Document:

exhibit1032.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    LICENSE
AGREEMENT

    

    between

    

    OUTLOOK
PHARMACEUTICALS, INC.

    

    and

    

    AURIGA
LABORATORIES, INC.

    

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          Confidential

        

      

    

    LICENSE
AGREEMENT

     

    THIS
LICENSE AGREEMENT (this “Agreement”),
effective as of November 28, 2007 (the “Effective Date”), is
entered into between Outlook
Pharmaceuticals, Inc., an Ohio corporation (“Outlook”), and Auriga Laboratories,
Inc., a Delaware
corporation (“Auriga”).

     

    Recitals

     

    WHEREAS, Outlook is the owner
of the rights relating to the product immediate release Dextroamphetamine
Sulfate Oral Solution, 5mg/5ml, a pharmaceutical product;

     

    WHEREAS, Outlook has filed and
is the sponsor of abbreviated new drug application 40-776.

     

    WHEREAS, Auriga desires to
obtain an exclusive license to Exploit, defined below, the Product in the
Territory, defined below, and;

     

    WHEREAS, Outlook is willing to
grant to Auriga said license, subject to the terms and limitations set forth
herein.

     

    Based on
the foregoing Recitals, and the mutual covenants set forth below, the parties
agree as follows:

     

    1 DEFINITIONS

     

    “Affiliate” shall
mean, with respect to any person or entity, any other person or entity that
controls, is controlled by or is under common control with such person or
entity.  For purposes of this Agreement, a person or entity shall be
in “control” of an entity if it owns or controls at least fifty percent (50%) of
the equity securities of the subject entity entitled to vote in the election of
directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority), or otherwise has the power to
control the management and policies of such other entity.

     

    "ANDA" the abbreviated
new drug application * * *.

     

    “Agreement” shall have
the meaning set forth in the preamble to this Agreement.

     

    "Act" shall mean the
United States Federal Food, Drug & Cosmetic Act (21 U.S. 301) and the
regulations promulgated thereunder.

     

    “Auriga” shall have
the meaning set forth in the preamble to this Agreement.

     

    "Auriga Common Stock"
shall mean the Common Stock of Auriga, $.001 par value per share.

     

    “Bankruptcy Code”
shall have the meaning set forth in Section 11.3.1 of the
License Agreement.

     

    "Business Days" shall
mean any day that banking institutions are open for regular business in
Cincinnati, Ohio.

     

    “Commercially Reasonable
Efforts” shall have the meaning set forth in Section 4.1.2 of this
Agreement.

     

    “Confidential
Information” shall mean, with respect to a party, all information (and
all tangible and intangible embodiments thereof), that is owned or controlled by
such party, is disclosed by or on behalf of such party to the other party
pursuant to this Agreement, and (if disclosed in writing or other tangible
medium) is marked or identified as confidential at the time of disclosure to the
receiving party or (if otherwise disclosed) is identified as confidential at the
time of disclosure to the receiving party and described as such in writing
within thirty (30) days after such disclosure.  Notwithstanding the
foregoing, Confidential Information of a party shall not include information
which, and only to the extent, the receiving party can establish by written
documentation (a) has been generally known prior to disclosure of such
information by the disclosing party to the receiving party; (b) has become
generally known, without the fault of the receiving party, subsequent to
disclosure of such information by the disclosing party to the receiving party;
(c) has been received by the receiving party at any time from a source,
other than the disclosing party, rightfully having possession of and the right
to disclose such information free of confidentiality obligations; (d) has
been otherwise known by the receiving party free of confidentiality obligations
prior to disclosure of such information by the disclosing party to the receiving
party; or (e) has been independently developed by employees or others on
behalf of the receiving party without use of such information disclosed by the
disclosing party to the receiving party (each, a “Confidentiality
Exception”).

     

    “Confidentiality
Exception” shall have the meaning set forth in the preceding
definition.

     

    "Controlling
Stockholders" shall have the meaning set forth in Section
5.1.4(b).

     

    “Effective Date” shall
have the meaning set forth in the preamble to this Agreement.

     

    “Encumbrance” shall
mean any lien, mortgage, deed of trust, pledge, security interest, charge,
condition, equitable interest, right of first refusal, community property
interest, covenant, option, title defect, claim, restriction, variance,
exception, license, or other adverse claim or interest or encumbrance of any
kind or nature whatsoever, whether or not perfected, including any restriction
on use, voting, transfer, receipt of income or exercise of any other attribute
of ownership

     

    “Exploit,” “Exploiting” or “Exploitation” shall
mean to make, have made, distribute, commercialize, market, offer for sale and
sell the Product in the Territory.

     

    “FDA” shall mean the
Food and Drug Administration of the United States, or the successor
thereto.

     

    "FDA Approval" shall
mean written communication from the FDA that the FDA has approved the
Product.

     

    “First Commercial
Sale” shall mean the first sale for use or consumption by the general
public of the Product; conclusive indicia of a First Commercial Sale shall
include, but is not limited to, the shipment of Product to
wholesalers.

     

    "First Product
Delivery" shall mean the first delivery of a commercial supply of the
Product by Mikart, Inc., or any other manufacturer or supplier, to Auriga or its
designee.

     

    “Indemnitee” shall
have the meaning set forth in Section 10.3 of this
Agreement.

     

    “Law” shall mean any
federal, state or local law, statute or ordinance, or any rule, regulation, or
published guidelines promulgated by any governmental authority, including the
United States Food, Drug and Cosmetic Act and applicable regulations promulgated
thereunder.

     

    “License Agreement”
shall mean this Agreement pursuant to which Outlook grants certain exclusive
license rights for Auriga to Exploit the Products in the Territory.

     

    "Minimum Annual Performance
Payments"  shall have the meaning set forth in Section 5.2.3
below.

     

    “Net Sales” shall mean
the amounts * * *.

     

    "Outlook" shall mean
Outlook Pharmaceuticals, Inc., an Ohio corporation.

     

    “Outlook Know-How
Rights” shall mean, collectively, all trade secret and other know-how
rights relating to the Product which Outlook has an ownership or licensable
interest as of the Effective Date.

     

    “Outlook Technology”
shall mean, collectively, (a) the ANDA; (b)  Outlook Know-How Rights; and
(c) Trademark.

     

    "Performance Payments"
shall have the meaning set forth in Section 5.2.2
below.

     

    “Product” or “Products” shall mean
immediate release * * * Solution, 5 mg/5ml.

     

    "Term" shall have the
meaning set forth in Section
11.1.

     

    “Territory” shall be
the United States, its territories and possessions and the District of
Columbia.

     

    "Trademark" shall mean
the trademark LiquaddTM, serial
number 77252236 filed in the United States Patent and Trademark Office on August
10, 2007 by Outlook.

     

    2 REPRESENTATIONS
AND WARRANTIES

     

    2.1 Both
Parties.  Each party represents and warrants to the other party
as follows:

     

    2.1.1 Organization.  Such
party is duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is organized.

     

    2.1.2 Authorization and
Enforcement of Obligations.  Such party (a) has the
requisite power and authority and the legal right to enter into this Agreement
and to perform its obligations hereunder; and (b) has taken all requisite
action on its part to authorize the execution and delivery of this Agreement and
the performance of its obligations hereunder.  This Agreement has been
duly executed and delivered on behalf of such party, and constitutes a legal,
valid, binding obligation, enforceable against such party in accordance with its
terms.

     

    2.1.3 Consents.  All
necessary consents, approvals and authorizations of all governmental authorities
and other persons or entities required to be obtained by such party in
connection with this Agreement have been obtained.

     

    2.1.4 No
Conflict.  The execution and delivery of this Agreement and the
performance of such party’s obligations hereunder (a) do not conflict with
or violate any requirement of applicable Laws, regulations or orders of
governmental bodies; and (b) do not conflict with, or constitute a default
under, any contractual obligation of such party.

     

    2.2 Outlook Additional
Representations and Warranties.  Outlook hereby represents and
warrants to Auriga that:

     

    2.2.1 Intellectual Property
Matters.

     

    (a) Other
than pursuant to this Agreement, Outlook has not assigned, licensed,
sublicensed, granted any interest in or options to, nor has Outlook otherwise
entered into any existing agreement with respect to, the ANDA for use in the
Territory and shall not do so prior to the expiration or termination of this
Agreement.

     

    (b) As of the
Effective Date, to Outlook's knowledge, the use of the ANDA in accordance with
the terms of this Agreement does not infringe the intellectual property rights
of any third party and does not constitute a misappropriation of the trade
secrets or other intellectual property rights of any third party in the
Territory.

     

    (c) As of the
Effective Date, to Outlook's knowledge, no third party has interfered with,
infringed upon or misappropriated the ANDA.

     

    (d) As of the
Effective Date, Outlook has not been served with notice of any interference
action, opposition, or litigation with respect to the ANDA nor has Outlook
received any written communication which expressly threatens any interference
action, opposition, litigation, requests that Outlook obtain a license from any
third party or otherwise threatens or contemplates litigation with respect to
the ANDA, whether before any patent and trademark office, court, or any other
governmental authority.  To Outlook's knowledge, as of the
Effective Date:  (i) no such action or litigation has been threatened,
and (ii) no event has occurred or circumstance exists that may give rise to or
serve as a basis for the commencement of any such action or
litigation.

     

    2.2.2 Regulatory
Matters.

     

    (a) Outlook
has not received any warning letters or written correspondence from the FDA
and/or any other governmental authority requiring the termination, suspension or
modification of any clinical or pre-clinical studies or tests with respect to
the Product.

     

    (b) As of the
Effective Date, there are no actual or, to the knowledge of Outlook, threatened
enforcement actions relating to the Product by the FDA or any other governmental
authority which has jurisdiction over Outlook's or any applicable third-party
manufacturer’s operations or products, including, without limitation, any fines,
injunctions, civil or criminal penalties, investigations, debarments or
suspensions.

     

    2.2.3 Compliance with
Laws.  To Outlook's knowledge, as of the Effective Date,
Outlook is in compliance in all material respects with all Laws that are
applicable to the ownership, operation or use of any of the Product or Outlook
Technology.  To the knowledge of Outlook, there are no events,
conditions, circumstances, activities, practices, incidents or actions of
Outlook relating to the Outlook Technology that would interfere with or
prevent compliance with or give rise to any liabilities or investigative,
corrective or remedial obligations with respect to the Outlook Technology under
applicable Laws.

     

    2.3 Disclaimer of
Warranties.  EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 2, OUTLOOK
MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE
OUTLOOK TECHNOLOGY, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY
REGARDING VALIDITY, ENFORCEABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR NONINFRINGEMENT.  EXCEPT AS EXPRESSLY SET FORTH IN THIS
SECTION 2, ALL
RIGHTS IN THE OUTLOOK TECHNOLOGY PROVIDED TO AURIGA HEREUNDER ARE PROVIDED “AS
IS.” 

     

    3 LICENSE
GRANT AND SUBLICENSING

     

    3.1 Outlook
Technology.  Outlook hereby grants to Auriga an exclusive (even
as against Outlook), sublicensable (as set forth in Section 3.2), license
under the Outlook Technology to Exploit the Products in the Territory (the
"License"). 

     

    3.2 Sublicenses.  Subject
to obtaining the prior written consent from Outlook Auriga shall have the right
to grant sublicenses under any portion or all of the license set forth in Section 3.1 to one or
more Affiliates and/or third parties.  A copy of each sublicense shall
be delivered to Outlook within thirty (30) days after signing the
sublicense.  Each sublicense shall be subject to the applicable terms
and conditions of this Agreement.  No such sublicense shall grant any
right to grant further sublicenses.  

     

    4 DILIGENCE
EFFORTS.

     

    4.1 Order, Launch Date and
Efforts.

     

    4.1.1 Order and Launch
Date.  Within five (5) Business Days after the Product receives
FDA Approval, Auriga shall place a purchase order on Mikart, Inc. for a
commercial supply of the Product and shall promptly provide Outlook with a copy
of such purchase order.  Auriga shall make the First Commercial Sale
of the Product no later than thirty (30) days after the delivery of the Product
to Auriga, or its designee, pursuant to such purchase order.

     

    4.1.2 Diligence
Efforts.  Auriga shall use Commercially Reasonable Efforts
(defined below) to maximize sales of the Products in the
Territory.  The term “Commercially Reasonable
Efforts” shall mean that level of effort and resources as Auriga applies
to its other first priority products.

     

    4.1.3 Abandonment.  If
at any time Auriga abandons or suspends its manufacture, marketing or intent to
market the Products for a period exceeding forty-five (45) days, Auriga shall
immediately notify Outlook, giving reasons therefore and a statement of its
actions.

     

    4.2 Safety Monitoring and
Notice, Promotion, Sales Reports.

     

    4.2.1 Safety Monitoring and
Notice.

     

    (a) Auriga
shall comply with all Laws applicable to the testing, manufacture,
transportation, packaging, labeling, promotion, distribution, sales and use of
the Products.  Without limiting the foregoing, Auriga shall be solely
responsible for assuring compliance with the Act and regulations applicable to
this Agreement and Auriga's activities hereunder, including but not limited to
safety monitoring and adverse event reporting.

     

    (b) Auriga
shall promptly notify Outlook of its knowledge of any fact, circumstance,
condition or knowledge that bears on (i) the safety or efficacy of the Products,
or (ii) any report of an adverse event associated with the
Product.  Auriga and Outlook may use and disclose such information to
the extent necessary to comply with the Law.  Auriga shall have sole
responsibility in taking all actions which may be required or commercially
reasonable in connection with any such fact, circumstance, condition or
knowledge.

     

    4.2.2 Promotion.  Auriga
shall develop, review and in all other respects be responsible for all
promotional materials related to the Product.  Auriga represents and
agrees only to promote the Product within and in accordance with the FDA
approved labeling and this Agreement.

     

    4.2.3 Sales
Reports.  Within sixty (60) days following the end of each
calendar quarter during the Term, Auriga shall prepare and deliver to Outlook a
written report which shall  (a) describe, in reasonable detail,
Auriga’s efforts to promote and sell Products during such quarter, and (b)
disclose the results thereof achieved during such quarter.  The report
and contents of any such report shall be owned exclusively by Auriga and Outlook
shall treat the report and its contents as Confidential Information of Auriga
consistent with Section 9 of this
Agreement.

     

    5 PAYMENTS

     

    5.1 Auriga Common Stock or
Cash.

     

    5.1.1 Delivery.  *
* *.

     

    5.1.2 Payment Amount and
Time.

     

    * * *
*

     

    5.1.3 Value.  * *
*

     

    5.1.4 Anti-Dilution and Tag Along
Rights.

     

    * *
*

     

    5.2 Performance
Payments.

     

    * *
*

     

    5.3 Performance Payments
Reports.

     

    5.3.1 * *
*.

     

    5.3.2 * *
*.

     

    5.3.3 * *
*.

     

    5.3.4 * *
*.

     

    5.3.5 * *
*.

     

    5.4 Audits.

     

    5.4.1 Upon the
written request of Outlook and not more than once in each calendar year, Auriga
shall permit an independent certified public accounting firm of nationally
recognized standing, selected by Outlook and reasonably acceptable to Auriga, at
Outlook’s expense, to have access during normal business hours to such of the
records of Auriga as may be reasonably necessary to verify the accuracy of the
Performance Payment reports hereunder for any year ending not more than
thirty-six (36) months prior to the date of such request.  The
accounting firm shall be required to sign a confidentiality agreement for the
benefit of, and in a form reasonably acceptable to, Auriga, and shall disclose
to Outlook and Auriga only whether the reports are correct or not and the
specific details concerning any discrepancies.  No other information
shall be shared.

     

    5.4.2 If such
accounting firm concludes that additional Performance Payments were owed during
the audited period, Auriga shall pay such additional Performance Payments within
thirty (30) days of the date Outlook delivers to Auriga such accounting firm’s
written report so concluding.  If such accounting firm concludes that
Auriga has overpaid Performance Payments during the audited period, Auriga shall
have the right to credit the amount of the overpayment against each subsequent
quarterly payment due to Outlook until the overpayment has been fully applied
against future Performance Payments.  If the overpayment is not fully
applied prior to the final quarterly payment of Performance Payments due
hereunder, Outlook shall promptly refund to Auriga an amount equal to any such
remaining overpayment.  The fees charged by such accounting firm shall
be paid by Outlook; provided, however, if the audit
discloses that the Performance Payments payable by Auriga for such period are
more than one hundred ten percent (110%) of the Performance Payments actually
paid for such period, then Auriga shall pay the reasonable fees and expenses
charged by such accounting firm.

     

    5.4.3 * *
*.

     

    5.5 Payment
Method.  All cash payments by Auriga to Outlook hereunder shall
be in United States Dollars in immediately available funds and shall be made by
wire transfer from a United States bank located in the United States to such
bank account as designated from time to time by Outlook to
Auriga.  

     

    6 TRANSFER
OF SPONSORSHIP AND MANAGEMENT OF ANDA

     

    6.1 Transfer of
Sponsorship.  Outlook shall within eight (8) business days
after the date of FDA Approval send written notice to the FDA transferring the
sponsorship of the ANDA to Auriga and Auriga shall at the same time send written
notice to the FDA assuming all obligations thereunder, and such notices shall
have an effective date that is approximately thirty (30) days after the date of
FDA Approval.  The parties shall coordinate with one another and shall
send such notices simultaneously, and each party shall deliver a copy of its FDA
notice to the other party.

     

    6.2 FDA Communications and
Management of ANDA.  Prior to FDA Approval, Outlook shall
communicate with the FDA and undertake all actions that it deems necessary, in
its sole discretion, with respect to the ANDA.  Outlook shall send
copies of all correspondence it receives from the FDA, prior to the transfer of
sponsorship described in Section 6.1 above, to
Auriga.

     

    7 TRADEMARKS

     

    7.1 Auriga
agrees to use the Trademark only in connection with the Product in compliance
with the standards, specifications, directions, information and know-how
supplied and approved by Outlook.

     

    7.2 Auriga
agrees to comply with any requirements established by Outlook concerning the
style, design, display and use of the Trademark; to correctly use the
appropriate trademark symbol with every use of the mark; and to submit in
advance to Outlook for approval a copy of its use on all advertising, labels,
stickers or packaging, which shall not be unreasonably withheld.

     

    7.3 Auriga
agrees to submit to Outlook from time to time and to permit Outlook or its duly
authorized representative the right to inspect the Products.  When
requested, Auriga agrees to send samples of advertising and promotional
materials, as well as goods and promotional and advertising materials bearing or
sold under the Trademark and any other documents which may permit Outlook to
determine whether the goods and services and trademark uses meet the standards,
specifications and directions approved by Outlook.

     

    7.4 Auriga
agrees that ownership of the Trademark and the goodwill relating thereto shall
remain vested in Outlook both during the period of this Agreement and
thereafter.  Auriga agrees to inform Outlook of the use of any marks
similar to the Trademark and any potential infringements of the Trademark which
come to its attention.

     

    8 AUTHORIZED
GENERIC

     

    8.1 * *
*.

     

    9 CONFIDENTIALITY

     

    9.1 Confidentiality.  During
the Term and for a period of seven (7) years following the expiration or earlier
termination hereof, each party shall maintain in confidence the Confidential
Information of the other party, shall not use or grant the use of the
Confidential Information of the other party except as expressly permitted
hereby, and shall not disclose the Confidential Information of the other party
except on a need-to-know basis to such party’s directors, officers, employees,
consultants, Affiliates and permitted sublicensees hereunder, to the extent such
disclosure is reasonably necessary in connection with such party’s activities as
expressly authorized by this Agreement.  To the extent that disclosure
to any person is authorized by this Agreement, prior to disclosure, a party
shall obtain written agreement of such person to hold in confidence and not
disclose, use or grant the use of the Confidential Information of the other
party except as expressly permitted under this Agreement.  Each party
shall notify the other party promptly upon discovery of any unauthorized use or
disclosure of the other party’s Confidential Information.

     

    9.2 Terms of
Agreement.  Neither party shall disclose any terms or
conditions of this Agreement to any third party without the prior consent of the
other party; provided, however, that a party
may disclose the terms or conditions of this Agreement, (a) on a
need-to-know basis to its legal and financial advisors to the extent such
disclosure is reasonably necessary, and (b) to a third party in connection
with (i) an equity investment in, or lending arrangement with, such party,
(ii) a sublicense, collaboration, co-promotion, strategic partnership,
merger, consolidation or similar transaction by such party, or (iii) the
sale of all or substantially all of the assets of such
party.  

     

    9.3 Permitted
Disclosures.  The confidentiality obligations under this Section 9 shall not
apply to the extent that a party is required to disclose information by Law;
provided, however, that such
disclosing party shall provide written notice thereof to the other party,
consult with the other party with respect to such disclosure, provide the other
party sufficient opportunity to object to any such disclosure or to request
confidential treatment thereof, and to the extent of any objection, make only
the minimum disclosure of information required by Law.

     

    9.4 Publicity.  If
either party wishes to make a public disclosure concerning this Agreement or the
relationship established hereunder, such party shall provide the other party in
advance with a copy of such proposed disclosure and the other party shall have
three (3) business days within which to approve or disapprove the content of the
proposed disclosure.  Neither party shall unreasonably withhold
approval of such disclosure.  Failure to respond within such three (3)
business day period shall constitute approval.

     

    10 INDEMNIFICATION

     

    10.1 Indemnification by
Auriga.  Except to the extent that Outlook is obligated to
indemnify Auriga under Section 10.2
below, Auriga shall indemnify and hold harmless Outlook, and its directors,
officers, employees and agents, from and against all losses, liabilities,
damages and expenses, including reasonable attorneys’ fees and costs, arising
from any claims, demands, actions or other proceedings by any third party
arising from (a) the breach of any representation, warranty or covenant by
Auriga under this Agreement; (b) the use of the
Outlook  Technology by or on behalf Auriga; or (c) the
Exploitation, handling or storage of Products by Auriga, its sublicensees or
their respective Affiliates (excluding Outlook), customers or end-users provided, however, that such
indemnification right shall not apply to any losses, liabilities, damages or
expenses to the extent directly attributable to the negligence, reckless
misconduct, or intentional misconduct of a party seeking indemnification under
this Section 10.1.

     

    10.2 Indemnification by
Outlook.  Outlook
shall indemnify and hold harmless Auriga, and its directors, officers, employees
and agents, from and against all losses, liabilities, damages and expenses,
including reasonable attorneys’ fees and costs, arising from any claims,
demands, actions or other proceedings by any third party arising from the breach
of any representation, warranty or covenant by Outlook under this
Agreement;
provided, however, that such
indemnification right shall not apply to any losses, liabilities, damages or
expenses to the extent directly attributable to the negligence, reckless
misconduct, or intentional misconduct of a party seeking indemnification under
this Section 10.2.

     

    10.3 Procedure.  A
party that intends to claim indemnification under this Section 10.3
(the “Indemnitee”) shall
promptly notify the other party (the “Indemnitor”) in
writing of any claim, demand, action or other proceeding for which the
Indemnitee intends to claim indemnification; provided, however, that the
failure to provide written notice of such claim within a reasonable period of
time will not relieve the Indemnitor of any of its obligation hereunder, except
to the extent that the Indemnitor is prejudiced by such failure to provide
prompt notice.  The Indemnitor shall have the right to participate in,
and to the extent the Indemnitor so desires to assume the defense thereof with
counsel selected by the Indemnitor; provided, however, that the
Indemnitee, shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitee, if representation of the Indemnitee by
the counsel retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between the Indemnitee and any other party
represented by such counsel in such proceedings.  The Indemnitor may
not settle or otherwise consent to an adverse judgment in any such claim,
demand, action or other proceeding, that diminishes the rights or interests of
the Indemnitee without the prior express written consent of the Indemnitee,
which consent shall not be unreasonably withheld or delayed, unless (a) there is
no finding or admission of any violation of Law or any violation of the rights
of any person and no effect on any other claims that may be made against the
Indemnitee and (b) the sole relief provided is monetary damages that are paid in
full by the Indemnitor.  

     

    10.4 Insurance.  Auriga
shall maintain insurance with respect to its activities under this Agreement as
is normal and customary in the pharmaceutical industry generally for parties
similarly situated.  Auriga shall, upon request of Outlook, provide
the requesting party with a copy of the foregoing policies of insurance, along
with any amendments and revisions thereto.  Outlook shall be named as
an additional insured on any such policies maintained hereunder by
Auriga.  If there is any additional costs for adding Outlook as an
additional insured, Auriga shall pay such additional costs.

     

    11 TERM;
TERMINATION

     

    11.1 Term.  This
Agreement shall commence on the Effective Date and be perpetual unless
terminated pursuant to this Section 11;  provided,
however, the license to the Trademark shall terminate and all rights to the
Trademark shall revert to Outlook if Auriga ceases to use the Trademark in any
material manner in connection with the Product or fails to use the Trademark in
the marketing associated with the First Commercial Sale of the Product
("Term").

     

    11.2 Termination for
Breach.

     

    11.2.1 If Auriga
has breached any of its obligations to pay any of the payments to which Outlook
is entitled under this Agreement, and such breach continues for thirty (30) days
after written notice of such breach was provided to Auriga by Outlook, Outlook
shall have the right at its option to terminate this Agreement effective at the
end of such thirty (30) day period.

     

    11.2.2 If a
party has materially breached any of its obligations hereunder, and such
material breach continues for sixty (60) days after written notice of such
breach was provided to the breaching party by the nonbreaching party, the
nonbreaching party shall have the right at its option to terminate this
Agreement effective at the end of such sixty (60) day period.

     

    11.3 Termination
for  Bankruptcy.

     

    11.3.1 Either
party may terminate this Agreement upon the occurrence of one or more of the
following:

     

    (a) immediately
upon written notice to the other party in the event such other party becomes
insolvent or initiates a voluntary proceeding under the U.S. Bankruptcy Code
(beginning at 11 U.S.C. 101, as amended) (the “Bankruptcy Code”);
or

     

    (b) immediately
upon written notice to the other party in the event such other party becomes the
subject of an involuntary proceeding under the U.S. Bankruptcy Code and such
proceeding is not dismissed or stayed within ninety (90) days of its
commencement.

     

    11.4 Termination by
Auriga.  * * *.

     

    11.5 Termination by
Outlook.  * * *.

     

    11.6 Effect of Expiration or
Termination.

     

    11.6.1 Expiration
or termination of this Agreement shall be without prejudice to any rights which
shall have accrued to the benefit of a party prior to such expiration or
termination.  Without limiting the foregoing, Articles 1, 9, 10, 11
and 12 and Sections 2.3, 4.2.3, 5.1.4, 5.2, 5.3 and 5.4 of this Agreement shall
survive any expiration or termination of this Agreement.

     

    11.6.2 Promptly
upon the expiration or earlier termination of this Agreement: (a) Auriga
shall destroy or return (at Outlook's expense) to Outlook (as Outlook shall
direct) all Outlook Technology and any data or information related to the
Product; (b) Auriga shall grant Outlook a perpetual exclusive royalty free
license in the Territory to use all tradenames and trademarks under which the
Product is being marketed or has been marketed and (c) Auriga shall promptly
send written notice to the FDA transferring the sponsorship of the ANDA to
Outlook and Outlook shall at the same time send written notice to the FDA
assuming all obligations thereunder, and such notices shall have an effective
date that is approximately thirty (30) days after the date of expiration or
termination of this Agreement.  The parties shall coordinate with one
another and shall send such notices simultaneously, and each party shall deliver
a copy of its FDA notice to the other party.

     

    12 GENERAL
PROVISIONS

     

    12.1 Governing
Law.  This Agreement shall be governed by, interpreted and
construed in accordance with the laws of the State of Ohio, without regard to
the conflicts of law principles thereof.

     

    12.2 Arbitration.  Any
dispute, controversy or claim initiated by either party arising out of,
resulting from or relating to this Agreement, or the performance by either party
of any obligation under this Agreement, whether before or after termination of
this Agreement, shall be finally resolved by binding
arbitration.   Whenever a party shall decide to institute
arbitration proceedings, it shall give written notice to that effect to the
other party.  Any such arbitration shall be conducted under the
Commercial Arbitration Rules of the American Arbitration Association by a panel
of three arbitrators appointed in accordance with such rules.  Any
such arbitration shall be held in Chicago, Illinois.  The method and
manner of discovery in any such arbitration proceeding shall be governed by the
Commercial Arbitration Rules of the American Arbitration
Association.  Each party shall choose one (1) arbitrator within thirty
(30) days after receipt of notice of the intent to
arbitrate.  Such arbitrators shall thereafter choose a third
arbitrator within thirty (30) days of their appointment.  If one
or both of the parties fails to make a timely appointment of its arbitrator,
then such missing arbitrator(s) will be appointed by the American Arbitration
Association.  The arbitrators shall have the authority to grant
specific performance and to allocate between the parties the costs of
arbitration in such equitable manner as they determine.  The
arbitrators shall make their award and decision by majority approval, which
shall be made in accordance with the terms of this Agreement and applicable
law.  Judgment upon the award so rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may
be.  In no event shall a demand for arbitration be made after the date
when institution of a legal or equitable proceeding based upon such claim,
dispute or other matter in question would be barred by the applicable statute of
limitations.  Notwithstanding the foregoing, either party shall have
the right, without waiving any right or remedy available to such party under
this Agreement or otherwise, to seek and obtain from any court of competent
jurisdiction any interim or provisional relief that is necessary or desirable to
protect the rights or property of such party, pending the selection of the
arbitrators hereunder or pending the arbitrators’ determination of any dispute,
controversy or claim hereunder.  Each of the parties agrees that if
certain material obligations under this Agreement are not performed in
accordance with their specific terms or are otherwise breached, (a) severe and
irreparable damage would occur, (b) no adequate remedy at law would exist and
(c) damages would be difficult to determine.  Each of the parties
agrees that, in such case, the injured party or parties shall be authorized and
entitled to obtain from any court of competent jurisdiction injunctive relief,
whether preliminary or permanent, as well as any other relief permitted by
applicable law, and the breaching party shall waive any requirement that such
party or parties post bond as a condition for obtaining any such
relief.

     

    12.3 Waiver.  No
waiver by a party hereto of any breach or default of any of the covenants or
agreements herein set forth shall be deemed a waiver as to any subsequent and/or
similar breach or default.  The failure by either party to take any
action or assert any right hereunder shall in no way be construed to be a waiver
of such right, nor in any way be deemed to affect the validity of this Agreement
or any part hereof, or the right of a party to thereafter enforce each and every
provision of this Agreement

     

    12.4 Rights Under U.S. Bankruptcy
Code.  All rights and licenses granted under or pursuant to
this Agreement by Outlook are, and shall otherwise be deemed to be, for purposes
of Section 365(n) of the Bankruptcy Code, licenses to intellectual property as
defined under Section 101 of the Bankruptcy Code.  Outlook agrees that
Auriga shall retain and may fully exercise its rights and elections under the
Bankruptcy Code.

     

    12.5 Assignment.  Neither
this Agreement nor any right or obligation hereunder may be assigned or
delegated, in whole or part, by either party without the prior express written
consent of the other.  Any permitted assignee shall assume all
obligations of its assignor under this Agreement.  Any purported
assignment in violation of this Section 12.5
shall be void.  

     

    12.6 Further
Actions.  Each party agrees to execute, acknowledge and deliver
such further documents and instruments and to perform all such other acts as may
be necessary or appropriate in order to carry out the purposes and intent of
this Agreement.

     

    12.7 Notices.  All
requests and notices required or permitted to be given to the parties hereto
shall be given in writing, shall expressly reference the section(s) of this
Agreement to which they pertain, and shall be delivered to the other party,
effective on receipt, at the appropriate address as set forth below or to such
other addresses as may be designated in writing by the parties from time to time
during the term of this Agreement.

     

    If to
Outlook:

     

    Outlook
Pharmaceuticals, Inc.

    Attn:
Stefan Antonsson

    747
Tusculum Ave.

    Cincinnati,
Ohio  45226

    

    with a
copy to:

     

    Dinsmore
& Shohl LLP

    Attn:  Paul
R. Mattingly, Esq.

    255 East
Fifth Street, Suite 1900

    Cincinnati,
Ohio 45202

    

    If to
Auriga:

     

    Auriga
Laboratories, Inc.

    Attn:  Philip
S. Pesin

    10635
Santa Monica Blvd., Suite 120

    Los
Angeles, California 90025

    

    12.8 No Implied
Licenses.  Only licenses and rights granted expressly herein
shall be of legal force and effect.  No license or other right shall
be created hereunder by implication, estoppel or otherwise.

     

    12.9 Force
Majeure.  Nonperformance of a party (other than for the payment
of money) shall be excused to the extent that performance is rendered impossible
by strike, fire, earthquake, flood, governmental acts or orders or restrictions,
failure of suppliers, or any other reason where failure to perform is beyond the
reasonable control and not caused by the negligence, intentional conduct or
misconduct of the nonperforming party; provided, however, that the
nonperforming party shall use commercially reasonable efforts to resume
performance as soon as reasonably practicable.  

     

    12.10 No Consequential
Damages.  IN NO EVENT SHALL A PARTY BE LIABLE FOR SPECIAL,
INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT OR
THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING WITHOUT LIMITATION LOST PROFITS
ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY
NOTICE OF SUCH DAMAGES.  NOTHING IN THIS SECTION 12.10 IS
INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF
EITHER PARTY UNDER SECTION 10
ABOVE.

     

    12.11 Complete
Agreement.  This Agreement constitutes the entire agreement
between the parties regarding the subject matter hereof, and all prior
representations, understandings and agreements regarding the subject matter
hereof, either written or oral, expressed or implied, are superseded and shall
be and of no effect. 

     

    12.12 Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original and together shall be deemed to be one and the same
agreement.

     

    12.13 Headings.  The
captions to the several sections hereof are not a part of this Agreement, but
are included merely for convenience of reference only and shall not affect its
meaning or interpretation.

     

    IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed by their
respective duly authorized officers as of the day and year first above
written.

     

    OUTLOOK
PHARMACEUTICALS, INC.

    

    By:           

    Its:           

    Print
Title:                                                                           

    

    AURIGA
LABORATORIES, INC.

    

    By:           

    Its:           

    Print
Title:                                                                           

    

    For the
purposes of Section 5.1.4(b) only:

    

    CONTROLLING
STOCKHOLDERS:

    

    ___________________________________________

    Philip S.
Pesin

    

    
      
        
          
            	 
      

          

          

          Outlook, License Agreement
(Redacted)
                                                                 

        

         

      

      
         

        
          

        

      

      
         

        
          Confidential

        

      

    

    EXHIBIT
A

    

    CONTROLLING
STOCKHOLDERS

    

    

    Philip S.
Pesin

    

    
      
        
          
            	 
      

          

          

          Outlook, License Agreement
(Redacted)ex10_37.htm

    
      

    

    Exhibit
10.37

     

    

      THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

      

      US
$170,000

      

      ________________________________________

      

      12%
SECURED PROMISSORY NOTE DUE May 1, 2008

      

      FOR VALUE
RECEIVED, D.L. CLAIRE CAPITAL, INC., a corporation organized and existing under
the laws of the State of Delaware (the “Company”), promises to pay to CAMHZN Master LDC, the
registered holder hereof (the “Holder”), the principal sum of One Hundred
Seventy Thousand Dollars (US $170,000) on the Maturity Date (as defined below)
and to pay interest on the principal sum outstanding from time to time in
arrears at the rate of 12% per annum (computed on the basis of the actual number
of days elapsed and a year of 360 days and compounded monthly), accruing from
October 31, 2007, the date of initial issuance of this Note (the “Issue Date”),
to the date of payment. Such interest shall be payable on the date which is the
earlier of (i) the Maturity Date, or (ii) the date of any prepayment of
principal permitted hereunder; except that interest for month in advance shall
be paid on the Issue Date. Accrual of interest shall commence on the Issue Date
and shall continue to accrue on a daily basis until payment in full of the
principal sum has been made or duly provided for (whether before or after the
Maturity Date).

      

      This Note
is being issued pursuant to the terms of the Purchase Agreement, dated as of
October 31, 2007 (the “Purchase Agreement”), to which the Company and the Holder
(or the Holder’s predecessor in interest) are parties. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Purchase Agreement.

      

      This Note
is subject to the following additional provisions:

      

      1.           
 The term “Maturity Date” means the earlier of (x) May 1, 2008 or (y) the
date on which the Company consummates an equity financing or funding transaction
in excess of $1,500,000 (a “Qualified Financing”), whether or not such
transaction is effected in connection with the current or future issuance of
securities.

      

      2.         
   (i)           This
Note may be prepaid in whole or in part at any time prior to the Maturity Date,
without penalty. Any payment shall be applied as provided in Section
3.

      

      (ii)           TIME IS OF THE ESSENCE WITH RESPECT TO ANY
PAYMENT DUE HEREUNDER. The Company shall be in default hereunder if any
payment is not made in a timely manner, without any right to cure unless such
right to cure is granted by the Holder or the terms of this Note in each
instance; provided, however, that the grant of such right by the Holder is in
the sole discretion of the Holder and may be withheld for any reason or for no
reason whatsoever.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      3.          
  Any payment made on account of the Note shall be applied in the
following order of priority: (i) first, to any amounts due hereunder other than
principal and accrued interest, (ii) then, to accrued interest through and
including the date of payment, and (iii) then, to principal of this
Note.

      

      4.          
  All payments contemplated hereby to be made “in cash” shall be made
in immediately available good funds of United States of America currency by wire
transfer to an account designated in writing by the Holder to the Company (which
account may be changed by notice similarly given). For purposes of this Note,
the phrase “date of payment” means the date good funds are received in the
account designated by the notice which is then currently effective.

      

      5.        
    Subject to the terms of the Purchase Agreement, no
provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Note at the time, place, and rate, and in the coin or currency, as herein
prescribed. This Note is a direct obligation of the Company.

      

      6.         
   The obligations of the Company under this Note are secured by
all of the assets of the Company and by certain stock of the Company and
Marshall Holdings International, Inc. The stock is pledged to the Holder under
the terms of the Pledge Agreements, to which the Holder and the Pledgors are
parties. If the Holder forecloses on any of the Pledged Shares, the obligations
of the Company will be reduced only to the extent of the proceeds actually
realized from such foreclosure, in the priority specified in Section 3
hereof.

      

      7.        
    Conversion.

      

      a)         
  Voluntary
Conversion. At any time after the Original Issue Date until this Note is
no longer outstanding, this Note shall be convertible into shares of Common
Stock at the option of the Holder, in whole or in part at any time and from time
to time (subject to the limitations on conversion set forth in Section 7(d)
hereof). The Holder shall effect conversions by delivering to the Company the
form of Notice of Conversion attached hereto (a “Notice of Conversion”),
specifying therein the principal amount of Notes to be converted and the date on
which such conversion is to be effected (a “Conversion Date”). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the
date that such Notice of Conversion is provided hereunder. To effect conversions
hereunder, the Holder shall not be required to physically surrender Notes to the
Company unless the entire principal amount of this Note plus all accrued and
unpaid interest thereon has been so converted. Conversions hereunder shall have
the effect of lowering the outstanding principal amount of this Note in an
amount equal to the applicable conversion. The Holder and the Company shall
maintain records showing the principal amount converted and the date of such
conversions. The Company shall deliver any objection to any Notice of Conversion
within 5 Business Days of receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in
the absence of manifest error. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note may be less than the amount stated on
the face hereof. However, at the Company’s request, the Holder shall surrender
the Note to the Company within five (5) Trading Days following such request so
that a new Note reflecting the correct principal amount may be issued to
Holder.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      b)       
    Conversion
Price. Subject to adjustment as provided for in Section 8, the initial
conversion price in effect on any Conversion Date shall be $10.00.

      

      c)       
    Reserved.

      

      d)      
     Conversion Limitations; Holder’s Restriction
on Conversion. The Company shall not effect any conversion of this Note,
and the Holder shall not have the right to convert any portion of this Note,
pursuant to Section 7(a) or otherwise, to the extent that after giving effect to
such conversion, the Holder (together with the Holder’s affiliates), as set
forth on the applicable Notice of Conversion, would beneficially own in excess
of 4.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to such conversion. For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination of such sentence
is being made, but shall exclude the number of shares of Common Stock which
would be issuable upon (A) conversion of the remaining, nonconverted portion of
this Note beneficially owned by the Holder or any of its affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other Notes or the
Warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 7(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation contained
in this section applies, the determination of whether this Note is convertible
(in relation to other securities owned by the Holder) and of which a portion of
this Note is convertible shall be in the sole discretion of such Holder. To
ensure compliance with this restriction, the Holder will be deemed to represent
to the Company each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 7(d), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) MHII’s most recent Form
10-QSB or Form 10-KSB (or such related form), as the case may be, (y) a more
recent public announcement by MHII or (z) any other notice by MHII or its
Transfer Agent setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request of the Holder, the Company shall within five
Trading Days confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Note, by the Holder or its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The provisions of this Section 7(d) may be waived by
the Holder upon, at the election of the Holder, not less than 61 days’ prior
notice to the Company, and the provisions of this Section 7(d) shall continue to
apply until such 61st day (or such later date, as determined by the Holder, as
may be specified in such notice of waiver).

      

      e)        
    Mechanics of
Conversion

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      i.         
    Conversion
Shares Issuable Upon Conversion of Principal Amount. The number of shares
of Common Stock issuable upon a conversion hereunder shall be determined by the
quotient obtained by dividing (x) the outstanding principal amount of this Note
to be converted by (y) the Conversion Price.

      

      ii.       
     Delivery
of Certificate Upon Conversion. Not later than five Trading Days after
any Conversion Date, the Company will deliver to the Holder (A) a certificate or
certificates representing the Conversion Shares which shall be free of
restrictive legends and trading restrictions (other than those required by the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of Notes (including, if so timely elected by the
Company, shares of Common Stock representing the payment of accrued interest)
and (B) a bank check in the amount of accrued and unpaid interest (if the
Company is required to pay accrued interest in cash). The Company shall, if
available and if allowed under applicable securities laws, use its best efforts
to deliver any certificate or certificates required to be delivered by the
Company under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions.

      

      iii.       
    Failure to
Deliver Certificates. If in the case of any Notice of Conversion such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the fifth Trading Day after a Conversion Date, the Holder
shall be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return the certificates
representing the principal amount of Notes tendered for conversion.

      

      iv.       
    Obligation
Absolute; Partial Liquidated Damages. If the Company fails for any reason
to deliver to the Holder such certificate or certificates pursuant to Section
7(d)(ii) by the fifth Trading Day after the Conversion Date, the Company shall
pay to such Holder, in cash, as liquidated damages and not as a penalty, for
each $1,000 of principal amount being converted, $10 per Trading Day (increasing
to $20 per Trading Day after 5 Trading Days after such damages begin to accrue)
for each Trading Day after such fifth Trading Day until such certificates are
delivered. The Company’s obligations to issue and deliver the Conversion Shares
upon conversion of this Note in accordance with the terms hereof are absolute
and unconditional, irrespective of any action or inaction by the Holder to
enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of such Conversion Shares; provided, however, such delivery shall not
operate as a waiver by the Company of any such action the Company may have
against the Holder. In the event a Holder of this Note shall elect to convert
any or all of the outstanding principal amount hereof, the Company may not
refuse conversion based on any claim that the Holder or any one associated or
affiliated with the Holder of has been engaged in any violation of law,
agreement or for any other reason, unless, an injunction from a court, on
notice, restraining and or enjoining conversion of all or part of this Note
shall have been sought and obtained and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the principal amount of this Note
outstanding, which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same, the Company shall
issue Conversion Shares or, if applicable, cash, upon a properly noticed
conversion. Nothing herein shall limit a Holder’s right to pursue actual damages
or declare an Event of Default pursuant to Section 9 herein for the Company’s
failure to deliver Conversion Shares within the period specified herein and such
Holder shall have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the
Holders from seeking to enforce damages pursuant to any other Section hereof or
under applicable law.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      v.        
    Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In
addition to any other rights available to the Holder, if the Company fails for
any reason to deliver to the Holder such certificate or certificates pursuant to
Section 7(d)(ii) by the fifth Trading Day after the Conversion Date, and if
after such fifth Trading Day the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares which the Holder
anticipated receiving upon such conversion (a “Buy-In”), then the Company shall
(A) pay in cash to the Holder (in addition to any remedies available to or
elected by the Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock
that such Holder anticipated receiving from the conversion at issue multiplied
by (2) the actual sale price of the Common Stock at the time of the sale
(including brokerage commissions, if any) giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue Notes in
principal amount equal to the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery requirements under
Section 7(e)(ii). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Notes with respect to which the actual sale price of the
Conversion Shares at the time of the sale (including brokerage commissions, if
any) giving rise to such purchase obligation was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a Holder requires
the Company to make payment in respect of a Buy-In for the failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder liquidated damages under
Section 7(d)(iv) in respect of the certificates resulting in such
Buy-In.

      

      vi.       
    Reservation of
Shares Issuable Upon Conversion. The Company covenants that it will use
its best efforts to have MHII at all times reserve and keep available out of its
authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of the Notes and payment of interest on the Note, each
as herein provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holders, not less than such number of
shares of the Common Stock as shall (subject to any additional requirements of
the Company and MHII as to reservation of such shares set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and restrictions of
Section 8) upon the conversion of the outstanding principal amount of the Notes
and payment of interest hereunder. The Company covenants that it shall use its
best efforts to ensure that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and, if the Registration Statement is then effective under the
Securities Act, registered for public sale in accordance with such Registration
Statement.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      vii.       
   Fractional
Shares. Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of the Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the VWAP at such time. If the Company elects not,
or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.

      

      viii.      
   Transfer
Taxes. The issuance of certificates for shares of the Common Stock on
conversion of the Notes shall be made without charge to the Holders thereof for
any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Notes so converted and the Company shall
not be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid. 

       

      ix.    Withholding of Taxes. All payments by
the Company under the Note shall be made in full without set-off or counterclaim
and free and clear of any deduction or withholding for or on account of any
taxes unless the Company is required by applicable law to make any deduction or
withholding from any payment due under the Note for or on account of any taxes.
In this event, the Company shall promptly notify the Purchaser, pay such
additional amounts as are necessary to ensure that the Purchaser receives the
amount which it would have received if there had been no such deduction or
withholding, promptly pay the tax deducted to the appropriate tax authority
before any fine or penalty becomes payable and indemnify the Purchaser in
respect of any such taxes. As soon as practical, but no later than 30 days after
any such deduction or withholding, the Company shall forward to the Purchaser
official tax receipts and any other documents or evidence reasonably required by
the Purchaser that such taxes have been remitted to the appropriate taxation
authority.

      

      8.       
     Certain
Adjustments.

      

      a)         
   Stock Dividends and
Stock Splits. If MHII, at any time while the Notes are outstanding: (A)
shall pay a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by MHII pursuant to this Note,
including as interest thereon), (B) subdivide outstanding shares of Common Stock
into a larger number of shares, (C) combine (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of shares, or
(D) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      b)         
   Subsequent Equity
Sales. If MHII, at any time while this Note is outstanding, shall offer,
sell, grant any option to purchase or offer, sell or grant any right to reprice
its securities, or otherwise dispose of or issue (or announce any offer, sale,
grant or any option to purchase or other disposition) any Common Stock or Common
Stock Equivalents entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then Conversion Price (such lower price,
the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”),
as adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued in
connection with such issuance, be entitled to receive shares of Common Stock at
an effective price per share which is less than the Conversion Price, such
issuance shall be deemed to have occurred for less than the Conversion Price),
then, the Conversion Price shall be reduced to equal the Base Share Price and
the number of Conversion Shares issuable hereunder shall be increased. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. The Company shall notify the Holder in writing, no later than three
Trading Day upon learning of the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of
clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 8(b), upon the occurrence of any Dilutive Issuance,
after the date of such Dilutive Issuance the Holder is entitled to receive a
number of Conversion Shares based upon the Base Share Price regardless of
whether the Holder accurately refers to the Base Share Price in the Notice of
Conversion.

      

      c)         
   Pro Rata
Distributions. If MHII, at any time while Notes are outstanding, shall
distribute to all holders of Common Stock (and not to Holders) evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Conversion Price shall be determined by
multiplying such Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors of MHII in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.

      

      d)        
    Calculations. All calculations under
this Section 8 shall be made to the nearest cent or the nearest 1/100th of a
share, as the case may be. The number of shares of Common Stock outstanding at
any given time shall not includes shares of Common Stock owned or held by or for
the account of the Company, and the description of any such shares of Common
Stock shall be considered on issue or sale of Common Stock. For purposes of this
Section 8, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and
outstanding.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      e)          
  Notice to
Holders.

      

      i.           Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any of this Section 8, the
Company shall promptly mail to each Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.

      

      ii.           Notice to Allow Conversion by Holder.
If (A) MHII shall declare a dividend (or any other distribution) on the Common
Stock; (B) MHII shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) MHII shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; (D) the approval of any
stockholders of MHII shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets of the
Company, of any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property; (E) MHII shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Notes, and shall cause
to be mailed to the Holders at their last addresses as they shall appear upon
the stock books of MHII , at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice. Holders are
entitled to convert Notes during the 20-day period commencing the date of such
notice to the effective date of the event triggering such notice.

      

      iii.           Fundamental Transaction. If, at any
time while this Note is outstanding, (A) MHII effects any merger or
consolidation of the Company with or into another Person, (B) MHII effects any
sale of all or substantially all of its assets in one or a series of related
transactions, (C) any tender offer or exchange offer (whether by MHII or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (D)
MHII effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
“Fundamental Transaction”), then upon any subsequent conversion of this Note,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion absent such Fundamental Transaction, the
same kind and amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it
had been, immediately prior to such Fundamental Transaction, the holder of one
share of Common Stock (the “Alternate Consideration”). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any conversion of this
Note following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, the Company, in the event of a Fundamental
Transaction, shall issue to the Holder a new note consistent with the foregoing
provisions and evidencing the Holder’s right to convert such note into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and
insuring that this Note (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      iv.           Exempt Issuance. Notwithstanding the
foregoing, no adjustment will be made under this Section 8 in respect of an
Exempt Issuance.

      

      9.      
     The Holder of the Note, by acceptance hereof,
agrees that this Note is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Note except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended,
or any applicable state Blue Sky or foreign laws or similar laws relating to the
sale of securities.

      

      10.           Any
notice given by any party to the other with respect to this Note shall be given
in the manner contemplated by the Purchase Agreement in the section entitled
“Notices.”

      

      11.           This
Note shall be governed by and construed in accordance with the laws of the State
of New York. Each of the parties consents to the exclusive jurisdiction of the
federal courts whose districts encompass any part of the County of New York or
the state courts of the State of New York sitting in the County of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non
coveniens, to the bringing of any such proceeding in such jurisdictions.
To the extent determined by such court, the Company shall reimburse the Holder
for any reasonable legal fees and disbursements incurred by the Holder in
enforcement of or protection of any of its rights under any of this
Note.

      

      12.           JURY TRIAL WAIVER. The Company
and the Holder hereby waive a trial by jury in any action, proceeding or
counterclaim brought by either of the Parties hereto against the other in
respect of any matter arising out of or in connection with this
Note.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      13.           The
following shall constitute an "Event of Default":

      

      
        	
                 
      

              	
                a.

              	
                The
      Company shall default in the payment of any amount due on this Note, time
      being of the essence, whether by maturity, pursuant to Section 2 or
      otherwise; or

              

      

      

      
        	
                 
      

              	
                b.

              	
                Any
      of the representations or warranties made by the Company herein, in the
      Purchase Agreement or any of the other Transaction Agreements shall be
      false or misleading in any material respect at the time made;
      or

              

      

      

      
        	
                 
      

              	
                c.

              	
                The
      Company shall (1) make an assignment for the benefit of creditors or
      commence proceedings for its dissolution; or (2) apply for or consent to
      the appointment of a trustee, liquidator or receiver for its or for a
      substantial part of its property or business;
or

              

      

      

      
        	
                 
      

              	
                d.

              	
                A
      trustee, liquidator or receiver shall be appointed for the Company or for
      a substantial part of its property or business without its consent;
      or

              

      

      

      
        	
                 
      

              	
                e.

              	
                Any
      governmental agency or any court of competent jurisdiction at the instance
      of any governmental agency shall assume custody or control of the whole or
      any substantial portion of the properties or assets of the Company;
      or

              

      

      

      
        	
                 
      

              	
                f.

              	
                Any
      Pledgor shall default on any of its obligations under the Pledge
      Agreements; or

              

      

      

      
        	
                 
      

              	
                g.

              	
                The
      Company shall enter into, create, incur, assume or suffer to exist any
      indebtedness for borrowed money or liens of any kind, on or with respect
      to any of its property or assets now owned or hereafter acquired or any
      interest therein or any income or profits therefrom that is senior to or
      pari passu with, in any respect, the Company’s obligations under this
      Note, other than as provided in the Disclosure Annex to the Purchase
      Agreement; or

              

      

      

      
        	
                 
      

              	
                h.

              	
                Bankruptcy,
      reorganization, insolvency or liquidation proceedings or other proceedings
      for relief under any bankruptcy law or any law for the relief of debtors
      shall be instituted by or against the Company or any of the
      Pledgors.

              

      

      

      
        	
                 
      

              	
                i.

              	
                Failure
      by the Company to deliver any Shares required to be delivered pursuant to
      the Transaction Documents or any other agreements between the
      parties.

              

      

      

      If an Event of Default shall have
occurred, then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at
the option of the Holder and in the Holder's sole discretion, the Holder may
consider this Note immediately due and payable (and the Maturity Date shall be
accelerated accordingly), without presentment, demand, protest or notice of any
kinds, all of which are hereby expressly waived, anything herein or in any note
or other instruments contained to the contrary notwithstanding, and interest
shall accrue on the total amount  shall not be deemed to be a waiver of
any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder
may consider this Note immediately due and payable (and the Maturity Date shall
be accelerated accordingly), without presentment, demand, protest or notice of
any kinds, all of which
are hereby expressly waived, anything herein or in any note or other
instruments contained to
the contrary notwithstanding, and interest shall accrue on the total amount
due (the "Default Amount")
on the date of the Event of Default (the "Default Date") at the rate of
110% per annum or the
maximum rate allowed by law, whichever is lower, from the Default Date
until the date payment is
made, and the Holder may immediately enforce any and all of the Holder's
rights and remedies
provided herein or any other rights or remedies afforded by
law.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        14.           In
the event of a Qualified Financing, the Company shall offer to repurchase from
the Holder, any restricted stock given to the Holder in connection with the
transactions contemplated under the Purchase Agreement. The purchase price for
such restricted stock shall be 70% of the VWAP for the 20 Trading Days prior to
the consummation of the Qualified Financing.

      

      
        

      

      
        15.           In
the event for any reason, any payment by or act of the Company or the Holder
shall result in payment of interest which would exceed the limit authorized by
or be in violation of the law of the jurisdiction applicable to this Note, then
ipso facto the
obligation of the Company to pay interest or perform such act or requirement
shall be reduced to the limit authorized under such law, so that in no event
shall the Company be obligated to pay any such interest, perform any such act or
be bound by any requirement which would result in the payment of interest in
excess of the limit so authorized. In the event any payment by or act of the
Company shall result in the extraction of a rate of interest in excess of a sum
which is lawfully collectible as interest, then such amount (to the extent of
such excess not returned to the Company) shall, without further agreement or
notice between or by the Company or the Holder, be deemed applied to the payment
of principal, if any, hereunder immediately upon receipt of such excess funds by
the Holder, with the same force and effect as though the Company had
specifically designated such sums to be so applied to principal and the Holder
had agreed to accept such sums as an interest-free prepayment of this Note. If
any part of such excess remains after the principal has been paid in full,
whether by the provisions of the preceding sentences of this Section or
otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provision's of this Section shall control every other provision
of this Note.

      

      
        

      

      
        IN
WITNESS WHEREOF, the Company has caused this Promissory Note to be duly .
executed by an officer thereunto duly authorized this 31st day of
October, .2007.

      

      
        

      

      
        

      

      
        	 
      	
                D.L.
      CLAIRE CAPITAL INC.

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	
                 /s/
      David Fuselier

              
	 
      	
                Name:

              	
                David
      Fuselier

              
	 
      	
                Title:

              	
                President

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