents or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (a) as a kickback or bribe to any Person or (b) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its Subsidiaries.

(oo)                 Money Laundering.  The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

(pp)           Management.  Except as set forth in the SEC Documents, during the past five year period, no current or former officer or director or, to the knowledge of the Company, stockholder of the Company or any of its Subsidiaries has been the subject of:

a petition under bankruptcy laws or any other insolvency or moratorium law or the appointment by a court of a receiver, fiscal agent or similar officer for such Person, or any partnership in which such person was a general partner at or within two years before the filing of such petition or such appointment, or any corporation or business association of which such person was an executive officer at or within two years before the time of the filing of such petition or such appointment;

a conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations);

 

any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining any such person from, or otherwise limiting, the following activities:

 

  

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1.           Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

2.           Engaging in any type of business practice; or

3.           Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of securities laws or commodities laws;

any order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or otherwise limiting for more than 60 days the right of any such person to engage in any activity described in the preceding sub paragraph, or to be associated with persons engaged in any such activity;

a finding by a court of competent jurisdiction in a civil action or by the SEC or other authority to have violated any securities law, regulation or decree and the judgment in such civil action or finding by the SEC or any other authority has not been subsequently reversed, suspended or vacated; or

a finding by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or vacated.

(qq)         No Additional Agreements. The Company does not have any agreement or understanding with any Buyer with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

 

(rr)           Public Utility Holding Act.  None of the Company nor any of its Subsidiaries is a “holding company,” or an “affiliate” of a “holding company,” as such terms are defined in the Public Utility Holding Act of 2005.

(ss)          Federal Power Act.  None of the Company nor any of its Subsidiaries is subject to regulation as a “public utility” under the Federal Power Act, as amended.

 

(tt)           Disclosure.  The Company confirms that neitheer it nor any other Person acting on its behalf has provided any of the Buyers or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information concerning the Company or any of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement and the other Transaction Documents. The Company understands and confirms that each of the Buyers will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Buyers regarding the Company and its Subsidiaries, their businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company, the Placement Agent or the Company’s Subsidiaries is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, prospects, operations (including results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed. The Company acknowledges and agrees that no Buyer makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 2.

 

  

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4.

	
COVENANTS.

(a)           Best Efforts. Each Buyer shall use its best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Section 6 of this Agreement. The Company shall use its best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Section 7 of this Agreement.

 

(b)           Form D and Blue Sky.  The Company shall file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing.  The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date.  Without limiting any other obligation of the Company under this Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Securities required under all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall comply with all applicable federal, state and local laws, statutes, rules, regulations and the like relating to the offering and sale of the Securities to the Buyers.

 

(c)           Reporting Status. Until the date on which the Buyers shall have sold all of the Registrable Securities (the “Reporting Period”), the Company shall use its reasonable best efforts to timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would no longer require or otherwise permit such termination.

 

(d)           Use of Proceeds. The Company will use the proceeds from the sale of the Securities for general corporate purposes, but not, directly or indirectly, for (i) the satisfaction of any Indebtedness of the Company or any of its Subsidiaries, (ii) the redemption or repurchase of any securities of the Company or any of its Subsidiaries (iii) the settlement of any outstanding litigation.

 

  

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(e)           Financial Information. The Company agrees to send the following to each Investor (as defined in the Registration Rights Agreement) during the Reporting Period (i) unless the following are filed with or furnished to the SEC through EDGAR and are available to the public through the EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim reports or any consolidated balance sheets, income statements, stockholders’ equity statements and/or cash flow statements for any period other than annual that are made publicly available, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) copies of any notices and other information made available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof to the stockholders.

 

(f)           Listing.  The Company shall promptly secure the listing or designation for quotation (as the case may be) of all of the Registrable Securities upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) and shall maintain such listing or designation for quotation (as the case may be) of all Registrable Securities from time to time issuable under the terms of the Transaction Documents on such national securities exchange or automated quotation system. The Company shall maintain the Common Stock’s listing or authorization for quotation (as the case may be) on the Principal Market, The New York Stock Exchange, the NYSE Amex, the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market (each, an “Eligible Market”). Neither the Company nor any of its Subsidiaries shall take any action which could be reasonably expected to result in the delisting or suspension of the Common Stock on an Eligible Market.

 

(g)           Fees.  The Company shall reimburse Greenberg Traurig, LLP (counsel to a Buyer, but not any other Buyer) for all reasonable, documented costs and expenses incurred by it in connection with preparing and delivering the Transaction Documents up to an amount not exceeding $20,000, which amount may be withheld by a Buyer (at the request of Greenberg Traurig, LLP) from its Purchase Price at the Closing or paid by the Company upon termination of this Agreement on demand by Greenberg Traurig, LLP.  The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, transfer agent fees, DTC (as defined below) fees or broker’s commissions (other than for Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby (including, without limitation, any fees payable to the Placement Agent, who is the Company’s sole placement agent in connection with the transactions contemplated by this Agreement). The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyers.

 

(h)           Pledge of Securities. Notwithstanding anything to the contrary contained in Section 2(g), the Company acknowledges and agrees that the Securities may be pledged by a Buyer in connection with a bona fide margin agreement or other bona fide loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder except as may otherwise be required under applicable securities laws, and no Buyer effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by a Buyer.

 

  

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(i)           Disclosure of Transactions and Other Material Information. The Company shall, on or before 8:30 a.m., New York time, on the first (1st) Business Day after the date of this Agreement, issue a press release (the “Press Release”) reasonably acceptable to the Buyers disclosing all the material terms of the transactions contemplated by the Transaction Documents. On or before 8:30 a.m., New York time, on the first (1st) Business Day after the date of this Agreement, the Company shall file a Current Report on Form 8-K describing all the material terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and attaching all the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the form of the Warrants and the form of the Registration Rights Agreement) (including all attachments, the “8-K Filing”). From and after the filing of the 8-K Filing, the Company shall have disclosed all material, non-public information (if any) provided to any of the Buyers by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. The Company shall not, and the Company shall cause each of its Subsidiaries and each of its and their respective officers, directors, employees and agents not to, provide any Buyer with any material, non-public information regarding the Company or any of its Subsidiaries from and after the issuance of the Press Release without the express prior written consent of such Buyer. In the event of a breach of any of the foregoing covenants, including, without limitation, Section 4(o) of this Agreement, or any of the covenants or agreements contained in any other Transaction Document, by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees and agents (as determined in the reasonable good faith judgment of such Buyer), in addition to any other remedy provided herein or in the Transaction Documents, such Buyer shall notify the Company in writing of the need to make a public disclosure and, no earlier than one business day after such notice, such Buyer shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such breach or such material, non-public information, as applicable, without the prior approval by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees or agents.  No Buyer shall have any liability to the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees, stockholders or agents, for any such disclosure. Subject to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) each Buyer shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of the applicable Buyer, the Company shall not (and shall cause each of its Subsidiaries and affiliates to not) disclose the name of such Buyer in any filing, announcement, release or otherwise, except as otherwise required by any law, rule or regulation applicable to the Company.

 

  

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(j)           Intentionally Omitted.

 

(k)          Intentionally Omitted.

 

(l)           Reservation of Shares.  So long as any Warrants remain outstanding, the Company shall take reasonable best efforts to at all times have authorized, and reserved for the purpose of issuance, no less than 100% of the maximum number of shares of Common Stock issuable upon exercise of all the Warrants as of the date hereof (without regard to any limitations on the exercise of the Warrants set forth therein), less the number of Warrant Shares represented by any such Warrants that have been exercised.

 

(m)           Conduct of Business.  The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or regulation of any Governmental Entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.

(n)           Variable Rate Transaction.  Until none of the Warrants are outstanding, the Company and each Subsidiary shall be prohibited from effecting or entering into an agreement to effect any Subsequent Placement involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company or any Subsidiary (i) issues or sells any Convertible Securities either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of, or quotations for the shares of Common Stock at any time after the initial issuance of such Convertible Securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such Convertible Securities or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock, other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into any agreement (including, without limitation, an equity line of credit) whereby the Company or any Subsidiary may sell securities at a future determined price (other than standard and customary “preemptive” or “participation” rights). Each Buyer shall be entitled to obtain injunctive relief against the Company and its Subsidiaries to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

(o)           Participation Right.  From the date hereof through the one (1) year anniversary of the Closing Date, neither the Company nor any of its Subsidiaries shall, directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with this Section Error! Reference source not found.. The Company acknowledges and agrees that the right set forth in this Section Error! Reference source not found. is a right granted by the Company, separately, to each Buyer.

 

  

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At least five (5) Trading Days prior to any proposed or intended Subsequent Placement, the Company shall deliver to each Buyer a written notice of its proposal or intention to effect a Subsequent Placement (each such notice, a “Pre-Notice”), which Pre-Notice shall not contain any information (including, without limitation, material, non-public information) other than: (i) a statement that the Company proposes or intends to effect a Subsequent Placement, (ii) a statement that the statement in clause (i) above does not constitute material, non-public information and (iii) a statement informing such Buyer that it is entitled to receive an Offer Notice (as defined below) with respect to such Subsequent Placement upon its written request. Upon the written request of a Buyer within three (3) Trading Days after the Company’s delivery to such Buyer of such Pre-Notice, and only upon a written request by such Buyer, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver to such Buyer an irrevocable written notice (the “Offer Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”) of the securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the Persons (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Buyer in accordance with the terms of the Offer all of the Offered Securities, provided that the number of Offered Securities which such Buyer shall have the right to subscribe for under this Section Error! Reference source not found. shall be (a) based on such Buyer’s pro rata portion of the aggregate number of Common Shares purchased hereunder by all Buyers (the “Basic Amount”), and (b) with respect to each Buyer that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase or acquire should the other Buyers subscribe for less than their Basic Amounts (the “Undersubscription Amount”).

To accept an Offer, in whole or in part, such Buyer must deliver a written notice to the Company prior to the end of the fifth (5th) Business Day after such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion of such Buyer’s Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Buyer elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all Buyers are less than the total of all of the Basic Amounts, then such Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), such Buyer who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent it deems reasonably necessary. Notwithstanding the foregoing, if the Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to each Buyer a new Offer Notice and the Offer Period shall expire on the fifth (5th) Business Day after such Buyer’s receipt of such new Offer Notice.

 

  

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The Company shall have five (5) Business Days from the expiration of the Offer Period above (i) to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by a Buyer (the “Refused Securities”) pursuant to a definitive agreement(s) (the “Subsequent Placement Agreement”), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable to the Company than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent Placement Agreement, and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y) the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.

In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section Error! Reference source not found.(iii) above), then such Buyer may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that such Buyer elected to purchase pursuant to Section Error! Reference source not found.(ii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Buyers pursuant to this Section Error! Reference source not found. prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Buyers in accordance with Section Error! Reference source not found.(i) above.

Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, such Buyer shall acquire from the Company, and the Company shall issue to such Buyer, the number or amount of Offered Securities specified in its Notice of Acceptance. The purchase by such Buyer of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and such Buyer of a separate purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to such Buyer and its counsel.

Any Offered Securities not acquired by a Buyer or other Persons in accordance with this Section Error! Reference source not found. may not be issued, sold or exchanged until they are again offered to such Buyer under the procedures specified in this Agreement.

 

  

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The Company and each Buyer agree that if any Buyer elects to participate in the Offer, neither the Subsequent Placement Agreement with respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement Documents”) shall include any term or provision whereby such Buyer shall be required to agree to any restrictions on trading as to any securities of the Company or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, any agreement previously entered into with the Company or any instrument received from the Company.

Notwithstanding anything to the contrary in this Section Error! Reference source not found. and unless otherwise agreed to by such Buyer, the Company shall either confirm in writing to such Buyer that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose its intention to issue the Offered Securities, in either case, in such a manner such that such Buyer will not be in possession of any material, non-public information, by the fifth (5th) Business Day following delivery of the Offer Notice. If by such fifth (5th) Business Day, no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received by such Buyer, such transaction shall be deemed to have been abandoned and such Buyer shall not be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries. Should the Company decide to pursue such transaction with respect to the Offered Securities, the Company shall provide such Buyer with another Offer Notice and such Buyer will again have the right of participation set forth in this Section Error! Reference source not found.. The Company shall not be permitted to deliver more than one Offer Notice to such Buyer in any sixty (60) day period, except as expressly contemplated by the last sentence of Section Error! Reference source not found.(ii).

The restrictions contained in this Section Error! Reference source not found. shall not apply in connection with the issuance of any Excluded Securities (as defined in the Series A Warrant).  The Company shall not circumvent the provisions of this Section Error! Reference source not found. by providing terms or conditions to one Buyer that are not provided to all.

For the purposes of this Section Error! Reference source not found. the following definitions shall apply:

(1)           “Subsequent Placement” means any issuance, offer, sale, grant, disposition (or the announcement of any issuance, offer, sale, grant, disposition) by the Company, directly or indirectly, of any equity security or any equity-linked or related security (including, without limitation, any “equity security” (as that term is defined under Rule 405 promulgated under the 1933 Act), any Convertible Securities (as defined below), any preferred stock or any purchase rights)

(2)           “Convertible Securities” means any capital stock or other security of the Company or any of its Subsidiaries that is at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock) or any of its Subsidiaries.

 

  

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(p)           Dilutive Issuances.  For so long as any Warrants remain outstanding, the Company shall not, in any manner, enter into or affect any Dilutive Issuance (as defined in the Warrants) if the effect of such Dilutive Issuance is to cause the Company to be required to issue upon exercise of any Warrant, any shares of Common Stock in excess of that number of shares of Common Stock which the Company may issue upon exercise of the Warrants without breaching the Company’s obligations under the rules or regulations of the Principal Market.

(r)           Passive Foreign Investment Company.  The Company shall conduct its business in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

(s)           Restriction on Redemption and Cash Dividends.  So long as any Warrants are outstanding, the Company shall not, directly or indirectly, redeem, or declare or pay any cash dividend or distribution on, any securities of the Company without the prior express written consent of the Required Buyers.

(t)           Corporate Existence.  So long as any Buyer owns any Warrants, the Company shall not be party to any Fundamental Transaction (as defined in the Warrants) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Warrants.

(u)           Stock Splits.  Until the Warrants and all warrants issued pursuant to the terms thereof are no longer outstanding, the Company shall not effect any stock combination, reverse stock split or other similar transaction (or make any public announcement or disclosure with respect to any of the foregoing) without the prior written consent of the Required Buyers (as defined below) such consent not to be unreasonably withheld;  provided, however, that such consent shall not be required if the Board of Directors of the Company deems a reverse stock split to be necessary in order for the Company to maintain compliance with the continued listing requirements of the Principal Market.

(v)           Closing Documents.  On or prior to fourteen (14) calendar days after the Closing Date, the Company agrees to deliver, or cause to be delivered, to each Buyer and Greenberg Traurig, LLP executed copies of the Transaction Documents, Securities and other document required to be delivered to any party pursuant to Section 7 hereof.

	
  

	 

	
5.

	
REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

(a)           Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Securities), a register for the Warrants in which the Company shall record the name and address of the Person in whose name the Warrants have been issued (including the name and address of each transferee, to the extent it is appropriately notified of transfers) and the number of Warrant Shares issuable upon exercise of the Warrants held by such Person. The Company shall keep the register open and available at all times during normal business hours for inspection of any Buyer or its legal representatives so long as Buyer continues to hold any Warrants.

 

  

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(b)           Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent in a form acceptable to each of the Buyers (the “Irrevocable Transfer Agent Instructions”) to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of each Buyer or its respective nominee(s), for the Warrant Shares in such amounts as specified from time to time by each Buyer to the Company upon the exercise of the Warrants (as the case may be). The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(g) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the Securities in accordance with Section 2(g), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144 (assuming the transferor is not an affiliate of the Company), the transfer agent shall issue such shares to such Buyer, assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to seek an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent promptly following each Effective Date (as defined in the Registration Rights Agreement). Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.

(c)           Legends. Each Buyer understands that the Securities have been issued (or will be issued in the case of the Warrant Shares) pursuant to an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

  

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[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

	
  

	 

(d)         Removal of Legends. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c) above or any other legend (i) while a registration statement (including a Registration Statement) covering the resale of such Securities is effective under the 1933 Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), (iii) if such Securities are eligible to be sold, assigned or transferred under Rule 144 (provided that a Buyer provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that such Buyer provides the Company with an opinion of counsel to such Buyer, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than two (2) Trading Days following the delivery by a Buyer to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from such Buyer as may be required above in this Section 5(d), as directed by such Buyer, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and such Securities are Common Shares or Warrant Shares, credit the aggregate number of shares of Common Stock to which such Buyer shall be entitled to such Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to such Buyer, a certificate representing such Securities that is free from all restrictive and other legends, registered in the name of such Buyer or its designee (the date by which such credit is so required to be made to the balance account of such Buyer’s or such Buyer’s nominee with DTC or such certificate is required to be delivered to such Buyer pursuant to the foregoing is referred to herein as the “Required Delivery Date”). The Company shall be responsible for any transfer agent fees or DTC fees with respect to any issuance of Securities or the removal of any legends with respect to any Securities in accordance herewith.

 

  

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(e)           Buy-In. If the Company fails to so properly deliver such unlegended certificates or so properly credit the balance account of such Buyer’s or such Buyer’s nominee with DTC by the Required Delivery Date, and if on or after the Required Delivery Date such Buyer purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Buyer of shares of Common Stock that such Buyer anticipated receiving from the Company without any restrictive legend, then, in addition to all other remedies available to such Buyer, the Company shall, within three (3) Trading Days after such Buyer’s request and in such Buyer’s sole discretion, either (i) pay cash to such Buyer in an amount equal to such Buyer’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate or credit such Buyer’s balance account shall terminate and such shares shall be cancelled, or (ii) promptly honor its obligation to deliver to such Buyer a certificate or certificates or credit such Buyer’s DTC account representing such number of shares of Common Stock that would have been issued if the Company timely complied with its obligations hereunder and pay cash to such Buyer in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Shares or Warrant Shares (as the case may be) that the Company was required to deliver to such Buyer by the Required Delivery Date times (B) the Closing Sale Price (as defined in the Warrants) of the Common Stock on the Trading Day immediately preceding the Required Delivery Date.

 

	
6.

	
CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

(a)           The obligation of the Company hereunder to issue and sell the Common Shares and the related Warrants to each Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof:

(i)           Such Buyer shall have executed each of the other Transaction Documents to which it is a party and delivered the same to the Company.

(ii)           Such Buyer and each other Buyer shall have delivered to the Company the Purchase Price (less, in the case of any Buyer, the amounts withheld pursuant to Section 4(g)) for the Common Shares and the related Warrants being purchased by such Buyer at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.

(iii)           The representations and warranties of such Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date), and such Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to the Closing Date.

 

  

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7.

	
CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

(a)           The obligation of each Buyer hereunder to purchase its Common Shares and its related Warrants at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

(i)           The Company and each Subsidiary (as the case may be) shall have duly executed and delivered to such Buyer each of the Transaction Documents to which it is a party and the Company shall have duly executed and delivered to such Buyer the Common Shares in such aggregate number of Common Shares as is set forth across from such Buyer’s name in column (3) of the Schedule of Buyers and the related Series A Warrants and Series B Warrants (initially for such aggregate number of shares of Warrant Shares as is set forth across from such Buyer’s name in columns (4) and (5) of the Schedule of Buyers, respectively) being purchased by such Buyer at the Closing pursuant to this Agreement.

(ii)           Such Buyer shall have received the opinion of Anslow & Jaclin, LLP, the Company’s counsel, dated as of the Closing Date, in the form acceptable to such Buyer.

(iii)           The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form acceptable to such Buyer, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.

(iv)           The Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company and each of its Subsidiaries in each such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction of formation as of a date within ten (10) days of the Closing Date.

(v)           The Company shall have delivered to such Buyer a certificate evidencing the Company’s and each Subsidiary’s qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which the Company and each Subsidiary conducts business and is required to so qualify, as of a date within ten (10) days of the Closing Date.

(vi)           The Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation as certified by the Delaware Secretary of State within ten (10) days of the Closing Date.

(vii)           Each Subsidiary shall have delivered to such Buyer a certified copy of its certificate of incorporation as certified by the Secretary of State (or comparable office) of such Subsidiary’s jurisdiction of incorporation within ten (10) days of the Closing Date.

 

  

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(viii)           The Company shall have delivered to such Buyer a certificate, in the form acceptable to such Buyer, duly executed by the Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company’s board of directors, in a form reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation of the Company and (iii) the Bylaws of the Company, each as in effect at the Closing.

(ix)           Each and every representation and warranty of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Buyer shall have received a certificate, duly executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the form acceptable to such Buyer.

(x)           The Company shall have delivered to such Buyer a letter from the Company’s transfer agent certifying the number of shares of Common Stock outstanding on the Closing Date immediately prior to the Closing.

(xi)           The Common Stock (I) shall be designated for quotation or listed on the Principal Market and (II) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum maintenance requirements of the Principal Market.

(xii)           The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities, including without limitation, those required by the Principal Market.

(xiii)           No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

(xiv)           Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect.

(xv)           The Company shall have obtained approval of the Principal Market to list or designate for quotation (as the case may be) the Common Shares and the Warrant Shares.

 

  

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(xvi)           Such Buyer shall have received a letter on the letterhead of the Company, duly executed by the Chief Executive Officer of the Company, setting forth the wire instructions of the Company.

(xvii)           The Company and its Subsidiaries shall have delivered to such Buyer such other documents relating to the transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.

	
  

	 

	
8.

	
TERMINATION.

In the event that the Closing shall not have occurred with respect to a Buyer within five (5) days of the date hereof, then such Buyer shall have the right to terminate its obligations under this Agreement with respect to itself at any time on or after the close of business on such date without liability of such Buyer to any other party; provided, however, (i) the right to terminate this Agreement under this Section 8 shall not be available to such Buyer if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of such Buyer’s breach of this Agreement and (ii) the abandonment of the sale and purchase of the Common Shares and the Warrants shall be applicable only to such Buyer providing such written notice, provided further that no such termination shall affect any obligation of the Company under this Agreement to reimburse such Buyer for the expenses described in Section 4(g) above. Nothing contained in this Section 8 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

	
9.

	
MISCELLANEOUS.

(a)           Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

  

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(b)           Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

(c)           Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.”  The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.

(d)           Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

  

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(e)           Entire Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Buyers, the Company, its Subsidiaries, their affiliates and Persons acting on their behalf solely with respect to the matters contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties solely with respect to the matters covered herein and therein; provided, however, nothing contained in this Agreement or any other Transaction Document shall (or shall be deemed to) (i) have any effect on any agreements any Buyer has entered into with the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment made by such Buyer in the Company or (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in any agreement entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries and any Buyer and all such agreements shall continue in full force and effect. Except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and (I) if on or prior to the Closing Date, all the Buyers or (II) if after the Closing Date, the Required Buyers (but all the Buyers with respect to any amendment of Section 4(o), the Schedule of Buyers or Section 9 hereof), and any amendment to any provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable, provided that no such amendment shall be effective to the extent that it (1) applies to less than all of the holders of the Securities then outstanding or (2) imposes any obligation or liability on any Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion).  No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction Documents, all holders of the Shares or all holders of the Warrants (as the case may be).  No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party, provided that after the Closing Date, the Required Buyers may waive any provision of this Agreement (other than Section 4(o) or this Section 9), and any waiver of any provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable, provided that no such waiver shall be effective to the extent that it (1) applies to less than all of the holders of the Securities then outstanding (unless a party gives a waiver as to itself only) or (2) imposes any obligation or liability on any Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion).  The Company has not, directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company, any Subsidiary or otherwise. As a material inducement for each Buyer to enter into this Agreement, the Company expressly acknowledges and agrees that (i) no due diligence or other investigation or inquiry conducted by a Buyer, any of its advisors or any of its representatives shall affect such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document and (ii) unless a provision of this Agreement or any other Transaction Document is expressly preceded by the phrase “except as disclosed in the SEC Documents,” nothing contained in any of the SEC Documents shall affect such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document. Without limiting any other provision of this Agreement, it is expressly understood and agreed that no inquiries by Buyer or any of its affiliates, advisors or representatives nor any other due diligence investigation conducted by Buyer or any of its affiliates, advisors or representatives (including, without limitation, as contemplated by Section 2(e)) shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained herein or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.  “Required Buyers” means (i) prior to the Closing Date, each Buyer entitled to purchase Shares at the Closing and (ii) on or after the Closing Date, holders of a majority of all Registrable Securities (excluding any Registrable Securities held by the Company or any of its Subsidiaries) issued or issuable hereunder or pursuant to the Warrants (or the Buyers, with respect to any waiver or amendment of Section 4(o)).

 

  

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(f)           Notices

. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Company:

American Standard Energy Corp.

4800 North Scottsdale Road

Suite 1400

Scottsdale, AZ 85251

Telephone:  (480) 371-1929

Facsimile:  (480) 990-2732

Attention:  Chief Executive Officer

With a copy (for informational purposes only) to:

Anslow & Jaclin, LLP

195 Route 9 South

Suite 204

Manalapan, NJ 07726

Telephone:  (732) 409-1212

Facsimile:  (732) 577-1188

Attention:  Gregg E. Jaclin, Esq.

If to the Transfer Agent:

Standard Registrar & Transfer Company, Inc,

12528 South 1840 East

Draper, UT 84020

Telephone:  (801) 571-8844

 

  

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If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers,

with a copy (for informational purposes only) to:

Greenberg Traurig, LLP

MetLife Building

200 Park Avenue

New York, NY 10166

Telephone:  (212) 801-9200

Facsimile:  (212) 805-9222

Attention:  Michael A. Adelstein, Esq.

or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

(g)           Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of any of the Securities. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Required Buyers, including, without limitation, by way of a Fundamental Transaction (as defined in the Warrants) (unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Warrants). A Buyer may assign some or all of its rights hereunder in connection with any transfer of any of its Securities without the consent of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.

 

(h)           No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than the Indemnitees referred to in Section 9(k).

 

(i)           Survival. The representations, warranties, agreements and covenants shall survive the Closing. Each Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

 

(j)           Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

  

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(k)           Indemnification.  In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless each Buyer and each holder of any Securities and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company or any Subsidiary in any of the Transaction Documents, (b) any breach of any covenant, agreement or obligation of the Company or any Subsidiary contained in any of the Transaction Documents or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company or any Subsidiary) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of any of the Transaction Documents, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (iii) any disclosure properly made by such Buyer pursuant to Section 4(i) or (iv) the status of such Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 9(k) shall be the same as those set forth in Section 6 of the Registration Rights Agreement.

 

(l)           Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.  No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty.  Each and every reference to share prices, shares of Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for stock splits, stock combinations and other similar transactions that occur with respect to the Common Stock after the date of this Agreement.

 

(m)           Remedies.  Each Buyer and each holder of any Securities shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it or any Subsidiary fails to perform, observe, or discharge any or all of its or such Subsidiary’s (as the case may be) obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.

 

  

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(n)           Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction Document and the Company or any Subsidiary does not timely perform its related obligations within the periods therein provided, then such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company or such Subsidiary (as the case may be), any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights

 

(o)           Payment Set Aside; Currency. To the extent that the Company makes a payment or payments to any Buyer hereunder or pursuant to any of the other Transaction Documents or any of the Buyers enforce or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.

 

(p)           Independent Nature of Buyers’ Obligations and Rights.  The obligations of each Buyer under the Transaction Documents are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any other Buyer under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges that the Buyers do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Buyers are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Buyers are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Transaction Documents. The decision of each Buyer to purchase Securities pursuant to the Transaction Documents has been made by such Buyer independently of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with such Buyer making its investment hereunder and that no other Buyer will be acting as agent of such Buyer in connection with monitoring such Buyer’s investment in the Securities or enforcing its rights under the Transaction Documents. The Company and each Buyer confirms that each Buyer has independently participated with the Company and its Subsidiaries in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose.  The use of a single agreement to effectuate the purchase and sale of the Securities contemplated hereby was solely in the control of the Company, not the action or decision of any Buyer, and was done solely for the convenience of the Company and its Subsidiaries and not because it was required or requested to do so by any Buyer.  It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company, each Subsidiary and a Buyer, solely, and not between the Company, its Subsidiaries and the Buyers collectively and not between and among the Buyers.

 

  

45

  

 

(q)           Judgment Currency.

(i)           If for the purpose of obtaining or enforcing judgment against the Company in connection with this Agreement or any other Transaction Document in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 9(q) referred to as the “Judgment Currency”) an amount due in U.S. Dollars under this Agreement or any other Transaction Document, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately preceding: (1) the date of actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction that will give effect to such conversion being made on such date or (2) the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 9(q)(i) being hereinafter referred to as the “Judgment Conversion Date”).

(ii)           If in the case of any proceeding in the court of any jurisdiction referred to in Section 9(q)(i) above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of U.S. Dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.

(iii)           Any amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Agreement or any other Transaction Document.

[signature pages follow]

 

  

46

  

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.

	 	 
COMPANY:

 

 
AMERICAN STANDARD ENERGY CORP.

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 

 

  

 

  

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.

	 	 
BUYERS:

 

 

 

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 

 

 

  

 

  

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.

	 	 
 

 

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 

 

  

 

  

 

	 
(1)

	 	 
(2)

	 	 	 
(3)

	 	 	 
(4)

	 	 	 
(5)

	 	 	 
(6)

	 	 	 
(7)

	 
	

Buyer

	 	

Address and Facsimile Number

	 	 	

Number of

Common

Shares

	 	 	

Number

of

Series A

Warrant

Shares

	 	 	

Number

of

Series B

Warrant

Shares*

	 	 	

Purchase 

Price **

	 	 	

Legal Representative’s

Address and Facsimile Number

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

* Represents number of shares issuable under Series B Warrants assuming a Market Price, as defined in the Series B Warrants, of $[    ].

** Based on a per share price of $5.75.

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