EXHIBIT 10.1

Execution Copy

 

 

 

 

SHARE PURCHASE AGREEMENT

 

among

 

PROTEA BIOSCIENCES GROUP, INC.

 

vivoPHARM PTY LTD.

 

DR. RALF BRANDT

 

and

 

THE BRANDT FAMILY TRUST

 

SOUTH AUSTRALIAN LIFE SCIENCE ADVANCEMENT PARTNERSHIP, LP

 

TERRA ROSSA CAPITAL PTY LTD

 

ROYAL MELBOURNE INSTITUTE OF TECHNOLOGY trading as “RMIT UNIVERSITY”

 

 

 

 

 

 

 

 

Dated as of March 31, 2015

 

 

 

  

TABLE OF CONTENTS

 

 

SECTION PAGE        ARTICLE I DEFINITIONS   1.1. Definitions 1       ARTICLE II
PURCHASE AND SALE OF SHARES   2.1. Basic Transaction 9 2.2. Payment of Fixed
Consideration 9 2.3. Holdback. 11 2.4. Payment of Contingent Consideration 12
2.5. The Closing 12 2.6. Closing Deliveries by Selling Shareholders 13 2.7.
Closing Deliveries by Buyer 13       ARTICLE III  REPRESENTATIONS AND WARRANTIES
OF THE SELLERS   3.1. Authorization of Transaction 14 3.2. Noncontravention 14  
    3.3. Subject Shares 14       ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SELLERS   4.1. Organization, Qualification, and Corporate
Power 15 4.2. Capitalization 16 4.3. Noncontravention 17 4.4. Brokers Fees 17
4.5. Title to Assets 17 4.6. Subsidiaries 17 4.7. Financial Statements;
Projections 17 4.8. Events Subsequent to Latest Balance Sheet 18 4.9.
Undisclosed Liabilities 20 4.10. Legal Compliance 20 4.11. Tax Matters 20 4.12.
Real Property 22 4.13. Intellectual Property 24 4.14. Tangible Assets 26 4.15.
Inventory 26 4.16. Contracts 26 4.17. Notes and Accounts Receivable 28 4.18.
Powers of Attorney 28 4.19. Insurance 28 4.20. Litigation 29 4.21. Product
Warranty 29 4.22. Product Liability 30

 

ii

 

 

4.23. Employees 30 4.24. Employee Benefits 30 4.25. Environmental Matters 32
4.26. Permits 33 4.27. Backlog 34 4.28. No Conflict of Interest 34 4.29. Bank
Accounts 34 4.30. Customers and Suppliers 34 4.31. Claims Against Officers and
Directors 35 4.32. Improper and Other Payments 35 4.33. Accuracy of Statements
35       ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER   5.1.
Organization of the Buyer 35 5.2. Authorization of Transaction 35 5.3.
Noncontravention 36 5.4. Brokers Fees 37 5.5. Legal Compliance 37 5.6.
Litigation 38 5.7. Accuracy of Statements 38       ARTICLE VI COVENANTS   6.1.
General 41 6.2. Notices and Consents 41 6.3. Operation of Business 41 6.4. Full
Access 43 6.5. Exclusivity 43 6.6. Efforts 44 6.7. Maintenance of Insurance 44
6.8. Notice and Supplemental Information 44 6.9. Employment Agreement 44 6.10.
Public Announcements 44 6.11. Consistent Tax Reporting 45 6.12. Termination of
Shareholder Agreements 45 6.13. Resignation of Officers and Directors 45 6.14.
Transition 45 6.15. Confidentiality 45 6.16. Noncompetition 45 6.17 Post-Closing
Covenants 45       ARTICLE VII CONDITIONS TO OBLIGATION OF BUYER   7.1.
Representations and Warranties True as of Closing Date 50 7.2. Compliance with
Covenants 50 7.3. Consents 50 7.4. Actions or Proceedings 50 7.5. Certificate 50
7.6. Financial Condition at Closing 50

 

iii

 

 

7.7. Resignations 51 7.8. Due Diligence Investigation 51 7.9. Financing
Contingency 51 7.10. Employment Agreements 52 7.11. Termination of Certain
Agreements 52 7.12. Insurance 52 7.13. Contracts 52 7.14. No Material Adverse
Effect 52 7.15. Documents 52       ARTICLE VIIICONDITIONS TO OBLIGATION OF THE
SELLERS   8.1. Representations and Warranties True as of Closing 53 8.2.
Compliance with Covenants 53 8.3. Actions or Proceedings 53 8.4. Certificate 53
8.5. Opinion of Counsel 53 8.6. Documents 53       ARTICLE IX SURVIVAL AND
REMEDY; INDEMNIFICATION   9.1. Survival of Representations and Warranties 53
9.2. Indemnification by the Management Selling Shareholders 54 9.3.
Indemnification by the Buyer 55 9.4. Third-Party Claims 55 9.5. Other
Indemnification Provisions 56 9.6. Holdback 57       ARTICLE X TERMINATION  
10.1. Termination of Agreement 57 10.2. Effect of Termination 58       ARTICLE
XI MISCELLANEOUS   11.1. Expenses 59 11.2. Press Releases and Public
Announcements 59 11.3. No Third-Party Beneficiaries 59 11.4. Entire Agreement 59
11.5. Succession and Assignment 59 11.6. Counterparts 59 11.7. Headings 59 11.8.
Notices 59 11.9. Governing Law 60 11.10. Amendments and Waivers 61 11.11.
Severability 61 11.12. Construction 61 11.13. Incorporation of Exhibits,
Annexes, and Schedules 61 11.14. Specific Performance 61 11.15. Submission to
Jurisdiction 61

 

iv

 

 

Exhibits

 

Exhibit A - Form of Certificate of Designations of Series A Preferred Stock

Exhibit B-1- Form of Dr. Ralf Brandt’s Employment Agreement

Exhibit B-2 - Form of Sabine Brandt’s Employment Agreement

Exhibit C - Form of Escrow Agreement

Exhibit D - Form of Option Holder Letter

Exhibit E - Form of Indemnification Agreement

 

v

 

   

Schedules

 

Schedule 2.2   Distribution of Fixed Consideration Schedule 3.2  
Noncontravention
Schedule 3.3   Subject Shares Schedule 4.2   Selling Shareholders Schedule 4.3  
Noncontravention Schedule 4.4   Brokers Schedule 4.5   Title to Assets Schedule
4.7(a)   Financial Statements Schedule 4.7(b)   Projections Schedule 4.8(b)  
Contracts Schedule 4.8(c)   Changes to Contracts Schedule 4.8(e)   Capital
Expenditures Schedule 4.8(g)   Indebtedness Schedule 4.8(l)   Changes in Capital
Stock Schedule 4.8(q)   Changes in Employment Terms Schedule 4.8(r)   Changes in
Benefit Plans Schedule 4.9   Undisclosed Liabilities Schedule 4.10   Legal
Compliance Schedule 4.11   Tax Returns Schedule 4.12(a)   Owned Property
Schedule 4.12(b)   Leased Property Schedule 4.13(a)   Ownership of Intellectual
Property Schedule 4.13(b)   Intellectual Property Infringement Schedule
4.13(c)   Company Intellectual Property Schedule 4.13(d)   Third Party
Intellectual Property Schedule 4.16   Contracts Schedule 4.19   Insurance
Schedule 4.20   Litigation Schedule 4.21   Warranties Schedule 4.23   Employees
Schedule 4.24   Employee Benefits Schedule 4.25(c)   Environmental Liabilities
Schedule 4.25(d)   Hazardous Substances Schedule 4.26   Permits Schedule 4.27  
Backlog Schedule 4.29   Bank Accounts Schedule 4.30   Customers and Suppliers
Schedule 4.31   Claims Against Officers and Directors Schedule 5.7   Litigation
Schedule 6.3   Operation of Business

 

vi

 

   

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT (“Agreement”), dated as of March 31, 2015, is made
and entered into by and among Protea Biosciences Group, Inc., a Delaware
corporation (the “Buyer” or “Protea”), Dr. Ralf Brandt (“Brandt”), The Brandt
Family Trust, a trust organized under the laws of Australia, Mrs. Sabine Brandt,
trustee (the “Trust”), South Australian Life Science Advancement Partnership,
LP, ABN 39 229 293 655 a limited partnership organized under the laws of
Australia (“SALSA”), Terra Rossa Capital Pty Ltd ACN 114 576 742 in its capacity
as manager of the South Australian Life Science Advancement Partnership, LP
(“Terra Rossa”) Royal Melbourne Institute of Technology trading as “RMIT
University” established under the laws of Victoria, Australia ( (“RMIT”) and
vivoPharm Pty Ltd. ACN 106 101 615, a corporation organized under the laws of
Australia (the “Company”). The Trust, SALSA and RMIT are hereinafter sometimes
individually referred to as a “Selling Shareholder” and collectively as the
“Selling Shareholders.”

 

WHEREAS, the Trust, SALSA and RMIT are the owners of 100% of the Company Capital
Shares and own 95.29% of the Fully-Diluted Company Capital Shares; and

 

WHEREAS, prior to the Closing Date, the Option Holders intend to exercise their
Company Options for 4.71% of the Fully-Diluted Company Capital Shares, and
receive on the Closing Date from the Buyer their pro-rata portion of the Fixed
Consideration and a pro-rata proportion of any Contingent Consideration, when
issued; and

 

WHEREAS, the Buyer wishes to purchase the Subject Shares from the Selling
Shareholders and the Selling Shareholders desire to sell to the Buyer all of the
Subject Shares.

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the parties agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.1. Definitions. Notwithstanding anything to the contrary, express or
implied, contained in this Agreement, unless otherwise specifically indicated,
all dollar references when used herein shall mean United States Dollars, and
specifically with respect to payments of the Cash Consideration, the Fixed
Consideration, the Contingent Consideration and the calculation of VWAP (as
those terms are defined below) shall mean and be expressed in United States
Dollars. The following terms shall have the following meanings for the purposes
of this Agreement.

 

“AASB” means accounting principles established by the Australian Accounting
Standards Board, as in effect from time to time.

 

“Adverse Consequences” means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys’ fees and expenses.

 

1

 

  

“Affiliate” means, with respect to any specified Person, a Person that directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, the Person specified.

 

“Affiliated Group” means any affiliated group within the meaning of Code
§1504(a) or any similar group defined under a similar provision of state, local
or foreign Law.

 

“Agreement” means this Stock Purchase Agreement, including all exhibits and
schedules hereto, as it may be amended from time to time.

 

“AUD” or “$AU” means Australian dollars.

 

“Authority” means any governmental regulatory or administrative body,
governmental agency, governmental subdivision or authority, any court or
judicial authority, any public, private or industry governmental regulatory
authority, whether foreign, national, federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or seek
compliance with any regulation.

 

“Backlog” has the meaning set forth in Section 4.27 below.

 

“Brandt” has the meaning set forth in the preface above.

 

“Break-up Fee” shall mean the amount that may be payable by the Buyer to the
Company as contemplated by Section 2.2(c) and Section 7.9(b) of this Agreement.

 

“Businesses” shall mean the collective reference to the Buyer Business and the
Company Business.

 

“Buyer” has the meaning set forth in the captions and recitals above.

 

“Buyer Business: shall mean the provision of molecular information though the
Buyer’s proprietary platform technology comprised of hardware and software
enabling the collection and mapping of images for applications in the
pharmaceutical, diagnostic, agricultural and life science industries to enable
the rapid generation of very large molecular image datasets, known as ‘big
data”, used to improve pharmaceutical development and life science research
outcomes, and to extend and add value to other technologies used in research and
development, such as 3D tissue models, biomarker discovery, synthetic
biologicals and mass spectrometry.

 

“Buyer Common Stock” means the 250,000,000 shares of common stock, $0.0001 par
value per share, of the Buyer authorized for issuance pursuant to its
certificate of incorporation, as amended to date.

 

“Buyer Counsel” shall mean the legal firm of CRK Law, LLP, 1330 Avenue of the
Americas, 35th Floor, New York, New York 10019, USA, who is acting as legal
counsel to the Buyer in connection with this Agreement and the transactions
contemplated hereby.

 

2

 

  

“Cash Consideration” means the sum of (a) Five Million Four Hundred Fifty Two
Thousand, Four Hundred and Sixty Three ($5,452,463) Dollars, plus (b) the USD
equivalent of the Company Option Payment (AUD).

 

“Certificate of Designations” shall mean the certificate of designations of
rights and privileges of the Protea Series A Preferred Stock to be filed with
the Secretary of State of the State of Delaware on the Closing Date, and in the
form of Exhibit A annexed hereto and made a part hereof.

 

“Closing” has the meaning set forth in Section 2.5 below.

 

“Closing Date” has the meaning set forth in Section 2.5 below.

 

“Closing Payment” means the Fixed Consideration, less the Holdback Amount.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock Equivalents” shall mean, with respect to the Buyer or the Company,
as applicable all shares of Buyer Common Stock or Company Ordinary Shares
issuable upon conversion of any convertible notes or convertible preferred stock
or preference shares, or upon exercise of any warrants or options to purchase
Buyer Common Stock or Company Ordinary Shares.

 

“Company” has the meaning set forth in the captions and recitals above.

 

“Company Business” means the offering of integrated research and preclinical
services in different disease areas (with focus on cancer) to the biotechnology
and pharmaceutical industries, including providing advice and optimized study
design to clients and conducting studies tailored to guide drug development,
starting from compound libraries and ending with a comprehensive set of in vitro
and in vivo data and reports, as needed for Investigational New Drug
Applications (IND) filing.

 

“Company Capital Shares” means, the collective reference to (a) the 3,037,500
Company Ordinary Shares owned of record and beneficially by (i) the Trust as to
2,250,000 Company Ordinary Shares, and (ii) RMIT as to 787,500 Company Ordinary
Shares; and (b) the 900,000 Company Series A Preference Shares owned of record
and beneficially by SALSA.

 

“Company Counsel” shall mean the legal firm of DW Fox Tucker, 14th Floor, 100
King William Street, Adelaide, 5000 South Australia, who is acting as legal
counsel to the Company and the Selling Shareholders in connection with this
Agreement and the transactions contemplated hereby.

 

“Company Indemnifying Parties” has the meaning set forth in Section 9.2 below.

 

“Company Options” shall mean the options issued to the Option Holders entitling
such Persons to purchase an aggregate of 194,626 Ordinary Shares of the Company
at a price of (AUD) $1.00 per share.

 

3

 

  

“Company Option Payment” shall mean AUD194,526, or such other cash amount to be
paid to the Company by the Option Holders on or before the Closing Date as their
subscription for Company Ordinary Shares upon exercise of the Company Options.

 

“Company Ordinary Shares” shall mean the 3,037,500 ordinary shares of the
Company issued under its constitution and currently outstanding.

 

“Company Series A Preference Shares” shall mean the 900,000 Series A preference
shares, having a Liquidation Amount of $AUD2,179,044, that are owned of record
and beneficially by SALSA.

 

“Confidential Information” means any information concerning the businesses and
affairs of the Company that is not already generally available to the public.

 

“Consideration” shall mean the sum of the Fixed Consideration and the Contingent
Consideration.

 

“Contingent Consideration” shall mean an amount equal to a maximum of seven and
one-half (7.5%) percent of the Stock Consideration that may be payable by the
Buyer in accordance with Section 2.4 of this Agreement in additional shares of
Series A Preferred Stock.

 

“Contract” means any contract, lease, commitment, understanding, sales order,
purchase order, agreement, indenture, mortgage, note, bond, right, warrant,
instrument, plan, permit or license, whether written or oral, which is intended
or purports to be binding and enforceable.

 

“Conversion Date” shall mean the date or dates on which any shares of Protea
Series A Preferred Stock shall be converted into Conversion Shares.

 

“Conversion Price” shall mean, as applicable to the Conversion Shares, a price
per share equal to the greater of (a) the same price per share at which the
Buyer sells shares of its Buyer Common Stock, or the highest conversion price or
exercise price per share of any Common Stock Equivalents, in either case, as
issued by Buyer in connection with the Required Financing contemplated by
Section 7.9 of this Agreement, or (b) forty ($0.40) cents; which Conversion
Price shall be subject to appropriate and proportionate adjustment for forward
stock splits, reverse stock splits or other subdivisions, recapitalizations or
combinations, including the Reverse Stock Split contemplated by Section 5.3(d)
of this Agreement.

 

“Conversion Shares” shall mean that number of shares of Buyer Common Stock
issuable upon any optional or mandatory conversion of the Protea Series A
Preferred Stock and as to each of the 570,053.7 shares of Protea Series A
Preferred Stock, that number of shares of Buyer Common Stock determined by
dividing (a) $10.00 plus accrued dividends on such share of Series A Preferred
Stock as at the Conversion Date, by (b) the Conversion Price then in effect;
which number of Conversion Shares shall be subject to appropriate and
proportionate adjustment for forward stock splits, reverse stock splits or other
subdivisions, recapitalizations or combinations, including the Reverse Stock
Split contemplated by Section 5.3(d) of this Agreement.

 

4

 

  

“Deposit” means the sum of $100,000.00 payable by way of deposit and part
payment of Cash Consideration in accordance with Section 2.2.

 

“Directors” shall mean all of the members of the Board of Directors of the
Company except for Ralf Brandt.

 

“Dollars” or “$” shall mean United States Dollars unless expressly indicated to
be Australian Dollars, or AUD or AU$.

 

“Employee Benefit Plan” means as to the Company or any Subsidiary of the
Company, any (a) nonqualified deferred compensation or retirement plan or
arrangement, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an employee pension benefit plan
(including any multiemployer plan), or (d) employee welfare benefit plan or
material fringe benefit or other retirement, bonus, or incentive plan or
program.

 

“Employment Agreements” shall mean the collective reference to (a) the
employment agreements between Dr. Ralf Brandt and the Company and Mrs. Sabine
Brandt, dated as of the Closing Date and in the form of Exhibit B-1 annexed
hereto for Dr Brandt, and in the form of Exhibit B-2 annexed hereto for Sabine
Brandt, and (b) the three (3) employment agreements between the Company and
certain of the other Company Employees, being (i) Dr Melanie Keller, Division
Head Europe, (vivo Pharm Europe Ltd), (ii) Dr. Joanne Chua, Division Head
Toxicology & Bioanalytic (RDDT) and (iii) Mr Chris Holding, Division Head
Efficacy Testing, to be entered into on or before the Closing Date.

 

“Environmental Laws” means all federal, state, local and foreign statutes,
regulations, ordinances and other provisions having the force or effect of law,
all judicial and administrative orders and determinations, all contractual
obligations and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Substances, materials or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended and as now or hereafter in
effect, including (but not limited to) (a) as to the Company and each Company
Subsidiary located in Australia, all environmental laws and statutes in
Australia, and (b) as to the Company Subsidiary located in the United States,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Resource Conservation and Recovery Act of 1976, as amended, the Toxic Substances
Control Act of 1976, as amended, the Federal Water Pollution Control Act
Amendments of 1972, the Clean Water Act of 1977, as amended, any so-called
“Superlien” law, and any other similar federal, state or local statutes.

 

“Escrow Agreement” shall have the meaning set forth in Section 2.3 hereof, and
annexed hereto as Exhibit C and made a part hereof.

 

“Execution Date” has the meaning set forth in Section 2.5 below.

 

5

 

  

“Financial Statements” means the following:

 

(a) the audited consolidated financial statements of the Company and its
Subsidiaries for the 2014 and 2013 Fiscal Year and the financial statements of
the Company and its Subsidiaries for the 2011 and 2012 Fiscal Years,
respectively (including all notes thereto), which are included in Schedule 4.7
consisting of the consolidated balance sheet at such dates and the related
consolidated statements of earnings and cash flows for the twelve month periods
then ended;

 

(b) the unaudited consolidated financial statements of the Company and its
Subsidiaries as of December 31, 2014 and for the six months then ended (which
shall include, for comparative purposes, financial statements as of December 31,
2013 and for the six months then ended), which are included in Schedule 4.7,
consisting of the balance sheet at such date and the related statement of
earnings for the one month period then ended.

 

“Fiscal Year” shall mean the fiscal year of the Company and its Subsidiaries
ended June 30th.

 

“Fixed Consideration” shall mean the aggregate sum (a) the Cash Consideration,
and (b) the Stock Consideration.

 

“Fully-Diluted Company Capital Shares” shall mean 4,132,126 Company Capital
Shares representing the sum of (a) the 3,937,500 Company Capital Shares owned by
the Trust, SALSA and RMIT as at the Closing Date, and (b) the 194,626 Company
Ordinary Shares issued on the Closing Date to the Option Holders upon exercise
of their Company Options.

 

“Hazardous Substance” means any material or substance which (i) constitutes a
hazardous substance, toxic substance or pollutant (as such terms are defined by
or pursuant to any Environmental Laws) or (ii) is regulated or controlled as a
hazardous substance, toxic substance, pollutant or other regulated or controlled
material, substance or matter pursuant to any Environmental Laws.

 

“Holdback Amount” has the meaning set forth in Section 2.3 below.

 

“Holdback Release Date” has the meaning set forth in Section 2.3 below.

 

“Indemnification Agreement” shall be the agreement referred to in Section 6.20
and shall be in the form of Exhibit E annexed hereto and made a part hereof.

 

“Indemnified Party” has the meaning set forth in Section 9.4 below.

 

“Indemnifying Party” has the meaning set forth in Section 9.4 below.

 

“Intellectual Property” means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all domain names, (h) all other proprietary rights
to intangible property, and (i) all copies and tangible embodiments thereof (in
whatever form or medium).

 

6

 

  

“Knowledge” means actual knowledge after reasonable investigation.

 

“Latest Balance Sheet” means the unaudited consolidated balance sheet of the
Company and its Subsidiaries dated as of December 31, 2014.

 

“Law” means any law, statute, regulation, ordinance, rule, order, decree,
judgment, consent decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by any Authority.

 

“Liability” means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.

 

“Lien” means any mortgage, lien (except for any lien for Taxes not yet due and
payable), charge, restriction, pledge, security interest, option, lease or
sublease, claim, right of any third party, easement, encroachment or
encumbrance.

 

“Liquidation Amount” means the amount payable on Closing to SALSA as the holder
of the Company Series A Preference Shares in the sum of $AUD,2,179,044.

 

“Material Adverse Effect” shall mean any circumstances, developments or matters
whose effect on the Business, properties, assets, results, operations, condition
(financial and other) and prospects of the Company and its consolidated
Subsidiaries, either alone or in the aggregate, is or would reasonably expected
to be materially adverse.

 

“Option Holders” mean the collective reference to Kym Weir, Brenton Wright, Ian
Nisbet, Chris Holding, Joanne Chua, Peter Tapley, Mayet Petines and Melanie
Keller.

 

“Option Holders Letter” shall mean the letter to be executed by each of the
Option Holders delivered to the Company and the Buyer on or prior to the Closing
Date and in the form of Exhibit D annexed hereto and made a part hereof.

 

“Ordinary Course of Business” means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and
frequency).

 

“Outside Closing Date” has the meaning set forth in Section 2.5 below.

 

7

 

  

“Permits” has the meaning set forth in Section 4.26 below.

 

“Person” means an individual, a partnership, a corporation, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).

 

“Projections” means all financial projections and forward-looking statements
concerning the Company and its Subsidiaries which have been furnished by the
Company and Brandt to Buyer or its Affiliates or representatives and which have
been attached to Schedule 4.7(b).

 

“Protea Series A Preferred Stock” shall mean the $5,700,540 of 4% voting,
convertible and redeemable shares of preferred stock, par value $0.0001 per
share, of Protea, to be issued on the Closing Date to the Selling Shareholders
as the Stock Consideration and evidenced by 570,053.7 shares of Series A
preferred stock, which shall, inter alia, have a $10.00 per share liquidation
preference and shall contain such rights, designations and privileges as are set
forth in the Certificate of Designations.

 

“Purchase Price” means the sum of the Fixed Consideration and the Contingent
Consideration.

 

“Required Financing” shall have the meaning set forth in Section 7.9 of this
Agreement.

 

“Reverse Stock Split” shall have the meaning set forth in Section 5.3(d) of this
Agreement.

 

“Schedules” means the disclosure schedules accompanying this Agreement.

 

“Securities Act” means the United States Securities Act of 1933, as amended.

 

“Securities Exchange Act” means the United States Securities Exchange Act of
1934, as amended.

 

“SEC” means United States Securities and Exchange Commission.

 

“Selling Shareholders” has the meaning set forth in the captions and recitals.

 

“Stock Consideration” shall mean the 570,053.7 shares of Protea Series A
Preferred Stock.

 

“Subject Shares” means the 4,132,126 Fully-Diluted Company Capital Shares to be
owned of record and beneficially by the Selling Shareholders on the Closing
Date.

 

“Subsidiary” means any corporation, partnership or limited liability company
with respect to which a specified Person (or a Subsidiary thereof) owns a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors. RDDT Pty Ltd, an
Australia corporation, vivoPharm Europe Ltd., a corporation organized under the
laws of the Federal Republic of Germany, and vivoPharm LLC, a Delaware limited
liability company, are each Subsidiaries of the Company.

 

8

 

  

“Tax” means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code §59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.

 

“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

“Third Party Claim” has the meaning set forth in Section 9.4 below.

 

“Trading Days” shall mean any day or days that shares of Buyer Common Stock
shall trade on any United States Stock Exchange.

 

“United States Stock Exchange” shall mean any one or more of the New York Stock
Exchange, Inc., the NYSE:AMEX Exchange, the NASDAQ Stock Market, the OTCQB, the
OTCQX or the OTC Pink Sheet exchanges.

 

“VWAP” shall mean the volume weighted average price of Buyer Common Stock as
traded on any United States Stock Exchange for the applicable number of Trading
Days.

 

ARTICLE II

 

PURCHASE AND SALE OF SHARES

 

SECTION 2.1. Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from the Selling Shareholders, and
each of the Selling Shareholders agrees to sell, or cause to be sold, to the
Buyer, all of the Subject Shares for the consideration specified herein.

 

SECTION 2.2. Payment of Fixed Consideration. Forthwith after the signing of this
Agreement by all parties, the Buyer will pay the sum of $100,000.00 by way of
deposit and part payment of the Cash Consideration in accordance with
Section 2.2(e) below. On the Closing Date, in consideration for sale and
delivery of the Subject Shares, the Buyer shall pay to the Selling Shareholders
(i) the sum of $5,352,463 and the Company Option Payment, representing the Cash
Consideration and (ii) the 570,053.7 shares of Protea Series A Preferred Stock,
evidencing $5,700,537 of Stock Consideration, representing a total of Eleven
Million One Hundred and Fifty Three ($11,153,000) Dollars plus the Company
Option Payment of Fixed Consideration, less (iii) the Holdback Amount set forth
in Section 2.3 below.

 

(a) Payment of Cash Consideration. The Cash Consideration shall be paid to the
Selling Shareholders by means of wire transfers of immediately available funds
to a trust account maintained by Company Counsel in accordance with wire
instructions provided by such legal counsel. Promptly following the Closing
Date, such Cash Consideration shall be disbursed by Company Counsel to accounts
designated by the Selling Shareholders and the Option Holders. The Liquidation
Amount will be paid to SALSA from the Cash Consideration and the amount of the
Cash Consideration payable to each of the Selling Shareholders and the Option
Holders shall be as set forth on Schedule 2.2 annexed hereto, and for an Option
Holder in accordance with the Option Holder’s Letter.

 

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(b) Payment of Stock Consideration. On the Closing Date, the Buyer shall cause
to be delivered to the Selling Shareholders stock certificates evidencing
570,053.7 shares of Protea Series A Preferred Stock representing (i) the Stock
Consideration, less (ii) the Holdback Amount set forth in Section 2.3 below.
Such stock certificates shall be registered in the names of each of the Selling
Shareholders and the Option Holders and shall be in such number of shares of
Protea Series A Preferred Stock to be issued or issuable to each Selling
Shareholder as shall be as set forth on Schedule 2.2 annexed hereto and for an
Option Holder in accordance with the Option Holder’s Letter.

 

(c) Restricted Securities. Without limiting the obligations of the Buyer
pursuant to Section 6.20, each of the Selling Shareholders acknowledge that the
Stock Consideration and any Contingent Consideration have not been registered
under the Securities Act and may not be sold in the absence of a registration
statement declared effective by the SEC or an applicable exemption for the
registration requirements of the Securities Act. Each certificate evidencing the
Stock Consideration and any Contingent Consideration shall bear the following
legend:

 

“The shares evidenced by this certificate have not be registered under the
Securities Act of 1933, as amended (the “Act”), and may not be sold, pledged,
hypothecated or assigned in the absence of an effective registration statement
under the Act, or an opinion of counsel satisfactory to the Company that
registration is not required under the Act.”

 

(d) Deposit and Break-up Fee. Forthwith on the signing of this Agreement by all
parties, the Buyer will pay by means of wire transfer of immediately available
funds to a trust account maintained by Company Counsel in accordance with wire
instructions provided by such legal counsel the sum of $100,000.00 (“Deposit”)
by way of deposit and part payment of the Cash Consideration. The Deposit will
be held by Company Counsel and paid and applied as Cash Consideration on
Closing. If the Break-up Fee is payable in accordance with Section 7.8 or
Section 7.9 of this Agreement, Company Counsel shall pay and apply the Deposit
on behalf of the Buyer in satisfaction of the Break-up Fee in accordance with
Section 7.9(e).

 

If this Agreement is terminated by the Buyer and the Selling Shareholders
pursuant to Section 10.1(a) , or by the Buyer pursuant to Section 10.1(d), or by
the Buyer pursuant to Section 10.1(f), the Deposit will be repaid to the Buyer.

 

(e) Summary of Terms of Protea Series A Preferred Stock. As set forth in the
Certificate of Designations, the Protea Series A Preferred Stock shall:

 

(i) have a stated or liquidation value per share of ten ($10.00) Dollars which
shall be payable upon any sale or liquidation of the Buyer prior to any payments
in respect of the Buyer Common Stock;

 

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(ii) pay an annual dividend of four (4%) percent which shall accrue annually, be
payable in additional shares of Protea Series A Preferred Stock, and be added to
the face or stated amount of such shares of Protea Series A Preferred Stock;

 

(iii) be convertible at any time, at the option of the holder, into shares of
Buyer Common Stock at the Conversion Price then in effect;

 

(iv) be subject to automatic conversion into Buyer Common Stock in the event
that either (A) the average of the VWAP of shares of Buyer Common Stock, as
traded on any United States Stock Exchange for any twenty (20) consecutive
Trading Days shall equal or exceed one hundred and fifty (150%) percent of the
Conversion Price then in effect; or (B) Protea shall consummate an underwritten
public offering of not less than $15,000,000 of its shares of Buyer Common
Stock.

 

(v) vote, together with the Buyer Common Stock, on an “as converted basis” with
respect to all matters submitted to the vote of holders of Buyer Common Stock;
and

 

(vi) be subject to redemption and repurchase at the sole option of the Buyer,
upon thirty days prior written notice to the holders, for a cash amount, payable
in United States Dollars, equal to the $10.00 per share stated value of the
Protea Series A Preferred Stock ($5,700,537) plus accrued dividends thereon.

 

The foregoing provisions of this Section 2.2(f) is merely a summary of the
principal terms and conditions of the Protea Series A Preferred Stock and is
qualified in all respects by the terms, conditions and provisions of the
Certificate of Designations annexed hereto as Exhibit A and made a part

 

SECTION 2.3. Holdback Amount.

 

(a) The Buyer will withhold a 28,502 shares of Protea Series A Preferred Stock
representing five (5.0%) percent of the Stock Consideration (the “Holdback
Amount”) from the Selling Shareholders until the expiration of twelve (12)
months from the Closing Date (the “Holdback Release Date”). The Holdback Amount
shall be delivered to and deposited in escrow with Buyer’s Counsel under an
escrow agreement among the Selling Parties, the Buyer and Buyer’s Counsel in the
form of Exhibit C annexed hereto (the “Escrow Agreement”) and shall serve as a
source for any indemnification claims pursuant to Article IX. On the Holdback
Release Date, if there are no pending claims for indemnification by the Buyer,
the Buyer shall cause the entire Holdback Amount to be distributed to the
Selling Shareholders.

 

(b) In the event that, on or before the Holdback Release Date, the Buyer shall
seek indemnification by reason of any of the matters that the “Buyer Indemnified
Parties” shall be entitle to be indemnified against pursuant to Article IX of
this Agreement, if there shall be a dispute as to whether Buyer is so entitled
to payment from the Holdback Amount or the amount of any such payment, the
parties hereto agree to submit the dispute to final and binding commercial
arbitration before the International Chamber of Commerce Australia, at a venue
in Melbourne, Victoria, or such other venue as may be determined by the ICC; it
being understood and agreed that the decision of the arbitrator(s) shall be
final and binding on the parties and may be enforced in any court of competent
jurisdiction in Australia (Victoria), Delaware or West Virginia.

 

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SECTION 2.4. Payment of Contingent Consideration. On a date which shall be not
later than March 31, 2016 (the “Contingent Consideration Payment Date”), in the
event that the consolidated revenues of the Company and its Subsidiaries for the
trailing twelve consecutive months ended December 31, 2015 (the “2015 Revenues”)
shall exceed by 110% or more the consolidated revenues of the Company and its
Subsidiaries for the trailing twelve consecutive months ended December 31, 2014
(the “2014 Revenues”), the Buyer shall issue to the Selling Shareholders and the
Option Holders who hold any of the Stock Consideration at the time of the
Contingent Consideration Payment Date (including any of the Stock Consideration
that is purchased or acquired by a Selling Shareholder or Option Holder from
another Selling Shareholder or Option Holder), based on the proportional
ownership of the Stock Consideration at that time, the Contingent Consideration
in accordance with the following formula:

 

Percentage by which 2015 Revenues   Amount of Contingent Consideration Exceed
2014 Revenues         110.0% to 120%   2.5% of the Stock Consideration 120.1% to
150%   5.0% of the Stock Consideration in excess of 150%   7.5% of the Stock
Consideration;

  

provided, that in the event that 2015 Revenues shall be a percentage in excess
of 110.1% but less than 120% or in excess of 120.1% but less than 150%, the
percentage of the Stock Consideration and the amount of Contingent Consideration
shall be appropriately and equitably pro-rated.

 

On the Contingent Consideration Payment Date the Buyer shall cause to be
delivered to the Selling Shareholders and the Option Holders stock certificates
evidencing shares of the Buyer Common Stock representing the Contingent
Consideration.

 

SECTION 2.5 The Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall take place at the offices of CKR Law, LLP, 1330
Avenue of the Americas, 35th Floor, New York, New York 10019, commencing at
10:00 a.m. local time on a date (the “Closing Date”) which shall be the earlier
to occur of (i) a date which shall be not more than ninety (90) days following
the date of execution of this Agreement by all parties hereto (the “Execution
Date”), or (ii) five business days following the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective parties will take at the Closing itself) or such other date as the
Selling Shareholders and the Buyer may mutually determine; provided, that, if
agreed by the Selling Shareholders and the Buyer, the Closing Date can be
extended to as late as July 31, 2015 (the “Outside Closing Date”). It is the
intent of the parties that Buyer shall assume control of the Company and its
Subsidiaries immediately after the close of business on the Closing Date.

 

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SECTION 2.6. Closing Deliveries by Selling Shareholders. To effect the transfer
referred to in Section 2.1 hereof and the delivery of the consideration
described in Section 2.2 hereof, the Selling Shareholders shall, on the Closing
Date, deliver the following:

 

(a) Selling Shareholders shall cause to be delivered to Buyer the Option Holders
Letter, for each Option Holder, signed by each Option Holder;

 

(b) Selling Shareholders shall cause to be delivered to Buyer certificates
evidencing the Subject Shares, free and clear of any and all Liens, with duly
executed instruments of transfer to the Buyer of the Subject Shares in
accordance with the constitution of the Company;

 

(c) Selling Shareholders shall have delivered to Buyer all consents, approvals,
releases and waivers from governmental Authorities and other third parties
required or necessary as a result of the transactions contemplated hereby,
reasonably satisfactory in form and substance to Buyer and its counsel;

 

(d) Selling Shareholders shall have delivered all other documents required to be
delivered pursuant to Article VII hereof not specifically mentioned above in
this Section;

 

(e) Ralf Brandt and Sabine Brandt shall have delivered a duly executed
Employment Agreement;

 

(f) Selling Shareholders shall have executed and delivered a counterpart of the
Indemnification Agreement;

 

(g) Selling Shareholders and the Company shall have executed and delivered to
Buyer and the Escrow Agent the Escrow Agreement; and

 

(h) All instruments and documents executed and delivered to Buyer pursuant
hereto shall be in form and substance, and shall be executed in a manner,
reasonably satisfactory to Buyer and its counsel.

 

SECTION 2.7. Closing Deliveries by Buyer. To effect the transfer referred to in
Section 2.1 hereof and the delivery of the consideration described in Section
2.2 hereof, the Buyer shall, on the Closing Date, deliver the following:

 

(a) Buyer shall have tendered to the Selling Shareholders the Cash Consideration
by wire transfer of immediately available funds in accordance with Section
2.2(a);

 

(b) Buyer shall have delivered the Stock Consideration, less the Holdback Amount
in accordance with Section 2.2(b);

 

(c) Buyer and the Escrow Agent shall have executed and delivered to Selling
Shareholders the Escrow Agreement;

 

(d) Buyer shall have deposited the Holdback Amount in escrow in accordance with
the Escrow Agreement;

 

13

 

  

(e) Buyer shall have tendered all other documents required to be delivered
pursuant to Article VIII hereof not specifically mentioned above in this
Section;

 

(f) Buyer shall have executed and delivered a counterpart of the Indemnification
Agreement; and

 

(g) All instruments and documents executed and delivered to Selling Shareholders
pursuant hereto shall be in form and substance, and shall be executed in a
manner, reasonably satisfactory to Selling Shareholders and their counsel.

 

SECTION 2.8. Employment Agreement. The Company will on or prior to Closing enter
into each of the Employment Agreements; provided, that, except for Exhibits B-1
and B-2 (the employment agreements with Dr. Ralf Brandt and Sabine Brandt) if
the Company or the other employees shall for any reason fail or refuse to
executed such employee’s respective employment agreement, the Buyer may waive
such condition and consummate the Closing of its purchase of the Subject Shares,
as contemplated by this Agreement.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF ALL SELLING SHAREHOLDERS

 

The Selling Shareholders each severally (not jointly and severally) represent
and warrant to the Buyer that the statements contained in this Article III are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Article
III) with respect to himself or itself.

 

SECTION 3.1. Authorization of Transaction. Each Selling Shareholder has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform his or its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of each Selling
Shareholder, enforceable in accordance with its terms and conditions. The
Selling Shareholders need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.

 

SECTION 3.2. Noncontravention. Except as set forth on Schedule 3.2, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, Law,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which any
Selling Shareholder is subject or any provision of the Trust agreement
applicable to the Trust or (B) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or consent under
any Contract, lease, license, instrument, or other arrangement to which any
Selling Shareholder is a party or by which he or it is bound or to which any of
his or its assets is subject.

 

SECTION 3.3. Subject Shares. Each of the Selling Shareholders holds of record
and owns beneficially all of the Subject Shares, free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities Laws), Taxes, Liens, options, warrants, purchase rights,
Contracts, commitments, equities, claims, and demands. No Selling Shareholder is
a party to any option, warrant, purchase right, or other Contract or commitment
that could require such Selling Shareholder to sell, transfer, or otherwise
dispose of any Subject Shares (other than this Agreement). Except as set forth
on Schedule 3.3, no Selling Shareholder is a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any Subject
Shares. The instruments of transfer delivered by the Selling Shareholders to
Buyer at the Closing will be sufficient to transfer each Selling Shareholders’
entire interest, legal and beneficial, in the Subject Shares and, after such
transfer, the Buyer shall acquire all of the Subject Shares. the Selling
Shareholders has full power and authority (including full corporate power and
authority) to convey good and marketable title to all of the Subject Shares, and
upon transfer to Buyer of the certificates representing such Subject Shares,
Buyer will receive good and marketable title to such Subject Shares, free and
clear of all Liens.

 

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SECTION 3.4 No Other Representations or Warranties. Notwithstanding anything to
the contrary, express or implied, contained in this Agreement, neither SALSA nor
RMIT make any representations or warranties to the Buyer, except as expressly
set forth above in this Article III.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY, BRANDT

AND THE TRUST

 

The Company, Brandt and the Trust hereby represent and warrant to the Buyer that
the statements contained in this Article IV are correct and complete as of the
date of this Agreement, and, except as amended pursuant to Section 6.8, will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Article IV), except as set forth in the Schedules hereto. Except as otherwise
noted herein or in a Schedule hereto, all representations and warranties are
deemed to be made as at the date of this Agreement and, unless otherwise noted
in an amended or updated Schedule pursuant to Section 6.8, shall also be true
and correct as of the Closing Date. Nothing in the Schedules shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Schedule identifies the exception with reasonable
particularity. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). An item disclosed in any Schedule shall be
deemed disclosed for purposes of all Schedules, provided that reasonably
particular cross references have been included.

 

Except as applicable to Section 4.2 below, or as otherwise specified, all
references in this ARTICLE IV to “the Company” shall mean and include the
Company and each of its Subsidiaries.

 

SECTION 4.1. Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
Laws of the country of Australia (Victoria). The Subsidiaries are Persons duly
organized, validly existing, and in good standing under the Laws of their
respective jurisdictions of organization. The Company is duly authorized to
conduct business and is in good standing under the Laws of each jurisdiction
except where the failure to be so qualified would not have a Material Adverse
Effect on the Company. The Company has full corporate power and authority and
all licenses, Permits, and authorizations necessary to carry on the Business in
which it is engaged and to own and use the properties owned and used by it. The
Company has delivered to the Buyer correct and complete copies of the articles
of incorporation, constitution, by-laws, operating agreements and code of
regulations of the Company and each of the Subsidiaries (as amended to date).
The minute books (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the share
registers, the stock certificate books, and the stock record books of the
Company are correct and complete. The Company is not in default under or in
violation of any provision of its constitution or articles of incorporation or
code of regulations.

 

15

 

  

SECTION 4.2. Capitalization; Exercise of Company Options.

 

(a) The entire issued capital shares of the Company consists of 3,037,500
Ordinary Shares and 900,000 Series A Preference Shares and the Company has
issued the Company Options to purchase 194,626 Ordinary Shares at an exercise
price of $AU1.00 per share. The holders of all Fully-Diluted Company Capital
Shares are set forth on Schedule 4.2 annexed hereto and made a part hereof.

 

(b) Immediately prior to the Closing, the Company will procure each of the
Option Holders to exercise their respective Company Options for the $AU1.00 per
share exercise price; it being understood and agreed, that such exercise price
shall be paid by each of the Option Holders by paying to the Company the
aggregate sum of $AU194,626 out of the Cash Consideration payable to the Option
Holders on the Closing Date, all as set forth on Schedule 4.2 annexed hereto.

 

(c) All of the issued and outstanding Subject Shares have been duly authorized,
are validly issued, fully paid, and non-assessable, and are and at the Closing
will be held of record by the Selling Shareholders. Except as set forth on
Schedule 4.2, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
Contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of the Subject Shares. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Subject Shares. There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of the Subject Shares.

 

(d) The instruments of transfer delivered by the Selling Shareholders to Buyer
at the Closing will be sufficient to transfer each Selling Shareholders’ entire
interest, legal and beneficial, in the Subject Shares and, after such transfer,
the Buyer shall acquire all of the Subject Shares. The Selling Shareholders have
full power and authority (including full corporate power and authority) to
convey good and marketable title to all of the Subject Shares, and upon transfer
to Buyer of the certificates representing such Subject Shares, Buyer will
receive good and marketable title to such Subject Shares, free and clear of all
Liens.

 

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SECTION 4.3. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, articles of association, Law, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Company is subject or any
provision of the articles of incorporation or code of regulations of the Company
or (ii) except as set forth on Schedule 4.3, conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any Contract, lease, license, instrument, or other arrangement to
which the Company is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Lien upon any of its
assets). The Company does not need to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the parties to consummate the transactions
contemplated by this Agreement.

 

SECTION 4.4. Brokers’ Fees. Except as set forth on Schedule 4.4, the Company has
no Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement.

 

SECTION 4.5. Title to Assets. Except as set forth on Schedule 4.5, the Company
has good and marketable title to, or a valid leasehold interest in, the
properties and assets used by it, located on its premises, or shown on the
Latest Balance Sheet or acquired after the date thereof, free and clear of all
Liens, except for properties and assets disposed of in the Ordinary Course of
Business since the date of the Latest Balance Sheet.

 

SECTION 4.6. Subsidiaries. Except as set forth below, the Company has no direct
or indirect Subsidiaries, either wholly or partially owned, and the Company does
not hold any direct or indirect economic, voting or management interest in any
Person or own any securities issued by any Person. Each of (a) RDDT Pty Ltd, an
Australia corporation, located at Level 3, Suite 29, 240 Plenty Road, Bundoora
VIC 3085, Australia; (b) vivoPharm Europe Ltd., a corporation organized under
the laws of the Republic of Germany, located at Grillparzerstrasse 25, Munich
81675, Germany; and (c) vivoPharm LLC, a Delaware limited liability company,
located at 1214 Research Road, Suite 1050, Hummelstown, PA 17036, USA, are
wholly-owned Subsidiaries of the Company.

   

SECTION 4.7. Financial Statements; Projections.

 

(a) The Financial Statements of the Company are set forth on Schedule 4.7(a).
The Financial Statements have been and will be prepared in accordance with AASB
consistently applied and present fairly the financial position, assets and
Liabilities of the Company as of the dates thereof and the revenues, expenses,
results of operations of the Company for the periods covered thereby. The
Financial Statements and the books and records of the Company and do not reflect
any transactions which are not bona fide transactions.

 

17

 

  

(b) The Projections of the Company are set forth on Schedule 4.7(b). All of the
Projections are based upon assumptions made in good faith and considered
reasonable by the Company in light of historical financial information
concerning the Company and its industry. The Projections represent Brandt’s and
the Company’s best estimate of the results of operations and cash flows for the
periods covered thereby and the financial position as of the dates set forth
therein of the Company. The Company’s failure to meet the Projections, other
than as the result of assumptions made negligently or in bad faith, shall not be
deemed to be a breach of this Agreement.

 

SECTION 4.8. Events Subsequent to Latest Balance Sheet. Since the date of the
Latest Balance Sheet, there has not been any change in the business, financial
condition, operations, results of operations, or future prospects of the
Company, or in any item set forth on any of the Schedules attached hereto, which
would have a Material Adverse Effect on the Company. Without limiting the
generality of the foregoing, since that date:

 

(a) the Company has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;

 

(b) except as set forth on Schedule 4.8(b), the Company has not entered into any
Contract, lease, or license (or series of related Contracts, leases, and
licenses) involving more than $25,000 and outside the Ordinary Course of
Business;

 

(c) except as set forth on Schedule 4.8(c), no party (including the Company) has
accelerated, terminated, modified, or canceled any agreement, Contract, lease or
license (or series of related Contracts, leases and licenses) to which the
Company is a party or by which it is bound outside the Ordinary Course of
Business;

 

(d) the Company has not imposed any Lien upon any of its assets, tangible or
intangible;

 

(e) except as set forth on Schedule 4.8(e), the Company has not made any capital
expenditure (or series of related capital expenditures) in an amount in excess
of $25,000 either individually or in the aggregate outside of the Ordinary
Course of Business;

 

(f) the Company has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions);

 

(g) except as set forth on Schedule 4.8(g), the Company has not issued any note,
bond, or other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation involving more
than $25,000 either individually or in the aggregate outside of the Ordinary
Course of Business;

 

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(h) the Company has not delayed or postponed the payment of accounts payable and
other Liabilities outside the Ordinary Course of Business;

 

(i) the Company has not cancelled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$25,000 or outside the Ordinary Course of Business;

 

(j) the Company has not granted any license or sublicense of any rights under or
with respect to any Intellectual Property;

 

(k) there has been no change made or authorized in the articles of incorporation
or code of regulations of the Company;

 

(l) except as set forth on Schedule 4.8(l), the Company has not issued, sold, or
otherwise disposed any of its shares, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any of its shares;

 

(m) the Company has not declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;

 

(n) the Company has not experienced any material damage, destruction, or loss
(whether or not covered by insurance) to its property;

 

(o) the Company has not made any loan to, or entered into any other transaction
with, any of its directors, officers, employees or Affiliates;

 

(p) the Company has not entered into any employment Contract or collective
bargaining agreement, written or oral, or modified the terms of any existing
such Contract or agreement;

 

(q) except for hourly employees and except as set forth on Schedule 4.8(q), the
Company has not granted any increase in the base compensation of any of its
directors, officers, and employees or made any other change in employment terms
for any of its directors, officers, and employees, in each case, with respect to
those directors, officers and employees, whose annual compensation, including
any bonuses, equals or exceeds $50,000;

 

(r) except as set forth on Schedule 4.8(r), the Company has not adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, Contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);

 

(s) the Company has not made or pledged to make any charitable or other capital
contribution outside the Ordinary Course of Business;

 

(t) there has not been any other occurrence, event, incident, action, failure to
act, or transaction outside the Ordinary Course of Business involving the
Company; and

 

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(u) the Company has not committed to any of the foregoing.

 

SECTION 4.9. Undisclosed Liabilities. Except as set forth on Schedule 4.9, the
Company has no Liability (and to the Knowledge of the Company and the directors
of the Company, there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
it giving rise to any Liability), except for (i) Liabilities set forth on the
face of the Latest Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the date of the Latest Balance Sheet in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of Contract, breach of
warranty, tort, infringement, or violation of Law or arose out of any charge,
complaint, actions, suit, claim, proceeding or demand).

 

SECTION 4.10. Legal Compliance. Except as set forth on Schedule 4.10, the
Company and its Affiliates have complied with all applicable Laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and, to the Knowledge of the Company and
the directors and officers of the Company, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply.

 

SECTION 4.11. Tax Matters.

 

(a) The Company has duly and timely filed all Tax Returns that it has been
required to file for all periods through and including the Closing Date. All
such Tax Returns were correct and complete in all respects. All Taxes owed by
the Company (whether or not shown on any Tax Return) have been timely paid. The
Company currently is not the beneficiary of any extension of time within which
to file any Tax Return. The Company has maintained adequate provision for, and
adequate funds to pay, all unpaid Liabilities for Taxes, whether or not
disputed, that have accrued with respect to or are applicable to the period
ended on and including the Closing Date or to any years and periods prior
thereto and for which the Company may be directly or contingently liable in its
own right or as a transferee of the assets of, or successor to, any Person. The
Company has not incurred any Tax Liabilities other than in the Ordinary Course
of Business for any taxable year for which the applicable statute of limitations
has not expired. No claim has ever been made by an Authority in a jurisdiction
where the Company does not pay Taxes or file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Liens on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.

 

(b) None of the Tax Returns that include the operations of the Company has ever
been audited or investigated by any taxing Authority, and no facts exist which
would constitute grounds for the assessment of any additional Taxes by any
taxing Authority with respect to the taxable years covered in such Tax Returns.
No issues have been raised in any examination by any taxing Authority with
respect to the businesses and operations of the Company which, by application of
similar principals, reasonably could be expected to result in a proposed
adjustment to the Liability for Taxes for any other period not so examined.
Neither the Selling Shareholders nor the directors and officers (and employees
responsible for Tax matters) of the Company have received, or expect to receive,
from any taxing Authority any written notice of a proposed adjustment,
deficiency, underpayment of Taxes or any other such notice which has not been
satisfied by payment or been withdrawn, and no claims have been asserted
relating to such Taxes against the Company.

 

20

 

  

(c) Schedule 4.11 lists all federal, state, local, and foreign income Tax
Returns filed with respect to the Company for taxable periods for which the
applicable statute of limitations has not expired, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the
subject of audit. The Company has delivered to the Buyer correct and complete
copies of all federal, state, local and foreign income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Company for taxable periods for which the applicable statute of limitations has
not expired. The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.

 

(d) The Company has withheld and paid all Taxes required to have been withheld
and paid, including without limitation, sales and use taxes, and all Taxes in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.

 

(e) The Company has not filed a consent to the application of Section 341(f) of
the Code.

 

(f) The Company will not be required, as a result of (i) a change in accounting
method for a Tax period beginning on or before the Closing Date, to include any
adjustment under Section 481(c) of the Code (or any corresponding provision of
state, local or foreign Tax Law) in taxable income for any Tax period beginning
on or after the Closing Date, or (ii) any “closing agreement,” as described in
Section 7121 of the Code (or any corresponding provision of state, local or
foreign Tax Law), to include any item of income in or exclude any item of
deduction from any Tax period beginning on or after the Closing Date.

 

(g) The Company has disclosed on its income Tax Returns all positions taken
therein that could give rise to an accuracy-related penalty under Section 6662
of the Code (or any corresponding provision of Tax Law).

 

(h) The Company has not made any payments, is not obligated to make any payments
and is not a party to any agreement that under certain circumstances could
obligate it to make any “excess parachute payment” as defined in Section 280G of
the Code or any payments that will not be deductible under Section 162(m) of the
Code.

 

(i) The Company is not a party to any Tax allocation or sharing agreement. The
Company is not subject to any joint venture, partnership or other arrangement or
Contract which is treated as a partnership for federal income Tax purposes.

 

21

 

  

(j) None of the assets of the Company constitutes tax-exempt bond financed
property or tax-exempt use property within the meaning of Section 168 of the
Code, and none of the assets reflected on the Financial Statements is subject to
a lease, safe harbor lease or other arrangement as a result of which the Company
is not treated as the owner for federal income Tax purposes.

 

(k) The basis of all depreciable or amortizable assets, and the methods used in
determining allowable depreciation or amortization (including cost recovery)
deductions of the Company, are correct and in compliance with the Code and the
regulations thereunder in all material respects.

 

(l) The Company is not a party to or otherwise subject to any arrangement having
the effect of or giving rise to the recognition of a deduction or loss in a
taxable period ending on or before the Closing Date, and a corresponding
recognition of taxable income or gain in a taxable period ending after the
Closing Date, or any other arrangement that would have the effect of or give
rise to the recognition of taxable income or gain in a taxable period ending
after the Closing Date without the receipt of or entitlement to a corresponding
amount of cash.

 

SECTION 4.12. Real Property.

 

(a) Schedule 4.12(a) lists and describes briefly all real property that the
Company owns (the “Owned Property”). With respect to each such parcel of Owned
Property:

 

(i) except as set forth on Schedule 3.10(a), the Company has good and marketable
title to the parcel of Owned Property, free and clear of all Liens, Permitted
Liens which do not impair the current use, occupancy, or value, or the
marketability of title, of the property subject thereto;

 

(ii) except as set forth on Schedule 3.10(a), there are no pending or, to the
Knowledge of the Company threatened condemnation proceedings, lawsuits, or
administrative actions relating to the property or other matters affecting
adversely the current use, occupancy, or value thereof;

 

(iii) the legal description for the parcel contained in the deed thereof
describes such parcel fully and adequately, the buildings and improvements are
located within the boundary lines of the described parcels of land, are not in
violation of applicable setback requirements, zoning Laws, and ordinances (and
none of the properties or buildings or improvements thereon are subject to
“permitted non-conforming use” or “permitted non-conforming structure”
classifications), and do not encroach on any easement which may burden the land,
and the land does not serve any adjoining property for any purpose inconsistent
with the use of the land, and the property is not located within any flood plain
or subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained;

 

(iv) all facilities have received all approvals of Authorities (including
licenses and permits) required in connection with the ownership or operation
thereof and have been operated and maintained in accordance with applicable
Laws, rules, and regulations;

 

22

 

  

(v) there are no leases, subleases, licenses, concessions, or other Contracts,
written or oral, granting to any party or parties the right of use or occupancy
of any portion of the parcel of Owned Property;

 

(vi) there are no outstanding options or rights of first refusal to purchase the
parcel of Owned Property, or any portion thereof or interest therein;

 

(vii) there are no parties (other than the Company) in possession of the parcel
of Owned Property;

 

(viii) all facilities located on the parcel of real property are supplied with
utilities and other services necessary for the operation of such facilities,
including gas, electricity, water, telephone, sanitary sewer, and storm sewer,
all of which services are adequate in accordance with all applicable Laws and
are provided via public roads or via permanent, irrevocable, appurtenant
easements benefitting the parcel of real property; and

 

(ix) except as set forth on Schedule 3.10(a), each parcel of real property abuts
on and has direct vehicular access to a public road, or has access to a public
road via a permanent, irrevocable, appurtenant easement benefitting the parcel
of real property, and access to the property is provided by paved public
right-of-way with adequate curb cuts available.

 

(b) Schedule 4.12(b) lists and describes briefly all real property leased or
subleased to the Company (the “Leased Property”). The Selling Shareholders have
delivered to the Buyer correct and complete copies of the leases and subleases
and other agreements for occupancy, including all amendments, extensions and
other modifications thereto (“Leases”) with respect to each Leased Property, as
listed in Schedule 4.12(b) (as amended to date). With respect to each Lease
listed in Schedule 4.12(b):

 

(i) the lease or sublease is legal, valid, binding, enforceable, and in full
force and effect;

 

(ii) the lease or sublease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;

 

(iii) no party to the lease or sublease is in breach or default, and no event
has occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;

 

(iv) no party to the lease or sublease has repudiated any provision thereof;

 

(v) there are no disputes, oral agreements, or forbearance programs in effect as
to the lease or sublease;

 

23

 

  

(vi) with respect to each sublease, the representations and warranties set forth
in subsections (i) through (v) above are true and correct with respect to the
underlying lease;

 

(vii) the Company has not assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or subleasehold;

 

(viii) all facilities leased or subleased thereunder have received all approvals
of governmental Authorities (including licenses and permits) required in
connection with the operation thereof and have been operated and maintained in
accordance with applicable Laws, rules, and regulations;

 

(ix) all facilities leased or subleased thereunder are supplied with utilities
and other services necessary for the operation of said facilities; and

 

(x) the owner of the facility leased or subleased has good and marketable title
to the parcel of real property, free and clear of all Liens, easements,
covenants, or other restrictions, except for installments of special easements
of real estate Taxes not yet delinquent and recorded easements, covenants, and
other restrictions which do not impair the current use, occupancy, or value, or
the marketability of title, of the property subject thereto.

 

SECTION 4.13. Intellectual Property.

 

(a) Except as set forth on Schedule 4.13(a), the Company owns or has the right
to use pursuant to license, sublicense, Contract, or permission all Intellectual
Property necessary for the operation of the Business as presently conducted and
as proposed to be conducted as set forth in the Projections. Each item of
Intellectual Property owned or used by the Company immediately prior to the
Closing hereunder will be owned or available for use by the Company on identical
terms and conditions immediately subsequent to the Closing hereunder. The
Company has taken all necessary action to maintain and protect each item of
Intellectual Property that it owns or uses.

 

(b) Except as set forth on Schedule 4.13(b), the Company has not to the
Knowledge of the Company and its directors interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and neither the Company nor the directors of the
Company have ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of the
Company and the directors of the Company, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.

 

(c) Schedule 4.13(c) identifies each patent or registration which has been
issued to the Company with respect to any of its Intellectual Property,
identifies each pending patent application or application for registration which
the Company has made with respect to any of its Intellectual Property, and
identifies each license, Contract or other permission which the Company has
granted to any third party with respect to any of its Intellectual Property
(together with any exceptions). The Company has delivered to the Buyer correct
and complete copies of all such patents, registrations, applications, licenses,
Contracts and permissions (as amended to date) and has made available to the
Buyer correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Schedule 4.13(c)
also identifies each trade name or unregistered trademark used by the Company in
connection with its Business. With respect to each item of Intellectual Property
required to be identified in Schedule 4.13(c):

 

24

 

  

(i) the Company possesses all right, title, and interest in and to the item,
free and clear of any Lien, license, or other restriction;

 

(ii) the item is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;

 

(iii) no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the Knowledge of the Company and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of the Company, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and

 

(iv) the Company has never agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with respect to
the item.

 

(d) Schedule 4.13(d) identifies each item of Intellectual Property that any
third party owns and that the Company uses pursuant to license, sublicense,
Contract or permission. The Company has delivered to the Buyer correct and
complete copies of all such licenses, sublicenses, Contracts and permissions (as
amended to date). With respect to each item of Intellectual Property required to
be identified in Schedule 4.13(d):

 

(i) the license, sublicense, Contract or permission covering the item is legal,
valid, binding, enforceable, and in full force and effect;

 

(ii) the license, sublicense, Contract or permission will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;

 

(iii) no party to the license, sublicense, Contract or permission is in breach
or default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;

 

(iv) no party to the license, sublicense, Contract or permission has repudiated
any provision thereof;

 

25

 

  

(v) with respect to each sublicense, the representations and warranties set
forth in subsections (i) through (iv) above are true and correct with respect to
the underlying license;

 

(vi) the underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;

 

(vii) no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the Knowledge of the Company and the
directors of the Company, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property; and

 

(viii) the Company has not granted any sublicense or similar right with respect
to the license, sublicense, agreement, or permission.

 

(e) To the Knowledge of the Company and the directors of the Company, the
Company will not interfere with, infringe upon, misappropriate, or otherwise
come into conflict with, any Intellectual Property rights of third parties as a
result of the continued operation of its Business as presently conducted and as
presently proposed to be conducted.

 

(f) Neither the Selling Shareholders nor the directors of the Company have any
Knowledge of any new products, inventions, procedures, or methods of
manufacturing or processing that any competitors or other third parties have
developed which reasonably could be expected to supersede or make obsolete any
product or process of the Company.

 

SECTION 4.14. Tangible Assets. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of its
Business as presently conducted and as presently proposed to be conducted. Each
such tangible asset has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), is suitable for the purposes for which it presently is used and, to the
Knowledge of the Company and the directors of the Company, free from defects
(patent and latent). The assets of the Company at the Closing will be sufficient
to permit the Buyer to operate the Business as currently conducted.

 

SECTION 4.15. Inventory. The inventory of the Company consists of raw materials
and supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth on
the face of the Latest Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company.

 

SECTION 4.16. Contracts. Schedule 4.16 lists the following Contracts and other
agreements to which the Company is a party:

 

(a) any Contract (or group of related Contracts) for the lease of personal
property to or from any Person providing for lease payments in excess of $25,000
per annum;

 

26

 

  

(b) any Contract (or group of related contracts) between the Company and any
Major Customer or Major Supplier;

 

(c) any capitalized lease, pledge, conditional sale or title retention agreement
involving the payment of more than $25,000 in the aggregate;

 

(d) any Contract concerning a partnership or joint venture;

 

(e) any Contract with a sales representative, manufacturer’s representative,
distributor, dealer, broker, sales agency, advertising agency or other Person
engaged in sales, distributing or promotional activities, or any agreement to
act as one of the foregoing on behalf of any Person;

 

(f) any Contract (or group of related Contracts) under which it has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, or under which it has imposed a Lien on any of its
assets, tangible or intangible;

 

(g) any Contract pursuant to which the Company has made or will make loans or
advances, or has or will have incurred debts or become a guarantor or surety or
pledged its credit on or otherwise become responsible with respect to any
undertaking of another Person (except for the negotiation or collection of
negotiable instruments in transactions in the ordinary course of business);

 

(h) any mortgage, indenture, note, bond or other agreement relating to
indebtedness incurred or provided by the Company;

 

(i) any form of Contract concerning confidentiality or noncompetition or
otherwise prohibiting the Company from freely engaging in any business;

 

(j) any Contract with any Selling Shareholder or any Affiliate thereof, other
than the Shareholders Agreement referred to in Section 6.14;

 

(k) any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, or other plan or arrangement for the benefit
of its current or former directors, officers, and employees;

 

(l) any license, royalty or other Contract relating to Intellectual Property;

 

(m) any Contract involving a governmental body;

 

(n) any collective bargaining agreement;

 

(o) any Contract for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $50,000 or
providing severance benefits;

 

27

 

  

(p) any Contract, whether or not fully performed, relating to any acquisition or
disposition of the Company or any predecessor in interest or any acquisition or
disposition of any Subsidiary, division, line of business, or real property;

 

(q) any Contract under which it has advanced or loaned any amount to any of its
directors, officers, and employees;

 

(r) any Contract under which the consequences of a default or termination could
have an adverse effect on the business, financial condition, operations, results
of operations, or future prospects of the Company;

 

(s) any other Contract (or group of related Contracts) the performance of which
involves consideration in excess of $25,000;

 

(t) any commitment to do any of the foregoing described in clauses (a) through
(s).

 

The Company has delivered to the Buyer a correct and complete copy (or form of
Contract for certain Contracts so identified on Schedule 4.16) of each written
Contract listed in Schedule 4.16 (as amended to date) and a written summary
setting forth the terms and conditions of each oral Contract referred to in
Schedule 4.16. With respect to each such Contract: (A) the Contract is legal,
valid, binding, enforceable, and in full force and effect; (B) the Contract will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the Contract; and (D) no party
has repudiated any provision of the Contract.

 

SECTION 4.17. Notes and Accounts Receivable. All notes and accounts receivable
of the Company are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Latest
Balance Sheet (rather than in any notes thereto) as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practices of the Company.

 

SECTION 4.18. Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.

 

SECTION 4.19. Insurance. Schedule 4.19 sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, Liability, and workers’ compensation coverage and bond and surety
arrangements) to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage:

 

(a) the name, address, and telephone number of the agent;

 

(b) the name of the insurer, the name of the policyholder, and the name of each
covered insured;

 

28

 

  

(c) the policy number and the period of coverage;

 

(d) the scope (including an indication of whether the coverage was on a claims
made, occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage; and

 

(e) a description of any retroactive premium adjustments or other loss-sharing
arrangements.

 

With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Company nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. The Company has been covered by insurance in scope and
amount customary and reasonable for the Business in which it has engaged.
Schedule 4.19 describes any self-insurance arrangements affecting the Company.
Schedule 4.19 sets forth known claims, if any, made against the Company that are
covered by insurance. Such claims have been disclosed to and accepted by the
appropriate insurance companies and are being defended by such appropriate
insurance companies. Except as set forth on Schedule 4.19, no claims have been
denied coverage during the last five years.

 

SECTION 4.20. Litigation. Schedule 4.20 sets forth each instance in which the
Company (i) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party or to the Knowledge of the Company and the
directors and officers (and employees with responsibility for litigation
matters) of the Company, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in Schedule 4.20 would reasonably be
expected to result in any adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Company. Neither
the Company nor the directors of the Company have any reason to believe that any
such action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Company. Neither the Selling Shareholders nor the Company
have any Liability with respect to any claims or threatened claims by third
parties relating to any sale or proposed sale of the Company (whether structured
as a sale of stock, a sale of assets, a merger or otherwise) or any division of
the Company, including any claims or threatened claims by the Crystal Corridor
Group. Neither the Selling Shareholders nor the Company is a party to any
litigation relating to such claims and, to the Knowledge of the Company and the
directors of the Company, no such litigation is threatened.

 

SECTION 4.21. Product Warranty. Each product manufactured, sold, leased, or
delivered by the Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and the Company has no
Liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) for replacement or repair
thereof or other damages in connection therewith, subject only to a $250,000 pro
forma reserve for product warranty claims. Any setoffs against the pro forma
reserve shall be calculated on the basis of the net cost to the Company to
repair or replace the defective product. No product manufactured, sold, leased,
or delivered by the Company is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale or lease.
Schedule 4.21 includes copies of the standard terms and conditions of sale or
lease for the Company (containing applicable guaranty, warranty, and indemnity
provisions).

 

29

 

  

SECTION 4.22. Product Liability. The Company has no Liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by the Company.

 

SECTION 4.23. Employees. Schedule 4.23 contains a true, complete and accurate
list of the names, titles, annual compensation and all bonuses and similar
payments made for the current and preceding fiscal years for all directors,
officers and employees of the Company whose annual compensation, including any
bonuses, equals or exceeds $50,000. To the Knowledge of the Company and the
directors of the Company, no executive, key employee, or group of employees has
any plans to terminate employment with the Company. The Company is not a party
to or bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Company has not committed any unfair labor practice.
Neither the Company nor the directors of the Company have any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company. The Company has not
engaged in any plant closing or employee layoff activities that would violate or
require notification pursuant to, the Worker Adjustment Retraining and
Notification Act of 1988, as amended, or any similar state, local or foreign
plant closing or mass layoff statute, rule or regulation.

 

SECTION 4.24. Employee Benefits.

 

(a) General. Except as set forth on Schedule 4.24, the Company is not a party
to, participates in or has any Liability or contingent Liability with respect
to:

 

(i) any Employee Benefit Plan; or

 

(ii) any retirement or deferred compensation plan, incentive compensation plan,
stock plan, unemployment compensation plan, vacation pay, severance pay, bonus
or benefit arrangement, insurance or hospitalization program or any other fringe
benefit arrangements for any current or former employee, director, consultant or
agent, whether pursuant to Contract, arrangement, custom or informal
understanding, which does not constitute an Employee Benefit Plan.

 

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(b) Plan Documents and Reports. A true and correct copy of each of the plans,
arrangements, and agreements listed on Schedule 4.24 (referred to hereinafter as
“Employee Benefit Plans”), and all Contracts relating thereto, or to the funding
thereof, including, without limitation, all trust agreements, insurance
Contracts, administration Contracts, investment management agreements,
subscription and participation agreements, and recordkeeping agreements, each as
in effect on the date hereof, has been supplied to the Buyer. In the case of any
Employee Benefit Plan which is not in written form, the Buyer has been supplied
with an accurate description of such Employee Benefit Plan as in effect on the
date hereof. A true and correct copy of the most recent annual report, actuarial
report, accountant’s opinion of the plan’s financial statements, summary plan
description and Internal Revenue Service determination letter with respect to
each Employee Benefit Plan, to the extent applicable, and a current schedule of
assets (and the fair market value thereof assuming liquidation of any asset
which is not readily tradable) held with respect to any funded Employee Benefit
Plan has been supplied to the Buyer, and there have been no material changes in
the financial condition in the respective plans other than market gains or
losses to date from that stated in the annual reports and actuarial reports
supplied.

  

(c) Compliance with Employee Benefit Laws; Liabilities. As to all Employee
Benefit Plans:

 

(i) All Employee Benefit Plans comply and have been administered in form and in
operation in all material respects with all applicable requirements of Law, and
no event has occurred which will or could cause any such Employee Benefit Plan
to fail to comply with such requirements and no notice has been issued by any
governmental Authority questioning or challenging such compliance.

 

(ii) None of the assets of any Employee Benefit Plan is invested in employer
securities or employer real property.

 

(iii) There have been no “prohibited transactions” (as described in any
applicable Law with respect to any Employee Benefit Plan and the Company has not
engaged in any prohibited transaction.

 

(iii) There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the Knowledge of the Company and the directors and
officers (and employees with responsibility for employee benefit matters) of the
Company, threatened involving any Employee Benefit Plan or the assets thereof
and, to the Knowledge of the Company and the directors and officers (and
employees with responsibility for employee benefit matters) of the Company, no
facts exist which could give rise to any such actions, suits or claims (other
than routine claims for benefits).

 

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(iv) The Company has no Liability or contingent Liability for providing, under
any Employee Benefit Plan or otherwise, employment benefits or any
post-retirement medical or life insurance benefits, other than statutory
Liability for providing group health plan continuation coverage under applicable
Law.

 

(v) Actuarially adequate accruals for all obligations under the Employee Benefit
Plans are reflected in the financial statements of the Company and such
obligations include a pro rata amount of the contributions and premiums which
would otherwise have been made in accordance with past practices and applicable
Law for the plan years which include the Closing Date.

 

(vi) There has been no act or omission by the Company that would impair the
ability of the Company (or any successor thereto) to unilaterally amend or
terminate (in compliance with and subject to applicable Laws) any Employee
Benefit Plan.

 

SECTION 4.25. Environmental Matters.

 

(a) Each of the Company and Subsidiaries:

 

(i) has complied and is in compliance with all Environmental Laws (and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or, to the Knowledge of the Company and the
directors and officers (and employees with responsibility for environmental
matters), commenced against any of them alleging any such failure to comply);

 

(ii) has obtained and complied with, and is in compliance with, all Permits,
licenses and other authorizations that are required pursuant to Environmental
Laws; and

 

(iii) has complied in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables which are contained in the Environmental Laws.

 

(b) Neither the Company nor its Affiliates has received any written or oral
notice, report or other information regarding any actual or alleged violation of
Environmental Laws, or any Liabilities or potential Liabilities (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including any investigatory, remedial or corrective
obligations, relating to any of them or its facilities arising under
Environmental Laws.

 

(c) Except as set forth on Schedule 4.25(c), the Company has no Liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), and the Company and its Affiliates have not
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could give rise to any Liability, for damage to any site, location or body of
water (surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental Law.

 

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(d) Schedule 4.25(d) sets forth all properties and equipment used in the
business of the Company and its Affiliates that contain, or have contained,
asbestos, PCB’s, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins, dibenzofurans and other Hazardous
Substances.

 

(e) None of the following exists at any property or facility owned or operated
by the Company: (1) underground storage tanks, (2) asbestos-containing material
in any form or condition, (3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills, surface impoundments, or disposal areas.

 

(f) Neither the Company nor its Affiliates has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled, or released any
substance, including without limitation any Hazardous Substance, or owned or
operated any property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given or would give
rise to Liabilities, including any Liability for response costs, corrective
action costs, personal injury, property damage, natural resources damages or
attorney fees, or any investigative, corrective or remedial obligations,
pursuant to Environmental Laws.

 

(g) Neither this Agreement nor the consummation of the transaction that is the
subject of this Agreement will result in any obligations for site investigation
or cleanup, or notification to or consent of government agencies or third
parties, pursuant to any of the so-called “transaction-triggered” or
“responsible property transfer” Environmental Laws.

 

(h) Neither the Company nor any of its Affiliates has, either expressly or by
operation of Law, assumed or undertaken any Liability, including without
limitation any obligation for corrective or remedial action, of any other Person
relating to Environmental Laws.

 

(i) No facts, events or conditions relating to the past or present facilities,
properties or operations of the Company or any of its Affiliates will prevent,
hinder or limit continued compliance with Environmental Laws, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental
Laws, or give rise to any other Liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental Laws, including
without limitation any relating to onsite or offsite releases or threatened
releases of Hazardous Substances or wastes, personal injury, property damage or
natural resources damage.

 

SECTION 4.26. Permits. Schedule 4.26 is a true and accurate list of all
licenses, certificates, permits, franchises, rights, code approvals and private
product approvals (collectively, “Permits”) held by the Company. Except for the
Permits listed on Schedule 4.26, there are no Permits, whether federal, state,
local or foreign, which are necessary for the lawful operation of the Business
of the Company as presently conducted.

 

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SECTION 4.27. Backlog. Schedule 4.27 sets forth a true, complete and correct
list of all customer orders of the Company which constitute backlog (“Backlog”)
and the dollar amount represented by each such order as of December 31, 2014.
Except as set forth on Schedule 4.27, none of the Backlog orders have been
canceled and, to the Knowledge of the Company and the directors and officers
(and employees with responsibility for Backlog matters) of the Company, there
are no threats of cancellation with respect to the Backlog orders.

 

SECTION 4.28. No Conflict of Interest. Neither any Selling Shareholder nor any
Affiliate thereof has or claims to have any direct or indirect interest in any
tangible or intangible property used in the Business of the Company except as a
holder of Subject Shares. Neither any Selling Shareholder nor any Affiliate
thereof has any direct or indirect interest in any other Person which conducts a
business similar to, has any Contract or arrangement with, or does business or
is involved in any way with, the Company, except for the ownership of less than
1% of the outstanding stock of any publicly held corporation.

 

SECTION 4.29. Bank Accounts. Schedule 4.29 sets forth the names and locations of
each bank or other financial institution at which the Company has accounts
(giving the account numbers) or safe deposit box and the names of all Persons
authorized to draw thereon or have access thereto, and the names of all Persons,
if any, now holding powers of attorney or comparable delegation of authority
from the Company and a summary statement thereof.

 

SECTION 4.30. Customers and Suppliers.

 

(a) Schedule 4.30 sets forth:

 

(i) a list of the 10 largest customers of the Company, in terms of revenue
during each of the 2013 and 2014 calendar years (collectively, the “Major
Customers”), showing the total revenue received in each such period from each
such customer;

 

(ii) a list of the 10 largest suppliers of the Company in terms of purchases
during the 2013 and 2014 calendar years (collectively, the “Major Suppliers”),
and showing the approximate total purchases in each such period from each such
supplier; and

 

(b) Since the date of the Latest Balance Sheet, there has not been any adverse
change in the business relationship, and there has been no dispute, between the
Company and any Major Customer or Major Supplier, and, to the Knowledge of the
Company and the directors, there are no indications that any Major Customer or
Major Supplier intends to reduce its purchases from, or sales to, the Company,
other than as set forth in the Projections. Since the date of the Latest Balance
Sheet, there have been no decreases in the profit margins on any Major Product
and, to the Knowledge of the Company and the directors of the Company, there are
no indications that the profit margins on any Major Product will decrease in the
next two fiscal years, other than as set forth in the Projections.

 

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SECTION 4.31. Claims Against Officers and Directors. Schedule 4.31 sets forth
each pending or, to the Knowledge of the Company and the directors of the
Company, threatened claims against any director, officer, employee or agent of
the Company or any other Person which could give rise to any claim for
indemnification against the Company.

 

SECTION 4.32. Improper and Other Payments.

 

(a) Neither the Company, any director, nor to the Knowledge of the Company and
the directors of the Company, any officer, employee, agent or representative of
the Company, any Selling Shareholder, their respective Affiliates nor any Person
acting on behalf of any of them, has made, paid or received any bribes,
kickbacks or other similar payments to or from any Person, whether lawful or
unlawful;

 

(b) no contributions have been made, directly or indirectly, to a domestic or
foreign political party or candidate.

 

(c) no improper foreign payment (as defined in the Foreign Corrupt Practices
Act) has been made; and

 

(d) the internal accounting controls of the Company are adequate to detect any
of the foregoing.

 

SECTION 4.33. Accuracy of Statements. Neither this Agreement nor any Schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of the Company to Buyer or any representative
or Affiliate of Buyer in connection with this Agreement or any of the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer represents and warrants to the Selling Shareholders that the
statements contained in this Article V are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article V).

 

SECTION 5.1. Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and legally authorized to do business in the State of West Virginia.
The Buyer is not in default under or in violation of any provision of its
articles of incorporation or bylaws.

 

SECTION 5.2. Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions. The Buyer need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the transactions
contemplated by this Agreement.

 

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SECTION 5.3. Capitalization.

 

(a) As at the date of this Agreement and as at the Closing Date, the total
authorized capital stock of the Buyer, consists of: (a) 200,000,000 shares of
Buyer Common Stock, and (b) 10,000,000 shares of Buyer Preferred Stock. A total
of 91,113,944 shares of Buyer Common Stock are currently issued and outstanding,
consisting of (i) 66,588,600 of Buyer Common Stock that was issued and
outstanding as of December 31, 2014 and (ii) an additional 27,525,344 shares of
Buyer Common Stock that was issued upon the automatic conversion into Buyer
Common Stock of shares of Series A preferred stock (the “Old Series A
Preferred”), all of which shares of Old Series A Preferred Stock were cancelled
upon such conversion. No shares of Buyer Preferred Stock are currently issued
and outstanding. In addition, the Buyer has outstanding:

 

·warrants to purchase up to 53,167,193 shares of our common stock at exercise
prices ranging between $0.375 and $2.25 per share, subject to adjustment in
certain circumstances as provided therein;

 

·options to purchase up to 7,019,750 shares of our common stock at a weighted
average exercise price of $0.92 per share, subject to adjustment in certain
circumstances as provided therein; and

 

·an obligation to issue 10,122,067 shares of common stock related to
anti-dilution protection rights to various stockholders; and

 

·warrants issuable to the placement agent for our winter 2014/2015 private
placement to purchase an aggregate of up to 2,718,571 shares of Common Stock at
exercise price equal to $0.25 per share

 

(b) Immediately prior to the Closing, all issued and outstanding shares of
capital stock of the Buyer (i) have been duly authorized and validly issued,
(ii) are fully paid and nonassessable, and (iii) were, in all material respects,
issued in compliance with all applicable state and federal laws concerning the
issuance of securities. Except as set forth on Schedule 5.3, there are no
outstanding securities of Buyer which contain any preemptive, redemption or
similar provisions, nor is any holder of securities of Buyer entitled to
preemptive or similar rights arising out of any agreement or understanding with
Buyer by virtue of this Agreement. Except as disclosed in Buyer’s Form 10-K
Annual Report for its fiscal year ended December 31, 2014 included in the
Securities Filings (the “Form 10-K”), and there are no contracts, commitments,
understandings or arrangements by which Buyer is or may become bound to redeem a
security of Buyer (ii) Buyer has no stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement; and (iii) there are no
outstanding options, warrants, agreements, convertible securities, preemptive
rights or other rights to subscribe for or to purchase or acquire, any shares of
capital stock of Buyer or contracts, commitments, understandings, or
arrangements by which Buyer is or may become bound to issue any shares of
capital stock of Buyer, or securities or rights convertible or exchangeable into
shares of capital stock of Buyer. Except as required by law, including any
federal securities rules and regulations, there are no restrictions upon the
voting or transfer of any of the shares of capital stock of Buyer pursuant to
its Organizational Documents or other governing documents or any agreement or
other instruments to which Buyer is a party or by which it is bound.

 

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(c) The Stock Consideration and, when and if issuable, the Contingent
Consideration are duly authorized and, when issued in accordance with this
Agreement, will be duly and validly issued, fully paid and nonassessable, free
and clear of all liens and encumbrances other than restrictions on transfer
provided for in this Agreement.

 

(d) On or before the Closing Date, the Buyer intends to consummate a reverse
split of its issued and outstanding shares of Buyer Common Stock and any
outstanding Common Stock Equivalents of the Buyer (the “Reverse Stock Split”).
Such extent of such Reverse Stock Split will be determined by the Buyer in
conjunction with the investment bank arranging for the Required Financing
contemplated by Section 7.9 of this Agreement. As a result of such Reverse Stock
Split, the Buyer has reserved and will have reserved a sufficient number of
shares of Buyer Common Stock for issuance of the Stock Consideration and the
Contingent Consideration. The Conversion Price of the Stock Consideration shall
be appropriately and equitably increased, and the number of Conversion Shares
issuable upon conversion of the Protea Series A Preferred Stock shall be
appropriately and equitably reduced upon consummation of the Reverse Stock
Split. For the avoidance of doubt, if, immediately prior to the Reverse Stock
Split, the Conversion Price in effect is $0.40 per share and the number of
Conversion Shares is therefore 14,251,353 shares of Buyer Common Stock, should
the Buyer consummate a 1:10 Reverse Stock Split, upon consummation of such
Reverse Stock Split, the new Conversion Price would be $4.00 per share, and the
adjusted number of Conversion Shares would be 1,425,134 Conversion Shares.

 

SECTION 5.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, Law, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or consent under
any agreement, Contract, lease, license, instrument, or other arrangement to
which the Buyer is a party or by which it is bound or to which any of its assets
is subject.

 

SECTION 5.5. Brokers’ Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Selling Shareholder could
become liable or obligated.

 

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SECTION 5.6. Legal Compliance. The Buyer has complied with all applicable Laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or to the Knowledge of the directors and officers of the Buyer commenced
against any of them alleging any failure so to comply with respect to the
transactions contemplated by this Agreement.

 

SECTION 5.7. Litigation. Schedule 5.7 sets forth each instance in which the
Buyer (i) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party or to the Knowledge of the directors and
officers (and employees with responsibility for litigation matters) of the
Buyer, is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator as a result of the transactions contemplated by this
Agreement. None of the actions, suits, proceedings, hearings, and investigations
set forth in Schedule 5.7 would reasonably be expected to result in any adverse
change in the business, financial condition, operations, results of operations,
or future prospects of the Buyer. The directors and officers (and employees with
responsibility for litigation matters) of the Buyer have no reason to believe
that any such action, suit, proceeding, hearing, or investigation may be brought
or to the Knowledge of the directors and officers (and employees with
responsibility for litigation matters) of the Buyer, threatened against the
Buyer.

 

SECTION 5.8. Accuracy of Statements. Neither this Agreement nor any Schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of the Buyer to Selling Shareholders or any
representative or Affiliate of Selling Shareholders in connection with this
Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.

 

SECTION 5.9 Intellectual Property.

 

(a) All registrations and applications for registration of all Owned
Intellectual Property and all Licensed Intellectual Property (collectively, the
“Protea Intellectual Property”) and applications in process for the Owned
Intellectual Property and the Licensed Intellectual Property are included in the
Securities Filings or have been identified by the Buyer to the Selling Parties.
All of the registrations and applications for registration of the Protea
Intellectual Property are valid, subsisting and in full force and effect, and
all actions and payments necessary for the maintenance and continuation of such
Protea Intellectual Property have been taken or paid. Buyer owns or possesses
sufficient legal rights to use all of the Protea Intellectual Property..

 

(b) To the knowledge of the Buyer, the business as currently conducted and as
proposed to be conducted by the Protea Entities has not and will not constitute
any infringement of the Intellectual Property rights of any other Person. To the
knowledge of the Buyer, the development of product candidates and the use,
manufacture or sale of the Buyer products based on the Protea Intellectual
Property does not, and will not, infringe the Intellectual Property rights of
any third Person. To the knowledge of the Buyer, no employee or agents of the
Buyer have misappropriated the Intellectual Property rights of any Person.

 

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(c) There are no outstanding options or other rights to acquire any Protea
Intellectual Property. To the knowledge of the Buyer, each licensor of the
Licensed Intellectual Property is the sole and exclusive owner of such Licensed
Intellectual Property and has the sole and exclusive right and authority to
grant licenses to such Licensed Intellectual Property.

 

(d) Buyer has not received any communications alleging or suggesting that it has
violated or, by conducting its business as currently conducted or proposed to be
conducted, would infringe or misappropriate any of the Intellectual Property
rights of any other Person.

 

(e) No Protea Intellectual Property is subject to any interference, reissue,
reexamination, opposition or cancellation proceeding or any other Legal
Proceeding or subject to or otherwise bound by any outstanding order or contract
(other than in the case of any Licensed Intellectual Property, the license
agreement or other contract pursuant to which the Buyer licenses the rights to
such Licensed Intellectual Property) that restricts in any manner the use,
transfer or licensing thereof by Buyer or may affect the validity, use or
enforceability of such Protea Intellectual Property . Buyer has no knowledge of
any fact or circumstance that would render any portion of the Protea
Intellectual Property invalid or unenforceable.

 

(f) Buyer has the right to: (i) bring actions for past, present and future
infringement, dilution, misappropriation or unauthorized use of any Protea
Intellectual Property owned or licensed by Buyer, injury to goodwill associated
with the use of any such Protea Intellectual Property, unfair competition or
trade practices violations of and other violation of such Protea Intellectual
Property; and (ii) with respect to the Protea Intellectual Property owned
exclusively by Buyer, receive all proceeds from the foregoing set forth in
subsection (a) hereof, including, without limitation, licenses, royalties
income, payments, claims, damages and proceeds of suit.

 

(g) The execution and delivery of this Agreement and the other Transaction
Documents and consummation of the transactions contemplated hereby and thereby
will not result in the breach of, or create on behalf of any third party the
right to terminate or modify, any license, sublicense, agreement or permission:
(a) relating to or affecting any Protea Intellectual Property; or (b) pursuant
to which Buyer is granted a license or otherwise authorized to use any third
party Intellectual Property.

 

(h) To the knowledge of the Buyer, no Person is infringing, violating,
misappropriating or making unauthorized use of any of the Protea Intellectual
Property.

 

SECTION 5.10 Permits; Regulatory. No Regulatory Approval or Consent of, or any
designation, declaration or filing with, any Governmental or Regulatory
Authority or any other Person is required in connection with the valid
execution, delivery and performance of this Agreement and the other Transaction
Documents (including, without limitation, the issuance of the Units), except
such Regulatory Approvals, Consents, designations, declarations or filings that
have been duly and validly obtained or filed, or with respect to any filings
that must be made after the Closing as will be filed in a timely manner. Buyer
has all franchises, Permits, licenses and any similar authority necessary for
the conduct of its business as now being conducted.

 

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SECTION 5.11 Offering Valid. Assuming the accuracy of the representations and
warranties of the Selling Shareholders and the Company contained in this
Agreement, the offer, sale and issuance of the Units will be exempt from the
registration requirements of the Securities Act,, and will be exempt from
registration and qualification under applicable state securities laws.

 

SECTION 5.12 Securities Filings..

 

(a) The Buyer is has made all filings required to be made by it with the United
States Securities and Exchange Commission (“SEC”) under the Securities Act and
the Securities Exchange Act, and all of such Securities Filings are available
for review by the Selling Shareholders and their legal and financial
representatives on the website of the SEC at www.sec.gov, (“search for company
filings”) under the name “Protea Biosciences. Such Securities Filings include
true and complete copies of all material contracts, licenses, Intellectual
Property and corporate documents applicable to the Buyer. All of the disclosures
set forth in the Securities Filings are true and complete in all material
respects and, does not, and if furnished after the date of this Agreement and
before the Closing Date, shall not, contain any untrue statement of material
fact or fail to state any material fact necessary to make such statement not
misleading.

 

(b) The Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act, and the Buyer has taken no action designed to, or which
to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Securities Exchange Act nor has the Buyer received
any notification that the SEC is contemplating terminating such registration.

  

SECTION 5.13 Foreign Payments; Undisclosed Contract Terms. To the knowledge of
the Buyer, it has not made any offer, payment, promise to pay or authorization
for the payment of money or an offer, gift, promise to give, or authorization
for the giving of anything of value to any Person in violation of the Foreign
Corrupt Practices Act of 1977, as amended and the rules and regulations
promulgated thereunder. To the knowledge of the Buyer, there are no
understandings, arrangements, agreements, provisions, conditions or terms
relating to, and there have been no payments made to any Person in connection
with any agreement, contract, commitment, lease or other contractual undertaking
of Buyer which are not expressly set forth in such contractual undertaking.

 

SECTION 5.14 Accuracy of Statements. Neither this Agreement nor any Schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of the Buyer to Selling Shareholders or any
representative or Affiliate of Selling Shareholders in connection with this
Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.

 

40

 

  

SECTION 5.15 Certificate of Designations. The Certificate of Designations is in
accordance with the Certificate of Incorporation of the Buyer and nothing in the
Certificate of Incorporation of the Buyer conflicts with or overrides any
provision of the Certificate of Designations.

 

ARTICLE VI

 

COVENANTS

 

SECTION 6.1. General. Each of the parties will use his or its best efforts to
take all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Articles
VII and VIII below).

 

SECTION 6.2. Notices and Consents. The Selling Shareholders will cause the
Company to give any notices to third parties, and will cause the Company to
obtain any third party consents, that the Buyer may reasonably request. Each of
the parties will (and the Selling Shareholders will cause the Company to) give
any notices to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Sections 4.3 and 5.3 above.

 

SECTION 6.3. Operation of Business. From the date of this Agreement until the
Closing Date, the Company shall be operated in the Ordinary Course of Business
and each of the Selling Shareholders and the Company shall use commercially
reasonable efforts to preserve intact the present business organization and
personnel of the Company, preserve the Company Business relationships with other
Persons material to the operation of the Company, and not permit any action or
omission which would cause any of the representations or warranties of the
Company contained herein to become inaccurate or any of the covenants of the
Company to be breached. Without limiting the generality of the foregoing, except
as set forth in Schedule 6.3, prior to the Closing, the Company will not,
without the prior written consent of the Buyer:

 

(a) incur any obligation or enter into any Contract, other than in the Ordinary
Course of Business, which (i) requires a payment by any party in excess of, or a
series of payments which in the aggregate exceed, $25,000 and (ii) has a term
of, or requires the performance of any obligations by the Company over a period
in excess of six months;

 

(b) take any action, or enter into or authorize any Contract or transaction
involving more than $25,000 and outside the Ordinary Course of Business, other
than any transactions contemplated by this Agreement;

 

(c) sell, transfer, convey, assign or otherwise dispose of any of its assets or
properties other than in the Ordinary Course of Business;

 

41

 

  

(d) waive, release or cancel any claims against third parties or debts owing to
it, or any rights which have any value involving more than $25,000 and outside
the Ordinary Course of Business;

 

(e) make any changes in its accounting systems, policies, principles or
practices;

 

(f) enter into, authorize, or permit any transaction with any Selling
Shareholder or any Affiliate thereof, or enter into any Contract relating to
compensation or benefits with any Person, or, other than in the Ordinary Course
of Business, modify any compensation amounts or levels of any officer or
employee;

 

(g) except as required for the transactions contemplated in this Agreement,
change or amend its articles of incorporation or code of regulations;

 

(h) authorize for issuance, issue, sell, deliver or agree or commit to issue,
sell or deliver (whether through the issuance or granting of options, warrants,
convertible or exchangeable securities, commitments, subscriptions, rights to
purchase or otherwise) any shares of capital stock or any other securities of
the Company, or amend any of the terms of any such capital stock or other
securities, except as required for the transactions contemplated in this
Agreement;

 

(i) except as required for the transactions contemplated in this Agreement,
split, combine, or reclassify any shares of its capital stock, declare, set
aside or pay any dividend or other distribution in property other than cash in
respect of its capital stock, or redeem or otherwise acquire any capital stock
or other securities of the Company;

 

(j) make any borrowings, incur any debt, or assume, guarantee, endorse (except
for the negotiation or collection of negotiable instruments in the Ordinary
Course of Business and consistent with past practice) or otherwise become liable
(whether directly, contingently or otherwise) for the obligations of any other
Person, or make any payment or repayment in respect of any indebtedness in
excess of $25,000 (other than trade payables and accrued expenses in the
Ordinary Course of Business and consistent with past practice);

 

(k) make any loans, advances or capital contributions to, or investments in, any
other Person;

 

(l) enter into, adopt, amend or terminate any bonus, profit sharing,
compensation, termination, stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreements, trusts, plans, funds or other
arrangements for the benefit or welfare of any director, manager, officer or
employee, or increase in any manner the compensation or fringe benefits of any
director, manager, officer or employee or pay any benefit not required by any
existing plan and arrangement or enter into any Contract, agreement, commitment
or arrangement to do any of the foregoing;

 

(m) acquire, lease, encumber or otherwise impose a Lien on any assets, whether
tangible or intangible;

 

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(n) authorize or make any capital expenditures which individually or in the
aggregate are in excess of $25,000;

 

(o) make any Tax election or settle or compromise any federal, state, local or
foreign income Tax Liability, or waive or extend the statute of limitations in
respect of any such Taxes;

 

(p) pay any amount, perform any obligation or agree to pay any amount or perform
any obligation, in settlement or compromise of any suits or claims of Liability
against the Company or any of its directors, managers, officers, employees or
agents;

 

(q) terminate, modify, amend or otherwise alter or change any of the terms or
provisions of any agreement, or pay any amount not required by Law or by any
Contract; or

 

(r) other than overnight deposits or money market instruments and investments
existing on the date hereof, make any investments with cash or the proceeds of
existing investments.

 

SECTION 6.4. Full Access. The Selling Shareholders will permit and cause the
Company to permit, representatives of the Buyer to have full access to all
premises, properties, personnel, books, records (including Tax records),
Contracts, and documents of or pertaining to the Company and shall make the
officers and employees of the Company available to the Buyer and its
representatives as the Buyer and their representatives shall from time to time
reasonably request, in each case to the extent that such access and disclosure
would not obligate the Company to take any actions that would disrupt the normal
course of its business or violate the terms of any agreement to which the
Company is bound or any applicable Law or regulation. The Buyer and the Buyer’s
representatives will not use any of the Confidential Information that they
receive from the Company except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, the Buyer and the Buyer’s
representatives will return to the Company all tangible embodiments (and all
summaries and copies, including electronically stored information) of the
Confidential Information that they receive from the Company or copied from
Confidential Information received from the Company which are in its possession
and will only use such Confidential Information in the defense of any litigation
related to this Agreement; provided, however, that the Buyer and the Buyer’s
representatives shall not be responsible for the confidentiality of any
information (i) which, at the time of disclosure, is available publicly, through
no fault of the Buyer (ii) which, after disclosure, becomes available publicly
through no fault of the Buyer, or (iii) which the Buyer knew or to which the
Buyer had access prior to disclosure.

 

SECTION 6.5. Exclusivity. The Selling Shareholders will not (and the Selling
Shareholders will not cause or permit the Company to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of the Company (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Selling
Shareholders will not vote their Subject Shares in favor of any such acquisition
structured as a merger, consolidation, or share exchange. The Selling
Shareholders will notify the Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.

 

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SECTION 6.6. Efforts.

 

(a) Subject to the terms and conditions hereof, each party hereto shall use all
reasonable efforts to consummate the transactions contemplated hereby as
promptly as practicable. An undertaking of a Person under this Agreement to use
such Person’s best efforts shall not require such Person to incur unreasonable
expenses or obligations in order to satisfy such undertaking.

 

(b) The Selling Shareholders, the Company and the Buyer will, as promptly as
practicable (i) make the required filings with, and use their respective best
efforts to obtain all required authorizations, approvals, consents and other
actions of, governmental Authorities and (ii) use their respective best efforts
to obtain all other required consents of other Persons with respect to the
transactions contemplated hereby.

 

(c) The Buyer will use its best efforts to obtain the financing necessary to
consummate the transactions contemplated by Section 7.9 hereof.

 

SECTION 6.7. Maintenance of Insurance. The Company will continue to carry its
existing insurance through the Closing Date, and shall not allow any material
breach, default or cancellation (other than expiration and replacement of
policies in the ordinary cause of business) of such insurance policies or
agreements to occur or exist.

 

SECTION 6.8. Notice and Supplemental Information. Brandt and the Company and the
Buyer shall each give prompt notice to the other parties of any material adverse
development causing a breach of any of its own representations and warranties in
Articles III, IV and V respectively. In addition, the Selling Shareholders and
the Company will, from time to time, as necessary, within a reasonable period of
time preceding the Closing, by notice in accordance with the terms of this
Agreement, supplement or amend the Schedules, including one or more supplements
or amendments to correct any matter which would constitute a breach of any
representation, warranty, agreement or covenant contained herein. If Brandt or
the Company supplement or amend the Schedules with facts or circumstances that
would reasonably be expected to have a Material Adverse Effect on the Company,
the sole remedy of the Buyer under this Agreement shall be termination of the
Agreement as provided for in Section 11.1(e).

 

SECTION 6.9. Employment Agreement. The Company, the Buyer and Brandt shall enter
into the Employment Agreement annexed hereto as Exhibit B-1, the Company and
Sabine Brandt shall enter into the Employment Agreement annexed hereto as
Exhibit B-2, and the other employees shall enter into the other Employment
Agreements with the Company referred to herein..

 

SECTION 6.10. Escrow Agreement. Each of the parties hereto and the Escrow Agent
shall enter into the Escrow Agreement.

 

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SECTION 6.11 Option Holders Letter. The Company and the Selling Shareholders
will endeavor to procure that each of the Option Holders shall execute and
deliver to the Buyer the Option Holders Letter, pursuant to which, among other
things, the Option Holders shall agree to exercise their Company Options for
4.71% of the Fully-Diluted Company Capital Shares, and receive on the Closing
Date from the Buyer their agreed portion of the Fixed Consideration and any
Contingent Consideration when issued, or cash in lieu of any Stock
Consideration.

 

SECTION 6.12 Public Announcements. The Selling Shareholders, the Company and the
Buyer will consult with each other before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated by
this Agreement and no party shall, without the prior written consent of the
others, issue any such press release or make any such public statement, except
as may be required by applicable Law.

 

SECTION 6.13. Consistent Tax Reporting. The Selling Shareholders, the Company
and the Buyer shall treat and report the transactions contemplated by this
Agreement in all respects consistently for purposes of any federal, state, local
or foreign Tax. The parties hereto shall not take any actions or positions
inconsistent with the obligations set forth herein.

 

SECTION 6.14. Termination of Shareholder Agreements. Prior to or at the Closing
the Company shall cause the termination, and render void and of no effect, (i)
any existing shareholder agreements between or among holders of Subject Shares
and the Company effecting the ownership or disposition of the capital stock of
the Company and (ii) any options or warrants to purchase or rights to subscribe
for, any capital stock of the Company to which the Company is a party and which
has not been previously exercised, canceled or redeemed. Without limiting the
foregoing, the Selling Shareholders and the Company will prior to or at the
Closing terminate the Shareholders Agreement of original date 8 January 2008, as
amended, between the Selling Shareholders, the Company and other parties, and
SALSA and RMIT will not at any time prior to the termination of that
Shareholders Agreement exercise any put option, or other option, in relation to
shares of the Company in accordance with that Shareholders Agreement.

 

SECTION 6.15. Resignation of Officers and Directors. The Selling Shareholders
shall cause each officer and member of the Board of Directors of, and each
trustee or fiduciary of any plan or arrangement involving employee benefits of,
the Company, if so requested by Buyer, to tender his or her resignation from
such position effective as of the Closing.

 

SECTION 6.16. Transition. The Selling Shareholders will not take any action that
is designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Company from maintaining
the same business relationships with the Company after the Closing as it
maintained with the Company prior to the Closing. The Selling Shareholders will
refer all customer inquiries relating to the Business of the Company to the
Buyer from and after the Closing.

 

SECTION 6.17. Confidentiality. The Selling Shareholders will, and will cause the
Company to, treat and hold as such all of the Confidential Information, refrain
from using any of the Confidential Information except in connection with this
Agreement, and the Business of the Company, and, in the event of a Closing,
deliver promptly to the Buyer or destroy, at the request and option of the
Buyer, all tangible embodiments (and all copies) of the Confidential Information
which are in their possession. In the event that any Selling Shareholder is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such Selling
Shareholder will notify the Buyer promptly of the request or requirement so that
the Buyer may seek an appropriate protective order or waive compliance with the
provisions of this Section 6.18. If, in the absence of a protective order or the
receipt of a waiver hereunder, a party is, on the advice of counsel, compelled
to disclose any Confidential Information to any tribunal or else stand liable
for contempt, such Selling Shareholder may disclose the Confidential Information
to the tribunal; provided, however, that such Selling Shareholder shall use his
or its best efforts to obtain, at the request of the Buyer, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer shall designate.
The foregoing provisions shall not apply to any Confidential Information which
is generally available to the public immediately prior to the time of
disclosure.

 

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SECTION 6.18. Restrictive Covenants.

 

(a) Brandt acknowledges that he has a special knowledge of the Company Business
and the proprietary and confidential information included in the Company
Business, and that the Buyer is making a considerable investment in the Company
Business from which Brandt has benefitted. In consideration of this Agreement
and such investment and benefit, and as an inducement to the Buyer to enter into
this Agreement and consummate the transactions contemplated herein, Brandt
hereby agrees that, for a period of five years after the Closing Date, he shall
not, directly or indirectly through any Affiliate, own, manage, operate, control
or participate in the ownership, management, operation or control of, or be
connected as an officer, employee, partner, director or otherwise with, or have
any financial interest in, or aid or assist anyone else in the conduct of, any
business that directly or indirectly competes with the Company Business or the
Buyer Business as at the date of this Agreement (each a “Competitive Business”);
provided, however, that Brandt may own less than 1% of any outstanding class of
securities registered pursuant to the Securities Exchange Act, as amended, of an
issuer that is a Competitive Business.

 

(b) For a period of five years following the Closing Date, Brandt will not,
without the express prior written approval of the Board of Directors of the
Buyer, (A) directly or indirectly recruit, solicit or otherwise induce or
influence any sales agent, joint venturer, lessor, supplier, agent,
representative or any other person that has or had during the one year period
initially preceding the Closing Date a business relationship with the Company or
the Buyer, to discontinue, reduce or adversely modify such employment, agency or
business relationship with the Buyer or the Company as it relates to the
Businesses as conducted by the Company or the Buyer after the Closing Date, or
(B) employ or seek to employ or cause any Competitive Business to employ or seek
to employ any person or agent who is employed or retained by the Buyer or the
Company. Notwithstanding the foregoing, nothing herein shall prevent Brandt from
providing a letter of recommendation to an employee with respect to a future
employment opportunity.

 

46

 

  

(c) For a period of five years following the Closing Date, Brandt will not,
without the express prior written approval of the Board of Directors of the
Buyer, directly or indirectly, recruit, solicit or otherwise induce or influence
any customer of the Buyer or the Company to discontinue, reduce or modify such
business relationship with the Buyer or the Company.

 

(d) Brandt agrees that the violation or threatened violation of any of the
provisions of this Section 6.18 shall cause immediate and irreparable harm to
the Buyer and that the damage to the Buyer will be difficult or impossible to
calculate with precision. Therefore, in the event Brandt violates this Section
6.18, an injunction restraining such Person or his Affiliate from such violation
may be entered against such Person or his Affiliate in addition to any other
relief available to the Buyer.

 

(e) If, at the time of enforcement of any provision of this Section 6.18, a
court shall hold that the duration, scope or other restrictions stated herein
are unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or other restrictions reasonable under such
circumstances shall be substituted for the stated duration, scope or other
restrictions and that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and other restrictions
permitted by law; provided, however, that the substituted period shall not
exceed the period contemplated by this Agreement.

 

SECTION 6.19. Guaranty of Employment. Without limiting the requirements for the
Company to enter into the Employment Agreements, all of the members of the
Management and all other mid-level employees of the Company shall, subject to
any legislative requirements in any applicable jurisdiction, be guaranteed
continued employment with the Company for a period of two (2) years following
the Closing Date at their current levels of compensation, subject to such
increases as the board of directors of the Company may determine following the
Closing Date.

 

SECTION 6.20 Registration of Stock Consideration; “Market Stand-Off” Agreement;
Reports Under Securities Exchange Act.

 

(a) Not later than ninety (90) days following the Closing Date the Buyer shall
file with the SEC a registration statement on Form S-1 or Form S-3, as
applicable, to register for resale under the Securities Act, (i) the Conversion
Shares issuable upon any optional or mandatory conversion of the shares of
Protea Series A Preferred Stock issued to the Selling Shareholders as Stock
Consideration or of the shares of Protea Series A Preferred Stock issued or
issuable to the Selling Shareholders as a dividend on the shares of Protea
Series A Preferred Stock issued to the Selling Shareholders as Stock
Consideration and (ii) any shares of Buyer Common Stock issued or issuable to
the Selling Shareholders as Contingent Consideration (the “Resale Registration
Statement”), and shall use its best efforts to cause such Resale Registration
Statement to be declared effective by the SEC as soon thereafter as is
practicable and, upon request of Selling Shareholders holding at least 2% of the
shares of Buyer Common Stock originally covered by the Resale Registration
Statement (in the case of a registration of shares that are intended to be
offered on a continuous or delayed basis), to keep the Resale Registration
Statement effective until all shares of Buyer Common Stock covered by the Resale
Registration Statement are sold, subject to compliance with applicable SEC
rules. Without limiting the generality of the preceding obligations, the Buyer
shall, as expeditiously as reasonably possible: (A) prepare and file with the
SEC such amendments and supplements to the Resale Registration Statement, and
the prospectus used in connection with such registration statement, as may be
necessary to comply with the Securities Act in order to enable the disposition
of all securities covered by such registration statement; (B) furnish to the
Selling Shareholders such numbers of copies of a prospectus, including a
preliminary prospectus, as required by the Securities Act, and such other
documents as the Selling Shareholders may reasonably request in order to
facilitate their disposition of their shares of securities covered by the Resale
Registration Statement; (C) use its best efforts to register and qualify the
securities covered by the Resale Registration Statement under such other
securities or blue-sky laws of such jurisdictions as shall be reasonably
requested by any of the Selling Shareholders (provided that the Buyer shall not
be required to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, unless the Buyer is already subject
to service in such jurisdiction and except as may be required by the Securities
Act); (D) use its best efforts to cause all securities covered by the Resale
Registration Statement to be listed on a United States Securities Exchange or
trading system and each securities exchange and trading system (if any) on which
similar securities issued by the Buyer are then listed; (E) provide a transfer
agent and registrar for all securities registered pursuant to this Agreement and
provide a CUSIP number for all such securities, in each case not later than the
effective date of such registration; (F) notify each Selling Shareholder,
promptly after the Buyer receives notice thereof, of the time when the Resale
Registration Statement has been declared effective or a supplement to any
prospectus forming a part of such registration statement has been filed; and (G)
after the Resale Registration Statement becomes effective, notify each Selling
Shareholder of any request by the SEC that the Buyer amend or supplement such
registration statement or prospectus.

 

47

 

  

(b) If requested by any underwriter or placement agent engaged by the Buyer to
provide the Required Financing, each of the Selling Shareholders shall, as a
condition to the effectiveness of any such Resale Registration Statement, agree
in writing with the Buyer not to publicly resell any of their shares of Stock
Consideration for a period of six (6) months following the Closing Date;
provided however that such obligation shall be applicable to the Selling
Shareholders only if all officers and directors of the Buyer, and all
stockholders individually owning more than 5% of the outstanding shares of Buyer
Common Stock are subject to the same restrictions (after giving effect to
conversion into Buyer Common Stock of all outstanding convertible securities).

 

(c) All expenses (other than selling commissions and stock transfer taxes
applicable to the sale of securities covered by the Resale Registration
Statement) incurred in connection with registrations, filings, or qualifications
pursuant to this Agreement, including but not limited to all registration,
filing, and qualification fees; printers’ and accounting fees; fees and
disbursements of counsel for the Company; and the reasonable fees and
disbursements of counsel for the Selling Shareholders, shall be borne and paid
by the Company.

 

(d) On the Closing Date, each of the Selling Shareholders and Protea shall
execute and deliver to each other the Indemnification Agreement in the form of
Exhibit E annexed hereto and made a part hereof.

 

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(e) With a view to making available to the Selling Shareholders the benefits of
SEC Rule 144 and any other rule or regulation of the SEC that may at any time
permit a Selling Shareholder to sell securities of the Buyer to the public
without registration or pursuant to a registration on Form S-3, the Buyer shall:

 

(i) make and keep available adequate current public information, as those terms
are understood and defined in SEC Rule 144, at all times after the Closing Date;

 

(ii) file with the SEC in a timely manner all reports and other documents
required of the Buyer under the Securities Act and the Securities Exchange Act;
and

 

(iii) furnish to any Selling Shareholder, so long as the Selling Shareholder
owns any securities covered (or intended to be covered) by the Resale
Registration Statement, forthwith upon request (A) to the extent accurate, a
written statement by the Buyer that it has complied with the reporting
requirements of SEC Rule 144, the Securities Act, and the Securities Exchange
Act (at any time the Buyer has been subject to such reporting requirements), or
that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after the Buyer so qualifies); (B) a copy of the most
recent annual or quarterly report of the Buyer and such other reports and
documents so filed by the Buyer; and (C) such other information as may be
reasonably requested in availing any Selling Shareholder of any rule or
regulation of the SEC that permits the selling of any such securities without
registration or pursuant to Form S-3 (at any time after the Buyer so qualifies
to use such form).

 

SECTION 6.21 Post-Closing Covenants. In addition to the post-Closing covenant
set forth in Section 6.20, the Selling Shareholders, the Company and the Buyer
agree as follows with respect to the period following the Closing:

 

(a) In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party hereto reasonably may request, all
at the sole cost and expense of the requesting party (unless the requesting
party is entitled to indemnification therefor under Article IX). From and after
the Closing, the Buyer will be entitled to access all documents, books, records,
agreements, and financial data of any sort relating to the Company.

 

(b) In the event and for so long as any party hereto actively is contesting or
defending against any charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Company, each of the other parties hereto will cooperate with him or it and
his or its counsel in the contest or defense, make available their personnel,
and provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending party (unless the contesting or defending
party is entitled to indemnification therefor under Article IX).

 

49

 

  

ARTICLE VII

 

CONDITIONS TO OBLIGATION OF BUYER

 

The obligation of the Buyer to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:

 

SECTION 7.1. Representations and Warranties True as of Closing Date. The
representations and warranties set forth in Articles III and IV shall have been
accurate, true and correct on and as of the date of this Agreement, and shall
also be accurate, true and correct on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date.

 

SECTION 7.2. Compliance with Covenants. The Selling Shareholders and the Company
shall have performed and complied with all of the covenants hereunder in all
material respects through the Closing.

 

SECTION 7.3. Consents. The Company shall have procured all of the third party
consents specified in Sections 4.3 and 6.2 above.

 

SECTION 7.4. Actions or Proceedings. No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge would (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (C) affect adversely the right
of the Buyer to own the Subject Shares and to control the Company, or (D) affect
adversely the right of the Company to own its assets and to operate its Business
(and no such injunction, judgment, order, decree, ruling, or charge shall be in
effect).

 

SECTION 7.5. No Material Adverse Effect and Closing Certificate.

 

(a)As at the Closing Date no Material Adverse Effect in respect of the Company
shall have occurred and shall be continuing.

 

(b)At the Closing, Brandt shall have delivered to the Buyer a certificate, in
his capacity as Chief Executive Officer and Managing Director of the Company to
the effect that each of the conditions specified above in Sections 7.1-7.4 is
satisfied in all respects, and that no Material Adverse Effect has occurred and
is continuing.

 

SECTION 7.6. Financial Condition at Closing. All of the following financial
conditions shall exist as of December 31, 2014:

 

(a) the working capital (excess of current assets over current liabilities) of
the Company at the Closing Date will not be less than 75% of the average amount
of the working capital of the Company for the months of October, November and
December 2014 as set forth in the Statement of Financial Position of the Company
as at December 31, 2014 as contained in Schedule 4.7 hereto; and

 

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(b) the mix of assets and liabilities of the Company and its consolidated
Subsidiaries shall be substantially the same as at December 31, 2014.

 

SECTION 7.7 Resignations. The Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Company other
than Brandt.

 

SECTION 7.8 Due Diligence Investigation. On or before March 15, 2015, the Buyer
and its legal and financial representatives shall have conducted a due diligence
investigation of the financial and legal affairs of the Company and its
Subsidiaries; which shall be satisfactory to the Buyer and its representatives
in the exercise of their reasonable discretion (the “Due Diligence
Investigation”). In the event that the Buyer shall notify the Selling
Shareholders that as it elects to terminate this Agreement by reason that the
Due Diligence Investigation was not satisfactory, absent bad faith by the Buyer,
this Agreement shall terminate and no party shall have any further liability or
obligation to the other, provided however that, unless a Material Adverse Effect
in respect of the Company or its subsidiaries shall have occurred and be
continuing, the Break-up Fee will be paid to the Company and SALSA in accordance
with Section 7.9(e). In the event that (a) the Buyer shall, on or before a date
which shall be not later than 30 days from the date of execution of this
Agreement, notify the Selling Shareholders that it has completed a satisfactory
Due Diligence Investigation, or (b) the Buyer fails to notify the Selling
Shareholders of its intention to terminate this Agreement by close of business
at 5:00 p.m. (Central Standard Time) on a date which shall be not later than 30
days from the date of execution of this Agreement, for all purposes of this
Agreement, it shall be deemed that Buyer has completed a satisfactory Due
Diligence Investigation and the provisions of and conditions set forth in this
Section 7.8 shall be deemed to have been fully satisfied.

 

SECTION 7.9. Required Financing Contingency; Break-Up Fee.

 

(a) On or before the Outside Closing Date, the Buyer shall have obtained, on
terms and conditions which are commercially reasonable and acceptable to the
board of directors of the Buyer, not less than Ten Million ($10,000,000) Dollars
of debt and/or equity financing (the “Required Financing”); being such aggregate
cash amount that is required by the Buyer to (a) consummate the transactions
contemplated by this Agreement, and (b) fund the working capital requirements of
the Buyer after the Closing.

 

(b) The Buyer must diligently proceed and use reasonable commercial efforts to
obtain the Required Financing.

 

(c) The Buyer will not in the course of obtaining Required Financing, or
otherwise prior to the Closing Date make, cause or effect any stock dividends
payable in shares of Buyer Common Stock.

 

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(d) The Buyer shall keep the Company and the Selling Shareholders informed of
the progress of the fund raising and actions taken to obtain the Required
Financing, and the prospects of success of the Required Financing.

 

(e) In the event that by the Outside Closing Date, the Buyer shall have been
unable to have obtained such Required Financing for any reason, other than a
Material Adverse Effect in respect of the Company, it shall pay to the Company
and SALSA an amount to reimburse the Company and SALSA for their legal and
related professional fees incurred in connection with the transactions
contemplated by this Agreement, of USD $100,000 (the “Break-up Fee”). The
Break-up Fee will be paid to the Company and SALSA from the Deposit in
accordance with Section 2.2(d) pro-rata in proportion to the amount of their
respective legal and related professional fees, to be established to the
reasonable satisfaction of Company Counsel, provided that the amount of legal
fees and related professional fees of SALSA shall not exceed $50,000.

 

SECTION 7.10. Employment Agreements. The Company shall have entered into the
Employment Agreements.

 

SECTION 7.11. Termination of Certain Agreements. The Selling Shareholders shall
have, and the Selling Shareholders shall have caused their Affiliates and the
Company to, and that the Company and its Affiliates shall have, effective as of
the Closing, without any cost to the Company, terminated, rescinded, canceled
and rendered void and of no effect any and all Contracts between the Company on
the one hand and any Selling Shareholder or any Affiliate thereof (other than
the Company) on the other hand. The Selling Shareholders agree that effective as
of the Closing, all rights of any Selling Shareholder or any Affiliate thereof
or any Affiliates of the Company to indemnification by the Company (whether by
Contract, code of regulations, Law or otherwise) are terminated, void, of no
effect and unenforceable by them except as may arise pursuant to this Agreement.

 

SECTION 7.12. Insurance. Buyer shall be satisfied as to the availability and
cost of adequate and reasonable insurance covering the business and assets of
the Company.

 

SECTION 7.13. Contracts. None of the material Contracts entered into by the
Company shall be breached or subject to termination, modification or change as a
result of the transactions contemplated by this Agreement, and none of the
customers of the Company shall have stated or indicated their determination or
intention to reduce or otherwise adversely change their orders or business.

 

SECTION 7.14. Documents. All actions to be taken by the Selling Shareholders in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Buyer.

 

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ARTICLE VIII

 

CONDITIONS TO OBLIGATION OF THE SELLERS

 

The obligation of the Selling Shareholders to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:

 

SECTION 8.1. Representations and Warranties True as of Closing. The
representations and warranties set forth in Article V shall have been accurate,
true and correct on and as of the date of this Agreement, and shall also be
accurate, true and correct on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date.

 

SECTION 8.2. Compliance with Covenants. The Buyer shall have delivered all of
the Fixed Consideration and performed and complied with all of its covenants
hereunder in all material respects through the Closing.

 

SECTION 8.3. Actions or Proceedings. No action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect).

 

SECTION 8.4. Certificate. The Buyer shall have delivered to the Selling
Shareholders a certificate to the effect that each of the conditions specified
above in Sections 8.1 - 8.3 is satisfied in all respects.

 

SECTION 8.5. Documents. All actions to be taken by the Buyer in connection with
the consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Selling Shareholders.

 

ARTICLE IX

 

SURVIVAL AND REMEDY; INDEMNIFICATION

 

SECTION 9.1. Survival of Representations and Warranties. All of the terms and
conditions of this Agreement, together with the warranties, representations,
agreements and covenants contained herein or in any instrument or document
delivered or to be delivered pursuant to this Agreement, shall survive the
execution of this Agreement and the Closing Date, notwithstanding any
investigation heretofore or hereafter made by or on behalf of any party hereto;
provided, however, that unless otherwise stated, the agreements and covenants
set forth in this Agreement shall survive and continue until all obligations set
forth therein shall have been performed and satisfied. Notwithstanding the
foregoing, (a) the representations and warranties contained in Article III and
Sections 4.1, 4.2, 4.3, 4.4, 5.1, 5.2, 5.3 and 5.4 of this Agreement shall
survive the Closing and continue in full force and effect for 7 years from the
Closing Date; (b) the representations and warranties of the Selling Shareholders
and the Company contained in Sections 4.11, 4.25 and the covenants set forth in
Section 10.6 of this Agreement shall survive the Closing and continue in full
force and effect until the expiration of 7 years from the Closing Date; and (c)
all other representations and warranties, and the related agreements of the
Selling Shareholders, the Company and the Buyer to indemnify each other set
forth in this Article IX, shall survive and continue for, and all
indemnification claims with respect thereto shall be made prior to the end of,
eighteen (18) months from the Closing Date, except for representations,
warranties and related indemnities for which an indemnification claim shall be
pending as of the end of the applicable period referred to above, in which event
such indemnities shall survive with respect to such indemnification claim until
the final disposition thereof (the “Indemnification Period”).

 

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SECTION 9.2. Indemnification by the Selling Stockholders.

 

(a) By the Trust and Brandt. In the event that, during the Indemnification
Period there is (i) a breach (or an alleged breach) of any of the
representations or warranties set forth in Article III or Article IV that is
made by, or any breach of or failure to perform any covenant, agreement or
obligation of, the Company or any Selling Shareholder in this Agreement or any
other document contemplated hereby, or in any document relating hereto or
thereto or contained in any exhibit or Schedule to this Agreement, (ii) any
Liabilities, Adverse Consequences or remediation, clean-up or similar
obligations or costs under Environmental Laws and relating to the Business and
activities or the ownership, operation or lease by the Company of facilities in
respect of any periods prior to the Closing, or (iii) any demands, assessments,
judgments, costs and reasonable legal and other expenses or other Adverse
Consequences arising from, or in connection with, any investigation, action,
suit, proceeding or other claim incident to any of the foregoing and, if there
is an applicable survival period pursuant to Section 9.1, then, in each case,
provided that the Buyer make a written claim for indemnification against the
Company within such survival period, the Company, Brandt and the Trust (the
“Company Indemnifying Parties”) hereby agree (subject to the limitations set
forth in this Section 9.2(c)) to, jointly and severally, indemnify the Buyer
from and against the entirety of any Adverse Consequences the Buyer Indemnified
Parties may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer may suffer through and after the
end of the applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by any breach (or alleged breach) of the
foregoing;

 

(b) By SALSA and RMIT. Subject to the provisions of Section 9.2(c) (including
any applicable threshold and ceiling provisions), SALSA and RMIT severally (not
jointly and severally) agree to indemnify the Buyer, from and against the
entirety of any Adverse Consequences the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any breach (or an
alleged breach) ONLY with respect to the representations or warranties of SALSA
and RMIT set forth in Article III.

 

(c) Threshold and Indemnity Cap. except for breaches of the representations and
warranties that would constitute fraud in the inducement, neither the Company
Indemnifying Parties nor SALSA or RMIT shall have any obligation to indemnify
the Buyer from and against any Adverse Consequences resulting from, arising out
of, relating to, in the nature of, or caused by any breach (or alleged breach)
by the Company or any of such Selling Shareholders, until the Buyer has suffered
Adverse Consequences by reason of all such breaches (or alleged breaches) in
excess of a $50,000 aggregate threshold (at which point the Company Indemnifying
Parties will be obligated to indemnify the Buyer from and against all such
Adverse Consequences) and (B) there will be a $3,000,000 aggregate ceiling on
the obligation to indemnify the Buyer from and against Adverse Consequences
resulting from, arising out of, or relating to, the items identified in this
Article IX; provided, that the payment of any amounts owed to the Buyer shall be
made only in accordance with the provisions of Section 9.6 below.

 

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(d) Limit of Liability to Indemnify. Other than by reason of any proven fraud,
the liability of each of the Selling Shareholders, the Trust and Brandt for any
breach of this Agreement or any representation or warranty under or pursuant to
this Agreement and for any Adverse Consequences arising therefrom to the Buyer
or any Associate of the Buyer shall be absolutely and solely limited to
indemnification pursuant to Article VIII of this Agreement and no further
action, claim or proceeding may be brought or made by the Buyer for or arising
from any breach or non-performance of this Agreement to any warranty or
representation made by the Selling Parties, the Trust or Brandt.

 

SECTION 9.3. Indemnification by the Buyer. Provided that the Selling
Shareholders make a written claim for indemnification against the Buyer within
the survival period set forth in Section 9.1, the Buyer agrees to indemnify the
Selling Shareholders against, and agrees to hold them harmless from, any and all
Adverse Consequences the Selling Shareholders may suffer through and after the
date of the claim for indemnification (including any Adverse Consequences the
Selling Shareholders may suffer through and after the end of the applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by (i) any breach of or any inaccuracy in any representation or
warranty made by the Buyer pursuant to this Agreement, any agreement, or
instrument contemplated hereby, any document relating hereto or thereto or
contained in any exhibit or Schedule to this Agreement; (ii) any breach of or
failure by the Buyer to perform any agreement, covenant or obligation of the
Buyer set out in this Agreement, any agreement, or instrument contemplated
hereby, any document relating hereto or thereto or contained in any exhibit or
Schedule to this Agreement; and (iii) any obligations and Liabilities in respect
of the Company from and after the Closing Date.

 

SECTION 9.4. Third-Party Claims.

 

(a) If any third party shall notify any party (the “Indemnified Party”) with
respect to any matter (a “Third Party Claim”) which may give rise to a claim for
indemnification against any other party (the “Indemnifying Party”) under this
Article IX, then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced. For purposes of this
Section 9.4, in all instances where the Indemnifying Party would be the Company
or any Selling Shareholder, the term “Indemnifying Party” shall be limited to
the Management Selling Shareholders.

 

55

 

  

(b) Any Indemnifying Party will have the right to defend the Indemnified Party
against the Third Party Claim with counsel of its choice reasonably satisfactory
to the Indemnified Party so long as (A) the Indemnifying Party notifies the
Indemnified Party in writing within 15 days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will indemnify
the Indemnified Party from and against the entirety of any Adverse Consequences
the Indemnified Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim, (B) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief, (D) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice materially adverse to the continuing business interests of
the Indemnified Party, and (E) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.

 

(c) So long as the Indemnifying Party is conducting the defense of the Third
Party Claim in accordance with Section 9.4(b) above, (A) the Indemnified Party
may retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim, (B) the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).

 

(d) In the event any of the conditions in Section 9.4(b) above is or becomes
unsatisfied in the reasonable judgment of the Indemnified Party, however, (A)
the Indemnified Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third Party Claim in
any manner it reasonably may deem appropriate (and the Indemnified Party need
not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the reasonable costs of
defending against the Third Party Claim (including attorneys’ fees and
expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Article IX.

 

SECTION 9.5. Other Indemnification Provisions.

 

(a) The liability of any party under this Article IX shall be in addition to,
and not exclusive of any other liability that such party may have at law or
equity based on a party’s fraudulent acts or omissions. None of the provisions
of this Agreement shall be deemed a waiver of any defenses which may be
available in respect of actions or claims for fraud, including but not limited
to, defenses of statutes of limitations or limitations of damages.

 

56

 

  

(b) Each Selling Shareholder hereby agrees that he will not make any claim for
indemnification against the Company by reason of the fact that he or she was a
director, manager, officer, employee, or agent of any such entity or was serving
at the request of any such entity as a partner, member, trustee, director,
manager, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought by the Buyer
against the Selling Shareholder (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable Law, or
otherwise).

 

(c) Indemnification claims shall be reduced, by and to the extent, that an
Indemnified Party shall be entitled to receive proceeds under insurance
policies, risk sharing pools, or similar arrangements specifically as a result
of, and in compensation for, the subject matter of an indemnification claim by
such Indemnified Party, net of any increased premiums or similar costs arising
out of the making of such claims against such arrangements; provided, however,
that indemnification claims shall not be reduced by Tax benefits, if any.

 

(d) The Buyer shall have the right to offset indemnification amounts due either
of them or from the Company Indemnifying Parties pursuant to this Agreement
against payments due to the Company Indemnifying Parties pursuant to this
Agreement or any other agreement between the Buyer and any Company Indemnifying
Party.

 

SECTION 9.6. Payment of Indemnified Amounts. Buyer agrees that to the fullest
extent permitted by Law, after the Closing and with respect to any claim or
cause of action asserted by Buyer relating to or arising from breaches of the
representations, warranties or covenants of the Company or the Selling
Shareholders contained in this Agreement, Buyer will first take any amounts owed
to the Buyer by the Company Indemnifying Parties, SALSA or RMIT, as applicable,
pursuant to this Article IX from the Holdback Amount. The Holdback Amount shall
be the Buyer’s sole and exclusive remedy until the Holdback Amount is completely
depleted, at which point the Buyer shall look to collect any additional amounts
owed hereunder from the Company Indemnifying Parties, SALSA or RMIT, as
applicable, only from the Stock Consideration or the net proceeds from the sale
of such Stock Consideration.

  

ARTICLE X

 

TERMINATION

 

SECTION 10.1. Termination of Agreement. Certain of the parties may terminate
this Agreement as provided below:

 

57

 

  

(a) the Buyer and the Selling Shareholders may terminate this Agreement by
mutual written consent at any time prior to the Closing;

 

(b) either the Buyer or the Selling Shareholders may terminate this Agreement in
accordance with Section 2.2(c) of this Agreement;

 

(c) the Buyer may terminate this Agreement on or before a date which shall be
thirty (30) days from the date of execution of this agreement, by giving written
notice to the Selling Shareholders, if the Buyer is not reasonably satisfied
with the results of its Due Diligence Investigation pursuant to Section 7.8;

 

(d) the Buyer may terminate this Agreement by giving written notice to the
Selling Shareholders at any time prior to the Closing (A) in the event any
Selling Shareholder has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Buyer has
notified the Selling Shareholders of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before the Outside Closing Date by reason
of the failure of any condition precedent under Article VII hereof (unless the
failure results primarily from the Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement); and

 

(e) the Selling Shareholders may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event that the
Buyer has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, the Selling Shareholders have
notified the Buyer of the breach, and the breach has continued without cure for
a period of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before the Outside Closing Date, by reason of the failure of
any condition precedent under Article VIII hereof (unless the failure results
primarily from any Selling Shareholder breaching any representation, warranty,
or covenant contained in this Agreement).

 

(f) the Buyer may terminate this Agreement by giving written notice to the
Selling Shareholders at any time prior to the Closing in the event: (i) the
Selling Shareholders or the Company supplement or amend the Schedules with facts
or circumstances that would reasonably be expected to have a Material Adverse
Effect on the Company or (ii) a Material Adverse Effect on the Company between
the date hereof and the Closing Date shall have occurred and is continuing.

 

SECTION 10.2. Effect of Termination. If any party terminates this Agreement
pursuant to Section 10.1 above, all rights and obligations of the parties
hereunder shall terminate other than those set forth in Sections 6.4 and 6.18,
without any Liability of any party to any other party (except for any Liability
of any party then in breach or its representations, warranties and covenants
herein).

 

ARTICLE XI

 

MISCELLANEOUS

 

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SECTION 11.1. Expenses. Each party will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.

 

SECTION 11.2. Press Releases and Public Announcements. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Buyer and the Selling
Shareholders; provided, however, that any party may make any public disclosure
it believes in good faith is required by applicable Law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing party will use its best efforts to advise the other parties prior to
making the disclosure).

 

SECTION 11.3. No Third-Party Beneficiaries. Subject to the provisions of Section
11.5, this Agreement shall not confer any rights or remedies upon any Person
other than the parties and their respective successors and permitted assigns.

 

SECTION 11.4. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements, or representations by or among the parties,
written or oral, to the extent they related in any way to the subject matter
hereof.

 

SECTION 11.5. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Selling Shareholders; provided, however,
that the Buyer may, upon prior written notice (i) assign any or all of its
rights and interests hereunder to one or more of its Affiliates, (ii) designate
one or more of its Affiliates to perform its obligations hereunder (in any or
all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder) and (iii) grant a security
interest in respect of its rights hereunder to its lenders.

 

SECTION 11.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.

 

SECTION 11.7. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

SECTION 11.8. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:

 

(a)If to the Company to:

 

59

 

 

vivoPharm LLC

1214 Research Road

Hummelstown PA 17036, USA

Attn. Dr; Ralf Brandt

Email: ralf.brandt@vivopharm.com

Facsimile: +1 (717) 724-5390

Mobile: +1 (415) 937 24 38

vivoPharm Pty Ltd.

Level 3, Suite 29

240 Plenty Road

Bundoora VIC 3085, Australia

Email: Ralf.brandt@vivopharm.com.au

Facsimile: +61 3 9925 7020

Mobile: +1 439 433 425

 

 

(b)If to the Selling Shareholders, to the addresses set forth in the Company’s
records:

 

with a copy (which shall not constitute notice) to:

 

(c) If to the Buyer, addressed as follows:

 

Protea Biosciences Group, Inc.

955 Hartman Run Road

Morgantown, West Virginia 26505

Attention: Stephen Turner, CEO

Email: stephen.turner@proteabio.com

Facsimile No.: (304) 292-7101

 

with a copy (which shall not constitute notice) to:

 

CKR Law, LLP

1330 Avenue of the Americas, 35th floor

New York, New York 10019

Attention: Stephen A. Weiss, Esq.

Email: sweiss@ckrlaw.com

Facsimile No.: (212) 400-6901

 

Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.

 

SECTION 11.9. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic Laws of Australia (Victoria) without giving
effect to any choice or conflict of Law provision or rule (whether of the Laws
of Australia (Victoria) or any other jurisdiction) that would cause the
application of the Laws of any jurisdiction other than the Laws of Australia
(Victoria).

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SECTION 11.10. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and Selling Shareholders. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.

 

SECTION 11.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

 

SECTION 11.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word “including” shall mean including without limitation.

 

SECTION 11.13. Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.

 

SECTION 11.14. Specific Performance. Each of the parties acknowledges and agrees
that the other parties would be damaged irreparably in the event any of the
provisions of Sections 6.4, 6.5, 6.10, 6.18, 6.19 and 6.21 of this Agreement are
not performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties agrees that the other parties shall be entitled
to an injunction or injunctions to prevent breaches of the aforementioned
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the parties and the matter
(subject to the provisions set forth in Section 11.15 below), in addition to any
other remedy to which they may be entitled, at law or in equity.

 

SECTION 11.15. Submission to Jurisdiction. Each of the parties submits to the
jurisdiction of any state or federal court sitting in the State of Pennsylvania,
United States or Victoria, Australia in any action or proceeding arising out of
or relating to this Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court. Each party
also agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 11.8
above. Nothing in this Section 11.15, however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or at equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or at equity.

 

Balance of this page intentionally left blank – signature pages follow

 

 

 

 

 

 

 

61

 

  

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

 

  PROTEA BIOSCIENCES GROUP, INC.               By:       Stephen Turner,
President and CEO               vivoPHARM PTY LTD pursuant to Section 127 of the
Corporations Act 2001 (Cth)               By:       Dr. Ralf Brandt, Director  
                    [Name] Director                             RALF BRANDT    
          THE BRANDT FAMILY TRUST               By:       Sabine Brandt, Trustee
              SOUTH AUSTRALIAN LIFE SCIENCE   ADVANCEMENT PARTNERSHIP, LP   by
its duly authorised manager and agent   TERRA ROSSA CAPITAL PTY LTD            
  By:       [Name], Director            

 

62

 

 

  ROYAL MELBOURNE INSTITUTE OF TECHNOLOGY               By:       _____________,
Authorized Officer     in the presence of:                             Witness  
                    Name of Witness

 

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Exhibit D

 

 

__ 2015

Protea Biosciences Group, Inc.

955 Hartman Run Road

Morgantown, West Virginia 26505

Attention: Stephen Turner, CEO

Email: stephen.turner@proteabio.com

 

vivoPharm Pty Ltd.

Level 3, Suite 29

240 Plenty Road

Bundoora VIC 3085, Australia

Attn: Dr. Ralf Brandt, CEO

Email: ralf.brandt@vivopharm.com

 

Gentlemen:

 

I the undersigned individual (an “Option Holder”) do hereby covenant and agree
with Protea Biosciences Group, Inc., a Delaware corporation (“Protea” or the
“Buyer” and vivoPharm Pty Ltd a corporation organized under the laws of
Australia (“the Company”)) as follows:

 

1.The undersigned has received a copy of the Stock Purchase Agreement, dated of
even date herewith (the “Purchase Agreement”) among Protea, Dr. Ralf Brandt
(“Brant”), The Brandt Family Trust, a trust organized under the laws of
Australia, Mrs. Sabine Brandt, trustee (the “Trust”), South Australian Life
Science Advancement Partnership, LP, a limited partnership organized under the
laws of Australia (“SALSA”), RMIT University, Australia (“RMIT”) and the
Company.

 

2.Unless otherwise defined in this letter, all capitalized terms when used
herein shall have the same meaning as is defined in the Purchase Agreement.

 

3.The undersigned has had an opportunity to review the Purchase Agreement and is
satisfied in all respects with the terms and conditions thereof.

 

4.I am an Option Holder and hold ______ Company Options for ________ Company
Capital Shares,

 

5.On or before the Closing Date under the Purchase Agreement I the undersigned
shall exercise my individual Company Options for Company Capital Shares and on
the Closing Date shall pay the Company the cash consideration payable under
exercise of such Company Option, and I direct that the cash consideration
payable for exercise of such Company Options be paid and deducted from the
amount of any Cash Consideration payable to me on Closing.

 

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6.On the Closing Date I shall receive from the Buyer my pro-rata portion of the
Fixed Consideration, when issued, payable in a combination of cash and Stock
Consideration, as determined by agreement between the Company and the
undersigned, as follows:

 

Fixed Consideration

 

Cash: USD __________

 

Stock: __________

  

 

7.In the event of the payment of any Contingent Consideration, if I hold Stock
Consideration at the Contingent Consideration Payment Date, I will receive my
pro-rata proportion of any Contingent Consideration in the proportion that the
Stock Consideration I then hold bears to the total amount of the Stock
Consideration.

 

8.This letter constitutes an agreement of the parties who are signatories hereto
and shall be governed by and construed in accordance with the domestic Laws of
Australia (Victoria) without giving effect to any choice or conflict of Law
provision or rule (whether of the Laws of Australia (Victoria) or any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the Laws of Australia (Victoria).

 

Very truly yours,

 

[Signature as appropriate]

 

 

 

___________________________

Kym Weir

 

 

____________________________

Brenton Wright

 

 

 

____________________________

Ian Nisbet

 

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_____________________________

Chris Holding

 

 

 

_____________________________

Joanne Chua

 

 

 

_____________________________

Peter Tabley

 

 

 

_______________________________

Mayet Petines

 

 

 

______________________________

Melanie Keller

 

ACCEPTED AND AGREED TO:

 

Protea Biosciences Group, Inc.

 

 

By: Stephen Turner, CEO           Signature                 vivoPharm Pty Ltd.  
                  By: Dr. Ralf Brandt, CEO           Signature

 

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