Document:

EXECUTION VERSION

 

WARRANT PURCHASE AGREEMENT

 

This WARRANT PURCHASE AGREEMENT (this “Agreement”) is entered into as of August 26, 2011 by and between UMAMI SUSTAINABLE SEAFOOD INC., a Nevada corporation trading on the OTC Bulletin Board under the symbol “UMAM” (the “Company”), and ________________________ (“Purchaser”).

 

WITNESSETH:

 

WHEREAS, the Company desires to borrow funds from several lenders acting through AMERRA CAPITAL MANAGEMENT, LLC, a Delaware limited liability company (in such capacity, the “Administrative Agent”), pursuant to that certain Credit Agreement (as amended, supplemented or otherwise modified and in effect from time to time, the "Credit Agreement") dated as of August 26, 2011 by and among the Company, the Purchaser (in its capacity as a lender), the other lenders described therein (together with the Purchaser, the “Lenders”), and the Administrative Agent (capitalized terms used but not defined in this Agreement have the respective meanings assigned to them in the Credit Agreement);

 

WHEREAS, to induce the Lenders to extend loans to the Company under the Credit Agreement, the Company has agreed to issue to Purchaser a warrant (the “Warrant”) to purchase shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”), in accordance with the terms set forth in the form of the warrant attached hereto as Exhibit A (the “Warrant”).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the parties agree as follows:

 

1.             Issuance of the Warrant.

 

1.1           Issuance of Warrant.  Subject to the terms and conditions of this Agreement, the Company shall issue to Purchaser at the Closing (as defined below) a Warrant to initially purchase up to 187,500 shares of Common Stock.

 

2.             Closing.

 

2.1           Time and Place. The closing for the issuance of the Warrant shall take place at the offices of Pillsbury Winthrop Shaw Pittman LLP, 1540 Broadway, New York, NY 10036, at 10:00 a.m., local time, on the business day that all of the conditions set forth in Section 7 hereof have been duly satisfied or waived, or at such later time or date as the Administrative Agent and the Company may mutually agree in writing (the “Closing”).  The date upon which the Closing shall occur is herein called the “Closing Date”.

  

  

  

3.             Credit Facility and Related Documents.

 

3.1           Credit Agreement.  At Closing, the Company shall enter into the Credit Agreement and the other Loan Documents therein described and the Lenders shall make the loans contemplated by the Credit Agreement.  For purposes hereof, the Loan Documents shall be collectively referred to as the “Transaction Documents”.

 

4.             Representations and Warranties of the Company.  The Company hereby represents and warrants to Purchaser and the Administrative Agent as follows (which representations and warranties shall be deemed to apply, where appropriate, to the other Loan Parties under the Credit Agreement (each, a “Subsidiary” and, collectively, the “Subsidiaries”), as of the Closing Date:

 

4.1           Subsidiaries.  The Company has no Subsidiaries other than Mexican Borrower, Kali, Bluefin Acquisition Group Inc., a New York corporation, and Oceanic Enterprises, Inc., a California corporation.  Except as disclosed in Schedule 4.1 or as specifically disclosed in the SEC Reports (as hereinafter defined) hereto, the Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary  free and clear of any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction (other than Liens in favor of the Administrative Agent) and all the issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued, fully paid and non-assessable and free of preemptive and similar rights.

 

4.2           Organization and Qualification.  Each of the  Company and the Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its respective incorporation or organization (as applicable), with the requisite legal authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  The Company and the Subsidiaries are each duly qualified to do business and in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have or reasonably be expected to result in a (a) a material adverse effect on the results of operations, assets, business condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, (b) a material and adverse impairment of the Company’s and the Subsidiaries’ ability to perform its obligations under any of the Transaction Documents, or (c) a material and adverse effect on the legality, validity or enforceability of any of the Transaction Documents (a “Material Adverse Effect”); provided, however, that no change, effect, event or occurrence to the extent arising or resulting from any of the following, either alone or in combination, shall constitute or be taken into account in determining whether there has been or will be, a Material Adverse Effect: (i) general business or economic conditions not specific or peculiar to the Company or any Subsidiary, (ii) acts of war or terrorism or natural disasters not specific or peculiar to the Company, a Subsidiary or a jurisdiction in which any of them operates, (iii) catastrophic economic or significant regulatory or political conditions or changes, (iv) changes in any applicable accounting regulations or principles or the interpretations thereof, (vi) changes in laws, or (vii) changes in the price or trading volume of the Company’s stock.

  

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4.3           Authorization; Enforcement.  The Company and each Subsidiary has the requisite corporate authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its respective obligations hereunder and thereunder.  The execution and delivery of the Transaction Documents by the Company or any Subsidiary and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company and each Subsidiary and no further consent or action is required by the Company, the Subsidiaries or their respective Board of Directors (or similar governing body) or shareholders.  The Transaction Documents to which they are a party have been duly executed by the Company and the Subsidiaries, as applicable, and when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the Company and the Subsidiaries, as applicable, enforceable against the Company and the Subsidiaries, as applicable, in accordance with their respective terms, except as the same may be limited by (a) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, and (b) the effect of rules of law governing the availability of specific performance and other equitable remedies.

 

4.4           No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company and the Subsidiaries, as applicable, and the consummation by the Company and the Subsidiaries, as applicable, of the transactions contemplated hereby and thereby do not, and will not, (a) conflict with or violate any provision of the Company’s or any Subsidiary’s memorandum or articles of association, certificate or articles of incorporation, bylaws or other organizational or charter documents, (b) conflict with, 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, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound, or affected, (c) except for Liens granted pursuant to the Transaction Documents, result in any Lien on assets or on property of the Company, or (d) 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 or a Subsidiary is subject (including, assuming the accuracy of the representations and warranties of Purchaser set forth in Section 5.2 hereof, federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject, including any market (such as the OTC Bulletin Board or Pink Sheets LLC) on which the shares of Common Stock are listed or quoted for trading on the date in question, as applicable (the “Trading Markets”)), or by which any property or asset of the Company or a Subsidiary is bound or affected.

 

4.5           The Securities. The Warrant and the equity securities issuable upon exercise thereof (collectively, the “Securities”) are duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and will not be subject to preemptive or similar rights of stockholders (other than those imposed by Purchaser).  The Company has reserved from its duly authorized shares of common stock the maximum number of securities issuable upon exercise of the Warrant (the “Warrant Shares”).  The offer, issuance and sale of the Warrant and the Warrant Shares pursuant to the Transaction Documents are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).

  

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4.6           Capitalization.

 

(i) As of the date of this Agreement, the aggregate number of shares and type of all authorized, issued and outstanding classes of shares, options and other securities of the Company and the Subsidiaries (whether or not presently convertible into or exercisable or exchangeable for shares of the Company and the Subsidiaries) is set forth in Schedule 4.6 hereto.  All outstanding shares are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance in all material respects with all applicable securities laws.  The Company and the Subsidiaries have outstanding only those options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or entered into any agreement giving any Person (as defined in Section 4.30 hereof) any right to subscribe for or acquire, any shares of capital stock of the Company or the Subsidiaries, or securities or rights convertible or exchangeable into shares of capital stock of the Company or the Subsidiaries as set forth on Schedule 4.6.

 

(ii) Except as set forth on Schedule 4.6 hereto, and except for customary adjustments as a result of share dividends, share splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued or agreement entered into by the Company or the Subsidiaries (or in any agreement providing rights to security holders) and the issuance and sale of the Securities will not obligate the Company or the Subsidiaries to issue shares of common stock or other securities to any Person (other than Purchaser) and will not result in a right of any holder of securities to adjust the exercise, conversion, exchange or reset price under such securities.  To the Knowledge (as hereinafter defined) of the Company, except as disclosed in Schedule 4.6 hereto and except for the Company’s ownership of the Subsidiaries, no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), or has the right to acquire, by agreement with or by obligation binding upon the Company or the Subsidiaries, a beneficial ownership interest in the Company or the Subsidiaries in excess of 5% of the outstanding capital stock of such entity. “Knowledge” means the actual knowledge (i.e., the conscious awareness of facts and other information) of the chief executive officer, chief financial officer or other key officers of the Company, after undertaking a customary and reasonable investigation under the circumstances.

  

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4.7           SEC Reports; Financial Statements; No Material Adverse Effect; Solvency.  Except as set forth on Schedule 4.7 or as specifically disclosed in the SEC Reports, 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, since June 30, 2011 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.  Such reports required to be filed by the Company under the Exchange Act after June 30, 2010, including pursuant to Section 13(a) or 15(d) thereof, together with any materials filed or furnished by the Company under the Exchange Act, whether or not any such reports were required, are collectively referred to herein as the “SEC Reports” and, together with this Agreement and the schedules to this Agreement, the “Disclosure Materials”.  As of their respective dates, the SEC Reports filed by the Company complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) promulgated thereunder, and none of the SEC Reports, when filed by the Company, 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.  The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements, the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP or may be condensed or summary statements, and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries 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, year-end audit adjustments.  All material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or identified in the SEC Reports, to the extent such agreements are required to be included or identified pursuant to the rules and regulations of the SEC.

 

Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in Schedule 4.7 hereto, (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or that would result in, or reasonably be expected to result in a Material Adverse Effect, (ii) the Company and Subsidiaries have not incurred any material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, (B) liabilities not required to be reflected in the Company’s and/or Subsidiary’s financial statements pursuant to GAAP or not required to be disclosed in filings made with the SEC and (C) other liabilities incurred by the Subsidiaries for the exclusive purpose of funding the day-to-day operations of the fish farming sites of the Company’s operating subsidiaries, (iii) the Company has not altered its method of accounting or changed its auditors, (iv) the Company and the Subsidiaries have not declared or made any dividend or distribution of cash or other property to their shareholders, in their capacities as such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock (except for repurchases by the Company  and/or the Subsidiaries of shares of capital stock held by employees, officers, directors, or consultants pursuant to an option of the Company and/or the Subsidiaries to repurchase such shares upon the termination of employment or services), and (v) the Company and/or the Subsidiaries have not issued any equity securities to any officer, director or affiliate, except pursuant to existing Company stock-based plans.  The Company and the Subsidiaries have not taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any Knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any Knowledge of any fact which would reasonably lead a creditor to do so.  The Company and the Subsidiaries will not be Insolvent (as defined below) after giving effect to the transactions contemplated hereby to occur at the Closing.  For purposes of this Section 4.7, “Insolvent” means that (i) the present fair saleable value of the Company’s assets is less than the amount required to pay the Company’s total Indebtedness (as defined in Section 4.30 hereof), (ii) the Company is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) the Company intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature, or (iv) the Company has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.

  

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4.8             Absence of Litigation.  Except as described in Schedule 4.8 or as specifically disclosed in the SEC Reports, there is no action, suit, claim, or Proceeding (as defined below), or, to the Company’s Knowledge, inquiry or investigation, before or by any court, public board, government agency, self-regulatory organization or body pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries that could, individually or in the aggregate, have a Material Adverse Effect. For the purposes hereof, “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, a partial proceeding, such as a deposition), whether commenced or threatened in writing.

 

4.9             Compliance.  Except as described in Schedule 4.9, neither the Company nor any Subsidiary, except in each case as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, (a) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (b) is in violation of any order of any court, arbitrator or governmental body, or (c) is or has been in violation of any statute, rule or regulation of any governmental authority.

 

4.10           Title to Assets.  The Company and the Subsidiaries own or lease no real property except as described in Schedule 4.10.  The Company and the Subsidiaries have good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens set forth in Schedule 4.10 and other Liens that could not if enforced, individually or in the aggregate, have or result in a Material Adverse Effect.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases as to which the Company and the Subsidiaries are in material compliance.

 

4.11           Significant Customers. Schedule 4.11 lists each customer who represented 10% or more of the sales of the Company or of any Subsidiary during the calendar year ended June 30, 2011 (each, a “Significant Customer“) and the percentage of the Company’s total revenues such Significant Customer represented during such period.  The Company has no outstanding material dispute concerning its business operations with any Significant Customer.  No Significant Customer has given notice to the Company, whether orally or in writing, that such customer shall not continue as a customer of the Company after Closing or that such customer intends to terminate or materially modify existing agreements with the Company at any time.

  

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4.12           No General Solicitation; Placement Agent’s Fees.  Neither the Company, nor, to the Company’s Knowledge, any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) in connection with the offer or sale of the Securities.  The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commission (other than for Persons engaged by Purchaser) relating to or arising out of the issuance of the Securities pursuant to this Agreement.  The Company shall pay, and hold Purchaser harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any such claim for fees arising out of the issuance of the Securities pursuant to this Agreement.

 

4.13           Private Placement.  Neither the Company nor, to the Company’s Knowledge, any of its Affiliates nor, any Person acting on the Company’s behalf has, directly or indirectly, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Securities as contemplated hereby, or (ii) cause the offering of the Securities pursuant to the Transaction Documents to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or stockholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market.  The sale and issuance of the Securities hereunder does not contravene the rules and regulations of any Trading Market on which the Common Stock is listed or quoted.

 

4.14           Company not an “Investment Company”. The Company is not required to be registered as, and is not an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “Investment Company Act”).

 

4.15           Form S-1/S-3 Eligibility.  The Company is eligible to register the Warrant Shares for resale by Purchaser using Form S-1 promulgated under the Securities Act.

 

4.16           Listing and Maintenance Requirements.  Except as described in Schedule 4.16, the Company has not, since June 30, 2011, received notice (written or oral) from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market.  The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in material compliance with all such listing and maintenance requirements.  The issuance of the Securities does not require stockholder approval, including without limitation under NASDAQ Marketplace Rule 5635, and the failure to obtain such stockholder approval will not materially impair the prospects of approval of any future listing application with NASDAQ.

 

4.17           Registration Rights.  Except as provided for in this Agreement, as described in Schedule 4.17 or as specifically disclosed in the SEC Reports, the Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the SEC or any other governmental authority that have not been satisfied or waived.

  

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4.18           Application of Takeover Protections.  Except as described in Schedule 4.18 or as specifically disclosed in the SEC Reports, there is no control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or could become applicable to Purchaser as a result of Purchaser and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Securities and Purchaser’s ownership of the Securities.

 

4.19           Disclosure.  All disclosure provided by the Company to Purchaser regarding the Company, its business and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company are true and correct in all material respects and do not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  Except for the transactions contemplated by this Agreement, no event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.  The Company acknowledges and agrees that Purchaser is not making and has not made any representations or warranties with respect to the transactions contemplated hereby other than those set forth in the Transaction Documents.

 

4.20           Acknowledgment Regarding Purchaser’s Purchase of Securities.  Based upon the assumption that the transactions contemplated by this Agreement are consummated in all material respects in conformity with the Transaction Documents, the Company acknowledges and agrees that Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby.  The Company further acknowledges that Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by Purchaser or any of its respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to Purchaser’ purchase of the Securities.  The Company further represents to Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

  

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4.21           Patents and Trademarks.  Except as described in Schedule 4.21 or as specifically disclosed in the SEC Reports, (a) the Company and its Subsidiaries owns or possesses sufficient rights to conduct its business in the ordinary course, including, without limitation, rights to use all material patents, patent rights, industry standards, trademarks, copyrights, licenses, inventions, trade secrets, trade names and know-how (collectively, “Intellectual Property Rights”) as owned or possessed by them or that are necessary for the conduct of its business as now conducted or as proposed to be conducted except where the failure to currently own or possess such rights would not have a Material Adverse Effect, (b) neither the Company nor any of its Subsidiaries is infringing any rights of a third party with respect to any Intellectual Property Rights that, individually or in the aggregate, would have a Material Adverse Effect, and, since January 1, 2011, neither the Company nor any of its Subsidiaries has received any notice of, or has any Knowledge of, any asserted infringement by the Company or any of its Subsidiaries of, any rights of a third party with respect to any Intellectual Property Rights that, individually or in the aggregate, would have a Material Adverse Effect and (c) since January 1, 2011, neither the Company nor any of its Subsidiaries has received any notice of, or has any Knowledge of, infringement by a third party with respect to any Intellectual Property Rights of the Company or of any Subsidiary that, individually or in the aggregate, would have a Material Adverse Effect.  The Company has not used Publicly Available Software (as hereinafter defined) in whole or in part in the development of any part of its Intellectual Property Rights in a manner that would be reasonably likely to subject the Company or its Intellectual Property Rights in whole or in part, to all or part of the license obligations of any Publicly Available Software that, individually or in the aggregate, would have a Material Adverse Effect on the Company.  “Publicly Available Software” means each of (i) any software that contains, or is derived in any manner (in whole or in part) from, any software that is distributed as free software, open source software (e.g., Linux), or similar licensing and distribution models; and (ii) any software that requires as a condition of use, modification, and/or distribution of such software that such software or other software incorporated into, derived from, or distributed with such software (A) be disclosed or distributed in source code form; (B) be licensed for the purpose of making derivative works; or (C) be redistributable at no or minimal charge.  Publicly Available Software includes, without limitation, software licensed or distributed under any of the following licenses or distribution models similar to any of the following: (a) GNU General Public License (GPL) or Lesser/Library GPL (LGPL), (b) the Artistic License (e.g. PERL), (c) the Mozilla Public License, (d) the Netscape Public License, (e) the Sun Community Source License (SCSL), the Sun Industry Source License (SISL), and the Apache Server License.

 

4.22           Insurance.  The Company and, to the Company’s Knowledge, the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses and locations in which the Company and the Subsidiaries are engaged, including a prudent and customary amount of such insurance coverage with respect to the fish inventory of the Company and the Subsidiaries, as applicable.  The Company has had continuous insurance coverage during the 12 months preceding the date of this Agreement and has no reason to believe it will not be able to renew its current insurance coverage in the same amounts or obtain new insurance coverage in amounts not less than it currently has with carriers of equal or better ratings.

 

4.23           Regulatory Permits.  The Company and the Subsidiaries hold, and are operating in compliance in all material respects with all franchises, grants, authorizations, licenses, permits, easements, consents, quotas, certificates and orders (collectively, “Material Permits”) of the U.S. Food and Drug Administration, any other federal, state or foreign governmental authority having authority over the Company and the Subsidiaries, or any self-regulatory body regulating the Company’s conduct of its business (collectively, “Governmental Authority”), and which are necessary to the operation of their respective businesses; all such Material Permits are valid and in full force and effect; and the Company and the Subsidiaries have not received notice of any revocation or modification of any such Material Permits or has reason to believe that any such Material Permits will be revoked, modified, or not be renewed in the ordinary course.

  

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4.24           Regulatory Compliance.  The Company and the Subsidiaries (a) are and at all times have been in material compliance with all applicable federal, state, local and foreign, laws, statutes, rules, regulations, or guidance applicable to Company and the Subsidiaries and the acquisition, ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product or services manufactured or distributed by the Company (the “Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; (ii) have not received any notice of adverse finding, untitled letter or other correspondence or notice from any Governmental Authority alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”) nor any warning letter from the U.S. Food and Drug Administration containing any unresolved issues concerning noncompliance with any Applicable Laws or Authorizations that could reasonably be expected to result in a Material Adverse Effect; (iii) possess all material Authorizations and such Authorizations are valid and in full force and effect and are not in violation of any term of any such Authorizations, except where such violation could not reasonably be expected to result in a Material Adverse Effect; (iv) have not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Authority or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and have no Knowledge that any such Governmental Authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (v) have not received notice that any Governmental Authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and the Company has no Knowledge that any such Governmental Authority is considering such action; and (vi) have filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission).

 

4.25           Workplace Safety.  The Company and the Subsidiaries (i) are in compliance, in all material respects, with any and all applicable foreign, federal, state and local laws, rules, regulations, treaties, statutes and codes promulgated by any and all governmental authorities (including pursuant to the Occupational Health and Safety Act) relating to the protection of human health and safety in the workplace (“Occupational Laws”); (ii) have received all material permits, licenses or other approvals required of it under applicable Occupational Laws to conduct its business as currently conducted, except where the failure to obtain such licenses could not reasonably be expected to result in a Material Adverse Effect; and (iii) are in compliance, in all material respects, with all terms and conditions of such permit, license or approval, except where the failure to be in compliance could not reasonably be expected to result in a Material Adverse Effect.  No action, proceeding, revocation proceeding, writ, injunction or claim is pending or, to the Company’s Knowledge, threatened against the Company or the Subsidiaries relating to Occupational Laws, and the Company does not have Knowledge of any facts, circumstances or developments relating to its operations or cost accounting practices that could reasonably be expected to form the basis for or give rise to such actions, suits, investigations or proceedings.

  

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4.26           Transactions With Affiliates and Employees.  Except as described on Schedule 4.26 or as specifically disclosed in the SEC Reports, none of the officers, directors or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the Company’s Knowledge, any corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner.

 

4.27           Internal Accounting Controls.  Except as specifically disclosed in the SEC Reports, the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management’s general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (c) access to assets is permitted only in accordance with management’s general or specific authorization, and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

4.28           Sarbanes-Oxley Act.  The Company is in compliance in all material respects with currently applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by the SEC thereunder.

 

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

  

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4.30           Indebtedness.  Except as disclosed in Schedule 4.30 or as specifically disclosed in the SEC Reports, neither the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as defined below), (ii) has any form of Indebtedness that grants senior Liens, or equivalent rights to any third party over the Liens of Purchaser in the Collateral that secures the obligations of the Company and the Subsidiaries under the Transaction Documents (iii) is in violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect.  Schedule 4.30 provides a detailed description of the material terms of any such outstanding Indebtedness.  For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the Company or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such Indebtedness, and (H) all Contingent Obligations (as defined below) in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligations” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; and (z) “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company or a government or any department or agency thereof.

 

4.31           Employee Relations.  Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union.  To the Company’s Knowledge, there are no material grievances, disputes or controversies with any union or any other organization of employees of the Company or any subsidiary, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization. Except as described in Schedule 4.31 or as specifically disclosed in the SEC Reports, since December 31, 2010, no executive officer of the Company or any of its Subsidiaries has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such Subsidiary.  To the Knowledge of the Company or any such Subsidiary, no executive officer of the Company or any of its Subsidiaries is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any such Subsidiary to any liability with respect to any of the foregoing matters.

 

4.32           Labor Matters.  The Company and its Subsidiaries are in compliance in all material respects with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

  

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

 

4.34           Subsidiary Rights.  Except as set forth in Schedule 4.34 or as specifically disclosed in the SEC Reports, the Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as are owned by the Company or such Subsidiary.

 

4.35           Tax Status.  Except as specifically disclosed in Schedule 4.35 in the Company’s financial statements, the Company and each of its Subsidiaries (i) has made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the Company has no Knowledge of any basis for any such claim.

 

4.36           No Manipulation of Stock.  The Company has not taken and will not, in violation of applicable law, take any action designed to or that would be reasonably be expected to cause or result in manipulation in violation of applicable law or regulation of the price of the Common Stock to facilitate the sale or resale of the Warrant Shares.

 

4.37           Accountants.  To the Company’s Knowledge, McGladrey & Pullen, LLP, the Company’s auditors, are independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder.

 

4.38           Contracts.  The contracts attached as exhibits to the SEC Reports that are material to the Company are in full force and effect on the date hereof, and neither the Company nor, to the Company’s Knowledge, any other party to such contracts is in breach of or default under any of such contracts which would have a Material Adverse Effect.

  

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4.39           Off-Balance Sheet Arrangements.  There is no transaction, arrangement or other relationship between the Company and an unconsolidated or other off-balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so disclosed.

 

4.40           U.S. Real Property Holding Corporation.  The Company is not, nor has it ever been, as U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.

 

5.               Representations and Warranties of Purchaser. Purchaser hereby, represents and warrants to the Company as follows, as of the date hereof and as of the Closing:

 

5.1             Organization; Authority.  Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, partnership or other power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The Purchaser is duly qualified to do business and in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.  The Purchaser has the requisite partnership authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its respective obligations hereunder and thereunder. The purchase by Purchaser of the Warrant hereunder has been duly authorized by all necessary corporate, partnership or other action on the part of such Purchaser.  This Agreement has been duly executed and delivered by Purchaser and constitutes the valid and binding obligation of Purchaser, enforceable against it in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, and (ii) the effect of rules of law governing the availability of specific performance and other equitable remedies.

 

5.2            No Public Sale or Distribution.  Purchaser is (i) acquiring the Warrant, and (ii) upon exercise of the Warrant will acquire the Warrant Shares issuable upon exercise thereof, in the ordinary course of business for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws, and Purchaser does not have a present arrangement to effect any distribution of the Securities to or through any Person; provided, however, that by making the representations herein, Purchaser does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.

  

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5.3            Purchaser Status.  Purchaser understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon such Purchaser’s representations contained in this Agreement, including at the time Purchaser was offered the Securities, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not a registered broker dealer registered under Section 15(a) of the Exchange Act, or a member of the NASD, Inc. or an entity engaged in the business of being a broker dealer.  Except as otherwise disclosed in writing to the Company on or prior to the date of this Agreement, Purchaser is not affiliated with any broker dealer registered under Section 15(a) of the Exchange Act, or a member of the NASD, Inc. or an entity engaged in the business of being a broker dealer.

 

5.4            Experience of Such Purchaser.  Purchaser, either alone or together with its representatives has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Purchaser understands that it must bear the economic risk of this investment in the Securities indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment.

 

5.5            Access to Information.  Purchaser acknowledges that it has had the opportunity to review the Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.  Neither such inquiries nor any other investigation conducted by or on behalf of Purchaser or its representatives or counsel shall modify, amend or affect such Purchaser’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents.

 

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

 

5.7            No Conflicts.  The execution, delivery and performance by Purchaser of this Agreement and the consummation by Purchaser of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of Purchaser, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Purchaser is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to Purchaser, except in the case of clauses (ii) and (iii) above, that do not otherwise affect the ability of Purchaser to consummate the transactions contemplated hereby.

  

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5.8            Prohibited Transactions.  Purchaser covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with Purchaser will engage, directly or indirectly, in any transactions in the securities, including derivatives, of the Company (including, without limitation, any Short Sales (a “Transaction”) involving any of the Company’s securities prior to the time the transactions contemplated by this Agreement are publicly disclosed.  Purchaser covenants further that neither it nor any Person acting on its behalf or pursuant to any understanding with Purchaser will engage, directly or indirectly, in any Short Sales involving any of the Company's securities during the time that Purchaser or its affiliates hold the Warrant.  “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers.

 

5.9            Restricted Securities.  Purchaser understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances.

 

5.10           Legends.  It is understood that certificates evidencing such Securities may bear the legend set forth in Section 11.1 of this Agreement.

 

5.11           No Legal, Tax or Investment Advice.  Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to Purchaser in connection with the purchase of the Securities constitutes legal, tax or investment advice.  Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Securities.

 

6.               Covenants and Agreements.

 

The parties hereto covenant and agree, as may be appropriate, to execute such documents and other papers and take such other further actions as may be reasonably required to carry out the provisions hereof and effectuate the transactions contemplated hereby and by the Warrant.

 

7.               Conditions Precedent to the Obligation of Purchaser to Close.

 

The obligation of Purchaser to complete the Closing is subject to the fulfillment on or prior to the Closing Date of all of the following conditions, any one or more of which may be waived by Purchaser in writing:

 

(i)           Representations and Warranties.  The representations and warranties of the Company contained in Section 4 shall be true on and as of the Closing.

 

(ii)          Agreements and Conditions.  On or before the Closing Date, the Company shall have complied with and duly performed and satisfied in all material respects all agreements and conditions on its part to be complied with and performed by such date pursuant to this Agreement and the other Transaction Documents.

  

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8.            Conditions Precedent to the Obligation of the Company to Close.

 

The obligation of the Company to complete the Closing is subject to the fulfillment on or prior to the Closing Date of all of the following conditions, any one or more of which may be waived by the Company in writing:

 

(i)           Representations and Warranties.  The representations and warranties of Purchaser contained in Section 5 shall be true on and as of the Closing.

 

(ii)          Agreements and Conditions.  On or before the Closing Date, Purchaser and the other Lenders shall have complied with and performed and satisfied in all material respects all agreements and conditions to be complied with and performed by such date pursuant to this Agreement and the other Transaction Documents.

 

(iii)         Consents.  Purchaser shall have obtained any consents necessary to effectuate this Agreement and to consummate the transactions contemplated hereby and delivered copies thereof to the Company.

 

9.            [RESERVED].

 

10.          Restrictions on Transferability.

 

10.1        Restrictive Legend.  Purchaser understands that, until such time as a registration statement pursuant to the Securities Act has been declared effective or the Warrant Shares may be sold pursuant to Rule 144(b) under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately resold, the certificate(s) representing the Warrant Shares shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for the securities comprising the Warrant Shares):

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

  

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10.2        Restrictions on Transferability.  Purchaser hereby covenants with the Company not to effect any resale or other disposition of any of the Warrant Shares without complying with the provisions of this Agreement, and without effectively causing any prospectus delivery requirement under the Securities Act to be satisfied, and Purchaser acknowledges and agrees that such Warrant Shares are not transferable on the books of the Company unless (a) the Warrant Shares have been sold in accordance with an effective registration statement or valid exemptions from registration under the Securities Act and any applicable state securities or “blue sky” laws, (b) prior to such time that a registration statement shall have become effective under the Securities Act, Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of the Warrant Shares under the Securities Act and (c) if applicable, the requirement of delivering a current prospectus has been satisfied.  Purchaser acknowledges that the Company is not obligated to file and may not file any such registration statement with the SEC.

 

11.          Registration Rights.

 

11.1    Demand Registration.

 

(i)           If, at any time after nine (9) months following the Closing Date, Purchaser decides it may sell or otherwise dispose of the Registrable Securities (as defined below), then Purchaser shall deliver a written request to the Company requesting that the Company prepare and file a registration statement under the Securities Act or any successor statute covering such Registrable Securities and specifying the intended method of the proposed disposition and the portion of the Registrable Securities to be sold or disposed (each such request shall be referred to herein as a “Demand Registration”).  “Registrable Securities” shall mean shares of Common Stock issued or issuable to Purchaser under the Warrant, together with any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing, provided however, that Registrable Securities shall not include any shares (i) the sale of which has been and continues to be registered pursuant to the Securities Act or (ii) which have been sold without restriction.

 

(ii)          Upon receipt of the Demand Registration, as expeditiously as possible, the Company shall use its best efforts to cause an appropriate registration statement (the “Registration Statement”) covering such Registrable Securities to be filed with the SEC and to be declared effective as soon as reasonably practicable.

 

(iii)         The Company shall not be obligated to effect more than a total of two (2) Demand Registrations on forms other than Form S-3.  A Demand Registration under this Section 11.1 shall not be deemed to have occurred unless the Registration Statement relating thereto (A) has become effective under the Securities Act and (B) has remained effective for a period of at least one hundred twenty (120) days (or such shorter period in which all of Purchaser’s Registrable Securities included thereunder have actually been sold), provided that such Registration Statement shall not be considered a Demand Registration if, after such registration statement becomes effective, such registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court.

 

(iv)         The Company shall bear all of the costs and expenses relating to the Registration Statement, including, but not limited to, registration, filing and qualification fees, printing expenses, reasonable accounting and legal fees and disbursements, provided however, that underwriting discounts and commissions and reimbursable underwriters’ expenses will be borne pro-rata by Purchaser based on the number of Purchaser’s Registrable Securities covered by the Registration Statement in relation to the total number of shares covered by the Registration Statement (collectively, the “Costs and Expenses”).  Notwithstanding the foregoing, Purchaser shall pay or reimburse the Company for fifty percent (50%) of the total amount of reasonable legal and accounting expenses incurred in connection with a Demand Registration, provided however, that to the extent that the Registration Statement covers the shares of common stock of other holders, then Purchaser shall be obligated to reimburse only 50% of Purchaser’s pro-rata portion of such legal and accounting expenses, which portion shall be based on the number of Purchaser’s Registrable Securities covered by the Registration Statement in relation to the total number of shares covered by the Registration Statement.

  

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(v)         Notwithstanding anything to the contrary herein, if the Company shall furnish to Purchaser a certificate signed by the President, Chief Executive Officer or Chairman of the Board of Directors of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Registration Statement to be filed and it is therefore essential to defer the filing of such Registration Statement, then the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the Demand Registration, provided however, that the Company may not utilize this right more than once in any twelve (12) month period.

 

11.2     Form S-3 Registration.  In the event the Company becomes eligible to use Form S-3 for the registration of its securities, and the Company shall receive from Purchaser a written request that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by Purchaser, then the Company will:

 

(i)           promptly give written notice of the proposed registration and Purchaser’s request therefor, and any related qualification or compliance, to all other holders (each, a “Holder”) of the Company’s common stock.

 

(ii)          as soon as practicable, effect such registration and any related qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of Purchaser’s Registrable Securities as are specified in such request, together with all or such portion of the common stock of any other Holder or Holders joining in such request as are specified in a written request given within twenty (20) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 11.2:

 

(a)           if Form S-3 is not available for such offering;

 

(b)           if Purchaser, together with the Holders of any other securities of the Company entitled to inclusion in such registration, propose to sell the Registrable Securities and such other securities (if any) at an aggregate price to the public of less than One Million Dollars ($1,000,000);

 

(c)           if the Company shall furnish to the Holders a certificate signed by the President, Chief Executive Officer or Chairman of the Board of Directors  of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement no more than once during any twelve (12) month period for a period of not more than ninety (90) days after receipt of the request of Purchaser under this Section 11.2;

  

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(d)           if the Company has, within the twelve (12) month period preceding the date of such request, already effected one (1) registration on Form S-3 for Purchaser pursuant to this Section 11.2; or

 

(e)           in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

 

(iii)          Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Securities and other securities so requested to be registered pursuant to this Section 11.2 as soon as practicable after receipt of the request or requests of Purchaser for such registration.  The Company shall pay all Costs and Expenses incurred in connection with the registration requested pursuant to this Section 11.2.

 

(iv)          Form S-3 registrations shall not be deemed to be a Demand Registrations as described in Section 11.1 above.

 

11.3     Piggyback Registration.  If at any time the Company shall propose the filing of a Registration Statement on an appropriate form under the Securities Act of any securities of the Company, but excluding Registration Statements relating to any registration under Section 11.1 or Section 11.2 or to any employee benefit plan or a corporate reorganization, then the Company shall give Purchaser notice of such proposed registration and shall include in any Registration Statement relating to such securities all or a portion of Purchaser’s Registrable Securities as Purchaser shall request, by notice given by Purchaser to the Company within twenty (20) days after the giving of such notice by the Company, to be so included.  In the event of the inclusion of Registrable Securities pursuant to this Section 11.3, the Company shall bear all of the Costs and Expenses of such registration; provided, however, that Purchaser shall be obligated to pay, pro rata based upon the number of Registrable Securities included therein, the underwriters' discounts and compensation.  In the event the distribution of securities of the Company covered by a Registration Statement referred to in this Section 11.3 is to be underwritten, then the Company's obligation to include Registrable Securities in such Registration Statement shall be subject, at the option of the Company, to the following further conditions:

 

(i)          The distribution for the account of Purchaser shall be underwritten by the same underwriters who are underwriting the distribution of the securities for the account of the Company and/or any other persons whose securities are covered by such Registration Statement, and Purchaser will enter into an agreement with such underwriters containing customary provisions;

  

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(ii)          If the underwriting agreement entered into with the aforesaid underwriters contains restrictions upon the sale of securities of the Company, other than the securities which are to be included in the proposed distribution, for a period not exceeding one hundred eighty (180) days from the effective date of the Registration Statement, then such restrictions will be binding upon Purchaser and, if requested by the Company, Purchaser will enter into a written agreement to that effect; and

 

(iii)          If the underwriters state in writing that they are unwilling to include any or all of Purchaser’s securities in the proposed offering because such inclusion will materially interfere with the orderly sale and distribution of the securities being offered by the Company, then the number of Purchaser’s Registrable Securities to be included will be reduced in accordance with such statement by the underwriters.

 

11.4     Amendment of Registration Rights.   The registration rights provisions under this Section 11 may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of Purchaser.

 

11.5     Registration Procedures.   In connection with the filing of a Registration Statement pursuant to Section 11 hereof, and in supplementation and not in limitation of the provisions hereof, the Company shall:

 

(i)           Notify Purchaser as to the filing of the Registration Statement and of all amendments or supplements thereto filed prior to the effective date of said Registration Statement;

 

(ii)          Notify Purchaser, promptly after the Company shall receive notice thereof, of the time when said Registration Statement became effective or when any amendment or supplement to any prospectus forming a part of said Registration Statement has been filed;

 

(iii)         Notify Purchaser promptly of any request by the SEC for the amending or supplementing of such Registration Statement or prospectus or for additional information;

 

(iv)         Prepare and promptly file with the SEC, and promptly notify Purchaser of the filing of, any amendments or supplements to such Registration Statement or prospectus as may be necessary to correct any statements or omissions;

 

(v)          Prepare and file with the SEC, promptly upon Purchaser's written request, any amendments or supplements to such Registration Statement or prospectus which may be reasonably necessary or advisable in connection with the distribution of the Registrable Securities;

 

(vi)         Prepare, promptly upon request of Purchaser or any underwriters for Purchaser, such amendment or amendments to such Registration Statement and such prospectus or prospectuses as may be reasonably necessary to permit compliance with the requirements of the Securities Act applicable;

  

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(vii)       Advise Purchaser promptly after the Company shall receive notice or obtain knowledge of the issuance of any stop order by the SEC suspending the effectiveness of any such Registration Statement or amendment thereto; or the initiation or threatening of any proceeding for that purpose.  In such event the Company shall promptly use its best efforts to prevent the issuance of any stop order or obtain its withdrawal promptly if such stop order should be issued;

 

(viii)      Furnish Purchaser, as soon as available, copies of any Registration Statement and each preliminary or final prospectus, or supplement or amendment required to be prepared pursuant hereto, all in such quantities as Purchaser may, from time to time, reasonably request; and

 

(ix)         If requested by Purchaser, enter into an agreement with the underwriters of the Registrable Securities being registered containing customary provisions and reflecting the foregoing.

 

12.       Rule 144 Reporting.  With a view to making available to Purchaser the benefits of certain rules and regulations of the SEC, which may permit the resale of the Warrant Shares to the public without registration, the Company agrees after the date hereof to:

 

(i)           make and keep public information available, as those terms are understood and defined in Rule 144(c) under the Securities Act;

 

(ii)          file with the SEC all reports and other documents required of the Company under the Securities Act and the Exchange Act (it being expressly acknowledged by the parties hereto that if any such report or document is not filed with the SEC within thirty (30) days of the date required under the rules and regulations of the SEC (after giving effect to any Rule 12b-25 extensions under the Exchange Act), such failure shall be deemed an Event of Default under the Credit Agreement); and

 

(iii)         so long as Purchaser owns any Registrable Securities, to furnish to Purchaser forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as Purchaser may reasonably request in writing in complying with any rule or regulation of the SEC allowing Purchaser to sell any such securities without registration.

  

22

  

13.             Indemnification.

 

13.1           Indemnification by the Company.  The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless Purchaser, its officers, directors, partners, members, agents and employees, each Person who controls Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, reasonable attorneys’ fees (collectively, “Losses”), as incurred, arising out of or relating to: (i) any material misrepresentation or material breach of any representation or warranty made by the Company in this Agreement or any other certificate, instrument or document contemplated hereby or thereby; (ii) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby; (iii) any cause of action, suit or claim brought or made against such Indemnified Party (as defined in Section 13.2 hereof) by a third party (including for these purposes a derivative action brought on behalf of the Company), arising out of or resulting from (x) the execution, delivery, performance or enforcement of this Agreement or any other certificate, instrument or document contemplated hereby or thereby, (y) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (z) the status of Indemnified Party as holder of the Securities; or (iv) any untrue or alleged untrue statement of a material fact contained in the Registration Statement or any form of Company prospectus or in any amendment or supplement thereto or in any Company preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding Purchaser furnished in writing to the Company by Purchaser for use therein, or to the extent that such information relates to Purchaser or Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved by Purchaser expressly for use in the Registration Statement, or (B) with respect to any prospectus, if the untrue statement or omission of material fact contained in such prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely made available by the Company to Purchaser, and Purchaser seeking indemnity hereunder was advised in writing not to use the incorrect prospectus prior to the use giving rise to Losses.  Notwithstanding anything contained herein to the contrary, no Indemnifying Party (as hereinafter defined) shall be obligated to indemnify an Indemnified Party (as hereinafter defined) hereunder for that portion of any Losses that have been the result of the gross negligence or willful misconduct of such Indemnified Party or the breach of a Transaction Document by an Indemnified Party.

 

13.2           Conduct of Indemnification Proceedings.  If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

  

23

  

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; (ii) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of separate counsel shall be at the expense of the Indemnifying Party).  It shall be understood, however, that the Indemnifying Party shall not, in connection with any one such Proceeding (including separate Proceedings that have been or will be consolidated before a single judge) be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, which firm shall be appointed by a majority of the Indemnified Parties.  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

 

All reasonable fees and expenses of the Indemnified Party required to be paid by an Indemnifying Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section 13.2) shall be paid to the Indemnified Party, as incurred, within 20 Trading Days (defined below) of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). For purposes of this Agreement, “Trading Day” means (i) a day on which the Common Stock is traded or is eligible to be traded on a Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is traded or is eligible to be traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.  “Trading Market” means whichever of the NYSE AMEX Equities, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing) on which the Common Stock is listed or quoted for trading on the date in question.

  

24

  

13.3          Contribution.  If a claim for indemnification under Section 13.1(iv) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 13.2, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 13.3 was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 13.3 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 13.3, Purchaser shall not be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by Purchaser from the sale of the Registrable Securities subject to the Proceeding exceed the amount of any damages that such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

The indemnity and contribution agreements contained in this Section 13.3 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

 

14.          Miscellaneous.

 

14.1        [INTENTIONALLY OMITTED].

 

14.2        Fees and Expenses.

 

(i)          Except as expressly set forth in the Transaction Documents 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.

 

(ii)          The Company agrees to reimburse Purchaser at the Closing (or, at Purchaser’s option, promptly thereafter) for all reasonable legal fees, due diligence expenses and other reasonable expenses incurred for services relating to the transactions contemplated herein, including any reasonable legal fees and other reasonable expenses related to Purchaser’s review of the Company’s compliance with post-closing covenants.  The foregoing reimbursement obligation of the Company shall be enforceable by Purchaser regardless of whether the Closing occurs.

 

14.3          Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, 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.  At or after the Closing, and without further consideration, the Company will execute and deliver to Purchaser such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.

  

25

  

 

14.4          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 or email at the facsimile number or email address specified in this Section 14.4 prior to 6:30 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 or email at the facsimile number or email address specified in this Section 14.4 on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.  The addresses, facsimile numbers and email addresses for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person.

 

14.5          Amendments; Waivers.  No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waiver 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.

 

14.6          Construction.  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.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

14.7          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 Purchaser.  Purchaser may assign its rights under this Agreement to any Person to whom Purchaser assigns or transfers or will assign or transfer (including by way of distribution to its members, partners or stockholders) any Securities, provided (i) such transferor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company after such assignment, (ii) at least five days prior to such assignment, the Company is furnished with written notice of (x) the name and address of such transferee or assignee and (y) the Registrable Securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (iv) such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Purchaser” and (v) such transfer shall have been made in accordance with the applicable requirements of this Agreement and with all laws applicable thereto.

 

  

26

  

 

14.8          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, except that each Indemnified Party is an intended third-party beneficiary of Section 13 and (in each case) may enforce the provisions of such section directly against the parties with obligations thereunder.

 

14.9          Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  THE COMPANY AND PURCHASER HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER.  EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF 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 MANNER PERMITTED BY LAW.  THE COMPANY AND PURCHASER HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

 

14.10          Survival.  The representations and warranties, agreements and covenants contained herein shall survive the Closing.

 

14.11          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 email attachment, 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 email-attached signature page were an original thereof.

 

  

27

  

 

14.12          Severability.  If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

14.13          Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever the Purchaser exercises a right, election, demand or option owed to such Purchaser by the Company under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then, prior to the performance by the Company of the Company’s related obligation, Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

 

14.14          Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith.  The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.

 

14.15          Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, Purchaser and the Company will be entitled to seek specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

 

14.16          Payment Set Aside.  To the extent that the Company makes a payment or payments to Purchaser hereunder or Purchaser enforces or exercises its rights hereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company by a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

  

28

  

 

14.17          Adjustments in Share Numbers and Prices.  In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in any Transaction Document to a number of shares or a price per share shall be amended to appropriately account for such event.

 

14.18          Public Announcement.  From and after the Closing, the Company and Purchaser will not disclose, shall not cause any Person to disclose, and will not include or cause any Person to include in any public announcement, the name of the other party to this Agreement, unless expressly agreed to by such other party or unless and until such disclosure is required by applicable law or applicable regulation, and then only to the extent of such requirement..

 

[SIGNATURE PAGE FOLLOWS]

 

  

29

  

 

EXECUTION VERSION

 

IN WITNESS WHEREOF, the parties hereto have executed this Warrant Purchase Agreement on the date first above written.

 

	  	
THE COMPANY:

	  	  
	  	
UMAMI SUSTAINABLE SEAFOOD INC.

	  	  
	  	
By:

	
     

	  	
Name:

	
Oli Valur Steindorsson

	  	
Title:

	
President and Chief Executive Officer

	  	  
	  	
Address:

	  	
1230 Columbia Street

	  	
San Diego, CA  92101

	  	  
	  	
PURCHASER:

	  	  
	  	
By:

	
     

	  	
Name:

	  	
Title:

  

  

  

 

SCHEDULE 4.1

 

Capital Stock Exceptions and Liens

 

Lien on shares of Bluefin Acquisition Group, Inc. owned by Umami in favor of UTA Capital LLC.

  

  

  

 

SCHEDULE 4.6

 

Capitalization

 

Capitalization of Umami:

	  	 	

Shares

	 	 	

Warrants

	 	 	

Options

	 	 	

Total, Fully

Diluted

	 
	
Insider Securities

	 	 	 	 	 	 	 	 	 	 	 	 
	
Atlantis

	 	 	30,000,000	 	 	 	 	 	 	 	 	 	30,000,000	 
	
Atlantis Credit Facility - initial $4.0 million

	 	 	 	 	 	 	200,000	 	 	 	 	 	 	200,000	 
	
Atlantis Credit Facility - cash draws

	 	 	 	 	 	 	75,000	 	 	 	 	 	 	75,000	 
	
Oli, Aur and Aurora

	 	 	3,380,000	 	 	 	720,000	 	 	 	800,000	 	 	 	4,900,000	 
	
Dan Zang

	 	 	 	 	 	 	 	 	 	 	300,000	 	 	 	300,000	 
	  	 	 	33,380,000	 	 	 	995,000	 	 	 	1,100,000	 	 	 	35,475,000	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Restricted Securities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Jones Gable et al

	 	 	4,275,400	 	 	 	740,000	 	 	 	 	 	 	 	5,015,400	 
	
Jones Gable et al

	 	 	 	 	 	 	1,000,000	 	 	 	 	 	 	 	 	 
	
Endeavor

	 	 	 	 	 	 	872,000	 	 	 	 	 	 	 	872,000	 
	
Pursuant to PPM - Not insiders or Jones Gable

	 	 	1,420,000	 	 	 	284,000	 	 	 	 	 	 	 	1,704,000	 
	
Transfers from Oli to non-affiliate

	 	 	220,000	 	 	 	 	 	 	 	 	 	 	 	220,000	 
	
UTA

	 	 	 	 	 	 	1,000,000	 	 	 	 	 	 	 	1,000,000	 
	
UTA

	 	 	 	 	 	 	1,981,000	 	 	 	 	 	 	 	1,981,000	 
	
Bedminster Financial Group

	 	 	 	 	 	 	650,000	 	 	 	 	 	 	 	650,000	 
	
Aegis offering

	 	 	1,666,666	 	 	 	1,666,666	 	 	 	 	 	 	 	3,333,332	 
	
Aegis warrants

	 	 	 	 	 	 	200,000	 	 	 	 	 	 	 	200,000	 
	
Seaside

	 	 	1,000,000	 	 	 	1,000,000	 	 	 	 	 	 	 	2,000,000	 
	
IRG

	 	 	 	 	 	 	150,000	 	 	 	 	 	 	 	150,000	 
	
Mirador

	 	 	100,000	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	8,682,066	 	 	 	9,543,666	 	 	 	-	 	 	 	17,125,732	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Original Lions Gate shares

	 	 	7,450,000	 	 	 	 	 	 	 	 	 	 	 	7,450,000	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Baja Acquisition

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Motomax SA de CV

	 	 	3,000,000	 	 	 	 	 	 	 	 	 	 	 	3,000,000	 
	
Salander Holdings Ltd.

	 	 	7,000,000	 	 	 	 	 	 	 	 	 	 	 	7,000,000	 
	  	 	 	10,000,000	 	 	 	 	 	 	 	 	 	 	 	10,000,000	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Total

	 	 	59,512,066	 	 	 	10,538,666	 	 	 	1,100,000	 	 	 	71,150,732	 

 

  

  

  

 

Capitalization of Subsidiaries:

 

Oceanic

 

Umami owns 100% of the issued and outstanding shares of Oceanic Enterprises, Inc.

 

Bluefin

 

Umami owns 100% of the issued and outstanding shares of Bluefin Acquisition Group, Inc.

 

Baja

 

Umami owns 99.984% of the issued and outstanding shares of Baja Aqua-Farms, S.A. de C.V.

 

Kali

 

Bluefin Acquisition Group, Inc. owns 100% of the issued and outstanding shares of Kali Tuna d.o.o.

 

Securities with Special Anti-dilution provisions:

 

The warrants issued to Bedminster Financial and UTA have certain anti-dilution provisions which could result in a greater number of securities being issued under those warrants.  Such provisions will not be triggered by the current transaction.

 

Holders of 5% of the Company’s common stock:

	
 

	  	

Number of Shares 

	 	
 

	Name	  	

Beneficially Owned

	 	Beneficial Ownership
	
Atlantis Group hf

	  	
30,275,000

	 	
50.6%

	
Oli Valur Steindorsson(1)

	  	
34,508,333

	 	
56.9%

	
Michael David Gault (2)

	  	
30,275,000

	 	
50.6%

	
Salander Holdings Ltd.

	  	
7,000,000

	 	
11.8%

	
Gunnhildur Robersdottir(3)

	  	
7,000,000

	 	
11.8%

	
Motomax S.A. DE C.V.

	  	
3,000,000

	 	
5.0%

	
Vilhelm Mar Gudmundsson(4)

	  	
3,000,000

	 	
5.0%

	
Karla Adriana Garcia(4)

	  	
3,000,000

	 	
5.0%

(1) Includes 30,275,000 shares beneficially owned by Atlantis Group hf.

(2) Consists of 30,275,000 shares beneficially owned by Atlantis Group hf.

(3) Consists of 7,000,000 shares beneficially owned by Salander Holdings Ltd.

(4) Consists of 3,000,000 shares beneficially owned by Motomax S.A. DE C.V.

 

  

  

  

EXECUTION VERSION

 

SCHEDULE 4.7

 

Exceptions to timely SEC filings; Material adverse effect events; Material liabilities

 

None other than as disclosed in SEC Reports.

  

  

  

EXECUTION VERSION

 

SCHEDULE 4.8

 

Litigation

 

None other than as disclosed in SEC Reports.

  

  

  

EXECUTION VERSION

 

SCHEDULE 4.9

 

Compliance

 

None.

  

  

  

 

SCHEDULE 4.10

 

Real Property

 

Umami – office lease at 405 Lexington Ave, Suite 2640 New York, NY (this lease has been terminated effective September 1, 2011)

 

Umami – office lease at 1230 Columbia Street, Suite 440, San Diego CA 92101

 

Kali - Put Vele Luke 70, 23 272 Kali, CROATIA – Land are facilities are owned dock space is leased.

 

Baja Aqua Farms SA de CV – 4 leased facilities

Calle 12 #211

Parque Industrial Fondeport

El Sauzal, Ensenada Baja California

CP 22760

 

Calle 25 Esq. Avenida Alfonso Iberri,

Int. 2, Centro, C.P. 85400

Guaymas, Sonora

  

Calle Diez # 385-D Parque Industrial Fondeport

El Sauzal, Ensenada Baja California 22760

Calle Séptima LD-5 Parque Industrial Fondeport

El Sauzal, Ensenada Baja California 22760

 

  

  

  

EXECUTION VERSION

 

SCHEDULE 4.11

 

Significant Customers year ended June 30, 2011

 

Kali

 

Atlantis Co., Ltd. = 64%

 

Mitsubishi = 21%

 

Sirius = 14

 

Baja

 

Atlantis Co. Ltd. = 81%

 

Global = 19%

  

  

  

 

SCHEDULE 4.16

 

Listing and Maintenance Requirements

 

None other than as disclosed in SEC Reports.

  

  

  

 

SCHEDULE 4.17

 

Registration Rights

 

None other than as disclosed in SEC Reports.

  

  

  

 

SCHEDULE 4.18

 

Takeover Protections

 

None other than as disclosed in SEC Reports.

  

  

  

 

SCHEDULE 4.21

 

Intellectual Property Exceptions

 

None other than as disclosed in SEC Reports.

  

  

  

 

SCHEDULE 4.26

 

Affiliated Transactions

 

None other than as disclosed in SEC Reports.

 

  

  

  

 

EXECUTION VERSION

 

SCHEDULE 4.30

 

Indebtedness

 

At August 24, 2011 based on exchange rates of same date

 

1) Indebtedness owing by Umami Sustainable Seafood Inc. to Ray Garea and Alan Fournier in an amount equal $5,624,000.

 

2) Indebtedness owing by Umami Sustainable Seafood Inc. to UTA Capital LLC in an amount equal $3,370,000.

 

3) Indebtedness owing by Umami Sustainable Seafood Inc.  to Aurora Investments ehf in an amount equal to $4,000,000.

 

4) ) Indebtedness owing by Umami Sustainable Seafood to The Atlantis Group hf up to an amount equal to $15,000,000.

5) Indebtedness owing by Kali Tuna d.o.o. to Erste & Steiermaerkische Bank d.d. in an amount equal to $20,573,000.

6) Indebtedness owing by Kali Tuna d.o.o. to Volksbank in an amount equal to $1,610,000.

7) Indebtedness owing by Kali Tuna d.o.o. to PBZ in an amount equal to $3,599,000.

8) Indebtedness owing by Baja Aqua-Farms, S.A. de C.V. to BBVA Bancomer, S.A., Institucion de Banca Multipler in an amount equal to $4,020,000.

  

  

  

 

SCHEDULE 4.31

 

Key Officer's intention to terminate employment

 

None.

 

  

  

  

 

SCHEDULE 4.34

 

Rights to Vote and Receive Distributions

 

None other than as disclosed in SEC Reports.

  

  

  

 

SCHEDULE 4.35

 

Taxes

Umami has engaged McGladrey & Pullen, LLC to review the status of its corporate tax filings and to prepare any necessary returns.  Their initial review show that Umami needs to file its U.S. federal and state tax returns for the period from March 2009 until June 2010 when the company was known as Lions Gate Lighting Corp. and for the period of March 2010 – June 2010 for its subsidiary Bluefin Acquisition Group.  McGladrey has begun this process and we will file such returns when completed.  Umami does not expect to owe any taxes due to its operating loss position during this period.

  

  

  

 

EXHIBIT A

 

Form of Common Stock Purchase WarrantSENIOR SECURED CREDIT FACILITY

USD 15.000.000

LOAN AGREEMENT

 

Between

Umami Sustainable Seafood Inc.

as Borrower

and

Atlantis Group hf.

as Lender

 

   

  

  

  

 

Execution Copy

 

CONTENTS

	
Clause

	  	
Page

	  	  	  
	
1.

	
DEFINITIONS AND INTERPRETATION

	
2

	
2.

	
THE FACILITY

	
5

	
3.

	
Purpose

	
5

	
4.

	
Conditions of Utilisation

	
6

	
5.

	
Utilisation – (Draw down request)

	
6

	
6.

	
Repayment

	
7

	
7.

	
Prepayment

	
8

	
8.

	
Interest

	
9

	
9.

	
Interest Periods

	
10

	
10.

	
TAXES

	
10

	
11.

	
Increased costs

	
10

	
12.

	
Other indemnities

	
11

	
13.

	
Mitigation by the Lender

	
11

	
14.

	
Costs and expenses

	
11

	
15.

	
Guarantee and indemnity

	
12

	
16.

	
Representations AND WARRANTIES

	
12

	
17.

	
Information undertakings

	
14

	
18.

	
NEGATIVE undertakings

	
15

	
19.

	
Events of Default

	
18

	
20.

	
ASSIGNMENTS AND SUBSTITUTION

	
20

	
21.

	
Changes to the Borrower

	
21

	
22.

	
Conduct of business by the Lender

	
21

	
23.

	
Payment mechanics

	
21

	
24.

	
Set-off

	
22

	
25.

	
Notices

	
22

	
26.

	
Calculations and certificates

	
23

	
27.

	
Partial invalidity

	
23

	
28.

	
Remedies and waivers

	
24

	
29.

	
Counterparts

	
24

	
30.

	
Governing law

	
24

	
31.

	
Enforcement

	
24

	
SCHEDULE 1

	
26

	
SCHEDULE 2

	
30

	
SCHEDULE 3

	
31

 

  

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WHEREAS The Lender has agreed to extend the Borrower a line of credit in the form of this Senior Secured Credit facility in the maximum amount of USD 15.000.000 under the terms and conditions set forth herein the Parties agree as follows:

THIS AGREEMENT is dated July 7, 2011 and made between:

	
  

	
(1)

	
Umami Sustainable Seafood Inc.  (the “Borrower”); and

	
  

	
(2)

	
Atlantis Group hf. a company formed under the laws of the republic of Iceland, registration no. 700805-1580, registered address at Stórhofda 15, 110 Reykjavik, Iceland  (the "Lender").

IT IS AGREED as follows:

	
1.

	
DEFINITIONS AND INTERPRETATION

	
1.1

	
Definitions

In this Agreement the following words and expressions, except where the context otherwise requires, shall have the following meaning:

“Available Facility” means USD 15.000.000 minus the amount corresponding to the drawdown of the Facility with accrued interests and costs.

"Availability Period" means the period from and including the date of this Agreement to and including December 31st  2011.

"Business Day" means a day on which banks are open in Reykjavik and in relation to other currencies, the Relevant Interbank Market.

“Closing” means the signing date of this Agreement.

"Default" means any Event of Default or any Potential Event of Default.

"Encumbrance" means any mortgage pledge, lien, hypothecation, charge, assignment or deposit by way of security or any other arrangement having the effect of providing or giving security or preferential ranking to a creditor (including set off, title retention arrangements which do not arise in the ordinary course of trade, defeasance or reciprocal fee arrangements).

"Environmental Permits" means all permits, licences, consents, approvals, certificates, specifications, registrations and other authorizations and the filing of all notifications, reports, improvement programmes and assessments required under any Environmental Laws for the operation of the business of any of the Group Companies or the occupation or use of  any property in which any Group Company conducts any activity or otherwise has an interest in.

"Event of Default" means any event or circumstance specified as such in Clause 23 (Events of Default).

"Facility" means the term loan facility in an aggregate amount of USD 15.000.000.00  made available under this Agreement as described in Clause 2 (The Facility) to the extent not cancelled, reduced or transferred under this Agreement.

"Final Repayment Date" means March 30th 2012.

  

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"Finance Documents" means this Agreement and the Security Documents and any other document so designated by the Lender and the Borrower.

"Group" means the Borrower and each of its subsidiaries (and the subsidiaries of such subsidiaries), whether wholly or partly owned and "Group Company" means any of them.

"Interest Payment Date" means in relation to amounts borrowed under this Agreement, the last day of each Interest Period.

"Interest Period" means, in relation to a Loan, each period determined in accordance with Clause 9 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest).

"Loan" means a loan made or to be made under the Facility or the principal amount outstanding for the time being of that loan.

“Material Adverse Effect” means an event or circumstance which (when taken alone or together with any previous event or circumstance) is or could be expected in the reasonable opinion of the Lender to be materially adverse to the assets, business, trading prospects or financial or trading position or condition of the Group take as a whole.

"Material Contracts" means, at any time, any agreement to which a Group Company is a party which is of such importance to any member of the Group that the loss of the benefit of that agreement for the Group taking into account commercial circumstances prevailing at that time and taking into account any available alternatives or replacements would have or be reasonably likely to have a Material Adverse Effect.

"Note" means the negotiable promissory note in the form of Schedule [3] (Form of Note).

"Obligor" means a Borrower

"Party" means a party to this Agreement.

"Parent" means the Borrower as defined in the preamble of this Agreement.

“Pledge” means security interests created by the Pledge Agreement entered into concurrently with the signing of this Agreement or after the date hereof in such form as may be agreed upon by the parties hereto and which may include, without limitation, live Tuna, kept in cages at the site of Kali Tuna d.o.o., Kali, Croatia, and of Baja Aqua-farms. S.A. de C.V in Mexico; it being understood that the aggregate value of all assets pledged hereunder will not exceed 200% of the amount of the Loans outstanding from time to time.

"Potential Event of Default" means anything which, with the giving of notice, the lapse of time, any determination of materiality, the satisfaction of any applicable condition, or any combination of them is likely, in the reasonable opinion of the Lender, to be in accordance with Clause 23 (Events of Default), an Event of Default.

"Reference Banks" means Arion Bank hf., or such other banks as may be appointed by the Lender in consultation with the Borrower.

"Security Documents" means the security documents that grant the Lender a security for repayment of the loan granted under the Credit Facility Agreement.

“Subsidiaries” all subsidiaries of the Borrower.

  

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"Tax" means any tax, levy, impost, duty or other charge or withholding of a similar nature (including a penalty or interest payable in connection with any failure to pay or delay in paying any of the same) and “Taxes” shall be construed accordingly.

"Unpaid Sum" means any sum due and payable but unpaid by an Obligor under this Agreement.

 

"Utilisation" means a utilisation of the Facility.

"Utilisation Date" means the date of a Utilisation, being the date on which the relevant Loan is to be made.

"Utilisation Request" means a notice substantially in the form set out in Schedule 2 (Utilisation Requests). – Also referred to as “drawdown request”

	
1.2

	
Construction

	 	
(a)

	
A provision of law is a reference to that provision as amended or re-enacted;

	 	
(b)

	
A clause on a Schedule is a reference to a clause or a schedule to this Agreement unless expressly set forth otherwise;

	 	
(c)

	
A reference to a person or entity includes its permitted successors, transferees and assigns;

	 	
(d)

	
Words importing the singular shall include the plural and vice versa.

	
2.

	
THE FACILITY

Subject to the terms of this Agreement, the Lender hereby makes available to the Borrower a term loan facility in the aggregate amount of USD 15.000.000.00.   Drawdown on this facility is subject to terms defined in this Agreement.

	
3.

	
PURPOSE

The amounts borrowed under this Agreement shall be applied to satisfy the Borrowers needs for funds to finance its operation and the operations of its subsidiaries, Kali Tuna d.o o, Kali, Croatia  and Baja Aqua- Farms S.A. de C.V. Mexico.

	
4.

	
CONDITIONS OF UTILISATION

	
4.1

	
Initial conditions precedent

	
  

	
a)

	
The Borrower acknowledges that this Credit Facility is initially entered into based on the Lender’s greater than 50% ownership of the shares of the Borrower on the date hereof.

	
  

	
b)

	
The parties agree that until June 30, 2011 no more than $10.000.000 in principal Loan amount will be advanced by the Lender hereunder, it being understood that (i) this amount includes $4,000,000 that was previously advanced to the Borrower or offset against existing Borrower indebtedness, (ii) $4,700,000 will be advanced by July 31, 2011.

	
  

	
c)

	
Subject to Section 4.2, and the Available Facility, the Lender hereby undertakes to honor the Borrower’s  Utilisation Requests delivered hereunder; provided the Lender has received  or waived  its right to receive:

	
  

	
(i)

	
Security which may be in the form of pledge of biomass, shares in the Borrower’s subsidiaries or of fixed assets, all subject to acceptance by the Lender;

	
  

	
(ii)

	
Weekly cash flow statement for the Borrower for all of his Tuna farming operations; and

  

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(iii)

	
Insurance certificate for the biomass in cages of Baja Acqua Farms and/or Kali Tuna and

	
  

	
(iv)

	
Update on new debts or encumbrances of the Borrower in the aggregated sum of        USD one million, entered into after the date of signing of this Agreement.

	
  

	
(v)

	
A statement by the Borrower setting forth the intended use of proceeds from the relevant Loan.

  

	
4.2

	
Further conditions precedent

The Lender will only be obliged to make a Loan available to the Borrower if on the date of the Utilisation Request and on the proposed Utilisation Date:

	 	
(a)

	
each representation in Clause 16 (Representations and Warranties) is true and accurate or has been waived by the Lender; and

	 	
(b)

	
no Default is continuing or would result from the proposed Loan.

	
4.3

	
Conditions Subsequent

	 	
(a)

	
If any of the condition precedent items referred to in Art. 4.1.b are expressly waived by the Lender, such conditions shall become conditions subsequent under this clause 4.3 and the Borrower will within 2 months deliver to the Lender in form and substance satisfactory to the Lender such documents.

	
4.4. 

	
Lenders Acknowledgement.

The Lender confirms that it has received a business plan for the current operation of the Borrower, expressing need for the loans to be made available under this Secured Credit Facility.  The Lender is further fully informed of the current financial status of the main subsidiaries of the Borrower in Croatia and Mexico and therefore until further notice not calling for any additional information under Clause 4.1 as a condition for utilization acceptance of utilization requests.  The Borrower grants the Lender full access to all financial information the Lender may require and commits itself to maintain the same processes on accounting and reporting as of now in Kali Tuna and for Baja Aqua-Farm.

	
5.

	
UTILISATION – (DRAW DOWN REQUEST)

	
5.1

	
Delivery and process of an Utilisation Request

	 	
(a)

	
The Borrower may utilise the Facility by delivery to the Lender of a duly completed Utilisation Request in the format provided for as Schedule 3.  Such request shall be submitted to the Lender no less than 10 banking days prior to the requested payout date.

	 	
(b)

	
The Lender in its sole discretion may decide whether the conditions for a Utilisation Request have been met and it is not to be held liable in any way, should it determine that such conditions have not been met.

	 	
(c)

	
In case the Lender declines to facilitate a utilisation request, it shall give a notice thereof to the Borrower no later than 24 hours prior to the requested date of execution.

	
5.2

	
Completion of an Utilisation Request

	 	
(a)

	
The Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

  

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(i)

	
the proposed Utilisation Date is a Business Day within the Availability Period;

	
  

	
(ii)

	
the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount); and

	
  

	
(iii)

	
the proposed Interest Period complies with Clause 9 (Interest Periods).

	
5.3

	
Currency and amount

	 	
(a)

	
The currency specified in a Utilisation Request must be USD.

	 	
(b)

	
The amount of the proposed Loan must be an amount which is not more than the Available Facility.

	
5.4

	
Note

 

Upon confirmation from the Lender that a valid Utilisation Request has been received, the Borrower shall issue a payment confirmation to the Borrower and cause the issuance and delivery to the Lender of a Note reflecting the principal amount of the Loan.

 

The Borrower acknowledges that:

	
  

	
(a)

	
Each Note is intended to evidence the relevant Loan ;

	
  

	
(b)

	
Each Note is issued subject to the terms of this Agreement which will in all circumstances override any provision of the Note which is inconsistent with any provision of this Agreement (as the case may be);

	
  

	
(c)

	
all payments under this Agreement (whether of principal, interest or otherwise) will be taken to be payments under the Note in question; and

	
  

	
(d)

	
each Note signed by the Borrower shall be deemed to have been issued by and on behalf of the Borrower from time to time.

 

Upon payment in full of all amounts outstanding Notes under the Facilities and those Facilities having been cancelled in full the Lender shall promptly return the Notes forthwith to the Borrower.

 

	
5.5

	
Utilisation Request

	
  

	
(a)

	
The first Utilisation Request by the Borrower shall be accompanied by a Note corresponding to the initial amount of Loan requested under the facility.  If the Borrower fails to complete the Note, then it irrevocably authorises the Lender to complete and sign a Note in the appropriate amount on its behalf.

	
  

	
(b)

	
If, for any reason, a Utilisation is not made following the receipt by the Lender of a Utilisation Request, the Lender shall return the Note to the Borrower as soon as reasonably practicable.

	
  

	
(c)

	
Notes for additional draw downs shall be issued pursuant Clause 5.4.

	
6.

	
REPAYMENT

	
6.1

	
Repayment of Loans

	 	
(a)

	
This Loan Facility Agreement is valid until March 31st   2012 which is the final repayment day.   Any terms of this Agreement granting the Lender any rights shall survive until any outstanding amount granted to the Borrower under the terms of this Credit Facility Agreement is fully paid together with all interests and accumulated costs.

	 	
(b)

	
For the avoidance of doubt, any amounts then outstanding under the terms of this Agreement shall be repaid on the Final Repayment Date.

  

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6.2

	
Re-borrowing

The Lender retains the right up on his sole discretion at the request of the Borrower to extend the validity of this Credit Facility Loan Agreement and to extend credit to the Borrower under the terms of such an extended Agreement.

	
7.

	
PREPAYMENT

	
7.1

	
Illegality

If it becomes unlawful in any relevant jurisdiction for the Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain any Loan:

	 	
(a)

	
the Lender shall promptly notify the Borrower upon becoming aware of that event whereupon the Facility will be immediately cancelled; and

	 	
(b)

	
the Borrower shall repay the Loans on the last day of the Interest Period for each Loan occurring after the Lender has notified the Borrower or, if earlier, the date specified by the Lender in the notice delivered to the Borrower (being no earlier than the last day of any applicable grace period permitted by law) together with accrued interest to the date of actual payment and all other sums due to it.

	
7.2

	
Change of control – asset sale - listing

	
  

	
(a)

	
If any person or group of persons acting in concert gains control over the Borrower or if all or substantially all of the business or assets of a Group company are disposed of in a trade sale;

 

	
  

	
(i)

	
the Borrower shall promptly notify the Lender upon becoming aware of that event;

	
  

	
(ii)

	
the Lender shall not be obliged to fund a Utilisation Request; and

	
  

	
(iii)

	
the Lender may, by not less than 2 days prior notice to the Borrower, cancel the Facility and declare all outstanding Loans, together with accrued interest, immediately due and payable, whereupon the Facility will be cancelled and all such outstanding amounts will become immediately due and payable.

	
  

	
(b)

	
For the purpose of sub-clause (a) above "control" means:

	
  

	
(i)

	
the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

	 	
1.

	
cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the Borrower ; or

	 	
2.

	
appoint or remove all, or the majority, of the directors or other equivalent officers of the Borrower; .

	
  

	
(ii)

	
the holding of more than one-half of the issued share capital of the Borrower (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital).

	
  

	
(iii)

	
For the purpose of sub-clause (a) above "acting in concert" means, a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition by any of them, either directly or indirectly, of shares in the Borrower , to obtain or consolidate control of the Borrower .

  

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Notwithstanding anything in this Agreement to the contrary, for purposes of this section, no change in control shall be deemed to have taken place, if such change of control occurred as a result of the direct or indirect action of the Lender or its affiliates.

	
7.3

	
Voluntary prepayment of Loans

	 	
(a)

	
The Borrower may prepay all or only part of the Loan without penalty on any Business Day if:

	
  

	
(i)

	
it has given to the Lender not less than 2 Business Days' irrevocable notice of the date of  the prepayment; and

	
  

	
(ii)

	
it pays the Break Costs and all appropriate breakage cost under Clause 15.1 (Miscellaneous indemnities); and

	
  

	
(iii)

	
the amount prepaid is at least USD 50,000 and, if greater, an integral multiple of USD 50,000.

	 	
(b)

	
Any prepayment shall be made with accrued interest on the amount prepaid and any other sums then due and payable to the Lender under this Agreement.

	 	
(c)

	
A notice of prepayment once given is irrevocable and the Borrower shall be bound, to the extent this Agreement permits, to prepay in accordance with that notice.

	
7.4

	
Restrictions

The Borrower may not repay or prepay all or part of a Loan except as provided in this Agreement.

	
8.

	
INTEREST

	
8.1

	
Calculation of interest

Amounts due under the Notes bear interest at the rate of 1% per month on the average amount outstanding from time to time until all amounts have been paid off.

	
8.2

	
Payment of interest

The Borrower shall pay accrued interest on each Loan under this Agreement and under the Note on each Interest Payment Date as set forth in the Notes.  At the request of the Borrower, any accrued and unpaid interest may be added to the then outstanding principal under any Loan; provided that the then Available Facility is sufficient for such additional principal.

	
8.3

	
Default interest

In the event that interest payments are not made in a timely fashion, a default rate of 1.5% per month will be in effect until all interest amounts then due and payable have been paid.

 (“Default Interest”)

	
9.

	
INTEREST PERIODS

	
9.1

	
Interest Periods

Each Interest Period (except the first one) shall be of one month duration.

  

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9.2

	
Non-Business Days

If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

	
10.

	
WARRANTS

On the funding date of each Loan, the Borrower shall issue to the Lender three year warrants to purchase that number of shares common stock equal to the product arrived at by multiplying (a) the quotient obtained by dividing one by 20 and (b) the dollar amount borrowed.  The exercise price for the warrants shall be $3.00.

	
11.

	
TAXES

All payments to be made by the Borrower hereunder shall be made:

	 	
(a)

	
without set-off or counterclaim; and

	 	
(b)

	
free and clear of and without deduction for or on account of any taxes unless the Borrower are compelled by law to make payment subject to such taxes.

All taxes in respect of this Agreement shall be paid by the Borrower when due and in any event prior to the date on which penalties attach thereto and the Borrower will forward to the Lender official tax receipts evidencing payment of such taxes within 30 days of payment being due for such. The Borrower will indemnify the Lender in respect of all such Taxes.

In addition, if any taxes or amounts in respect thereof must be deducted from any amounts payable or paid by the Borrower hereunder, the Borrower shall pay such additional amounts as may be necessary to ensure that the Lender receives a net amount equal to the full amount which it would have received on the due date had payment not been made subject to such taxes.

	
12.

	
FEES AND COSTS

	
12.1

	
FEES.

The Borrower shall pay in relation to each Loan made available under the terms of this agreement, an amount equal to 1.25% of the amount of each such Loan .  The fee shall be calculated for each Note issued under those terms and shall be added to the amount of the Note to be paid at its final due date.

	
12.2

	
Increased Costs

	 	
(a)

	
Subject to Clause 11..3(Exceptions), the Borrower shall within three Business Days of a demand by the Lender, pay the Lender the amount of any reasonable increased cost incurred by it or any of its affiliated entities as a result of:

	 	
(i)

	
the introduction of or any change in (or in the interpretation or application of) any law or regulation with which it is customary for, or expected of, banks generally (operating in the Relevant Interbank Market) to comply; or

	 	
(ii)

	
compliance with any law or regulation adopted after the date of this Agreement that impacts on the Lender’s performance hereunder;

and which is generally borne by other borrowers of the Lender.

  

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12.3

	
Increased Cost claims

If the Lender intends to make a claim pursuant to Clause 11.1 (Increased costs), the Lender shall promptly notify the Borrower.

	
12.4

	
Exceptions

Clause 1.1.1 (Increased costs) does not apply to the extent any Increased Cost is attributable to the wilful breach (or grossly negligent failure to comply) by the Lender of (or with) any law or regulation.

	
13.

	
OTHER INDEMNITIES

	
13.1

	
Miscellaneous indemnities

	 	
(a)

	
The Borrower shall indemnify on demand the Lender against any costs, loss, expense or liability sustained by the Lender (including on its termination of any hedging instrument) as a consequence of:  (a) the occurrence or continuance of any Default or (b) its taking any steps under Clause 14.1 (Mitigation).

	 	
(b)

	
The Borrower shall promptly indemnify the Lender against any cost, loss or liability incurred by them as a result of:

	 	
(i)

	
its investigating any event which it reasonably believes to be a Default; or

	 	
(ii)

	
acting or relying on any notice which it believes to be genuine, correct and authorised.

	 	
(iii)

	
decline of a Utilisation request.

	 	
(iv)

	
decline of a request to extend the validity of the Credit Facility Loan Agreement cc. Clause 6.2

	
13.2

	
Financing Indemnity

The Borrower shall, within 15 Business Days of demand, indemnify the Lender, each of its affiliated entities and each of its directors, officers, employees or agents (each an "Indemnified Party") against any cost, expense, loss or liability (including reasonable legal fees) incurred by that Indemnified Party (otherwise than by reason of the gross negligence or wilful misconduct of that Indemnified Party) related to, arising out of or in connection with any actual or potential legal action or proceeding arising out of or in connection with the use of proceeds of any Loan.

	
14.

	
MITIGATION BY THE LENDER

	
14.1

	
Mitigation

The Lender shall (in consultation with the Borrower) take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under, or cancelled pursuant to any of Clause 7.1 (Illegality) or Clause 10(Taxes). The Lender is under no obligation to take any steps, if it considers, in its absolute discretion, that to do so might be prejudicial to it. This Clause does not in any way limit the obligations of the Borrower under this Agreement.

  

  

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15.

	
COSTS AND EXPENSES

	
15.1

	
Transaction expenses

 

The Borrower shall reimburse the Lender promptly on demand (on a full indemnity basis and whether or not the Facility is utilised) for all reasonable costs and expenses in any relevant jurisdiction (including legal, valuation, accountancy, and consulting fees and communication and out-of-pocket expenses) and any VAT or similar Tax thereon incurred by the Lender in connection with the negotiation, preparation, printing, execution and syndication of:

	
  

	
-

	
this Agreement and any other document referred to in this Agreement; and

	
  

	
-

	
any other Finance Document executed after the date of this Agreement.

Reimbursable  cost under this provision shall not exceed USD 100.000 in total.

	
15.2

	
Enforcement Costs

The Borrower shall, within 20 Business Days of demand, pay to the Lender the amount of all costs and expenses (including legal, valuation, accountancy and consulting fees and commission and out-of-pocket expenses) and any VAT thereon incurred by the Lender in connection with the enforcement of, or the preservation of its rights under this Agreement or any of the documents referred to therein in any jurisdiction.

	
16.

	
GUARANTEE AND INDEMNITY

	
16.1

	
Guarantee and indemnity

Save as described in Clause 13.2 (Limitation of Liability), the Borrower irrevocably and unconditionally:

	 	
(a)

	
guarantees to the Lender punctual performance by the Borrower of all the Borrower's obligations under the Finance Documents;

	 	
(b)

	
indemnifies the Lender immediately on demand against any cost, loss or liability suffered by the Lender if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which the Lender would otherwise have been entitled to recover.

	
16.2

	
Appropriations

Upon the occurrence or continuation of an Event of Default, until all amounts which become payable by the Borrower under or in connection with the Finance Documents have been irrevocably paid in full, the Lender (or any trustee or agent on its behalf) may refrain from applying or enforcing any other moneys, security or rights held or received by the Lender (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise).

	
17.

	
REPRESENTATIONS AND WARRANTIES

	
17.1

	
Representations and Warranties

The Borrower for itself and each the Group Companies represents and warrants that on the date of this Agreement and on the dates and to the extent specified in Clause 16.2(Repetition):

	 	
(a)

	
Status: (in case of the Borrower) each Group Company is an entity duly organized, validly existing and registered under the applicable laws in its jurisdiction and has the power and all necessary governmental and other material consents, approvals, licences and authorities in any applicable jurisdiction to own its assets and carry on its business as it is being conducted;

  

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(b)

	
Powers and authority: it has the power to enter into and perform the Finance Documents and the transaction contemplated hereby and has taken all necessary action to authorize the entry into and performance of the Finance Documents and the transaction contemplated hereby;

	
  

	
(c)

	
Obligation Binding: the Finance Documents constitute a legal, valid and binding obligation of it enforceable in accordance with its terms. The Finance Documents are in proper form to make it admissible in evidence for bringing an action on the same in such courts. Without limiting the generality of the above, each Security Document to which it is a party to creates the security which the Security Document purports to create and those security interests are valid effective;

	 	
(d)

	
Non-conflict with laws:  To its knowledge, the entry into and performance of the Finance Documents and the transactions contemplated hereby do not and will not conflict with (i) any law or regulation or any official or judicial order or treaty in any relevant jurisdiction or (ii) any agreement or document to which the Borrower are party to or which is binding upon or any of its assets, nor result in the creation or imposition of any Encumbrance on any of its assets pursuant to the provisions of any such agreement or document;

	 	
(e)

	
No Default: No Default has occurred which might have a material adverse change on its business or financial condition;

	 	
(f)

	
Consents:  All authorizations, approvals, consents, licenses, exemptions, filings, registrations, notarizations and other matters, official or otherwise, required or advisable in connection with the entry into performance, validity and enforceability of the Finance Documents and the transactions contemplated hereby have been obtained or effected and are in full force and effect;

	 	
(g)

	
No filings required:  It is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of the Finance Documents that it be filed, recorded or enrolled with any governmental authority or agency in Iceland, USA or Croatia or that any stamp, registration or similar tax be paid on or in relation to this Agreement in Iceland, USA or Croatia;

	 	
(h)

	
Pari Passu Ranking: Under the laws of Iceland in force at the date hereof, the claims of the Lender under this Loan will rank at least pari passu with the claims of all its unsecured creditors to the extend it may not be covered with a security provided herein;

	 	
(i)

	
Full Disclosure: All information supplied by the Borrower in connection with this Loan is true, complete and accurate and it is not aware of any facts or circumstances that have not been disclosed to the Lender and which might, if disclosed, adversely affect the decision of a person considering whether or not to provide finance to the Borrower;

	 	
(j)

	
No Event of Default is Continuing or is reasonably likely to result from the execution of, or the performance of any transaction contemplated by the Finance Documents;

  

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17.2

	
Repetition

On the date on which a Loan is requested, on the Utilisation Date and on the first day of each Interest Period the Borrower shall be deemed to repeat each representation and warranty in Clause 17 and 18 (Information Undertakings and  Negative  undertakings)

Lender information.  The Lender is fully knowledgeable of all current processes at the Borrower and its subsidiaries and is satisfied with the level and quality of information he has been receiving thereof.  He does not request any additional processes to be put in place at Kali Tuna but retains his right to have the same information thereof updated fin line with the current schedule.  Other paragraphs of this Clause 17 shall in the case of Kali Tuna be construed in coherence to this acceptance of current procedures.

 

	
18.

	
INFORMATION UNDERTAKINGS

The Borrower shall cause each other Group Company to:

	
  

	
(a)

	
General: Furnish the Lender with a copy from time to time with reasonable promptness of such financial and other information as to itself as the Lender may reasonably request.

 

	
  

	
(b)

	
Budget: Deliver to the Lender upon request, an itemized consolidated budget for the Group as a whole for the next financial year in the format approved by the Lender containing :

 

	
  

	
(i)

	
capital expenditure;

	
  

	
(ii)

	
trading and revenue forecast prepared on a month by month basis;

	
  

	
(iii)

	
proposed disposals where the forecast consideration exceeds on a month by month basis;

	
  

	
(iv)

	
a statement on revenue and cash flow and a balance sheet as it is forecasted to be at the end of the financial year;

	
  

	
(v)

	
the principal assumptions underlying the budget; and

such budget to have been approved by the directors of the Borrower, to include for each Month consolidated statements of forecast profit and loss; together with a commentary on the above and to contain such other information as is necessary in the reasonable opinion of the Lender.

	
  

	
(c)

	
Accounts: Deliver to the Lender up on request

 

	
  

	
(i)

	
audited annual accounts within one month of the same being prepared and in any event not later than 90 days after the end of the period to which such statements relate. Such accounts shall provide explanations of any material changes against the budget supplied under clause 20 (b) for that financial year; and

 

	
  

	
(ii)

	
consolidated quarterly financial statements for the Group for the period ending every three months, within 2 days after the filing with the Securities and Exchange Commission , in a form consistent with the management accounts and also to include:

  

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Such accounts shall be prepared in accordance with generally accepted accounting principles in the jurisdiction where the relevant entity is incorporated and be approved by the directors (and the board where relevant) of each Group Company.

	
  

	
(d)

	
Other information. Such other information concerning the business or financial condition of the Group (or any part of it), including but not limited to information of any litigation or administrative proceedings current, pending or threatened against any Group Company, any Default, any changes or proposed or possible changes in the markets in which the Group operates which may have material effect on its business.

 

	 	
(e)

	
"Know your customer" checks: If:

	 	
(i)

	
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

	 	
(ii)

	
any change in the status of an Obligor or the composition of the shareholders of an Obligor after the date of this Agreement; or

	 	
(iii)

	
a proposed assignment by the Lender of any of its rights under this Agreement,

obliges the Lender to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Lender (for itself or, in the case of the event described in paragraph (iii) above, on behalf of any prospective new Lender) in order for the Lender or, in the case of the event described in paragraph (iii) above, any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in this Agreement.

	
19.

	
UNDERTAKINGS

The Borrower shall and the Borrower shall procure that each Group Company shall:

	
  

	
(a)

	
Authorisations: Promptly obtain, maintain and comply with the terms of any authorization required under any law or regulation to enable it to perform its obligations under, or for the validity, enforceability or admissibility in evidence of the Finance Documents;

	
  

	
(b)

	
Security:

	
  

	
(i)

	
take whatever steps and execute whatever documents the Lender may reasonably require in order to give effect to the Security Documents;

	
  

	
(ii)

	
grant such further security in favour of the Lender as may be required by the Lender at any time, and which the relevant Group Company can legally grant, from time to time and all such further security will secure the obligations of each Group Company under the Finance Documents; provided that (i) the aggregate value of the security granted shall not exceed 200% the amount of the Loans outstanding from time to time and (ii) no security shall be granted in property that has been pledged or has been committed to be pledged to any other financing source or prospective financing source; and

	
  

	
(iii)

	
take all actions necessary to, in every sense maintain, preserve, protect and defend the security interest granted under the Security Documents;

  

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(c)

	
Ranking of Liabilities: Ensure that its liabilities under the Finance Documents will constitute its direct and unconditional obligations and rank in priority to all its other present and future indebtedness, except (i) amounts owed to UTA Capital LLC and (ii) indebtedness ranking equally or entitled to priority by operation of law.

	
  

	
(d)

	
Insurance

	
  

	
(i)

	
Maintain at all times, with insurance companies of good financial standing acceptable to the Lender acting reasonably, such policies of insurance in relation to its business and assets against such risks as are normally insured by prudent companies carrying on similar business and against such other risks as the Lender may from time to time require (including cover for public, product, environmental, business interruption, terrorism and third party liability), to the full replacement value of such assets for the time being on the basis of a declared value with a reasonable inflation provision;

 

	
  

	
(ii)

	
Comply with the terms of all insurance policies, including any stipulations or restrictions as to use or operation of any asset, and for the avoidance of doubt, observe every safety regulation as recorded and set out in the policies and/or schedules relating thereto, and shall not do or permit anything which may make any insurance policy void or voidable;

	
  

	
(iii)

	
If any default shall at any time be made by any Group Company in effecting or maintaining such insurance or in producing any such evidence to the Lender promptly or depositing any policy with the Lender, the Lender may take out or renew such insurances in such sums as the Lender may think expedient and all money expended by the Lender under this provision shall be recoverable by the Lender under the this Agreement;

	
  

	
(iv)

	
Procure that the Group Companies shall, if so required by the Lender, use their reasonable endeavours to cause the policies of insurance maintained by them as required by this clause to be forthwith amended to include clauses in form satisfactory to the Lender to ensure that the policies shall not be voidable by the insurers as a result of any misrepresentation, non-disclosure of material facts or breach of warranty provided that in each case there shall have been no fraud or wilful deceit on the part of the insured Group Company;

	
  

	
(e)

	
Maintenance of licences: Protect and maintain (and take no action which could foreseeable imperil the continuation of) the licences and statutory authorisations, consents, approvals, intellectual property, trade names, franchises and contracts (the "Authorisations") which are material and necessary for the conduct and continuation of its business substantially as presently conducted and procure that all material conditions attaching to the Authorisations are complied with and that the Group's business is carried on within the terms of the Authorisations;

	
  

	
(f)

	
Access: On at least two day's notice being given to the Borrower by the Lender (except in the case of emergency), permit representatives of the Lenders or its advisers to have access to and inspect the property, assets, books and records of any Group Company during normal business hours at the risk and the cost of that Group Company;

 

  

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(g)

	
Environmental Matters: Comply with all Environmental Laws and obtain, maintain and comply with any Environmental Permit where, in either case, failure to do so is to result in liability and/or costs in excess of two hundred and fifty thousand USD 250,000 (two hundred fifty thousand US dollars) or in the closure of any site or suspension of any of its operations or business;

	
  

	
(h)

	
Compliance with laws: Comply in all respects with all laws and regulations to which it is subject, non-compliance with which would have a Material Adverse Effect;

	
  

	
(i)

	
Taxes: Pay all Taxes due and payable by it within applicable time limits without incurring penalties;

	
  

	
(j)

	
Intellectual Property

	
  

	
(i)

	
preserve and maintain the subsistence and validity of its intellectual property necessary for the business of the relevant Group member;

	
  

	
(ii)

	
use reasonable endeavours to prevent any infringement in any material respect of its intellectual property;

	
  

	
(iii)

	
make registrations and pay all registration fees and taxes necessary to maintain its intellectual property in full force and effect and record its interest in that intellectual property;

	
  

	
(iv)

	
not use or permit its intellectual property to be used in a way or take any step or omit to take any step in respect of that intellectual property which may materially and adversely affect the existence or value of the intellectual property or imperil the right of any member of the group to use such property; and

	
  

	
(v)

	
not discontinue the use of any of its intellectual property;

where failure to do so is reasonably likely to have a Material Adverse Effect.

	
  

	
(k)

	
Pensions

	
  

	
(i)

	
ensure that all pension schemes operated by or maintained for the benefit of the Group Companies and/or its employees are fully funded and that no action or omission is taken by any Group Company in relation to such a pension scheme which has or is reasonably likely to have materially adverse affect.

	
  

	
(ii)

	
the Parent shall ensure that no Group Company establishes any defined benefit occupational pension scheme.

	
  

	
(iii)

	
The Parent shall deliver to the Lender at such times as those reports are prepared in order to comply with the then current statutory or auditing requirements (as applicable either to the trustees of any relevant schemes or to a Parent), actuarial reports in relation to all pension scheme mentioned in (a) above;

	
  

	
(l)

	
Senior Management Service contracts: ensure that the senior management of each Group Company continues to be employed for that Group Company and agreements with such parties are not terminated without the Lender’s consent.

	
  

	
(m)

	
Default – Litigation: promptly, upon becoming aware of the same, notify the Lender of :

	
  

	
(i)

	
any Default;

  

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(ii)

	
any litigation, arbitration or administration proceeding commenced against any member of the Group; which if adversely determined involves a potential liability of any member of the Group exceeding USD [250,000] (two hundred fifty thousand US dollars;

	
  

	
(iii)

	
any Encumbrance attaching to any of the assets of any member of the Group, which has not been declared in budget or by other means;

	
  

	
(n)

	
Status: remain a duly organized entity and validly existing under the laws of its jurisdiction of incorporation and to maintain its power to sue, to own its assets and carry on its business as it is being conducted;

	
  

	
(o)

	
Material Contracts: comply at all times with all Material Contracts;

	
  

	
(p)

	
Preservation of assets: maintain in good working order and condition (ordinary wear and tear excepted) all of its assets necessary or desirable in the conduct of its business;

	
  

	
(q)

	
No discontinuation of current processes:  The Borrower accepts to maintain all current processes at Kali Tuna in regard of Budgeting, financial planning and preparation and delivery of any information on the finances or the operation of the Company.

	
20.

	
EVENTS OF DEFAULT

	
20.1

	
Events of default

Each of the events set out below is an Event of Default, whether or not caused by any reason whatsoever outside the control of the Borrower or of any other person or legal entity:

	
  

	
(a)

	
Non-payment: Failure by the Borrower to pay promptly and for value on the due date any sum whatsoever due for payment by the Borrower to the Lender under the Finance Documents provided the failure shall only constitute an Event of Default if such failure to pay continue unremedied for 3 (three) Business Days after a notice thereof has been given by the Lender to a Borrower; or

	
  

	
(b)

	
Breach of certain obligations:  If the Borrower fails to comply with any of its obligations according to the Finance Documents and such breach if capable of remedy continues unremedied for 5 (five) Business Days after receipt of a notice thereof from the Lender; or

	
  

	
(c)

	
Cross default: failure by any Group Company to make payment when due of any obligation (other than in respect of the Finance Documents) exceeding USD 500,000 (five hundred thousand US dollars) (or its equivalence in other currencies); or default by any Group Company, in the performance of any agreement under which any such obligation is created if the effect of such default is to cause such obligation to become due, or to permit the holder or holders of such obligation to declare such obligation due prior to its normal maturity; or

	
  

	
(d)

	
Cessation: dissolution, termination of existence, suspension (unless fully covered by business interruption insurance) or discontinuance of business (other than as a result of a consolidation of one or more of Borrower’s subsidiaries with Borrower or another subsidiary) or ceasing to operate as going concern of Borrower or any Subsidiary; or

  

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(e)

	
Unlawfulness: at any time it is unlawful for an Obligor to perform any of its obligations under any Finance Document or Transaction Document or if any Security Document is not or ceases to be legal, valid and binding on any Group Company or does not create the security it purports to create or becomes unenforceable;

	
  

	
(f)

	
Legal process: Any judgment or order issued against a Group Company is not stayed or complied with within fourteen days or a creditor attaches or takes possession of, or a distress, execution, sequestration or other process is levied or enforced upon or against, any of the assets, rights or revenues of a Group Company (with a value in excess of $500,000 or foreign currency equivalent thereof) which is not discharged within fourteen days, unless in each case the same is being contested in good faith by appropriate proceedings; or

	
  

	
(g)

	
Insolvency; compositions: any Group Company stops or suspends payment of any of its indebtedness or commences negotiations with one or more of its creditors with a view to the general readjustment or rescheduling of its indebtedness or proposes or enters into any composition or other arrangement for the benefit of its creditors generally or any class of creditors or proceedings are commenced in relation to any Group Company under any law, regulation or procedure relating to reconstruction or readjustment of its indebtedness; or

	
  

	
(h)

	
Bankruptcy or insolvency proceedings:  Kali Tuna or Baja takes any action or any legal proceedings are started or other steps taken for (i) any Group Company to be adjudicated or found bankrupt or insolvent, (ii) the winding-up or dissolution of any Group Company or (iii) the appointment of a liquidator, administrator, trustee, receiver or similar officer of any Group Company or the whole or any part of their respective undertaking, assets, rights or revenues; or

	
  

	
(i)

	
Change of ownership or control of Borrower or any Group Company: upon the occurrence of a change of control as defined in section 7.2.(b); or  .

 

	
  

	
(j)

	
Analogous Effect: Any event occurs which, under the law of any relevant jurisdiction, has an analogous or equivalent effect to any of the events mentioned in this clause19.1.

	
  

	
(k)

	
Rescission: (i) any party to the Transaction Documents rescinds or purports to rescind all or part of that document where to do so would, in the Lender's opinion, have a Material Adverse Effect; or (ii) any liquidator or other person takes action to reverse or overturn the effect of a Transaction Document and the Lender is advised that such action has a material prospect of success and in the Lender's opinion such action would have a Material Adverse Effect;

 

	
  

	
(l)

	
Fishing Licences: if at any time it is foreseeable that a fishing license of a Fishing Vessel is withdrawn by the appropriate Croatian authorities or if at any time a Fishing Vessel loses its fishing license or it becomes illegal for a Fishing Vessel to fish in accordance with Croatian laws.

 

  

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20.2

	
Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Lender may by notice to the Borrower and/or the Guarantors:

	 	
(a)

	
declare any un-borrowed amount to be cancelled after which the Facility shall be reduced to zero; and/or

	 	
(b)

	
declare the Loans to be immediately due and payable together with all interest, fees and other amounts payable under this Agreement after which such sums shall become due without further demand or other notice of any kind, all of which are expressly waived by the Borrowers; and/or

	 	
(c)

	
exercise and/or enforce all or any of its rights under and pursuant to the Security Documents in such manner as it sees fit.

Notwithstanding anything herein to the contrary, upon the occurrence of an Event of a Default, at the request of the Borrower, in lieu of exercising its rights under paragraph (b) hereof, Lender shall collect any amounts due only from the proceeds of sales of biomass pledged hereunder; provided that such sales are finalized no later than November 30, 2011 and provided further that any Notes then outstanding shall become due and payable upon collection of the proceeds of such sales or December 31, 2011, whichever occurs earlier.

	
21.

	
ASSIGNMENTS AND SUBSTITUTION

 

	
21.1

	
Successors

This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective permitted successors and assigns.

	
21.2

	
Assignments by the Borrower

The Borrowers may not assign or transfer all or any part of its rights or obligations hereunder without the prior written consent of the Lender.

	
21.3

	
Assignments by the Lender

The Lender may at any time assign or otherwise transfer or novate all or any part of its rights or obligations hereunder and provided that any transferee shall have confirmed to the Borrower prior to the transfer taking effect, that it undertakes to be bound by the terms of this Agreement as the Lender in form and substance satisfactory to the Borrower. On the transfer being made, the Lender shall be relieved of its obligations to the extent of the transfer of such obligations.

	
21.4

	
Sub-participations

Nothing in this Agreement restricts the ability of the Lender to sub-participate or sub-contract all or part of its rights and obligations if the Lender remains liable under this Agreement for any such obligation.

	
22.

	
CHANGES TO THE BORROWER

	
22.1

	
Assignments and transfers by Borrower

No Obligor may assign any of its rights or transfer any of its rights or obligations under this Agreement.

  

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23.

	
CONDUCT OF BUSINESS BY THE LENDER

No provision of this Agreement will:

	 	
(a)

	
interfere with the right of the Lender to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

	 	
(b)

	
oblige the Lender to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

	 	
(c)

	
oblige the Lender to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

	
24.

	
PAYMENT MECHANICS

	
24.1

	
Partial payments

If the Lender receives a payment that is insufficient to discharge all the amounts then due and payable under this Agreement, the Lender shall apply that payment towards the obligations of that Borrower under this Agreement in the following order:

	 	
(a)

	
first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Lender;

	 	
(b)

	
secondly, in or towards payment pro rata of any accrued interest or commission due but unpaid under this Agreement;

	 	
(c)

	
thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement.

	
24.2

	
No set-off by Borrower

All payments to be made by the Borrower under this Agreement shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim; provided, however, that insurance proceeds paid out to the Lender as a result of a loss or partial loss of the collateral pledged in connection with the Loans may be offset against any amounts due hereunder..

	
24.3

	
Business Days

	 	
(a)

	
Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

	 	
(b)

	
During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

 

	
24.4

	
Currency of account

	 	
(a)

	
Subject to sub-clauses (b) and (c) below, USD is the currency of account and payment for any sum due from the Borrower under this Agreement.

	 	
(b)

	
Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

	 	
(c)

	
Any amount expressed to be payable in a currency other than USD shall be paid in that other currency.

 

  

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25.

	
SET-OFF

	 	
(a)

	
The Lender may set off any matured or contingent obligation owed to it by the Borrower under this Agreement against any matured or contingent obligation owed by the Lender to that Borrower regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.  No security interest is created by this Clause.

  

	
26.

	
NOTICES

	
26.1

	
Communications in writing

Any communication to be made under or in connection with this Agreement by an Obligor shall be made in writing and, unless otherwise stated, may be made by facsimile or letter.

	
26.2

	
Addresses

The address and facsimile number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with this Agreement is:

	 	
(a)

	
in the case of the Borrowers, that identified with its name below;

	 	
(b)

	
in the case of any other Obligor, that notified in writing to the Lender; and

	 	
(c)

	
in the case of the Lender, that identified with its name below,

or any substitute address, facsimile number, or department or officer as the Party may notify to the Lender (or the Lender may notify to the other Parties, if a change is made by the Lender) by not less than five Business Days' notice.

 

	
Borrower:

 

UMAMI SUSTAINABLE SEAFOOD, INC.,

1230 Columbia St., Suite 1100

San Diego, CA 92101

 

	
 Lender:

 

Atlantis Group hf.

Attn: Thorarinn V. Thorarinsson

Storhofda 23

110 Reykjavik

Iceland

	
26.3

	
Delivery

	 	
(a)

	
Any communication or document made or delivered by one person to another under or in connection with this Agreement will only be effective:

	 	
(i)

	
if by way of facsimile, at the time the facsimile transmission report (or other appropriate evidence) confirming transmission is received by the sender; or

	 	
(ii)

	
if by way of letter, when it has been left at the relevant address or, if posted, at noon on the second Business Day (in the case of an inland address) or the fifth Business Day (in the case of an overseas address) following the day of posting,

and, if a particular department or officer is specified as part of its address details provided under Clause 25.2(Addresses), if addressed to that department or officer.

  

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In proving service it shall be sufficient to prove that personal delivery was made, or that the envelope containing the communication was correctly addressed and posted or that a facsimile transmission report (or other appropriate evidence) was obtained.

	 	
(b)

	
Any communication or document to be made or delivered to the Lender will be effective only when actually received by the Lender and then only if it is expressly marked for the attention of the department or officer identified with the Lender's signature below (or any substitute department or officer as the Lender shall specify for this purpose).

 

	
27.

	
CALCULATIONS AND CERTIFICATES

	
27.1

	
Accounts

The accounts maintained by the Lender in connection with this Agreement shall, in the absence of manifest error, be conclusive evidence of the matters to which they relate.

	
27.2

	
Certificates and Determinations

Any certification or determination by the Lender of a rate or amount is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

	
27.3

	
Day count convention

Interest under the Notes accrues and shall be payable monthly in arrears no later than the fifth calendar day following the relevant month.  In the event that interest payments are not made in a timely fashion, a default rate of 1.5% per month will be in effect until all interest amounts then due and payable have been paid.

	
28.

	
PARTIAL INVALIDITY

If any provision of this Agreement is illegal, invalid or unenforceable, the other provisions and the remainder of the affected provision shall continue to be valid.

	
29.

	
REMEDIES AND WAIVERS

No failure to exercise and no delay in exercising any right, remedy, power or privilege of the Lender under this Agreement and no course of dealing between the Parties shall be construed or operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

	
29.1

	
Amendments and waivers

Any term of the this Agreement may be amended or waived only with the consent of the Lender and the Borrowers and any such amendment or waiver will be binding on all Parties.

	
30.

	
COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be an original, but all of which when taken together shall constitute a single instrument.

  

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31.

	
GOVERNING LAW

This Agreement is governed by Icelandic law.

	
32.

	
ENFORCEMENT

	
32.1

	
Jurisdiction

Each of the Parties irrevocably agrees for the benefit of the Lender that the courts of Iceland shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and, for such purposes, irrevocably submits to the jurisdiction of such courts. The Borrower hereby irrevocably and unconditionally:

	
  

	
(a)

	
waives any objection it may have to the laying of venue of any such proceedings in any of the said courts and any claim it may have that any such proceedings have been brought in an inconvenient forum or are being brought before another court;

	
  

	
(b)

	
consents to the service of process out of any of the said courts in any such proceedings by the airmailing of copies, postage prepaid, to the Borrower at its said address such service to be effective on the receipt at that address;

	
  

	
(c)

	
agrees that nothing herein shall affect the right to serve process in any other manner permitted by law, or to bring proceedings before any other courts of competent jurisdiction;

	
  

	
(d)

	
agrees that the submission to the jurisdiction of the courts referred to above shall not (and shall not be construed so as to) limit the right of the Lender to take proceedings against the Borrower in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law.

 

[SIGNATURE PAGE TO FOLLOW]

  

  

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IN WITNESS OF THE ABOVE, the representatives of the Parties have signed this Agreement in the presence of witnesses.

Done in Reykjavik on the date first above written

AS WITNESS the hands of the parties the day and year first above written.

 

THE BORROWER

 

	
Umami Sustainable Seafood Ltd.

	  
	
By:

	
/s/

	  
	
Dan Zang, Chief Financial Officer

THE LENDER

	
Atlantis Group  HF.

	  
	
By:

	
/s/

	  
	
Thorarinn V. Thoararinsson

  

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Execution Copy

 

SCHEDULE 1

 

NEITHER THIS SECURITY NOR ANY SECURITIES WHICH MAY BE ISSUED UPON EXERCISE OF THIS SECURITY HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY U.S. STATE OR OTHER JURISDICTION OR ANY EXCHANGE OR SELF-REGULATORY ORGANIZATION, IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND SUCH OTHER LAWS AND REQUIREMENTS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR LISTING OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, SUCH REGISTRATION AND/OR LISTING REQUIREMENTS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH WILL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

UMAMI SUSTAINABLE SEAFOOD INC.

 

COMMON STOCK WARRANT

 

No_________

_______________, 2011

 

Umami Sustainable Seafood Inc., a Nevada corporation (the “Company”), hereby certifies that ______________________________, its permissible transferees, designees, successors and assigns (collectively, the “Holder”), for value received, is entitled to purchase from the Company at any time and from time to time commencing on the date first appearing above (the “Issuance Date”), up to and through 12:01a.m. (EST) on the date three (3) years from the Issuance Date (the “Termination Date”) up to _______ shares (each, a “Share” and collectively the “Shares”) of the Company’s common stock, at an exercise price per Share equal to $3.00 (the “Exercise Price”).  The number of Shares purchasable hereunder and the Exercise Price are subject to adjustment as provided in Section 4 hereof.

 

  

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1.

	
Method of Exercise; Payment.

(a)           Exercise.  The purchase rights represented by this Warrant may be exercised, for cash only, by the Holder, in whole or in part, at any time, or from time to time, by the surrender of this Warrant (with the notice of exercise form (the "Notice of Exercise") attached hereto as Exhibit A duly executed) at the principal office of the Company, and by payment to the Company of an amount equal to the Exercise Price multiplied by the number of the Shares being purchased, which amount may be paid, at the election of the Holder, by wire transfer or certified check payable to the order of the Company. The person or persons in whose name(s) any certificate(s) representing Shares shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the Shares represented thereby (and such Shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised.

 

(b)           Stock Certificates.  In the event of any exercise of the rights represented by this Warrant, as promptly as practicable after this Warrant is surrendered and delivered to the Company along with all other appropriate documentation on or after the date of exercise and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of Shares issuable upon such exercise.  In the event this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of Shares for which this Warrant may then be exercised.

(c)           Taxes.  The issuance of the Shares upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such Shares, shall be made without charge to the Holder for any tax or other charge in respect of such issuance.

2.             Warrant.

(a)           Transfer and Replacement.  At any time prior to the exercise hereof, this Warrant may be exchanged upon presentation and surrender to the Company, alone or with other warrants of like tenor of different denominations registered in the name of the same Holder, for another warrant or warrants of like tenor in the name of such Holder exercisable for the aggregate number of Shares as the warrant or warrants surrendered.

(b)           Replacement of Warrant.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver in lieu thereof, a new Warrant of like tenor.

(c)           Cancellation. Payment of Expenses.  Upon the surrender of this Warrant in connection with any transfer, exchange or replacement as provided in this Section 2, this Warrant shall be promptly canceled by the Company.  The Holder shall pay all taxes and all other expenses (including legal expenses, if any, incurred by the Holder or transferees) and charges payable in connection with the preparation, execution and delivery of Warrants pursuant to this Section 2.

(d)           Warrant Register.  The Company shall maintain, at its principal executive offices (or at the offices of the transfer agent for the Warrant or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant (the “Warrant Register”), in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant.

  

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3.             Rights and Obligations of Holders of this Warrant.  

The Holder of this Warrant shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity;  provided,  however, that in the event any certificate representing shares of Common Stock or other securities is issued to the holder hereof upon exercise of this Warrant, such holder shall, for all purposes, be deemed to have become the holder of record of such Common Stock on the date on which this Warrant, together with a duly executed Notice of Exercise, was surrendered and payment of the aggregate Exercise Price was made, irrespective of the date of delivery of such Common Stock certificate.

 

4.             Adjustments.

 

(a)           Stock Dividends, Reclassifications, Recapitalizations, Etc.  While this Warrant is outstanding, in the event the Company:  (i) pays a dividend in Common Stock or makes a distribution in Common Stock, (ii) subdivides its outstanding Common Stock into a greater number of shares, (iii) combines its outstanding Common Stock into a smaller number of shares or (iv) increases or decreases the number of shares of Common Stock outstanding by reclassification of its Common Stock (including a recapitalization in connection with a consolidation or merger in which the Company is the continuing corporation), then (1) the Exercise Price on the record date of such division or distribution or the effective date of such action shall be adjusted by multiplying such Exercise Price by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately before such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event, and (2) the number of shares of Common Stock for which this Warrant may be exercised immediately before such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the Exercise Price immediately before such event and the denominator of which is the Exercise Price immediately after such event.

(b)           Combination: Liquidation.  While this Warrant is outstanding, (i) In the event of a Combination (as defined below), each Holder shall have the right to receive upon exercise of the Warrant the kind and amount of shares of capital stock or other securities or property which such Holder would have been entitled to receive upon or as a result of such Combination had such Warrant been exercised immediately prior to such event (subject to further adjustment in accordance with the terms hereof).  Unless paragraph (ii) is applicable to a Combination, the Company shall provide that the surviving or acquiring Person (as defined below) (the “Successor Company”) in such Combination will assume by written instrument the obligations under this Section 4 and the obligations to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to acquire. “Combination” means an event in which the Company consolidates with, mergers with or into, or sells all or substantially all of its assets to another Person, where “Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity; (ii) In the event of (x) a Combination where consideration to the holders of Common Stock in exchange for their shares is payable solely in cash or (y) the dissolution, liquidation or winding-up of the Company, the Holders shall be entitled to receive, upon surrender of their Warrant, distributions on an equal basis with the holders of Common Stock or other securities issuable upon exercise of the Warrant, as if the Warrant had been exercised immediately prior to such event, less the Exercise Price.  In case of any Combination described in this Section 4, the surviving or acquiring Person and, in the event of any dissolution, liquidation or winding-up of the Company, the Company, shall deposit promptly with an agent or trustee for the benefit of the Holders of the funds, if any, necessary to pay to the Holders the amounts to which they are entitled as described above.  After such funds and the surrendered Warrant are received, the Company is required to deliver a check in such amount as is appropriate (or, in the case or consideration other than cash, such other consideration as is appropriate) to such Person or Persons as it may be directed in writing by the Holders surrendering such Warrant.

  

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(c)           Exercise Price Protection. If the Company, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to equal the Base Share Price.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 4(c) in respect of an Exempt Issuance.  As used herein, the term “Exempt Issuance” shall mean the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company, (b) securities upon the exercise or exchange of or conversion of any Shares issued hereunder, and (c) securities issued pursuant to acquisitions or strategic transactions.  As used herein, the term “Common Stock Equivalents” shall mean any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

 (d)          Notice of Adjustment.  Whenever the Exercise Price or the number of shares of Common Stock and other property, if any, issuable upon exercise of the Warrant is adjusted, as provided in this Section 4, the Company shall deliver to the holders of the Warrant in accordance with Section 10 a certificate of the Company’s Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a description of the basis on which (i) the Board of Directors determined the fair value of any evidences of indebtedness, other securities or property or warrants, options or other subscription or purchase rights and (ii) the Current Market Value (as defined below) of the Common Stock was determined, if either of such determinations were required), and specifying the Exercise Price and number of shares of Common Stock issuable upon exercise of the Warrant after giving effect to such adjustment.

(e)           Notice of Certain Transactions.  While this Warrant is outstanding, in the event that the Company shall propose (a) to pay any dividend payable in securities of any class to the holders of its Common Stock or to make any other non-cash dividend or distribution to the holders of its Common Stock, (b) to offer the holders of its Common Stock rights to subscribe for or to purchase any securities convertible into shares of Common Stock or shares of stock of any class or any other securities, rights or options, (c) to effect any capital reorganization, reclassification, consolidation or merger affecting the class of Common Stock, as a whole, or (d) to effect the voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company shall, within the time limits specified below, send to each Holder a notice of such proposed action or offer.  Such notice shall be mailed to the Holders at their addresses as they appear in the Warrant Register, which shall specify the record date for the purposes of such dividend, distribution or rights, or the date such issuance or event is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and shall briefly indicate the effect of such action on the Common Stock and on the number and kind of any other shares of stock and on other property, if any, and the number of shares of Common Stock and other property, if any, issuable upon exercise of each Warrant and the Exercise Price after giving effect to any adjustment pursuant to  Section 4  which will be required as a result of such action.  Such notice shall be given as promptly as possible and (x) in the case of any action covered by clause (a) or (b) above, at least ten (10) days prior to the record date for determining holders of the Common Stock for purposes of such action or (y) in the case of any other such action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier.

  

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(f)           Current Market Value.  The “Current Market Value” per share of Common Stock or any other security at any date means (i) if the security is not registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and/or traded on a national securities exchange, quotation system or bulletin board, (a) the value of the security, determined in good faith by the Board of Directors of the Company and certified in a board resolution, based on the most recently completed arm’s-length transaction between the Company and a Person other than an affiliate of the Company or between any two such Persons and the closing of which occurs on such date or shall have occurred within the six-month period preceding such date, or (b) if no such transaction shall have occurred within the six-month period, the value of the security as determined by an independent financial expert or an agreed upon financial valuation model or (ii) if the security is registered under the Exchange Act and/or traded on a national securities exchange, quotation system or bulletin board, the average of the daily closing bid prices (or  the equivalent in an over-the-counter market) for each day on which the Common Stock is traded for any period on the principal securities exchange or other securities market on which the common Stock is being traded (each, a “Trading Day”) during the period commencing thirty (30) days before such date and ending on the date one (1) day prior to such date.

 

5.             Fractional Shares.  

In lieu of issuance of a fractional share upon any exercise hereunder, the Company will issue an additional whole share in lieu of that fractional share, calculated on the basis of the Exercise Price.

 

6.             Legends.  

Prior to issuance of the shares of Common Stock underlying this Warrant, all such certificates representing such shares shall bear a restrictive legend to the effect that the Shares represented by such certificate have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and that the Shares may not be sold or transferred in the absence of such registration or an exemption therefrom, such legend to be substantially in the form of the bold-face language appearing at the top of Page 1 of this Warrant.   

7.             Disposition of Warrants or Shares.  

The Holder of this Warrant, each transferee hereof and any holder and transferee of any Shares, by his or its acceptance thereof, agrees that no public distribution of Warrants or Shares will be made in violation of the provisions of the Securities Act.  Furthermore, it shall be a condition to the transfer of this Warrant that any transferee thereof deliver to the Company his or its written agreement to accept and be bound by all of the terms and conditions contained in this Warrant.

 

8.             Merger or Consolidation.  

The Company will not merge or consolidate with or into any other corporation, or sell or otherwise transfer its property, assets and business substantially as an entirety to another corporation, unless the corporation resulting from such merger or consolidation (if not the Company), or such transferee corporation, as the case may be, shall expressly assume, by supplemental agreement reasonably satisfactory in form and substance to the Holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company.

  

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9.             Notices.  

Except as otherwise specified herein to the contrary, all notices, requests, demands and other communications required or desired to be given hereunder shall only be effective if given in writing by certified or registered U.S. mail with return receipt requested and postage prepaid; by private overnight delivery service (e.g. Federal Express); by facsimile transmission (if no original documents or instruments must accompany the notice); or by personal delivery.  Any such notice shall be deemed to have been given (a) on the business day immediately following the mailing thereof, if mailed by certified or registered U.S. mail as specified above; (b) on the business day immediately following deposit with a private overnight delivery service if sent by said service; (c) upon receipt of confirmation of transmission if sent by facsimile transmission; or (d) upon personal delivery of the notice.  All such notices shall be sent to the following address (or to such other address or addresses as a party may have advised the other in the manner provided in this Section 9):

 

	
If to the Company:

	
1230 Columbia St., Suite 1110

	  	
San Diego, CA 92101

	  	
Attn: Dan Zang

Notwithstanding the time of effectiveness of notices set forth in this Section 9, a Notice of Exercise shall not be deemed effectively given until it has been duly completed and submitted to the Company together with this original Warrant and payment of the Exercise Price in a manner set forth in this Section 9. 

10.           Governing Law.  

This Agreement shall be governed by and construed solely and exclusively in accordance with and pursuant to the internal laws of the State of California without regard to the conflicts of laws principles thereof. The parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this Agreement shall be brought solely in a federal or state court located in the City of San Diego. By its execution hereof, the parties hereby covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City of San Diego and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in San Diego. The parties hereto expressly and irrevocably waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding, the party prevailing therein shall be entitled to payment from the other party hereto of all of its reasonable counsel fees and disbursements.

 

11.           Successors and Assigns.  

This Warrant shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

  

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12.           Headings.  

The headings of various sections of this Warrant have been inserted for reference only and shall not affect the meaning or construction of any of the provisions hereof.

 

13.           Severability.

If any provision of this Warrant is held to be unenforceable under applicable law, such provision shall be excluded from this Warrant, and the balance hereof shall be interpreted as if such provision were so excluded.

 

14.           Modification and Waiver.  

This Warrant and any provision hereof may be amended, waived, discharged or terminated only by an instrument in writing signed by the Company and the Holder.

 

15.           Specific Enforcement.  

The Company and the Holder acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Warrant were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Warrant and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which either of them may be entitled by law or equity.

 

16.           Assignment.  

This Warrant may be transferred or assigned, in whole or in part, at any time and from time to time by the then Holder by submitting this Warrant to the Company together with a duly executed Assignment in substantially the form and substance of the Form of Assignment which accompanies this Warrant as  Exhibit B  hereto, and, upon the Company’s receipt thereof, and in any event, within five (5) business days thereafter, the Company shall issue a Warrant to the Holder to evidence that portion of this Warrant, if any as shall not have been so transferred or assigned.

 

(Signature Page Immediately Follows)

 

  

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, manually or by facsimile, by one of its officers thereunto duly authorized.

Date: __________________, 2011

	  	
UMAMI SUSTAINABLE SEAFOOD INC.

	  	  
	  	
By:

	  	  

 

  

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EXHIBIT A

 

NOTICE OF EXERCISE

 

To Be Executed by the Holder

 

in Order to Exercise the Warrant

 

The undersigned Holder hereby elects to purchase _______ Shares pursuant to the attached Warrant, and requests that certificates for securities be issued in the name of:

 

	  
	  
	
(Please type or print name and address)

	  
	  
	  
	  
	 
	 
	
(Social Security or Tax Identification Number)

 

and delivered to:                                                                                                                                                                           

 

                                                                                                                                                                                .

 

(Please type or print name and address if different from above)

 

If such number of Shares being purchased hereby shall not be all the Shares that may be purchased pursuant to the attached Warrant, a new Warrant for the balance of such Shares shall be registered in the name of, and delivered to, the Holder at the address set forth below.

 

In full payment of the purchase price with respect to the Shares purchased and transfer taxes, if any, the undersigned hereby tenders payment of $__________ by check, money order or wire transfer payable in United States currency to the order of [________________].

 

  

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The Holder represents that it is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act (as set forth on Schedule A), and that the Holder is able to bear the economic risk of an investment in the Shares. To evidence the Subscriber’s status as an accredited investor, the Subscriber agrees to deliver to the Company a fully completed and executed Accredited Investor Questionnaire in the form attached hereto as Schedule A, and agrees that the representations and warranties set out in such questionnaire, as executed by the Holder, are true as of the date hereof.

 

	
HOLDER:

	
 

	
By:

	  	  
	
Name:

	
Title:

	
Address:

	
Dated:

  

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SCHEDULE A

U.S. ACCREDITED INVESTOR QUESTIONNAIRE

 

The Holder covenants, represents and warrants to the Company that it satisfies one or more of the categories of “Accredited Investors”, as defined by Regulation D promulgated under the 1933 Act, as indicated below:  (Please initial in the space provide those categories, if any, of an “Accredited Investor” which the Holder satisfies.)

 

	
             Category 1

	
An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Shares, with total assets in excess of US $5,000,000.

 

	
              Category 2

	
A natural person whose individual net worth, or joint net worth with that person’s spouse, on the date of purchase exceeds US $1,000,000.

 

	
              Category 3

	
A natural person who had an individual income in excess of US $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of US $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

 

	
              Category 4

	
A “bank” as defined under Section (3)(a)(2) of the 1933 Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the 1933 Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance Corporation as defined in Section 2(13) of the 1933 Act; an investment Corporation registered under the Investment Corporation Act of 1940 (United States) or a business development Corporation as defined in Section 2(a)(48) of such Act; a Small Business Investment Corporation licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of $5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance corporation or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors.

 

	
              Category 5

	
A private business development corporation as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States).

 

	
              Category 6

	
A director or executive officer of the Company.

 

	
              Category 7

	
A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the 1933 Act.

 

	
              Category 8

	
An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories.

 

Note that the Holder may be required to supply the Company with a balance sheet, prior years’ federal income tax returns or other appropriate documentation to verify and substantiate the Holder’s status as an Accredited Investor.

 

If the Holder is an entity which initialled Category 8 in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

The Holder hereby certifies that the information contained in this US Questionnaire is complete and accurate and the Holder will notify the Company promptly of any change in any such information. The Holder acknowledges and agrees that the Holder may be required by the Company to provide such additional documentation as may be reasonably required by the Company and its legal counsel in determining the Holder’s eligibility to acquire the Shares under relevant legislation.

 

  

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If this US Questionnaire is being completed on behalf of a corporation, partnership, trust or estate, the person executing on behalf of the Holder represents that it has the authority to execute and deliver this US Questionnaire on behalf of such entity.

 

IN WITNESS WHEREOF, the Holder has executed this US Questionnaire as of the ___ day of _________, 20___.

 

	
If a Corporation, Partnership or Other Entity:

	  	
If an Individual:

	 	 	 
	  	  	  
	
Print of Type Name of Entity

	  	
Signature

	 	 	 
	  	  	  
	
Signature of Authorized Signatory

	  	
Print or Type Name

	 	 	 
	  	  	  
	
Type of Entity

	  	
Social Security/Tax I.D. No. (if applicable)

 

  

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EXHIBIT B

 

FORM OF ASSIGNMENT

 

(To be signed only on transfer of Warrant)

 

For value received, the undersigned hereby sells, assigns, and transfers unto _____________ the right represented by the within Warrant to purchase ______ shares of Common Stock of Umami Sustainable Seafood Inc., a Nevada corporation, to which the within Warrant relates, and appoints ____________________ Attorney to transfer such right on the books of Umami Sustainable Seafood Inc., a Nevada corporation, with full power of substitution of premises.

 

	
Dated:

	
By:

	  	  
	  	
Name:

	  	
 Title:

	  	
(signature must conform to name

	  	
of holder as specified on the fact of the Warrant)

	  	  
	  	
 Address:

 

Signed in the presence of:

 

Dated:

  

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SCHEDULE 2

 

UTILISATION REQUEST

From: [Borrower]

To: [Lender]

Dated:

 

Dear Sirs

USD [ ● ] Facility Agreement

dated [      ] (the "Agreement")

	
1.

	
We refer to the Agreement.  This is a Utilisation Request.  Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

 

	
2.

	
We wish to borrow a Loan on the following terms:

	
Proposed Utilisation Date:

	
[        ] (or, if that is not a Business Day, the next Business Day)

	
Currency of Loan:

	
USD:

	
Amount:

	
[     ] or, if less, the Available Facility

	
3.

	
We confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

	
4.

	
This Utilisation Request is irrevocable.

 

Yours faithfully

 

.......................................

authorised signatory for UMAMI SUSTAINABLE SEAFOOD, INC., UMAMI SUSTAINABLE SEAFOOD, INC.,

 

  

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SCHEDULE 3

 

SCHEDULE 4

 

PLEDGE AGREEMENT

 

  

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