Document:

EXHIBIT 10.3

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this "Agreement") is made and entered into as of March 28, 2011 by and among American Standard Energy Corp., a Delaware corporation (the "Company"), and the several purchasers signatory hereto (each a "Purchaser" and collectively, the "Purchasers").

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated March 28, 2011 between the Company and each Purchaser (the "Purchase Agreement").

 

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

 

·           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" has the meaning set forth in Section 6(d).

 

"Agreement" has the meaning set forth in the Preamble.

 

"Company" has the meaning set forth in the Preamble.

 

"Effective Date" means the date that the Registration Statement filed pursuant to Section 2(a) is first declared effective by the Commission.

 

"Effectiveness Deadline" means, with respect to the Initial Registration Statement or the New Registration Statement, the one-hundred twentieth (120th) calendar day following the Closing Date (or, in the event the Commission reviews and has written comments to the Initial Registration Statement or the New Registration Statement, the one hundred fiftieth (150th) calendar day following the Closing Date); provided, however, that if the Company is notified by the Commission that the Initial Registration Statement or the New Registration Statement will not be reviewed or is no longer subject to further review and comments, the Effectiveness Deadline as to such Registration Statement shall be the fifth (5th) Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above; provided, further, that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Effectiveness Deadline shall be extended to the next Business Day on which the Commission is open for business.

 

"Effectiveness Period" has the meaning set forth in Section 2(b).

 

"Event" has the meaning set forth in Section 2(c).

 

"Event Date" has the meaning set forth in Section 2(c).

 

"Filing Deadline" means, with respect to the Initial Registration Statement required to be filed pursuant to Section 2(a), the thirtieth (30th) calendar day following the Closing Date, provided, however, that if the Filing Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Filing Deadline shall be extended to the next business day on which the Commission is open for business.

 

  

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"FINRA" has the meaning set forth in Section 3(i).

 

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

 

"Indemnified Party" has the meaning set forth in Section 5(c).

 

"Indemnifying Party" has the meaning set forth in Section 5(c).

 

"Initial Registration Statement" has the meaning set forth in Section 2(a).

 

"Liquidated Damages" has the meaning set forth in Section 2(c).

 

"Losses" has the meaning set forth in Section 5(a).

 

"New Registration Statement" has the meaning set forth in Section 2(a).

 

“Previous Placement” means the sale of shares of Common Stock of the Company and warrants to purchase shares of common stock of the Company sold by the Company to investors pursuant to those certain purchase agreements dated January 2011 and as amended to date.

 

 "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

"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 under 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.

 

"Purchase Agreement" has the meaning set forth in the Recitals.

 

"Purchaser" or "Purchasers" has the meaning set forth in the Preamble.

 

"Registrable Securities" means all of (i) the Shares, (ii) the Warrant Shares and (iii) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing, provided, that the Holder has completed and delivered to the Company a Selling Stockholder Questionnaire and provided to the Company any other information regarding the Holder and the distribution of the Registrable Securities as the Company may, from time to time, reasonably require for inclusion in a Registration Statement pursuant to applicable law; and provided, further, that with respect to a particular Holder, such Holder's Shares and Warrant Shares shall cease to be Registrable Securities upon the earliest to occur of the following: (A) a sale pursuant to a Registration Statement or Rule 144 under the Securities Act (in which case, only such security sold by the Holder shall cease to be a Registrable Security); or (B) becoming eligible for resale by the Holder under Rule 144 without the requirement for the Company to be in compliance with the current public information required thereunder and without volume or manner-of-sale restrictions, pursuant to a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent.

 

  

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"Registration Statements" means any one or more registration statements of the Company filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement (including without limitation the Initial Registration Statement, the New Registration Statement and any Remainder Registration Statements), amendments and supplements to such Registration Statements, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statements.

 

"Remainder Registration Statement" has the meaning set forth in Section 2(a).

 

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

 

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

 

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

 

"Selling Stockholder Questionnaire" means a questionnaire in the form attached as Annex B hereto, or such other form of questionnaire as may reasonably be adopted by the Company from time to time.

 

"Shares" means the shares of Common Stock issued or issuable to the Purchasers pursuant to the Purchase Agreement.

 

“Warrants” means the Warrants issued to the Purchasers pursuant to the Purchase Agreement.

 

“Warrant Shares” means the shares of Common Stock issuable to the Purchasers pursuant to the exercise of the Warrants.

 

  

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·           Registration.

 

o           On or prior to the Filing Deadline, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 or, if Rule 415 is not available for offers and sales of the Registrable Securities, by such other means of distribution of Registrable Securities as the Holders may reasonably specify (the "Initial Registration Statement").  The Initial Registration Statement shall be on Form S-3 (except if the Company is then ineligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on such other form available to register for resale the Registrable Securities as a secondary offering) subject to the provisions of Section 2(e) and shall contain (except if otherwise required pursuant to written comments received from the Commission upon a review of such Registration Statement) the "Plan of Distribution" section attached hereto as Annex A (which may be modified to respond to comments, if any, provided by the Commission or to reflect any non-material changes).  Notwithstanding the registration obligations set forth in this Section 2, 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 (i) 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 and/or (ii) withdraw the Initial Registration Statement and file a new registration statement (a "New Registration Statement"), in either case 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. Notwithstanding any other provision of this Agreement and subject to the payment of Liquidated Damages in Section 2(c), if applicable, if the Commission or any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering, 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 first be reduced by Registrable Securities represented by holders of Warrant Shares sold pursuant to the Purchase Agreement (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 second by Registrable Securities represented by Shares sold pursuant to the Purchase (applied, in the case that some Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Shares held by such Holders, subject to a determination by the Commission that certain Holders must be reduced first based on the number of Shares held by such Holders).  If the Company amends the Initial Registration Statement or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, 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, 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, or the New Registration Statement (the "Remainder Registration Statements").  For purposes of clarification, in the event the Registration Statement seeks to register the Registrable Securities as well as the shares of common stock and shares of common stock underlying the warrants sold by the Company pursuant to the Previous Placement and if the Commission or any SEC Guidance sets forth a limitation of the number of securities permitted to be registered on a particular Registration Statement as a secondary offering, then the number of  securities to be registered on such Registration Statement will first be reduced by all of the Registrable Securities sold pursuant to the Purchase Agreement and not by any of the securities sold in the Previous Placement.

 

  

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o           The Company shall use its commercially reasonable efforts to cause each Registration Statement to be declared effective by the Commission as soon as practicable and, with respect to the Initial Registration Statement or the New Registration Statement, as applicable, no later than the Effectiveness Deadline (including filing with the Commission a request for acceleration of effectiveness in accordance with Rule 461 promulgated under the Securities Act), and shall use its commercially reasonable efforts to keep each Registration Statement continuously effective under the Securities Act until the earliest of (i) such time as all of the Registrable Securities covered by such Registration Statement have been sold by the Holders; (ii) the date that all the Shares, the Warrant Shares and any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing cease to be Registrable Securities; and (iii) the first anniversary of the Closing Date (provided, however, that such one-year period will be extended for a period of time equal to the period any Purchaser is required to suspend sales of such Registrable Securities pursuant to the terms of this Agreement) (the "Effectiveness Period").  The Company shall promptly notify the Holders via facsimile or electronic mail of a ".pdf" format data file 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. New York City time on the first Trading Day after the Effective Date, file a final Prospectus with the Commission, as required by Rule 424(b).  Failure to so notify the Holders on or before the second Trading Day after such notification of effectiveness or failure to file a final Prospectus as aforesaid shall be deemed an Event under Section 2(c).

 

  

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o           Subject to the provisions of Sections 3(a), 3(h) and 3(i), if (i) the Initial Registration Statement is not filed with the Commission on or prior to the Filing Deadline, (ii) the Initial Registration Statement or the New Registration Statement, as applicable, is not declared effective by the Commission (or otherwise does not become effective) for any reason on or prior to the Effectiveness Deadline or (iii) after its Effective Date, (A) such Registration Statement ceases for any reason (including without limitation by reason of a stop order, or the Company's failure to update the Registration Statement), to remain continuously effective as to all Registrable Securities included in such Registration Statement for more than twenty (20) consecutive calendar days or more than an aggregate of thirty (30) calendar days (which need not be consecutive calendar days) during any 12-month period, or (B) the Holders are not permitted to utilize the Prospectus therein to resell such Registrable Securities for any reason for more than an aggregate of thirty (30) consecutive calendar days (or forty-five (45) consecutive calendar days if the Company receives comments on its Annual Report on Form 10-K for the year ended December 31, 2010) or sixty (60) calendar days (which need not be consecutive days) during any twelve (12) month period, (any such failure or breach in clauses (i) through (iii) above being referred to as an "Event," and, for purposes of clauses (i) or (ii), the date on which such Event occurs, or for purposes of clause (iii), the date on which such thirty (30), forty-five (45) or sixty (60) calendar day period is exceeded, being referred to as an "Event Date"), then on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the earlier of (1) the applicable Event is cured and (2) the Registrable Securities are eligible for resale pursuant to Rule 144 without manner of sale or volume restrictions, the Company shall pay to each Holder an amount in the Company’s common stock, as liquidated damages and not as a penalty ("Liquidated Damages"), equal to one percent (1.0%) of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement for any unregistered Registrable Securities then held by such Holder (which remedy shall be exclusive of any other remedies available under this Agreement or under applicable law).  The parties agree that (1)  notwithstanding anything to the contrary herein or in the Purchase Agreement, no Liquidated Damages shall be payable with respect to any period after the expiration of the Effectiveness Period (except in respect of an Event described in Section 2(c)(iv) herein), (it being understood that this sentence shall not relieve the Company of any Liquidated Damages accruing prior to the Effectiveness Deadline) and (2) in no event shall the Company be liable in any thirty (30) day period for Liquidated Damages under this Agreement in excess of six percent (6.0%) of the aggregate purchase price paid by the Holders pursuant to the Purchase Agreement, except in the case of a payment made on an Event Date and the monthly anniversary of such Event Date.  If the Company fails to pay any Liquidated Damages pursuant to this Section 2(c) in full within ten (10) Business Days after the date payable, the Company will pay simple interest thereon at a rate of fifteen percent (15.0%) per year (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such Liquidated Damages are due until such amounts, plus all such interest thereon, are paid in full.  The 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, except in the case of the first Event Date.  The Company shall not be liable for Liquidated Damages under this Agreement as to any Registrable Securities which are not permitted by the Commission to be included in a Registration Statement due solely to SEC Guidance from the time that it is determined that such Registrable Securities are not permitted to be registered until such time as the provisions of this Agreement as to the Remainder Registration Statements required to be filed hereunder are triggered, in which case the provisions of this Section 2(c) shall once again apply, if applicable.  In such case, the Liquidated Damages shall be calculated to only apply to the percentage of Registrable Securities which are permitted in accordance with SEC Guidance to be included in such Registration Statement.  The Effectiveness Deadline for a Registration Statement shall be extended without default or Liquidated Damages hereunder in the event that the Company's failure to obtain the effectiveness of the Registration Statement on a timely basis results from the failure of a Purchaser to timely provide the Company with information requested by the Company and necessary to complete the Registration Statement in accordance with the requirements of the Securities Act (in which the Effectiveness Deadline would be extended with respect to Registrable Securities held by such Purchaser).

 

  

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o           Each Holder agrees to furnish to the Company a completed Selling Stockholder Questionnaire not more than three (3) Trading Days following the date of this Agreement.  At least five (5) Trading Days prior to the first anticipated filing date of a Registration Statement for any registration under this Agreement, the Company will notify each Holder of the information the Company requires from that Holder other than the information contained in the Selling Stockholder Questionnaire, if any, which shall be completed and delivered to the Company promptly upon request and, in any event, within three (3) Trading Days prior to the applicable anticipated filing date.  Each Holder further agrees that it shall not be entitled to be named as a selling securityholder in the Registration Statement or use the Prospectus for offers and resales of Registrable Securities at any time, unless such Holder has returned to the Company a completed and signed Selling Stockholder Questionnaire and a response to any reasonable requests for further information as described in the previous sentence.  If a Holder of Registrable Securities returns a Selling Stockholder Questionnaire or a request for further information, in either case, after its respective deadline, the Company shall use its commercially reasonable efforts to take such actions as are required to name such Holder as a selling security holder in the Registration Statement or any pre-effective or post-effective amendment thereto and to include (to the extent not theretofore included) in the Registration Statement the Registrable Securities identified in such late Selling Stockholder Questionnaire or request for further information, provided, however, that the Company shall not be obligated to file more than one post-effective amendment or supplement in any 60-day period following the date such Registration Statement is declared effective for the purpose of naming Holders as selling securityholders who are not named in such Registration Statement at the time of effectiveness. Each Holder acknowledges and agrees that the information in the Selling Stockholder Questionnaire or request for further information as described in this Section 2(d) will be used by the Company in the preparation of the Registration Statement and hereby consents to the inclusion of such information in the Registration Statement.

 

o           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 promptly after 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.  The Holders acknowledge that as of the Closing Date and at the time of the Filing Deadline the Company will not be eligible to use a Form S-3 to register the resale of the Registrable Securities.

 

·           Registration Procedures

 

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

 

o           Not less than two (2) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (except for Annual Reports on Form 10-K (including portions of the Company's Proxy Statement for its Annual Meetings of Stockholders to the extent specifically incorporated by reference into such Annual Reports on Form 10-K), Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any similar or successor reports or any prospectus supplement the substance of which is limited to any of the foregoing filings), (i) furnish to the Holder copies of such Registration Statement, Prospectus or amendment or supplement thereto, as proposed to be filed, which documents will be subject to the review of such Holder (it being acknowledged and agreed that if a Holder does not object to or comment on the aforementioned documents within such two (2) Trading Day or one (1) Trading Day period, as the case may be, then the Holder shall be deemed to have consented to and approved the use of such documents) and (ii) use commercially reasonable efforts to 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.  The Company shall not file any Registration Statement or amendment or supplement thereto in a form to which a Holder reasonably objects in good faith, provided that, the Company is notified of such objection in writing within the two (2) Trading Day or one (1) Trading Day period described above, as applicable, and for such period as the Company and such Holder are attempting in good faith to resolve the objection of such Holder, any time period or deadline for purposes of Section 2(c) shall be extended for such period and no Liquidated Damages shall accrue or be payable for such period.

 

  

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o           (i) Prepare and file with the Commission such amendments (including post effective amendments) and supplements, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement continuously effective as to the applicable Registrable Securities for its Effectiveness Period; (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 practicable to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible, provide the Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to the Holders as "Selling Stockholders" but not any other comments or any comments that would result in the disclosure to the Holders of material and non-public information concerning the Company; and (iv) comply with the 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 Effectiveness Period (subject to the terms of this Agreement) in accordance with the intended methods of disposition by the Holders thereof as set forth in such Registration Statement as so amended or in such Prospectus as so supplemented; provided, however, that each Purchaser shall be responsible for the delivery of the Prospectus, if required, to the Persons to whom such Purchaser sells any of the Shares or the Warrant Shares (including in accordance with Rule 172 under the Securities Act), and each Purchaser agrees to dispose of Registrable Securities in compliance with the "Plan of Distribution" described in the Registration Statement and otherwise in compliance with applicable federal and state securities laws. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Exchange Act, the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the Commission on the same day on which the Exchange Act report which created the requirement for the Company to amend or supplement such Registration Statement was filed.

 

  

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o           Notify the Holders (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 practicable (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing): (i)(A) when a Prospectus or any Prospectus supplement or post effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on any Registration Statement (in which case the Company shall provide to each of the Holders true and complete copies of all comments that pertain to the Holders as a "Selling Stockholder" or to the "Plan of Distribution" and all written responses thereto, but not any other comments or responses or information that the Company believes would constitute material and non-public information); and (C) with respect to each Registration Statement or any post effective amendment, when the same has become effective; (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 that pertains to the Holders as "Selling Stockholders" or the "Plan of Distribution"; (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 such 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 such Registration Statement, Prospectus or other documents so that, in the case of such 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 the case of any Prospectus, form of prospectus or supplement thereto, 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 that, any and all such information shall remain confidential to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; and provided, further, that notwithstanding each Holder's agreement to keep such information confidential, each such Holder makes no acknowledgement that any such information is material, non-public information.

 

  

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o           Use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order 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, as soon as practicable.

 

o           If requested by a Holder, furnish to such Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto 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 the Company shall have no obligation to provide any document pursuant to this clause that is available on the Commission's EDGAR system; provided further, that the Company shall have no obligation to provide an unredacted form of any exhibit if the Company has filed or the Commission has granted a confidential treatment request with respect to such exhibit.

 

o           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.

 

o           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 (i) the Holder upon effectiveness of a Registration Statement covering the resales of the Shares or (ii) a transferee pursuant to transfers made pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement and the Warrants and under law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may reasonably request.

 

  

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o           Following the occurrence of any event contemplated by Section 3(c), as promptly as reasonably practicable (taking into account the Company's good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event), prepare a supplement or amendment, including a post effective amendment, to the affected Registration Statements 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, no Registration Statement nor any 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 the case of any Prospectus, form of prospectus or supplement thereto, 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(c) 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 reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company shall be entitled to exercise its right under this Section 3(h) to suspend the availability of a Registration statement and Prospectus, without the payment of partial Liquidated Damages otherwise required pursuant to Section 2(c), for periods not to exceed the time periods set forth in Section 2(c)(iii)(B).

 

o           The Company may require each selling Holder to furnish to the Company a certified statement as to (i) the number of shares of Common Stock beneficially owned by such Holder and any Affiliate thereof, (ii) any Financial Industry Regulatory Authority ("FINRA") affiliations, (iii) any natural persons who have the power to vote or dispose of the common stock and (iv) any other information as may be requested by the Commission, FINRA or any state securities commission.  During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of Registrable Securities because any Holder fails to furnish such information within three (3) Trading Days of the Company's request, any Liquidated Damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.

 

(j)           Neither the Company nor any subsidiary or affiliate thereof shall identify any Purchaser as an underwriter in any public disclosure or filing with the Commission or any Trading Market  and any Purchaser being deemed an underwriter by the Commission shall not relieve the Company of any obligations it has under this Agreement or any other Transaction Document; provided, however, that the foregoing shall not prohibit the Company from including the disclosure found in the "Plan of Distribution" section attached hereto in the Registration Statement, provided, further, if any Purchaser is required to be identified as an underwriter by the Commission or the Trading Market, prior to the Company so naming such Purchaser, the Company shall promptly notify such Purchaser and such Purchaser shall be entitled to either (i) agree to be so named, or (ii) withdraw as a selling stockholder with respect to the applicable Registration Statement.  If any such Purchaser refuses to be so named as an underwriter or to withdraw from the applicable Registration Statement, such Purchaser shall not be entitled to any Liquidated Damages or to recover from the Company any other damages or losses caused by such refusal.

 

  

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·           Registration Expenses.  All fees and expenses incident to the Company's performance of or compliance with its obligations under this Agreement (excluding any underwriting discounts and selling commissions and all legal fees and expenses of legal counsel for any Holder) 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 (A) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading and (B) with respect to compliance with applicable state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as requested by the Holder), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses incurred by the Company, (iv) fees and disbursements of counsel for the Company, and (v) 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 underwriting, broker or similar fees or commissions of any Holder or any legal fees or other costs of the Holders.

 

·           Indemnification.

 

o           Indemnification by the Company.  The Company shall, notwithstanding any termination of this Agreement, indemnify, defend and hold harmless each Holder, the officers, directors, agents, partners, members, managers, stockholders, Affiliates and employees 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, partners, members, managers, stockholders, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, expenses, damages, liabilities and costs (including, without limitation, reasonable costs of preparation and investigation and reasonable attorneys' fees, all of which shall be payable quarterly in arrears as they are incurred) (collectively, "Losses"), that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in any 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 to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, 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 (A) such untrue statements, alleged untrue statements, omissions or alleged 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 approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that each Holder has approved Annex A hereto for this purpose) or (B) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi), related to the use by a Holder of an outdated or defective Prospectus after the Company has notified such Holder that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated and defined in Section 6(d) below, to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected or (C) to the extent that any such Losses arise out of the Purchaser's (or any other indemnified Person's) failure to send or give a copy of the Prospectus or supplement (as then amended or supplemented), if required, pursuant to Rule 172 under the Securities Act (or any successor rule) to the Persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such Prospectus or supplement.  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 an Indemnified Party (as defined in Section 5(c)) and shall survive the transfer of the Registrable Securities by the Holders.

 

  

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o           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 (all of which shall be payable quarterly in arrears as they are incurred), as incurred, arising out of or are based upon any untrue or alleged untrue statement of a material fact contained in any 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 any form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (A) to the extent that 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 (B) 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 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 such form of Prospectus or in any amendment or supplement thereto or (C) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi), to the extent related to the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d).  In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities.

 

  

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o           Conduct of Indemnification Proceedings.  If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all reasonable fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, unless such failure materially prejudices the Indemnifying Party.

 

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 such Indemnified Party shall have been advised by counsel that, in the reasonable judgment of such counsel, representation of both parties by the same counsel would be inappropriate under the applicable rules of professional responsibility (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 such counsel shall be at the expense of the Indemnifying Party); provided, that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties.  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld 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 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 5) shall be paid to the Indemnified Party, quarterly in arrears as they are incurred; 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 judicially determined to not be entitled to indemnification hereunder).

 

  

-15-

  

 

o           Contribution.  If a claim for 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, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 5 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), (A) no Holder shall be required to contribute, 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 and (B) no contribution will be made under circumstances where the maker of such contribution would not have been required to indemnify the Indemnified Party under the fault standards set forth in this Section 5.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

The indemnity and contribution agreements contained in this Section 5 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

 

·           Miscellaneous.

 

o           Remedies.  In the event of a breach by the Company or by a Holder of any of their 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, will be entitled to specific performance of its rights under this Agreement.  The Company and each Holder agree 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 waive the defense that a remedy at law would be adequate.

 

o           [Reserved]

 

o           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 the Registration Statement and shall sell the Registrable Securities only in accordance with a method of distribution described in the Registration Statement

 

  

-16-

  

 

o           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(c)(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.  The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(c) and Section 3(h).

 

o           Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, or waived unless the same shall be in writing and signed by the Company and Holders holding no less than two-thirds of the Registrable Securities issued and issuable pursuant to the Securities Purchase Agreement and the Transaction Documents on the Closing Date, provided that any party may give a waiver as to itself.  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 one or more Holders and that does not directly or indirectly affect the rights of other Holders may be given by 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 immediately preceding sentence.

 

o           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.

 

o           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.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.  The Company may not assign its rights or obligations hereunder (except in connection with a Fundamental Transaction (as defined by the Warrants), provided that the Company is in compliance with the provisions governing Fundamental Transactions set forth in the Warrants, without the prior written consent of all the Holders of the then outstanding Registrable Securities.  Each Holder may assign its respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement; provided in each case that (i) the Holder agrees in writing with the transferee or assignee to assign such rights and related obligations under this Agreement, and for the transferee or assignee to assume such obligations, and a copy of such agreement is furnished to the Company promptly, and in any event within three Business Days, (ii) the Company is promptly, and in any event within three Business Days, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being transferred or assigned, (iii) at or before the time the effectiveness of such transfer or assignment, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein and (iv) the transferee or assignee is an "accredited investor," as that term is defined in Rule 501 of Regulation D.

 

  

-17-

  

 

o           Execution and Counterparts.  This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute 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.  If 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 were the original thereof.

 

o           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.

 

o           Cumulative Remedies.  Except as provided herein, the remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

 

o           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 good faith 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.

 

o           Headings.  The headings in this Agreement are for convenience only and shall not limit or otherwise affect the meaning hereof.

 

  

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o           Independent Nature of Purchasers' Obligations and Rights.  The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder.  The decision of each Purchaser to purchase the Securities pursuant to the Purchase Agreement has been made independently of any other Purchaser.  Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement.  Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents.  Each Purchaser 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 Purchaser to be joined as an additional party in any Proceeding for such purpose.  The Company acknowledges that each of the Purchasers has been provided with the same Registration Rights Agreement for the purpose of closing a transaction with multiple Purchasers and not because it was required or requested to do so by any Purchaser.

 

o           Termination.  This Agreement shall be automatically terminated with respect to any Holder and shall have no force or effect with respect to such Holder upon the termination of the Purchase Agreement with respect to such Holder (other than such Holder's obligations under Section 5).  Nothing in this Section 6(n) shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement.

 

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

 

	  	
AMERICAN STANDARD ENERGY CORP.

	  	  	  
	  	
By:

	  
	  	  	
Name: Scott Feldhacker

	  	  	
Title: Chief Executive Officer

 

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

 

	  	
NAME OF INVESTING ENTITY

	  	  	  
	  	  	  
	  	
AUTHORIZED SIGNATORY

	  	  	  
	  	
By: 

	
 

	  
	 	 	
Name:

	 
	 	 	
Title:

	 

 

	  	
ADDRESS FOR NOTICE

	  	  	  
	  	
c/o:

	  
	  	  	  
	  	
Street:

	  
	  	  	  
	  	
City/State/Zip:

	  
	  	  	  
	  	
Attention:

	  
	  	  	  
	  	
Tel:

	  
	  	  	  
	  	
Fax:

	  
	  	  	  
	  	
Email:

	  

 

  

  

  

 

 ANNEX A

 

PLAN OF DISTRIBUTION

 

We are registering the shares of common stock issued to the selling stockholders and issuable upon exercise of the warrants issued to the selling stockholders to permit the resale of these shares of common stock by the holders of the shares of common stock and warrants from time to time after the date of this prospectus.  We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock.  We will bear all fees and expenses incident to our obligation to register the offer and sale of the shares of common stock.

 

The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents.  If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions.  The shares of common stock may be sold on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale, in the over-the-counter market or in transactions otherwise than on these exchanges or systems or in the over-the-counter market and in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices.  These sales may be effected in transactions, which may involve crosses or block transactions.  The selling stockholders may use any one or more of the following methods when selling shares:

 

	
  

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

 

	
  

	
block trades in which the broker-dealer will attempt to sell the shares 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;

 

	
  

	
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

 

	
  

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

 

	
  

	
a combination of any such methods of sale; and

 

	
  

	
any other method permitted pursuant to applicable law.

 

  

  

  

 

The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, as permitted by that rule, or Section 4(1) under the Securities Act, if available, rather than under this prospectus, provided that they meet the criteria and conform to the requirements of those provisions.

 

Broker dealers engaged by the selling stockholders may arrange for other broker dealers to participate in sales.  If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal.  Such commissions will be in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction will not be 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 sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume.  The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales.  The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares, to the extent permitted by applicable law.  The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the warrants or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.  The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

The selling stockholders and any broker-dealer or agents participating in the distribution of the shares of common stock may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act in connection with such sales and in which case may be subject to certain statutory liabilities under the Exchange Act.

 

The selling stockholders will be subject to the applicable prospectus delivery requirements of the Securities Act unless subject to an exemption therefrom, including under Rule 172 thereunder.

 

  

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Each selling stockholder has informed us that it is not a registered broker-dealer and does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock.  Upon our being notified in writing by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of common stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such selling stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares of common stock were sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction.  In no event shall any broker-dealer receive fees, commissions and markups, which, in the aggregate, would exceed 8.0%.

 

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.  In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

 

Each selling stockholder and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholder and any other participating person.  To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock.  All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

 

We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, including, without limitation, SEC filing fees and expenses of compliance with state securities or "blue sky" laws; provided, however, that each selling stockholder will pay all underwriting discounts and selling commissions, if any and any related legal expenses incurred by it.  We will indemnify the selling stockholders against certain liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreement, or the selling stockholders will be entitled to contribution.  We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholders specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

  

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 ANNEX B

 

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

 

The undersigned holder of shares of the common stock, par value $0.001 per share of American Standard Energy Corp. (the "Company") issued pursuant to a certain Securities Purchase Agreement by and among the Company and the Purchasers named therein, dated as of March 28, 2011 (the "Agreement"), understands that the Company intends to file with the Securities and Exchange Commission a registration statement on Form S-1 (the "Resale Registration Statement") for the registration and the 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 Agreement and the terms of the Registration Rights Agreement by and among the Company and the Purchasers named therein, dated as of March 28, 2011 (the “Registration Rights Agreement”). All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in either the Agreement or Registration Rights Agreement.

 

In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale Registration Statement, a holder of Registrable Securities generally will be required to be named as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the "Prospectus"), deliver the Prospectus to purchasers of Registrable Securities, if required (including pursuant to Rule 172 under the Securities Act) and be bound by the provisions of the Agreement (including certain indemnification provisions, as described below).  Holders must complete and deliver this Notice and Questionnaire in order to be named as selling stockholders in the Prospectus.  Holders of Registrable Securities who do not complete, execute and return this Notice and Questionnaire within three (3) Trading Days following the date of the Agreement (1) will not be named as selling stockholders in the Resale Registration Statement or the Prospectus and (2) may not use the Prospectus for resales of Registrable Securities.

 

Certain legal consequences arise from being named as a selling stockholder in the Resale Registration Statement and the Prospectus.  Holders 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 stockholder in the Resale Registration Statement and the Prospectus.

 

NOTICE

 

The undersigned holder (the "Selling Stockholder") of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned by it and listed below in Item 3, unless otherwise specified in Item 3, pursuant to the Resale Registration Statement.  The undersigned, by signing and returning this Notice and Questionnaire, understands and agrees that it will be bound by the terms and conditions of this Notice and Questionnaire, the Agreement and the Registration Rights Agreement.

 

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

 

  

  

  

 

QUESTIONNAIRE

 

	
1.

	
Name.

 

	
  

	
(a)

	
Full Legal Name of Selling Stockholder:

 

	
   

	
  

	
  

 

	
  

	
(b)

	
Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below 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 the questionnaire):

 

	
   

	
 

	
 

 

	
2.

	
Address for Notices to Selling Stockholder:

	 	 	 
	 	 	 
	 	 	 
	
Telephone:

	
 

	  	  
	
Fax:

	
 

	  	  
	
Contact Person:

	
 

	  	  
	
E-mail address of Contact Person:

	
 

	  

 

	
3.

	
Beneficial Ownership of Registrable Securities Issuable Pursuant to the Purchase Agreement:

 

	
  

	
(a)

	
Type and Number of Registrable Securities beneficially owned and issued pursuant to the Agreement:

 

	
   

	
  

	
  

	
   

	
  

	
  

	
   

	
 

	
  

 

	
  

	
(b)

	
Number of shares of Common Stock to be registered pursuant to this Notice for resale:

 

	
   

	
 

	
  

	
   

	
 

	
  

	
   

	
 

	
  

 

	
4.

	
Broker-Dealer Status:

 

	
  

	
(a)

	
Are you a broker-dealer registered pursuant to Section 15 of the Exchange Act?

 

Yes   ̈    No   ̈

 

  

  

  

 

	
  

	
(b)

	
If "yes" to Item 4(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?

 

Yes   ̈    No   ̈

 

	
Note:

	
If no, 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 registered pursuant to Section 15 of the Exchange Act?

 

Yes   ̈    No   ̈

 

Note:    If yes, provide a narrative explanation below:

 

	
    

	
 

	
  

	
    

	
 

	
  

 

	
  

	
(d)

	
If you are an affiliate of a broker-dealer, do you certify that you bought 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, the Commission's staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

	
  

	
For the purposes of this Item 4, an "affiliate" of a registered broker-dealer shall include any company that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such broker-dealer, and does not include any individuals employed by such broker-dealer or its affiliates.

 

	
5.

	
Nature of Your Beneficial Ownership:

 

	
  

	
(a)

	
If the name of the beneficial owner of the Registrable Securities set forth in your response to Item 1(a) above is that of a limited partnership, state the names of the general partners of such limited partnership:

 

	
   

	
 

	
 

	
   

	
 

	
 

	
   

	
 

	
 

 

	
  

	
(b)

	
With respect to each general partner listed in Item 5(a) above who is not a natural person, and is not publicly held, name each stockholder (or managing member, if applicable) of such general partner. If any of these named stockholders are not natural persons or publicly held entities, please provide the same information. This process should be repeated until you reach natural persons or a publicly held entity.

 

	
    

	
 

	
 

	
   

	
 

	
 

	
   

	
 

	
 

 

  

  

  

 

	
  

	
(c)

	
If you are not publicly held, name the entity that exercises voting and dispositive power over the Registrable Securities set forth in Item 3 above (the "Controlling Entity"). If the Controlling Entity is not a natural person or a publicly held entity, please name the entity that controls such Controlling Entity and provide the same information for the entity controlling the Controlling Entity. This process should be repeated until you reach natural persons or a publicly held entity.

 

	
  

	
(i)

	
Full legal name of Controlling Entity(ies) or natural person(s) who have sole or shared voting or dispositive power over the Registrable Securities:

 

	
   

	
 

	
 

 

	
  

	
(a)

	
Business address (including street address) (or residence if no business address), telephone number and facsimile number of such person(s):

 

	
Address:

	   
	  	  
	  	  
	  	  
	
Telephone:

	  
	
Fax:

	  

 

	
  

	
(b)

	
Name(s) of stockholders:

 

	
   

	
 

	
 

	
   

	
 

	
 

 

	
  

	
(ii)

	
Full legal name of Controlling Entity(ies):

 

	
  

	
(a)

	
Business address (including street address) (or residence if no business address), telephone number and facsimile number of such person(s):

	
Address:

	  
	  	  
	  	  
	  	  
	
Telephone:

	  
	
Fax:

	  

 

	
  

	
(b) Name(s) of shareholders:

 

	
 

	
 

	
 

	
 

 

  

  

  

 

	
6.

	
Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder.

 

Except as set forth below in this Item 6, the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item 3.

 

Type and amount of other securities beneficially owned:

 

	
 

	
 

	
 

	
 

  

	
7.

	
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:

 

	
 

	
 

	
 

	
 

 

	
8.

	
Plan of Distribution:

 

The undersigned has reviewed the form of Plan of Distribution attached as Annex A 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 hereunder and pursuant to the Agreement shall be made in writing, by hand delivery, confirmed 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.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (8) 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.

 

  

  

  

 

Once this Notice and Questionnaire is executed by the undersigned and received by the Company, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the undersigned with respect to the Registrable Securities beneficially owned by the undersigned and listed in Item 3 above.

 

I confirm that, to the best of my knowledge and belief, the foregoing statements (including without limitation the answers to this Questionnaire) are correct.

 

  

  

  

 

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

 

	
Dated:

	  	 	
Beneficial Owner: ________________________________

	  	  	 	  	  
	  	  	 	
By:

	  
	  	  	 	  	
Name:

	  	  	 	  	
Title:

 

PLEASE EMAIL OR FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND

QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

Ted Warner

Northland Capital Markets

45 South 7th Street

Suite 2000

Minneapolis, MN 55402

Direct: 612-851-4906

Cell :  612-308-8293

Fax:  612-851-4988

Email: twarner@northlandcapitalmarkets.comUnassociated Document

AMENDED AND RESTATED ESCROW AND SECURITY AGREEMENT

 

This AMENDED AND RESTATED ESCROW AND SECURITY AGREEMENT (this “Agreement”) is made and entered into as of March 24, 2011 (the “Effective Date”), by and among DeWind Co., a California corporation (“DeWind”), Stribog, Inc., a Nevada corporation (“Seller”), and U.S. Bank National Association, a national banking association, as Escrow Agent (the “Escrow Agent”).

 

RECITALS

 

A.           The parties had entered into that certain Escrow and Security Agreement dated September 4, 2009 (the “Previous Escrow Agreement”) pursuant to that certain Asset Purchase Agreement, dated as of August 10, 2009 (as amended, the “Purchase Agreement”) by and among Daewoo Shipbuilding & Marine Engineering Co., Ltd. (“DSME”), Seller and Composite Technology Corporation.  Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings given to them in the Purchase Agreement.

 

B.           Seller had deposited with the Escrow Agent cash in the amount of Seventeen Million One Hundred Seventy-Five Thousand Dollars ($17,175,000) on September 4, 2009 in an escrow account (the “Escrow Account”);

 

C.           Eight Hundred Thirty-Six Thousand Dollars ($836,000) were disbursed to the Seller from the Escrow Account on July 27, 2010, per the joint instruction of DeWind and Seller;

 

D.           From the $16,339,000 which currently remains in the Escrow Account, the parties desire to authorize disbursement of approximately Thirteen Million Three Hundred Thirty-Nine Thousand Dollars ($13,339,000) from the Escrow Account and to retain Three Million ($3,000,000) and any Additional Escrow Fund in the Escrow Account for the purpose of reimbursing DeWind or its Affiliates, at least in part, for any and all Losses DeWind or its Affiliates might incur related to the Purchase Agreement and the transactions thereunder.

 

E.           DeWind and Seller are entering into this Agreement to set forth in this Agreement the terms and conditions pursuant to which the Escrow Funds shall be held in and disbursed from the Escrow Account.

 

NOW, THEREFORE, the parties hereby agree as follows:

 

1.      Disbursement and Escrow.

 

(a)           Disbursement.

 

(i)           Upon receiving a joint instruction signed by both DeWind and Seller (a “Joint Instruction”), the Escrow Agent shall continue to hold in escrow the remaining $3,000,000 Escrow Funds and the Additional Escrow Fund in the Escrow Account and shall disburse the following:

 

(1)           $2,700,000 to DeWind at the wire instructions below;

 

  

  

 

 

(2)           $1,846,240 to DeWind at the wire instructions below,

 

(3)           Euro 1,100,000 to Zollern Dorstener Antriebstechnik Gesellschaft mbH & Co. KG at the wire instructions below; and

 

(4)           Around $7,233,620 to Seller at the wire instructions below (subject to adjustment depending on the exchange rate between U.S. Dollars and Euros on the distribution day after leaving in the Escrow Account $3,000.000 from the Escrow Fund).

 

(b)           Escrow of Funds.

 

(i)           Escrow Funds.  After the disbursement set forth in Section 1(a) above, the Escrow Agent shall hold the remaining Three Million Dollars ($3,000,000) (the “Escrow Funds”) and any Additional Escrow Funds in escrow for the purpose of paying, at least in part, any Claims (defined below) which might be made against the Escrow Funds by DeWind, until the Escrow Agent is required to release such Escrow Funds in accordance with the terms of this Agreement.  The Escrow Agent agrees to hold such Escrow Funds in escrow for the benefit of DeWind and Seller subject to the terms and conditions of this Agreement.

 

(ii)           Investment of Escrow Funds.  The Escrow Funds shall be placed by the Escrow Agent into a U.S. Bank Money Market Account as described in Exhibit A attached hereto.  All interest or appreciation accrued on the Escrow Funds (the “Additional Escrow Funds”) shall be deemed to be Escrow Funds for the purposes contemplated in this Agreement.

 

(c)              Notice of Claim.  As used herein, the term “Claim” means a claim for any Losses under Section 10.2 of the Purchase Agreement.  DeWind shall deliver a written notice of the Claim (the “Notice of Claim”) to the Seller and the Escrow Agent in compliance with Section 3 below.  DeWind may give the Notice of Claim after the determination of any Claims in accordance with Section 10 of the Purchase Agreement.

 

(d)              Escrow Period.  As used herein, the term “Escrow Period” means that time period beginning on the Closing Date and ending on the third anniversary thereafter at 5:00 p.m. (Pacific Standard Time), unless and to the extent extended under Section 2(a)(ii) below.

 

2.      Distribution; Release from Escrow.

 

(a)              Distribution; Obligations in Case of Administration/Liquidation Proceedings of DeWind Ltd. or 4.15 Claim

 

(i)           Distribution on Release Date.  On the date upon which the Escrow Period expires (the “Release Date”), the Escrow Agent shall release from the Escrow Account to Seller the remaining Escrow Funds (including any Additional Escrow Funds), less (A) any Escrow Funds delivered to DeWind in accordance with this Agreement or Section 10 of the Purchase Agreement in satisfaction of any Claims by DeWind and (B) any amounts subject to unresolved Claims for which DeWind has delivered a Notice of Claim, provided that the Escrow Agent shall promptly release to Seller the balance of the Escrow Funds (including any Additional Escrow Funds) not subject to such unresolved Claims as soon as any such Claims are resolved.

 

  

2

 

 

(ii)           Administration/Liquidation or 4.15 Claim.  Notwithstanding anything in this Agreement, if, at any time before the Release Date, (i) DeWind Ltd. is the subject of administration or liquidation proceedings in England or Wales (or similar proceedings in another jurisdiction) (the “Proceedings Event”) or (b) winding up petition has been issued in England or Wales (or an analogous claim or petition issued in another jurisdiction) against DeWind Ltd (the “Wind Up Event,” and each of the Proceedings Event and Wind Up Event, an “Insolvency Event”), or (c) an assertion of any claim is made or any action or lawsuits have been filed which allege to be, or could become, 4.15(n) Losses (as defined in Section 10.2(c) of the Purchase Agreement) (a “4.15 Claim”), then:

 

(1)           All of the funds as then remains in the Escrow Account (the “Bankruptcy Fund”) shall remain in the Escrow Account and shall not be released to Seller under any provision of this Agreement (other than this Section 2(a)(ii)) until the dissolution of DeWind Ltd. or full and final resolution of any 4.15 Claim;

 

(2)           If DeWind and Seller shall deliver a Joint Bankruptcy Fund Notice (as defined below) to the Escrow Agent, then Escrow Agent shall, as soon as practicable after receipt of such Joint Bankruptcy Fund Notice, but in no event later than 2 Business Days after such receipt, release some or all of the Bankruptcy Fund as directed in the Joint Bankruptcy Fund Notice;

 

(3)           DeWind and Seller agree to the following:

 

A.           “Joint Bankruptcy Fund Notice” means a notice (a) instructing Escrow Agent to release all or portion of the Bankruptcy Fund to DeWind or Seller or other third party, and (b) certifying (in good faith) that such funds will be used to pay for claims, settlements, fees, expenses or costs incurred as result of (X) any 4.15 Claim or (Y) any administrator, liquidator, trustee, creditor or other person seeking to avoid or otherwise challenging the validity of all or any part of any transaction (1) involving the transfer of assets between DeWind Ltd. and Seller, (2) involving the transfer of assets between DeWind, Inc. and DSME or any of its Affiliates, and/or (3) contemplated in the Purchase Agreement (together with a 4.15 Claim, each an “Administrator Challenge”);

 

B.           If the Administrator Challenge is claimed against Seller, then (X) Seller may request that DeWind cooperate in such defense or settlement of such Administrator Challenge (and Seller shall pay for any and all reasonable costs, expenses and attorneys fees incurred by DeWind in such defense to the extent not otherwise paid according to the terms of this Agreement), and (Y) Seller will not settle any Administrator Challenge unless such settlement both is consented to by DeWind (which consent will not be unreasonably withheld) and releases DeWind from all potential claims that could arise under the Administrator Challenge;

 

  

3

 

 

C.           If the Administrator Challenge is claimed against DeWind, then (X) Seller may request that DeWind defend against such Administrator Challenge and that Seller co-operate and participate in the defense or settlement of any Administrator Challenge (and Seller shall pay for any reasonable costs, expenses and attorneys fees incurred by DeWind in such defense to the extent not otherwise paid according to the terms of this Agreement ), (Y) DeWind will not settle any Administrator Challenge unless such settlement both is consented to by Seller (which consent will not be unreasonably withheld) and releases Seller from all potential claims that could arise under the Administrator Challenge, and (Z) Seller agrees to provide DeWind with reasonable access during regular business hours to any information Seller has that is reasonably necessary in connection with the preparation of any defense against or settlement of the Administrator Challenge; and

 

D.           If Seller is obligated by this section to defend such Administrator Challenge and does not do so diligently in DeWind’s reasonable determination, DeWind shall have the exclusive right to defend such Administrator Challenge at Seller’s cost.

 

(4)           The remaining balance of the Bankruptcy Fund shall be immediately released from the Escrow Account to Seller upon written notice by Seller to DeWind and the Escrow Agent, which notice is not contested by DeWind within 5 Business Days of receipt of Seller’s notice, certifying (in good faith) that the dissolution of DeWind Ltd. has occurred or that the 4.15 Claim has been fully and finally resolved.

 

(b)              Release of Escrow Funds.  The Escrow Funds shall be held by the Escrow Agent for the benefit of DeWind and Seller until such Escrow Funds are required to be released pursuant to either:  (i) Section 2(a) above; or (ii) when required under applicable provisions of Section 4 below.  The Escrow Agent shall deliver to Seller or to DeWind, as applicable hereunder, the requisite amount of Escrow Funds to be released on such applicable date(s) by wire transfer to such account(s) as have been designed in writing to the Escrow Agent by Seller or DeWind, respectively.

 

(c)              Nature of Interest in Escrow Funds.  The parties acknowledge and agree that DeWind’s and Seller’s payment interests in the Escrow Funds are contingent rights to payment from the Escrow Funds, and that neither a voluntary or involuntary case under any applicable bankruptcy, insolvency or similar law, nor the appointment of a receiver, trustee, custodian or similar official in respect of DeWind or Seller shall increase its respective payment interest in the Escrow Funds or affect, modify, convert or otherwise change any right it may have to the Escrow Funds.

 

(d)              No Transfer or Encumbrance of Escrow Funds.  Both parties have not, and agree that they will not, subject the Escrow Funds to a Lien or otherwise encumber the Escrow Funds, except as permitted by this Agreement.

 

  

4

 

 

(e)              Grant of Security Interest to DeWind.  In order to secure Seller’s obligations and enhance DeWind’s rights and remedies under this Agreement and under the Purchase Agreement, Seller hereby grants to DeWind, effective as of the date hereof, a security interest in all of Seller’s right, title and interest in and to the Escrow Account and the Escrow Funds, including, without limitation, all accounts, certificates of deposit, cash, funds and investments established or made with the Escrow Funds and any replacements or proceeds thereof.  The Escrow Agent acknowledges that DeWind has a security interest in the Escrow Account, the Escrow Funds and Additional Escrow Funds, and all assets and investments which may be held in the Escrow Account from time to time, and shall maintain and preserve such assets subject to this security interest.  The parties hereto agree that this Agreement including Section 2(g) shall establish “control,” as defined in Sections 9-104 and 8-106 of the Uniform Commercial Code, as enacted in the State of California, and as amended from time to time (the “UCC”), of the Escrow Funds, which control is effective to perfect DeWind’s security interest in the Escrow Funds.  The Escrow Agent and Seller shall take all actions as may be reasonably requested in writing by DeWind to perfect or maintain the security interest created by Seller hereunder in the Escrow Funds.  DeWind is authorized by the other parties hereto to file UCC financing statements naming Seller as “Debtor” and DeWind as “Secured Party” and take such other and further actions as DeWind may reasonably determine to perfect DeWind’s security interest granted herein, with or without execution by the other parties hereto, to the extent permitted by applicable law.  Such security interest shall automatically be released solely with respect to any funds properly distributed from the Escrow Funds pursuant to the terms of this Agreement.  DeWind agrees to promptly execute such instruments of release and termination of the security interest granted hereunder with respect to any Escrow Funds properly received by or distributable to Seller pursuant to the terms of this Agreement, and as may be reasonably requested in writing by Seller.  Seller hereby represents and warrants to DeWind that (1) its exact legal name is as set forth in the Preamble hereto, (2) it is a Nevada corporation, (3) its organizational identification number issued by the state of Nevada is E0851042006-3 and (4) its principal place of business is 2026 McGaw Ave., Irvine, California 93614

 

(f)              Power to Transfer Escrow Funds.  The Escrow Agent is hereby granted the power to effect any transfer of Escrow Funds contemplated by this Agreement.

 

(g)              Tax Reporting.  The parties hereto agree that, for tax reporting purposes, all interest or other income, if any, attributable to the Escrow Funds or any other amount held in escrow by the Escrow Agent pursuant to this Agreement shall be allocable to Seller.

 

(h)              Certification of Tax Identification Numbers.  DeWind and Seller agree to provide the Escrow Agent with certified tax identification numbers for each of them by signing and returning Forms W-8 or W-9 to the Escrow Agent at signing of this Agreement.  The parties hereto understand that, if such tax identification numbers are not so certified to the Escrow Agent, the Escrow Agent may be required by the Internal Revenue Code, as it may be amended from time to time, to withhold a portion of any interest or other income earned on the investment of monies or other property held by the Escrow Agent pursuant to this Agreement.

 

3.      Notice of Claim.

 

(a)              Contents of Notice.  The Notice of Claim given by DeWind pursuant to Section 1(c) above shall be set forth in writing and shall contain the following information to the extent it is reasonably available to DeWind:

 

(i)           The amount, if known, or if not known, of an estimate of the foreseeable maximum amount of claimed Losses (which estimate shall not be conclusive of the final amount of such Losses) (the “Loss Amount”); and

 

(ii)           A detailed description of the basis for such Claim, including the facts and circumstances justifying DeWind’s entitlement to indemnification pursuant to Section 10.2 of the Purchase Agreement with reference to the specific breach alleged or other basis for such entitlement, and the application (or inapplicability) of the threshold for a De Minimis Claim, the Deductible and the Cap.

 

  

5

 

 

(b)              No Release Until Resolved Under Section 4.  The Escrow Agent shall not transfer any of the Escrow Funds held in the Escrow Account to DeWind pursuant to a Notice of Claim until such Notice of Claim has been resolved in accordance with Section 4.

 

4.      Resolution of Claims and Transfers of Escrow Funds.  The Notice of Claim received by Seller and the Escrow Agent pursuant to Section 1(c) and Section 3 above shall be resolved as follows:  After the Notice of Claim has been delivered by DeWind to Seller and the Escrow Agent pursuant to Section 6(e), Seller will have 15 Business Days from receipt of such Notice of Claim to dispute the Claim and shall reasonably cooperate and assist DeWind in determining the validity of the Claim for indemnity.  If Seller does not give notice to DeWind that it disputes the Claim within 15 Business Days after receipt of the Notice of Claim, the Claim shall be deemed to be a Loss subject to indemnification under Section 10 of the Purchase Agreement, and the Escrow Agent shall:  (a) as soon as is reasonably practical release from escrow and transfer to DeWind an amount of the Escrow Funds equal to (i) the amount of the Loss Amount specified in the Notice of Claim if the Loss Amount is less than the amount of the Escrow Funds, or (ii) the amount of the Escrow Funds if the Loss Amount exceeds the amount of the Escrow Funds; and (b) notify Seller in writing of such transfer of Escrow Funds as promptly thereafter.  Notwithstanding the foregoing, if Seller gives notice to DeWind, with a copy to the Escrow Agent, that it disputes the Claim, then the Escrow Agent shall not release any of the Escrow Funds in favor of DeWind until such dispute is resolved pursuant to Section 5(b).

 

5.      Limitation of Escrow Agent’s Liability.

 

(a)              Limitation of Liability.  The Escrow Agent shall incur no liability with respect to any action taken or suffered by it in good faith reliance upon any notice, direction, instruction, consent, statement or other document believed by it in good faith to be genuine and duly authorized, nor for any other action or inaction, except its own willful misconduct, fraud or gross negligence or a material breach of its obligations under this Agreement.  The Escrow Agent shall have no duty to inquire into or investigate the validity, accuracy or content of the Notice of Claim or any other document delivered to it.  The Escrow Agent also need not inquire into or verify that any Claim set forth in a Notice of Claim conforms to the requirements of Section 10.5 of the Purchase Agreement.  The Escrow Agent shall not be responsible for the validity or sufficiency of this Agreement.  In all questions arising under this Agreement, the Escrow Agent may rely on the advice or opinion of counsel, and for anything done, omitted or suffered in good faith by the Escrow Agent based on such advice, the Escrow Agent shall not be liable to anyone.  The Escrow Agent shall not be required to take any action hereunder involving any expense unless the payment of such expense is made or provided for in a manner satisfactory to it.  The Escrow Agent shall have no duties or responsibilities other than those expressly set forth in this Agreement and the implied duty of good faith and fair dealing.

 

  

6

 

 

(b)              Resolution of Conflicting Demands.  In the event conflicting demands are made or conflicting notices are served upon the Escrow Agent with respect to the Escrow Account, the Escrow Agent shall not release any of the Escrow Funds, but shall have the absolute right, at the Escrow Agent’s election, to do any or all of the following:  (i) resign so a successor Escrow Agent can be appointed pursuant to Section 5(f); (ii) file a suit in interpleader and obtain an order from a court of competent jurisdiction requiring the parties to interplead and litigate in such court their several claims and rights among themselves; or (iii) give written notice to the parties that it has received conflicting instructions from the parties hereto and is refraining from taking action until it receives Joint Instructions consented to in writing by both DeWind and Seller.  In the event an interpleader suit as described in clause (ii) above is brought, the Escrow Agent shall thereby be fully released and discharged from all further obligations imposed upon it under this Agreement with respect to the matters that are the subject of such interpleader suit, and DeWind shall pay the Escrow Agent all costs, expenses and reasonable attorneys’ fees expended or incurred by the Escrow Agent pursuant to the exercise of the Escrow Agent’s rights under this Section 5(b) (such costs, fees and expenses shall be treated as fees and expenses for the purposes of Section 5(g)).  The prevailing party shall be entitled to reimbursement from the other party of any fees and expenses of the Escrow Agent in connection with such interpleader.

 

(c)           Indemnification.  Each of DeWind on the one hand and Seller on the other (each an “Indemnifying Party” and together the “Indemnifying Parties”), hereby jointly and severally covenants and agrees to reimburse, indemnify and hold harmless the Escrow Agent, and the Escrow Agent’s officers, directors, employees, counsel and agents (severally and collectively, “Escrow Agent”), from and against any loss, damage or liability suffered, incurred by or asserted against Escrow Agent (including amounts paid in settlement of any action, suit, proceeding or claim brought or threatened to be brought and including reasonable expenses of legal counsel) arising out of, in connection with or based upon, any act or omission in good faith by Escrow Agent (not involving negligence, breach of the terms of this Agreement, gross negligence, willful misconduct or fraud on Escrow Agent’s part) relating in any way to this Agreement or the Escrow Agent’s services hereunder.  Anything in this Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be liable for special, indirect or consequential loss or damages of any kind whatsoever (including but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damages and regardless of the form of action.  Any Indemnifying Party who reimburses or indemnifies the Escrow Agent pursuant to this Section 5(c) shall have a right to seek contribution from any and all other Indemnifying Parties according to their relative fault.

 

(d)              Defense.  Each Indemnifying Party may participate at its own expense in the defense of any claim or action that may be asserted against Escrow Agent, and if the Indemnifying Parties so elect, the Indemnifying Parties may assume the defense of such claim or action; provided, however, that if there exists a conflict of interest that would make it inappropriate, in the sole discretion of the Escrow Agent, for the same counsel to represent both Escrow Agent and the Indemnifying Parties, Escrow Agent’s retention of separate counsel shall be reimbursable as hereinabove provided.  Escrow Agent’s right to indemnification hereunder shall survive Escrow Agent’s resignation or removal as Escrow Agent and shall survive the termination of this Agreement by lapse of time or otherwise.

 

  

7

 

 

(e)              Notice to Indemnifying Parties.  The Escrow Agent shall notify each Indemnifying Party by letter, or by telephone or telecopy confirmed by letter, of any receipt by Escrow Agent of a written assertion of a claim against Escrow Agent, or any action commenced against Escrow Agent, for which indemnification is required under Section 5(c), within 10 Business Days after Escrow Agent’s receipt of written notice of such claim.  The Indemnifying Parties will be relieved of their indemnification obligations under this Section 5 if Escrow Agent fails to timely give such notice and such failure adversely affects the Indemnifying Parties’ ability to defend such claim.  However, Escrow Agent’s failure to so notify each Indemnifying Party shall not operate in any manner whatsoever to relieve an Indemnifying Party from any liability that it may have otherwise than on account of this Section 5.

 

(f)              Successor to Escrow Agent.  The Escrow Agent may resign as Escrow Agent by giving both DeWind and Seller 30 days written notice of its intention to resign.  In the case of such a resignation, the Escrow Agent shall cooperate fully with the other parties in the orderly transfer of the Escrow Funds to a successor Escrow Agent and shall promptly refund the pro rata portion of any unearned escrow fees which may have been paid.  If the Escrow Agent resigns or is not available for any reason, DeWind and Seller shall mutually appoint a successor to the Escrow Agent who (i) is a national bank having assets of at least Ten Billion Dollars ($10,000,000,000); and (ii) shall execute a copy of this Escrow Agreement for delivery to DeWind and Seller.  Until such time as the Escrow Agent’s successor is appointed, the Escrow Agent shall retain the Escrow Funds.

 

(g)              Fees.

 

(i)           DeWind on the one hand, and Seller on the other hand, shall each bear 50% of the Escrow Agent’s fees and expenses and shall timely pay such fees and expenses.  The Escrow Agent’s non-refundable Initial Setup fee in the amount of One Thousand Dollars ($1,000) was paid at signing of the Previous Escrow Agreement and an additional fee for each transaction of funds or documents in or out of the escrow, excluding the initially required documents, including this Agreement, to fully effect the escrow (the “Transaction Fee”) will be invoiced (the “Invoice”) when a transaction occurs, and all fees shall be payable in U.S. Dollars.

 

(ii)           In the event of non-payment of any fees or charges invoiced by the Escrow Agent, the Escrow Agent shall give notice of non-payment of any fee due and payable hereunder to the non-paying party and, in such an event, such party shall have the right to pay the unpaid fee within ten Business Days after receipt of notice from the Escrow Agent or otherwise give notice of its good faith dispute thereof.  If such party fails to pay in full all undisputed fees due during such ten business day period, the Escrow Agent shall give notice of non-payment of any undisputed fee due and payable hereunder to the other party hereto and, in such event, such party shall have the right, but not the obligation, to pay the unpaid fee within ten days of receipt of such notice from the Escrow Agent.  A party who pays the other party’s portion of fees pursuant to this Section 5(g)(ii) shall have a claim against the Escrow Funds for such amounts.  Upon payment of the undisputed unpaid fee by either DeWind or Seller, as the case may be, this Agreement shall continue in full force and effect until the end of the applicable term. Failure to pay the undisputed unpaid fee under this Section 5(g)(ii) by both DeWind and Seller shall result in termination of this Agreement upon 30 days prior written notice by the Escrow Agent to Seller and DeWind, unless the Escrow Agent has been given notice of any good faith dispute of the unpaid fees.

 

  

8

 

 

6.      General Terms.

 

(a)              Termination; Successors and Assigns.  Upon the release of all Escrow Funds to Seller and/or to DeWind pursuant to the terms and conditions of this Agreement, this Agreement shall terminate and be of no further force and effect.  Until such time, this Agreement shall bind and inure to the benefit of Seller, DeWind, the Escrow Agent and their respective successors and permitted assigns.  Neither Seller nor DeWind may assign any of its rights or obligations hereunder without the prior written consent of the other party, provided that either may assign or delegate any of its rights and obligations under this Agreement to an Affiliate upon notice to the other parties hereto at any time without requiring the consent of any party.

 

(b)              Governing Law.  This Agreement shall be governed by and interpreted and enforced in accordance with the Laws of the State of California, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of California or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of California.

 

(c)              Severability.  Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

(d)              Amendment and Waivers; Rights Non-Exclusive.  Any term or provision of this Agreement may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only by a writing signed by the party to be bound thereby.  The waiver by a party of any breach hereof or default in the performance hereof will not be deemed to constitute a waiver of any other default or any succeeding breach or default.  The rights and remedies of the parties under this Agreement are cumulative and not exclusive of any rights or remedies which such party would otherwise have.

 

(e)              Notices.  Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given (i) on the date established by the sender as having been delivered personally, (ii) on the date delivered by a private courier as established by the sender by evidence obtained from the courier, (iii) on the date sent by facsimile, with confirmation of transmission, if sent during normal business hours of the recipient, if not, then on the next business day, or (iv) on the fifth day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.  Such communications, to be valid, must be addressed as follows:

 

If to DeWind, to:

 

DeWind Co.

3 Park Plaza, Jamboree Center Building, Suite 1920

Irvine, CA 92614

Attention:  Dong Won Shin

Phone:  (949) 250-9491

Facsimile: (949) 250-9492

 

  

9

 

 

With a required copy to:

Reed Smith LLP

1510 Page Mill Road, Suite 110

Palo Alto, CA 94304

Attention:  Catharina Y. Min

Phone:  (650) 352-0526

Facsimile:  (650) 352-0699

If to Seller, to:

 

Composite Technology Corporation

2026 McGaw Ave.

Irvine, CA 92614

Attention:  Michael McIntosh

Phone:   (949) 428-8500

Facsimile:  (949) 660-1533

With a required copy to:

 

Milbank, Tweed, Hadley & McCloy LLP

601 S. Figueroa St., 30th Floor

Los Angeles, CA 90017

Attention:  Neil Wertlieb

Phone:   (213) 892-4410

Facsimile:  (213) 892-4710

 

If to Escrow Agent, to:

 

U.S. Bank National Association

Corporate Trust Services

One California Street, Suite 1000

San Francisco, CA 94111

Attention:  Alan Maravilla

Phone:  (415) 273-4512

Facsimile:  (415) 273-4590

or to such other address or to the attention of such person or persons as the recipient party has specified by prior written notice to the sending party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain).  If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.

 

  

10

 

 

(f)              Further Assurances.  DeWind and Seller each agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurances as may be reasonably requested by the other parties to evidence and reflect the transactions provided for herein and to carry into effect the intent of this Agreement.

 

(g)              Entire Agreement.  This Agreement, any agreements referenced herein, and any exhibits and schedules hereto constitute the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect to the subject matter hereof.  Any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement.

 

(h)           Escrow Agent.  U.S. Bank National Association is acting solely as Escrow Agent and is not a party to, nor has it reviewed or approved the Purchase Agreement or any other matter of background related to this Escrow Agreement, other than this Agreement itself, and has assumed without investigation, the authority of the individuals executing this Escrow Agreement to be authorized to do so on behalf of the party or parties involved.

 

(i)           USA Patriot Act Compliance.  To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.  For a non-individual person such as a business entity, a charity, a trust or other legal entity the Escrow Agent will ask for documentation to verify its formation and existence as a legal entity.  The Escrow Agent may also ask to see financial statements, licenses, identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation.  The parties each agree to provide all such information and documentation as to themselves as requested by Escrow Agent to ensure compliance with federal law.

 

(j)           Consent to Jurisdiction.  Each party irrevocably submits to the exclusive jurisdiction of (i) Los Angeles County, California, and (ii) the United States District Court for the District of Central California, for the purposes of any Action arising out of this Agreement or any transaction contemplated hereby.  EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE ANCILLARY AGREEMENTS OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF AND THEREOF.

 

(k)           Counterparts.  This Agreement may be executed in any number of counterparts, and any party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument.  This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto.

 

[Signature Pages Follow]

 

  

11

 

 

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

 

	
DEWIND:

	 
	  	 
	
DEWIND CO.

	 
	  	  	 
	
By:

	/s/ D. W. Shin	 
	
Name: 

	Dong Won Shin	 
	
Title:

	President/COO	 
	  	  	 
	
SELLER:

	 
	  	 
	
STRIBOG INC.

	 
	  	  	 
	
By:

	/s/ Benton H Wilcoxon	 
	
Name:

	Benton H Wilcoxon	 
	
Title:

	Director	 
	  	  	 
	
ESCROW AGENT:

	 
	  	 
	
U.S. BANK, NATIONAL ASSOCIATION

	 
	  	  	 
	
By:

	
/s/ Alan Maravilla

	 
	
Name:

	
Alan Maravilla

	 
	
Title:

	
Vice President

	 

 

  

12

 

 

EXHIBIT A

U. S. BANK MONEY MARKET ACCOUNTS

ACCOUNT DESCRIPTION AND TERMS

U.S. Bank money market accounts are U.S. Bank National Association (“U.S. Bank”) deposit accounts designed to meet the needs of Corporate Escrow and other Corporate Trust customers of U. S. Bank.  Accounts pay competitive variable interest rates, which are determined upon the customer’s aggregated balance.  Customer deposits are insured up to $250,000 per depositor  pursuant to the Federal Deposit Insurance Corporation’s insurance rules.

Interest rates currently offered on the accounts are determined at U. S. Bank’s discretion and may change daily.  U. S. Bank National Association uses the daily balance method to calculate interest on these accounts.  This method applies a daily periodic rate to the principal in the accounts each day of the month and divides that figure by the number of days in the period.  Interest on customer deposits begins to accrue on the business day funds are credited to a U.S. Bank deposit account.  Interest is compounded on a monthly basis.

The owner of the accounts is U. S. Bank National Association as agent for its customers.  All account deposits and withdrawals are performed by U.S. Bank National Association.

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