Document:

vicl-ex102_235.htm

 

Exhibit 10.2

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “Agreement”) is made as of August 1st, 2016 (the “Effective Date”), by and between Vical Incorporated, a Delaware corporation  (the “Company”), having its principal place of business at 10390 Pacific Center Court, San Diego, California 92121, USA, and AnGes MG Inc., a Japanese corporation  (the “Purchaser”), having its principal place of business at 7-7-15 Saito-Asagi, Ibaraki, Osaka, 567-0085, Japan.  The Company and the Purchaser are individually referred to herein as a “party” and collectively as the “parties.”

Whereas, the Company wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Company, shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), on the terms and subject to the conditions set forth in this Agreement.

Agreement

In consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Purchaser hereby agree as follows:

	
1.
	
Definitions

The following terms shall have the respective meanings set forth below:

1.1 “Acquisition Transaction” shall have the meaning set forth in Section 10.1(g).

1.2 “Affiliate” shall mean any entity controlled by, controlling, or under common control with a party hereto and shall include any entity more than 50% of the voting stock or participating profit interest of which is owned or controlled, directly or indirectly, by a party, and any entity which owns or controls, directly or indirectly, more than 50% of the voting stock of a party.

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

1.4 “Bankruptcy Event” shall mean the Company making an assignment for the benefit of creditors or commencing any proceeding under any bankruptcy, reorganization, insolvency, dissolution or liquidation law of any jurisdiction or any such petition being filed or any such proceeding being commenced against the Company and either (a) the Company by any act indicating its approval thereof, consents thereto or acquiesces therein or (b) such petition, application or proceeding is not dismissed within 90 days.

1.5 “Board” shall have the meaning set forth in Section 8.1(c).

1.6 “Business Day” shall mean any day (except Saturdays and Sundays and public holidays) when a majority of deposit-taking banks in each of the City of San Diego, United States of America and Tokyo, Japan are open to take over-the-counter deposits.

1.7 “Closing” shall mean the closing of the sale and purchase of the Shares.

1.8 “Closing Date” shall mean the date of the closing of the purchase and sale of the Shares, which shall take place on the Business Day following the satisfaction or waiver of all of the conditions to the obligations of 

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the parties set forth in Sections 6 and 7 (other than those conditions that by their nature will be satisfied on the Closing Date), or such other date as mutually agreed by the parties; provided, that, the Closing Date is not later than the Outside Date.

1.9 “Company Indemnified Party” shall have the meaning set forth in Section 11.2(b).

1.10 “Confidential Information” shall have the meaning set forth in Section 10.5(b).

1.11 "Company IP" means all material Intellectual Property used or held for use in or reasonably necessary for the conduct of, the business of the Company as currently conducted.

1.12 “Company Products” means each of the biopharmaceutical products developed, manufactured, sold or distributed by the Company.

1.13 “Company Securities” shall have the meaning set forth in Section 10.1(a)

1.14 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

1.15 “FDA” means the United States Food and Drug Administration.

1.16 “Federal and State Health Care laws” means all:  (a) laws and regulations administered by the FDA, including the Food Drug and Cosmetic Act, and any other federal laws and regulations governing the manufacture, distribution, and sale of medical devices, whether or not administered by the FDA; (b) federal fraud and abuse laws and regulations, including the federal patient referral law, 42 U.S.C.  § 1395nn, commonly known as “Stark”, the federal anti-kickback law, 42 U.S.C.  § 1320a-7b, the federal civil monetary penalty statute, 42 U.S.C.  §1320a-7a, federal laws and regulations governing exclusion, including 42 U.S.C.  §1320a-7, federal laws and regulations regarding the submission of false claims, false billing, false coding, and similar state laws and regulations; (c) federal and state laws and regulations applicable to reimbursement and reassignment; (d) HIPAA and other federal and state privacy laws and regulations; (e) federal laws and regulations affecting the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act; (f) laws and regulations affecting the Tricare, CHAMPUS, Veterans, and black lung disease programs and any other health care program financed with United States government funds; (g) all federal laws and regulations affecting the medical assistance program established by Titles V, XIX, XX, and XXI of the Social Security Act, and all state statutes and plans and regulations for medical assistance enacted in connection with the federal statutes and regulations; (h) state laws and regulations regarding fee splitting, referrals by physicians and other health care professionals, and kickbacks; (i) any other federal or state law or regulation governing medical devices or health care; and (j) with regard to (a)(i) above any law succeeding thereto and all amendments and supplements to the laws and regulations set forth in (a)(i), in each case to the extent applicable to the Company.

1.17 “Financial Statements” shall mean the financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and filed with SEC, and in any of the Company’s Quarterly Reports on Form 10-Q filed with the SEC subsequent to such Form 10-K and prior to the Effective Date.

1.18 “Food Drug and Cosmetic Act” means 21 U.S.C 301 et.  seq., and all regulations promulgated thereto.

1.19 “GAAP” means generally accepted accounting principles in the United States as currently in effect.

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1.20 “Government Health Care Programs” means the Medicare, Tricare, CHAMPUS, Veterans, and black lung disease programs and any other health care plan or program that provides health benefits, whether directly, through insurance or otherwise, which is funded directly, in whole or in part, by the United States government, other than the federal employee health benefits program; and any program receiving funds under Titles V, XIX (including Medicaid), and XX of the Social Security Act, or from an allotment to a state under such title, or a state child health plan approved under Title XXI of the Social Security Act, in each case to the extent applicable to the Company.

1.21 “HIPAA” means the Health Insurance Portability and Accountability Act of 1996, and all regulations and formal guidance promulgated thereunder.

1.22 “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

1.23 “Indemnified Party” shall have the meaning set forth in Section 8.4(c).

1.24 “Indemnifying Party” shall have the meaning set forth in Section 8.4(c).

1.25 “Intellectual Property” shall mean all intellectual property and other similar proprietary rights in any jurisdiction worldwide, whether registered or unregistered, including such rights in and to: (a) patents (including all reissues, divisions, provisionals, continuations and continuations-in-part, re-examinations, renewals and extensions thereof), patent applications, patent disclosures or other patent rights ("Patents"); (b) copyrights, design, design registration, and all registrations, applications for registration, and renewals for any of the foregoing, and any "moral" rights ("Copyrights"); (c) trademarks, service marks, trade names, business names, logos, trade dress, certification marks and other indicia of commercial source or origin together with all goodwill associated with the foregoing, and all registrations, applications and renewals for any of the foregoing ("Trademarks"); (d) trade secrets and business, technical and know-how information, databases, data collections and other confidential and proprietary information and all rights therein, including but not limited to formulations, systems, practices or procedures ("Trade Secrets"); (e) software, including data files, source code, object code, application programming interfaces, architecture, files, records, schematics, computerized databases and other software-related specifications and documentation ("Software"); and (f) Internet domain name registrations.

1.26 “Law” shall mean any law, statute, regulation, directive, treaty, code, ordinance, decree, judgment, rule, permits, and the organizational documents and bylaws of the Company.

1.27 “Lien” shall mean any security interest, pledge, hypothecation, mortgage, lien (including, without limitation, environmental and tax liens), violation, charge, lease, license, encumbrance, claim, servient easement, adverse claim, reversion, reverter, preferential arrangement, restrictive covenant, condition or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

1.28 “Losses” shall mean all liabilities, including, without limitation, all fines, fees, losses, costs, claims, judgments, awards, obligations, liabilities, charges, taxes, interest, damages, penalties and expenses (including, without limitation, reasonable attorneys’ fees and expenses and costs of investigation and litigation).

1.29 “Material Agreement” shall have the meaning set forth in Section 4.8.

1.30 “Material Adverse Effect” shall any circumstances, developments, violations, changes, state of facts or matters that individually or in the aggregate have (i) a material adverse effect on the business, results of operations, employee relationships, customer or supplier relationships, financial condition, properties, assets or liabilities of the Company; provided, however, that for purposes of this clause (i) “Material Adverse Effect” 

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shall not include any changes, effects, events or circumstances to the extent arising out of or resulting from (a) general economic, banking, currency, capital market or political conditions, (b) general market conditions (including in each of clauses (a) and (b) above, war, acts of war, declared or undeclared, outbreaks or escalations of hostilities, or acts or threats of terrorism), or (c) any announcement or public disclosure of the execution of this Agreement or the transactions contemplated hereby, except, in the case of clauses (a) and (b) above, to the extent such conditions have a materially disproportionate adverse impact on the Company relative to other industry participants, and (ii) a material adverse effect on the ability of the Company to timely consummate the transactions contemplated by this Agreement.

1.31 “Outside Date” shall have the meaning set forth in Section 12.1(d).

1.32 “party” or “parties” shall have the meaning set forth in the preamble.  

1.33 “Person” shall mean any natural person, corporation, limited liability company, general or limited partnership, limited liability partnership, joint venture, joint stock company, trust, unincorporated organization, association, sole proprietorship, governmental body, or agency or political subdivision of any government.

1.34 “Purchase Price” shall mean the purchase price for the Shares calculated by multiplying the total number of Shares by the Share Price.

1.35 “Registrable Shares” shall mean the Shares; provided, however, that Shares shall only be treated as Registrable Shares if and only for so long as they (a) have not been disposed of pursuant to a registration statement declared effective by the SEC, and (b) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions, resale volume limitations and restrictive legends with respect thereto are removed upon the consummation of such sale and (c) are held by the Purchaser, an Affiliate of the Purchaser or any other Person to whom the rights under Article 8 have been transferred in accordance with Section 8.9.

1.36 “Registration Expenses” shall mean all expenses incurred by the Company in complying with Section 8 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, reasonable out of pocket expenses of the Company related to the “road show” for any underwritten offering (including all travel, meals and lodging), fees and disbursements of counsel to the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration and the fees and disbursements of counsel to the Purchaser (up to a maximum of $25,000 for such counsel fees and disbursements), but excluding all underwriting discounts and selling commissions in an applicable sale of Registrable Shares.

1.37 “Registration Statement” shall mean a registration statement filed by the Company with the SEC to register Registrable Shares on Form S-3 under the Securities Act or on such other form which is appropriate to register such Registrable Shares for resale from time to time by the Purchaser.

1.38 “Release” shall mean any release, spill, emission, pouring, pumping, injection, deposit, disposal, discharge, dispersal, leaking or migration into the indoor or outdoor environment or into or out of any assets or properties owned or leased by the Company, as the case may be, including the movement of contaminants through or in the air, soil, surface water, ground water or property.

1.39 “Representative” shall have the meaning set forth in Section 10.5(a).

1.40 “SEC” shall mean the United States Securities and Exchange Commission.

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1.41 “SEC Filings” shall mean all reports, schedules, forms, statements and other documents filed or required to be filed by the Company with the SEC pursuant to the requirements of the Securities Act or the Exchange Act, including material filed pursuant to Section 13(a) or 15(c) of the Exchange Act, in each case, together with all exhibits, supplements, amendments and schedules thereto, and all documents incorporated by reference therein.

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

1.43 “Shares” shall mean 1,841,420 shares of Common Stock being purchased under this Agreement.

1.44 “Share Price” shall mean $4.2448 per Share.

1.45 “SPA Purchaser Indemnified Parties” shall have the meaning set forth in Section 11.2(a).

1.46 “Suspension Period” shall have the meaning set forth in Section 8.2(b).

1.47 “Tax Return” shall have the meaning set forth in Section 4.12(a).

1.48 “Transfer Restriction Expiration Date” shall have the meaning set forth in Article 9.

	
2.
	
Agreement to Sell and Purchase.

2.1 Authorization of Shares.  The Company has authorized the sale and issuance to the Purchaser of the Shares under the terms and conditions of this Agreement.

2.2 Sale and Purchase.  Subject to the terms and conditions hereof, at the Closing, the Company shall issue and sell to the Purchaser free and clear of all Liens (other than those imposed by this Agreement or by applicable laws or regulations), and the Purchaser shall purchase from the Company, the Shares at a price per share equal to the Share Price.

	
3.
	
Closing, Delivery And Payment.

3.1 Closing.  The Closing shall take place at the offices of Cooley llp, 4401 Eastgate Mall, San Diego, CA, 92121 at 10 AM (local time) on the Closing Date or at such other place, time and/or date as the Company and the Purchaser may agree in writing (including by electronic transmission).  The Company and the Purchaser will use their respective reasonable efforts to cause the Closing Date to occur on August 2nd, 2016 and, if the Closing Date does not occur on such date, then as soon as practicable thereafter prior to the Outside Date; provided, that, no party shall be required as a result of the foregoing to waive any conditions to such party’s obligations to consummate the Closing.

3.2 Payment and Delivery.  

(a) At the Closing, subject to the terms and conditions hereof, the Purchaser shall pay the Purchase Price by wire transfer of immediately available funds in accordance with wire instructions provided by the Company to the Purchaser at least five Business Days prior to the Closing, and the Company shall deliver to the Purchaser (i) a certificate or certificates registered in the name of the Purchaser, and/or in such nominee name(s) as designated in writing by the Purchaser (or, at the election of the Purchaser, appropriate evidence of a book-entry transfer representing the Shares registered in the name of the Purchaser, and/or in such nominee name(s) as designated in writing by the Purchaser), and (ii) the officer’s certificate contemplated in Section 7.5.  

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(b) The Company acknowledges that the delivery to it of a federal wire reference number indicating that a wire transfer has been initiated for the Purchase Price in immediately available funds to the bank account notified to the Purchaser by the Company pursuant to Section 3.2(a) shall constitute payment by the Purchaser to the Company of the Purchase Price; provided, however, that this Section 3.2(b) shall be null and void if the Purchase Price has not been delivered to such bank account on the Closing Date.

	
4.
	
Representations, Warranties and Covenants of the Company.

The Company hereby represents and warrants to the Purchaser as of the Effective Date and the Closing Date as follows, in each case except as otherwise disclosed in the SEC Filings only to the extent that the facts giving rise to the exception are readily apparent from a reading of the SEC Filings:

4.1 Organization, Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business.  The Company is duly qualified to transact business as a corporation and is in good standing in each jurisdiction in which the failure so to qualify would have a Material Adverse Effect.  The Company does not have any subsidiaries.

4.2 Authorization; Due Execution.  The Board has duly authorized the entry by the Company into this Agreement and the transactions contemplated in this Agreement.  No other corporate action on the part of the Company is necessary to enter into this Agreement and to consummate the transactions contemplated in this Agreement.  This Agreement has been duly authorized, executed and delivered by the Company and, upon due execution and delivery by the Purchaser of this Agreement, this Agreement will be a valid and binding obligation of the Company, enforceable in accordance with its terms, except (a) as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by equitable principles or (b) to the extent that the enforceability of the indemnification provisions set forth in Sections 8.4 and 11 hereof may be limited by applicable laws.

4.3 Capitalization; Valid Issuance of Stock.

(a) The authorized capital stock of the Company consists of (a) 5,000,000 shares of preferred stock, par value $.01 per share, and (b) 160,000,000 shares of Common Stock.  As of the close of business on July 25, 2016, no shares of the Company’s preferred stock were issued and outstanding or held in treasury, and 9,207,105 shares of Common Stock were issued and outstanding.  As of the close of business on July 25, 2016, there were outstanding options to purchase an aggregate of 1,235,620 shares of Common Stock and outstanding restricted stock units covering an aggregate of 101,241 shares of Common Stock.  As of the close of business on July 28, 2016, the Company had reserved an aggregate of 655,113 shares of Common Stock for issuance pursuant to the Company’s employee benefit plans (including shares issued in respect of awards and shares subject to outstanding awards).  All issued shares of Common Stock have been duly authorized and are validly issued, fully paid and are non-assessable and are not subject to and were not issued in violation of any preemptive rights.  Except as set forth above, as of the close of business on July 28, 2016, the Company did not have outstanding any securities providing the holder the right to acquire Common Stock, and did not have any commitment to authorize, issue or sell any Common Stock.  

(b) The Shares, when issued, sold and delivered in accordance with the terms of Sections 2 and 3 hereof for the consideration and on the terms and conditions set forth herein, will be duly and validly authorized and issued, fully paid and nonassessable and, based in part upon the representations of the Purchaser in this Agreement, will be issued in compliance with all applicable federal and state 

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securities laws.  At the Closing, the Purchaser will acquire good and marketable title to the Shares, free and clear of all Liens (other than those imposed by this Agreement or by applicable laws or regulations).  

4.4 No Defaults.  

(a) There exists no default under the provisions of any instrument or agreement evidencing, governing or otherwise relating to any material indebtedness of the Company, or with respect to any other agreement, a default under which could have a Material Adverse Effect upon the Company’s ability to perform its obligations under this Agreement.

(b) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby (with or without the passage of time or the giving of notice, or both) will (i) with or without the giving of notice or passage of time, or both, violate, be in conflict with or constitute a default (or give rise to any right of termination, amendment, cancellation or acceleration) under any of the terms, conditions or provisions of any Material Agreement to which the Company is a party or by which the Company or any of its assets may be bound; or (ii) violate or conflict with any Laws to which the Company is subject, except in each case for any such conflicts, violations, breaches, defaults or other occurrences which have not had and do not constitute a Material Adverse Effect.

4.5 SEC Filings.  The Company has timely filed with the SEC all SEC Filings.  The SEC Filings were prepared in accordance with and, as of the date on which each such SEC Filing was filed with the SEC, complied in all material respects with the applicable requirements of the Exchange Act.  None of such SEC Filings, including, without limitation, any financial statements, exhibits and schedules included therein and documents incorporated therein by reference, at the time filed, declared effective or mailed, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  To the knowledge of the Company, none of the SEC Filings is the subject of ongoing SEC review or outstanding SEC comment.  Each of the balance sheets included in or incorporated by reference into any SEC Filing required to be filed by the Company on or after December 31, 2015 and until the Effective Date presented fairly in all material respects the consolidated financial position of the Company as of its date, and each of the statements of income and of cash flows included in or incorporated by reference into such SEC Filings (including any related notes and schedules) presented fairly in all material respects the results of operations, and changes in financial position, income or cash flows, as the case may be, of the Company for the periods set forth therein (subject, in the case of unaudited statements, to the omission of certain notes not ordinarily accompanying such unaudited financial statements and to normal, year-end audit adjustments, none of which is material), in each case in accordance with generally accepted accounting principles consistently applied during the periods involved, except as may be noted therein.

4.6 Governmental Consents.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, local or provincial governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for such approvals or consents as may be required under the HSR Act and such other notices required or permitted to be filed with certain state and federal securities commissions after the Effective Date, which notices will be filed on a timely basis.

4.7 No Conflict.  The Company’s execution, delivery and performance of this Agreement does not violate any provision of the Company’s Restated Certificate of Incorporation or Bylaws, each as amended as of the date hereof (copies of which have been filed with the Company’s SEC Filings), any provision of any order, writ, 

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judgment, injunction, decree, determination or award to which the Company is a party or by which it is bound, or, to the Company’s knowledge, any law, rule or regulation currently in effect having applicability to the Company.

4.8 Material Agreements.  

(a) All material agreements required to be filed or required to be incorporated by reference by the Company in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015 under Item 601(b)(10) of Regulation S-K (collectively, the “Material Agreements”) are valid and enforceable against the Company in accordance with their respective terms, except (i) as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or moratorium or similar laws affecting creditor’s and contracting parties’ rights generally, and (ii) as enforceability may be subject to general principles of equity and except as rights to indemnity and contribution may be limited by state or federal securities laws or public policy underlying such laws.  The Company is not in material breach or default of any terms of any of the Material Agreements, and no condition or event exists which, with the giving of notice or the passage of time or both, would constitute a breach or default of any material term by the Company or any other party there to, or permit the termination, cancellation or acceleration of performance of any material obligation of the Company or any other party to such Material Agreements, except as would not reasonably be expected to result in a Material Adverse Effect.  The Company has not received a written notice of termination nor is the Company otherwise aware of any threats to terminate any of the Material Agreements.  

(b) There are no Material Agreements to which the Company is a party that impose on the Company any obligations which would materially restrict the business, the use of the assets or other conduct of the Company; including, without limitation, contracts that: (i) contain covenants restricting the ability of the Company from competing in any line of business or geographical area; or (ii) contain most-favored nation clauses under which the Company must set favorable conditions for a counter-party that would materially and adversely impair the Company’s ability to conduct its business as described in the SEC Filings.  

(c) The Company has never entered into any material strategic alliance agreements, joint venture agreements, or any other similar contracts that remain in effect.

4.9 No Material Adverse Effect.  Since December 31, 2015 and prior to the Closing Date, there has not been any event, condition, change, effect, state of facts, circumstance, omission or occurrence that has had a Material Adverse Effect.

4.10 Intellectual Property.  

(a) To the Company’s knowledge, the Company owns or possesses adequate rights to use all Intellectual Property necessary for the conduct of its businesses as conducted as of the Effective Date, except to the extent any failure to possess such rights would result in a Material Adverse Effect.  The conduct of the business of the Company as currently conducted and the products and services of the Company, do not infringe, violate, dilute or misappropriate and have not infringed, violated, diluted or misappropriated any Intellectual Property of any Person (“Third Party Rights”), except as would not result in a Material Adverse Effect.  Since January 1, 2014, the Company has not received any written notice of any claims (including through an invitation to license, cease and desist or equivalent letter or any other notice of any allegation (including any third party claims for indemnification)) that have been made against the Company, nor is there any pending or, to the Company’s knowledge, threatened legal action or any other proceeding alleging the infringement, violation or 

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misappropriation by the Company, or by the products or services of the Company, of any Third Party Rights.  To the Company’s knowledge, there is no infringement, misappropriation or violation by any Person of any of the material Company IP.

(b) The Company has taken reasonable steps and security measures in accordance with industry practice to protect, maintain and safeguard the confidentiality of and its rights in all Company-owned Trade Secrets included in Company IP and third party Trade Secrets provided to the Company that are subject to confidentiality obligations, including by requiring all of its employees, contractors and consultants and any other Person whom the Company has authorized to have access to such Trade Secrets to execute confidentiality and non-disclosure agreements or to otherwise be bound by similar obligations of confidentiality and non-use, and to the Company’s knowledge, there has not been any breach by any party to such agreements, except in each case, as would not constitute a Company Material Adverse Effect.  To the Company’s knowledge, no Company IP is in jeopardy of being lost or abandoned through failure to act of the Company.

(c) Each current, and to the Company’s knowledge, former, employee, advisor, partner, consultant or contractor of the Company and any other individual (to the extent such individual has been involved in the creation, invention or development of Intellectual Property for or on behalf of the Company) (each such Person, a “Contributor”) has executed and delivered written contracts with the Company that assigns to the Company, or provides the Company with a right to negotiate a license to, all Intellectual Property relating to the business of the Company that are or were created, invented or developed by such Contributors during the course of their work for or on behalf of the Company.  Without limiting the foregoing, to the Company’s knowledge no Contributor owns or has any right, claim, interest or option, including the right to further remuneration or consideration, with respect to Company IP, nor has any Contributor made any assertions in writing to the Company with respect to any alleged ownership or any such right, claim, interest or option, nor threatened any such assertion; and neither this Agreement nor the transactions contemplated hereby will provide any Contributor with any such right, claim, interest or option.

4.11 Litigation.  

(a) Except for those that would not have a Material Adverse Effect, there are no: (i) claims pending or threatened against, relating to or affecting the Company, the business of the Company, or any of the officers, directors or key employees of the Company, or (ii) facts or circumstances that would reasonably be expected to give rise to any claims that would be required to be disclosed pursuant to clause (i).

(b) Except for those that would not have a Material Adverse Effect, none of the Company, or the assets or properties of the Company are subject to any continuing order, outstanding judgment, warrant, decree, or injunction issued by any governmental authority.

4.12 Taxes.

(a) The Company has legally and properly filed all returns and otherwise followed the procedures required in connection with corporate income tax, inhabitant tax, enterprise tax and any other taxes and public dues (including foreign taxes and public dues and back taxes, delinquency tax or additional tax, etc.  imposed by the tax authority in relation to the taxes referred to above), and have paid all taxes that became due and payable in a timely manner, or, where not yet due, have been adequately provided for in the Company’s Financial Statements (in accordance with GAAP), in each case except as would not result in a Material Adverse Effect.  The Company’s Financial Statements 

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reflect an adequate reserve (in accordance with GAAP) for all material taxes payable by the Company through the date of such Financial Statements.  All tax returns and reports filed by the Company in connection with the taxes and other documents addressed to the tax authority (collectively, the “Tax Returns”) are true and correct.  The Company has not received any request for amendment, or any correction or determination with respect to material issues, that is adverse to the Company from the tax authority with respect to the Tax Returns filed by the Company to date.  There are no special agreements or other arrangements (whether or not legally binding) between the Company and the tax authority in connection with the taxes.  With respect to the Company, it is not a party to any action by any taxing authority and there is not (to its knowledge) any pending or threatened inquiry, inspection, investigation, attachment, delinquency disposition or other proceeding in relation to the taxation or proceedings for administrative protests relating to taxes, tax litigation or other dispute (whether mandatory or voluntary).

(b) The Company has legally, properly and in a timely manner paid the taxes for which the Company is obligated to withhold income tax at the source or otherwise to collect the taxes and pay them to the tax authority, and has properly accounted for such taxes, except as would not have a Material Adverse Effect.

(c) There are no Liens for taxes upon the assets of the Company other than for current taxes not yet due and payable or for taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been made in the Company’s Financial Statements, except as would not have a Material Adverse Effect.  

(d) No claim has been made by any taxing authority in any jurisdiction where the Company does not file Tax Returns that it is, or may be, subject to tax by that jurisdiction, except as would not have a Material Adverse Effect.  

4.13 Environmental Matters.  

(a) In relation to the business of the Company, during the three year period prior to the Effective Date, no proceeding or action, domestic or foreign, relating to any environmental law has been taken or is pending and is threatened against the Company by any authority or any third party with respect to the use, Release, manufacture, storage, handling, transportation or disposal of contaminants, except for those that would not have a Material Adverse Effect.

(b) There has not been a Release or threatened Release of any contaminants on the current real property owned, leased or used in connection with the business of the Company in amounts or under circumstances that result in a material violation by the Company of any environmental law, except as would not have a Material Adverse Effect.

4.14 Compliance with Laws.  The Company has complied with, and is not in violation or default of, any law to which it or its business is subject, including export and import licensing and other laws, nor has any event occurred nor does any circumstance exist which, with the giving of notice or passage of time or both, would constitute any such violation or breach, except for the violation of such laws that did not have or would not have a Material Adverse Effect.

4.15 No Corrupt Payments.

(a) None of the Company or any of its directors, officers, agents, employees, representatives or any Person authorized to act on their behalf (in their capacities as such), has during the past five years 

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with respect to the Company’s business: (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity (including any political party or party official or candidate for political office); (ii) directly or indirectly paid or delivered any fee, commission or other sum of money or item of property, however characterized, to any finder, agent or other party acting on behalf of or under the auspices of a government official or a governmental authority (including any entity owned or controlled by a governmental authority or of a public international organization) that, in each case, was illegal under any applicable Law; (iii) made any payment, bribe or kickback payment to any customer or supplier or to any officer, director, partner, employee or agent of any such customer or supplier, in each case that was unlawful under any applicable Law; (iv) made any payment to any Person in connection with any contract with a governmental authority (including any entity owned or controlled by a governmental authority or of a public international organization) in violation of any applicable Law; or (v) engaged in any other reciprocal practice, or made any other payment or gave any other consideration to any such customer or supplier or any such officer, director, partner, employee or agent, in each case, that was unlawful under any applicable Law.  

(b) No officer, director or, to the Company’s knowledge, employee of the Company is employed or a representative of a governmental authority or a public international organization.

4.16 No Undisclosed Liabilities.  There are no liabilities of the Company of the type required to be disclosed on the balance sheet of the Company or in the notes thereto in accordance with GAAP and the rules and regulations of the SEC applicable thereto, other than liabilities (a) specifically stated and adequately reserved against in the Company’s balance sheet dated December 31, 2015, (b) incurred in the ordinary course of business consistent with past practice since the Company’s balance sheet dated December 31, 2015, or (c) that would not constitute a Material Adverse Effect.  

4.17 No Brokers or Finders.  The Company is not a party to any contract, agreement or understanding with any Person that would give rise to a claim against the Company or the Purchaser for a brokerage commission, finder’s fee or like payment in connection with the transactions contemplated by this Agreement (including the issuance and sale of the Shares).

4.18 Regulatory Compliance.  

(a) There are no Company Products that are distributed for commercial sale or sold commercially by or on behalf of the Company.

(b) All of the Company Products that are manufactured by the Company are manufactured in compliance in all material respects with the Food, Drug and Cosmetic Act, state law equivalents and similar foreign acts applicable to the Company’s Products, including, without limitation, the following:  (i) each facility owned by the Company and, to the Company’s knowledge, each facility not owned by the Company, that manufactures the Company’s Products conforms to applicable current good manufacturing practices and complies with all other applicable requirements of the FDA and other governmental authorities with respect to the manufacture of the Company’s Products; (ii) no facility owned by the Company or, to the Company’s knowledge, not owned by the Company, that manufactures the Company Products has been the subject of any adverse inspection report by the FDA or other governmental authority; (iii) each of the Company’s Products has received all necessary FDA and other approvals necessary for non-commercial manufacture in the United States and in each other country where it is manufactured; (iv) none of the Company Products is subject to an adverse event report, an FDA warning letter (or similar correspondence or notification) or recall, or a public health notification from or to the FDA or other governmental authority; and (v) all Company Products 

11.

 

that are exported by or on behalf of the Company to or from the United States are exported or imported in accordance with all FDA requirements, the Food, Drug, and Cosmetic Act, all similar foreign acts applicable to the Company Products, and all other applicable import and export control Laws, in each case except as would not result in a Material Adverse Effect.

(c) The Company has not engaged in any activities which are prohibited under any Federal and State Health Care Laws (whether applicable to relationships with Government Health Care Programs, commercial third-party payors, healthcare providers or other entities or  individuals), including prohibitions on referrals by physicians or other health care licensees, fee splitting, billing, or which otherwise constitute fraud, including the following:  (i) making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (ii) making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (iii) soliciting, paying or receiving any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay such remuneration (A) in return for referring an individual to a Person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by a Government Health Care Program, or (B) in return for purchasing, leasing, or ordering or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part by any Government Health Care Program, and (iv) filing or causing the filing of any claim for services in violation of federal or state laws and regulations governing referrals by physicians or other health care providers, including 42 U.S.C.  § 1395nn and regulations promulgated thereunder, except in each case as would not result in a Material Adverse Effect.

(d) The Company has timely and accurately filed all requisite claims and other reports (including pursuant to the Physician Payments Sunshine Act and any other applicable open records laws of any applicable government entities) required to be filed in connection with all Government Health Care Programs in which the Company participates, if any, except to the extent that the failure to file such claims and reports has not had and would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  There are no Proceedings or orders from any Governmental Authority pending or, to the knowledge of the Company, threatened or scheduled, by or before any governmental authority, which for this purpose includes any intermediary, carrier, CMS, or any other state or federal agency with respect to any Government Health Care Program claim filed by the Company, or program compliance matters (including compliance with all applicable reporting requirements), which individually or in the aggregate have had or would reasonably be expected to result in a Material Adverse Effect.  Except for routinely scheduled reviews, no validity review or program integrity review related to the Company Products or services has been conducted by any governmental authority in connection with any Government Health Care Programs or by any other third-party payor, and, to the knowledge of the Company, no such review is scheduled, pending or threatened against or affecting the Company.

(e) No physician who has a financial relationship with the Company (whether an investment or ownership interest or compensation arrangement) refers patients to the products or services of the Company.

(f) The Company has not submitted and does not submit claims to Government Health Care Programs.

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(g) None of the Company or its employees or, to knowledge of the Company, independent contractors is or has ever been excluded from participation from any federal or state health care program or listed on the General Services Administration list of excluded parties.

	
5.
	
Representations, Warranties and Covenants of the Purchaser.

The Purchaser hereby makes the following representations and warranties to the Company:

5.1 Organization and Good Standing.  The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to carry on its business.  

5.2 Authorization; Due Execution.  The Purchaser has the requisite corporate power and authority to enter into this Agreement and to perform its obligations under the terms of this Agreement.  All corporate action on the part of the Purchaser, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement have been taken.  This Agreement has been duly authorized, executed and delivered by the Purchaser, and, upon due execution and delivery by the Company, this Agreement will be a valid and binding obligation of the Purchaser, enforceable in accordance with its terms, except (a) as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by equitable principles or (b) to the extent that the enforceability of the indemnification provisions set forth in Sections 8.4 and 11 hereof may be limited by applicable laws.

5.3 Ownership in the Company.  As of the Closing Date, the Purchaser will not beneficially own (as such term is defined for purposes of Section 16 of the Exchange Act), directly or indirectly, more than 19.9% of the outstanding Common Stock.  Other than the rights provided for under this Agreement, the Purchaser does not have any rights to acquire Common Stock.

5.4 Purchase Entirely for Own Account.  This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement it hereby confirms, that the Shares purchased by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same.  By executing this Agreement, the Purchaser further represents that it does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participation to such Person or to any third party, with respect to the Shares, if issued.

5.5 Disclosure of Information.  The Purchaser has received all the information that it has requested and that it considers necessary or appropriate for deciding whether to enter into this Agreement and to acquire the Shares.  The Purchaser further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Shares.  Section 5.5 is not intended to limit in any respect the representations and warranties made by the Company in Section 4.

5.6 Investment Experience.  The Purchaser is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Shares.  The Purchaser also represents it has not been organized solely for the purpose of acquiring the Shares.

5.7 Accredited Investor.  The Purchaser is an “accredited investor” as such term is defined in Rule 501 of the General Rules and Regulations promulgated by the SEC pursuant to the Securities Act.

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5.8 Restricted Securities.  The Purchaser understands that: 

(a) the Shares will not be registered under the Securities Act by reason of a specific exemption therefrom, that such securities must be held by it indefinitely and that the Purchaser must, therefore, bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration;

(b) each certificate representing the Shares, if issued, will be endorsed with the following legends:

(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED; and

(ii) Any legend required to be placed thereon under applicable state securities laws.

(c) The Company will instruct its transfer agent not to register the transfer of the Shares (or any portion thereof) unless the conditions specified in the foregoing legends are satisfied, until such time as a transfer is made, pursuant to the terms of this Agreement, and in compliance with Rule 144 under the Securities Act (“Rule 144”) or pursuant to a registration statement or, if the opinion of counsel referred to above is to the further effect that such legend is not required in order to establish compliance with any provisions of the Securities Act or this Agreement.  

5.9 No Short Sales.  The Purchaser has not engaged, and will not engage, in any short sales of the Company’s Common Stock within the 50 trading days prior to the Closing Date.

5.10 No Legal, Tax or Investment Advice.  The Purchaser understands that nothing in the SEC Filings, this Agreement or any other materials presented to the Purchaser in connection with the purchase and sale of the Shares constitutes legal, tax or investment advice and that independent legal counsel has reviewed these documents and materials on the Purchaser’s behalf.  The Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Shares.

5.11 No Brokers or Finders.  The Purchaser is not a party to any contract, agreement or understanding with any Person that would give rise to a claim against the Company for a brokerage commission, finder’s fee or like payment in connection with the transactions contemplated by this Agreement (including the issuance and sale of the Shares).

	
6.
	
Conditions to the Company’s Obligations at Closing.  

The Company’s obligation to sell, issue and deliver the Shares to the Purchaser at the Closing shall be subject to the following conditions to the extent not waived in writing by the Company:

6.1 Receipt of Payment.  The Company shall have received payment in full, by wire transfer of immediately available funds, for the Shares, at a price per share equal to the Share Price pursuant to Section 3.2.

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6.2 Representations and Warranties; Obligations.  The representations and warranties made by the Purchaser in Section 5 hereof shall be true and correct on the Closing Date with the same force and effect as if made on and as of such date (except for those representations and warranties that specifically address matters only as of a particular date).  The Purchaser shall have performed and complied with all obligations and conditions required to be performed and complied with by the Purchaser under this Agreement on or prior to the Closing Date.

6.3 HSR Act.  Any waiting period applicable to the consummation of the issuance and sale of the Shares to the Purchaser under the HSR Act shall have expired or been terminated.  

	
7.
	
Conditions to the Purchasers’ Obligations At Closing.  

The Purchaser’s obligation to accept delivery of and pay for the Shares at the Closing shall be subject to the following conditions to the extent not waived in writing by the Purchaser:

7.1 Representations and Warranties; Obligations.  The representations and warranties made by the Company in Section 4 hereof shall be true and correct in all material respects on the Closing Date with the same force and effect as if made on and as of such date (except for those representations and warranties that specifically address matters only as of a particular date).  The Company shall have performed and complied with all obligations and conditions to be performed and complied with by the Company under this Agreement on or prior to the Closing Date.

7.2 HSR Act.  Any waiting period applicable to the consummation of the issuance and sale of the Shares to the Purchaser under the HSR Act shall have expired or been terminated.

7.3 No Material Adverse Effect.  Since December 31, 2015, no event or events shall have occurred and be continuing that constitutes a Material Adverse Effect.

7.4 Nasdaq Listing.  The Shares shall have been approved for listing on the Nasdaq Capital Market subject to notice of issuance by the Company.

7.5 Compliance Certificate.  The Company shall have delivered to the Purchaser a certificate dated the Closing Date, signed by the Company’s Chief Executive Officer, certifying that the conditions set forth in this Section 7 have been satisfied.

	
8.
	
Registration Rights.

8.1 Registration of Shares.

(a) At any time that the Purchaser is entitled to sell or transfer any Shares pursuant to Article 9 hereof, the Purchaser may request, in writing, that the Company effect the registration for resale of Registrable Shares pursuant to a Registration Statement.  Thereupon, the Company shall, as expeditiously as possible, use its best efforts to effect the registration for resale of all such Registrable Shares.  If the Purchaser intends to distribute the Registrable Shares by means of an underwriting, it shall so advise the Company in its request.

(b) The Company shall not be required to effect more than one registration pursuant to this Section 8.1.  If the Company has filed a registration statement within six months of the proposed date of filing of the applicable Registration Statement, the Company shall not be obligated to file a Registration Statement until after the end of such six month period.  A registration shall not be 

15.

 

counted as “effected” for purposes of this Section 8.1(b) until such time as the applicable registration statement has been declared effective by the SEC.

(c) If at the time of any request to register Registrable Shares pursuant to this Section 8.1, the Company is engaged in any activity which, in the good faith determination of the Company’s Board of Directors (the “Board”), would be adversely affected by the requested registration, then the Company may at its option direct that such request be delayed for a period not in excess of three months from the effective date of such offering or the date of commencement of such other material activity, as the case may be, such right to delay a given request may not be exercised by the Company more than once in any one-year period.

8.2 Registration Procedures.  If and whenever the Company is required by the provisions of this Agreement to use its best efforts to effect the registration of any of the Registrable Shares under the Securities Act, the Company shall do no less than the following:

(a) The Company shall file with the SEC a Registration Statement with respect to such Registrable Shares within 30 days after receiving such request and use its best efforts to cause that Registration Statement to become effective as soon as is reasonably possible.  

(b) The Company shall as expeditiously as possible prepare and file with the SEC any amendments and supplements to the Registration Statement and the prospectus included in the Registration Statement and such SEC Filings and other filings required by the SEC, in each case, as may be necessary to keep the Registration Statement effective, in the case of a firm commitment underwritten public offering, until each underwriter has completed the distribution of all securities purchased by it and, in the case of any other offering, until the earlier of the sale of all Registrable Shares covered thereby or such time as all of the Registrable Shares held by the Purchaser that are registered under such Registration Statement can be sold pursuant to Rule 144 without volume limitations or other limitations that would restrict sales under Rule 144 (or any similar provisions then in force) under the Securities Act.  Notwithstanding the foregoing, if, at any time following the effectiveness of a Registration Statement, the Company shall have determined that the Company may be required to disclose any material corporate development, the Company may suspend the effectiveness of a Registration Statement until such time as an amendment to such Registration Statement has been filed by the Company and declared effective by the SEC or until such time as the Company has filed an appropriate report with the SEC pursuant to the Exchange Act, by giving notice to the Purchaser.  The Company will use its best efforts to limit the length of any period of suspension of a Registration Statements to a reasonable period of time (which shall in no event be longer than 90 days or such longer period of time as is required, due to circumstances outside of the Company’s control, such as a delay by the SEC) (a “Suspension Period”), and further, the Company will use its best efforts to amend or supplement such prospectus in order to cause such prospectus not to include any 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 not misleading in the light of the circumstances then existing and end the Suspension Period.  The Purchaser agrees that, upon receipt of any notice from the Company of a Suspension Period, the Purchaser will not sell any Registrable Shares pursuant to the Registration Statement during the Suspension Period until (i) the Purchaser is advised in writing by the Company that the use of the applicable prospectus may be resumed, (ii) the Purchaser has received copies of any additional or supplemental or amended prospectus, if applicable, and (iii) the Purchaser has received copies of any additional or supplemental filings which are incorporated or deemed to be incorporated by reference in such prospectus.  

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(c) The Company shall furnish to the Purchaser such reasonable numbers of copies of the prospectus and the Registration Statement, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as the Purchaser may reasonably request in order to facilitate the public sale or other disposition of its Registrable Shares.  If the Company has delivered preliminary or final prospectuses to the Purchaser and after having done so the prospectus is amended to comply with the requirements of the Securities Act, the Company shall promptly notify the Purchaser and, if requested, the Purchaser shall immediately cease making offers of Registrable Shares and return all prospectuses to the Company.  The Company shall promptly provide the Purchaser with revised prospectuses and, following receipt of the revised prospectuses, the Purchaser shall be free to resume making offers of its Registrable Shares.

(d) The Purchaser hereby covenants with the Company, in connection with any sale of the Registrable Shares, the Purchaser shall cause the prospectus delivery requirements under the Securities Act to be satisfied and shall otherwise comply with all applicable laws, rules and regulations.  The Purchaser acknowledges and agrees that the Registrable Shares sold pursuant to the Registration Statement are not transferable on the books of the Company unless the stock certificate submitted to the transfer agent evidencing such Registrable Shares (or reference to the book entry if stock certificates do not represent the Registrable Shares) is accompanied by a certificate reasonably satisfactory to the Company to the effect that (i) the Registrable Shares have been sold in accordance with such Registration Statement and (ii) the requirement of delivering a current prospectus has been satisfied.

(e) The Company shall use its best efforts to register or qualify the Registrable Shares covered by the Registration Statement under the securities or blue sky laws of such states as the Purchaser shall reasonably request, and do any and all other acts and things that may be necessary or desirable to enable the Purchaser to consummate the public sale or other disposition in such states of its Registrable Shares; provided, however, that the Company shall not be required in connection with this Section 8.2(e) to qualify as a foreign corporation or execute a general consent to service of process in any jurisdiction.

(f) The Company shall promptly notify the Purchaser of the happening of any event as a result of which the prospectus included in any Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.  

8.3 Allocation of Expenses.  The Company will pay all Registration Expenses of any registration under this Agreement.  The Purchaser will pay all other expenses incurred in connection with any registration hereunder.

8.4 Indemnification and Contribution.

(a) In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the seller of such Registrable Shares, each underwriter of such Registrable Shares, and each other Person, if any, who controls such seller or underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling Person may become subject under the Securities Act, the Exchange Act, state securities or blue sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Shares were 

17.

 

registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will reimburse such seller, underwriter and each such controlling Person for any legal or any other expenses reasonably incurred by such seller, underwriter or controlling Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus or final prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by or on behalf of such seller, underwriter or controlling Person specifically for use in the preparation thereof.

(b) In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, each seller of Registrable Shares, severally and not jointly, will indemnify and hold harmless the Company, each of its directors and officers and each underwriter (if any) and each Person, if any, who controls the Company or any such underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities, joint or several, to which the Company, such directors and officers, underwriter or controlling Person may become subject under the Securities Act, Exchange Act, state securities or blue sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if the statement or omission was made in reliance upon and in conformity with information relating to such seller furnished in writing to the Company by or on behalf of such seller specifically for use in connection with the preparation of such Registration Statement, prospectuses, amendment or supplement; provided, however, that the obligations of each seller of Registrable Shares hereunder shall be limited to an amount equal to the proceeds to such seller of Registrable Shares sold in connection with such registration.

(c) Each party entitled to indemnification under this Section 8.4 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld); and, provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 8.4.  The Indemnified Party may participate in such defense at such party’s expense; provided, however, that the Indemnifying Party shall pay such expense if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by such counsel in such proceeding.  No Indemnifying Party, in the defense of any such claim or litigation shall, except with the written consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to each Indemnified Party of a release from all liability in respect 

18.

 

of such claim or litigation, and no Indemnified Party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of each other Indemnified Party.

(d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) the Purchaser makes a claim for indemnification pursuant to this Section 8.4 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 8.4 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of the Purchaser in circumstances for which indemnification is provided under this Section 8.4; then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, liabilities, or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the Indemnified Party 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 the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such Indemnifying Party or Indemnified Party, and the parties’ relative knowledge, access to information and opportunity to correct or prevent such statement or omission.  The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8.4(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8.4(d).  The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages, liabilities, or expenses (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such Indemnified Party in connection with investigating or, except as provided in Section 8.4(c), defending any such action or claim.  Notwithstanding the provisions of this Section 8.4(d), (A) the Purchaser will not be required to contribute any amount in excess of the net proceeds to it of all Registrable Shares sold by it pursuant to such Registration Statement, and (B) 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 is not guilty of such fraudulent misrepresentation.

8.5 Information from the Purchaser.  If the Purchaser requests a registration pursuant to Section 8.1, it shall furnish to the Company such information regarding the Purchaser and the distribution proposed by the Purchaser as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement.

8.6 Rule 144 Requirements.  The Company agrees to:

(a) make and keep public information available in compliance with the requirements of Rule 144;

(b) use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; 

(c) furnish to the Purchaser upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, and the reporting requirements of the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company as the Purchaser may reasonably request to avail itself of any similar rule or regulation of the SEC allowing it to sell the Shares without registration; and

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(d) in connection with any sale, transfer or other disposition by the Purchaser of any Registrable Shares pursuant to Rule 144, upon receipt of reasonable documentation and representations from Purchaser regarding such sale, promptly cause the timely preparation and delivery of certificates representing the Registrable Shares to be sold and the removal of any legend restricting transfers of the Registrable Shares, and enable certificates for such Registrable Shares to be issued (or, in the case of book-entry shares, make or cause to be made appropriate notifications on the books of the Company’s transfer agent) for such number of shares and registered in such names as the Purchaser may reasonably request.

8.7 Market Stand‐Off.  Following the termination of the transfer restrictions in Article 9, if requested by the representative of the underwriters or placement agents in connection with an offering of Common Stock (or other securities) of the Company, the Purchaser shall not sell or otherwise transfer or dispose of any Common Stock (or other securities) of the Company held by the Purchaser for a period specified by a representative of the underwriters, in any case not to exceed 90 days following any registered offering of the Common Stock of the Company.  The obligations described in this Section 8.7 shall not apply to a registration effected pursuant to a Registration Statement.  The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said periods.  The Purchaser agrees to execute such agreements as may be reasonably requested by any underwriters that are consistent with this Section 8.7 or that are necessary to give further effect thereto.  The obligations of the Purchaser under this Section 8.7 shall (i) terminate immediately upon the Purchaser beneficially owning in the aggregate less than 10% of the Company’s outstanding Common Stock, and (ii) apply only so long as all executive officers and directors of the Company agree to similar restrictions relating to such registered offering.

8.8 Termination of Registration Rights.  All of the Company’s obligations to register Registrable Shares, and the Purchaser’s rights to cause such registration, under this Agreement shall cease and terminate upon the earlier of (a) such time as all of the Registrable Shares have been sold by the Purchaser in one or more transactions in which the Purchaser’s registration rights under this Section 8 have not been transferred under Section 8.9 or (b) the Purchaser can resell all of its Shares without volume restrictions pursuant to Rule 144 or other limitations that would restrict sales under Rule 144 (or any similar provisions then in force) under the Securities Act.

8.9 Transfer of Registration Rights.  Subject to Article 9, the rights granted to the Purchaser by the Company under this Article 8 may be assigned in full by the Purchaser to a third party in connection with a sale by the Purchaser of Registrable Shares to such third party, provided, that (a) such transfer is effected in accordance with applicable securities laws; and (b) such transferee agrees to comply with the terms and provisions of this Agreement, and such transfer is otherwise in compliance with this Agreement.  Except as specifically permitted by this Section 8.9, the rights of a holder of Registrable Shares shall not be transferable to any other Person, and any attempted transfer shall cause all rights of such holder therein to be forfeited.

	
9.
	
Restrictions on Transfer.

The Purchaser agrees not to make any disposition of all or any portion of the Shares until the date that is the second anniversary of the Closing Date (such date the “Transfer Restriction Expiration Date”).  For the avoidance of doubt, subject to Section 8.7, following the Transfer Restriction Expiration Date, the Purchaser shall have the right hereunder to sell all or any portion of the Shares.

	
10.
	
Additional Covenants.  

10.1 Standstill.  The Purchaser agrees that for so long as it and its wholly-owned subsidiaries beneficially own 10% or more of the issued and outstanding Common Stock or it has a representative acting in an observer 

20.

 

or director capacity on the Board, except with the prior written consent of the Company, the Purchaser shall not, and shall cause its wholly-owned subsidiaries not to:

(a) acquire, offer to acquire, agree to acquire or cause or effect the acquisition of, directly or indirectly, by purchase or otherwise, beneficial ownership of any securities of the Company or any instruments convertible into or exchangeable or exercisable for securities of the Company (the “Company Securities”) such that the aggregate beneficial ownership of the Purchaser and its wholly-owned subsidiaries (on a combined basis) is 20% or more of the Company’s outstanding Common Stock, unless such Company Securities are acquired by way of stock dividends or other distributions or offerings made available to holders of Company Securities generally on a pro rata basis;

(b) solicit or encourage any other entity to solicit proxies (as such terms are defined in Regulation 14A under the Exchange Act) with respect to any matter involving the Company or otherwise initiate, propose or solicit, or induce any other Person to initiate, propose or solicit any stockholder of the Company, any stockholder proposal, any tender offer for Company Securities, any change of control of the Company, or for the purpose of convening a stockholders’ meeting of the Company;

(c) deposit any Company Securities in any voting trust or subject them to any voting agreement or other agreement of similar effect; 

(d) join or form any partnership, limited partnership, syndicate, or other group within the meaning of Section 13(d)(3) of the Exchange Act for the purpose of circumventing or avoiding any of the provisions of this Section 10.1 or encourage, advise or, for the purpose of circumventing or avoiding any of the provisions of this Section 10.1, assist any Person to do any of the foregoing or otherwise take any action individually or jointly with any partnership, limited partnership, syndicate, or other group or assist any other Person or group in taking any action it could not individually take under this Section 10.1;

(e) make, effect, cause, initiate or participate in any Acquisition Transaction (as defined below) with respect to the Company, except as permitted by this Agreement; or 

(f) make any public proposals to the Company or any of its Affiliates, directors, officers, or employees concerning any Acquisition Transaction or take any action that would require the Company to make a public announcement regarding the possibility of an Acquisition Transaction with the Purchaser or any of its Affiliates.

(g) For purposes of this Section 10.1, “Acquisition Transaction” shall mean any transaction involving: (i) any sale, license, lease, exchange, transfer or other disposition of the assets of the Company or any subsidiary of the Company constituting more than 50% of the consolidated assets of the Company or accounting for more than 50% of the consolidated revenues of the Company in any one transaction or in a series of related transactions; (ii) any offer to purchase, tender offer, exchange offer or any similar transaction or series of related transactions made by any Person involving more than 50% of the outstanding shares of capital stock of the Company; or (iii) any merger, consolidation, business combination, share exchange, reorganization or similar transaction or series of related transactions involving the Company or any subsidiary of the Company whereby the holders of voting capital stock of the Company immediately prior to any such transaction hold less than 50% of the voting capital stock of the Company or the surviving corporation (or its parent company) immediately after the consummation of any such transaction.  

21.

 

Notwithstanding the foregoing, nothing in this Section 10.1 shall prohibit the Purchaser from submitting to the Board one or more confidential proposals or offers for a potential Acquisition Transaction (as long as such confidential offer or proposal is made in a manner that would not reasonably be expected to require the Purchaser or the Company to make a public announcement regarding such confidential offer or proposal).

10.2 Termination of Standstill.  The obligations of the Purchaser under Section 10.1 shall terminate in the event (a) of any bona fide unsolicited third party tender or exchange offer for at least 50% of the outstanding voting capital stock of the Company, (b) the Company enters into any agreement for an Acquisition Transaction with any entity not affiliated with the Purchaser, (c) the Company, upon the decision of the Board, initiates a structured auction process with regard to an Acquisition Transaction, but excluding any market check in response to an unsolicited proposal made by any entity not affiliated with the Purchaser, (d) any Person or group unaffiliated with the Purchaser acquires beneficial ownership of more than 35% of the Common Stock, or (e) the occurrence of a Bankruptcy Event.  All of the provisions of Section 10.1 shall be reinstated and shall apply in full force according to their terms in the event that: (i) if the provisions of Section 10.1 shall have terminated as the result of a tender or exchange offer, such tender or exchange offer (as originally made or as amended or modified) shall have terminated (without closing) prior to the commencement of a tender or exchange offer by the Purchaser that would have been permitted to be made pursuant to this Section 10.2 as a result of such third-party tender or exchange offer; (ii) any tender or exchange offer by the Purchaser (as originally made or as extended or modified) that was permitted to be made pursuant to this Section 10.2 shall have terminated (without closing); or (iii) if the provisions of Section 10.1 shall have terminated as a result of any action by the Company referred to in this Section 10.2, the Company shall have determined not to take any of such actions (and no such transaction shall have closed) prior to the commencement of any action by the Purchaser that would have been permitted to be made pursuant to this Section 10.2 as a result of the initial determination of the Company referred to in this Section 10.2.  Upon reinstatement of the provisions of Section 10.2, the provisions of this Section 10.2 shall continue to govern in the event that any of the events described in this Section 10.2 shall occur.  

10.3 Efforts to Complete.  

(a) Each party shall use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things reasonably necessary, proper or advisable under applicable Law to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including using commercially reasonable efforts to: (i) cause the conditions set forth in Section 6 and Section 7 to be satisfied; (ii) obtain all necessary actions or non-actions, waivers, consents, approvals, orders and authorizations from governmental authorities and make all necessary registrations, declarations and filings with governmental authorities; and (iii) execute or deliver any additional instruments reasonably necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement.  

(b) Each party shall cooperate with one another in good faith to (i) promptly determine whether any filings are required to be or should be made, and whether any other consents, approvals, permits or authorizations are required to be or should be obtained, from any governmental authority under any other applicable law in connection with the transactions contemplated hereby, and (ii) promptly make any filings, furnish information required in connection therewith and seek to obtain timely any such consents, permits, authorizations, approvals or waivers that the parties determine are required to be or should be made or obtained in connection with the transactions contemplated hereby.  

22.

 

10.4 Voting Agreement.  

(a) At any meeting of the stockholders of the Company, however called, or at any adjournment thereof, (i) the Purchaser shall appear or otherwise cause all its shares of Common Stock to be present thereat for purposes of calculating a quorum, through granting a proxy or otherwise, (ii) the Purchaser shall vote (or cause to be voted) all of its shares of Common Stock, in accordance with (e.g.  for, against, withheld, abstain and/or electing any other choice (such as frequency for any stockholder vote on executive compensation)) the recommendation of the Board as set forth in the applicable SEC Filings and (iii) if such meeting involves a vote regarding an Acquisition Transaction or similar transaction that would give rise to any appraisal rights or dissenter’s rights in respect of its shares of Common Stock, the Purchaser agrees to waive and not to exercise such appraisal rights or dissenter’s rights.

(b) The provisions of this Section 10.4 shall terminate upon the earliest of any of the following events: (i) the Common Stock held by the Purchaser represents less than 10% of the issued and outstanding shares of the Company’s Common Stock, (ii) an Acquisition Transaction being consummated with respect to the Company and (iii) a Bankruptcy Event; provided, that notwithstanding this Section 10.4(b), if applicable, clause (iii) of Section 10.4(a) shall survive until the expiration of any period in which to perfect or exercise such appraisal rights or dissenter’s rights.

10.5 Purchaser Board Rights.  

(a) If and for so long as the Purchaser, together with its Affiliates, holds not less than 15% of the issued and outstanding Common Stock, the Purchaser shall have the right to send one representative, who shall initially be Dr.  Ei Yamada, (the “Representative”) to attend in a non-voting capacity all meetings of the Board; provided, that the Company shall have the right to exclude the Representative from access to any material or meeting, or portion thereof, if the Company determines in good faith that there is a conflict of interest, or such exclusion is reasonably necessary to preserve its attorney-client privilege or confidentiality.  In the event the Representative is unable to attend a meeting of the Board, he or she may appoint a delegate to attend such meeting in the Representative’s place; provided that such delegate is approved by the Company in advance, which such approval must not be unreasonably withheld, conditioned or delayed, and provided further that each such delegate shall be deemed to be a “Representative” for purposes of Section 10.5(b).  If the Representative resigns or for any other reason ceases to serve in such capacity, the Purchaser may designate a successor Representative, who shall be subject to the Company’s approval which such approval must not be unreasonably withheld, conditioned or delayed.  

(b) The Purchaser agrees, and shall cause the Representative to agree, to hold in confidence and trust and not use or disclose to any third party any information provided to or learned by the Purchaser or its Representative in connection with the Purchaser’s rights under this Section 10.5 or in connection with the Representative’s attendance at any meetings of the Board (collectively, “Confidential Information”).  The foregoing obligations of confidentiality shall not apply to any information that (i) the Purchaser possesses without obligation of confidentiality prior to the date hereof, (ii) the Purchaser develops independently without reference to or reliance on any Confidential Information, (iii) the Purchaser rightfully receives from a third party without any obligation of confidentiality, or (iv) is or becomes publicly available without breach of this Agreement Nothing herein shall prohibit any disclosure of information to the extent required by the order of a court of competent jurisdiction or pursuant to applicable law, rule or regulation, provided that, unless otherwise prohibited by law or court order, the Purchaser shall use all commercially reasonable 

23.

 

efforts to give the Company prior written notice of such disclosure in order that the Company may seek (with the Purchaser’s reasonable cooperation) a protective order, confidential treatment, or other appropriate remedy (at the Company’s sole cost and expense).

(c) If the Purchaser has continuously held not less than 15% of the issued and outstanding Common Stock from the Closing through the second anniversary of the Closing Date, the Company will appoint the Representative to the Board as a director of the Company, subject to later reelection by the Company’s stockholders.

10.6 Notification of Certain Matters.  From the Effective Date through the Closing, the Company shall give prompt written notice to the Purchaser of the occurrence or non-occurrence of any event known to the Company the occurrence or non-occurrence of which would reasonably be expected to cause a Material Adverse Effect on the Company or its ability to satisfy the conditions to closing contained in Section 7.  From the Effective Date through the Closing, the Purchaser shall give prompt written notice to the Company of the occurrence or non-occurrence of any event known to the Purchaser the occurrence or non-occurrence of which would reasonably be expected to materially impair the Purchaser’s ability to satisfy the conditions to closing contained in Section 6.

10.7 Publicity and Announcements.  All press releases and other public disclosures concerning the transactions contemplated by this Agreement will be subject to review and approval by the Company and the Purchaser, such approval not to be unreasonably withheld, conditioned or delayed; provided, that to the extent a party shall be required to make an announcement, disclosure or filing pursuant to any law of its home jurisdiction or any jurisdiction in which any of its securities are publicly traded or the rules of any stock exchange upon which its securities are listed or any securities quotation system on which such securities are traded, it shall be permitted to do so without an approval of the Company or the Purchaser, as the case may be; provided, further that such party has used commercially reasonable efforts to consult with the Company or the Purchaser, as the case may be, and strictly limits such announcement, disclosure or filing to the minimum disclosure required by law or such rules.  The other parties may then also make an announcement, disclosure or filing containing the same.  

	
11.
	
Indemnification.

11.1 Survival.  Each of the representations and warranties set forth in this Agreement shall survive the Closing of this Agreement and expire 12 months after the Closing Date (or until final resolution of any claim or action arising from the breach of any such representation and warranty, if notice of such breach was provided prior to the end of such period); other than the representations and warranties set forth in Sections 4.1 through 4.4, which shall survive the Closing of this Agreement indefinitely.  All covenants and agreements contained herein, other than those which by their terms are to be performed in whole or in part after the Closing Date, shall terminate 12 months after the Closing Date.

11.2 Indemnification.  

(a) The Company agrees to indemnify and hold harmless the Purchaser and each of its directors, officers, employees, and statutory auditors (the “SPA Purchaser Indemnified Parties”) to the fullest extent permitted under applicable Law from and against any and all Losses arising out of or resulting from (i) any inaccuracy in or breach of the Company’s representations or warranties in this Agreement, or (ii) the Company’s breach of its agreements or covenants in this Agreement.  For purposes of this Section 11.2(a), in determining the amount of any Losses in respect of the failure of any representation or warranty to be true and correct as of any particular date, and not in determining if a breach has occurred, the representations and warranties in this Agreement (including any 

24.

 

disclosure schedules provided against the representations and warranties in this Agreement) shall be deemed to have been made without any qualifications as to “Material Adverse Effect,” “material,” “in all material respects” and similar qualifications as to materiality shall be deemed to be deleted therefrom.

(b) The Purchaser agrees to indemnify and hold harmless the Company and its directors, officers, and employees (the “Company Indemnified Parties”) to the fullest extent permitted under applicable Law from and against any and all Losses arising out of or resulting from (i) any inaccuracy in or breach of the Purchaser’s representations or warranties in this Agreement, or (ii) any breach of the Purchaser’s agreements or covenants in this Agreement.

11.3 Claims.  

(a) An SPA Purchaser Indemnified Party or a Company Indemnified Party, as the case may be, entitled to indemnification under this Section 11 shall give written notice to the party from whom indemnification is sought of any claim with respect to which it seeks indemnification promptly after the discovery by such indemnified Person of any matters giving rise to a claim for indemnification hereunder; provided, that the failure of any indemnified Person to give notice as provided herein shall not relieve the Company or the Purchaser (as the case may be) of its obligations under this Section 11 unless and to the extent that the Company or the Purchaser (as the case may be) shall have been actually materially prejudiced by the failure of such indemnified Person to so notify the Company or the Purchaser (as the case may be).  Such notice shall describe in reasonable detail such claim.  

(b) In case any such action, suit, claim or proceeding is brought against a SPA Purchaser Indemnified Party or a Company Indemnified Party, as the case may be, by a third-party, the Company or the Purchaser (as the case may be) shall be entitled to assume and conduct the defense thereof, with counsel reasonably satisfactory to the indemnified Person, unless (i) such claim seeks remedies, in addition to or other than, monetary damages that are reasonably likely to be awarded, (ii) such claim involves a criminal proceeding, (iii) counsel to the indemnified Person advises the Company or the Purchaser (as the case may be) in writing that such claim involves a conflict of interest (other than one of a monetary nature) that would reasonably be expected to make it inappropriate for the same counsel to represent both the Company or the Purchaser (as the case may be) and the indemnified Person, or (iv) the Company or the Purchaser (as the case may be) shall not have assumed the defense of the third-party claim within 10 Business Days of receipt of the first notice of such third-party claim sent by the indemnified Person to the Company or the Purchaser (as the case may be) (or sooner, if the nature of the third-party claim so requires or a more timely response is advisable to avoid jeopardizing the defense against such third-party claim).  If any one of the foregoing clauses (i) through (iv) applies, the indemnified Person shall be entitled to retain its own counsel at the cost and expense of the Company or the Purchaser (as the case may be) (except that the Company or the Purchaser (as the case may be) shall only be liable for the legal fees and expenses of one law firm for the indemnified Person).  If the Company or the Purchaser (as the case may be) assumes the defense of any claim, the indemnified Person shall nevertheless be entitled to hire, at its own expense, separate counsel and participate in the defense thereof.  The Company or the Purchaser (as the case may be) shall not, without the indemnified Person’s prior written consent (not to be unreasonably withheld, conditioned or delayed), settle or compromise any claim or consent to entry of any judgment in respect thereof in any pending or threatened action, suit, claim or proceeding in respect of which indemnification has been sought hereunder unless such settlement or compromise includes an unconditional release of the indemnified Person from all liability arising out of such action, suit, claim or proceeding.  If the indemnifying Party is not assuming and conducting the 

25.

 

defense of an indemnifiable claim, then the indemnified Person shall not settle or compromise an indemnifiable claim without the indemnifying Party’s prior consent, which consent shall not be unreasonably withheld, delayed or conditioned.

11.4 Exclusive Remedy.  Except for actions grounded in fraud, willful misconduct, intentional misrepresentation or criminal activity, from and after the Closing, the indemnification provided in this Section 11 shall constitute the sole and exclusive remedy for an indemnified Person under this Section 11 for damages arising out of, resulting from or incurred in connection with any claims relating to this Agreement or arising out of the transactions contemplated hereby; provided however, that this exclusive remedy for damages shall not preclude a party from bringing an action for specific performance or other equitable remedy to require a party to perform its obligations under this Agreement.

11.5 No Limitations.   No investigation by or knowledge of an SPA Purchaser Indemnified Party or a Company Indemnified Party, as the case may be, shall limit such indemnified Person’s exercise of any right under this Section 11 or be deemed to be a waiver of any such right.  The parties further acknowledge and agree that the indemnification provisions provided in Section 8 are separate and discrete obligations of the parties and shall have no impact whatsoever on the indemnification provisions in this Section 11.

	
12.
	
Termination

12.1 Termination.  This Agreement may be terminated at any time prior to the Closing:

(a) by the mutual written consent of the Company and the Purchaser;

(b) by the Purchaser, if (i) the Company shall have breached any representation, warranty, covenant or agreement set forth in this Agreement, (ii) such breach is not cured within ten (10) Business Days after the Company receives written notice thereof from the Purchaser (or such shorter period between the date of such notice and the Closing), and (iii) such breach would cause any of the conditions set forth in Section 7 not to be satisfied;

(c) by the Company, if (i) the Purchaser shall have breached any representation, warranty, covenant or agreement set forth in this Agreement, (ii) such breach is not cured within 10 Business Days after the Purchaser receives written notice thereof from the Company (or such shorter period between the date of such notice and the Closing), and (iii) such breach would cause any of the conditions set forth in Section 6 not to be satisfied;

(d) by the Company or the Purchaser if the Closing shall not have occurred by August 4th, 2016 or such other date as mutually agreed in writing by the parties (the “Outside Date”); provided, however, that the right to terminate this Agreement under this subclause (d) shall not be available to a party whose failure to fulfill any obligation under this Agreement shall have been the principal cause of, or shall have resulted in, the failure of the Closing to occur on or prior to the Outside Date; or

(e) by the Purchaser in the event (i) (x) any Person unaffiliated with the Purchaser, whether singly or as part of a group, acquires more than 35% of the Common Stock or all or substantially all of the Company’s assets (whether by merger, consolidation, business combination, tender or exchange offer, recapitalization, restructuring, sale, equity issuance or otherwise), or (y) the Company shall enter into a definitive agreement with respect to, or shall publicly announce that it plans to enter into a transaction with respect to, any of the foregoing, (ii) a Bankruptcy Event, or (iii) of any transaction or other event in which the Common Stock no longer is required to be registered under the Exchange Act.

26.

 

12.2 Effect of Termination.  In the event of termination of this Agreement as provided herein, this Agreement shall forthwith become void and there shall be no liability under this Agreement on the part of either party hereto except that nothing herein shall relieve either party from liability for any breach of this Agreement that occurred before such termination, and the terms of Sections 10.5 (b), 10.7, 12, and 13 shall survive any such termination.

	
13.
	
Miscellaneous.

13.1 Waivers and Amendments; Delays.  Neither this Agreement nor any provision hereof may be changed, waived, discharged, terminated, modified or amended except upon the written consent of the Company and the Purchaser.

No delay or omission to exercise any right, power or remedy accruing to the Purchaser, upon any breach or default of the Company under this Agreement, shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or a waiver of or acquiescence 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.  It is further agreed that any waiver, permit, consent or approval of any kind of character on the Purchaser’s part of any breach or default under this Agreement, or any waiver on the Purchaser’s part 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 and that all remedies, either under this Agreement, or by law or otherwise afforded to the Purchaser, shall be cumulative and not alternative.

13.2 Severability.  In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

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

13.4 Arbitration.  Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be submitted exclusively to arbitration.  Arbitration shall be administered by the American Arbitration Association (“AAA”) under the AAA’s International Arbitration Rules.  The arbitral tribunal award shall be final and binding, shall be the sole and exclusive remedy regarding any and all claims and counterclaims presented, and may not be reviewed by or appealed to any court except for enforcement.  Any arbitration under this Agreement shall be conducted in San Francisco, California, USA and in the English language, including all oral presentations and arguments as well as all documentation.

13.5 Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original document, and all of which, together with this writing, shall be deemed one instrument.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile or .pdf shall be as effective as delivery of a manually executed counterpart of this Agreement.

13.6 Successors and Assigns.  Except as expressly provided hereunder, neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either party without the prior written consent of the other party; provided, however, (a) that either party may assign this Agreement and its rights and obligations hereunder without the other party’s consent in connection with the transfer or sale of all or substantially all of the business of such party to a third party, whether by merger, sale of stock, sale of assets or otherwise, and (b) the Purchaser may assign this Agreement and its rights and obligations hereunder without the Company’s consent to an Affiliate; provided, that, the Purchaser shall remain liable and responsible to the Company hereto for the performance and observance of all such duties and obligations by such Affiliate.  

27.

 

The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties.  Any assignment not in accordance with this Agreement shall be void.

13.7 Entire Agreement.  This Agreement and other documents delivered pursuant hereto, including the exhibits, constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof whether or not the Closing shall have occurred.

13.8 Payment of Fees and Expenses.  Each of the Company and the Purchaser shall bear its own expenses and legal fees incurred on its behalf with respect to this Agreement and the transactions contemplated hereby.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

13.9 Notices.  Any notice to be given under this Agreement must be in writing and delivered either in person, by any method of mail (postage prepaid) requiring return receipt, or by overnight courier or facsimile confirmed thereafter by any of the foregoing, to the party to be notified at its address given below, or at any address such party has previously designated by prior written notice to the other.  Notice shall be deemed sufficiently given for all purposes upon the earliest of: (a) the date of actual receipt; (b) if mailed, seven days after the date of postmark; or (c) if delivered by overnight courier, the second business day the overnight courier regularly makes deliveries.

	
 
	
(a)
	
If to the Company, notices must be addressed to:

Vical Incorporated

10390 Pacific Center Court

San Diego, CA 92121

Attention: 

Telephone: 

Facsimile:  858-646-1152

	
 
	
(b)
	
If to the Purchaser, notices must be addressed to:

AnGes MG, Inc.

5F, Mita Suzuki Bldg., 5-20-14

Shiba, Minato‐ku, Tokyo, 108-0014

Japan

Telephone:  81-3-5730-2480

Facsimile:  81-3-5730-2635

13.10 Headings.  The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

13.11 Disclaimer.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY NATURE, EXPRESS OR IMPLIED.

[Signature Page to Follow]

 

 

 

28.

 

In Witness Whereof, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written.

 

	
Vical Incorporated

	
 
	
 
	
 

	
By:
	
 
	
/s/ Vijay B.  Samant

	
Name:
	
 
	
Vijay B.  Samant

	
Title:
	
 
	
President and CEO

	
 
	
 
	
 

	
AnGes MG, Inc.

	
 
	
 
	
 

	
By:
	
 
	
/s/ Ei Yamada

	
Name:
	
 
	
Ei Yamada, Ph.D

	
Title:
	
 
	
President and CEO

 

[Signature Page to Stock Purchase Agreement]exhibit10220160630finals

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 14-cv-01243-CMA-KMT (Consolidated for all purposes with Civil Action No. 14-cv-01402-CMA-KMT)  UNITED FOOD AND COMMERCIAL WORKERS UNION AND PARTICIPATING FOOD INDUSTRY EMPLOYERS TRI-STATE PENSION FUND, Individually and on behalf of all others similarly situated,  Plaintiff,  v.  ADVANCED EMISSIONS SOLUTIONS, INC., et al.,  Defendants.  ______________________________________________________________________ STIPULATION AND AGREEMENT OF SETTLEMENT ______________________________________________________________________   

 

2  This Stipulation and Agreement of Settlement (“Settlement”) is made and entered into by and among (i) Lead Plaintiff, on behalf of itself and each of the Class Members, by and through Lead Counsel; and (ii) Defendants, by and through their counsel.  This Settlement is intended by the Settling Parties to fully, finally and forever compromise, resolve, discharge and settle the Released Claims and result in the complete dismissal of this Action with prejudice, upon and subject to the approval of the Court and the terms and conditions herein, without any admission or concession as to the merits of any of the Settling Parties’ claims or defenses.1 WHEREAS: A. All terms with initial capitalization shall have the meanings ascribed to them in Paragraph 1 below or as otherwise defined herein. B. On May 1, 2014, plaintiff Karen Barnwell filed a class action complaint, Civil Action No. 14-cv-01243 (Dkt. 1), against Advanced Emissions Solutions, Inc. (“ADES” or the “Company”), and five of its current or former officers, Michael D. Durham, Mark H. McKinnies, C. Jean Bustard, Sharon M. Sjostrom, and Christine B. Amrhein (the “Individual Defendants”), in the United States District Court for the District of Colorado (the “Court” or “District Court”), on behalf of a putative class comprising purchasers of the Company’s common stock between March 14, 2013 and March 12, 2014, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5                                             1 The terms Lead Plaintiff, Class Members, Lead Counsel, Defendants, Settling Parties, Released Claims, and Action are defined herein.   

 

3  promulgated thereunder by the Securities and Exchange Commission (“SEC”), 17 C.F.R. § 240.10b-5. The case was assigned to the Honorable Christine M. Arguello. C. On May 19, 2014, plaintiff Evan Pawloski filed a substantially similar class action complaint, Civil Action No. 14-cv-01402 (Dkt. 1) in the same Court against ADES, and two of its current or former officers, Michael D. Durham and Mark H. McKinnies, with a proposed class period of March 14, 2013 to April 23, 2014. This case was also assigned to the Honorable Christine M. Arguello. D. On February 19, 2015, the Court consolidated the two actions, appointed United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Fund (“UFCW Tri-State”) as Lead Plaintiff, and approved Lead Plaintiff’s selection of Shepherd Finkelman, Miller, & Shah, LLP as Lead Counsel and the Edgar Law Firm, LLC, as Liaison Counsel in the consolidated action (the “Action”) (Dkt. 29). E. On April 20, 2015, Lead Plaintiff filed a Consolidated Amended Class Action Complaint (“First Amended Complaint”) (Dkt. 35). The First Amended Complaint alleged: (1) that ADES and Individual Defendants Durham and McKinnies made material misrepresentations and omissions in violation of Section 10(b) and Rule 10b-5 of the Exchange Act; and (2) that Individual Defendants Durham, McKinnies, Bustard, Sjostrom, Amrhein, as well as an additional defendant, L. Heath Sampson, are liable for ADES’s primary violations of the Exchange Act as alleged “control persons” of the Company within the meaning of Section 20(a) of the Exchange Act. F. On June 19, 2015, Defendants filed a Motion to Dismiss the First Amended Complaint Under Federal Rule of Civil Procedure 12(b)(6). (Dkt. 36.) The 

 

4  Lead Plaintiff filed a Response to the Motion to Dismiss on July 2, 2015 (Dkt. 40), and the Defendants filed a Reply in support of the Motion to Dismiss on July 16, 2015 (Dkt. 42). G. On March 7, 2016, before an order was entered on the Motion to Dismiss, the parties filed a Stipulated Motion to Stay Under D.C.COLO.LCivR 16.6 to allow them time to mediate the dispute. (Dkt. 54). On March 8, 2016, the District Court granted the parties’ Stipulated Motion to Stay (Dkt. 55). H. On May 16, 2016, the Lead Plaintiff filed a Second Amended Consolidated Class Action Complaint (“Second Amended Complaint”). The Second Amended Complaint continued to name ADES, Durham, McKinnies, Bustard, Sjostrom, Amrhein, and Sampson as Defendants, in the District Court, on behalf of a putative class comprised of purchasers of the Company’s common stock between May 12, 2011 and January 29, 2015. The Second Amended Complaint continues to assert claims under Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder.  I. On May 24, 2016, counsel for the Lead Plaintiff, Defendants, and Defendants’ insurers participated in a mediation under the auspices of Jed Melnick of JAMS. Pursuant to Mr. Melnick’s instructions, the parties submitted detailed mediation statements in advance of the mediation session. As a result of the arm’s-length negotiations at that mediation, the parties (including Defendants’ insurers) agreed in principle to settle the Action for $3,950,000, subject to the approval of the Court.  J. Lead Counsel and Lead Plaintiff have concluded, after due investigation and after carefully considering the relevant circumstances, including, without limitation, the claims asserted in the Action, the legal and factual defenses thereto, and the 

 

5  applicable law, that (i) it is in the best interests of the Class (defined below) to enter into this Settlement in order to avoid the uncertainties of litigation and to ensure that the benefits reflected herein are obtained for the Class and (ii) the Settlement set forth herein is fair, reasonable and adequate and in the best interests of the Class Members. K. Defendants believe that they are not liable for the claims asserted against them in the Action and that they have good and meritorious defenses thereto. They have nevertheless agreed to enter into this Settlement to avoid further expense, inconvenience, and the distraction of burdensome and protracted litigation, and thereby to put to rest this controversy and avoid the risks inherent in litigation. NOW THEREFORE, IT IS HEREBY STIPULATED AND AGREED, by and among the Settling Parties, through their respective counsel of record, that, subject to the approval of the District Court pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, the Private Securities Litigation Reform Act, 15 U.S.C. § 78u-4 and other conditions set forth herein, in consideration of the benefits flowing to the Settling Parties hereto, that the Action and all Released Claims as against the Released Parties shall be fully, finally and forever compromised, settled, released, discharged and dismissed with prejudice, upon and subject to the following terms and conditions: I. DEFINITIONS 1. As used in this Settlement, the following terms shall have the meanings specified below. In the event of any inconsistency between any definition set forth below and any definition set forth in any document attached as an exhibit to this Settlement, the definition set forth below shall control. 

 

6  a) “Action” means the action pending in this Court under the caption United Food and Commercial Workers Union and Participating Food Industry Employers Tri- State Pension Fund v. Advanced Emissions Solutions, Inc., et al., Case No. 14-cv- 01402-CMA-KMT (D. Colo.), including, without limitation, all cases consolidated under that caption. b) “Authorized Claimant(s)” means a Class Member that timely submits a valid Proof of Claim Form to the Claims Administrator in accordance with the requirements established by the Court, and that is approved by the Claims Administrator for payment from the Net Settlement Fund. c) “Claim(s)” means a claim submitted by a Class Member to the Claims Administrator for payment pursuant to the Plan of Allocation. d) “Claims Administrator” means Strategic Claims Services. e) “Class” means, for purposes of this Settlement, and to be certified pursuant to Fed. R. Civ. P. 23, for purposes of effectuating this Settlement only, all persons and entities who purchased or otherwise acquired the common stock of Advanced Emissions Solutions, Inc. (ticker symbol: ADES) between May 12, 2011 and January 29, 2015, both dates inclusive. Excluded from the Class are: i) Defendants, directors, officers and other employees of ADES, their families and affiliates, any entities in which any of the Defendants have a controlling interest, the legal representatives, heirs, successors, predecessors-in-interest, affiliates or assigns of any of the Defendants, and the Judge(s) to whom this case is assigned; and ii) any putative members of the Class who timely and validly exclude themselves from the Class in 

 

7  accordance with the requirements set forth in the Mailed Notice and Rule 23 of the Federal Rules of Civil Procedure. f) “Class Distribution Order” means an order entered by the Court authorizing and directing that the Net Settlement Fund be distributed, in whole or in part, to eligible Class Members. g) “Class Member(s)” means a person or entity that is a member of the Class. h) “Class Period” means the period from May 12, 2011 and January 29, 2015, both dates inclusive. i) “Defendants” means Advanced Emissions Solutions, Inc., Michael D. Durham, Mark H. McKinnies, C. Jean Bustard, Sharon M. Sjostrom, Christine B. Amrhein and L. Heath Sampson (each is a “Defendant” and collectively referred to as the “Defendants”). j) “Defendants’ Counsel” means the law firms of Gibson, Dunn & Crutcher LLP; Fortis Law Partners LLP (counsel for ADES, Michael D. Durham, C. Jean Bustard, Sharon M. Sjostrom, Christine B. Amrhein and L. Heath Sampson), and Morrison & Foerster LLP (counsel for Mark H. McKinnies). k) “Effective Date” means the first day on which the Settlement shall become effective as set forth in ¶ 43 below. Lead Counsel shall advise Defendants’ Counsel and the Claims Administrator promptly after it has determined that it believes the Effective Date has occurred.  

 

8  l) “Escrow Account” means an escrow account established, maintained, and controlled by the Escrow Agent, subject to Lead Counsel’s supervisory authority, into which Defendants shall deposit or cause to be deposited the Settlement Amount. m) “Escrow Agent” means the Claims Administrator. n) “Final” means, with respect to any order of the Court, including, without limitation, the Judgment, that such order represents a final and binding determination of all issues within its scope and is not subject to further review on appeal or otherwise. Without limitation, an order becomes “Final” when (i) no appeal has been filed and the prescribed time for commencing any appeal has expired; or (ii) an appeal has been filed and either (a) the appeal has been dismissed and the prescribed time, if any, for commencing any further appeal has expired, or (b) the order has been affirmed in all material respects and the prescribed time, if any, for commencing any further appeal has expired. For purposes of this paragraph, an “appeal” includes appeals as of right, discretionary appeals, interlocutory appeals, proceedings involving writs of certiorari or mandamus, and any other proceedings of like kind. However, any appeal or proceeding seeking subsequent judicial review pertaining solely to the Class Distribution Order, the Plan of Allocation, or to the Court’s award of Lead Counsel’s fees and/or expenses shall not in any way delay or affect the time set forth above for the Judgment to become Final. o) “Final Approval Hearing” means the hearing set by the Court under Rule 23(e) of the Federal Rules of Civil Procedure to consider final approval of the Settlement, Lead Counsel’s request for an award of attorneys’ fees, and reimbursement of Litigation Expenses. 

 

9  p) “Judgment” means the order of final judgment to be entered by the Court which, subject to the approval of the Court, shall be substantially in the form attached hereto as Exhibit B. q) “Lead Counsel” means the law firm of Shepherd, Finkelman, Miller, & Shah, LLP. r) “Lead Plaintiff” means United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Fund (“UFCW Tri-State”). s) “Litigation Expenses” means the reasonable costs and expenses incurred by Lead Counsel in connection with commencing and prosecuting the Action, for which Lead Counsel intends to apply to the Court for reimbursement from the Settlement Fund. Litigation Expenses may also include reimbursement of the reasonable costs and expenses (including lost wages) of Lead Plaintiff in accordance with 15 U.S.C. § 78u- 4(a)(4). t) “Net Settlement Fund” means the Settlement Fund less: (i) any Taxes and Tax Expenses; (ii) any Notice and Administration Costs; and (iii) any attorneys’ fees and Litigation Expenses awarded by the District Court.  u) “Notice” means the Notice of Pendency of Class Action and Proposed Settlement (substantially in the form attached hereto as Exhibit A-1), which is to be sent to members of the Class. v) “Notice and Administration Costs” means the costs, fees and expenses that are reasonably incurred by the Claims Administrator in connection with (i) providing notice to the Class; and (ii) administering the claims process, including, without limitation, the actual costs of publication, printing and mailing the Notice, 

 

10  reimbursements to nominee owners for forwarding the Notice to their beneficial owners, the administrative expenses actually incurred and fees reasonably charged by the Claims Administrator in connection with identifying Class Members and providing notice and processing the submitted Claims, and the reasonable fees, if any, of the Escrow Agent. Prior to the Effective Date, the Escrow Agent, without further approval of Defendants or the Court, may pay from the Settlement Fund up to $100,000.00 in Notice and Administration Costs actually and reasonably incurred and associated with the administration of the Settlement. Prior to the Effective Date, payment of any Notice and Administration Costs exceeding $100,000.00 shall require notice to and agreement from Defendants, through Defendants’ Counsel. Subsequent to the Effective Date, without further approval by Defendants or the Court, the Settlement Fund may be used by Lead Counsel to pay reasonable and necessary Notice and Administration Costs in excess of $100,000.00. In the event that the Settlement is terminated pursuant to the terms of this Settlement, all Notice and Administration Costs properly paid or incurred, including any related fees, shall not be returned or repaid to Defendants. w) “Plan of Allocation” means the proposed plan of allocation of the Net Settlement Fund set forth in ¶ 22 below and in the Notice, or such other plan of allocation that the Court approves. The Plan of Allocation is not part of the Settlement, and Defendants and any Released Party shall have no responsibility for the Plan of Allocation or its implementation, and no liability with respect thereto. x) “Preliminary Approval Order” means the order to be entered by the Court preliminarily approving the Settlement, and directing that Notice be provided to the 

 

11  Class, which, subject to the approval of the Court, shall be substantially in the form attached hereto as Exhibit A. y) “Proof of Claim Form” means the form provided to Class Members by the Claims Administrator for purposes of submitting a Claim, substantially in the form attached hereto as Exhibit A-3. z) “Released Claims” means any and all actions, causes of action, claims (including “Unknown Claims,” defined below), duties, debts, demands, rights, disputes, suits, matters, damages, losses, obligations, proceedings, issues, judgments, and liabilities of every nature and description whatsoever (and including, but not limited to, any claims for damages, whether compensatory, consequential, special, punitive, exemplary or otherwise, and any fees, costs, expenses, or charges), whether known or unknown, suspected or unsuspected, fixed or contingent, foreseen or unforeseen, liquidated or unliquidated, accrued and unaccrued, matured or unmatured, at law or in equity, whether class, derivative, or individual in nature, whether or not concealed or hidden, which now exist, or heretofore have existed, or can, shall or may exist, whether arising under federal, state, common, statutory, administrative or foreign law, regulation, or at equity, that (a) Lead Plaintiff or any Class Member has asserted in this Action, or could have asserted in this Action or in any other proceeding or forum that arise out of, relate to or are based upon, the allegations, claims, transactions, facts, matters, occurrences, events, failures, representations, statements, or omissions alleged, involved, set forth, or referred to in either the First Amended Complaint or the Second Amended Complaint; (b) would have been barred by res judicata, claim preclusion, issue preclusion, or collateral estoppel had the Action been fully litigated to a final 

 

12  judgment; and (c) were, could have been, or in the future could be, asserted in any forum or proceeding or otherwise by any Class Member that relate to the purchase, sale, acquisition or holding of ADES common stock during the Class Period. Released Claims do not, however, include claims to enforce this Settlement. aa) “Released Party” and “Released Parties” means each of the Defendants and his, her or its respective past, present or future directors, officers, employees, parents, partners, members, principals, agents, owners, fiduciaries, shareholders, related or affiliated entities, subsidiaries, divisions, accountants, auditors, attorneys, associates, consultants, advisors, insurers, co-insurers, reinsurers, trustees, estates, beneficiaries, administrators, foundations, underwriters, banks or bankers, personal or legal representatives, divisions, joint ventures, spouses, domestic partners, family members, heirs, executors, or any other person or entity acting or purporting to act for or on behalf of any of the Defendants, and each of their respective predecessors, successors and assigns, and any trusts for which any of them are trustees, settlors, or beneficiaries. bb) “Settled Defendants’ Claims” means any and all claims, rights or causes of action or liabilities whatsoever, whether based on federal, state, local, statutory, or common law, or any other law, rule, or regulation, including both known claims and Unknown Claims, that have been or could have been asserted in the Action or any forum by Defendants, a Released Party or the Released Parties, against Lead Plaintiff, any of the Class Members, or their attorneys, which arise out of or relate in any way to the institution, prosecution, or settlement of the Action. Settled Defendants’ Claims do not, however, include claims to effectuate or to enforce this Settlement. 

 

13  cc) “Settlement” means this Stipulation and Agreement of Settlement and the settlement contained herein. dd) “Settlement Amount” means Three Million, Nine Hundred-Fifty Thousand Dollars ($3,950,000). ee) “Settlement Fund” means the Settlement Amount plus any interest earned thereon after it is deposited into the Escrow Account. ff) “Settling Parties” means Defendants and Lead Plaintiff, on behalf of themselves and the Class. gg) “Summary Notice” means the Summary Notice of Pendency of Class Action and Proposed Settlement, which shall be substantially in the form attached hereto as Exhibit A-2, to be published as set forth in the Preliminary Approval Order. hh) “Taxes” means any taxes due and payable with respect to the income earned by the Settlement Fund, including any interest or penalties thereon.  ii) “Tax Expenses” means any reasonable expenses and costs incurred in connection with the payment of Taxes or the preparation of tax returns, including, without limitation, reasonable expenses of tax attorneys and/or accountants and/or other advisors and reasonable expenses relating to the filing of or failure to file all necessary or advisable tax returns. jj) “Unknown Claims” means any and all Released Claims, of every nature and description, that Lead Plaintiff and/or any Class Member does not know or suspect to exist in his, her or its favor at the time of the release of a Released Party or the Released Parties, which, if known by him, her or it, might have affected his, her or its settlement with and release of a Released Party or the Released Parties, or might have 

 

14  affected his, her or its decision not to object to this Settlement or not to exclude himself, herself or itself from the Class or to release the Released Claims. With respect to any Settled Defendants’ Claims, “Unknown Claims” means any and all Settled Defendants’ Claims, of every nature and description, which Defendants and the other Released Party or Released Parties do not know or suspect to exist in their favor at the time of the release of Lead Plaintiff, the Class Members, and their attorneys, which, if known by them, might have affected their decisions with respect to the release of Settled Defendants’ Claims or the Settlement. II. SETTLEMENT CONSIDERATION 2. ADES, on behalf of all Defendants, shall cause to be deposited Three Million, Nine Hundred-Fifty Thousand Dollars ($3,950,000) into the Escrow Account by wire transfer or delivery of a check by no later than thirty (30) calendar days after the later of: (i) entry of a Preliminary Approval Order by the Court, or (ii) receipt by Defendants’ Counsel from Lead Counsel of all necessary payment details to accomplish payment of the Settlement Amount by wire transfer or check, including payee name, payee mailing address, bank account number, name of bank, and bank address, a Sort Code or ABA Routing Number, the currency of the account receiving the funds, wire transfer instructions, the Tax Identification Number and an executed Form W-9. The Settlement Amount shall constitute the full and sole monetary contribution made by or on behalf of a Released Party or the Released Parties in connection with the resolution of the Action and the Settlement. If the Settlement Amount, or any portion thereof, is not deposited into the Escrow Account by the date provided for in this paragraph, the Settling Parties agree that Defendants will not be obligated to pay the Settlement 

 

15  Amount or any portion thereof and Lead Plaintiff’s, Lead Counsel’s, and any other parties’ remedy against Defendants shall be to terminate the Settlement, in which case ¶ 44 below shall govern. III. CAFA NOTICE 3. Pursuant to the Class Action Fairness Act, 28 U.S.C. § 1715, no later than ten (10) days after the Settlement is filed with the Court, Defendants will serve proper notice of the proposed Settlement upon the appropriate representatives and, within three (3) business days thereafter, will provide written notification to Lead Counsel that they have done so. Defendants shall be responsible for all costs and expenses related to such notification. IV. RELEASES 4. Upon the Effective Date, Lead Plaintiff and each of the Class Members (on behalf of themselves and each of their respective present and former directors, officers, employees, parents, subsidiaries, related or affiliated entities, shareholders, members, divisions, partners, joint ventures, family members, spouses, domestic partners, heirs, principals, agents, owners, fiduciaries, personal or legal representatives, attorneys, auditors, accountants, advisors, banks or bankers, insurers, reinsurers, trustees, trusts, estates, executors, administrators, predecessors, successors, assigns, and any other person or entity who has the right, ability, standing, or capacity to assert, prosecute, or maintain on behalf of any Class Member any of the Released Claims (or to obtain the proceeds of any recovery therefrom)), regardless of whether that Class Member actually submits a Proof of Claim Form, seeks or obtains a distribution from the Net Settlement Fund, is entitled to receive a distribution under the Plan of Allocation 

 

16  approved by the Court, or has objected to the Settlement, the Plan of Allocation, or Lead Counsel’s application for attorneys’ fees and Litigation Expenses, shall be deemed to have and by operation of the Judgment shall have fully, finally and forever waived, released, relinquished, discharged and dismissed each and every Released Claim against each and every Released Party. 5. With respect to any and all Released Claims, the Settling Parties stipulate and agree that, upon the Effective Date, Lead Plaintiff expressly waives, and each Class Member shall be deemed to have waived, and by operation of the Judgment shall have expressly waived, to the fullest extent permitted by law, the provisions, rights and benefits of California Civil Code § 1542, and of any U.S. federal or state law, or principle of common law or the law of any foreign jurisdiction, that is similar, comparable, or equivalent to Section 1542 of the California Civil Code, which provides, in relevant part: A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor. Lead Plaintiff and other Class Members, or certain of them, may hereafter discover facts in addition to or different from those which he, she or it now knows or believes to be true with respect to the subject matter of the Released Claims, but Lead Plaintiff and the Class Members, and each of them, upon the Effective Date, by operation of the Judgment, shall have, fully, finally, and forever settled and released any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non- contingent, whether or not concealed or hidden, that now exist or heretofore have existed, upon any theory of law or equity now existing or coming into existence in the future, including, but not limited to, claims relating to conduct that is negligent, reckless, 

 

17  intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts. Lead Plaintiff acknowledges, and Class Members by law and operation of the Judgment shall be deemed to have acknowledged, that the inclusion of “Unknown Claims” in the definition of Released Claims was separately bargained for and was a material element of the Settlement. 6. Upon the Effective Date, Lead Plaintiff and each of the Class Members (on behalf of themselves and each of their respective present and former directors, officers, employees, parents, subsidiaries, related or affiliated entities, shareholders, members, divisions, partners, joint ventures, family members, spouses, domestic partners, heirs, principals, agents, owners, fiduciaries, personal or legal representatives, attorneys, auditors, accountants, advisors, banks or bankers, insurers, reinsurers, trustees, trusts, estates, executors, administrators, predecessors, successors, assigns, and any other person or entity who has the right, ability, standing, or capacity to assert, prosecute or maintain, on behalf of any Class Member, any of the Released Claims (or to obtain the proceeds of any recovery therefrom)), regardless of whether that Class Member actually submits a Proof of Claim Form, seeks or obtains a distribution from the Net Settlement Fund, is entitled to receive a distribution under the Plan of Allocation approved by the Court, or has objected to the Settlement, the Plan of Allocation, or Lead Counsel’s application for attorneys’ fees and Litigation Expenses, and in accordance with the terms of the proposed Judgment attached hereto as Exhibit B, shall have covenanted not to sue the Released Parties with respect to any Released Claims and are forever barred and enjoined from commencing, instituting, participating in, 

 

18  maintaining, or continuing to prosecute any action or proceeding in any court of law or equity, arbitration tribunal, administrative forum, or other forum of any kind, asserting any Released Claim (including, without limitation, Unknown Claims), as well as any claims arising out of, relating to, or in connection with, the defense, settlement, or resolution of this Action against any Released Party.  7. Upon the Effective Date, each of the Released Parties, on behalf of themselves and each of their past or present subsidiaries, affiliates, parents, assigns, successors and predecessors, estates, heirs, executors, administrators, and the respective officers, directors, shareholders, agents, legal representatives, spouses and any persons or entities they represent, shall, with respect to each and every one of Settled Defendants’ Claims, release and forever discharge each and every one of the Settled Defendants’ Claims, and shall forever be enjoined from instituting, commencing, or prosecuting the Settled Defendants’ Claims. V. BAR ORDER 8. The proposed Judgment shall include, and the Settling Parties agree to the entry by the Court of an order providing for the bar order in ¶ 9 (the “Bar Order”), subject to the terms in ¶ 11 herein. 9. The Bar Order shall provide that, upon the Effective Date, except as provided in ¶ 11 below, any and all persons and entities are permanently barred and enjoined, to the fullest extent permitted by law, from commencing, prosecuting, or asserting any and all claims for contribution or indemnity (or any other claim when the alleged injury to that person or entity is their actual or threatened liability to the Class or a Class Member in the Action) based upon, relating to, arising out of, or in connection 

 

19  with the Released Claims, against each and every one of the Released Parties, whether arising under state, federal, common, statutory, administrative or foreign law, regulation, or at equity, as claims, cross-claims, counterclaims, or third-party claims, in this Action or a separate action, in this Court or in any other court, arbitration proceeding, administrative proceeding, or other forum; and, except as provided in ¶ 11 below, the Released Parties are permanently barred and enjoined, to the fullest extent permitted by law, from commencing, prosecuting, or asserting any and all claims for contribution or indemnity (or any other claim when the alleged injury to the Released Party is their actual or threatened liability to the Class or a Class Member in the Action) based upon, relating to, or arising out of the Released Claims, against any person or entity, other than a person or entity whose liability to the Class has been extinguished pursuant to the Settlement and the Judgment, whether arising under state, federal, common, statutory, administrative, or foreign law, regulation, or at equity, as claims, cross-claims, counterclaims, or third-party claims, in this Action or a separate action, in this Court or in any other court, arbitration proceeding, administrative proceeding, or other forum. Nothing herein shall bar, release, or alter, in any way, any obligations, rights or claims among or between the Released Parties. 10. The Judgment shall also contain a provision, substantially in the form set forth in Exhibit “B” hereto, requiring that any final verdict or judgment that may be obtained by or on behalf of the Class or a Class Member against any person or entity subject to the Bar Order as defined herein be reduced by the greater of: (i) an amount that corresponds to the percentage of responsibility of any of the Defendants for common damages; or (ii) the Settlement Amount. 

 

20  11. Notwithstanding the Bar Order in ¶ 9 above, nothing in this Settlement shall bar any action by any of the Settling Parties to enforce or effectuate the terms of this Settlement, the Preliminary Approval Order, or the Judgment. VI. USE AND TAX TREATMENT OF SETTLEMENT FUND 12. The Settlement Fund shall be held and invested in the Escrow Account as provided in ¶ 13 hereof. If the Settlement becomes Final, any interest earned on the Settlement Fund shall be for the benefit of the Class. If the Settlement does not become Final and the Settlement is terminated for any reason, within ten (10) days of termination, the Settlement Fund shall be returned pursuant to written instructions from Defendants’ Counsel, together with any interest earned on the Settlement Fund, less any Notice and Administration Costs actually incurred. 13. The Escrow Agent shall invest any funds in excess of the $100,000.00 preliminarily allocated to Notice and Administration Costs, in United States Agency or Treasury Securities having maturities of one hundred and eighty (180) days or less, money market mutual funds comprised of investments secured by the full faith and credit of the United States government, or an interest-bearing account insured by the Federal Deposit Insurance Corporation (“FDIC”), and shall collect or reinvest all interest accrued thereon. Any funds held in escrow in an amount equal to or less than $100,000.00 may be held in an interest-bearing bank account insured by the FDIC. The Released Parties and Defendants’ Counsel shall have no responsibility for, interest in, or liability with respect to the investment decisions of the Escrow Agent. The Settlement Fund and the Escrow Agent shall bear all risks related to investment of the Settlement Amount. 

 

21  14. The Escrow Agent shall not disburse the Settlement Fund except as provided in this Settlement. 15. Subject to the terms and conditions of this Settlement, the Settlement Fund shall be used to pay: (i) Taxes and Tax Expenses; (ii) Notice and Administration Costs; and (iii) any attorneys’ fees and Litigation Expenses awarded by the Court. In no event shall the Released Parties bear any responsibility for any fees, costs or expenses beyond payment of the Settlement Amount. 16. After (i) the Judgment becomes Final, and (ii) entry by the Court of a Class Distribution Order approving distribution of the Net Settlement Fund to the Class, the Claims Administrator shall distribute the Net Settlement Fund to Authorized Claimants in accordance with the terms of such Class Distribution Order; provided, however, that any amounts in the Escrow Account necessary for payment of Taxes and Tax Expenses and/or Notice and Administration Costs shall remain in the Escrow Account for such purpose. 17. Except as provided herein, the Net Settlement Fund shall remain in the Escrow Account prior to the distribution. All funds held in the Escrow Account shall be deemed to be in the custody of the Court and shall remain subject to the jurisdiction of the Court until such time as the funds are distributed or returned pursuant to the terms of this Settlement. 18. The Settling Parties agree that the Settlement Fund is intended to be a “qualified settlement fund” within the meaning of Treasury Regulation § 1.468B-1 and that the Claims Administrator, as “administrator” of the Settlement Fund within the meaning of Treasury Regulation § 1.468B-2(k)(3), shall be solely responsible for filing or 

 

22  causing to be filed all informational and other tax returns as may be necessary or appropriate (including, without limitation, the returns described in Treasury Regulation § 1.468B-2(k)) for the Settlement Fund. Such returns shall be consistent with this paragraph and in all events shall reflect that all Taxes on the income earned on the Settlement Fund shall be paid out of the Settlement Fund as provided by ¶ 19 herein. The Claims Administrator shall also be solely responsible for causing payment to be made from the Settlement Fund of any Taxes and Tax Expenses owed with respect to the Settlement Fund, and is authorized to withdraw, without prior order of the Court, from the Settlement Fund such amounts as are necessary to pay Taxes and Tax Expenses. Defendants will provide to the Claims Administrator the statement described in Treasury Regulation § 1.468B-3(e). However, neither the Released Parties nor Defendants’ Counsel shall have any liability or responsibility for the filing of any tax returns or other documents with the Internal Revenue Service or any other state or local taxing authority. The Claims Administrator, as “administrator” of the Settlement Fund within the meaning of Treasury Regulation § 1.468B-2(k)(3), shall timely make such elections as are necessary or advisable to carry out this paragraph, including, as necessary, making a “relation-back election,” as described in Treasury Regulation § 1.468B-1(j), to cause the qualified settlement fund to come into existence at the earliest allowable date, and shall take or cause to be taken all actions as may be necessary or appropriate in connection therewith. 19. All Taxes (including any interest or penalties) and Tax Expenses shall be considered to be a cost of administration of the Settlement and shall be paid out of the Settlement Fund. The Released Parties shall not have any responsibility for, and no 

 

23  liability with respect to, payment of any such Taxes or Tax Expenses, and shall have no responsibility for, and no liability with respect to, the acts or omissions of the Claims Administrator, Lead Counsel or their agents, with regard to Taxes and Tax Expenses. The Settling Parties agree to cooperate with each other, and their tax attorneys and accountants, to the extent reasonably necessary to carry out the terms of this Settlement with regard to Taxes and Tax Expenses. 20. If all conditions of the Settlement are satisfied and the Judgment is entered and becomes Final, no portion of the Settlement Fund will be returned to Defendants, irrespective of the number of Claims filed, the collective amount of losses of Authorized Claimants, the percentage of recovery of losses, or the amounts to be paid to Authorized Claimants from the Net Settlement Fund. If any portion of the Net Settlement Fund remains following distribution pursuant to ¶ 29 and is of such an amount that in the discretion of the Claims Administrator it is not cost effective or efficient to redistribute to the Class, then such remaining funds, after payment of any further Notice and Administration Costs and Taxes and Tax Expenses, shall be donated to a non-sectarian charitable organization(s) certified as tax-exempt under United States Internal Revenue Code Section 501(c)(3), to be designated by Lead Counsel. VII. CLASS CERTIFICATION 21. Solely for purposes of the Settlement, the Settling Parties stipulate and agree to: (a) certification of the Action as a class action pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure on behalf of the Class; (b) appointment of Lead Plaintiff as Class representative; and (c) appointment of Lead Counsel as Class counsel pursuant to Rule 23(g) of the Federal Rules of Civil Procedure. 

 

24  VIII. PLAN OF ALLOCATION 22. The Net Settlement Fund shall be distributed to Authorized Claimants in accordance with a Plan of Allocation prepared by Lead Counsel, in conjunction with Lead Plaintiff’s damages expert and set forth in Exhibit A-1. The Released Parties and Defendants’ Counsel have had no role in the preparation of the Plan of Allocation. 23. The finality of the Settlement shall not be conditioned on any ruling by the District Court concerning the Plan of Allocation or any award of attorneys’ fees or reimbursement of Litigation Expenses. Any order or proceeding relating to a request for approval of the Plan of Allocation, or any appeal from any order relating thereto or reversal or modification thereof, shall not operate to terminate the Settlement or affect or delay the Effective Date or the effectiveness or finality of the Judgment and the release of the Released Claims. There shall be no distribution of any of the Settlement Fund to any Class Member until the Plan of Allocation is finally approved and such order of approval is affirmed on appeal and/or is no longer subject to review by appeal or certiorari, and the time for any petition for rehearing, appeal, or review, by certiorari or otherwise, has expired. Again, and for the avoidance of doubt, the Released Parties and Defendants’ Counsel shall have no responsibility for, and no liability with respect to, the investment or distribution of the Settlement Fund. 24. The allocation of the Net Settlement Fund among Authorized Claimants is a matter separate and apart from the proposed Settlement between Defendants and Lead Plaintiff, and any decision by the Court concerning the Plan of Allocation shall not affect the validity or finality of the proposed Settlement. The Plan of Allocation is not a necessary term of this Settlement, and it is not a condition of this Settlement that any 

 

25  particular plan of allocation be approved by the Court.   None of the Settling Parties may cancel or terminate the Settlement based on this Court’s or any appellate court’s ruling with respect to the Plan of Allocation or any plan of allocation in this Action. The Released Parties shall have no responsibility for, and no liability with respect to, the allocation of the Net Settlement Fund, nor shall they object to the Plan of Allocation proposed by Lead Plaintiff. IX. ATTORNEYS’ FEES AND LITIGATION EXPENSES 25. Lead Counsel may apply to the Court for an award from the Settlement Fund of attorneys’ fees not to exceed one-third of the Settlement Fund. Litigation Expenses may include reimbursement of the expenses of Lead Plaintiff’s counsel up to $150,000.00 and Lead Plaintiff’s expenses up to  $5,000.00 in accordance with 15 U.S.C. § 78u-4(a)(4). Attorneys’ fees and Litigation Expenses are not the subject of any agreement between the Settling Parties other than what is set forth in this Settlement. 26. The Released Parties will take no position on Lead Counsel’s request for attorneys’ fees or Litigation Expenses, and shall have no responsibility for, and no liability with respect to, the attorneys’ fees or Litigation Expenses that the Court may award. 27. The procedure for and amounts of any award of attorneys’ fees and Litigation Expenses, and the allowance or disallowance by the Court thereof, shall not be a condition of the Settlement. Lead Counsel shall request that its application for an award of attorneys’ fees and Litigation Expenses be considered by the Court separately from the Court’s consideration of the fairness and adequacy of the Settlement. Any order or proceedings relating to such request, or any appeal from any order relating 

 

26  thereto or reversal or modification thereof, shall not operate to terminate the Settlement or affect the release of the Released Claims. The finality of the Settlement shall not be conditioned on any ruling by the Court concerning Lead Counsel’s application for attorneys’ fees and Litigation Expenses.  28. Within ten (10) days after both the Judgment and an order by the Court approving Lead Counsel’s attorneys’ fees and Litigation Expenses (the “Fee and Expense Order”) become Final, any awarded attorneys’ fees and Litigation Expenses shall be paid to Lead Counsel from the Escrow Account. Notwithstanding the foregoing, such attorneys’ fees and Litigation Expenses awarded by the Court may be paid immediately following entry of the Judgment and the Fee and Expense Order notwithstanding the existence of or pendency of any appeal or collateral attack on the Settlement or any part thereof or the Fee and Expense Order. In the event that the Effective Date does not occur, or the Judgment or the Fee and Expense Order is reversed or modified by a Final, non-appealable order, or the Settlement is terminated or canceled for any reason, and in the event that attorneys’ fees and Litigation Expenses have been paid out of the Escrow Account to any extent, then Lead Counsel shall be obligated and do hereby agree, within ten (10) days from receiving notice from Defendants’ Counsel or from the Court, to refund to the Escrow Account such attorneys’ fees and Litigation Expenses that have been paid, plus interest thereon at the same rate as would have been earned had those sums remained in the Escrow Account.  Lead Counsel is responsible for refunding 100% of the sums to be refunded regardless of whether the sums were distributed to Plaintiff (as Lead Plaintiff’s expenses) as provided in Paragraph 25, or to other counsel. 

 

27  X. ADMINISTRATION OF THE SETTLEMENT 29. The Claims Administrator, subject to the supervision of Lead Counsel and the jurisdiction of the Court, shall administer and calculate the Claims submitted by Class Members, oversee distribution of the Net Settlement Fund to Authorized Claimants, and perform all claims administration procedures necessary or appropriate in connection therewith. The Claims Administrator shall receive and administer Claims in accordance with the Plan of Allocation approved by the Court. The proposed Plan of Allocation is set forth in the Notice attached hereto as Exhibit A-1.  30. The Released Parties shall have no liability, obligation or responsibility whatsoever to any person, including, but not limited to, Class Members, the Escrow Agent, Lead Counsel, Lead Plaintiff, or the Claims Administrator, in connection with the Plan of Allocation, the administration of the Settlement, the investment of the Settlement Fund, the processing of claims, or the disbursement of the Settlement Fund or the Net Settlement Fund.  The Settlement Fund shall indemnify and hold all Released Parties harmless for any Taxes and related expenses on the Settlement Fund of any kind whatsoever (including, without limitation, taxes payable by reason of any such indemnification), as well as for any claims related to the Plan of Allocation, the administration of the Settlement, the investment of the Settlement Fund, the processing of claims, or the disbursement of the Settlement Fund or the Net Settlement Fund. Defendants shall notify the Escrow Agent promptly if Defendants receive any notice of any claim so indemnified. 31. Within ten (10) business days of the Court’s Preliminary Approval Order, Defendants will use reasonable efforts to cause ADES’s transfer agent to provide the 

 

28  Claims Administrator, in a computer-readable format, the last known names and addresses of all of ADES’s shareholders of record during the Class Period. 32. Lead Counsel shall cause the Claims Administrator to mail the Notice to those Class Members who may be identified through the records maintained by or on behalf of ADES, and to publish the Summary Notice, pursuant to the terms of the Preliminary Approval Order entered by the Court. 33. Any Class Member who does not timely submit a valid Proof of Claim Form by the deadline set by the Court will not be entitled to receive any distribution from the Net Settlement Fund but will, nevertheless, be bound by all of the terms of the Settlement, including the terms of the Judgment to be entered in the Action and the releases provided for therein, and will be permanently barred and enjoined from bringing any action, claim or other proceeding of any kind against any Released Party concerning any Released Claim. 34. By submitting a Claim, a Class Member shall be deemed to have submitted to the jurisdiction of the Court with respect to the Claim, including, but not limited to, the releases and Bar Order provided for in the Judgment, and the Claim will be subject to investigation and discovery under the Federal Rules of Civil Procedure, provided that such investigation and discovery shall be limited to their status as a Class Member and the validity and amount of their Claim. No discovery shall be allowed on the merits of this Action or this Settlement in connection with the processing of Proof of Claim Forms, nor shall any discovery be taken of the Released Parties in connection with such matters. 

 

29  35. Lead Counsel will apply to the Court, with reasonable notice to Defendants, for a Class Distribution Order, inter alia: (i) approving the Claims Administrator’s administrative determinations concerning the acceptance and rejection of the Claims submitted; (ii) approving payment of any outstanding Notice and Administration Costs from the Escrow Account; and (iii) if the Effective Date has occurred, directing payment of the Net Settlement Fund to Authorized Claimants. 36. Payment pursuant to the Class Distribution Order shall be final and conclusive against any and all Class Members. All Class Members who did not submit a Claim or whose Claim was not approved by the Court shall be barred from participating in distributions from the Net Settlement Fund, but shall be bound by all of the terms of this Settlement, including the terms of the Judgment and the releases provided for therein, and will be permanently barred and enjoined from bringing any action, claim or proceeding of any kind against any Released Party concerning any Released Claim. 37. All proceedings with respect to the administration, processing and determination of Claims and the determination of all controversies relating thereto, including disputed questions of law and fact with respect to the validity of Claims, shall be subject to the jurisdiction of the Court. XI. OBJECTIONS AND REQUESTS FOR EXCLUSION 38. Any member of the Class may appear at the Final Approval Hearing and show cause why the proposed Settlement should or should not be approved as fair, reasonable, adequate and in the best interests of the Class, or why the Judgment should or should not be entered thereon, and/or to present opposition to the Plan of Allocation or to the application of Lead Counsel for attorneys’ fees and reimbursement 

 

30  of Litigation Expenses. However, no Class Member or any other person or entity shall be heard or entitled to contest the approval of the terms and conditions of the Settlement, or, if approved, the Judgment to be entered thereon approving the same, or the terms of the Plan of Allocation or the application by Lead Counsel for an award of attorneys’ fees and reimbursement of Litigation Expenses, unless that Class Member (i) has served written objections, by hand or first-class mail, including the basis therefor, as well as copies of any papers and/or briefs in support of his, her or its position upon Lead Counsel and Defendants’ Counsel for receipt no later than twenty-one (21) days prior to the Final Approval Hearing; and (ii) filed said objections, papers and briefs with the Clerk of the United States District Court for the District of Colorado by no later than twenty-one (21) days prior to the Final Approval Hearing. Any objection must include: (a) the full name, address, and telephone number of the objecting Class Member; (b) a list and documentation of all of the Class Member’s transactions in ADES’s common stock during the Class Period, such as brokerage confirmation receipts or other competent documentary evidence of such transactions, including the amount and date of each purchase (or acquisition) or sale and the price or other consideration paid and/or received (including all income received thereon); (c) a written statement of all grounds for the objection accompanied by any legal support for the objection; (d) copies of any papers, briefs or other documents upon which the objection is based; (e) a list of all persons who will be called to testify in support of the objection; (f) a statement of whether the objector intends to appear at the Final Approval Hearing; (g) a list of other cases in which the objector or the objector’s counsel have appeared either as settlement objectors or as counsel for objectors in the preceding five years; and (h) the 

 

31  objector’s signature, even if represented by counsel. If the objector intends to appear at the Final Approval Hearing through counsel, the objection must also state the identity of all attorneys who will appear on the objector’s behalf at the Final Approval Hearing. Any Class Member who does not make his, her or its objection in the manner provided for herein shall be deemed to have waived such objection and shall forever be foreclosed from making any objection to the fairness or adequacy of the Settlement, to the Judgment, to the Plan of Allocation or to the application by Lead Counsel for an award of attorneys’ fees and reimbursement of Litigation Expenses. The Notice shall also state the manner in which a notice of objection should be prepared, filed and delivered. By objecting to the Settlement, the Judgment, the Plan of Allocation and/or the application by Lead Counsel for an award of attorneys’ fees and reimbursement of Litigation Expenses, or otherwise requesting to be heard at the Final Approval Hearing, an objector shall be deemed to have submitted to the jurisdiction of the Court with respect to the person’s or entity’s objection or request to be heard and the subject matter of the Settlement, including, but not limited to, enforcement of the terms of the Settlement (including, but not limited to, the release of the Released Claims provided for in the Settlement and the Judgment). 39. A person or entity requesting exclusion from the Class must timely provide the following information to the Claims Administrator: (i) name; (ii) address; (iii) telephone number; (iv) number of shares of ADES common stock purchased (or otherwise acquired) or sold during the Class Period; (v) prices or other consideration paid or received for such ADES common stock; (vi) the date of each purchase (or acquisition) or sale transaction; and (vii) a statement that the person or entity wishes to 

 

32  be excluded from the Class. Unless otherwise ordered by the Court, any Class Member who does not timely submit a written request for exclusion as provided by this Paragraph shall be bound by the Settlement. Lead Plaintiff shall request that any requests for exclusion must be received by the Claims Administrator no later than twenty-one (21) days prior to the Final Approval Hearing. 40. The Claims Administrator shall scan and electronically send copies of all requests for exclusion in PDF format (or such other format as shall be agreed upon) to Defendants’ Counsel and to Lead Counsel expeditiously (and not more than two (2) days) after the Claims Administrator receives such a request. Lead Counsel shall provide Defendants’ Counsel, within two (2) days after the expiration of the request for exclusion deadline, copies of all requests for exclusion of any Class Members who will be identified to the Court as having validly and timely requested exclusion from the Class. Lead Counsel will submit to the Court a final list of all persons or entities who have requested exclusion from the Class, and shall certify that copies of all requests for exclusion received by the Claims Administrator have been provided to Defendants’ Counsel, at least two (2) days before the Final Approval Hearing. XII. PRELIMINARY APPROVAL OF THE SETTLEMENT 41. Promptly after execution of this Settlement, Lead Plaintiff, by and through Lead Counsel, with Defendants’ Counsel’s consent, shall submit the Settlement together with its exhibits, to the Court and shall move for entry of the Preliminary Approval Order, among other things, preliminarily (a) approving the Settlement, (b) approving the contents and method of distribution of the Notice and Summary Notice, (c) approving the contents of the Proof of Claim Form, and (d) setting a date for the 

 

33  Final Approval Hearing. To permit compliance with the settlement notice requirements of the Class Action Fairness Act, the Final Approval Hearing shall take place no earlier than one hundred (100) days after the Court enters the Preliminary Approval Order. XIII. JUDGMENT APPROVING THE SETTLEMENT 42. Lead Plaintiff, by and through Lead Counsel, with Defendants’ Counsel’s consent, shall request that the Court, if it approves the Settlement following the Final Approval Hearing, enter the Judgment. The Settlement is expressly conditioned upon, among other things, the entry of a Judgment substantially in the form attached hereto as Exhibit B and in all respects consistent with this Settlement.  XIV. EFFECTIVE DATE OF THE SETTLEMENT, AND TERMINATION 43. The Effective Date of the Settlement shall be the first date by which all of the following have occurred: a) The Court has entered the Preliminary Approval Order; b) ADES has caused the Settlement Amount to be deposited into the Escrow Account; c) Defendants have not exercised their option to terminate the Settlement pursuant to ¶ 45 herein; d) The Court has approved the Settlement following notice to the Class and the Final Approval Hearing in accordance with Rule 23 of the Federal Rules of Civil Procedure, and has entered the Judgment; and e) The Judgment has become Final, as defined in ¶ I 1(n) herein. 44. Defendants and Lead Plaintiff each shall have the right to terminate the Settlement by providing written notice of their election to do so to the other within twenty 

 

34  (20) days of the date on which: (a) the Court refuses to approve this Settlement, or the terms contained herein, in any material respect; (b) the Court declines to enter the Preliminary Approval Order in any material respect; (c) the Court refuses to grant final approval of this Settlement, or any material part of it; (d) the Court declines to enter the Judgment in any material respect; (e) any appellate court refuses to approve the Judgment in any material respect in such a way that the Court cannot, on remand from such an appeal, enter the Judgment; (f) the Effective Date of the Settlement does not occur; or (g) the payment of the Settlement Amount is not satisfied in accordance with the terms herein. In addition, Defendants may also terminate the Settlement in accordance with ¶ 45. The foregoing list is not intended to limit or impair the Settling Parties’ rights under the law of contracts of the State of Colorado with respect to any breach of this Settlement (except as provided in ¶ 2 hereof). In the event the Settlement is terminated, the provisions of this Paragraph and of ¶¶ 12, 13, 14, 15, 17, 19, 28, 30, 46, 47, 51, 53, 54, 60, 63, 64, 65, 66, and 67 shall survive termination. If the Settlement does not become Final or is terminated for any reason, within ten (10) days of termination, the Settlement Fund shall be returned to Defendants pursuant to written instructions from Defendants’ Counsel, together with any interest earned on the Settlement Fund, less any Notice and Administration Costs actually and reasonably incurred. 45. Defendants shall have the option to terminate the Settlement in the event that the aggregate number of total shares of ADES common stock purchased or acquired during the Class Period by persons or entities who would otherwise be entitled to participate in the Settlement as Class Members, but who timely and validly request 

 

35  exclusion in accordance with the terms of this Settlement, equals or exceeds the threshold (the “Opt-Out Threshold”) as calculated pursuant to a separate agreement (the “Supplemental Agreement”) executed between Lead Counsel and Defendants’ Counsel, which is incorporated by reference into this Settlement. The Opt-Out Threshold may be disclosed in camera to the Court for purposes of approval of the Settlement, as may be required by the Court, but such disclosure shall be carried out to the fullest extent possible in accordance with the practices of the Court so as to maintain the confidentiality of the Opt-Out Threshold. 46. Except as otherwise provided herein, in the event the Settlement is terminated, the Settling Parties reserve their rights to proceed in all respects as if this Settlement had not been entered into and without any prejudice in any way from the negotiation, fact or terms of this Settlement. If the Settlement is terminated, the Settling Parties shall be restored to their respective positions in the Action as of March 8, 2016, the date the Court entered its Order granting the parties’ Stipulated Motion to Stay this proceeding pending settlement discussions. Any order certifying a class in this Action for purposes of this Settlement prior to termination shall be null and void and a class shall not be considered certified for purposes of further litigation. The Settling Parties will, in good faith, propose a new case schedule for the completion of briefing on any motion to dismiss the Second Amended Complaint, class certification briefing, discovery and other pretrial proceedings and for the trial of this Action. XV. NO ADMISSION OF WRONGDOING 47. Whether or not the Settlement is approved by the Court, and whether or not the Settlement is consummated, the fact and terms of this Settlement, including its 

 

36  exhibits, all negotiations, discussions, drafts and proceedings in connection with the Settlement, and any act performed or document signed in connection with the Settlement: a) shall not be offered or received against the Released Parties, Lead Plaintiff or the other Class Members as evidence of, or be deemed to be evidence of, any presumption, concession or admission by any of the Released Parties or by Lead Plaintiff or the other Class Members with respect to the truth of any fact alleged by Lead Plaintiff or the validity, or lack thereof, of any claim that has been or could have been asserted in the Action or in any litigation, or the deficiency of any defense that has been or could have been asserted in the Action or in any litigation, or of any liability, negligence, fault or wrongdoing of the Released Parties; b) shall not be offered or received against the Released Parties as evidence of a presumption, concession or admission of any fault, misrepresentation or omission with respect to any statement or written document approved or made by any Released Party, or against Lead Plaintiff or any of the other Class Members as evidence of any infirmity in the claims of Lead Plaintiff and the other Class Members; c) shall not be offered or received against the Released Parties, Lead Plaintiff or the other Class Members as evidence of a presumption, concession or admission with respect to any liability, negligence, fault or wrongdoing, or in any way referred to for any other reason as against any of the Released Parties, Lead Plaintiff or the other Class Members, in any 

 

37  arbitration proceeding or other civil, criminal or administrative action or proceeding, other than such proceedings as may be necessary to effectuate the provisions of this Settlement; provided, however, that if this Settlement is approved by the Court, the Released Parties may refer to the Settlement and the Judgment in any action that may be brought against them to effectuate the liability protection granted them hereunder, including, without limitation, to support a defense or claim based on principles of res judicata, collateral estoppel, release, good faith settlement, judgment bar or reduction, or any other theory of claim preclusion or issue preclusion or similar defense or claim under U.S. federal or state law or foreign law; d) shall not be construed against the Released Parties, Defendants’ Counsel, Lead Counsel or Lead Plaintiff or the other Class Members as an admission or concession that the consideration to be paid hereunder represents the amount which could be or would have been recovered after trial or that any damages potentially recoverable in the Action would have exceeded or would have been less than the Settlement Amount; and e) shall not be construed as or received in evidence as an admission, concession or presumption against Lead Plaintiff or the other Class Members, or any of them, that any of their claims are without merit; and f) shall not be construed as or received in evidence as an admission, concession or presumption against the Released Parties that class 

 

38  certification is appropriate in this Action, except for purposes of this Settlement. 48. Defendants have denied, and continue to deny, each and every claim and contention alleged in the Action and affirm that they have acted properly and lawfully at all times. Further, Defendants have denied expressly, and continue to deny, all allegations of wrongdoing, fault, liability, or damage against them arising out of any of the conduct, statements, acts or omissions alleged, or that could have been alleged, in the Action and deny that they ever engaged in or committed any fraud, wrongdoing, improper conduct, violation of law, or breach of duty whatsoever. Defendants also have denied, and continue to deny, inter alia, that there were any materially false or misleading statements or material omissions in any of Defendants’ public statements, including their filings with the SEC, and that Lead Plaintiff or any Class Member has suffered damage or harm of any kind. Had the terms of this Settlement not been reached, Defendants would have continued to contest vigorously Lead Plaintiff’s allegations, and Defendants maintain that they had and have meritorious defenses to all claims alleged in the Action.  XVI. MISCELLANEOUS PROVISIONS 49. All of the exhibits attached hereto are hereby incorporated by reference as though fully set forth herein. 50. The Settling Parties intend this Settlement to be a final and complete resolution of all disputes asserted or that could be asserted by Lead Plaintiff or any other Class Members in the Action or with respect to all Released Claims. Except in the event of termination of this Settlement, Lead Plaintiff and Defendants agree not to 

 

39  assert, under Rule 11 of the Federal Rules of Civil Procedure or any similar law, rule or regulation, that the Action was brought or defended in bad faith or without a reasonable basis. The Settling Parties agree that the Settlement Amount and the other terms of the Settlement were negotiated at arm’s length and in good faith by the Settling Parties and reflect a settlement that was reached voluntarily based upon adequate information and after consultation with their respective experienced legal counsel. 51. While maintaining their positions that the claims and defenses asserted in the Action are meritorious, Lead Plaintiff and Lead Counsel, on the one hand, and Defendants and Defendants’ Counsel, on the other, shall not make any public statements or statements to the media (whether or not for attribution) that disparage the other’s business, conduct, or reputation or that of their counsel based on the subject matter of the Action. 52. This Settlement may not be modified or amended, nor may any of its provisions be waived, except by a writing signed by all Settling Parties or their successors-in-interest. After prior notice to the Court, but without further order of the Court, the Settling Parties may agree to reasonable extensions of time to carry out any provisions of this Settlement. 53. The headings herein are used for the purpose of convenience only and are not meant to have legal effect. 54. Neither the Settlement, nor any act performed or document executed pursuant to or in furtherance of the Settlement: (a) is or may be deemed to be or may be used as an admission of, or evidence of, the truth or validity of any Released Claim, any allegations or claims made in the Action, or of any purported wrongdoing or liability 

 

40  of any of the Released Parties; or (b) is or may be deemed to be or may be used as an admission of, or evidence of, any liability, negligence, fault, omission, or wrongdoing as against any of the Released Parties in any civil, criminal or administrative proceeding in any court, any arbitration proceeding or any administrative agency or other tribunal, other than in such proceedings as may be necessary to consummate or enforce the Settlement or the Judgment. 55. The waiver by one party of any breach of this Settlement by any other party shall not be deemed a waiver of any other prior or subsequent breach of this Settlement. The provisions of this Settlement may not be waived except by a writing signed by the affected party, or counsel for that party. 56. This Settlement, including its exhibits and the Supplemental Agreement, which are material parts thereof, constitute the entire agreement among the Settling Parties, and no representations, warranties or inducements have been made to any party concerning this Settlement, its exhibits, or the Supplemental Agreement, other than the representations, warranties and covenants contained and memorialized in such documents. It is understood by the Settling Parties that, except for the matters expressly represented herein, the facts or law with respect to which this Settlement is entered into may turn out to be other than, or different from, the facts now known to each party or believed by such party to be true; each party therefore expressly assumes the risk of the facts or law turning out to be so different, and agrees that this Settlement shall be in all respects effective and not subject to termination by reason of any such different facts or law. 

 

41  57. This Settlement may be executed in one or more counterparts, including by signature transmitted via facsimile, or by a .pdf/.tif image of the signature transmitted via e-mail. All executed counterparts and each of them shall be deemed to be one and the same instrument. 58. Lead Plaintiff agrees that it will use its best efforts to obtain all necessary approvals of the Court required by this Settlement, and Defendants agree to provide such support as may be reasonably requested by Lead Plaintiff or Lead Counsel. 59. Each signatory to this Settlement represents that he or she has authority to sign this Settlement on behalf of Lead Plaintiff or Defendants, as the case may be, and that they have the authority to take appropriate action required or permitted to be taken, pursuant to this Settlement, to effectuate its terms. Lead Plaintiff and Lead Counsel also represent and warrant that none of Lead Plaintiff’s claims or causes of action referred to herein, or that could have been alleged in the Action, have been assigned, encumbered, hypothecated, conveyed, transferred, or in any manner granted or given, in whole or in part, to any other person or entity. 60. This Settlement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto, including all Released Parties, and any corporation, partnership, or other entity into or with which any party hereto may merge, consolidate or reorganize. 61. Any notice required by this Settlement shall be submitted by overnight mail and e-mail to each of the signatories below. 62. The administration, consummation and enforcement of the Settlement shall be under the authority of the Court and the Settling Parties intend that the Court 

 

42  retain jurisdiction for the purpose of, inter alia, entering orders, providing for awards of attorneys’ fees and Litigation Expenses, and enforcing the terms of the Settlement. 63. The construction, interpretation, operation, effect and validity of this Settlement, and all documents necessary to effectuate it, shall be governed by the internal laws of the State of Colorado without regard to that State’s choice-of-law principles, except to the extent that federal law requires that federal law governs. 64. To the extent there are disputes regarding the interpretation of any term of this Settlement, the Settling Parties will attempt to resolve any such dispute in good faith, including, if necessary, through further mediation discussions with Jed Melnick. If the Settling Parties fail to resolve the dispute, or in the event of a breach of the terms of the Settlement, any non-breaching Settling Party shall be entitled to bring an action seeking to enforce those provisions, and the exclusive forum for any such action shall be this Court. The prevailing Settling Party in any such action to enforce these provisions of the Settlement shall be entitled to recover their reasonable attorneys’ fees and expenses incurred in connection with remedying the breach. 65. This Settlement shall not be construed more strictly against one Settling Party than another merely by virtue of the fact that it, or any part of it, may have been prepared by counsel for one of the Settling Parties, it being recognized that it is the result of arm’s-length negotiations among the Settling Parties and all Settling Parties have contributed substantially and materially to the preparation of this Settlement. 66. Nothing in this Settlement, or the negotiations or proceedings relating to the Settlement, is intended to or shall be deemed to constitute a waiver of any applicable privilege or immunity, including, without limitation, the attorney-client 

 

43  privilege, the joint defense privilege, the accountants’ privilege, or work product immunity; further, all information and documents transmitted between Lead Plaintiff’s Counsel and Defendants’ Counsel in connection with this Settlement shall be kept confidential and shall be inadmissible in any proceeding in any U.S. federal or state court or other tribunal or otherwise, in accordance with Rule 408 of the Federal Rules of Evidence as if such Rule applied in all respects in any such proceeding or forum. 67. Except where specifically noted, all time periods set forth in this Settlement will be computed in calendar days and pursuant to the terms of Rule 6(a) of the Federal Rules of Civil Procedure.   

 

44  IN WITNESS WHEREOF, the Settling Parties hereto have caused this Settlement to be executed, by their duly authorized attorneys, as of June 30, 2016. SHEPHERD, FINKELMAN, MILLER & SHAH, LLP  s/ James E. Miller   James E. Miller Laurie Rubinow 65 Main Street Chester, CT 06412 Telephone: (860) 526-1100 Facsimile: (866) 300-7367 Email: jmiller@sfmslaw.com  Email: lrubinow@sfmslaw.com   Nathan Zipperian 1625 N. Commerce Pkwy., Suite 320 Ft. Lauderdale, FL 33326 Telephone: (954) 515-0123 Facsimile: (866) 300-7367 Email: nzipperian@sfmslaw.com    Valerie L. Chang Chiharu Sekino 401 West A Street, Suite 2350 San Diego, CA 92101 Telephone: (619) 235-2416 Facsimile: (866) 300-7367 Email: vchang@sfmslaw.com Email: csekino@sfmslaw.com  EDGAR LAW FIRM, LLC  David W. Edgar (Bar No. 41956) The Spectrum Building 1580 Lincoln Street, Ste. 1100 Denver, CO 80203 Tel: (720) 529-0505 Facsimile: (303) 486-0001 Email: dwe@edgarlawfirm.com  Attorneys for Lead Plaintiff, The United Food and Commercial Workers Union GIBSON, DUNN & CRUTCHER LLP  s/ Gregory J. Kerwin   Gregory J. Kerwin Allison K. Kostecka 1801 California Street, Suite 4200 Denver, CO 80202 Telephone: (303) 298-5700 Facsimile: (303) 313-2829 Email: gkerwin@gibsondunn.com  Email: akostecka@gibsondunn.com  FORTIS LAW PARTNERS LLC Stephen M. DeHoff Jeffrey M. Brenman 1900 Wazee Street, Suite 300 Denver, CO 80202 Telephone: (720) 904-6009 Facsimile: (303) 675-5200 Email: sdehoff@fortislawpartners.com  Email: jbrenman@fortislawpartners.com  Attorneys for Defendants Advanced Emissions Solutions, Inc., Michael D. Durham, C. Jean Bustard, Sharon M. Sjostrom, Christine B. Amrhein, and L. Heath Sampson 

 

45  and Participating Food Industry Employers Tri-State Pension Fund  MORRISON & FOERSTER LLP s/ Steven M. Kaufmann   Steven M. Kaufmann Nicole K. Serfoss 370 Seventeenth Street, Suite 4200 Denver, CO 80202 Telephone: (303) 592-2246 Facsimile: (303) 592-1520 Email: skaufmann@mofo.com  Email: nserfoss@mofo.com   Attorneys for Defendant Mark H. McKinnies   

 

46  CERTIFICATE OF SERVICE I hereby certify that on [date], a true and correct copy of the foregoing STIPULATION AND AGREEMENT OF SETTLEMENT was served via the ECF/PACER system on counsel of record.  s/

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