Document:

Unassociated Document

Exhibit 10.1      

 

ASSET PURCHASE AND LICENSE AGREEMENT

 

 

THIS ASSET PURCHASE AND LICENSE AGREEMENT (this “Agreement”) is made and entered into as of this May 16, 2011 (the “Effective Date”) by and between Human Pheromone Sciences, Inc., a California corporation (“Grantor”) and CrowdGather Inc., a Nevada corporation (“Grantee”), individually “the Party, together “the Parties”;

 

WHEREAS, Grantor is the owner of, or otherwise controls, the domain name “Erox”, the  trademark “Erox” in the United States and selected other countries in the world, as further detailed in Schedule A (collectively, “Erox Brand Assets”);

 

WHEREAS, Grantor has know-how relevant to, and has been granted U.S and foreign patents for, the use of Androstadienone (AND), has licensed or sold AND combined with Estratetraenol (TET) to other companies for inclusion in their products, and has a patent application pending for the use of the compound Muricin Aglycone (“ER 303”), as further detailed in Schedule B (collectively, “the Grantor Technology Assets”);

 

WHEREAS, Grantee desires to acquire the Erox Brand Assets;

 

WHEREAS,  Grantee desires to receive the requisite licenses in and to the Grantor Technology Assets to make, use, sell, market, import, and distribute a fragranced product that includes a combination of Androstadienone, Estratetraenol and ER 303 (“the EROX Product”), which will be sold and distributed in the Field, as defined below, and further desires to receive an exclusive license in and to the Grantor Technology Assets to exclusively make, use, sell, market, import, and distribute the EROX Product in the Exclusive Field, as defined below;

 

WHERAS, Grantee desires to retain Grantor to assist in the development, manufacture, and shipping of the EROX Product, which is the subject of a separate and independent Consulting Services Agreement to be concurrently executed with the Agreement;

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

(a)           I.           Definitions.

 

As used in this Agreement, the following terms and phrases shall have the following meanings:

 

	
  

	
1.

	
“Affiliate” shall mean any entity, including any individual, trust, corporation, partnership, joint venture, limited liability company, association, unincorporation organization, non-profit, or other legal entity, that on or after the Effective Date directly or indirectly controls, is controlled by or is under common control with Grantee, whether through the ownership of securities, as a result of contract or otherwise, it being understood that the ownership of securities or other instruments representing fifty percent (50%) or more of the outstanding voting power of a particular entity shall conclusively constitute control for purposes of this definition (or less if the country of incorporation or the country of domicile of the entity require

s that foreign ownership be less than fifty percent (50%)).

 

  

  

  

	
  

	
2.

	
“Agreement” shall have the meaning set forth in the Introduction hereof.

 

	
  

	
3.

	
“Bankruptcy” of either Party shall mean any of the following events:

 

	
  

	
(a)

	
Such Party is unable to pay its debts as they come due or such Party fails to have assets (both tangible and intangible) with a fair salable value in excess of the amount required to pay the probable liability on its respective existing debts for a period of more than ninety (90) days (“Insolvency”);

 

	
  

	
(b)

	
The institution by such Party of proceedings to be adjudicated as bankrupt, or insolvent or the consent by such Party to the institution of bankruptcy or Insolvency proceedings against such Party or the filing by such Party of a petition or answer or consent seeking reorganization or release under any applicable law, or the consent by such Party to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee, or other similar official of such Party, or of any substantial part of such Party's property, or the making by such Party of an assignment for the benefit of creditors, or the taking of action by such Party in furtherance of any such action; or

 

	
  

	
(c)

	
The institution, consent, or the filing by (or against) such Party of any composition, reorganization, or bankruptcy liquidation proceedings under applicable law.

 

	
  

	
4.

	
“Confidential Information” shall mean all proprietary and confidential information disclosed by a Party (the “Disclosing Party”) to the other Party (the “Receiving Party”) pursuant to, or in connection with this Agreement, including, without limitation, any information disclosed in contemplation of this Agreement prior to the Effective Date, regardless of the form or manner of disclosure.  “Confidential Information” shall not include information:  (a) of which the Receiving Party was rightfully in possession prior to disclosure, as evidenced by appropriate contemporaneou

s documentation; (b) that was independently developed by employees or agents of the Receiving Party without the benefit of Confidential Information provided by the Disclosing Party, as evidenced by appropriate contemporaneous documentation; (c) that the Receiving Party rightfully receives from a third party not owing a duty of confidentiality to the Disclosing Party; (d) that is or becomes publicly available without fault of the Receiving Party; (e) that is published incident to patent application prosecution; or (f) that the Parties agree in writing will not be treated as Confidential Information.

 

	
  

	
5.

	
“Disclosing Party” shall have the meaning set forth in the definition of Confidential Information hereof.

 

	
  

	
6.

	
“Distributors” shall mean any Grantee agent, representative, or other third party having an agreement with Grantee to promote, advertise, sell, and/or distribute the EROX Product

 

	
  

	
7.

	
“Effective Date” shall have the meaning set forth in the Introduction hereof.

 

  

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8.

	
“EROX Brand Assets” shall include those U.S. and foreign trademarks and domain names listed in Schedule A.

 

	
  

	
9.

	
“EROX Product” shall be defined as any product incorporating the Grantor Technology Assets (now existing or hereafter devised) which meet the specifications provided in Schedule B of the Consulting Services Agreement.

 

	
  

	
10.

	
“Exclusive Field” shall mean, and be limited to the manufacturing, using, selling, offering for sale, distributing, exporting, importing or otherwise commercially exploiting the EROX Product (a) through online affiliate marketing programs and (b) through adult content and accessory sex-based Internet   .

 

	
  

	
11.

	
“Field” shall mean any commercial, industrial, or consumer market that is accessible through any distribution channel other than the Exclusive Field.

 

	
  

	
12.

	
“Grantee” shall have the meaning set forth in the Introduction hereof.

 

	
  

	
13.

	
“Grantee Indemnities” shall mean Grantee and its directors, officers, employees, Affiliates and agents.

 

	
  

	
14.

	
“Grantor” shall have the meaning set forth in the Introduction hereof.

 

	
  

	
15.

	
“Grantor Indemnities” shall mean Grantor and its directors, officers, employees, Affiliates and agents.

 

	
  

	
16.

	
“Grantor Technology Assets” shall include those U.S. and foreign patents and patent applications listed in Schedule B.

 

	
  

	
17.

	
“Indemnified Party” shall mean the Party seeking indemnification.

 

	
  

	
18.

	
“Indemnifying Party” shall mean the Party indemnifying the Indemnified Party.

 

	
  

	
19.

	
“Infringes” shall mean impairs, dilutes, misappropriates, or otherwise violates.

 

	
  

	
20.

	
“Insolvency” shall have the meaning set forth in the definition of Bankruptcy hereof.

 

	
  

	
21.

	
“Receiving Party” shall have the meaning set forth in the definition of Confidential Information hereof.

 

	
  

	
22.

	
“Term” shall have the meaning set forth in Section 9.1 hereof.

 

	
  

	
23.

	
“Territory” shall mean all countries, territories and possessions worldwide.

 

	
II.

	
Grant.

 

2.1           Assignment.  Subject to the terms and conditions of this Agreement, Grantor hereby assigns, sells, transfers and quitclaims to Grantee the full right, title, and interest in and to the Erox Brand Assets, and all goodwill associated therewith. Grantor further agrees, to execute all the requisite documentation required to effectuate the transfer of rights, including any and all assignment agreements, without further or additional compensation. Since erox.com is currently the Company’s e-mail address, Grantor agrees to allow 120 days for changeover so that the Grantor a can notify all of its customers of the Grantor of its new e-mail addresses.  Provided the $50,000 portion of the

 Advance Payment for the EROX Brand Assets have been paid (as per Section 3.1 below), to the extent Grantor is unable or does not effect the foregoing acts required to transfer rights to Grantee, Grantor hereby irrevocably grants Grantee full power of attorney to effect the foregoing, and such power shall be deemed coupled with an interest. Grantor covenants and agrees that, after such transfer, Grantor will no longer have any right to use the EROX Brand Assets for any purpose, or authorize any other party to use the EROX Brand Assets for any purpose, nor will it have any right to restrict Grantee from using the EROX Brand Assets for any purpose whatsoever; provided, however, Grantee agrees that it shall never market, sell, promote or otherwise distribute any product bearing the EROX Brand Assets as a pharmaceutical product.

  

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2.2           Exclusive License Grant.  Subject to the terms and conditions of this Agreement, Grantor hereby grants to Grantee an exclusive, royalty-free, fully paid up right to the Grantor Technology Assets for the purpose of making, having made, using, selling, offering for sale, distributing, exporting, importing, manufacturing or otherwise commercially exploiting the EROX Product in the Territory within the Exclusive Field for the Term of this Agreement (“Exclusive Rights”).  Notwithstanding the above, if, and only if, the June 20, 2009 Supply, License, and Distribution Agreement between
Grantor and Pheromone International Co., Ltd. is in full force and effect, Grantee’s Exclusive Rights shall not include the right to make, have made, use, sell, offer for sale, distribute, export, import or otherwise commercially exploit the EROX Product in Taiwan.

 

2.3           Non-Exclusive License Grant.  Subject to the terms and conditions of this Agreement, Grantor hereby grants to Grantee a non-exclusive, non-assignable royalty-free, fully paid up right in the Grantor Technology Assets for the purpose of making, having made, using, selling, offering for sale, distributing, exporting, manufacturing or otherwise commercially exploiting the EROX Product in the Territory within the Field for the Term of this Agreement (“Non-Exclusive Rights”).
  Notwithstanding the above, if, and only if, the June 20, 2009 Supply, License, and Distribution Agreement between Grantor and Pheromone International Co., Ltd. is in full force and effect, Grantee’s Non-Exclusive Rights shall not include the right to make, have made, use, sell, offer for sale, distribute, export, import, manufacture or otherwise commercially exploit the EROX Product in Taiwan.

 

2.4           No Right to Sublicense.  Except as expressly provided for in this Agreement, neither Grantee nor its Affiliates shall, without Grantor’s prior written approval, which shall not be unreasonably withheld, have the right to sub-license any of the Grantor Technology Assets in accordance with Sections 2.2 and 2.3 hereof.  Any sub-license agreement authorized in writing by Grantor shall be consistent with the terms and conditions of this Agreement.  Notwithstanding the above, nothing in this Section 2.4 shall prohibit, restrain, or otherwise prevent Grantee from selling,
distributing, manufacturing or marketing the EROX Product through Affiliates or Distributors.

 

2.           III.           Loan to Grantor/Initial EROX Product/Disposition of Loan

 

3.1.           Advance Payment to Grantor.  In consideration of this Agreement, Grantee shall make an advanced payment to Grantor of one hundred thousand U. S. dollars (US$100,000) (the “Advance Payment”) as of the Effective Date. The Advance Payment shall apply as follows:

 

(a) $49,900.00 shall be applied as the Purchase Price for the EROX Brand Assets, which shall be considered 100% allocated towards good will with 0% being allocated to personal property;

 

(b) $100.00 shall be applied as the fee for the services rendered under the Consulting Agreement; and

  

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(c) $50,000 shall be applied to the purchase of Grantor’s Common Stock as per Section 3.3 below.

 

Grantor shall be fully, completely, and solely responsible for all federal, state, municipal, regulatory, local, or other taxes related to, or arising from, the Advance Payment.

 

3.2           Initial EROX Product.  Pursuant to a separate and independent Consulting Services Agreement being executed concurrently herewith, Grantor will assist Grantor with the development of the EROX Product, including sourcing the materials, identifying qualified manufacturers and logistics support, finalizing the fragrance, packaging, procurement and filling of the EROX Product, and arranging for a fulfillment service in accordance with the Erox Product specifications provided in Schedule B of the Consulting Services Agreement and in accordance with terms to be agreed between the Grantee and third party manufacturing, logistics, and/or fulfillment services.

 

3.3           Disposition of Advance Payment.  As per Section 3.1 above, within 30 days of receipt of the EROX Product from the Consultant, Grantee shall issue an Acceptance Certificate or request changes to the EROX Product; not later than 60 days from the end of such thirty (30) day period Grantee agrees to apply $50,000 of the Advance payment as an Asset Acquisition cost and a paid up development fee. The remaining $50,000 of the Advance Payment will be converted into restricted common stock of the Grantor.  The number of shares of the Grantor’s Common Stock to be issued to Grantee shall be calculated by dividing $50,000 by the closing price of the Grantor’s Common Stock on such six

tieth (60) day. If such day is not a Trading Day (a day on which the New York Stock Exchange is open for business) it shall be calculated by using the closing price the next such Trading Day.

 

All notification provisions and requirements herein shall be determined in accordance with Section 9.1 of this Agreement.

3.           IV.           Ownership, Maintenance, and Enforcement of Intellectual Property.

 

4.1           Ownership of Grantor Technology Assets.  Grantee acknowledges and agrees, that as between the Parties, Grantor owns all right, title, and interest in and to the Grantor Technology Assets and Grantee shall have no rights thereto beyond the licenses granted in Sections 2.2-2.4 hereof.

 

4.2           Ownership of Intellectual Property Developed by Grantee.  Grantor acknowledges and agrees, that Grantee owns all right, title, and interest in and to any intellectual property, including know-how, designs, formulas, compounds, patentable inventions, trademarks, or brands (“Intellectual Property”), invented or developed solely by Grantee, by Grantee’s Affiliates, by employees thereof, or by a third party working as a contractor or under Grantee’s guidance, supervision or control (“Grantee Developed Intellectual Property”) prior to the Effective Date of this Agreement or during the Term of this Agreement,

 except for any Intellectual Property that is directly related to changes or modifications in the chemical formula of the androstadienone and/or estratetraenol compounds (“Pheromone Compound”).

 

4.3           Ownership of Jointly Developed Intellectual Property.  Grantor acknowledges and agrees, that except for any Intellectual Property constituting a derivative of the Pheromone Compound , Grantee shall own all right, title, and interest in and to any Intellectual Property that is jointly developed or invented by employees or contractors of Grantee and Grantor; provided, however, that Grantee shall grant Grantor a royalty-free, perpetual, irrevocable license to such Jointly Developed Intellectual Property for any and all uses by Grantor outside the Exclusive Field as app

ropriate.

  

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4.4           Ownership of the Erox Brand Assets. Grantee will be responsible for maintain, at its expense, any and all of the Erox Brand Assets.  Grantor agrees to assist Grantee in executing all of the administrative, legal, or other documentation necessary or beneficial to enabling Grantee to secure its rights in the Erox Brand Assets.  In the event Grantee chooses not to maintain the Erox Brand Assets, Grantee shall use its best efforts to provide Grantor with sixty (60) days notice to enable Grantor to make an offer to reacquire the Erox Brand Assets and maintain the Erox Brand Assets.

4.5           Enforcement. Upon written notice to Grantor, Grantee may take steps to stop a third party who is selling a product that does or will compete with the EROX Product sold or being developed by Grantee or any of its Affiliates (“Third Party Infringer”) from infringing an issued patent falling within the definition of Grantor Technology Assets by providing Grantor with an opinion from a law firm, reasonably acceptable to Grantor, stating that, based on the facts and circumstances, such third party is infringing a Patent.  In the event Grantor receives such opinion, Grantee shall have the right to initiate legal proceedings against any such

 Third-Party Infringer at Grantee’s sole expense, unless Grantor, not later than ninety (90) days after receipt of such notice, either (i) causes such infringement to cease or (ii) initiates legal proceedings against the Third Party Infringer.  If Grantee exercises such right to commence suit, Grantor agrees to be a party if required to establish subject matter jurisdiction and agrees to cooperate reasonably with Grantee in such suit at Grantee’s sole expense.  Any proposed disposition or settlement of a legal proceeding filed by Grantee to enforce any issued patent falling within the definition of Grantor Technology Assets against any Third-Party Infringer shall be subject to Grantor’s prior written approval, which approval shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, Grantee’s rights under this Section shall apply only to claims of Grantor Technology Assets that are exclusively licensed to Grantee under this Agreement a

nd only in the Exclusive Field and Territory which are exclusively licensed to Grantee under this Agreement.  Any proposed disposition or settlement of a legal proceeding filed by Grantor to enforce any issued patent falling within the definition of Grantor Technology Assets and within the Exclusive Field against any Third-Party Infringer shall be subject to Grantee’s prior written approval, which approval shall not be unreasonably withheld or delayed, if such disposition or settlement would materially affect or modify the Grantee’s rights or obligations under this Agreement. To the extent that any judgment or license fees are obtained from such Third-Party Infringer as a result of such action, Grantee’s reasonable attorneys fees and out of pocket expenses shall be reimbursed first out of such proceeds, plus an interest at a rate of 10% per annum on advanced out of pocket expenses.

(a)           V.           Representations, Warranties, and Covenants.

 

5.1           Grantor’s Representations and Warranties.  Grantor hereby represents and warrants that:

 

(a)           Grantor is a corporation validly existing and in good standing under the laws of the jurisdiction of its organization.

 

(b)           The Grantor represents and warrants that Grantor is the owner of, or otherwise controls, all right, title and interest in and to the EROX Brand Assets, the Grantor Technology Assets, and the EROX Product, and further represents and warrants that it has the right to grant to Grantee the rights contemplated in this Agreement.

 

(c)           Neither the execution, delivery or performance of this Agreement when so executed (with or without the giving of notice, the lapse of time, or both) nor the consummation of the transactions contemplated hereby:  (i) will conflict with any provision of the organizational charter or bylaws of Grantor; (ii) will conflict with, will result in a breach of, or will constitute a default under any applicable law, judgment, order, ordinance, decree, rule, regulation or ruling of any court or governmental instrumentality; (iii) will result in a breach of, will conflict with, will constitute a default under or will permit any party to terminate, modify, accelerate the performance of or cancel the terms of, any contract to which Grantor is a party or by which Grantor m

ay be bound; or (iv) will create any lien upon any of the EROX Brand Assets, the Grantor Technology Assets or the EROX Product.

  

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(d)           The Grantor, to the best of its knowledge, using, manufacturing, having made, importing, selling, offering for sale, or otherwise commercially exploiting the EROX Product will not infringe any patent or other proprietary right of third parties.

 

(e)           The Grantor also represents and warrants that to the best of its knowledge, as of the Effective Date, the Grantor Confidential Information is sufficient, accurate and correct.

 

(f)           The Grantor will take every commercially reasonable action to preserve the security, confidentiality, and value of all information regarding the EROX Product.

 

(g)           The Grantor represents and warrants that, to the best of its knowledge, it has received the requisite management, board of directors, and/or shareholder approvals, if any, required to legally transfer, grant, or otherwise convey the rights herein to Grantee and all necessary actions on the part of Grantor have been duly and validly taken to authorize the execution, delivery and performance of this Agreement without the requirement of consent from any other party. This Agreement has been duly executed and delivered by Grantor and constitutes the legal, valid and binding obligation of Grantor enforceable against Grantor, and will constitute a valid and binding obligation of Grantor, enforceable in accordance with its terms, except as provided by bankruptcy, insolvency,

 fraudulent conveyance or similar laws affecting creditors’ rights generally and general equitable principles.

 

(h)           The Grantor has filed or has caused to be filed, to the best of its knowledge , all federal, state, county, local or city Tax Returns affecting the EROX Brand Assets which are required to be filed by Grantor, and all Tax assessments and other governmental charges which are due and payable have been timely paid.  To Grantor’s knowledge, there are no tax liens upon the EROX Brand Assets.  With respect to the EROX Brand Assets all tax reports filed by Grantor fairly reflect the taxes of Grantor for the periods covered thereby and the Grantor has received no notice of any tax deficiency or delinquency.

 

(i)           As of the closing, to the best of its knowledge, there are no actions, suits, proceedings, orders or claims pending or threatened against Grantor, or pending or threatened by Grantor against any third party, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality which relate to, or in any way affect, the EPOX Branded Assets (including, without limitation, any actions, suits, proceedings or investigations with respect to the transactions contemplated by this Agreement).  Grantor is not subject to any judgment, order or decree of any court or other governmental agency, and Grantor has received no written opinion or memorandum from legal counsel to the effect

 that it is exposed, from a legal standpoint, to any liability which relates to, or in any way affects, the EPOX Branded Assets, the Grantor Technology Assets, and/or the EROX Product.

 

(j)           No insolvency proceedings of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the EROX Brand Assets are pending, or to Grantor’s knowledge, threatened, and Grantor has made no assignment for the benefit of creditors, nor taken any action with a view to, or which would constitute a basis for, the institution of any such insolvency proceedings.

 

  

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(k)           There are no existing agreements with, options or rights of, or commitments to any Person, other than to Grantee, to acquire any of the EROX Brand Assets or any interest therein.

 

(l)            To the best of its knowledge, no representation or warranty by Grantor contained in this Agreement in any certificate furnished pursuant to this Agreement, contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein made not misleading.

 

(b)           VI.           Indemnification.

 

6.1           Indemnification by Grantor.  The Grantor shall defend, indemnify and hold harmless Grantee from and against any and all Losses which the Grantee may suffer or incur by reason of:

 

(a)           Any material breach by Grantor of any of its representations, warranties, agreements, or covenants contained in this Agreement;

 

(b)           Any third party claim of harm or injury arising out of related to, or in connection with a product recall or the manufacture of the EROX Product that is attributable to the Pheromone Compounds (“Product Claim”); provided, however, that such Product Claim is not a result of any modification, alteration, enhancement, or combination undertaken, authorized, or otherwise implemented by Grantee (for which Grantor shall not be required to indemnify and hold harmless Grantee);

 

(c)            Any Grantor Indemnified Claim that the manufacture, use, distribution, importation, offering for sale, or sale of any of the EROX Products infringes upon or violates any patent, trademark, copyright, trade secret or other proprietary rights of any third party (“IP Claim”) so long as such IP Claim is only based upon the EROX Product as designed by Grantor and not based on any modifications made by Grantee;

 

(d)           Any injury or alleged injury to any person (including death) or to the property of any person not a party hereto arising out of the gross negligence or intentional act or omission of Grantor, its employees or agents relating to the EROX Product or Grantor Technology Assets;

 

(e)           The enforcement of Grantee’s indemnification rights hereunder; or

 

(f)           Any action taken by or on behalf of Grantor’s shareholders with respect to this Agreement or the rights transferred or conveyed by this Agreement.

 

6.2           Indemnification by Grantee. Grantee shall defend, indemnify and hold harmless Grantor   from and against any and all Losses, which any Grantor may suffer or incur by reason of:

 

(a)           Any material breach by Grantee of its representations, warranties, agreements, or covenants contained in this Agreement or by the willful misconduct of Grantee;

 

(b)           Any third party claim of harm or injury arising out of, related to, or in connection with a product recall or the manufacture of the EROX Products arising from, and solely related to, the modification, alteration, enhancement or combination of the EROX Product undertaken, authorized or otherwise implemented by Grantee;

  

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(c)           Any injury or alleged injury to any person (including death) or to the property of any person not a party hereto arising out of the gross negligence or intentional act or omission of Grantee, its employees or agents relating to the manufacture, use or sale of any of the EROX Products;

 

(d)           Any injury or alleged injury to any person (including death) or to the property of any person not a party hereto arising out of the use of the EROX Products in the Territory arising from a use that is not authorized by Grantor;

 

(e)           The use, manufacture, promotion, marketing and sale of the EROX Products by Grantee, its Affiliates, its Distributors, retailers and customers, provided such a claim is not a Product Claim; or

 

(f)           The enforcement of Grantor’s indemnification rights hereunder.

 

6.3           Indemnification Procedures.

 

(a)           The Indemnified Party pursuant to this Article VII shall promptly notify the Indemnifying Party, in writing, of a claim covered by the indemnification provisions of Section 6.1 or 6.2 (“Claim”) and shall describe such Claim in reasonable detail.

 

(b)           The Indemnifying Party shall have a right within thirty (30) days after receipt of such written notice to take control, through counsel of its own choosing (but reasonably acceptable to the Indemnified Party) and at its own cost, the settlement, or defense thereof unless: (i) the Indemnifying Party is also a party to the proceeding and the Indemnified Party determines in good faith that joint representation would be inappropriate; or (ii) the Indemnifying Party fails to provide reasonable assurance to the Indemnified Party of its financial capacity to defend such proceeding, and provide indemnification with respect thereto.  The Indemnifying Party shall not, without the written consent of the Indemnified Party (which consent shall not be unreasonably withhe

ld, delayed, or conditioned), settle or compromise any Claim, unless such settlement or compromise includes an unconditional release of the Indemnified Party.  If the Indemnifying Party does not notify the Indemnified Party within thirty (30) days after the receipt of written notice of a Claim of indemnity hereunder that it elects to undertake the defense thereof, the Indemnified Party shall have the right to contest, settle, or compromise the Claim but shall not pay or settle any such Claim without the consent of the Indemnifying Party (which consent shall not be unreasonably withheld, delayed, or conditioned).

 

(c)           The Indemnifying Party and the Indemnified Party shall cooperate fully in all aspects of any investigation, defense, pre-trial activities, trial, compromise, settlement, or discharge of any Claim in respect of which indemnity is sought pursuant to this Article VI, including, without limitation, providing the other Party with reasonable access to employees and officers (including, without limitation, as witnesses) and other information.  The remedies provided in this Article VI shall not be exclusive of or limit any other remedies that may be available to the Indemnified Parties.

 

(c)           VII.           Confidential Information.

 

7.1           Confidential Information Generally.  The existence and terms and conditions of this Agreement are confidential, and neither Party may make any disclosures regarding this Agreement without the express prior written consent of the other Party, except:

 

(a)           As may be required by law or legal process;

  

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(b)           During the course of litigation so long as the disclosure of such terms and conditions are restricted in the same manner as is the confidential information of other litigating parties and so long as: (i) the restrictions are embodied in a court-entered protective order; and (ii) the Disclosing Party informs the Receiving Party in writing in advance of the disclosure;

 

(c)           In confidence to its legal counsel, accountants, banks and financing sources and their advisors solely in connection with complying with financial transactions; or

 

(d)           Either party may issue a press release announcing or otherwise disclosing the existence of this Agreement, provided the Party intending to issue such press release or disclosure provides the other Party with a copy of the press release or disclosure for its prior approval or disapproval, such approval not to be unreasonably withheld.  Unless disapproved within two (2) days from submission, any requests for approval shall be deemed approved.

 

7.2           Restrictions on Confidential Information.

 

(a)           The Receiving Party agrees not to disclose any Confidential Information of the Disclosing Party and to maintain such Confidential Information in strictest confidence, to take all reasonable precautions to prevent its unauthorized dissemination and to refrain from sharing any or all of the information with any third party for any reason whatsoever except as required by court order, both during and after the Term of this Agreement.  Without limiting the scope of this duty, the Receiving Party agrees to limit its internal distribution of the Confidential Information of the Disclosing Party only
on a “need to know” basis solely in connection with the performance of this Agreement, and to take steps to ensure that the dissemination is so limited.

 

(b)           The Receiving Party agrees not to use the Confidential Information of the Disclosing Party for its own benefit or for the benefit of any third party other than in accordance with the terms and conditions of this Agreement.

 

(c)           All Grantor's Confidential Information remains the sole property of Grantor and all Grantee' Confidential Information remains the sole property of Grantee.

 

(d)           Upon written request of the Disclosing Party, or upon the expiration or other termination of this Agreement for any reason whatsoever, the Receiving Party agrees to return to the Disclosing Party all such provided Confidential Information, including, without limitation, all copies thereof.

 

(e)           Notwithstanding anything to the contrary herein, Grantor expressly acknowledges that Grantee may have an obligation or need to disclose certain of Grantor’s Confidential Information to third parties and government agencies for the limited purpose of obtaining government approval and product development.  Grantor expressly consents to such disclosure, provided Grantee first ensures that any third party receiving such information enters into a written confidentiality agreement at least as restrictive as the provisions governing Confidential Information provided for in this Agreement.

 

7.3           Survival.  The obligations set forth in this Article VII shall apply throughout the Term of this Agreement and for a period of five (5) years after the termination or expiration of this Agreement or any extensions hereof.

 

(d)           VIII.           Term and Termination.

  

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8.1           Initial Term.  This Agreement shall commence on the Effective Date and continue for five (5) years, unless extended by the mutual written agreement of the Parties for an additional five (5) year period(s)., (the “Term”).  Notwithstanding the Term, the assignment of Erox Brand Assets under Section 2.1 shall not be subject to any Term and shall be permanently effective when made.

 

8.2           Early Termination.  Upon the occurrence of any of the following, this Agreement may be terminated by:

 

(a)           Either Party immediately upon written notice to the other Party if the other Party breaches any material provision of this Agreement and such breach is: (i) incapable of cure; or (ii) capable of cure, but not cured within sixty (60) days of the breaching Party's receipt of written notice of such default from the non-breaching Party.

 

(b)           Either Party immediately upon the Bankruptcy of the other Party.  Notwithstanding the above, Bankruptcy, dissolution, or insolvency of Grantor shall not give any third party the right to terminate this Agreement.  Grantee shall have the option to maintain this Agreement in force pursuant to Section 365(b) of the Bankruptcy Code.

 

(c)           Mutual written agreement of the Parties.

 

8.3              Effect of Early Termination.  Upon the expiration or termination of this Agreement for any reason whatever, all rights of Grantee under this Agreement, with the exception of Section 2.1, shall terminate and automatically revert to Grantor.  Grantee shall immediately discontinue all sales and promotion of the EROX Products and shall no longer have any right to use the Grantor Technology Assets, except as provided in Section 8.4 hereof.  Grantee shall, however, continue to have the right to use the Erox Brand Assets for any purpose whatsoever, provided such purpose does not infringe the Grantor Technology Assets.

 

8.4              Termination Inventory Sales.  For a period of three (3) months after the early termination of this Agreement, Grantee may sell finished Units of the EROX Product, as defined in Schedule C, which exist as of the date of (“Termination Inventory”) termination in accordance with all of the terms of this Agreement.  Any Units in the Termination Inventory not sold and remaining after the selling period provided for in this Section shall be sold by Grantee with the explicit, written approval of Grantor, or disposed of or destroyed in accordance with Grantor’s instructions.

 

8.5              Survival.  Expiration or early termination of this Agreement shall not relieve either Party of its obligations incurred prior to the expiration or early termination.  The following provisions shall survive expiration or early termination of this Agreement or of any extensions thereof for a period of five (5) years or for such period of time as indicated in the surviving provisions Sections 2.1, IV, VI, VII, VIII, and IX.

 

(e)           IX.           Miscellaneous.

 

9.1           Notices.  All notices, requests, demands and other communications required to or permitted to be given under this Agreement shall be in writing and shall be conclusively deemed to have been delivered:  (a) when hand delivered to the other Party; (b) when received when sent by facsimile at the address and number set forth below (provided, however, any notice given by facsimile shall be deemed received on the next
business day if such notice is received after 5:00 p.m. recipient's time, or on a non-business day); (c) three (3) business days after the same have been deposited in a United States post office with first class or certified mail return receipt requested postage prepaid and addressed to the Parties as set forth below; or (d) the next business day after the same have been deposited with a nationally recognized overnight delivery service (i.e., Federal Express, DHL, or United Parcel Service) postage prepaid, addressed to the Parties as set forth below with next business-day delivery guaranteed.  For the purposes of this Agreement, the delivery addresses of the Parties are:

  

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If to Grantee:

CrowdGather, Inc

 20300 Ventura Blvd., Suite 330

Woodland Hills, CA 91364

Phone: 818-435-2472

Fax: 818-435-2473

Attn: Sanjay Sabnani

 

If to Grantor:

 

Human Pheromone Sciences, Inc.

84 West Santa Clara Street, Suite 740

San Jose, CA  95113

Phone: (408) 938-3030

Fax: (408) 938-3025

Attention: CEO

Each Party shall make an ordinary, good faith effort to ensure that it will accept or receive notices that are given in accordance with this Section, and to ensure that the receiving Party actually receives such notice.  A Party may change or supplement the addresses given above, or designate additional addresses by giving the other Party written notice of the new address in the manner set forth above.  Any correctly addressed notice that is refused, unclaimed, or undeliverable because of an act or omission of the Party to be notified shall be deemed effective as of the first date that said notice was refused, unclaimed, or deemed undeliverable by the postal authorities, messenger, or overnight delivery service.

 

9.2           Entire Agreement.  This Agreement, together with any exhibits and schedules attached hereto and incorporated herein by this reference and any other agreements entered into pursuant to this Agreement, constitute the entire agreement between the Parties pertaining to the subject matter contained herein, and supersede all prior or contemporaneous agreements, representations and understandings of the Parties.

 

9.3           Delays or Omissions.  No delay or omission to exercise any right, power, or remedy accruing to either Party upon any breach or default under this Agreement shall impair any such right, power, or remedy of such Party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent, or approval of any kind or character on the part of either Party of any breach or default under this Agreement, or any waiver on the part of

either Party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing or as provided in this Agreement.  All remedies, either under this Agreement or by law or otherwise afforded to either Party, shall be cumulative and not alternative.

 

9.4           Severability.  This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof.  Furthermore, in lieu of any such invalid or unenforceable term or provision, the Parties intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible to be valid and enforceable.

 

  

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9.5           Arbitration.  Subject to the provisions of Section 9.6, all disputes arising under this Agreement or the obligations of the Parties hereunder shall be submitted to arbitration in Los Angeles, California or San Jose, California before a panel of three arbitrators, in accordance with the then prevailing Rules for Commercial Arbitration of the American Arbitration Association.  The arbitrators in any such arbitration shall award costs to the prevailing Party, but shall not be required to, award reasonable attorneys' fees.  The decision of the arbitrators shall be final and binding on all Parties, except that the arbitrators shall have no
 power to vary the terms of this Agreement.  Judgment on the arbitrators' award may be entered in any court in the State of California or in any other court of competent jurisdiction.

 

9.6           Applicable Law.  THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN CALIFORNIA.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCES TO PRINCIPLES OF CONFLICTS OF LAW, REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE PARTIES HERETO, EACH PARTY HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY CLAIMS OR DISPUTES BETWEEN OR AMONG THE PARTIES HERETO PERTAINING TO THIS AGREEMENT OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT SHALL BE SUBMITTED
TO ARBITRATION IN ACCORDANCE WITH SUBSECTION 9.5 OR, IN ACCORDANCE WITH SUBSECTION 9.13, BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA  BY EXECUTION AND DELIVERY OF THIS AGREEMENT; EACH PARTY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH PANEL OR COURT, AS APPLICABLE.  EACH PARTY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE, OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH PANEL OR COURT, AS APPLICABLE.

 

9.7           Commercial Impracticability.  No Party shall be liable for any failure to perform its obligations in connection with any action described in this Agreement, only if such failure directly results from and is caused by any act of God, riot, war, terrorist attack, civil unrest, flood, earthquake, or other causes beyond such Party's reasonable control, excluding a Party's financial condition or negligence.

 

9.8           Successors and Assigns; No Third Party Beneficiaries.  Neither this Agreement nor any of the rights or obligations arising under this Agreement may be assigned or transferred by Grantee, in whole or in part, without the prior written consent of Grantor.  Notwithstanding the foregoing, this Agreement, including, without limitation, the rights and obligations arising under this Agreement, can be assigned upon written notice to any entity that acquired all or substantially all of the assets of the business of Grantee that relates to this Agreement.  This Agreement shall
be binding upon and inure to the benefit of the successors and permitted assigns of each of the Parties.

 

9.9           Construction; Headings.  The article, section and subsection headings in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.  The language of this Agreement shall be construed simply and according to its fair meaning, and shall not be construed for or against any Party hereto as a result of the source of its draftsmanship.

  

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9.10           Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one instrument.  Signatures transmitted electronically or by facsimile will be deemed original signatures.

 

9.13           Independent Contractor.  Each Party is an independent contractor and is not and shall not be deemed to be the legal representative or agent of the other Party for any purpose whatsoever, and neither Party is authorized by the other Party to transact business, incur obligations (express or implied), bill goods, or otherwise act in any manner, in the name or on behalf of the other Party, or to make any promise, warranty, or representation in the name or on behalf of the other Party except as permitted in this Agreement..

 

9.14           Entire Agreement; Amendment.  Neither this Agreement nor any term hereof may be amended, waived, discharged, or terminated other than by a written instrument signed by the Party against whom enforcement of any such amendment, waiver, discharge, or termination is sought.

 

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

  

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IN WITNESS WHEREOF, the Parties, each by their duly authorized representative, have executed this Agreement as of the date first above written.

 

	  	
CrowdGather, Inc

	  	  
	
Date:  May 16, 2011

	
By: /s/ Sanjay Sabnani

	  	
Title: Chief Executive Officer

	  	  
	  	
Human Pheromone Sciences, Inc.

	  	  
	
Date: May 16, 2011

	
By: /s/ William P. Horgan

	  	
Title: Chief Executive Officer

  

- 15 -Unassociated Document

 

CHINA 3C GROUP

2011 RESTRICTED STOCK PLAN

 

ARTICLE I

PURPOSE

 

The purpose of this China 3C Group 2011 Restricted Stock Plan (the “Plan”) is to benefit the shareholders of China 3C Group, a Nevada  corporation (the “Company”), by assisting the Company to attract, retain and provide incentives to key management employees and directors of, and non-employee consultants to, the Company and its Affiliates, and to align the interests of such employees, directors and non-employee consultants with those of the Company’s shareholders.

 

ARTICLE II

DEFINITIONS

 

The following definitions shall be applicable throughout the Plan unless the context otherwise requires:

 

“Affiliate” shall mean any person or entity which, at the time of reference, directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company.

 

“Board” shall mean the Board of Directors of the Company.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to any section and any regulation under such section.

 

“Committee” shall mean a committee comprised of not less than two (2) members of the Board who are selected by the Board as provided in Section 4.1.

 

“Common Stock” shall mean the Company’s common stock, par value $0.001 per share.

 

“Company” shall mean China 3C Group, a Nevada corporation, and any successor thereto.

 

“Consultant” shall mean any non-Employee advisor to the Company or an Affiliate who has contracted directly with the Company or an Affiliate to render bona fide perform consulting or advisorial services thereto.

 

“Director” shall mean a member of the Board or a member of the board of directors of an Affiliate, in either case, who is not an Employee.

 

“Effective Date” shall mean ______________, 2011.

 

  

  

  

 

“Employee” shall mean any person employed by the Company or an Affiliate.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” shall mean, as determined consistent with the applicable requirements of Sections 409A and 422 of the Code, as of any specified date, the closing sales price of the Common Stock for such date (or, in the event that the Common Stock is not traded on such date, on the immediately preceding trading date) on the Nasdaq Stock Market or a domestic or foreign national securities exchange (including London’s Alternative Investment Market) on which the Common Stock may be listed, as reported in The Wall Street Journal or The Financial Times.  If the Common Stock is not listed on the Nasdaq Stock Market or on a national securities exchange, but is quoted on the OTC Bulletin Board or by the National Quotation Bureau, the Fair Market Value of the Common Stock shall be the mean of the bid and asked prices per share of the Common Stock for such date.  If the Common Stock is not quoted or listed as set forth above, Fair Market Value shall be determined by the Board in good faith by any fair and reasonable means (which means, with respect to a particular Award grant, may be set forth with greater specificity in the applicable Award Agreement).  The Fair Market Value of property other than Common Stock shall be determined by the Board in good faith by any fair and reasonable means, and consistent with the applicable requirements of Sections 409A and 422 of the Code.

 

“Family Member” shall mean any child, stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the Holder’s household (other than a tenant or employee of the Holder), a trust in which such persons have more than fifty percent (50%) of the beneficial interest, a foundation in which such persons (or the Holder) control the management of assets, and any other entity in which such persons (or the Holder) own more than fifty percent (50%) of the voting interests.

 

“Holder” shall mean an Employee, Director or Consultant who has been granted a Restricted Stock Award or any such individual’s beneficiary, estate or representative, to the extent applicable.

 

“Plan” shall mean this China 3C Group 2011 Restricted Stock Plan, as amended from time to time, together with each of the Restricted Stock Award Agreements utilized hereunder.

 

“Restricted Stock Award” shall mean an award granted under the Plan of shares of Common Stock, the transferability of which by the Holder shall be subject to Transfer Restrictions.

 

“Restricted Stock Award Agreement” shall mean a written agreement between the Company and a Holder with respect to a Restricted Stock Award.

 

  

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“Restriction Period” shall mean the period of time for which shares of Common Stock subject to a Restricted Stock Award shall be subject to Transfer Restrictions, as set forth in the applicable Restricted Stock Award Agreement.

 

“Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, as such may be amended from time to time, and any successor rule, regulation or statute fulfilling the same or a substantially similar function.

 

“Total and Permanent Disability” shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, all as described in Section 22(e)(3) of the Code.

 

“Transfer Restrictions” shall mean restrictions on the transferability of shares of Common Stock awarded to an Employee, Director or Consultant under the Plan pursuant to a Restricted Stock Award Agreement.

 

ARTICLE III

EFFECTIVE DATE OF PLAN

 

The Plan shall be effective as of the Effective Date.

 

ARTICLE IV

ADMINISTRATION

 

Section 4.1                      Composition of Committee. The Plan shall be administered by the Committee, which shall be appointed by the Board.  The Committee shall consist solely of two (2) or more Directors who are each (i) “outside directors” within the meaning of Section 162(m) of the Code (“Outside Directors”), (ii) “non-employee directors” within the meaning of Rule 16b-3 and (iii) “independent” for purposes of any applicable listing requirements (“Non-Employee Directors”); provided, however, that the Board or the Committee may delegate to a committee of one or more members of the Board who are not (x) Outside Directors, the authority to grant Restricted Stock Awards to eligible persons who are not (A) then “covered employees” within the meaning of Section 162(m) of the Code and are not expected to be “covered employees” at the time of recognition of income resulting from such Restricted Stock Award, or (B) persons with respect to whom the Company wishes to comply with the requirements of Section 162(m) of the Code, and/or (y) Non-Employee Directors, the authority to grant Restricted Stock Awards to eligible persons who are not then subject to the requirements of Section 16 of the Exchange Act. If a member of the Committee shall be eligible to receive a Restricted Stock Award under the Plan, such Committee member shall have no authority hereunder with respect to his or her own Restricted Stock Award.

 

Section 4.2                      Powers. Subject to the provisions of the Plan, the Committee shall have the sole authority, in its discretion, to determine which individuals shall receive a Restricted Stock Award, the time or times when such Restricted Stock Award shall be made (the date of award of a Restricted Stock Award shall be the date on which the Restricted Stock Award is awarded by the Committee) and the number of shares of Common Stock which may be issued under such Restricted Stock Award, as applicable. In making such determinations the Committee may take into account the nature of the services rendered by the respective individuals, their present and potential contribution to the Company’s (or the Affiliate’s) success and such other factors as the Committee in its discretion shall deem relevant.

 

  

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Section 4.3                      Additional Powers. The Committee shall have such additional powers as are delegated to it under the other provisions of the Plan. Subject to the express provisions of the Plan, the Committee is authorized to construe the Plan and the respective Restricted Stock Award Agreements executed hereunder, to prescribe such rules and regulations relating to the Plan as it may deem advisable to carry out the intent of the Plan, and to determine the terms, restrictions and provisions of each Restricted Stock Award, and to make all other determinations necessary or advisable for administering the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in any Restricted Stock Award Agreement in the manner and to the extent it shall deem expedient to carry it into effect. The determinations of the Committee on the matters referred to in this Article IV shall be conclusive.

 

Section 4.4                      Committee Action. In the absence of specific rules to the contrary, action by the Committee shall require the consent of a majority of the members of the Committee, expressed either orally at a meeting of the Committee or in writing in the absence of a meeting.

 

ARTICLE V

STOCK SUBJECT TO PLAN AND LIMITATIONS THEREON

 

Section 5.1                      Stock Grant and Award Limits. The Committee may from time to time grant Restricted Stock Awards to one or more Employees, Directors and/or Consultants determined by it to be eligible for participation in the Plan in accordance with the provisions of Article VI. Subject to Article XIV, the aggregate number of shares of Common Stock that may be issued under the Plan shall not exceed Three Million (3,000,000) shares. Shares shall be deemed to have been issued under the Plan solely to the extent actually issued and delivered pursuant to a Restricted Stock Award. To the extent that a Restricted Stock Award lapses or the rights of its Holder terminate, any shares of Common Stock subject to such Restricted Stock Award shall again be available for the grant of a new Restricted Stock Award.

 

Section 5.2                      Stock Offered. The stock to be offered pursuant to the grant of a Restricted Stock Award may be authorized but unissued Common Stock, Common Stock purchased on the open market or Common Stock previously issued and outstanding and reacquired by the Company.

 

  

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ARTICLE VI

ELIGIBILITY FOR RESTRICTED STOCK AWARDS; TERMINATION OF

EMPLOYMENT, DIRECTOR STATUS OR CONSULTANT STATUS

 

Section 6.1                      Eligibility. Restricted Stock Awards made under the Plan may be granted solely to persons who, at the time of grant, are Employees, Directors or Consultants. A Restricted Stock Award may be granted on more than one occasion to the same Employee, Director or Consultant.

 

Section 6.2                      Termination of Employment or Director Status. Except to the extent inconsistent with the terms of the applicable Restricted Stock Award Agreement and/or the provisions of Section 6.4, if a Holder’s employment with, or status as a Director of, the Company or an Affiliate, as applicable, terminates for any reason prior to the actual or deemed satisfaction and/or lapse of the Transfer Restrictions applicable to such Holder’s Restricted Stock Award, such Restricted Stock shall immediately be canceled, and the Holder (and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Stock. The immediately preceding sentence to the contrary notwithstanding, the Committee, in its sole discretion, may determine, prior to or within thirty (30) days after the date of such termination of employment or Director status, that all or a portion of any such Holder’s Restricted Stock shall not be so canceled and forfeited.

 

Section 6.3                      Termination of Consultant Status. Except to the extent inconsistent with the terms of the applicable Restricted Stock Award Agreement and/or the provisions of Section 6.4, if the status of a Holder as a Consultant terminates for any reason prior to the actual or deemed satisfaction and/or lapse of the Transfer Restrictions applicable to a Restricted Stock Award, such Restricted Stock shall immediately be canceled, and the Holder (and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Stock. The immediately preceding sentence to the contrary notwithstanding, the Committee, in its sole discretion, may determine, prior to or within thirty (30) days after the date of such termination of such a Holder’s status as a Consultant, that all or a portion of any such Holder’s Restricted Stock shall not be so canceled and forfeited.

 

Section 6.4                      Special Termination Rule. Except to the extent inconsistent with the terms of the applicable Restricted Stock Award Agreement, and notwithstanding anything to the contrary contained in this Article VI, if a Holder’s employment with, or status as a Director of, the Company or an Affiliate shall terminate, if, within ninety (90) days of such termination, such Holder shall become a Consultant, such Holder’s rights with respect to any Restricted Stock Award or portion thereof granted thereto prior to the date of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been a Consultant for the entire period during which such Restricted Stock Award or portion thereof had been outstanding. Should the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her employment or Director status had terminated until such time as his or her Consultant status shall terminate, in which case his or her Restricted Stock Award, as it may have been reduced in connection with the Holder’s becoming a Consultant, shall be treated pursuant to the provisions of Section 6.3. Should a Holder’s status as a Consultant terminate, if, within ninety (90) days of such termination, such Holder shall become an Employee or a Director, such Holder’s rights with respect to any Restricted Stock Award or portion thereof granted thereto prior to the date of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been an Employee or a Director, as applicable, for the entire period during which such Restricted Stock Award or portion thereof had been outstanding, and, should the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her Consultant status had terminated until such time as his or her employment with the Company or an Affiliate, or his or her Director status, as applicable, shall terminate, in which case his or her Restricted Stock Award shall be treated pursuant to the provisions of Section 6.2

 

  

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ARTICLE VII

AWARDS

 

Section 7.1                      Restriction Period to be Established by Committee. At the time; a Restricted Stock Award is made, the Committee shall establish the Restriction Period applicable to the Transfer Restrictions imposed in connection with such Restricted Stock Award. Each Restricted Stock Award may have different Transfer Restrictions and/or a different Restriction Period, in the discretion of the Committee. The Transfer Restrictions and/or Restriction Period applicable to a particular Restricted Stock Award shall not be changed except as permitted by Section 7.2.

 

Section 7.2                      Other Terms and Conditions. Common Stock awarded pursuant to a Restricted Stock Award shall be represented by a stock certificate registered in the name of the Holder of such Restricted Stock Award. If provided for under the Restricted Stock Award Agreement, the Holder shall have the right to vote Common Stock subject thereto and to enjoy all other shareholder rights, except that (i) the Holder shall not be entitled to delivery of the stock certificate until the Restriction Period shall have expired, (ii) the Company shall retain custody of the stock certificate during the Restriction Period, (iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the Common Stock during the Restriction Period, (iv) the Holder shall be entitled to receive dividends on the Common Stock during the Restriction Period and (v) a breach of the terms and conditions established by the Committee pursuant to the Restricted Stock Award Agreement shall cause a forfeiture of the Restricted Stock Award. At the time of such Restricted Stock Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Restricted Stock Awards, including, but not limited to, rules pertaining to the effect of termination of employment, Director status or Consultant status prior to expiration of the Restriction Period. Such additional terms, conditions or restrictions shall, to the extent inconsistent with the provisions of Sections 6.2, 6.3 and 6.4, as applicable, be set forth in a Restricted Stock Award Agreement made in conjunction with the Restricted Stock Award. Such Restricted Stock Award Agreement may also include provisions relating to (i) subject to the provisions hereof, accelerated vesting of Restricted Stock Awards, including but not limited to accelerated vesting upon the occurrence of a Change of Control, (ii) tax matters (including provisions covering any applicable Employee wage withholding requirements and requiring additional “gross-up” payments to Holders to meet any excise taxes or other additional income tax liability imposed as a result of a payment made in connection with a Change of Control resulting from the operation of the Plan or of such Restricted Stock Award Agreement) and (iii) any other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine. The terms and conditions of the respective Restricted Stock Agreements need not be identical.  All shares of Common Stock delivered to a Holder pursuant to a Restricted Stock Award shall be delivered and reported by the Company or the Affiliate, as applicable, to the Holder by no later than the fifteenth (15th) day of the third (3rd) calendar month next following the end of the calendar year in which the Holder’s entitlement to such shares becomes vested.

 

  

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Section 7.3                      Payment for Restricted Stock. The Committee shall determine the amount and form of any payment for Common Stock received pursuant to a Restricted Stock Award, provided that in the absence of such a determination, a Holder shall not be required to make any payment for Common Stock received pursuant to a Restricted Stock Award, except to the extent otherwise required by law.

 

Section 7.4                      Restricted Stock Award Agreements. At the time any Restricted Stock Award is made under this Article VII, the Company and the Holder shall enter into a Restricted Stock Award Agreement setting forth each of the matters contemplated hereby and such other matters as the Committee may determine to be appropriate.

 

ARTICLE VIII

RECAPITALIZATION OR REORGANIZATION

 

Section 8.1                      Adjustments to Common Stock. The shares with respect to which Restricted Stock Awards may be granted under the Plan are shares of Common Stock as presently constituted; provided, however, that if, and whenever, prior to the expiration or distribution to the Holder of shares of Common Stock underlying a Restricted Stock Award theretofore granted, the Company shall effect a subdivision or consolidation of shares of Common Stock or the payment of a stock dividend on Common Stock without receipt of consideration by the Company, the number of shares of Common Stock with respect to which such Restricted Stock Award may thereafter be exercised or satisfied, as applicable, (i) in the event of an increase in the number of outstanding shares, shall be proportionately increased, and (ii) in the event of a reduction in the number of outstanding shares, shall be proportionately reduced.

 

Section 8.2                      Recapitalization. If the Company recapitalizes or otherwise changes its capital structure, thereafter upon any exercise or satisfaction, as applicable, of a previously granted Restricted Stock Award, the Holder shall be entitled to receive (or entitled to purchase, if applicable) under such Restricted Stock Award, in lieu of the number of shares of Common Stock then covered by such Restricted Stock Award, the number and class of shares of stock and securities to which the Holder would have been entitled pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the Holder had been the holder of record of the number of shares of Common Stock then covered by such Restricted Stock Award.

 

  

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Section 8.3                      Other Events. In the event of changes to the outstanding Common Stock by reason of extraordinary cash dividend, reorganization, mergers, consolidations, combinations, split-ups, spin-offs, exchanges or other relevant changes in capitalization occurring after the date of the grant of any Restricted Stock Award and not otherwise provided for under this Article VIII, any outstanding Restricted Stock Awards and any Restricted Stock Award Agreements evidencing such Restricted Stock Awards shall be adjusted by the Committee in its discretion as to the number and price of shares of Common Stock or other consideration subject to such Restricted Stock Awards. In the event of any adjustment pursuant to Sections 8.1, 8.2 or 8.3, the aggregate number of shares available under the Plan may be appropriately adjusted by the Board, the determination of which shall be conclusive.

 

Section 8.4                      Powers Not Affected. The existence of the Plan and the Restricted Stock Awards granted hereunder shall not affect in any way the right or power of the Board or of the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change of the Company’s capital structure or business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Common Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.

 

Section 8.5                      No Adjustment for Certain Restricted Stock Awards. Except as hereinabove expressly provided, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect previously granted Restricted Stock Awards, and no adjustment by reason thereof shall be made with respect to the number of shares of Common Stock subject to Restricted Stock Awards theretofore granted or the purchase price per share, if applicable.

 

ARTICLE IX

AMENDMENT AND TERMINATION OF PLAN

 

The Board in its discretion may terminate the Plan at any time with respect to any shares for which Restricted Stock Awards have not theretofore been granted. The Board shall have the right to alter or amend the Plan or any part hereof from time to time; provided, however, that no change in any Restricted Stock Award theretofore granted may be made which would materially and adversely impair the rights of a Holder without the consent of the Holder (unless such change is required in order to cause the benefits under the Plan to qualify as “performance-based” compensation within the meaning of Section 162(m) of the Code).

 

  

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ARTICLE X

MISCELLANEOUS

 

Section 10.1                      No Right to Restricted Stock Award. Neither the adoption of the Plan by the Company nor any action of the Board or the Committee shall be deemed to give an Employee, Director or Consultant any right to a Restricted Stock Award except as may be evidenced by a Restricted Stock Award Agreement duly executed on behalf of the Company, and then solely to the extent and on the terms and conditions expressly set forth therein.

 

Section 10.2                      No Rights Conferred. Nothing contained in the Plan shall (i) confer upon any Employee any right with respect to continuation of employment with the Company or any Affiliate, (ii) interfere in any way with the right of the Company or any Affiliate to terminate the employment of an Employee at any time, (iii) confer upon any Director any right with respect to continuation of such Director’s membership on the Board, (iv) interfere in any way with the right of the Company or an Affiliate to terminate a Director’s membership on the Board at any time, (v) confer upon any Consultant any right with respect to continuation of his or her consulting engagement with the Company or any Affiliate, or (vi) interfere in any way with the right of the Company or an Affiliate to terminate a Consultant’s consulting engagement with the Company or an Affiliate at any time.

 

Section 10.3                      Other Laws., Withholding. The Company shall not be obligated to issue any Common Stock pursuant to any Restricted Stock Award granted under the Plan in violation of any laws, rules or regulations.  No fractional shares of Common Stock shall be delivered, nor shall any cash in lieu of fractional shares be paid. The Company shall have the right to deduct in cash (whether under this Plan or otherwise) in connection with all Restricted Stock Awards any taxes required by law to be withheld and to require any payments required to enable it to satisfy its withholding obligations. No shares shall be issued under any Restricted Stock Award unless and until arrangements satisfactory to the Company shall have been made to satisfy any tax withholding obligations applicable with respect to such Restricted Stock Award. Subject to such terms and conditions as the Committee may impose, the Company shall have the right to retain, or the Committee may, subject to such terms and conditions as it may establish from time to time, permit Holders to elect to tender, Common Stock (including Common Stock issuable in respect of a Restricted Stock Award) to satisfy, in whole or in part, the amount required to be withheld.

 

Section 10.4                      No Restriction on Corporate Action. Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate from taking any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any Restricted Stock Award made under the Plan. No Employee, Director, Consultant, beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any such action.

 

  

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Section 10.5                      Restrictions on Transfer. No Restricted Stock Award under the Plan or any Restricted Stock Award Agreement and no rights or interests herein or therein, shall or may be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Holder except (i) by will or by the laws of descent and distribution, or (ii) by gift to any Family Member of the Holder. Notwithstanding any such transfer, the Holder shall continue to be subject to the withholding requirements provided for under Section 10.3 hereof.

 

Section 10.6                      Beneficiary Designations. Each Holder may, from time to time, name a beneficiary or beneficiaries (who may be contingent or successive beneficiaries) for purposes of receiving any amount which is payable in connection with a Restricted Stock Award under the Plan upon or subsequent to the Holder’s death. Each such beneficiary designation shall serve to revoke all prior beneficiary designations, be in a form prescribed by the Company and be effective solely when filed by the Holder in writing with the Company during the Holder’s lifetime. In the absence of any such written beneficiary designation, for purposes of the Plan, a Holder’s beneficiary shall be the Holder’s estate.

 

Section 10.7                      Rule 16b-3. It is intended that the Plan and any Restricted Stock Award made to a person subject to Section 16 of the Exchange Act shall meet all of the requirements of Rule 16b-3. If any provision of the Plan or of any such Restricted Stock Award would disqualify the Plan or such Restricted Stock Award under, or would otherwise not comply with the requirements of, Rule 16b-3, such provision or Restricted Stock Award shall be construed or deemed to have been amended as necessary to conform to the requirements of Rule 16b-3.

 

Section 10.8                      Section 162(m). It is intended that the Plan shall comply fully with and meet all the requirements of Section 162(m) of the Code so that Restricted Stock Awards hereunder which are made to Holders who are “covered employees” (as defined in Section 162(m) of the Code) shall constitute “performance-based” compensation within the meaning of Section 162(m) of the Code. The performance criteria to be utilized under the Plan for such purposes shall consist of objective tests based on one or more of the following: earnings or earnings per share, cash flow or cash flow per share, revenue growth, financial return ratios (such as return on equity and/or return on assets), share price performance, stockholder return and/or value, operating income, earnings before interest, taxes, depreciation and amortization, net income, pre- or post-tax income, economic value added (or an equivalent metric), profit returns and margins, credit quality, sales growth, market share and/or working capital.  Performance criteria may be established on a Company-wide basis or with respect to one or more Company business units or divisions or subsidiaries; and either in absolute terms, relative to the performance of one or more similarly situated companies, or relative to the performance of an index covering a peer group of companies.  When establishing performance objectives for the applicable performance period, the Committee may exclude any or all “extraordinary items” as determined under U.S. generally acceptable accounting principles including, without limitation, the charges or costs associated with restructurings of the Company, discontinued operations, other unusual or non-recurring items, and the cumulative effects of accounting changes and as identified in the Company’s financial statements, notes to the Company’s financial statements or management’s discussion and analysis of financial condition and results of operations contained in the Company’s most recent annual report filed with the U.S. Securities and Exchange Commission pursuant to the Exchange Act.  If any provision of the Plan would disqualify the Plan or would not otherwise permit the Plan to comply with Section 162(m) as so intended, such provision shall be construed or deemed amended to conform to the requirements or provisions of Section 162(m).  The Committee may postpone the issuance or delivery of Common Stock under any Restricted Stock or any action permitted under the Plan to prevent the Company or any subsidiary from being denied a federal income tax deduction with respect to any Restricted Stock Award, provided that such deferral satisfies the requirements of Section 409A of the Code.

 

  

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Section 10.9                      Indemnification.  Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred thereby in connection with or resulting from any claim, action, suit, or proceeding to which such person may be made a party or may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid thereby in settlement thereof, with the Company’s approval, or paid thereby in satisfaction of any judgment in any such action, suit, or proceeding against such person; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf.  The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-laws, by contract, as a matter of law, or otherwise.

 

Section 10.10                   Other Plans. No Restricted Stock Award payment or amount received hereunder shall be taken into account in computing an Employee’s salary or compensation for the purposes of determining any benefits under any pension retirement life insurance or other benefit plan of the Company or any Affiliate unless such other plan specifically provides for the inclusion of such Restricted Stock Award payment or amount received.

 

Section 10.11                   Limits of Liability. Any liability of the Company with respect to a Restricted Stock Award shall be based solely upon the contractual obligations created under the Plan and the Restricted Stock Award Agreement. Neither the Company nor any member of the Committee shall have any liability to any party for any action taken or not taken in good faith in connection with or under the Plan.

 

Section  10.12                   Governing Law. Except as otherwise provided herein the Plan shall be construed in accordance with the laws of the State of Nevada.

 

Section  10.13                   Severability of Provisions. If any provision of the Plan is held invalid or unenforceable such invalidity or unenforceability shall not affect any other provision of the Plan and the Plan shall be construed and enforced as if such invalid or unenforceable provision had not been included in the Plan.

 

Section  10.14                    Headings. Headings used throughout the Plan are for convenience only and shall not be given legal significance.

 

  

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