Document:

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of June 8, 2011, between Castle Brands Inc., a Florida corporation (the “Company”), and each of the several purchasers signatory hereto (each such purchaser, a “Purchaser” and, collectively, the “Purchasers”).

 

WHEREAS, in connection with those certain Securities Purchase Agreements, dated as of June 8, 2011, by and among the Company and certain Purchasers (including Affiliates of the Company), pursuant to which such Purchasers agreed to purchase shares of Preferred Stock and Warrants and, in the case of purchasers who are Affiliates of the Company, promissory notes of the Company convertible into such Preferred Stock and Warrants immediately following Shareholder Approval, and that certain Exchange Agreement, dated as of June 8, 2011, by and among the Company and certain Purchasers who hold debt issued by the Company, pursuant to which such debtholders agreed to exchange, subject to Shareholder Approval, debt issued by the Company, plus all accrued but unpaid interest thereon, for shares of Preferred Stock and Warrants, as such Securities Purchase Agreements or Exchange Agreement may be amended, modified or supplemented from time to time in accordance with their terms; provided, however, that if the terms of any Securities Purchase Agreements shall differ, the terms of the Securities Purchase Agreement to which a given Purchaser is a party shall apply to such Purchaser (collectively, the “Purchase Agreement”), the Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to issue and sell to each Purchaser shares of the Company’s Preferred Stock and Warrants; and

 

WHEREAS, to induce the Purchasers to execute and deliver the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act and applicable state securities laws.

 

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

 

1.           Definitions.

 

Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

 

“Advice” shall have the meaning set forth in Section ‎6(d).

 

“Conversion Shares” shall have the meaning ascribed to such term in the Articles of Designation.

 

“Effectiveness Date” means, with respect to the Initial Registration Statement required to be filed hereunder, the 150th calendar day following the date hereof and with respect to any additional Registration Statements which may be required pursuant to Section ‎2(c) or Section ‎3(c), the 90th calendar day following the date on which an additional Registration Statement is required to be filed hereunder; provided, however, that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the next succeeding Trading Day.

  

 

  

“Effectiveness Period” shall have the meaning set forth in Section ‎2(a).

 

“Event” shall have the meaning set forth in Section ‎2(d).

 

“Event Date” shall have the meaning set forth in Section ‎2(d).

 

“Filing Date” means, with respect to the Initial Registration Statement required hereunder, the 60th calendar day following the date hereof and, with respect to any additional Registration Statements which may be required pursuant to Section ‎2(c) or Section ‎3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.

 

“Grace Period” shall have the meaning set forth in Section ‎3(k).

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

 

“Holding Information” shall have the meaning set forth in Section ‎3(n)

 

“Indemnified Party” shall have the meaning set forth in Section ‎5(c).

 

“Indemnifying Party” shall have the meaning set forth in Section ‎5(c).

 

“Initial Registration Statement” means the initial Registration Statement filed pursuant to this Agreement.

 

“Losses” shall have the meaning set forth in Section ‎5(a).

 

“Plan of Distribution” shall have the meaning set forth in Section ‎2(a).

 

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

  

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“Registrable Securities” means, as of any date of determination, (a) all of the shares of Common Stock then issuable upon conversion in full of the Preferred Stock (assuming on such date the shares of Preferred Stock are converted in full without regard to any conversion limitations therein), (b) all shares of Common Stock issuable as dividends on the Preferred Stock assuming the Preferred Stock is held for at least three years, (c) all Warrant Shares then issuable upon exercise of the Warrants (assuming on such date the Warrants are exercised in full without regard to any exercise limitations therein), (d) any additional shares of Common Stock issuable in connection with anti-dilution provisions in the Preferred Stock or the Warrants, if any (in each case, without giving effect to any limitations on conversion set forth in the Articles of Designation or limitations on exercise set forth in the Warrants) and (e) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) upon the earliest to occur of the following: (i) such Registrable Securities have been sold or disposed of by the Holder in accordance with an effective Registration Statement or in accordance with Rule 144, or (ii) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company), as reasonably determined by the Company, upon the advice of counsel to the Company.

 

“Registration Statement” means any registration statement required to be filed hereunder pursuant to Section ‎2(a) and any additional registration statements contemplated by Section ‎2(c) or Section ‎3(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted by the Commission from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted by the Commission from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Selling Shareholder Questionnaire” shall have the meaning set forth in Section ‎3(a).

 

“SEC Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

  

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2.           Shelf Registration.

 

(a)           On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415.  Each Registration Statement filed hereunder shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith, subject to the provisions of Section ‎2(e)) and shall contain (unless otherwise directed by the Holders of at least 85% in interest of the Registrable Securities) substantially the “Plan of Distribution” attached hereto as Annex A.  Subject to the terms of this Agreement, the Company shall use its commercially reasonable efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section ‎3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Date, and shall use its commercially reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent, as reasonably determined by the Company, upon the advice of counsel to the Company (the “Effectiveness Period”).  The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. Eastern Time on a Trading Day.  The Company shall as soon as reasonably practicable notify the Holders via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission.  The Company shall, by 9:30 a.m. Eastern Time on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424.  Failure to so notify the Holder within one Trading Day of such notification of effectiveness or failure to file a final Prospectus as foresaid shall be deemed an Event under Section ‎2(d).

 

(b)           Notwithstanding the registration obligations set forth in Section ‎2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section ‎2(e); provided, however, that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.

  

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(c)           Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section ‎2(d), if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:

 

	
  

	
a.

	
First, the Company shall reduce or eliminate any securities to be included by any Person other than a Holder;

 

	
  

	
b.

	
Second, the Company shall reduce Registrable Securities represented by Warrant Shares (applied, in the case that some Warrant Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Warrant Shares held by such Holders); and

 

	
  

	
c.

	
Third, the Company shall reduce Registrable Securities represented by Conversion Shares (applied, in the case that some Conversion Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Conversion Shares held by such Holders).

 

In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment.  In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by the Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended.

  

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(d)           If: (i) the Initial Registration Statement is not filed on or prior to its Filing Date (if the Company files the Initial Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section ‎3(a) herein, the Company shall be deemed to have not satisfied this clause (i)), or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within 45 calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) subject to the Grace Period, after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than ten consecutive calendar days or more than an aggregate of 20 calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i) and (iv), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five Trading Day period is exceeded, and for purpose of clause (iii) the date which such 45 calendar day period is exceeded, and for purpose of clause (v) the date on which such ten or 15 calendar day period, as applicable, is exceeded being referred to as “Event Date”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to 1.0% of the Subscription Amount paid by such Holder pursuant to the Purchase Agreement. The parties agree that the maximum aggregate liquidated damages payable to a Holder under this Agreement shall be 3.0% of the aggregate Subscription Amount paid by such Holder pursuant to the Purchase Agreement.  If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable, the Company shall pay interest thereon at a rate of 10% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an Event.

 

(e)           If Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.

 

3.           Registration Procedures.

 

In connection with the Company’s registration obligations hereunder, the Company shall:

 

(a)           Not less than five Trading Days prior to the filing of each Registration Statement and not less than one Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (other than any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed (other than those incorporated or deemed to be incorporated by reference), which documents will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. Notwithstanding the above, the Company shall not be obligated to provide the Holders advance copies of any universal shelf registration statement registering securities in addition to those required hereunder, or any Prospectus prepared thereto.  The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto (other than documents incorporated or deemed to be incorporated by reference) to which the Holders of a majority in interest of the Registrable Securities shall reasonably object in good faith, provided that the Company is notified of such objection in writing no later than four Trading Days after the Holders have been so furnished copies of a Registration Statement or one Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire substantially in the form attached to this Agreement as Annex B (a “Selling Shareholder Questionnaire”) on a date that is not less than two Trading Days prior to the Filing Date or by the end of the fourth Trading Day following the date on which such Holder receives draft materials in accordance with this Section.

  

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(b)           (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

 

(c)           If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.

  

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(d)           Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible and (if requested by any such Person) confirm such notice in writing no later than one Trading Day following the day (i) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided, however, in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.

 

(e)           Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

(f)           Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be so furnished.

 

(g)           Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto in conformity therewith, except after the giving of any notice pursuant to Section ‎3(d).

 

(h)          The Company shall reasonably cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as reasonably requested by any such Holder.

  

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(i)           Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that, the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

 

(j)           If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may reasonably request.

 

(k)          Upon the occurrence of any event contemplated by Section ‎3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its shareholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section ‎3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.  The Company will use its commercially reasonably efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  Notwithstanding anything to the contrary contained herein, the Company shall be entitled under this Section ‎3(k) to suspend the availability of a Registration Statement and Prospectus, without the payment of damages otherwise required pursuant to Section ‎2(d), for a period not to exceed 120 calendar days (which need not be consecutive days) in any 12-month period (the “Grace Period”).

 

(l)           Comply with all applicable rules and regulations of the Commission.

 

(m)         The Company shall use its commercially reasonably efforts to maintain eligibility for use of Form S-3 (or any successor form thereto) for the registration of the resale of Registrable Securities.

  

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(n)           The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over such shares (collectively, “Holding Information”). During any periods that the Company is unable to meet its obligations under this Agreement with respect to the registration of the Registrable Securities because any Holder fails to furnish either (i) Holding Information within three Trading Days of the Company’s request, or (ii) a Shareholder Questionnaire within the time period specified in Section ‎3(a), any liquidated damages that are accruing at such time as to such Holder shall be tolled and any Event that may otherwise occur because of such delay shall be suspended, as to such Holder only, until the first Filing Date following the date that such Holding Information or Shareholder Questionnaire, as applicable, is delivered to the Company; provided that if the date of such delivery is less than three Trading Days prior to such Filing Date, such damages shall continue to be tolled and any Event that may otherwise occur because of such delay shall continue to be suspended, in each case until the following Filing Date.

 

4.           Registration Expenses. All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) fees and disbursements of counsel for the Company, (iv) Securities Act liability insurance, if the Company so desires such insurance, and (vi fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.  In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

  

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5.           Indemnification.

 

(a)           Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, shareholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any 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 Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section ‎3(d)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section ‎6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected.  The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section ‎6(h).

 

(b)           Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with any applicable prospectus delivery requirements of the Securities Act through no fault of the Company or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any 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 Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section ‎3(d)‎(iii)-‎(vi), to the extent, but only to the extent, related to the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section ‎6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected.  In no event shall the liability of any selling Holder under this Section ‎5(b) be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

  

11

  

(c)           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; 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 such failure shall have materially and adversely prejudiced the Indemnifying Party.  The Indemnifying Party shall have the right to 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.

 

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:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) 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 (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material 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 no more than one separate counsel for all Holders shall be at the expense of the Indemnifying Party).  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 or delayed.  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.

 

Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified 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) shall be paid to the Indemnified Party, as incurred, within 30 Trading Days of written notice thereof to the Indemnifying Party; provided, that, the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.

  

12

  

(d)           Contribution. If the indemnification under Section ‎5(a) or ‎5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, 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 this Agreement, any reasonable attorneys’ or other 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 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 ‎5(d) 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 ‎5(d), no Holder shall be required to contribute pursuant to this Section ‎5(d), in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

 

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

 

6.           Miscellaneous.

 

(a)           Remedies.  In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement.  Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.

  

13

  

(b)           No Piggyback on Registrations; Prohibition on Filing Other Registration Statements.  Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in any Registration Statements other than the Registrable Securities.

 

(c)           Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to a Registration Statement.

 

(d)           Discontinued Disposition.  By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section ‎3(d)‎(iii)-‎(vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed.  The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.

 

(e)           Piggy-Back Registrations. If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within 15 days after the date of the delivery of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section ‎6(e) that are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Commission pursuant to the Securities Act or that are the subject of a then effective Registration Statement.

 

(f)           Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of 67% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise or conversion of any Security).  If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first  sentence of this Section ‎6(f). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

  

14

  

(g)           Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

 

(h)           Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities.  Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.7 of the Purchase Agreement.

 

(i)           No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.  Except as set forth on Schedule 6(i), neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.

 

(j)           Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

(k)          Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.

 

(l)           Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

 

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

  

15

  

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

 

(o)           Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not asset any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder.  It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders.

 

********************

 

(Signature Pages Follow)

  

16

  

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

 

	  	
CASTLE BRANDS INC.

	  	  	  
	  	
By:

	
/s/ Alfred J. Small

	  	
Name:

	
Alfred J. Small

	  	
Title:

	
Senior Vice President, Chief Financial

Officer, Secretary and Treasurer

[SIGNATURE PAGES OF HOLDERS FOLLOW]

  

 

  

[SIGNATURE PAGE OF HOLDERS TO ROX RRA]

	
Name of Holder:

	  

	
Signature of Authorized Signatory of Holder:

	  

	
Name of Authorized Signatory:

	  

	
Title of Authorized Signatory:

	  

 

[SIGNATURE PAGES CONTINUE]

  

 

  

Annex A

 

Plan of Distribution

 

Each Selling Shareholder (the “Selling Shareholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the NYSE AMEX or any other stock exchange, market or trading facility on which the securities are traded or in private transactions.  These sales may be at fixed or negotiated prices.  A Selling Shareholder may use any one or more of the following methods when selling securities:

 

	
  

	
·

	
ordinary brokerage transactions and transactions in which the broker dealer solicits purchasers;

 

	
  

	
·

	
block trades in which the broker dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

	
  

	
·

	
purchases by a broker dealer as principal and resale by the broker dealer for its account;

 

	
  

	
·

	
an exchange distribution in accordance with the rules of the applicable exchange;

 

	
  

	
·

	
privately negotiated transactions;

 

	
  

	
·

	
settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;

 

	
  

	
·

	
in transactions through broker dealers that agree with the Selling Shareholders to sell a specified number of such securities at a stipulated price per security;

 

	
  

	
·

	
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

	
  

	
·

	
a combination of any such methods of sale; or

 

	
  

	
·

	
any other method permitted pursuant to applicable law.

 

The Selling Shareholders may also sell securities under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

 

Broker dealers engaged by the Selling Shareholders may arrange for other brokers dealers to participate in sales.  Broker dealers may receive commissions or discounts from the Selling Shareholders (or, if any broker dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

  

 

  

In connection with the sale of the securities or interests therein, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume.  The Selling Shareholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities.  The Selling Shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Shareholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.  Each Selling Shareholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).

 

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities.  The Company has agreed to indemnify the Selling Shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

Because Selling Shareholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder.  In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. The Selling Shareholders have advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securities by the Selling Shareholders.

 

We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Shareholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect.  The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

  

A-2

  

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution.  In addition, the Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of securities of the common stock by the Selling Shareholders or any other person.  We will make copies of this prospectus available to the Selling Shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

  

A-3

  

Annex B

 

CASTLE BRANDS INC.

 

Selling Shareholder Notice and Questionnaire

 

The undersigned beneficial owner of common stock (the “Registrable Securities”) of Castle Brands Inc., a Florida corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed.  A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a selling shareholder in the Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling shareholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling Shareholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.

 

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

 

QUESTIONNAIRE

 

1.           Name.

 

(a)           Full Legal Name of Selling Shareholder

 

_________________________________________________________________________________________

 

(b)           Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:

 

_________________________________________________________________________________________

 

(c)           Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire):

  

 

  

2.           Address for Notices to Selling Shareholder:

 

_________________________________________________________________________________________

_________________________________________________________________________________________

_________________________________________________________________________________________

Telephone: ____________________________________________________________________________

Fax: _________________________________________________________________________________

Contact Person: ________________________________________________________________________

 

3.           Broker-Dealer Status:

 

(a)           Are you a broker-dealer?

 

Yes    ̈                                No    ̈

 

(b)           If “yes” to Section ‎3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?

 

Yes    ̈                                No    ̈

 

Note:     If “no” to Section ‎3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

(c)           Are you an affiliate of a broker-dealer?

 

Yes    ̈                                No    ̈

 

(d)           If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

 

Yes    ̈                                No    ̈

 

Note:           If “no” to Section ‎3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

4.           Beneficial Ownership of Securities of the Company Owned by the Selling Shareholder.

 

Except as set forth below in this Item ‎4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreement.

 

(a)           Type and Amount of other securities beneficially owned by the Selling Shareholder:

 

_________________________________________________________________________________________

_________________________________________________________________________________________

  

B-2

  

5.           Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

 

State any exceptions here:

 

_________________________________________________________________________________________

_________________________________________________________________________________________

 

6.           Plan of Distribution:

 

The undersigned has reviewed the form of Plan of Distribution attached as Exhibit B to the Registration Rights Agreement, and hereby confirms that, except as set forth below, the information contained therein regarding the undersigned and its plan of distribution is correct and complete.

 

State any exceptions here:

 

_________________________________________________________________________________________

_________________________________________________________________________________________

 

***********

 

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof and prior to the effective date of any applicable Resale Registration Statement. All notices to the Company hereunder shall be made in writing, by hand delivery, confirmed e-mail or facsimile transmission, first-class mail or air courier guaranteeing overnight delivery at the address set forth below. In the absence of any such notification, the Company shall be entitled to continue to rely on the accuracy of the information in this Notice and Questionnaire.

 

The undersigned also agrees to provide the Company and the Company’s counsel any and all such further information regarding the undersigned promptly upon request in connection with the preparation, filing, amending or supplementing of any Registration Statement (or any Prospectus contained therein).  The undersigned hereby consents to the use of all such information in the Registration Statement.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Resale Registration Statement and the Prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of any such Registration Statement and the Prospectus.

  

B-3

  

By signing below, the undersigned acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M in connection with any offering of Registrable Securities pursuant to the Resale Registration Statement. The undersigned also acknowledges that it understands that the answers to this Questionnaire are furnished for use in connection with Registration Statements filed pursuant to the Registration Rights Agreement and any amendments or supplements thereto filed with the Commission pursuant to the Securities Act.

 

The undersigned understands that the undersigned may be subject to serious civil and criminal liabilities if the Registration Statement, when it becomes effective, either contains an untrue statement of a material fact or omits to state a material fact required to be stated in the Registration Statement necessary to make the statements in the Registration Statement not misleading.  The undersigned represents and warrants that all information it provides to the Company and the Company’s counsel is currently accurate and complete and will be accurate and complete at the time the Registration Statement becomes effective and at all times subsequent thereto, and agrees during such periods to notify the Company immediately of any misstatement of a material fact in the Registration Statement, and of the omission of any material fact necessary to make the statements contained therein not misleading.

 

The undersigned confirms that, to the best of its knowledge and belief, the foregoing statements (including without limitation the answers to this Questionnaire) are correct.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 6 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus and any amendments or supplements thereto.

 

  

B-4

  

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

	
Date:

	  	  	
Beneficial Owner:

	  

	  	
By:

	  
	  	
Name:

	  
	  	
Title:

	  

PLEASE FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

[_____________]

 

[_____________]

 

[_____________]

  

B-5Unassociated Document

Exhibit 10.2

ASSET ACQUISITION AGREEMENT

 

Between

 

Cherrybrook Kitchen, LLC

And

 

Cell-nique Corporation

 

  

  

  

 

TABLE OF CONTENT

 

	
1.

	
Acquisition of the Assets

	4 
	  	
1.01.

	
Acquisition of the Assets from the Transferor

	4
	  	
1.02.

	
Consideration

	4 
	  	
1.03.

	
Closing

	4
	  	
1.04.

	
Consents to Assignment

	4
	  	
1.05.

	
Tax Treatment

	5    

	
2.

	
Representations of the Transferor Regarding the Assets and Certain Liabilities

	5   

 

	
3.

	
Representations of the Transferor

	5 
	  	
3.01.

	
Organization

	5
	  	
3.02.

	
The Company

	5 
	  	
3.03.

	
Authorization

	6
	  	
3.04.

	
Financial Statements

	6
	  	
3.05.

	
Absence of Undisclosed Liabilities

	6
	  	
3.06.

	
Litigation

	6
	  	
3.07.

	
Personal Property and Inventory

	7
	  	
3.08.

	
Intangible Property

	7
	  	
3.09.

	
Leases

	8
	  	
3.10.

	
Real Estate

	8
	  	
3.11.

	
Accounts Receivable and Accounts Payable

	8
	  	
3.12.

	
Tax Matters

	8
	  	
3.13.

	
Contracts and Commitments

	8
	  	
3.14.

	
Compliance with Agreements and Laws

	9
	  	
3.15.

	
Employee Relations

	10
	  	
3.16.

	
Employee Benefit Plans

	10
	  	
3.17.

	
Customers and Suppliers

	10
	  	
3.18.

	
Indebtedness to and from Officers, Directors and Stockholders

	10 
	  	
3.19.

	
Conflicts of Interest

	10
	  	
3.20.

	
Investment Representation

	10
	  	
3.21.

	
Full Disclosure

	11
	  	
3.22.

	
Solvency

	11
	  	
3.23.

	
Vendor Agreement

	11
	  	
3.24.

	
Limitation on Representations and Warranties

	11

	
4.

	
Representations of the Transferee

	11 
	  	
4.01.

	
Organization and Authority

	11
	  	
4.02.

	
Capitalization of the Transferee

	11
	  	
4.03.

	
Authorization

	11
	  	
4.04.

	
Regulatory Approvals

	11
	  	
4.05.

	
Investment Representation

	11
	  	
4.06.

	
Litigation

	11
	  	
4.07.

	
Broker's Fee

	11

	
5.

	
Access to Information

	12 

	
6.

	
Conditions to Obligations of the Transferee

	12 
	  	
6.01.    

	Continued Truth of Representations and Warranties of the Transferor; Compliance with Covenants and Obligations	12
	  	
6.02.    

	Performance by the Transferor	12 
	  	
6.03.

	
Corporate Proceedings

	12
	  	
6.04.

	
Governmental Approvals

	12
	  	
6.05.

	
Consent of Lenders, Vendors and Other Third Parties

	12
	  	
6.06.

	
Adverse Proceedings

	12
	  	
6.07.

	
Adverse Change in Business

	12
	  	
6.08.

	
Closing Deliveries

	12
	  	
6.09.

	
Due Diligence

	13

 

  

1

  

 

	
7.

	
Conditions to Obligations of the Transferor

	13 
	  	
7.01.

	
Continued Truth of Representations and Warranties of the Transferee; Compliance with Covenants and obligations

	13
	  	
7.02.

	
Corporate Proceedings

	13
	  	
7.03.

	
Governmental Approvals

	13
	  	
7.04.

	
Consents of Lenders, Vendors and Other Third Parties

	13
	  	
7.05.

	
Adverse Proceedings

	13
	  	
7.06.

	
Closing Deliveries

	14

	
8.

	
Other Covenants

	14 
	  	
8.01.

	
Consents

	14
	  	
8.02.

	
Ordinary Course of Business

	14

 

	
9.

	
Indemnification

	14 
	  	
9.01.

	
By the Transferor

	14
	  	
9.02.

	
Claims for Indemnification

	15
	  	
9.03.

	
Defense by the Indemnifying Party

	15
	  	
9.04.

	
Payment of Indemnification Obligation

	15
	  	
9.05.

	
Survival of Representations; Claims for Indemnification

	15

 

	
10.

	
Restrictive Covenants

	16  
	  	
10.01.

	
Confidentiality

	16
	  	
10.02.

	
Non-Compete of Transferor and Managers

	16
	  	
10.03.

	
Additional Terms

	16

	
11.

	
Termination of Agreement

	16 
	  	
11.01.

	
Termination by Agreement of the Parties

	16
	  	
11.02.

	
Termination by Reason of Breach

	17

	
12.

	
Notices

	17 
	
13.

	
Successors and Assigns

	17
	
14.

	
Entire Agreement; Amendments; Attachments

	17
	
15.

	
Severability

	17
	
16.

	
Investigation of the Parties

	18 
	
17.

	
Approval of Special Committee of the Transferee

	18
	
18.

	
Expenses

	18
	
19.

	
Governing Law

	18
	
20.

	
Section Headings

	18
	
21.

	
Counterparts

	18

 

  

2

  

 

Exhibits

Exhibit 6.08(f) - Bill of Sale and Assignment and Assumption Agreement

Schedules to be provided by the Transferor

2.00         -      Assumed Liabilities

3.02         -      The Transferor

3.03         -      Third Party Consents

3.04         -      Financial Statements

3.05         -      Undisclosed Liabilities

3.06         -      Litigation

3.07         -      Personal Property

3.08         -      Intangible Property

3.09         -      Leases

3.11         -      Accounts Receivable

3.13         -      Contracts and the Vendor Liability Release – and Final Agreements

3.17         -      Customers and Suppliers

3.19         -      Conflicts of Interest

3.20         -      Transferor’s Shareholders Listing

 

  

3

  

 

ASSET ACQUISITION AGREEMENT

Agreement (the "Agreement") made as of the 31th day of May, 2011 by and among, Cell-nique Corporation a Delaware corporation (the "Transferee"), Cherrybrook Kitchen, LLC a Massachusetts limited liability company (the "Transferor").

PRELIMINARY STATEMENT

 The Transferee desires to acquire, and the Transferor desires to transfer all of its owned assets and certain liabilities as provided in Schedule 2.00 (“Assumed Liabilities”) including without limitation all of its operating assets, as of the date hereof for the consideration in the transaction contemplated hereunder.

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows:

1. ACQUISITION OF THE ASSETS

	
1.01. 

	
ACQUISITION OF THE ASSETS FROM THE TRANSFEROR.

Subject to and upon the terms and conditions of this Agreement, at the closing of the transactions contemplated by this Agreement (the "Closing"), the Transferor shall sell, transfer, convey, assign and deliver to the Transferee, and the Transferee shall purchase, acquire, accept and assume from the Transferor, the Assets and Assumed Liabilities, as set forth on Exhibits attached hereto.

	
1.02. 

	
CONSIDERATION FOR THE ASSETS.

In consideration for the sale and transfer of the Assets , and subject to the terms and conditions of this Agreement, Transferee shall on the Closing Date (a) issue to Transferor three million (3,000,000) shares of common stock, $.00001 par value per share and five thousand (5,000) shares of Series A preferred stock, $.00001 par value per share, of Transferee, (b) assume the Assumed Liabilities and (c) issue a Promissory Note payable to the Transferor in the amount of and rate equal to the Mellon Bank note with the Transferor with repayment terms of $18,000 per month principal amortization and acceleration clause requiring 50% of outstanding balance to be repaid upon successful equity offering by Transferee if such net proceeds exceed $1 million dollars (a)(b) and (c) collectively totaling $3,000,000 (Three Million Dollars), the "Consideration").

	
1.03. 

	
CLOSING.

The Closing shall take place at the offices of Cherrybrook, at 1 p.m., on May 31th, 2011, or at such other place, time or date as may be mutually agreed upon in writing by the parties (the "Closing Date"). The transfer of the Assets by the Transferor to the Transferee and the assumption of the Assumed Liabilities by the Transferee shall be deemed to occur at 12:01 a.m., EST, on May 31, 2011, subject to post closing agreements with Mellon Bank and Commerce Bank approval and release of assets and revised Silverwood Partners commission agreement between the parties.

	
1.04. 

	
CONSENTS TO ASSIGNMENT.

(a) Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign or transfer any contract, lease, authorization, license or permit, or any claim, right or benefit arising thereunder or resulting therefrom, if an attempted assignment or transfer thereof, without the consent of a third party thereto or of the issuing Governmental Entity, as the case may be, would constitute a breach thereof and such consent has not been obtained. If such consent (a "Deferred Consent") is not obtained, or if an attempted assignment or transfer thereof would be ineffective or would affect the rights thereunder so that the Transferee would not receive, or the relevant Company would not continue to receive, all such rights, then, in each such case, (a) the contract, lease, authorization, license or permit to which such Deferred Consent relates (a "Deferred Item") shall be withheld from sale pursuant to this Agreement without any reduction in the Consideration, (b) from and after the Closing, the Transferor and the Transferee will cooperate, in all reasonable respects, to obtain such Deferred Consent as soon as practicable after the Closing, provided that neither the Transferor nor the Transferee shall be required to make any payments or agree to any material undertakings in connection therewith, and (c) until such Deferred Consent is obtained, the Transferor and the Transferee will cooperate, in all reasonable respects, to provide to the Transferee or the relevant Company all benefits under the Deferred Item to which such Deferred Consent relates (with the Transferee or relevant Company entitled to all the profits, rights and gains and responsible for all the losses, Taxes, liabilities and/or obligations thereunder). In particular, in the event that any such Deferred Consent is not obtained prior to the Closing, then the Transferee and the Transferor shall enter into such arrangements (including subleasing or subcontracting if permitted) to provide to the Transferee or relevant Company the economic and operational equivalent of obtaining such Deferred Consent and assigning or transferring such contract, lease, authorization, license or permit, including enforcement for the benefit of the Transferee of all claims or rights arising thereunder, and the performance by the Transferee of the obligations thereunder on a prompt and punctual basis.

 

  

4

  

	
1.05. 

	
TAX TREATMENT.

For purposes of this transaction, the Transferee and the Transferor have agreed that for tax purposes the transaction contemplated hereunder shall be treated under the Code as if the Transferor sold and exchanged all of its assets, , for new shares of the Transferee's stock and the other Consideration set forth herein, including assumption of the Assumed Liabilities.

	
2. 

	
REPRESENTATIONS OF THE TRANSFEROR REGARDING THE ASSETS AND CERTAIN LIABILITIES.

The Transferor represents and warrants to the Transferee as follows:

(a) The Transferor has good and marketable title to the Assets, free and clear of any and all covenants, conditions, restrictions, voting trust arrangements, liens, charges, encumbrances, options and adverse claims or rights whatsoever. If any transferred Assets are encumbered they shall be listed on Exhibits herein with such assignment and release approving the transfer by secured party attached herein.

(b) The Transferor has the full right, power and authority to enter into this Agreement and to transfer, convey and sell to the Transferee at the Closing the Assets and Assumed Liabilities and, upon consummation of the purchase contemplated hereby, the Transferee will acquire from the Transferor good and marketable title to the Assets and will assume the Assumed Liabilities.

(c) The Transferor is not a party to, subject to or bound by any agreement or any judgment, order, writ, prohibition, injunction or decree of any court or other governmental body which would prevent the execution or delivery of this Agreement by the Transferor or the transfer, conveyance and sale of the Assets or the Transferor Contracts to the Transferee pursuant to the terms hereof.

(d) Silverwood Partners LLC (“Silverwood”) acted for the Transferor in connection with this agreement or the transactions contemplated hereby, and no other broker or finder is entitled to any brokerage or finder's fee or other commissions in respect of such transactions based upon agreements, arrangements or understandings made by or on behalf of the Transferor.

	
3. 

	
REPRESENTATIONS OF THE TRANSFEROR REGARDING THE TRANSFEROR.

The Transferor represents and warrants to the Transferee as follows:

	
3.01.

	
ORGANIZATION.

The Transferor is a limited liability company duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, and has all requisite power and authority (company and other) to own its properties, to carry on its business as now being conducted, to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby.

	
3.02.

	
THE TRANSFEROR.

Schedule 3.02 attached hereto sets forth: (i) the name of the Transferor; (ii) the jurisdiction of organization of the Transferor; (iii) the names of its members, managers, officers and directors; and (iv)the jurisdictions in which the Transferor is qualified or holds licenses to do business as a foreign company.

(a) the Transferor is a limited liability company duly organized and validly existing and in good standing under the laws of the state of its incorporation or organization and has all requisite power and authority to own its properties and carry on its business as now being conducted.  Copies of the operating agreement, charter, bylaws and other governing instruments of the Company, each as amended to date, have been delivered to the Transferee, are complete and correct, and no amendments have been made thereto or have been authorized since the date of such delivery.

 

  

5

  

	
3.03.

	
AUTHORIZATION.

The execution and delivery by the Transferor of this Agreement and the agreements provided for herein, and the consummation by the Transferor of all transactions contemplated hereunder and thereunder by the Transferor, have been duly authorized by all requisite company action. This Agreement has been duly executed by the Transferor. This Agreement and all other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which the Transferor is a party constitute the valid and legally binding obligations of the Transferor, enforceable against it in accordance with their respective terms. The execution, delivery and performance by the Transferor of this Agreement and the agreements provided for herein, and the consummation by the Transferor of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any law, rule or regulation applicable to the Transferor; (b) violate the provisions of the Certificate of Organization or the Limited Liability Company Agreement of the Transferor; (c) violate any judgment, decree, order or award of any court, governmental body or arbitrator; or (d) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of the Company pursuant to, any indenture, mortgage, deed of trust, security agreement or other instrument or agreement to which any of the Companies is a party or by which  Transferor or any of its properties is or may be bound. Schedule 3.03 attached hereto sets forth a true, correct and complete list of all consents and approvals of third parties (including Governmental Entities) that are required in connection with the consummation by the Transferor of the transactions contemplated by this Agreement.

	
3.04.

	
FINANCIAL STATEMENTS, BANK ACCOUNTS AND ACCESS TO ALL FINANCIAL RECORDS FOR PAST 3 YEARS.

Schedule 3.04 attached hereto contains true, complete and correct copies of the unaudited balance sheets of the Transferor as of December 31, 2008, 2009 and 2010 and the related statements of income, shareholders' equity, retained earnings and changes in financial condition of the Transferor for the fiscal year then ended (collectively, the "Annual Financial Statements"), the unaudited balance sheets of the Transferor as of May 31, 2011 (the "Current Balance Sheets") and the related statements of income, shareholders' equity, retained earnings and changes in financial condition of the Transferor for the period January 1, 2011 through May 31, 2011 (collectively, the "Current Financial Statements"). The Annual Financial Statements and the Current Financial Statements (collectively, the

"Financial Statements") have been prepared in accordance with past practices. The Financial Statements fairly resent, as of their respective dates, the financial condition, retained earnings, assets and liabilities of the Transferor and the results of operations of the business of the Transferor for the periods indicated. The Transferor shall deliver all financial records for 2008, 2009, 2010 and interim 2011 to Transferee and transfer of all cash on deposit and assumption of all rights to Transferor bank accounts. The Transferee shall provide and back up copy of accounting records since December 31, 2008.

	
3.05.

	
ABSENCE OF UNDISCLOSED LIABILITIES.

Except as and to the extent (a) reflected and reserved against in the Current Balance Sheets, (b) set forth on Schedule 3.05 attached hereto, or (c) incurred in the ordinary course of business after the date of the Current Balance Sheets and not material in amount, either individually or in the aggregate, the Transferor does not have any liability or obligation, secured or unsecured, whether accrued, absolute, contingent, unasserted or otherwise, which, either individually or in the aggregate, is material to the condition (financial or otherwise) of the assets, properties, business or prospects of such Transferor.

	
3.06.

	
LITIGATION.

Except as set forth on Schedule 3.06 attached hereto (a) there is no action, suit or proceeding to which the Transferor is a party (either as a plaintiff or defendant) pending or threatened before any court or governmental agency, authority, body or arbitrator and, to the actual knowledge of the Transferor, there is no basis for any such action, suit or proceeding; (b) neither the Transferor, nor, to the actual knowledge of the Transferor, any officer, director or employee of any of the foregoing, has been permanently or temporarily enjoined by any order, judgment or decree of any court or any governmental agency, authority or body from engaging in or continuing any conduct or practice in connection with the business, assets, or properties of the Transferor; and (c) there is not in existence on the date hereof any order, judgment or decree of any court, tribunal or agency enjoining or requiring the Transferor to take any action of any kind with respect to its business, assets or properties.

 

  

6

  

	
3.07.

	
PERSONAL PROPERTY AND INVENTORY

Schedule 3.07 attached hereto sets forth: (i) a true, correct and complete list of all items of tangible personal property and inventory owned by the Transferor as of the date hereof having either a net book value per unit or historical cost per unit; or not owned by the Transferor but in the possession of or used or useful in the business of the Transferor (collectively, the "Personal Property"); and (ii) a description of the owner of, and any agreement relating to the use of, each item of Personal Property not owned by the Transferor and the circumstances under which such Property is used. Except as disclosed in Schedule 3.07:

(a) the Transferor has good and marketable title to its Assets and Personal Property free and clear of all liens, leases, encumbrances, claims under bailment and storage agreements, equities, conditional sales contracts, security interests, charges and restrictions, except for liens, if any, for personal property taxes not due;

(b) no officer, director, stockholder or employee of the Transferor,

nor any spouse, child or other relative or affiliate thereof, owns directly or indirectly, in whole or in part, any of the Personal Property described in Schedule 3.07;

(c) each item of Personal Property not owned by the Transferor is in such condition that upon the return of such property to its owner in its present  condition at the end of the relevant lease term or as otherwise contemplated by the applicable agreement between the Transferor and the owner or lessor thereof, the obligations of the Transferor to such owner or lessor will be discharged; and

(d) the Personal Property and inventory is adequate for the conduct of the business of the Transferor as currently conducted and is in good operating condition and repair, normal wear and tear excepted or merchantable, is currently used by the Transferor in the ordinary course of its business and normal maintenance has been consistently performed with respect to the Personal Property.

	
3.08. 

	
INTANGIBLE PROPERTY.

SCHEDULE 3.08 attached hereto sets forth: (i) a true, correct and complete list and, where appropriate, a description of, all material items of intangible property owned by, or used or useful in connection with the business of, the Transferor,  including, but not limited to, supplier and customers lists and related relationships, product formula and production processes, research and development and work in progress, trade secrets, know-how, any other confidential information of the Transferor, United States and foreign patents, trade names, trademarks, trade name and trademark registrations, copyrights and copyright registrations, and applications for any of the foregoing (the "Intangible Property"); and (ii) a true, correct and complete list of all material licenses or similar agreements or arrangements to which the Transferor is a party, either as licensee or licensor, with respect to the Intangible Property.  Except as otherwise disclosed in Schedule 3.08:

(a) the Transferor is the sole and exclusive owner of all right, title and interest in and to the Intangible Property and all designs, permits, labels and packages  used on or in connection therewith, free and clear of all liens, security interests,  charges, encumbrances, equities or other adverse claims;

(b) the Transferee has the right and authority to use, and to continue to use after the Closing, the Intangible Property in connection with the conduct of the Transferor’s business in the manner presently conducted, and such use or continuing use does not and will not conflict with, infringe upon or violate any rights of any other person, corporation or entity

(b) The Transferor has not received notice of, or hasany actual knowledge of any basis for, a pleading or threatened claim, interference action or other judicial or adversarial proceeding against the Transferor that any of the operations,   activities,  products, services or publications of the Transferor or any of its customers or  distributors  infringes or will infringe any patent, trademark,  trade name, copyright,  trade secret or other  property right of a third party, or that it is illegally or otherwise using the trade secrets, formulae or property rights of others;

 

  

7

  

 

(c) there are no outstanding, nor to the actual knowledge of the Transferor, any threatened disputes or other disagreements with respect to any research and development in process or licenses or similar agreements or arrangements described in Schedule 3.08 or with respect to infringement by a third party of any of the Intangible Property;

 

(d) no officer, director, stockholder or employee of the Transferor,  nor any spouse, child or other relative or affiliate thereof, owns directly or indirectly, in whole or in part, any of the Intangible Property; and

 

(f) the Transferor does not have any actual knowledge that any third party is infringing, or will threaten to infringe upon or otherwise violate any of the Intangible Property in which any Company has ownership rights.

	
3.09. 

	
LEASES.

The Transferor does not have any leased property.

	
3.10. 

	
REAL ESTATE.

The Transferor does not have any leased property.

	
3.11. 

	
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE.

Schedule 3.11 attached hereto sets forth a true, correct and complete list of the accounts and notes receivable and accounts payable of the Transferor (the "Accounts"), including the aging thereof as of the date hereof. All Accounts arose out of the sales of services or purchases in the ordinary course of business. All Accounts are collectible in the ordinary course of business, without undue delay or extraordinary collection process, net of any reserves on the Current Balance Sheets.

	
3.12. 

	
TAX MATTERS.

The Transferor has properly filed on a timely basis all Tax Returns (as defined below) that it was required to file and all such Tax Returns were correct and complete, except for any error or omission that could not reasonably be expected to have a material adverse effect on the results of operations, condition (financial or otherwise), assets, properties, business or prospects of the Transferor, taken as a whole (a "Material Adverse Effect"). The Transferor has paid on a timely basis all Taxes (as defined below) that were due and payable. All Taxes that Transferor is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper governmental entity. For purposes of this Agreement, "Taxes" means all taxes, including without limitation income, gross receipts, ad valorem, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment and franchise taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof. For purposes of this Agreement, "Tax Returns" means all reports, returns, declarations, statements, forms or other information required to be supplied to a taxing authority in connection with Taxes.

	
3.13. 

	
CONTRACTS AND COMMITMENTS.

(a) SCHEDULE 3.13 attached hereto contains a true, complete and correct list of the following contracts and agreements, whether written or oral (collectively, the "Contracts"):

(i) all loan agreements and guaranties to which the Transferor is a party or any of its property is bound;

(ii) all pledges, conditional sale or title retention agreements, security agreements, equipment obligations, personal property leases and lease purchase agreements  to which the Transferor or any of its property is bound;

(iii) all contracts, agreements, commitments, purchase orders or other understandings or arrangements to which the Transferor or any of their property is bound which (A) involve payments or receipts by the Transferor of more than $500 in the case of any single contract, agreement, commitment, understanding or arrangement under which full performance (including payment) has not been rendered by all parties thereto or (B) which may materially  adversely  affect the condition financial or otherwise) or the properties, assets, business or prospects of the Transferor;

 

  

8

  

(iv) all collective bargaining agreements, employment and consulting agreements,  executive  compensation plans, bonus plans, deferred compensation agreements, pension  plans, retirement plans, employee stock option or stock purchase plans and group life, health and accident insurance and other employee benefit plans, agreements, arrangements or commitments to which the Transferor is a party or any of its property is bound;

(v) all agency, distributor, sales representative, franchise or similar agreements  to which the  Transferor  is a party or by which the Transferor or any of its property is bound;

(vi) all contracts, agreements or other understandings or arrangements the  Transferor and any of its affiliates (including, but not limited to, any tax sharing arrangements);

(vii) all leases, whether operating, capital or otherwise, under which the Transferor is lessor or lessee;

(viii) all contracts, agreements or other arrangements imposing a non-competition or  non-solicitation  obligation on the Transferor; and

(ix) any other material agreements or contracts entered into by the Transferor.

(b) EXCEPT AS SET FORTH ON SCHEDULE 3.13:

(i) each Contract is a valid and binding agreement of the Transferor, enforceable against the Transferor in accordance with its terms, and the Transferor does not have any actual knowledge that any Contract is not a valid and binding agreement of the other parties thereto, except where the failure to be a valid and binding Agreement would not, individually or in the aggregate with matters under Sections 3.13(b)(i)-(iv), reasonably be expected to result in a Material Adverse Effect.

(ii) the Transferor has fulfilled all material obligations required pursuant to the  Contracts to have been performed by the Transferor, on its part prior to the date hereof, and the Transferor, has no reason to believe that the Transferor will not be able to fulfill, when due, all of its obligations under the Contracts which remain to be performed  after the date hereof,  except where the failure to fulfill all material obligations required pursuant the contract would not, individually or in  the aggregate with matters under Sections 3.13(b)(i)-(iv), reasonably be expected to result in a Material Adverse Effect;

(iii) the Transferor is not in breach of or default under any Contract, and no event has occurred which with the passage of time or giving of notice or both would  constitute  such a default, result in a loss of rights or result in the creation of any lien, charge or encumbrance, thereunder or pursuant  thereto, except for such breach,  default or events that would not individually or in the aggregate with matters under  Sections  3.13(b)(i)-(iv), reasonably be expected to result in a Company Material Adverse Effect; and

(iv) to the actual knowledge of the Transferor, there is no existing breach or default by any other party to any Contract,  and no event has occurred  which  with the  passage  of time or giving  of  notice or both  would constitute a default by such other  party,  result in a loss of rights or result in the  creation  of any lien,  charge or  encumbrance  thereunder  or  pursuant thereto,  except for such breach,  default or events that would not individually or in the aggregate with matters under Sections  3.13(b)(i)-(iv),  reasonably be expected to result in a Material Adverse Effect.

3.14. COMPLIANCE WITH AGREEMENTS AND LAWS.

The Transferor has all requisite licenses, permits and certificates, including environmental, health and safety permits, from federal, state and local authorities  necessary to conduct their respective  business and own and operate their respective assets  (collectively, the "Permits"). Neither the Transferor is in violation in any material  respect of any law or regulation relating to its Assets.  The business of the Transferor as conducted since May 31, 2011 has not violated, and on the date hereof does not violate, in any material respect, any federal, state, local or foreign laws, regulations or orders (including, but not limited to, any of the foregoing relating to employment discrimination, immigration, occupational safety, environmental protection, hazardous waste, conservation, or corrupt practices), the enforcement of which would have a Material Adverse Effect.

 

  

9

  

	
3.15. 

	
EMPLOYEE RELATIONS.

The Transferor shall terminate employment agreements and therefore does not have any Employees at Closing. At Closing, the Transferor shall provide said employee termination letters and agreements confirming all obligations and money owed to Transferor’s employee and manner of payment or assumption by Transferee.

	
3.16. 

	
EMPLOYEE BENEFIT PLANS.

The Transferor does not have, and has never had, any Employee Benefit Plan.

	
3.17. 

	
CUSTOMERS AND SUPPLIERS.

SCHEDULE 3.17 attached hereto sets forth a true, correct and complete detailed list of (a) the name of each customer of the Transferor from 2007, 2008, 2009 and 2010 (b) the names of suppliers from 2007, 2008, 2009 and 2010 (by dollar volume) of the Transferor as of the current period May 31, 2011. Except as set forth on Schedule 3.17, the Transferor has good customer and supplier relations and none of the customers or suppliers of the Transferor has notified the Transferor that it intends to discontinue or materially diminish its relationship with the Transferor.

	
3.18.

	
INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND STOCKHOLDERS.

Except as set forth on Schedule 3.18 attached hereto the Transferor is not indebted, directly or indirectly, to any person who is an officer, director or stockholder of any of the Transferor or any affiliate of any such person in any amount whatsoever including salaries for services rendered or reimbursable business expenses, all of which have been written off and reduced to zero as such reflected on the Current Final Financial Statements, and no such officer, director, stockholder or affiliate is indebted to the Transferor including for advances made to employees of the Transferor in the ordinary course of business to meet reimbursable business expenses anticipated to be incurred by such obligor.

	
3.19.

	
CONFLICTS OF INTEREST.

Except as set forth on Exhibit 3.19 attached hereto, no officer, director or stockholder of the Transferor nor, to the actual knowledge of the Transferor, any affiliate of any such person, now has or within the last three (3) years had, either directly or indirectly:

(a) an equity  or debt  interest  in any  corporation,  partnership,  joint venture, association,  organization or other person or entity which furnishes or sells or during  such  period  furnished  or sold  services  or  products to the Transferor or purchases or during such period purchased from the Transferor any goods or services,  or otherwise does nor during  such  period did  business with the Transferor; or

(b) a beneficial interest in any contract, commitment or agreement to which the  Transferor  was a party or under which any of them is or was obligated or bound or to which any of their respective properties may be or may have been subject,  other than stock options and other  contracts, commitments  or  agreements  between the  Transferor and such  persons in their  capacities  as  employees,  officers or directors of the Transferor or such Company.

	
3.20.

	
INVESTMENT REPRESENTATION.

The Transferor is acquiring and shall hold the shares issued by the Transferee as part of the Consideration for its own account for investment. The Transferor acknowledges that the certificates representing such shares will have a restricted 144 legend to such effect.  The Transferor is fully informed as to the business by public records and prospects of the Transferee and has had the opportunity to request from the Transferee any information concerning the Transferee which the Transferor deemed relevant.

 

  

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3.21. 

	
FULL DISCLOSURE.

There are no materially misleading misstatements in any of the representations and warranties made by Transferor in this Agreement, the Exhibits or Schedules to this Agreement, or any certificates delivered by Transferor pursuant to this Agreement and Transferor has not omitted to state any fact necessary to make statements made herein or therein not materially misleading.

	
3.20

	
SOLVENCY.

The Transferor is now cash flow insolvent and but has a positive net asset by the transactions contemplated by this Agreement.  As used in this section, "insolvent" means that the sum of the debts and other probable Liabilities of the Transferor exceeds the present fair saleable value of the Transferor's assets.

	
3.23. 

	
VENDOR, COPACKING AND STORAGE AGREEMENT.

The Transferor shall disclose all outstanding agreements with vendors, copackers and storage providers.

	
3.24. 

	
LIMITATION ON REPRESENTATIONS AND WARRANTIES.

The Transferor's representations and warranties in Sections 3.07, 3.08, 3.09, 3.10 and 3.13 shall not apply to any assets or liabilities of the Transferor that are not being transferred to or assumed by the Transferee pursuant to this Agreement.

	
4. 

	
REPRESENTATIONS OF THE TRANSFEREREE REGARDING THE TRANSFEREREE

The Transferee represents and warrants to the Transferor that:

	
4.01.

	
ORGANIZATION AND AUTHORITY.

The  Transferee is a corporation  duly organized,  validly existing and in good standing under the laws of the State of Delaware, and has all requisite power and authority (corporate and other) to own its  properties  and to  carry  on its  business  as now  being  conducted.  The Transferee has full power to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby.

	
4.02.

	
CAPITALIZATION OF THE TRANSFEREE.

On the date hereof, the Transferee's authorized capital stock consists of 49,000,000 shares of Common Stock, $.00001 par value, of which 6,830,410 shares are issued and outstanding, and 1,000,000 shares of preferred stock, $.01 par value, of which 240,000 shares are issued and outstanding. All of the outstanding shares of capital stock of the Transferee have been and on the Closing Date will be duly and validly issued and are, or will be, fully paid and non-assessable.

	
4.03.

	
AUTHORIZATION.

The  execution  and  delivery  of  this  Agreement  by the  Transferee,  and the agreements  provided for herein,  and the  consummation by the Transferee of the transactions  contemplated hereby and thereby,  have been duly authorized by all requisite  corporate  action.  This Agreement and all such other agreements and written obligations entered  into  and  undertaken  in  connection  with  the transactions  contemplated  hereby  constitute  the  valid and  legally  binding obligations of the Transferee,  enforceable against the Transferee in accordance with their  respective  terms.  The execution,  delivery and performance of this Agreement and the agreements  provided for herein,  and the  consummation by the Transferee of the transactions  contemplated hereby and thereby,  will not, with or without the giving of notice or the passage of time or both,  (a) violate the provisions  of any law, rule or regulation  applicable  to the  Transferee;  (b) violate the  provisions of the  Transferee's  Certificate  of  Incorporation  or Bylaws;  (c)  violate  any  judgment,  decree,  order  or  award  of any  court, governmental body or arbitrator; or (d) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the  properties  or assets of the  Transferee  pursuant to, any indenture, mortgage, deed of trust or other agreement or instrument to which the Transferee is a party or by which the Transferee is or may be bound.

	
4.04.

	
REGULATORY APPROVALS.

No regulatory approvals are needed.

	
4.05.

	
INVESTMENT REPRESENTATION.

The Transferee is acquiring the Assets from the Transferor for its own account as an operating business and will continue to operate in the normal manner.

	
4.06.

	
LITIGATION.

There is no suit, action or legal administrative, arbitration or order, proceeding or governmental investigation pending or, to the knowledge of the Transferee, threatened, to which the Transferee is a party which, considered individually or in the aggregate, would reasonably be expected to materially impair the Transferee's ability to perform its obligations under this Agreement.

	
4.07.

	
BROKER'S FEE.

Silverwood Partners, LLC is the sole broker and no other brokers or finder has acted for the Transferee in connection with this agreement or the transactions contemplated hereby, and no broker or finder is entitled to any brokerage or finder's fee or other commissions in respect of such transactions based upon agreements, arrangements or understandings made by or on behalf of the Transferee.

 

  

11

  

	
5.

	
ACCESS TO INFORMATION.

From the date of this Agreement until the Closing Date, the Transferor shall, and shall cause the Company to, afford the officers, attorneys, accountants and other authorized representatives of the Transferee free and full access upon reasonable notice and during normal business hours to all management personnel, offices, properties, books and records of the Transferor, so that the Transferee may have full opportunity to make such investigation as it shall desire to make of the management, business, properties and affairs of the Transferor, and the Transferee shall be permitted to make abstracts from, or copies of, all such books and records. The Transferor shall furnish to the Transferee such financial and operating data and other information as to the business of the Transferor as the Transferee shall reasonably request.

	
6. 

	
CONDITIONS TO OBLIGATIONS OF THE TRANSFEREE.

The obligations of the Transferee under this Agreement are subject to the fulfillment, at the Closing Date, of the following conditions precedent, each of which may be waived in writing in the sole discretion of the Transferee:

	
6.01. 

	
CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR; COMPLIANCE WITH COVENANTS AND OBLIGATIONS.

All representations and warranties of the Transferor shall be true and correct in all material aspects on and as of the Closing Date as though such representations and warranties were made on and as of such date (even though they purport to have been given on a date prior to the Closing Date), except for any changes permitted by the terms hereof or consented to in writing by the Transferee. The Transferor shall have performed and complied with all terms, conditions, covenants, obligations, agreements and restrictions required by this Agreement to be performed or complied with by it prior to or at the Closing Date.

	
6.02.

	
PERFORMANCE BY THE TRANSFEROR.

At the Closing, the Transferor shall have delivered to the Transferee a certificate signed by the Manager or Officer of the Transferor as to the Transferor's compliance with Subsection 6.01 hereof.

	
6.03. 

	
CORPORATE PROCEEDINGS.

All company and other proceedings required to be taken on the part of the Transferor to authorize or carry out this Agreement shall have been taken and the Transferor shall have delivered to the Transferee a copy of the resolutions of its Members and Managers, authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby.

	
6.04

	
GOVERNMENTAL APPROVALS.

No governmental approvals are needed.

6.05.           CONSENT OF LENDERS, VENDORS AND OTHER THIRD PARTIES. The Transferor shall have received all requisite consents and approvals of all lenders, vendors and other third parties whose consent or approval is required in order for the Transferor to consummate the transactions contemplated by this Agreement, including without limitation, those set forth on Schedule 3.03 attached hereto.

6.06.           ADVERSE PROCEEDINGS. No action or proceeding by or before any court or other governmental body shall have been instituted or threatened by any governmental body or person whatsoever which shall seek to restrain, prohibit or invalidate the transactions contemplated by this Agreement or which might affect the right of the Transferee to own the Shares or to own or operate the business of the Transferor after the Closing.

6.07.           ADVERSE CHANGE IN BUSINESS. No material adverse change shall have occurred in the business, financial condition or prospects of the Transferor.

	
6.08

	
CLOSING DELIVERIES.

The Transferee shall have received at or prior to the Closing such documents, instruments or certificates as the Transferee may reasonably request including, without limitation:

(a) the Assets and Assumed Liabilities represented in accordance with this Agreement;

 

  

12

  

(b) such certificates of the Transferor's managers and officers and such other documents evidencing  satisfaction  of the  conditions  specified in Section 6.01 as the Transferee shall reasonably request;

(c) a certificate of the secretary of state of the state of incorporation of the Transferor as to the legal existence and good standing (including tax) of the Transferor in such state;

(d) certificates of the Secretary of the Company attesting to the authenticity and continuing validity of the charter documents delivered pursuant to Subsection 3.02(b)

(e) Transferor resolution approving the terms, valuation of consideration and any amounts on account of Transferor due under vendor agreements are final and settled (and the applicable Liability Release and Final Agreements with respect thereto);

(f) a Bill of Sale and Assignment and Assumption Agreement, in substantially the form attached as EXHIBIT 6.08(f);

(g) a Current Final Financial Statement. The Transferor shall provide back up copy of accounting records since inception in Quickbooks format to May 31st, 2011; and

(h) a cross receipt executed by the Transferee and Transferor.

	
6.09.

	
DUE DILIGENCE.

Transferee shall have completed a satisfactory financial, legal, tax, accounting, intellectual property, regulatory and business due diligence review of the assets, accounts and operations of the Transferor the results of which shall be satisfactory to Transferee in its sole discretion.

	
7. 

	
CONDITIONS TO OBLIGATIONS OF THE TRANSFEROR

The obligations of the Transferor under this Agreement are subject to the fulfillment, at the Closing Date, of the following conditions precedent, each of which may be waived in writing in the sole discretion of the Transferor:

	
7.01. 

	
CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE; COMPLIANCE WITH COVENANTS AND OBLIGATIONS.

The representations and warranties of the Transferee in this Agreement shall be true on and as of the Closing Date as though such representations and warranties were made on and as of such date, except for any changes consented to in writing by the Transferor. The Transferee shall have performed and complied with all terms, conditions, covenants, obligations, agreements and restrictions required by this Agreement to be performed or complied with by it prior to or at the Closing Date.

	
7.02.

	
CORPORATE PROCEEDINGS.

All corporate and other proceedings required to be taken on the part of the Transferee to authorize or carry out this Agreement shall have been taken.

	
7.03.

	
GOVERNMENTAL APPROVALS.

No governmental approvals are needed.

	
7.04.

	
CONSENTS OF LENDERS, VENODRS AND OTHER THIRD PARTIES.

The Transferee shall have received all requisite consents and approvals of all lenders, vendors and other third parties whose consent or approval is required in order for the Transferee to consummate the transactions contemplated by this Agreement, including, without limitation, those set forth on Schedule 3.13 and 3.17 attached hereto.

	
7.05.

	
ADVERSE PROCEEDINGS.

No action or proceeding by or before any court or other governmental body shall have been instituted or threatened by any governmental body or person whatsoever which shall seek to restrain, prohibit or invalidate the transactions contemplated by this Agreement or which might reasonably be expected to adversely affect the right of the Transferor to transfer the Assets.

 

  

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7.06.

	
CLOSING DELIVERIES.

The Transferor shall have received at or prior to the Closing such documents, instruments or certificates as the Transferor may reasonably request including, without limitation:

(a) such certificates of the Transferee's officers and such other documents evidencing  satisfaction of the conditions specified in this Section 7 as the Transferor shall reasonably request;

(b) a certificate of the Secretary of State of the State of Delaware as to the legal existence and good standing (including tax) of the Transferee in Delaware;

(c) a  certificate of the Secretary of the Transferee attesting to the authenticity of the resolutions authorizing the transactions contemplated by this Agreement, and the authenticity and continuing validity of the Transferee's charter documents and by-laws;

(d) payment of the Consideration;

 

(e) the Bill of Sale and Assignment and Assumption Agreement, in substantially the form attached as EXHIBIT 6.08(f);

 

(f) the applicable Liability Release and Final Agreements; and

(g) a cross receipt executed by the Transferee and Transferor.

	
8. 

	
OTHER COVENANTS.

	
8.01.

	
CONSENTS.

The Transferor shall use all reasonable best efforts to obtain promptly all consents, waivers, approvals, authorizations or orders (including, without limitation, from vendors), and the Transferee and the Transferor shall promptly make all filings (including, without limitation)required in connection with the authorization, execution and delivery of this Agreement by the parties hereto and the consummation by them of the transactions contemplated hereby.

	
8.02.

	
ORDINARY COURSE OF BUSINESS.

Between the execution of this Agreement and Closing Date, the Transferor shall conduct its businesses in the ordinary course and the Transferor and shall notify the Transferee of any event, occurrence or development of a state or circumstances or facts which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Transferor, or which would otherwise constitute a breach of any representation or warranty by the Transferor in this Agreement. Between the execution of this Agreement and the Closing Date, the Transferor shall not borrow any funds or incur, or assume or become subject to, whether directly or by way of guarantee or otherwise, any obligation or liability with respect to any such indebtedness for borrowed money; grant any liens on the assets of the business; issue a dividend, issue or sell any equity securities or other securities or make any advances to any person other than in the ordinary course of business, redeem or repurchase shares in the Transferor; act in a manner which would cause a closing condition not to be fulfilled.

	
9. 

	
INDEMNIFICATION

	
9.01.

	
BY THE TRANSFEROR.

The Transferor for the twelve months following the Closing Date shall indemnify and hold harmless the Transferee, its directors, officers,  employees and agents (the "Transferee Indemnitees") from and against all actual claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any reasonable legal, accounting or other expenses for investigating or defending any actions or threatened actions) (collectively, the "Losses") actually incurred by the Transferee

Indemnitees in connection with each and all of the following:

(a) any misrepresentation or breach of any representation or warranty made by the Transferor in this Agreement;

(b) any breach of any covenant, agreement or obligation of the Transferor contained in this Agreement or any other agreement, instrument or document contemplated by this Agreement; and

(c) any liability of the Transferor not specifically assumed by the Transferee. The Transferee for the twelve months following the Closing Date shall indemnify and hold harmless the Transferor, its members, managers, officers,  employees and agents (the "Transferor Indemnitees") from and against all Losses actually incurred by the Transferor Indemnitees in connection with each and all of the following:

 

  

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(i) any misrepresentation or breach of any representation or warranty made by the Transferee in this Agreement; and

(ii) any breach of any covenant, agreement or obligation of the Transferee contained in this Agreement or any other agreement, instrument or document contemplated by this Agreement.

	
9.02.

	
CLAIMS FOR INDEMNIFICATION.

Whenever any claim shall arise for indemnification under this Section 9, the party seeking  indemnification (the "Indemnified Party"), shall promptly notify the other party (the "Indemnifying Party") of the claim and, when known, the facts constituting the basis for such claim. In the event of any such claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third party, the notice shall specify, if known, the amount or an estimate of the amount of the liability arising therefrom.  The Indemnified Party shall not settle or compromise any claim by a third party for which it is entitled to indemnification hereunder without the prior written consent, which shall not be unreasonably withheld or delayed, of the Indemnifying Party; provided, however, that if suit shall have been instituted against the Indemnified Party and the Indemnifying Party shall not have taken control of such suit after notification thereof as provided in Section 9.04 of this  Agreement, the Indemnified Party shall have the right to settle or compromise such claim upon giving notice to the Indemnifying Party as provided in Section 9.04.

	
9.03.

	
DEFENSE BY THE INDEMNIFYING PARTY.

In connection with any claim which may give rise to indemnity hereunder resulting from or arising out of any claim or legal proceeding by a person other than the Indemnified Party, the Indemnifying Party, at its sole cost and expense, may, upon written notice to the Indemnified Party, assume the defense of any such claim or legal proceeding if the Indemnifying Party acknowledges to the Indemnified Party in writing the obligation of the  Indemnifying Party to indemnify the Indemnified Party with respect to all elements of such claim.  If the Indemnifying Party assumes the defense of any such claim or legal proceeding, the Indemnifying Party shall select counsel reasonably acceptable to the Indemnified Party to conduct the defense of such claims or legal proceedings and at the sole cost and expense of the Indemnifying Party shall take all steps necessary in the defense or settlement thereof. The Indemnifying Party shall not consent to a settlement of, or the entry of any judgment arising from, any such claim or legal proceeding, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed).  Without limitation, it shall not be deemed unreasonable to withhold consent to a settlement if equitable relief against the Indemnified Party is contemplated, awarded or stipulated, the Indemnified Party is required to make an admission of civil liability or to the commission of a crime, or money is required to be paid by the Indemnified Party. The Indemnified Party shall be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense. If the Indemnifying  Party does not assume the defense of any such claim or  litigation resulting  therefrom  within 30 days after the date such claim is made:  (a) the Indemnified  Party may defend against such claim or litigation in such manner as it may deem appropriate,  including,  but not limited to, settling such claim or litigation,  after giving notice of the same to the Indemnifying  Party, on such terms as the Indemnified  Party may deem  appropriate,  and (b) the Indemnifying Party shall be entitled to  participate in (but not control) the defense of such action,  with its  counsel and at its own  expense.  If the  Indemnifying  Party thereafter seeks to question the manner in which the Indemnified  Party defended such  third  party  claim or the  amount or nature of any such  settlement,  the Indemnifying  Party  shall  have the burden to prove by a  preponderance  of the evidence  that the  Indemnified  Party did not defend or settle such third party claim in a reasonably prudent manner.

	
9.04.

	
PAYMENT OF INDEMNIFICATION OBLIGATION.

All indemnification by the Indemnifying Party hereunder shall be effected by repayment of Transferee’s common stock at current market prices in the amount of the indemnification liability or a cash payment at the option of the Indemnifying Party.

	
9.05.

	
SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION.

All representations and warranties made by the Transferor and the Transferee in this Agreement, or in any instrument or document furnished in connection with this Agreement or the transactions contemplated hereby, shall survive the Closing and the consummation of the transactions contemplated hereby for twelve (12) months. Notwithstanding the foregoing, (a) the representations and warranties of the Transferor contained in Sections 2, 3.01, 3.02, and 3.03 and of the Transferee contained in Sections 4.01 and 4.03 shall survive the Closing and the consummation of the transactions contemplated hereby without limitation, and (b) any valid claim that is properly  asserted in writing  pursuant to Section 9.02 and/or 9.03 prior to the  expiration as provided in this Section 9.05 of the  representation or warranty  that is the basis for such claim shall  survive until such claim is finally resolved and satisfied.

 

  

15

  

	
10.

	
RESTRICTIVE COVENANTS.

10.1 CONFIDENTIALITY.

The Transferor recognizes and acknowledges that by reason of its ownership of the Transferor, it has had access to confidential information relating to the Business including, without limitation, information and knowledge pertaining to products and services offered,innovations, ideas, plans, trade secrets, proprietary information, advertising, sales methods and systems, sales and profit figures, customer and client lists, and relationships with dealers, customers, clients, suppliers and others who have business dealings with such ("Confidential Information"). The Transferor acknowledges that such Confidential Information is a valuable and unique asset and covenants that it will not disclose any such Confidential Information after Closing to any person for any reason whatsoever, unless such

information is (a) within the public domain through no wrongful act of the Transferor, (b) has been rightfully received from a third party without restriction and without breach of this Agreement, (c) is required by law to be disclosed or is disclosed for purposes of defending claims related to the Transferor in a manner designed to protect the confidentiality of the Confidential Information or (d) represents historical information reasonably required by a prospective purchaser of the Transferor.

	
10.2.

	
TRANSFEROR NON-COMPETE

The Transferor and its members, managers, officers or family agrees not to compete with Transferee in any manner for a period of 12 months (the Non-Competition Period”). Transferor agrees that during the Non-Competition Period, the Transferor, its members, Managers, officers or family will not, directly or indirectly either for themselves or for any other person, partnership, corporation or company; participate in any business that manufactures gluten-free or allergy-free baking mixes or baked products to any health food stores in the United States of America

	
10.3.

	
ADDITIONAL TERMS.

The Transferor acknowledges that the restrictions contained in this Section 10 are reasonable and necessary to protect the legitimate interest of the Transferee, and that any violation will result in irreparable injury to the Transferee. The Transferor agrees that for the twelve months following the Closing Date, the Transferee shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages or providing bond, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 10, which rights shall be cumulative and in addition to any other rights or remedies to which the Transferee may be entitled. In the event that any of the provisions of this Section 10 should ever be adjudicated to exceed the time, geographic, product or service, or other limitations permitted by applicable law in any jurisdiction, then such provision shall be deemed reformed in such jurisdiction to the maximum time, geographic,

product or service, or other limitation permitted by applicable law. The covenants and limitations  set forth in this Section 10 shall be binding upon the successors and assigns of the Transferor and Transferee, including any acquiror of all or substantially all the assets or business of the Transferor or Transferee.

	
11. 

	
TERMINATION OF AGREEMENT

11.01.          TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement may be terminated by the mutual written agreement of the parties hereto. In the event of such termination by agreement, the Transferee shall have no further obligation or liability to the Transferor under this Agreement, and the Transferor shall have no further obligation or liability to the Transferee under this Agreement.

 

  

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11.02.          TERMINATION BY REASON OF BREACH. This Agreement may be terminated by the Transferor, if at any time prior to the Closing there shall occur a material breach of any of the representations, warranties or covenants of the Transferee or the failure by the Transferee to perform any condition or obligation hereunder, and may be terminated by the Transferee, if at any time prior to the Closing there shall occur a material breach of any of the representations, warranties or covenants of the Transferor or the failure of the Transferor to perform any condition or obligation hereunder. Written notice of any such termination must be delivered by the terminating party to the non-terminating party and Transferee shall have 30 days to cure said breach thereafter if uncured by 31st day then said agreement shall be deemed terminated.

	
12. 

	
NOTICES.

Any notices or other communications required or permitted hereunder shall be sufficiently given if delivered personally or sent by telex, federal express, registered or certified mail, postage prepaid, addressed as follows or to such other address of which the parties may have given notice:

	 	
To the Transferee:   

	
Cell-nique Corporation

12 Old Stage Coach Rd

Weston, CT 06883

Attention:  Dan Ratner, President

 

	 	
To the Transferee:   

	Cherrybrook Kitchen, LLC

c/o Charles Rosenburg

63 Buttrick Lane

Carlisle, MA 01741

 

	 	With a copy to:    	Republic Holdings Corporation

41 West Putnam Ave

Greenwich, CT 06830

Unless otherwise specified herein, such notices or other communications shall be deemed received (a) on the date delivered, if delivered personally, or (b) three business days after being sent, if sent by registered or certified mail.

	
13. 

	
SUCCESSORS AND ASSIGNS.

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Transferee, on the one hand, and the Transferor, on the other hand, may not assign their respective obligations hereunder without the prior written consent of the other party; provided, however, that the Transferee may assign this Agreement, and its rights and obligations hereunder, to a subsidiary or Affiliate of the Transferee. Any assignment in contravention of this provision shall be void. No assignment shall release the Transferee or the Transferor from any obligation or liability under this Agreement.

	
14. 

	
ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS

(a) This Agreement,  all Schedules and Exhibits hereto,  and all agreements and  instruments to be delivered by the parties  pursuant  hereto  represent the entire  understanding  and agreement  between the parties hereto with respect to the  subject  matter  hereof and  supersede  all prior oral and  written and all contemporaneous oral negotiations,  commitments and understandings  between such parties. The Transferee, by the consent of its Special Committee of Independent Directors or officers authorized by such Committee, and the Transferor may amend or modify this Agreement, in such manner as may be agreed upon, by a written instrument executed by the Transferee and the Transferor.

(b) If the provisions  of any  Exhibit to this Agreement are inconsistent with the  provisions of this Agreement, the  provisions of the Agreement shall prevail.  The Exhibits attached hereto or to be attached hereafter are hereby incorporated as integral parts of this Agreement.

	
15. 

	
SEVERABILITY.

Any provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction.

 

  

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16. 

	
INVESTIGATION OF THE PARTIES.

Any representations and warranties contained herein which are made to the best knowledge of a party shall require that such party make reasonable investigation and inquiry with respect thereto to ascertain the correctness and validity thereof.

	
17.

	
EXPENSES.

Except as otherwise expressly provided herein, the Transferee, on the one hand, and the Transferor, on the other hand, will pay all their respective fees and expenses (including, without limitation, legal and accounting fees and expenses) incurred by them in connection with the transactions contemplated hereby. All fees or expenses not exceeding $5,000 incurred in connection with this transaction by the Transferor shall be included in Assumed Liabilities . The Transferor shall be responsible for payment of all sales or transfer taxes arising out of the conveyance of the Assets.

	
18. 

	
GOVERNING LAW.

This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

	
19. 

	
SECTION HEADINGS.

The section headings are for the convenience of the parties and in no way alter, modify, amend, limit, or restrict the contractual obligations of the parties.

	
20. 

	
COUNTERPARTS.

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document.

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of and on the date first above written.

	 	
TRANSFEREE:

	
Cell-nique Corporation

By:   /s/ Dan Ratner                    

 Dan Ratner

Title: President

	 	
TRANSFEROR:

	
Cherrybrook Kitchen, LLC

 

By:   /s/ Charles Rosenberg      

     Charles Rosenberg

Title:  Manager

 

  

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