Document:

ex10_1.htm

    Exhibit
10.1

     

    EMPLOYMENT
AGREEMENT

     

    

    This
Employment Agreement (“Agreement”) is made by and between Cyberonics, Inc., a
Delaware corporation (the “Company”) and[Name]
(“Executive”).

    The
Company desires to maintain Executive’s employment as the Company’s Vice
President,[Title] and to
encourage Executive’s attention and dedication to the Company as a member of the
Company’s executive management, in the best interests of the Company and its
shareholders;

    Executive
desires to accept employment with the Company;

    The
Company and Executive desire to enter into this Agreement to set forth the terms
and conditions on which Executive is employed by the Company from and after the
Effective Date.

    This
Agreement contemplates that Executive is a key employee of the
Company.  As such, the Company will continue to make available to
Executive confidential information and will continue to make a substantial
investment in Executive for the benefit of the Company and its
shareholders.  The Company and Executive recognize that the goodwill
derived therefrom is a valuable asset of the Company.  The Company and
Executive agree that such confidential information and goodwill are entitled to
protection during the term of this Agreement and for a reasonable time
thereafter. Company acknowledges that Executive brings to the Company his
experience and his non-confidential general knowledge of the medical device
industry.

    The
Company and Executive are sophisticated business persons.  Each has
been advised by counsel with respect to this Agreement, including the
post-termination restrictions and acknowledges that these restrictions are
appropriate protection of the Company’s confidential information and goodwill,
and that Executive has entered into this Agreement fully knowing the effect of
such restrictions and voluntarily accepting the restrictions, which the parties
believe to be reasonable in temporal and geographic scope.

    Now,
therefore, for good and valuable consideration, the receipt and sufficiency of
such consideration being hereby acknowledged, and for and in consideration of
the mutual promises, covenants, and obligations contained herein, Company and
Executive agree as follows:

    1.          
Employment.  The
Company shall employ Executive as Vice President,[Title], and
Executive hereby accepts such employment, on the terms and conditions set forth
in this Agreement.

    2.   Term.  Unless
earlier terminated pursuant to Section 9, this Agreement shall be effective as
of June 1, 2009 (the “Effective Date”) and shall terminate at 12:01 a.m. on May
2, 2011, the period during which this Agreement remains in effect being referred
to as the “Employment Period.”

    3.   Duties.  During
the Employment Period, Executive agrees to devote his full energy, attention,
abilities, and productive time to the diligent performance of the duties and
responsibilities ordinarily required of a[Title] of a publicly
traded company and such other duties and services on behalf of the Company,
consistent with his position and customary duties as such, as may from time to
time be assigned to him by the Board or its designated
representative.  Executive agrees and acknowledges that Executive owes
fiduciary duties to the Company and will act accordingly.

    4.   Outside Business
Activities.  During the Employment Period, Executive shall not,
without the prior written consent of the Company, engage in any other business
activity, with or without compensation.  Notwithstanding the
foregoing, Executive shall be permitted to spend a reasonable amount of time on
civic, charitable, and other non-commercial activities, and activities related
to Executive’s investments, provided such activities are consistent in nature
and scope as exist on the Effective Date and do not interfere with his duties
and obligations under this Agreement.

    5.   Base
Salary.  For all services rendered by Executive during the
Employment Period, the Company shall pay Executive an annual base salary of
($___________)
(the “Base Salary”) per year.  This amount shall be payable bi-weekly
in equal installments, in arrears, according to the Company’s customary payroll
practices, less all amounts required to be held by federal, state, or local law,
and all applicable deductions authorized by Executive or required by
law.  The Compensation Committee of the Company’s Board of Directors
(“Compensation Committee”) shall meet at least annually to review Executive’s
Base Salary.  The Base Salary, at the discretion of the Compensation
Committee, may be increased, but may not be decreased during the Employment
Period.

    6.   Annual Bonus
Opportunity.  During the Employment Period, Executive shall be
eligible to earn a bonus payable within a reasonable period following the end of
each of the Company’s fiscal years (or at such other earlier times during the
year as determined by the Compensation Committee) based on the achievement of
certain objectives (the “Bonus Objectives”) to be determined by the Compensation
Committee within the first ninety (90) days of each such fiscal
year.  Executive’s annual bonus (the “Annual Bonus”) for achievement
of all Bonus Objectives at target (the “Target Bonus Amount”) will be fifty
percent (50%) of the Base Salary paid in such fiscal year (or pro rata as to any
portion of the fiscal year), but the actual amount of the Annual Bonus may
exceed 50% of Base Salary or be less than 50% of Base Salary based on
overachievement of the Bonus Objectives, underachievement of the Bonus
Objectives, or the discretion of the Compensation Committee.  If
awarded, the Annual Bonus for a fiscal year shall be paid in the fiscal year
following such fiscal year after the Compensation Committee determination of the
amount of the Annual Bonus, if any, but no later than the 15th day of the third
month of such subsequent fiscal year and shall be subject to all amounts
required to be withheld by federal, state, or local law and all applicable
deductions properly authorized by Executive or required by law.

    7.   Benefits.  Executive
shall be eligible for the following benefits:

    (a)         All
welfare benefit plans generally applicable to employees or senior executives of
the Company, subject to the general eligibility requirements of such
plans.  The Company shall have the right to amend, modify, or
terminate any such plans from time to time at its discretion; provided that,
such action is generally applicable to all employees.

    (b)         Reimbursement
of all actual, reasonable, and customary business expenses incurred during the
Employment Period by Executive in performing services for the Company, including
all reasonable expenses of travel on business; provided that, such expenses are
incurred and accounted for in accordance with policies and procedures
established by the Company.  Executive shall submit to the Company
accounts and records of each such expense within thirty (30) days after the
later of (i) Executive’s incurrence of such expense or (ii) Executive’s receipt
of the invoice for such expense.  If such expense qualifies for
reimbursement, then the Company shall reimburse Executive the expense within
thirty (30) days thereafter.  In no event will such expense be
reimbursed after the close of the calendar year following the calendar year in
which that expense is incurred.  The amount of reimbursement to which
Executive may become entitled in any one calendar year shall not affect the
amount of expenses eligible for reimbursement hereunder in any other calendar
year.  Executive’s right to reimbursement cannot be liquidated or
exchanged for any other benefit or payment.

    (c)          Fringe
benefits and perquisites (including, but not limited to, reasonable vacation
time) in accordance with the plans, practices, programs, and policies of the
Company from time to time in effect and which are commensurate with Executive’s
position.

    8.   Confidential
Information.  During the Employment Period, the Company shall
continue to provide Executive with trade secrets and confidential information,
knowledge, and data relating to the business of the Company or to the business
of other entities with which the Company has a confidential relationship
(including trade secrets, being collectively referred to as “Confidential
Information”).  Executive shall hold in a fiduciary capacity for the
benefit of the Company all Confidential Information obtained by Executive during
Executive’s employment by the Company and which shall not have been or hereafter
become public knowledge (other than by acts by Executive in violation of this
Agreement).  Executive agrees to return all Confidential Information,
including all photocopies, extracts, and summaries thereof, and any such
information stored electronically on tapes, computer disks, or in any other
manner to the Company at any time upon request by the Company and upon the
termination of Executive’s employment for any reason.  Except as may
be required or appropriate in connection with carrying out Executive’s duties
under this Agreement and in furtherance of the Company’s business, Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such Confidential Information to anyone other than the Company and those
designated by the Company or on behalf of the Company. Notwithstanding the
foregoing, Executive may retain, upon termination of employment, information and
documents of a purely personal nature relating to compensation and benefits
accrued during the Employment Period.

    9.   Early
Termination.  Notwithstanding the Employment Period established
in Section 2 or any renewal or extension thereof, Executive’s employment
hereunder and this Agreement may be terminated as follows:

    (a)          Death.  Executive’s
employment hereunder shall terminate upon Executive’s death.

    (b)          Disability.  If,
as a result of Executive’s incapacity due to physical or mental illness,
Executive shall have been absent from the full-time performance of his duties
hereunder for a period of ninety (90) days in the aggregate during any period of
twelve (12) consecutive months, or where Executive shall have been absent from
the full-time performance of his duties hereunder for a period of ninety (90)
consecutive days and it is reasonably expected that Executive will be eligible
for long-term disability benefits under a Company sponsored disability plan, and
no later than thirty (30) days after written notice is given or the end of the
ninety (90) day period, if Executive shall not have returned to the performance
of his duties hereunder on a full-time basis, the Company may terminate
Executive’s employment for disability.

    (c)           Termination by the Company
For Cause.  The Company may terminate Executive’s employment
for Cause.  “Cause” shall mean (i) Executive’s material breach of any
provision of this Agreement, (ii) Executive’s willful conduct which is
demonstrably and materially injurious to the Company’s reputation, financial
condition, or business relationships, (iii) Executive’s willful failure to
comply with a lawful directive of the Company’s Chief Executive Officer (“CEO”),
(iv) Executive’s failure to comply with the Company’s written policies and
procedures, including the Company’s Corporate Code of Business Conduct and
Ethics and its Financial Code of Ethics, (v) Executive’s fraud, dishonesty, or
misappropriation involving the Company’s assets, business, customers, suppliers,
or employees, (vi) Executive’s conviction of, or plea of guilty or nolo
contendere to, a felony; or, (vii) Executive’s continued failure or refusal to
perform satisfactorily, or gross neglect of, Executive’s duties (other than any
such failure or neglect resulting from Executive’s incapacity due to physical or
mental illness).

    No
termination of Executive for Cause other than as set forth in (c)(vi) above
shall be effective unless the Company shall, within ninety (90) days of
sufficient facts known to it to constitute Cause, give written notice to
Executive in reasonable detail of the material facts constituting Cause and the
reasonable steps the Company believes necessary to cure, and thereafter
Executive shall have thirty (30) business days from the date of notice to cure
any such occurrence otherwise constituting Cause; provided that, no such notice
and opportunity to cure is required if the Company has previously given
Executive notice and opportunity to cure the same conduct.

    (d)          Termination by Executive for
Good Reason.  Executive may terminate his employment and this
Agreement for Good Reason.  “Good Reason” shall mean the occurrence,
without Executive’s prior written consent, of any one or more of the
following:  (i) any reduction in Executive’s compensation as set forth
in Section 5 hereof; (ii) an adverse change in Executive’s title, status,
authority, duties, or responsibilities, provided that, changes in Executive’s
title, status, authority, duties, and responsibilities necessitated solely by a
change, following a Change in Control (as defined in Section 12), in the
Company’s status from a publicly traded company to a subsidiary of a publicly
traded company shall not by themselves be considered “adverse” within the
meaning of this subsection; (iii) the failure by the Company to obtain a
satisfactory agreement from any successor of the Company requiring such
successor to assume and agree to perform the Company’s obligations under this
Agreement, as contemplated in Section 17; (iv) the failure by the Company
to comply with any material provision of this Agreement; (v) the Company’s
requiring Executive to relocate to an office more than 35 miles from the
Company’s office to which Executive was assigned on the Effective Date; or (vi)
the amendment, modification, or repeal of any provision of the Company’s
Certificate of Incorporation, as amended, or the Bylaws of the Company as such
documents exist on the Effective Date, if such amendment, modification, or
repeal would adversely affect Executive’s right to indemnification by the
Company; provided that, any action of the CEO to seek information directly from,
or to request that a project be undertaken by, an employee reporting directly or
indirectly to Executive shall not constitute "Good Reason"
hereunder.

    No
resignation for Good Reason shall be effective unless Executive shall, within
ninety (90) days of sufficient facts known to Executive to constitute Good
Reason, give written notice to the CEO setting forth in reasonable detail the
material facts constituting Good Reason and the reasonable steps Executive
believes necessary to cure, and thereafter the Company shall have thirty (30)
business days from the date of such notice to cure any such occurrence otherwise
constituting Good Reason; provided that, no such notice and opportunity to cure
is required if Executive has previously given the Company notice and opportunity
to cure the same conduct.

    (e)           Termination by Executive
other than for Good Reason. Executive may terminate his employment other
than for Good Reason by giving the Company no less than thirty (30) days prior
written notice of Executive’s intent to terminate this Agreement.  As
used in this Section, “other than Good Reason” shall mean for any reason not
constituting Good Reason or for Good Reason but without notice and opportunity
to cure as provided in subsection (d) above.

    (f)           Termination by the Company
without Cause.  The Company may terminate the employment
relationship and this Agreement at any time by giving Executive no less than
thirty (30) days prior written notice of the Company’s intent to terminate this
Agreement or, in addition to any other amounts payable under this Agreement, one
month of Base Salary in lieu of notice.  As used in this Section,
“without Cause” shall mean for any reason not constituting Cause or for Cause
but without notice and opportunity to cure, if required, as provided in
subsection (c) above.

    (g)          In
the event of Executive’s termination, Executive and the Company, including its
directors, officers, employees, representatives, attorneys, and agents shall
refrain from making any public or private statement (including, as to Executive,
any statement with respect to the directors, officers, employees,
representatives, attorneys, and agents of the Company) that is derogatory or may
tend to injure such person in its or their business, public or private
affairs.  The foregoing obligations shall not apply to information
required to be disclosed or requested by any governmental agency, court, or
stock exchange, or any law, rule, or regulation.

    (h)          If,
in connection with Executive’s termination of employment with the Company, the
Company determines to issue a press release, the Company agrees to provide a
copy of the press release to Executive by e-mail or facsimile to review and
comment on in advance of its publication; however, the Company retains sole
discretion as to the content of the press release.

    10.          Compensation Upon
Termination.  In the event Executive’s employment terminates
upon expiration of the Employment Period or as provided under Section 9
hereof, the Company shall pay to Executive or his estate: (i) Executive’s Base
Salary through the date of termination, and (ii) any other amounts due Executive
as of the date of termination, in each case to the extent not previously
paid.  The Company shall also provide additional compensation (the
“Severance Benefits”) as provided below.

    (a)           Death or
Disability.  Upon termination of Executive’s employment
pursuant to Sections 9(a) hereof, (i) the restrictions on all of Executive’s
time-based vesting equity awards, including restricted stock and stock options,
shall lapse, the unvested portion of each such award vesting immediately and
being immediately tradable or exercisable, as the case may be; and (ii)
restrictions on that number of shares of performance-based restricted stock
awards shall lapse as determined by the Compensation Committee of the Company’s
Board of Directors (“Compensation Committee”) in its sole discretion to
represent the extent of progress, if any, toward attainment of the performance
criteria as of the date of Executive’s termination.  Upon termination
of Executive’s employment pursuant to Sections 9(b) hereof, the restrictions on
all of Executive’s stock options shall lapse, the unvested portion of each such
award vesting immediately and being immediately
exercisable.  Thereafter, the Company shall have no further
obligations to Executive or his estate other than as may be required by
law.

    (b)          By the Company for
Cause.  If during the Employment Period the Company terminates
Executive for Cause pursuant to Section 9(c), the Company shall have no
further obligations to Executive other than as may be required by
law.

    (c)           By Executive other than for
Good Reason.  If during the Employment Period Executive
terminates his employment other than for Good Reason pursuant to
Section 9(e), the Company shall have no further obligations to Executive
other than as may be required by law.

    (d)          By the Company without Cause
or by Executive for Good Reason.  Except as otherwise provided
in Section 11, if either the Company terminates Executive’s employment without
Cause, or Executive terminates his employment for Good Reason, then the Company
shall pay and provide to Executive the following benefits:

     

    (i)           a
payment equal to 1.5 times the sum of (A) Base Salary and (B) the average bonus
amount paid Executive for the past two fiscal years (or, if the termination
occurs prior to the second anniversary of the date Executive commences
employment at the Company, sixty percent (60%) of the Target Bonus Amount for
the year of termination).  Subject to the holdback and interest
provisions of  Section 22, such payment shall be made within sixty
(60) days following Executive’s Separation from Service provided that the
Release required under Section 10(e) has become effective during such sixty
(60)-day period following any applicable revocation period;

     

    (ii)           the
restrictions on that number of shares of time-based vesting equity awards,
including restricted stock and stock options, shall immediately lapse as would
otherwise have lapsed if Executive had remained employed with the Company for a
period through the date that is twelve (12) months from the date of
termination;

    
 

    (iii)           the
restrictions on that number of shares of performance-based vesting restricted
stock shall lapse as determined by the Compensation Committee in its sole
discretion to represent the extent of progress, if any, toward attainment of the
performance criteria as of the date of Executive’s termination;

    
 

    (iv)           provided
Executive and/or his eligible dependents timely elects to continue their
healthcare coverage under the Company’s group health plan pursuant to the
Consolidated Omnibus Reconciliation Act (“COBRA”), the Company shall reimburse
Executive for the costs incurred to obtain such continued coverage for himself
and his eligible dependents for a period of twelve months measured from the
termination date.  In order to obtain reimbursement for such
healthcare coverage costs, Executive shall submit appropriate evidence to the
Company of each periodic payment within thirty (30) days after the payment date,
and the Company shall within thirty (30) days after such submission reimburse
Executive for that payment.  During the period such healthcare
coverage remains in effect hereunder, the following provisions shall govern the
arrangement: (a) the amount of coverage costs eligible for reimbursement in any
one calendar year of such coverage shall not affect the amount of coverage costs
eligible for reimbursement in any other calendar year for which
such  reimbursement is to be provided hereunder; (ii) no coverage
costs shall be reimbursed after the close of the calendar year following the
calendar year in which those coverage costs were incurred; and (iii) Executive’s
right to the reimbursement of such coverage costs cannot be liquidated or
exchanged for any other benefit.  To the extent the reimbursed
coverage costs constitute taxable income to Executive, the Company shall report
the reimbursement as taxable W-2 wages and collect the applicable withholding
taxes, and any remaining tax liability shall be Executive’s sole responsibility,
provided that the reimbursed coverage costs shall not be considered as taxable
income to Executive if such treatment is permissible under applicable law;
and

    

    (v)           waiver
of the requirement, if any, to repay relocation benefits as otherwise required
by the Company’s Relocation Policy with such waiver to occur within sixty (60)
days following Executive’s Separation from Service provided that the Release
required under Section 14(f) has become effective during such sixty (60)-day
period following any applicable revocation period.

     

    For
purposes of this Agreement, "Separation from Service" shall mean Executive’s
separation from service as determined in accordance with Section 409A of the
Internal Revenue Code (“Code”) and the applicable standards of the Treasury
Regulations issued thereunder.

    (e)           The
Severance Benefits payable to Executive under subsection (d) shall be in lieu of
any other severance benefits to which Executive may otherwise be entitled upon
his termination of employment under any severance plan, program, policy,
practice, or arrangement of the Company.  Payment of the Severance
Benefits herein is contingent upon Executive’s execution of a full and complete
release substantially in the form set forth in Exhibit A hereto within
twenty-one (21) days (or forty-five (45) days if such longer period is required
under applicable law) after the date of termination and such Release becoming
effective and enforceable in accordance with applicable law after the expiration
of any applicable revocation period.

    11.          Conduct Detrimental to the
Company.  Executive acknowledges and agrees that the Company
and its shareholders need to protect themselves from Conduct Detrimental to the
Company and the provisions of this Section are designed to protect the Company
and its shareholders from Conduct Detrimental to the Company.

    (a)           The
terms of Executive’s equity awards shall provide that if Executive engages in
Conduct Detrimental to the Company (as defined in subsection (c)) during the
Employment Period, Executive shall disgorge and return to the Company, upon
demand, that number of shares of restricted stock or options to purchase shares
of Company stock on which restrictions lapsed after the date on which the
Company establishes, by a preponderance of the evidence, Executive first engaged
in Conduct Detrimental to the Company, less the net effect of any taxes paid by
Executive (taking into account the initial taxes paid and the tax effect of the
disgorgement), or if Executive does not then own that number of shares, the
amount of the cash proceeds received by Executive from his most recent sale of a
like number of the shares, less the net tax effect as stated
above.  Executive understands and agrees that this Section does not
prohibit Executive from competing with the Company or soliciting the Company’s
employees, but requires only a return of equity in the event of such competition
or solicitation. Executive understands and agrees that the return of shares is
in addition to and separate from any other relief available to the Company under
the terms of this Agreement.

    (b)          The
Company shall have no obligation to pay Executive the Severance Benefits
pursuant to Section 10(d), and Executive agrees to repay any portion of such
Severance Benefits previously paid, for any period that the Company establishes,
by a preponderance of the evidence, that Executive engaged in Conduct
Detrimental to the Company.  Executive understands and agrees that
this Section does not prohibit Executive from competing with the Company or
soliciting the Company’s employees, but requires only return of the Severance
Benefit for the period of such competition or solicitation.

    (c)           “Conduct
Detrimental to the Company,” as used in this Section, means:

     

    
      	
               
      

            	
              (i)

            	
              conduct that results
      in Executive’s termination for Cause as defined in Section 9(c) (or
      that would have resulted in termination for Cause if known by the
      Company prior to the termination of Executive’s
      employment);

            

    

     

    
      	
               
      

            	
              (ii)

            	
              Executive
      engages in conduct in violation of Section 8 of this Agreement;
      or

            

    

     

    
      	
               
      

            	
              (iii)

            	
              Executive
      engages in conduct in violation of Section 9 of this
      Agreement.

            

    

     

    12.           Change of
Control.

    (a)           In
the event a Change of Control of the Company occurs during the Employment
Period, the forfeiture restrictions on all shares of the time-based vesting
restricted stock as to which such restrictions remain in place shall lapse
immediately; all unvested stock options shall vest immediately; and if the
Change of Control occurs as provided in Section 12(c) (i), (ii), or (iii), the
forfeiture restrictions on all shares of the performance-based vesting
restricted stock as to which such restrictions remain in place shall lapse
immediately.

    (b)           If,
within one year following a Change of Control, either the Company terminates
Executive’s employment without Cause, or Executive terminates his employment for
Good Reason, then the Company shall pay and provide to Executive the benefits
and rights provided in Section 10(d), except that in lieu of the amount set
forth in Section 10(d)(i), the amount shall equal two times the sum of (A) Base
Salary and (B) the Target Bonus Amount in effect at the time of
termination.

    (c)           For
purposes of this Agreement, a “Change of Control” of the Company shall
mean:

     

    
      	
               
      

            	
              (i)

            	
              the
      acquisition by any “person,” as such term is used in Sections 13(d) and
      14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”), other than the Company, a subsidiary of the Company or a Company
      employee benefit plan, of “beneficial ownership” (as defined in Rule 13d-3
      under the Exchange Act), directly or indirectly, of securities of the
      Company which, together with any securities held by the person, represents
      50% or more of the combined voting power of the Company’s then outstanding
      securities entitled to vote generally in the election of directors;
      or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      consummation of a reorganization, merger, consolidation or other form of
      corporate transaction or series of transactions, in each case, with
      respect to which persons who were the shareholders of the Company
      immediately prior to such reorganization, merger or consolidation or other
      transaction do not, immediately thereafter, own more than 50% of the
      combined voting power entitled to vote generally in the election of
      directors of the reorganized, merged or consolidated company’s then
      outstanding voting securities in substantially the same proportions as
      their ownership immediately prior to such event;
  or

            

    

     

    
      	
               
      

            	
              (iii)

            	
              the
      closing of a sale or disposition by the Company of all or substantially
      all the Company’s assets; or

            

    

     

    
      	
               
      

            	
              (iv)

            	
              a
      change in the composition of the Board, as a result of which less than a
      majority of the directors are Incumbent Directors.  “Incumbent
      Directors” shall mean directors who either (A) are directors of the
      Company as of the Start Date, or (B) are elected, or nominated for
      election, thereafter to the Board with the affirmative votes of at least a
      majority of the Incumbent Directors at the time of such election or
      nomination, but “Incumbent Director” shall not include an individual whose
      election or nomination is in connection with (i) an actual or threatened
      election contest (as such terms are used in Rule 14a-11 of Regulation 14A
      promulgated under the Exchange Act) or an actual or threatened
      solicitation of proxies or consents by or on behalf of a person other than
      the Board or (ii) a plan or agreement to replace a majority of the then
      Incumbent  Directors; or

            

    

     

    
      	
               
      

            	
              (v)

            	
              the
      approval by the Board or the stockholders of the Company of a complete or
      substantially complete liquidation or dissolution of the
      Company.

            

    

     

    13.           Post-Termination
Restrictions.  Executive acknowledges and agrees that the
Company has a substantial and legitimate interest in protecting the Company’s
Confidential Information and goodwill.  Executive and the Company
further acknowledge and agree that the provisions of this Section are reasonably
necessary to protect the Company’s legitimate business interests and are
designed to protect the Company’s Confidential Information and goodwill during
the Employment Period and for a period following the Employment Period (such
period following the Employment Period, the “Restricted Period”).  The
Restricted Period for the Non-Competition Covenant shall be one (1) year from
the date of termination of the Agreement, and the Restricted Period for the
Non-Solicitation Covenant shall be two (2) years from the date of termination of
the Agreement.

    (a)           Non-Competition
Covenant.  Executive shall not engage in, or otherwise directly
or indirectly be employed by or act as a consultant or lender to, or be a
director, officer, employee, principal, agent,  member, owner, or
partner of, or permit his name to be used in connection with the activities of
any other business, organization, or entity which engages, directly or
indirectly, with any “Competitive Business” as defined in subsection (c) during
the Employment Period or the Restricted Period; provided, that it shall not be a
violation of this Section for Executive to become the registered or beneficial
owner of up to one percent (1%) of any class of the capital stock of a
corporation registered under the Securities Exchange Act of 1934, as amended,
provided that Executive does not actively participate in the business of such
corporation until such time as the Restricted Period expires.

    (b)           Non-Solicitation
Covenant.  Executive shall not, directly or indirectly, for his
benefit or for the benefit of any other person, firm, entity, or business
solicit, recruit, advise, attempt to influence, or otherwise induce or persuade,
directly or indirectly (including encouraging another person to influence,
induce, or persuade), any person, employed by the Company to leave the employ of
the Company during the Employment Period and the Restricted Period (except for
those actions that are within the scope of Executive’s employment and taken on
behalf of the Company).  Nothing herein shall prohibit Executive from
general advertising for personnel not specifically targeting any employee of the
Company.

    (c)           For
purposes of this Section, the term “Competitive Business” means any business
enterprise (whether a corporation, partnership, sole proprietorship, or other
business entity) that competes in any material way with the products of the
Company marketed and sold or under substantial development by the Company during
the Employment Period.

    Executive
agrees that the scope of the restrictions as to time, geographic area, and scope
of activity in this Section are reasonably necessary for the protection of the
Company’s legitimate business interests and are not oppressive or injurious to
the public interest.  Executive further agrees that any breach or
threatened breach of any of the provisions of this Section 13 would cause
irreparable injury to the Company for which it would have no adequate remedy at
law.  Executive agrees that in the event of a breach or threatened
breach of any of the provisions of this Section the Company shall,
notwithstanding Section 16 hereof, be entitled to injunctive relief against
Executive’s activities to the extent allowed by law.  Finally,
Executive further agrees that the relief available under this Section 13 is
in addition to and separate from any other relief available to the Company under
this Agreement, including without limitation under Section 11.

    14.           Publicity.  Executive
agrees that the Company may use, and hereby grants the Company the nonexclusive
and worldwide right to use, Executive’s name, picture, likeness, photograph, or
any other attribute of Executive’s persona (all of such attributes are hereafter
collectively referred to as “Persona”) in any media for any advertising,
publicity, or other purpose at any time, during the Employment
Period.  Executive agrees that such use of his Persona will not result
in any invasion or violation of any privacy or property rights Executive may
have; and Executive agrees that he will receive no additional compensation for
the use of his Persona.  Executive further agrees that any negatives,
prints, or other material for printing or reproduction purposes prepared in
connection with the use of his Persona by the Company shall be and are the sole
property of the Company.

    15.           Indemnification.  If
Executive is made a party to or is threatened to be made a party to or is
otherwise involved in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, by reason of the fact that Executive is or was
an officer of the Company or is or was serving at the request of the Company as
a director, officer, or trustee of another corporation or of a partnership,
joint venture, trust, or other enterprise, including service with respect to an
employee benefit plan, whether the basis of such proceeding is alleged action in
an official capacity as a director, officer, or trustee or in any other capacity
while serving as a director, officer, or trustee, then Executive shall be
indemnified and held harmless by the Company to the fullest extent authorized by
the Delaware General Corporate Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent such
amendment permits the corporation to provide broader indemnification rights than
such law permitted the corporation to provide prior to such amendment), against
all expense, liability, and loss (including attorneys’ fees, judgments, fines,
ERISA excise taxes or penalties, and amounts paid in settlement) reasonably
incurred or suffered by Executive in connection therewith; provided, however,
that, except with respect to proceedings to enforce his right to indemnification
hereunder, the Company shall indemnify Executive in connection with a proceeding
(or part thereof) initiated by Executive only if such proceeding (or part
thereof) was authorized by the Board.

    16.           Arbitration.  Any
dispute or controversy arising out of or relating to this Agreement, including
without limitation, any and all disputes, claims (whether in tort, contract,
statutory, or otherwise), or disagreements concerning the interpretation or
application of the provisions of this Agreement shall be resolved by arbitration
in accordance with the rules of the American Arbitration Association (the “AAA”)
then in effect for employment disputes.  The arbitration shall be
conducted before a single arbitrator, who shall be a Labor and Employment Law
specialist certified by the Texas Board of Legal Specialization, selected by
mutual agreement of the parties, or if not agreed within 30 days following
commencement of the proceeding, appointed by the AAA.  The arbitrator
shall not have the authority to alter the terms of this Agreement or to award
punitive damages.  The decision of the arbitrator will be final and
binding on both parties.  The Company shall pay the expenses of the
AAA and the arbitrator, and the Company and Executive shall pay their own legal
fees.  The arbitrator shall have the authority to award reasonable
attorneys’ fees to the prevailing party.  The Company and Executive
agree that the arbitration and all matters related to the arbitration shall be
treated as confidential.  This arbitration provision is expressly made
pursuant to and shall be governed by the Federal Arbitration Act, 9 U.S.C.
Sections 1-16 (or replacement or successor statute).  Pursuant to
Section 9 of the Federal Arbitration Act, the Company and Executive agree that a
judgment of the United States District Court for the Southern District of Texas
may be entered upon the award made pursuant to the arbitration.

    17.           Successors.

    (a)           This
Agreement shall be binding upon the Company and any successor thereof (whether
direct or indirect, by purchase, merger, consolidation, or
otherwise).  As used in this Agreement, “Company” shall mean the
Company as hereinbefore defined and any successor to its business or assets or
any entity that otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or by contract.

    (b)           This
Agreement and all rights of Executive hereunder shall inure to the benefit of
and be enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and
legatees.  If Executive dies while any amounts are payable to him
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive’s devisee, legatee, or
other designee or, if there is no such designee, to Executive’s
estate.

    18.           Entire Agreement.  This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations, or warranties, whether oral or written, by any
person in respect of such subject matter.  Any prior agreements of the
parties hereto in respect of the subject matter contained herein are hereby
terminated and canceled.

    19.           Enforcement of
Agreement.  No waiver of any
action with respect to any breach by the other party of any provision of this
Agreement shall be construed to be a waiver of any succeeding breach of such
provision, or as a waiver of the provision itself.  Should any
provisions hereof be held to be invalid or wholly or partially unenforceable,
such holdings shall not invalidate or void the remainder of this
Agreement.  Portions held to be invalid or unenforceable shall be
enforced to the greatest extent permitted by law, and shall be revised and
reduced in scope so as to be valid and enforceable, or, if such is not possible,
then such portion shall be deemed to have been wholly excluded with the same
force and effect as if the provision had never been included
herein.

    20.           Governing
Law.  The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of
Texas without regard to its conflicts of law principles.

    21.           Notice.  All notices or other communications
required or permitted hereunder shall be in writing and sufficient if delivered
personally, or sent by nationally-recognized, overnight courier or by registered
or certified mail, return receipt requested and postage prepaid, addressed as
follows:

     

    
      
        
          
            
              
                
                  
                    	 	
                            If to Executive:

                          	
                            [Name]                                                                

                          
	 	 
      	
                            100 Cyberonics Blvd.

                          
	 	 
      	
                            Houston, TX 77058

                          
	 	 
      	 
      

                  

                

              

            

          

        

      

    

    

    
      
        
          
            
              
                
                  
                    
                      
                        	 	
                                If to Company:

                              	
                                Cyberonics, Inc.

                              
	 	 
      	
                                100 Cyberonics Blvd.

                              
	 	 
      	
                                Houston, TX 77058

                              
	 	 
      	
                                Attn:  General
      Counsel

                              
	 	 
      	
                                (281) 218-9332
  (Facsimile)

                              

                      

                    

                  

                

              

            

          

        

      

    

    

    or to such other address as any party may have furnished
to the other in writing in accordance herewith.  All such notices and
other communications shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of a facsimile
transmission, when the party receiving such transmission shall have confirmed
receipt of the communication, (c) in the case of delivery by
nationally-recognized, overnight courier, on the business day following dispatch
and (d) in the case of registered or certified mailing, on date actually
received.

    22.           Section 409A of the Internal
Revenue Code.

    (a)           This
Agreement is intended to comply with the requirements of Section 409A of the
Code.  Accordingly, all provisions herein shall be construed and
interpreted to comply with Code Section 409A and if necessary, any such
provision shall be deemed amended to comply with Code Section 409A and the
regulations thereunder.

    (b)           Notwithstanding
any provision to the contrary in this Agreement, no payments or benefits to
which Executive becomes entitled under this Agreement in connection with the
termination of Executive’s employment with the Company shall be made or paid to
Executive prior to the earlier of (i) the first day of the seventh (7th) month
following the date of Executive’s Separation from Service due to such
termination of employment or (ii) the date of Executive’s death, if Executive is
deemed, pursuant to the procedures established by the Board in accordance with
the applicable standards of Code Section 409A and the Treasury Regulations
thereunder and applied on a consistent basis for all non-qualified deferred
compensation plans subject to Code Section 409A, to be a “specified employee” at
the time of such Separation from Service and such delayed commencement is
otherwise required in order to avoid a prohibited distribution under Code
Section 409A(a)(2).  Upon the expiration of the applicable Code
Section 409A(a)(2) deferral period, all payments deferred pursuant to this
Section 22(b) shall be paid in a lump sum to Executive, and any remaining
payments due under this Agreement shall be paid in accordance with the normal
payment dates specified for them herein.  In addition, if Executive is
deemed to be a specified employee at the time of Separation from Service and
there is an amount payable by Executive to the Company under the Company’s
Relocation Policy (the "Relocation Amount"), then notwithstanding Section
10(d)(v), the following provisions shall apply:  (i) the Company shall
waive the requirement to repay the portion of the Relocation Amount up to the
applicable dollar amount under Code Section 402(g)(1)(B), (ii) Executive shall
repay to the Company any Relocation Amounts in excess of such limit (the "Repaid
Amount") and (iii) upon the expiration of the applicable Code Section 409A(a)(2)
deferral period, the Company shall pay to Executive the Repaid Amount in a lump
sum.  The specified employees subject to a delayed commencement date
shall be identified on December 31 of each calendar year.  If
Executive is so identified on any such December 31, he shall have specified
employee status for the twelve (12)-month period beginning on April 1 of the
following calendar year.

    23.           Counterparts.  This Agreement my be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.

    24.           Surviving Terms.  The rights and obligations of the parties
regarding the payment or provision of benefits set forth in this Agreement upon
such termination and the rights and restrictions during the period after
termination shall survive the termination of this Agreement.

    25.           Amendment or
Modification.  No provisions of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing and signed by Executive and an authorized officer of the
Company.

    26.           Withholding.  All
payments, compensation, and benefits hereunder shall be subject to any required
withholding of federal, state, and local taxes pursuant to any applicable law or
regulation.

    27.           No
Waiver.  Executive’s or the Company’s failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right that Executive or the Company may
have hereunder shall not constitute a
waiver of such right to insist upon strict compliance in the
future.

    

    
      
        
          
            	 
      	
                    Cyberonics,
      Inc.

                  
	 
      	 
      
	 
      	 
      
	 
      	
                    By:/s/ Daniel J.
      Moore                        

                  
	 
      	
                    Daniel
      J. Moore

                  
	 
      	
                    President
      & Chief Executive Officer

                  
	 
      	 
      
	 
      	 
      
	 
      	
                    Executive:

                  
	 
      	 
      
	 
      	 
      
	 
      	
                    
        

          

        

      

    

    

    

    
      
        
           

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    RELEASE

     

    Executive
hereby irrevocably and unconditionally releases, acquits, and forever discharges
the Company and its affiliated companies and their directors, officers,
employees, and representatives, (collectively “Releasees”), from any and all
claims, liabilities, obligations, damages, causes of action, demands, costs,
losses, and/or expenses (including attorneys’ fees) of any nature whatsoever,
whether known or unknown, including, but not limited to, rights arising out of
alleged violations of any contracts, express or implied, any covenant of good
faith and fair dealing, express or implied, any tort, any legal restrictions on
the Company’s right to terminate employees, or any federal, state, or other
governmental statute, regulation, or ordinance, including, without limitation,
Title VII of the Civil Rights Act of 1964, and the Federal Age Discrimination in
Employment Act, which Executive claims to have against any of the
Releasees.  Executive acknowledges that the payments provided in the
Agreement are in full and complete satisfaction of all contract or severance
obligations that the Company may have.  In addition, Executive waives
all rights and benefits afforded by any state laws which provide in substance
that a general release does not extend to claims which a person does not know or
suspect to exist in his favor at the time of executing the release which, if
known by him, must have materially affected Executive’s settlement with the
other person.  Notwithstanding the foregoing, this Release shall not
apply to: (i) Executive’s continuing rights under any pension or welfare plans,
including his rights under COBRA, (ii) Executive’s right to enforce the
surviving terms of the Employment Agreement, (iii) Executive’s right to
indemnification, and (iv) claims and rights that may arise after the date of
execution of this Release.

    Executive
represents and acknowledges that in executing this Release he does not rely and
has not relied upon any representation or statement, oral or written, not set
forth herein or in the Agreement made by any of the Releasees or by any of the
Releasees’ agents, representatives, or attorneys with regard to the subject
matter, basis, or effect of this Release, the Agreement, or
otherwise.

    Executive
represents and agrees that he fully understands his right to discuss all aspects
of this Release with his private attorney, that to the extent, if any, that he
desires, he has availed himself of this right, that he has carefully read and
fully understands all of the provisions of this Release, and that he is
voluntarily entering into this Release for good and valuable consideration, the
receipt of which is hereby acknowledged.

    Executive
further represents and acknowledges that Executive has twenty-one (21) days to
consider this Release prior to signing.  Executive further understands
that Executive may revoke this Agreement within seven (7) days of its
execution.  This Release shall not become effective or enforceable
until the seven-day revocation period has expired.

    AGREED
AND ACCEPTED, on this _____ day of _______________, 20__.STOCK PURCHASE AGREEMENT

Exhibit 10.1

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this “Agreement”) is dated as of June 24, 2009, among Northern Oil and Gas, Inc., a Nevada corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, shares of capital stock of the Company as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1       Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 promulgated under the Securities Act.   

 

“Board of Directors” means the board of directors of the Company.

 

“Closing” means the closing of the purchase and sale of the Shares pursuant to Section 2.1.

 

“Closing Date” means the Trading Day on which this Agreement has been executed and delivered by the parties hereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Shares, in each case, have been satisfied or waived.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed. 

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction, other than restrictions imposed by securities laws.

 

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“Per Share Purchase Price” equals $6.00, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Shares” means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

“Trading Day” means a day on which the Principal Market (as defined below) is open for trading.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1       Closing.
 On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement
 by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of 2,250,000 Shares. Each Purchaser shall deliver to the Company, via wire transfer of immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser and the Company shall deliver to each Purchaser its respective Shares, and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and
2.3, the Closing shall occur at the offices of the Company or such other location as the parties shall mutually agree.

 

2.2       Deliveries.

 

(a)       On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i)        this Agreement duly executed by the Company;

 

(ii)       a copy of the irrevocable instructions to the Company’s transfer agent instructing the transfer agent to deliver via the Depository Trust Company Deposit Withdrawal Agent Commission System (“DWAC”) Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser; and

 

2

(iii)      the Prospectus (as defined below) (which may be delivered in accordance with Rule 172 under the Securities Act).

 

(b)    On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i)        this Agreement
 duly executed by such Purchaser; and

 

(ii)       such Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by the Company.

 

2.3       Closing
Conditions.

 

(a)        The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)        each of the representations and warranties of the Company contained herein shall be true and correct in all respects (in the case of any representation or warranty containing a materiality or Material Adverse Effect qualification) or in all material respects (in the case of any representation or warranty not containing a materiality or Material Adverse Effect qualification) at the Closing Date and all covenants and agreements contained herein to be performed on the part of the Company and all conditions contained herein to be fulfilled or complied with by the Company at or prior to the Closing Date shall have been duly performed, fulfilled or complied with; and

 

(ii)       the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b)    The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)        each of the representations and warranties of the Company contained herein shall be true and correct in all respects (in the case of any representation or warranty containing a materiality or Material Adverse Effect qualification) or in all material respects (in the case of any representation or warranty not containing a materiality or Material Adverse Effect qualification) at the Closing Date and all covenants and agreements contained herein to be performed on the part of the Company and all conditions contained herein to be fulfilled or complied with by the Company at or prior to the Closing Date shall have been duly performed, fulfilled or complied with;

 

(ii)       the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(iii)      there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

 

3

(iv)      from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Principal Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally shall not have been suspended or limited, or minimum prices shall not have been established on the New York Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or in the over-the-counter market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1       Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a)    The Company meets the requirements for use of Form S-3 under the Securities Act for a primary offering. A Registration Statement on Form S-3 (Registration No. 333-158320) with respect to the Shares, including a base prospectus (the “Base Prospectus”), and such amendments to such registration statement as may have been required prior to the date of this Agreement, has been carefully prepared by the Company pursuant to and in conformity with the requirements of the Securities Act, and the rules and regulations thereunder (the “Rules and Regulations”) of the Commission and has been filed with the Commission under the Securities Act. Such registration statement has been declared effective by the
Commission. Copies of such registration statement, including any amendments thereto, each related preliminary prospectus (meeting the requirements of Rule 430, 430A or 430B of the Rules and Regulations) contained therein, and the exhibits, financial statements and schedules thereto have heretofore been delivered by the Company to the Purchasers. A final prospectus supplement containing information permitted to be omitted at the time of effectiveness by Rule 430A or 430B of the Rules and Regulations will be filed promptly by the Company with the Commission in accordance with Rule 424(b) of the Rules and Regulations. The term “Registration Statement” as used herein means the registration statement as amended at the time it became effective by the Commission under the Securities Act (the “Effective Date”), including financial statements, all exhibits and all documents
incorporated by reference therein and, if applicable, the information deemed to be included by Rule 430A or 430B of the Rules and Regulations. If an abbreviated registration statement is prepared and filed with the Commission in accordance with Rule 462(b) under the Securities Act (an “Abbreviated Registration Statement”), the term “Registration Statement” as used in this Agreement includes the Abbreviated Registration Statement. The term “Prospectus” as used herein means, together with the Base Prospectus, the final prospectus supplement as first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations, including the documents incorporated by reference therein. The Prospectus delivered to the Purchasers for use in connection with the offering of the Shares has been and will be identical to the
version thereof transmitted to the Commission for filing via the Electronic Data Gathering Analysis and Retrieval System, except to the extent permitted by Regulation S-T. For purposes of this Agreement, the words “amend,” “amendment,” “amended,” “supplement” or “supplemented” with respect to the Registration Statement or the Prospectus shall mean amendments or supplements to the Registration Statement or the Prospectus, as the case may be, as well as documents filed after the date of this Agreement and prior to the completion of the distribution of the Shares and incorporated by reference therein as described above. 

 

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(b)    Neither the Commission nor any state or other jurisdiction or other regulatory body has issued,
and neither is, to the knowledge of the Company, threatening to issue, any stop
order under the Securities Act or other order suspending the effectiveness of
the Registration Statement (as amended or supplemented) or preventing or
suspending the use of the Prospectus or suspending the qualification or
registration of the Shares for offering or sale in any jurisdiction nor
instituted or, to the knowledge of the Company, threatened to institute
proceedings for any such purpose. The Registration Statement at the Effective
Date and at 9:00 a.m., New York City time, on the date hereof (the
“Initial Time of Sale”), and the Prospectus and any amendments or supplements thereto or
to the Registration Statement when they are filed with the Commission or become
effective, as the case may be, contain or will contain, as the case may be, all
statements that are required to be stated therein by, and in all material
respects conform or will conform, as the case may be, to the requirements of,
the Securities Act and the Rules and Regulations. Neither the Registration
Statement nor any amendment thereto, as of the applicable effective date,
contains or will contain, as the case may be, any untrue statement of a material
fact or omits or will omit to state any material fact required to be stated
therein or necessary to make the statements therein, not misleading. Neither the
Prospectus nor any supplement thereto contains, as of the date thereof, or will
contain, as the case may be, any untrue statement of a material fact or omits or
will omit to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The documents incorporated by reference in the
Prospectus at the time they were filed with the Commission, complied in all
material respects with the requirements of the Exchange Act, and the rules and
regulations adopted by the Commission thereunder (the “Exchange Act Rules and Regulations”). Any
future documents incorporated by reference so filed, when they are filed, will
comply in all material respects with the requirements of the Exchange Act and
the Exchange Act Rules and Regulations; no such incorporated document contained
or will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and, when read together and with the other information
in the Prospectus, at the time the Registration Statement became effective, at
the Initial Time of Sale and at the Closing Date, each such incorporated
document did not or will not, as the case may be, contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.

 

(c)    The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Nevada, with full power and authority (corporate and otherwise) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to be so qualified or in good standing would not result in a Material Adverse Effect (as defined below).

 

5

(d)    The Company has the full corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its shareholders. The Agreement has been (or upon delivery will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by
applicable (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws in effect which affect creditors’ rights generally, or (ii) laws relating to the availability of specific performance, injunctive relief or other equitable remedies. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not:  (i) conflict with or violate any provision of the Company’s articles of incorporation, bylaws or other organizational or charter documents in effect as of the date of execution of this Agreement, or (ii) subject to obtaining the Required Approvals (as defined below), conflict with, breach, or constitute a default (or an event that 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 (with or without notice, lapse of time or both) of, any
agreement, mortgage, indenture, credit facility, indebtedness or other instrument (evidencing a Company indebtedness or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate: (a) adversely affect the legality, validity or enforceability of this Agreement, (b) could reasonably be expected to have or result in a material adverse effect on the results of operations, assets, business, management, operations or financial condition of the Company, or (c) adversely impair the
Company’s ability to perform fully on a timely basis its obligations under this Agreement (any of foregoing clauses (a), (b) or (c), a “Material Adverse Effect”).

 

(e)    Neither the Company nor any of its subsidiaries is in violation of its articles of incorporation, bylaws or other organizational or charter documents in effect as of the date of execution of this Agreement or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any agreement, mortgage, indenture, credit facility, indebtedness or other instrument (evidencing a Company indebtedness or otherwise) or other understanding to which the Company or any of its subsidiaries is a party or by which any property or asset of the Company or any of its subsidiaries is bound or affected.

 

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(f)     The Company is not required to obtain any consent, approval, waiver, authorization or order of, give any notice to, or make any filing or registration with, or qualification of, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than (i) the filing of a Form 8-K disclosing the transaction contemplated hereby, (ii) the filing with the Commission of a prospectus supplement, (iii) approval for the listing of the Shares by the NYSE Amex Equities Market (the “Principal Market”) for the listing of the Shares for trading thereon in the time and manner required thereby, and (iv) applicable state securities filings (collectively, the
“Required Approvals”).

 

(g)    There are no contracts or other documents required to be described in the Registration Statement or to be filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations which have not been described in, filed as exhibits to, or incorporated by reference in the Registration Statement, as required. The contracts so described in the Registration Statement to which the Company or any of its subsidiaries is a party have been duly authorized, executed and delivered by the Company or its subsidiaries, constitute valid and binding agreements of the Company or its subsidiaries (as applicable) and are enforceable against the Company or its subsidiaries (as applicable) in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws in effect which affect creditors’ rights generally, or (ii) laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and, to the Company’s knowledge, such contracts are enforceable in accordance with their respective terms by the Company against the other parties thereto, except as such enforceability may be limited by (x) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws in effect which affect creditors’ rights generally, or (y) laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and such contracts are in full force and effect on the date hereof. Neither the Company nor any of its subsidiaries, nor, to the best of the Company’s knowledge, any other party thereto, is in breach of or default under any of such contracts, except for such breaches or defaults that
will not result in a Material Adverse Effect.

 

(h)    As of June 24, 2009, the authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, par value $0.001 per share, of which 34,300,103 shares are issued and outstanding and 400,000 shares are reserved for issuance upon exercise of stock options outstanding under the Company’s equity compensation plans and 300,000 shares are reserved for issuance upon exercise of currently outstanding warrants. All of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the descriptions thereof in the Prospectus. All of the issued shares of capital stock of each subsidiary of the Company (i) have been duly and validly authorized and issued, are fully paid and non-assessable and (ii) except as disclosed in the
Prospectus, are owned directly by the Company, free and clear of all Liens. Except as disclosed in this Section 3.1(h) and except for the transactions contemplated by this Agreement, neither the Company nor any subsidiary has outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations. The description of the Company’s equity compensation plans and the options or other rights granted and exercised thereunder set forth in the Prospectus accurately and fairly presents in all material respects the information required by the Securities Act and the Rules and Regulations to be shown with respect to such plans, options and rights.

 

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(i)     Except as disclosed in the Prospectus, there are no legal or governmental actions, suits or proceedings pending or, to the best of the Company’s knowledge, threatened to which the Company or any of its subsidiaries is or may be a party or of which property owned or leased by the Company or any of its subsidiaries is or may be the subject, or related to environmental or discrimination matters, which actions, suits or proceedings, would reasonably be expected, individually or in the aggregate, to prevent or adversely affect the transactions contemplated by this Agreement or have a Material Adverse Effect. No labor disturbance by the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent that would reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries is a party or subject to the provisions of any material injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body, that would reasonably be expected to have a Material Adverse Effect.

 

(j)     The Company owns, or possesses sufficient rights in, and/or has been granted valid and enforceable licenses for, all registered patents, patent applications, trademarks, trademark applications, tradenames, servicemarks and copyrights necessary to the conduct of its business as such business is described in the Prospectus (collectively, the “Registered Intellectual Property”). The expected expiration of any of the Company’s rights to the Registered Intellectual Property would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. There has been no infringement or misappropriation by third parties of any of the Registered Intellectual Property, or any material inventions, manufacturing processes, formulae, trade secrets,
know-how, unregistered trademarks, and other intangible property and assets necessary to the conduct of its business as such business is described in the Prospectus (collectively, the “Other Intellectual Property,” and together with the Registered Intellectual Property, the “Intellectual Property”), nor is there any pending or, to the best knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the Company’s rights of title or other interest in or to any Intellectual Property. There is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity and scope of any Intellectual Property. There is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or claim by others that the Company or any of its products or processes or the
Intellectual Property infringe or otherwise violate any patent, trademark, servicemark, copyright, trade secret or other proprietary right of others. There is no pending or, to the best knowledge of the Company, threatened action, suit proceeding or claim by any current or former employee, consultant or agent of the Company seeking either ownership rights to any invention or other intellectual property right or compensation from the Company for any invention or other intellectual property right made by such employee, consultant or agent in the course of his/her employment with the Company or otherwise. The Prospectus fairly and accurately describes in all material respects the Company’s rights with respect to the Intellectual Property.

 

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(k)    The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all tangible properties and assets described in the Prospectus as owned by it, in each case free and clear of all Liens, except such as (i) are described in the Prospectus or (ii) do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries. Any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries. The Company and its
subsidiaries own or lease all such properties as are necessary to its operations as now conducted or as proposed to be conducted, except where the failure to so own or lease would not have a Material Adverse Effect.

 

(l)     The Company and its subsidiaries possess all licenses, certificates, authorizations or permits issued by the appropriate governmental or regulatory agencies or authorities that are necessary to enable them to own, lease and operate their respective properties and to carry on their respective businesses as presently conducted, except where the failure to possess such licenses, certificates, authorization or permits would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such license, certificate, authority or permit which, singly or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

(m)   Each of the Company and its subsidiaries maintains insurance of the types and in the amounts which it deems adequate for its business, including, but not limited to, third-party liability and all-risk insurance, and insurance covering real and personal property owned or leased by the Company and its subsidiaries against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect.

 

(n)    The Company (i) is in compliance in all material respects with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “Environmental Laws”), (ii) has received and is in compliance with all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business and (iii) has not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except where such non-compliance with Environmental Laws, failure to receive required
permits, licenses or other approvals, or liability would not, individually or in the aggregate, have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated by the Prospectus. The Company has not been named as a “potentially responsible party” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.

 

(o)    Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements incorporated by reference in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, that is in each case material to the Company and its subsidiaries taken as a whole, otherwise than as set forth in the Prospectus. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) there has not been any change in the capital stock or long-term indebtedness of the Company or any of its subsidiaries or any Material Adverse Effect, and (ii) the Company or its subsidiaries have not entered into any
material transaction or incurred any material obligation outside of the ordinary course of business, otherwise than as set forth in the Prospectus.

 

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(p)    The Shares that are being purchased hereunder are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and will conform to the description of the Common Stock in the Prospectus. No preemptive rights or other rights to subscribe for or purchase exist with respect to the issuance and sale of the Shares by the Company pursuant to this Agreement and no stockholder of the Company has any right, which has not been waived, to require the Company to register the sale of any shares of capital stock owned by such stockholder under the Securities Act in the public offering contemplated by this Agreement.

 

(q)    The issuance by the Company of the Shares has been registered under the Securities Act and all of the Shares are freely transferable and tradable by the Purchasers without restriction. No other document with respect to the Registration Statement or document incorporated by reference in the Registration Statement or the Prospectus has heretofore been filed with the Commission. The “Plan of Distribution” section in the Prospectus permits the issuance and sale of the Shares hereunder. The description of the Company’s capital stock set forth in the Prospectus, insofar as it purports to constitute a summary of the terms of the Common Stock, is accurate, complete and fair. Upon receipt of the Shares, the Purchasers will have good and marketable title to the Shares free and clear of any Liens except those incurred
by the Purchasers.

 

(r)     Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Shares to be integrated with prior offerings by the Company for purposes of 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, nor will the Company take any action or steps that would cause the offering of the Shares to be integrated with other offerings. Except as disclosed in the Prospectus, the Company has not, in the twelve (12) months preceding the date hereof, received notice
from the Principal Market to the effect that the Company is not in compliance with the listing or maintenance requirements of the Principal Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The issuance and sale of the Shares hereunder does not contravene the rules and regulations of the Principal Market and no stockholder approval is required for the Company to fulfill its obligations under this Agreement. The Common Stock has been registered pursuant to Section 12(b) of the Exchange Act and is currently listed on the Principal Market.

 

(s)     The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the three (3) years preceding the filing date of the Registration Statement and for the three (3) year period preceding the date hereof (the foregoing materials being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

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(t)     The Company is in material compliance with the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder by all government and regulatory authorities and agencies. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles in the United States and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect thereto. The Company has established and maintains and evaluates “disclosure controls and procedures” (as such term is defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act) and “internal control over financial reporting” (as such term is defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s Chief Executive Officer and Chief Financial Officer by others within those entities, and such disclosure controls and procedures are effective to perform the functions for which they were established.

 

(u)    The financial statements of the Company included in the Prospectus comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, as certified by the Company’s independent registered public accounting firm (with respect to the Company’s audited financial statements), during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. Mantyla McReynolds LLC, who has audited certain financial statements of the Company, are independent registered public accountants as required by the Securities Act and the Rules and Regulations and have been appointed by the Company’s audit committee and such audit committee is comprised entirely of independent directors of the Board of Directors of the Company.

 

(v)    Since the date of the latest audited financial statements included in the Prospectus, except as specifically disclosed in the Prospectus: (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or could result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash
or other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing equity compensation plans of the Company. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Shares contemplated by this Agreement or as set forth in the Prospectus, no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one trading day prior to the date that this representation is made.

 

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

 

(x)    Neither the Company nor, to the knowledge of the Company, any other Person associated with or acting on behalf of the Company including, without limitation, any director, officer, agent or employee of the Company or any of its subsidiaries, has, directly or indirectly, while acting on behalf of the Company or any of its subsidiaries (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses, or received or retained any funds, relating to political activity; (ii) made any unlawful payment from corporate funds to, or received or retained any unlawful funds from, foreign or domestic government officials or employees or to or from foreign or domestic political parties or campaigns; (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made
any other unlawful payment or received or retained any other unlawful funds.

 

(y)    As the time of filing of the Registration Statement, the Company was not, and the Company on the date of this Agreement is not, an “ineligible issuer” as defined in Rule 405 under the Securities Act.

 

(z)    Neither the Company, nor any director or officer thereof, is or has been the subject of any action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty, or any criminal statute during the term of such director or officer’s tenure with the Company, nor, to the knowledge of the Company, prior to such tenure that is of a nature that would be required to be disclosed pursuant to Item 103 of Regulation S-K with regard to the Company or Item 401 of Regulation S-K with regard to the Company’s officers or directors. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company, other than routine reviews of the Company’s filings with the Commission, none
of which are currently pending with respect to the Prospectus or the Registration Statement. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act.

 

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(aa)   There are no transactions, arrangements or other relationships between and/or among the Company, any of its Affiliates and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s liquidity or the availability of or requirements for its capital resources required to be described in the Registration Statement that have not been described as required.

 

(bb)  Except as set forth in the Prospectus, neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any Person that would give rise to a valid claim against the Company or the Purchasers for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Shares.

 

(cc)   The Company is not 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.

 

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

 

Each Purchaser acknowledges and agrees that the Company does not make and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.1.

 

3.2       Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

(a)       Such Purchaser is either an individual or an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate, partnership or limited liability company power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. This Agreement has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

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(b)       The execution, delivery and performance by the Purchaser of the Agreement and the consummation by it of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected.

 

(c)       Such Purchaser is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling such Shares or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Shares in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Shares in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Shares pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is
acquiring the Shares hereunder in the ordinary course of its business.

 

(d)       Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first became aware of the proposed transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Shares covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.

 

The Company acknowledges and agrees that each Purchaser does not make or has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.

 

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ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1       Securities Laws Disclosure; Publicity. The Company shall, by 9:00 a.m. (New York City time) on the Trading Day immediately following the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby. The Company shall, by 5:30 p.m. (New York City time) on the Trading Day immediately following the date hereof, file a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and including this Agreement as an exhibit thereto. From and after the issuance of such press release, the Company shall have publicly disclosed all material, non-public information delivered to any of the Purchasers 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 this Agreement. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or the Principal Market, without the prior written
consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of this Agreement (including signature pages hereto) with the Commission and (b) to the extent such disclosure is required by law, by regulations of the Principal Market or pursuant to an investigation conducted by the Financial Industry Regulatory Authority, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).

 

4.2       Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by this Agreement, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement with the Company regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

4.3       Use of Proceeds. Except as set forth in the Prospectus Supplement, the Company shall use the net proceeds from the sale of the Shares hereunder for working capital purposes.

 

4.4       Indemnification of Purchasers. Subject to the provisions of this Section 4.4 and to the extent permitted by law, the Company will indemnify and hold each Purchaser and its directors, managers, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, managers, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur due to a claim by a third party as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or (b) any action instituted against a Purchaser in any capacity, or any of them or their respective Affiliates, by any shareholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by this Agreement (unless such action is based upon a breach of such Purchaser’s representations, warranties or covenants under this Agreement or any agreements or understandings
such Purchaser may have with any such shareholder or any violations by such Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to
employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement. The Company will have the exclusive right to settle any claim or proceeding, provided that the Company will not settle any such claim, action or proceeding without the prior written
consent of the Purchaser Party, which will not be unreasonably withheld or delayed; provided, however, that such consent shall not be required if the settlement includes a full and unconditional release satisfactory to the Purchaser Party from all liability arising or that may arise out of such claim or proceeding and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Purchaser Party.

 

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4.5       Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares pursuant to this Agreement.   

 

4.6       Listing of Common Stock. The Company hereby agrees to use best efforts to maintain the listing of the Common Stock on the Principal Market, and as soon as reasonably practicable (but not later than the Closing Date) to list all of the Shares on such Principal Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other securities exchange, it will include in such application all of the Shares, and will take such other action as is necessary to cause all of the Shares to be listed on such other securities exchange as promptly as possible. The Company will take all action reasonably necessary to continue the listing and trading of its Common Stock on such securities exchange and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of such securities exchange.

 

4.7       Subsequent Equity Sales. From the date hereof through the 45 day anniversary of the date hereof, the Company will not, directly or indirectly, except pursuant to its existing employee and director stock and stock option plans, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its equity or equity equivalent securities, including, without limitation, any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for shares of Common Stock or Options or Convertible Securities. “Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities. “Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for shares of Common Stock. 

 

4.8       Equal Treatment of Purchasers. No consideration (including any modification of this Agreement) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration is also offered to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Shares or otherwise.

 

4.9       Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.1. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section
4.1, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules. Notwithstanding the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.1, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.1 and (iii) no Purchaser shall
have any duty of confidentiality to the Company or its subsidiaries after the issuance of the initial press release as described in Section 4.1. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.

 

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ARTICLE V.

MISCELLANEOUS

 

5.1       Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before July 1, 2009; provided, however, that no such termination will affect the right of any party to sue for any breach by the other party (or parties).

 

5.2       Fees and Expenses. Except as expressly set forth in this Agreement to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 

 

5.3       Entire Agreement. This Agreement, together with the exhibits and schedules hereto, the Prospectus and the Prospectus Supplement, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4       Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.5       Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least 50% in interest of the Shares then outstanding (which amendment shall be binding on all Purchasers) or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

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5.6       Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.7       Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger, consolidation or sale of all or substantially all of the Company’s assets). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Shares, provided that such transferee agrees in writing to be bound, with respect to the transferred Shares, by the provisions of this Agreement that apply to the “Purchasers.”

 

5.8       No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

5.9       Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City 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 improper or is an inconvenient venue for such proceeding. 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 via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for 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 other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

5.10     Execution. This Agreement may be executed in two or more counterparts, all of which when taken together 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, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature 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 facsimile or “.pdf” signature page were an original thereof.

 

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5.11     Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.

 

5.12     Replacement of Certificates. If any certificate evidencing the Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity or security, if requested. The applicant for a new certificate under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement certificates.

 

5.13     Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in this Agreement and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.14     Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under this Agreement. Nothing contained herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to independently protect and enforce its rights including, without
limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. The Company has elected to provide all Purchasers with the same terms for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.

 

5.15     Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise this Agreement and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments hereto. In addition, each and every reference to share prices and shares of Common Stock in this Agreement shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.16     WAIVER OF JURY
TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
 KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY. 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

	
NORTHERN OIL AND GAS, INC.
 	
Address for Notice:

315 Manitoba Avenue, Suite 200

Wayzata, Minnesota 55391

Attn:  General Counsel
 
	
By:
 	
 
 	
 
 	
Fax:  (952) 476-9801
 
	
 
 	
Name:
 	
 
 	
 
 	
 
 
	
 
 	
Title:
 	
 
 	
 
 	
 
 

With a copy to (which shall not constitute notice):

Faegre & Benson LLP

90 South Seventh Street

Minneapolis, Minnesota 55402

Attn:  W. Morgan Burns  

Telephone:  (612) 766-7000

Facsimile:  (612) 766-1600

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

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[PURCHASER SIGNATURE PAGES TO STOCK PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

	
Name of Purchaser:
 	
 
 
	
 
 	
 
 
	
Signature of Authorized Signatory of
Purchaser: 
 	
 
 
	
 
 	
 
 
	
Name of Authorized Signatory: 
 	
 
 
	
 
 	
 
 
	
Title of Authorized Signatory: 
 	
 
 
	
 
 	
 
 
	
Email Address of Authorized Signatory: 
 	
 
 
	
 
 	
 
 
	
Facsimile Number of Authorized Signatory: 
 	
 
 
	
 
 	
 
 
	
Address for Notice of Purchaser:
 	
 
 

 

Address for Delivery of certificated Securities for Purchaser (if not same as address for notice):

 

Information for Delivery of uncertificated Securities by DWAC:

 

	
Account Number:
 	
 
 
	
Account Name:
 	
 
 
	
DTC Number:
 	
 
 
	
 
 	
 
 
	
Subscription Amount: $
 	
 
 

 

	
Shares:
 	
 
 

 

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

 

[SIGNATURE PAGES CONTINUE]

 

21

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